Tradegrow (UK) Ltd v Wigmore Street Investments Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE PETER SMITH |
| Judgment Date | 07 July 2010 |
| Neutral Citation | [2010] EWHC 1693 (Ch) |
| Docket Number | Case No: 18230 OF 2009 |
| Court | Chancery Division |
| Date | 07 July 2010 |
[2010] EWHC 1693 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mr Justice Peter Smith
Case No: 18230 OF 2009
John McGhee QC & Richard Fowler (instructed by Eversheds LLP) for the Applicant
Matthew Collings QC (instructed by Seddons) for the Second Respondent
Christopher Harrison ( instructed by Olswang LLP) for Olswang LLP
Hearing dates: 23rd June 2010
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Peter Smith J:
INTRODUCTION
This judgment arises out of an adjourned application to determine to whom should be paid the sum of approximately £650,000 which is in the client account of Olswang and being held pursuant to an undertaking given by them.
The application is made in the context of the Administration of the First Respondent (“WSI”) but is effectively being treated as an interpleader. The applicant (“Tradegro”) contends that the money should be paid to it. The Second Respondent (“Mr Price”) contends that the money should be paid to WSI (in administration). It does not appear on the application because Mr Price is advancing its argument to the monies having been joined as a Second Respondent for this purpose. There is a doubt whether Mr Price is actually a creditor in WSI but no point is taken on that.
The application came first before me on 10th February 2010 at which Tradegro was given permission to amend the application. Further there were difficulties about the arguments which led me to conclude it was appropriate that Olswang be joined to intervene and make submissions. This they have done.
FACTUAL BACKGROUND
Tradegro and Mr Price and other companies have been (and apparently still are) in dispute over a number of matters. The root cause is a share purchase agreement (“SPA”) whereby WSI (then called Real Estate Property Corporation Ltd) acquired from Tradegro the majority shareholding in a company called Progress Property Company Ltd. Two provisions of the SPA are relevant whereby:—
1) Tradegro provided WSI with a tax indemnity; and
2) WSI agreed to pay Tradegro certain Additional Consideration (as set out in the SPA).
WSI brought a claim against Tradegro in respect of the tax indemnity and after a trial Tradegro was found liable to WSI in the sum of £647,098.31 (inclusive of a payment on account of costs). When judgment was delivered on 15th October 2008 it was envisaged that that judgment and the result of other actions would be netted off but Tradegro's solicitors (Eversheds) wrote on 3rd November 2008 stating that “each order must be strictly complied with”. So Tradegro had to satisfy the judgment (and costs) in favour of WSI in the above sum (“the sum”).
On 12th November 2008 Eversheds then threatened a freezing injunction in respect of this sum once it had been paid to WSI because of an alleged risk of dissipation on WSI's part and because the Additonal Consideration which would be payable by WSI to Tradegro in due course pursuant to the SPA which they believed would exceed the sum.
THE ENSUING CORRESPONDENCE
Olswang (then acting for WSI) wrote on 14th November 2008 denying that its clients had any intention of dissipating the sum to be paid by Tradegro to it stating “it has no objection to that sum being paid in to the Firm's client account on the basis of an undertaking (the precise terms of which we will need to agree) to hold the monies to your order pending the determination of the amount of the Additional Consideration due to your client.”
The proposal was stated to be conditional on Tradegro not applying for a freezing injunction and the exchange of monies taking place as set out in their earlier letter. Eversheds replied on 14th November 2008 accepting the proposal. Olswang prepared a form of undertaking in their letter of 17th November 2008 which was accepted by Eversheds on 19th November 2008.
The undertaking is set out in Olswang's letter on its headed notepaper dated 19th November 2008 and is signed by Olswang. It provides (after antecedent arrangements for the transfer of funds) as follows:—
“Undertaking to hold received funds
Upon receipt in cleared funds of £647,098.31 from Eversheds LLP on behalf of Tradegro (“the Monies”), we undertake that we will:-
(a) hold the Monies upon deposit in this firm's client account with Lloyds TSB Bank Plc; and
(b) not take any steps to transfer or otherwise deal with the Monies (save for the purposes of the ordinary operation of our client account);
Without the consent in writing of Tradegro, or order of the court, until the satisfaction in full of any Additional Consideration determined to be payable by WSI to Tradegro under the terms of the [SPA] (or other agreement between the parties regarding that Additional Consideration) provided that this undertaking will be immediately discharged by the payment of the sum to Tradegro, whether in full or partial settlement of the Additional Consideration, and whether following a final determination of that Additional Consideration or on an interim basis.”
