Hawksford Trustees Jersey Ltd v Stella Global UK Ltd & Anor

The structure of this judgment is as follows:

Introduction

This judgment follows the trial of one of the claims advanced in these proceedings, which is a claim for rectification of a contract (‘the SPA’) for the sale and purchase of the entire issued ordinary share capital of a company, The Global Travel Group plc (‘Global’). The issue is whether or not the SPA should be rectified so that, when determining Global’s EBITDA (Footnote: ¹) for the year ending 31/12/07 (‘2007 EBITDA’), there should be specifically excluded all consultancy payments made by Global to its former consultant, Mr George Begg, in that year (‘the 2007 consultancy payments’). Since according to Global’s records the relevant payments in that year amounted to £708,800, and since the minimum earn out consideration payable under the SPA is 7 x 2007 EBITDA, it can be seen that the financial value of this claim may be as much as £5M.

Although the Claimant’s primary case is that its desired result can be arrived at by a process of construction of the relevant terms of the contract, it has always accepted there are real difficulties with this argument, which its counsel Mr Gourgey QC described in his closing submissions as ‘not the easiest route to give effect to what the parties intended’. This was an entirely realistic assessment of the position, for two very good reasons: (a) the relevant terms of the SPA are both clear and, on their clear wording, inconsistent with the Claimant’s suggested construction; (b) without reference to the pre-contract negotiations – which is, on the current state of the law, inadmissible when construing (as opposed to rectifying) a contract – there is no basis for an argument that the relevant factual matrix demonstrates that ‘something must have gone wrong with the language (Footnote: ²)’.

Accordingly, although the Claimant has not abandoned its case on construction, in reality this case has been fought on the battlefield of rectification. As to that, the Claimant’s case is that all of the parties to the SPA, alternatively all of the parties to the SPA with an interest in the calculation of 2007 EBITDA, executed the contract under a common mistake, wrongly believing that the SPA as executed accorded with their continuing common intention that Mr Begg’s 2007 consultancy payments should be excluded when determining 2007 EBITDA.

The Defendants however argue that the Claimant has not established by convincing proof that there was any such common intention or common mistake. They say that the most the evidence establishes is that Mr Begg may have been operating under a mistake. However, even if he was, they say that he was not the relevant decision-maker so far as the Claimant trust company is concerned, so that his intention is not to be attributed to the Claimant itself, who they say had no such intention. They also say that it has not been established that those negotiating the SPA on behalf of the Defendants, being respectively the purchaser company and the guarantor company, were either mistaken or, even if they were, that they were the relevant decision-makers. They submit that the other party to the SPA, Mr Andrew Botterill, being the holder of a minority shareholding in Global, did not share in any common intention and did not execute the SPA under a mistake, and they submit that rectification cannot be ordered against the Defendants in circumstances where Mr Botterill, although not a defendant, had an interest in the SPA as an entire contract and also in the relevant provisions the subject of this claim.

The Defendants submit that the absence of convincing proof of mistake is particularly compelling in a case such as the present where: (a) there is a complex commercial contract, containing an entire agreement clause, the subject of detailed and lengthy negotiations and drafting, involving both the parties, who were experienced businessmen, and their lawyers, who were highly experienced in the field; (b) the SPA as executed was specifically approved by all of the parties before execution; (c) the process of negotiation, drafting and approval happened not just one but three times because, following its original execution, the SPA was subsequently the subject of a draft variation agreement and then the subject of a renegotiation, amendment and re-execution; (d) the amended SPA was entered into against the background that the parties knew that a third party, CVC, who was in the process of acquiring Global, was also involved in the discussions about and the drafting of the amended SPA, and would place reliance on what the amended SPA said, not what some of the parties may have believed that it should have said.

The Claimant contends that it has a complete answer to all of these points, and that this is on proper analysis a clear case where rectification can and should be ordered.

In the course of the trial I heard evidence from 7 witnesses, being: (1) Mr George Begg; (2) Mr Rolf Krecklenberg; (3) Mr Matthew Fleetwood; (4) Mr Andrew Botterill; (5) Mr Michael Lion; (6) Mr Andrew Laurie; (7) Mr Steven Robinson. I was provided with full written opening submissions. On the final day of trial I heard oral closing submissions, which were supplemented the following week by written closing submissions and short responsive written submissions. I pay tribute at the outset to the high standard of preparation of the case for trial and, in particular, express my gratitude to the Claimant’s solicitors who made their Manchester offices available to hear evidence by video-link from the witnesses based in Australia due to compatibility problems with the court’s video-link facility. I also pay tribute to the quality of the advocacy, both written and oral, on both sides.

