Ventura Capital GP Ltd v Dnanudge Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Freedman |
| Judgment Date | 30 June 2023 |
| Neutral Citation | [2023] EWHC 1631 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2022-000921 |
[2023] EWHC 1631 (Ch)
Mr Justice Freedman
Case No: BL-2022-000921
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Timothy Collingwood KC (instructed by Fladgate LLP) for the Claimant
David Peters (instructed by Dorsey & Witney (Europe) LLP) for the Defendants
Hearing date: 19 April 2023
Approved Judgment
This judgment was handed down remotely at 12noon on 30 June 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
I Contents
| SECTION NUMBER | SUBJECT | PARAGRAPH NUMBER |
| I | Contents | |
| II | Introduction | 1–8 |
| III | The contractual documents | 10–28 |
| IV | The issues | 29–31 |
| V | Summary judgment – legal principles | 32–34 |
| VI | Construction: The 18 January Email | |
| (a) The submissions of the Defendants | 35 | |
| (b) The submissions of Ventura | 36–37 | |
| (c) The law | 38–43 | |
| (d) Discussion | 44–64 | |
| VII | Variation issue | |
| (a) The submission of Ventura | 65–69 | |
| (b) The submission of the Defendants | 70–72 | |
| (c) Discussion | 73–75 | |
| VIII | Conclusion | 76 |
II Introduction
There are before the court applications in the nature of summary judgment and striking out of parts of the respective cases. It is made both by the Claimant (“Ventura”) against the Defendants and by the Defendants against Ventura. It is in respect of an issue whether an email dated 18 January 2021 (“the 18 January Email”) from Mr El Husseiny to the First Defendant (“DNA”) gave rise to a binding obligation to subscribe for shares in DNA to an amount of £40,000,000, and if there was such an obligation, whether it was varied and/or abrogated.
The underlying proceedings are to the effect that the investment of Ventura was procured by fraudulent misrepresentation. Whatever happens on these applications, it will not dispose of the action in that the claim for fraud remains to be tried.
Ventura acts in these proceedings on behalf of the two Cayman exempted Limited Partnerships/investment funds, namely Ventura Capital LP Fund IV and Ventura Capital MG1 LP Fund. It sues as the general partner of those funds and references to Ventura are to it in those capacities.
DNA is a medical and health technology company in the business of supplying products for rapid PCR testing for Covid-19 and providing genetic services intended to nudge users to a healthier lifestyle. The Second Defendant (“Professor Toumazou”) is a co-founder of DNA and a shareholder in and director of DNA. The Third Defendant (“Mr Lyons”) was formerly the in-house general counsel of DNA.
In about late 2020 to early 2021 DNA was seeking to raise significant funding from investors in reliance on a substantial contract for the supply of clinical products to the NHS worth up to about £161m (“the DHSC Contract”).
Over the course of 2021, Ventura made investments in DNA in a sum of almost £40m by way of subscription for shares in DNA. It alleges that it was induced (in the cae of £30 thereof) to do so by fraudulent misrepresentations made by the Defendants concerning the commercial performance of DNA's business. These are alleged to have consisted principally of misrepresentations concerning DNA's relationship with its then main customer, the Department of Health and Social Care (“the DHSC”). They related in particular to the status of the DHSC Contract for the provision of Covid test kits. Ventura claims damages for fraudulent misrepresentation and/or unlawful means conspiracy against all Defendants and further (against DNA) for damages under s.2 Misrepresentation Act 1967 and breach of contract.
In the Defence and Counterclaim, the Defendants deny every element of the claims based on fraudulent misrepresentation and related wrongs. They also say that the alleged misrepresentations occurred after 21 January 2021, by which time Ventura was already contractually bound to invest a further £40m into DNA. They say that that occurred as a result of the 18 January Email. The Defendants rely upon this as (a) providing a complete defence to Ventura's claim; and (b) founding a counterclaim of approximately £10m (being the difference between the further amount which they say Ventura was obliged to invest in DNA and the further amount which it actually did invest).
Ventura denies that the 18 January Email gave rise to an obligation to subscribe to shares in DNA to a total value of £40m (on top of an initial subscription in the amount of about £10m). DNA has made a counterclaim against Ventura for a sum of £10,242,596. This is the extent to which the sum of £40m exceeds the shares to which Ventura has subscribed.