It is clear that the word “sum” was meant to be the same as “the Monies”. It is clear that the words following (b) in the subsequent paragraph are intended to cover undertaking (b) only.
SUBSEQUENT EVENTS
Tradegro paid the monies to Olswang who placed it in their Client Account and it has remained there since.
Tradegro sought an interim payment in respect of the Additional Consideration but that was resisted. It then sought permission to serve a new claim on WSI in respect of the Additional Consideration but that was refused by Morgan J on 11th September 2009.
WSI went in to administration pursuant to an order made on 17th September 2009.
On 13th October 2009 an expert appointed by the parties under the provisions of the SPA concerning the formula for the calculation of the Additional Consideration determined the “y (ii)” component of that formula. Initially it was not accepted by Mr Price that the Additional Consideration itself was at that point agreed in accordance with clause 6 of the SPA. That stance was maintained in his further information provided in response to a request by Tradegro (without illumination). It was initially maintained by Mr Matthew Collings QC who appears for Mr Price before me. However I indicated that if that was an objection because the matter appeared to be purely arithmetical I would adjourn the present application and give Tradegro permission (because of the Administration Order) to seek a determination of the Additional Consideration from an expert. If that turned out to be purely an arithmetical exercise I expressed the view there might be some serious costs consequences. In the light of that Mr Collings QC sensibly accepted on behalf of Mr Price that the Additional Consideration has actually been determined by reason of the determination of the expert. The Additional Consideration is £2,417,820 and became due from WSI to Tradegro on 20th October 2009 (as set out in paragraph 21 of Mr Hyndman's witness statement on behalf of Tradegro dated 18th November 2009). Unsurprisingly Tradegro has not been paid any of that Sum.
I do not know whether there will be any recovery in the administration for Tradegro.
THE APPLICANT'S CONTENTIONS
Although it contends that WSI is not entitled to the sum because Tradegro is entitled to a larger set off that seems to me to be misconceived. Tradegro has already parted with ownership of the sum when it was transferred to Olswang who received it on behalf of WSI. If it had not paid the sum then I accept it would have been entitled to set its obligation to pay the sum off against the sums due to it from WSI. It is surprising that the result of the payment and the undertaking would make Tradegro worse off than if it had not made the payment at all. That is in effect what Mr Collings QC submits. In my view that is not the correct view as I will set out in this judgment. There is no set off as such however.
Tradegro's other arguments are that Olswang holds the Sum as a stakeholder and in the events as have happened are obliged to pay it to Tradegro. Alternatively it submits that Olswang hold the Sum as Trustee to give effect to the undertaking and to pay the Sum out to person entitled to the same by virtue of the undertaking.
MR PRICE'S CONTENTION
Mr Collings QC submits that when one looks at the earlier correspondence the undertaking was offered in exchange for Tradegro not applying for a freezing injunction. Given that one should therefore look at the undertaking as providing for the equivalent of a freezing injunction. On that basis he submits that the granting of a freezing injunction confers no security. Thus the undertaking creates no proprietary rights and accordingly as there is no chance of dissipation on the part of WSI as it is in the hands of insolvency practitioners the undertaking should be discharged and the monies repaid to their true owner WSI. This is in line with it is submitted the authorities of Flightline Ltd v Edwards [2003] 1 BCLC 427 (CA) and Capital Cameras Ltd v Harold Lines Ltd [1991] 1 WLR 54.
The third basis put forward by Tradegro is that Olswang's undertaking is a solicitor's undertaking which it is entitled to ask the court to enforce by compelling Olswang to pay the sum to it.
Thus Tradegro's arguments involve a personal claim against Olswang as stakeholder, a claim against them as Trustee and a claim against them requiring them to honour their solicitor's undertaking....
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Tradegro (UK) Ltd (1st Respondent) Wigmore Street Investments Ltd and Another (2nd Respondent) Olswang Llp (Intervening) Charles Price (Appellant)
...money in the light of those terms. The factual background 2 The basic facts, which I largely take from the Judge's summary at [2010] EWHC 1693 (Ch), paras 4–10, are as follows. 3 By a share purchase agreement ("the Agreement"), Wigmore Street Investments Ltd ("WSI"), then called Real Estate......