Given that this case involved the negotiation and re-negotiation of a substantial and important contract, not just once but twice, it is not surprising that a substantial amount of documentation has been placed before me, comprising principally 10 files of chronological correspondence together with a number of other documents in various other files. The witnesses were cross-examined in some detail in relation to the contents of the contemporaneous correspondence, and other matters. I have attempted however to concentrate only on matters which are said by the parties and thought by me to be relevant to the issues which I have to decide.

Parties & relevant events

Global is an English company formed in 1993, which carries on business in the independent travel sector. At all relevant times prior to the SPA its shares were owned as to 97.99% by the Claimant and as to 2.01% by Mr Botterill.

The Claimant is a professional trust company, incorporated and based in Jersey. Mr Steven Robinson, from whom I heard evidence, is a trust company director of the Claimant. Other persons within the Claimant from whom I have not heard evidence, but who have featured in the case are: (i) Mr Stephen Carr, who dealt with matters whilst Mr Robinson was not available to do so; (ii) Mr Michael Powell, a director of the Claimant and a qualified English solicitor who was involved in reviewing the original SPA; (iii) Mr Jason Bloom, an in-house lawyer with the Claimant, who was also involved in reviewing the original SPA.

Mr Begg was at all relevant times a consultant to Global and an adviser to its board of directors. He appears to have been very much the strategic mind behind Global’s successful development as a business. Under a written consultancy agreement made 1/02/03 Mr Begg (Footnote: ³) agreed to provide consultancy services to Global for a remuneration to be ‘set according to the specific project or service undertaken’. As I noted in paragraph 2, in the year ending 31/12/07 the total invoice value rendered under that agreement amounted, according to the documents in Bundle E, to £708,800. Global was also the owner of certain expensive forms of transport, namely two jet planes, a helicopter, a catamaran, and two cars, all of which it placed at the disposal of Mr Begg, and which were commonly referred to as his ‘toys’ (‘the assets’). The costs associated with these assets amounted to a further £228,100 (Footnote: ⁴) in 2007 (‘the 2007 asset costs’). There is no suggestion that any of this was hidden or in any way improper; thus the payments were included in Global’s statutory accounts, and Mr Begg declared and paid tax on his private use of the assets.

Mr Botterill was at all relevant times and still is the CEO of Global. It appears that he had worked very closely with Mr Begg to make Global a successful company. His evidence was that earlier in 2007 he had reached an oral agreement with Mr Begg at a meeting at Mr Begg’s house that, should a sale of Global’s shareholding be achieved, he would be entitled to require an upfront fixed payment of £2M (on the basis of an overall share valuation of £100M) rather than to take the risks associated with a deferred earn out consideration. Mr Begg did not in his evidence dispute that this had been agreed. It was Mr Botterill’s case and evidence that, before the original SPA was entered into, Mr Begg had sought to renege on this agreement, and that this was the reason why there was no provision for Mr Botterill to receive a fixed upfront payment of £2M in the original SPA. Mr Botterill’s evidence was that this only went into the amended SPA when Mr Begg had to give way to Mr Botterill’s demand for the original agreement to be honoured as the ‘price’ for Mr Botterill agreeing to other revisions to the SPA in Mr Begg’s wider interests. In contrast, Mr Begg’s evidence was that he had always been willing to support Mr Botterill in his demand for a £2M up-front payment, and the reasons why it was not provided for in the original SPA were, first, that the purchaser was not willing to agree to this and, second, that on the basis of tax advice received from the accountants, Deloittes, Mr Botterill was willing to accept an undocumented assurance from the Claimant in lieu of a formal provision in the SPA. Although the resolution of this dispute did not appear to have any wider ramifications so far as the rectification claim is concerned, since there was a fundamental conflict between the two men which was relevant to their respective overall credibility, I will need to resolve the issue as part of my judgment in this case.

The First Defendant (‘Stella UK’) is a UK company and the UK arm of a global travel company, the Stella Group. In 2007 it was owned by an investment bank known as MFS Ltd. The Second Defendant (‘Stella Holdings No 1’) is an Australian company which is part of the chain of holding companies of Stella UK. On 29/02/08 MFS sold its interest in the Stella group companies to CVC, an Australian based multinational private equity fund manager. At all times relevant to the negotiation of the original and amended SPA: (a) the managing director of Stella UK was Andrew Laurie; (b) the CEO of the Stella Group was Rolf Krecklenberg, who was also a director of Stella UK and Stella Holdings No 1; (c) the general counsel for the Stella Group was Daniel Bender. The two directors of CVC involved in the acquisition of the Stella Group were Michael Lion and Ben Keeble.