III The contractual documents
Ventura and DNA negotiated terms of an investment to be made. On about 7 October 2020 Ventura and DNA agreed heads of terms concerning a proposed investment by Ventura in DNA (“the Heads of Terms”). Its purpose was to summarise the terms on which Ventura was to invest in DNA. It expressly provided that its terms were not intended to be exhaustive and were not binding (save to the extent that the contrary was expressly stated in the Heads of Terms itself).
The Heads of Terms included the following terms:
(i) Clause 1.1 identified the shares which DNA was to receive for its investment.
(ii) Clause 1.2 provided for the relevant “Investment Round” to be in a sum of up to £50m.
(iii) Clause 1.4 (which was stated to be legally binding) provided for Ventura to pay a “Ventura Deposit” of £502,999 by 30 November 2020, in return for which it was to receive 214 shares in DNA at a price of £2,350 per share.
(iv) Clause 1.5 (which was stated to become legally binding upon payment of the Ventura Deposit) provided Ventura with an option to make “the Initial Ventura Investment” of £10m within 60 days of the Heads of Terms (i.e., by 6 December 2020). In return, it was to receive shares in DNA at a price of £2,350 per share.
(v) Clause 1.6 (which was stated to be legally binding upon completion of the Ventura Deposit and the Initial Ventura Investment) granted Ventura an option to invest a further £15m in DNA. The amount of the further investment (defined as “the Subsequent Ventura Allotment”) which Ventura wished to make pursuant to this option was to be notified to DNA within 60 days (i.e., by 6 December 2020). The Subsequent Ventura Allotment was to be completed within 90 days (i.e., by 5 January 2021).
(vi) Clause 3.3 stated that the Heads of Terms was subject to the conclusion of definitive legally binding agreements relating to the Investment Round.
In October 2020, pursuant to the Heads of Terms, Ventura paid to DNA the sum of £502,900.
On about 19 November 2020, Ventura and DNA agreed a term sheet (“the Term Sheet”). Its purpose was to provide an updated summary of the terms on which Ventura was to invest in DNA. It expressly provided, subject to certain specific exceptions which are not relevant for present purposes, that its terms were not binding. Among its terms, it provided as follows:
(i) Clause 1.1 identified the shares which DNA was to receive for its investment.
(ii) Clause 1.2 provided for the relevant “Investment Round” to be in a sum of up to £50m.
(iii) Clause 1.4 acknowledged that Ventura had paid the Ventura Deposit of £502,999 and stated that the shares in DNA which were to be issued to Ventura in return for that payment would be issued to Ventura upon completion of the Initial Ventura Investment.
(iv) Clause 1.5 dealt with the Initial Ventura Investment. It provided that Ventura would have the right to subscribe for up to £10m worth of shares in DNA (at a price of £2,350 per share). The right to subscribe for these shares was stated to last for 60 days from the date of the Term sheet – i.e., until 18 January 2021.
(v) Clause 1.6 dealt with what the Term Sheet refers to as “the Subsequent Ventura Allotment”. It granted Ventura the right to subscribe for up to £40m worth of shares in DNA (at a price of £2,350 per share). It provided that Ventura was to notify DNA of the amount of the Subsequent Ventura Allotment which it intended to take up within 60 days of the date of the Term Sheet (i.e., on or before 18 January 2021), and that the Subsequent Ventura Allotment was to be completed within 90 days (i.e., by 17 February 2021).
(vi) Clause 3.3 stated that the Term Sheet was subject to the conclusion of definitive legally binding agreements relating to the Investment Round.
On about 17 December 2020 Ventura sent a letter to DNA concerning its subscription for shares in DNA which letter was ultimately agreed and signed by both parties (“the Subscription Letter”). It was expressly provided that “the parties acknowledge and agree that the terms of this subscription letter agreement are binding and irrevocable between the parties, subject to the conditions set forth herein”. The Subscription Letter provided among other matters that subject to obtaining the approvals as therein defined (which were obtained by 21 January 2021):
(i) Ventura thereby irrevocably applied and subscribed for the issuance and allotment of 4256 shares for the amount of £10,001,600 (the “Initial Subscription”). This was a price of £2,350 per share;
(ii) DNA granted Ventura “the first right to apply and subscribe for the issuance and allotment of up to 17,021 shares for the amount of up to GBP40,000,000 (“the Subsequent Subscription”).
It was further provided:
“Ventura will notify [DNA] in writing of the specific amount of its commitment for the Subsequent Subscription on or before 18 January 2021...
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