Ve Vegas Investors IV LLC v Evelyn Partners LLP (formerly known as Smith & Williamson LLP)
| Jurisdiction | England & Wales |
| Judge | Master Clark |
| Judgment Date | 27 July 2023 |
| Neutral Citation | [2023] EWHC 1786 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2022-000651 |
[2023] EWHC 1786 (Ch)
Master Clark
Case No: BL-2022-000651
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Barry Isaacs KC and Lloyd Tamlyn (instructed by Clarion) for the Claimant
David Turner KC and Tom Shepherd (instructed by Clyde & Co LLP) for the Defendants
Hearing date: 4 July 2023
Approved Judgment
I direct that this approved judgment, sent to the parties by email at 10am on 27 July 2023, shall deemed to be handed down on that date, and copies of this version as handed down may be treated as authentic.
This is my judgment on the defendants' application dated 8 March 2023.
Parties and the claim
For present purposes, the parties and the claim are sufficiently described in the agreed case summary, as set out below.
The claims are professional negligence claims brought by the claimant as assignee against the first defendant (Evelyn Partners LLP, known as Smith & Williamson LLP at the material times – “SW”) and the second to fifth defendants (licensed insolvency practitioners and partners/directors of SW – “the Administrators”).
The claims relate to the pre-packaged sale of the business of a company called VE Interactive Limited (“the Company”).
SW was retained by the Company under an engagement letter counter-signed on 21 April 2017 to provide the services set out in that letter. The Administrators were appointed as administrators of the Company on 25 April 2017, and procured the Company to sell its business to Rowchester Limited, a company connected to the Company's management, later the same day.
The claims against SW are for breach of contract (the term implied in the engagement letter to act with reasonable care and skill in providing the services) or its duty in tort to act with reasonable care and skill.
The claims against the Administrators are for breach of their common law/equitable duties to act with reasonable care and skill and/or to obtain the best price for the Company's business that circumstances permitted, also for breach of their fiduciary and statutory duties.
The claimant claims that by reason of the alleged breaches, the business of the Company was sold at an undervalue and claims damages or equitable compensation.
The defendants deny all claims, for the following reasons (summarised in para 3 of the Defence):
(1) they committed no breach of duty, but acted reasonably in circumstances of extreme urgency and pressure; alternatively
(2) any such breach of duty caused no loss; alternatively
(3) the true value of the Company's business was substantially less than the £126 million or £107 million alleged by the claimant.
The Administrators were removed from office by an order made on 23 January 2018, and new administrators appointed in their place. The Company entered voluntary liquidation and entered into a Deed of Assignment of the claims dated 6 June 2019.
Application
The defendants' application concerns the allegations of breach of duty made in paragraphs 37 and 40 of the particulars of claim:
“ D. BREACHES OF DUTY BY SW
37. In acting as pleaded above between 10 April 2017 and 25 April 2017, SW breached the duties as pleaded above.
(1) failing to obtain an independent valuation of the Business;
(2) failing to require the Company to provide and/or to obtain from the Company accurate and/or up-to-date and/or sufficient information such that adequate marketing of the Business could commence on 13 April 2017 or shortly thereafter;
(3) failing to require the Company to provide and/or to obtain from the Company or at all sufficient information about the identity of potential purchasers of the Business (including, but not limited to, those who had invested in the Company in March 2017 (including Mr Astrachan, Mr Binion and Mr Ranson), the Clerkenwell Consortium and the larger and more wealthy shareholders, referred to in the “Ve Fund Raising Overview 18 April 2017” pleaded at paragraph 18.1 above), the principals of LLC,
(4) minority owners of the Company's subsidiaries, the Company's operational partners, participants in the same or similar businesses as the Company's, and investors therein, and private equity and venture capital companies) (“ Potential Purchasers”);
(5) failing to identify Potential Purchasers;
(6) failing to require the Company to provide copies of proposals (such as the Dial Proposal) which were made for investment in the Company; and of communications between the Company and shareholders relating to potential investment in the Company;
(7) failing to market and/or to cause the Company to market the Business to Potential Purchasers;
(8) failing to carry out the steps SW had identified in the Timeline in accordance with the Timeline or at all, including failing to prepare, agree or issue a teaser document whereby the Company might have been marketed to Potential Purchasers, failing to prepare or cause the Company to prepare a dataroom for Potential Purchasers, and failing to test the market;
(9) failing to access market research so as to identify Potential Purchasers;
(10) failing to instruct a business valuer or other intermediary to identify Potential Purchasers and/or to market the Business;
(11) failing to proceed with and/or to ensure that the Company proceeded with an adequate marketing process for the sale of the Business on 13 April 2017 or at all;
(12) failing to form an independent view as to the appropriate marketing process for the sale of the Business;
(13) failing to require the Company to provide and/or to obtain from the Company in a timely fashion or at all accurate and/or up-to-date and/or sufficient information (including the reviews, plans and forecasts referred to in the 4 April Update and at paragraphs 18.1 and 27.2 above) to enable Potential Purchasers to bid for the Business at a level which reflected its true value and/or to assist SW in considering, investigating and pursuing whether steps could be taken to enable the Company to trade for a short period;
(14) failing to identify and/or consider adequately or at all Mr Barrowman's and/or Mr Pearson's interests in and connections with Rowchester and/or the conflicts between the duties they owed to the Company and their interests in purchasing the Business;
(15) allowing Rowchester to be in and/or failing to ensure that Rowchester was not in a preferential position (in relation to, among other things, its access to information about the Company and the Business, and the process relating to the pre-packaged sale of the Business) vis-à-vis other Potential Purchasers;
(16) failing to consider, investigate or pursue whether steps could be taken (including but not limited to negotiating with suppliers of essential services to the Company) to enable the Company to continue to trade for a short period and to allow a sale of the Business for its true value.”
“ F. BREACHES OF DUTY BY THE ADMINISTRATORS
40. In acting as pleaded above the Administrators breached the duties as pleaded above.
(1) failing to obtain an independent valuation of the Business;
(2) failing to obtain sufficient information such that adequate marketing of the Business could be carried out;
(3) failing to identify Potential Purchasers and/or to market the Business to Potential Purchasers;
(4) failing to require the Company to provide copies of proposals (such as the Dial Proposal) which were made for investment; and of communications between the Company and shareholders relating to potential investment in the Company;
(5) failing to carry out the steps SW had identified in the Timeline in accordance with the Timeline or at all, including failing to prepare or issue a teaser document whereby the Company might have been marketed to Potential Purchasers, failing to prepare a dataroom for interested parties and failing to test the market;
(6) failing to access market research so as to identify Potential Purchasers;
(7) failing to instruct a business valuer or other intermediary to identify Potential Purchasers and/or to market the Business;
(8) failing to pursue the offer of third-party funding of £3,000,000 to enable the Company to continue to trade for a short period and to allow a sale of the Business for its true value;
(9) failing to consider, investigate or pursue whether other Potential Purchasers would provide funding and/or whether other steps could be taken (including but not limited to negotiating with suppliers of essential services to the Company) to enable the Company to continue to trade for a short period and to allow a sale of the Business for its true value;
(10) failing to obtain sufficient information about the identity of Potential Purchasers;
(11) failing to carry out an adequate marketing process for the sale of the Business;
(12) failing to form an independent view as to the appropriate marketing process for the sale of the Business;
(13) failing to obtain in a timely fashion or at all accurate and/or up-to-date and/or sufficient information (including the reviews, plans and forecasts referred to in the 4 April Update and at paragraphs 18.1 and 27.2 above) to enable Potential Purchasers to bid for the Business at a level which reflected its true value and/or to assist the Administrators in considering, investigating and pursuing whether the Company might continue to trade for a short period;
(14) failing to cause the Company to sell its right, title and interest in the Representative Agreement;
(15) failing to identify and/or consider adequately or at all Mr Barrowman's and/or Mr Pearson's interests in and...
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