In late July 2007 initial discussions began regarding the potential acquisition by Stella UK of Global’s shareholding. It is clear that both parties were interested in principle in exploring matters further. There was a meeting on 16/08/07, at which a PowerPoint presentation was made which referred to Global’s ‘key management’ as being Mr Botterill as CEO and Jens Penny as financial director, and to its shareholding as being ‘98% The Bald Eagle Trust (George Begg is beneficiary), 2% Mr Botterill’.

On 17/08/07 Mr Begg e-mailed Mr Laurie a document headed ‘The Global Travel Group plc – background note for Stella Group’. This was a detailed 9 page document containing information about Global under 9 sub-headings. For present purposes it is relevant in that:

More financial details were contained in two versions of an excel spreadsheet e-mailed by Jens Penny to Mr Laurie, copied to Mr Begg and Mr Botterill, on 28/08/07 and 3/09/07 respectively. The document contained more detailed financial information, which again showed that shareholder costs had been added back to statutory EBITDA to arrive at underlying EBITDA.

By late September 2007 discussions had progressed sufficiently for it to be agreed that a senior Stella executive would travel to the UK to see if a deal could be negotiated. After some delay a meeting was held over 2 days on 12 & 13 November 2007 in London, involving Mr Krecklenberg as the senior Stella executive together with Mr Bender, Mr Laurie, Mr Begg and Mr Botterill.

It was Mr Begg’s evidence that at this meeting he explained the nature of the ‘shareholder costs’, explaining that around £700,000 of the £1M related to his 2007 consultancy payments and around £300,000 related to the 2007 asset costs. He said that, either at this meeting or in a subsequent telephone call, Mr Krecklenberg agreed that Stella had no interest in retaining the assets and also agreed that the shareholder costs should be excluded from the calculation of EBITDA. He said that none of this was controversial. Mr Krecklenberg’s evidence was to similar effect, saying that this was not unusual in his experience when considering the purchase of a private company.

On 14/11/07 Mr Begg sent an e-mail to Mr Laurie, copied to Mr Botterill, which set out 3 alternative proposals for the transaction to proceed. It is relevant to note in the context of the dispute between Mr Begg and Mr Botterill that in none of the proposals was any fixed upfront payment being proposed.

Following the meeting there was a further conference call, as a result of which an agreement was reached in principle. On 17/11/07 Mr Krecklenberg sent a first draft Heads of Agreement. It envisaged that the SPA should be finalised by 28/11/07. The commercial basis of the agreement was that the Claimant and Mr Botterill would receive deferred consideration after a 3 year earn out period, the earn out consideration being 6 x 2010 EBITDA, but with a minimum earn out consideration (‘MEOC’) of 7 x 2007 EBITDA payable in any event. There was to be an advance payment of £8M, to be used to settle specific liabilities of Global. Mr Begg was to continue as a consultant for the 3 year earn out period and to receive £1M pa in that period, which was to be deducted from the earn out consideration.

There are 2 bullet points on p.2 said to be relevant to the ascertainment of 2007 EBITDA. The first (point 5) is that the 2007 EBITDA is said to be ‘assumed to be in the region of £4.2M’, which is consistent with the adjusted figure provided in the financial information to which I have referred, i.e. after adding back the shareholder costs. The second (point 8) is that it was specified that ‘all EBITDA calculations historical and future are free and clear of any abnormals and are not normalised save for George’s consulting costs’. Mr Begg’s response to this, in the revised draft Heads of Agreement which he sent the next day, was to add comments to bullet points 5 and 8 as follows:

When cross-examined about this, Mr Krecklenberg agreed with Mr Stewart QC for the Defendants that this was as ‘clear as mud’.

There was then a further conference call followed by a further revised Heads of Agreement sent by Mr Begg to Halliwells, copied to Mr Krecklenberg, Mr Bender and Mr Botterill. In this version:

There was then a further telephone conversation between Mr Begg and Mr Krecklenberg, following which Mr Begg sent an e-mail, copied again to amongst others Mr Botterill, which included the following:

Mr Krecklenberg’s reply was to the effect that these comments were accurate.

As envisaged, solicitors were instructed in order to draw up the SPA. The solicitor for the vendors (i.e. the Claimant and Mr Botterill) was the Manchester firm Halliwells LLP, which had a large and well-established commercial practice. The solicitor for the purchaser was also a Manchester firm, a niche commercial firm known as Heatons LLP. Tim Jackson-Smith and Karen Procter were the solicitors involved at Halliwells, and Matthew Fleetwood was the solicitor most involved at Heatons. I heard from Mr Fleetwood, although he said little if anything of direct relevance to the issues in this case. The Claimant did not call Mr Jackson-Smith nor Ms Procter, although I was given to understand that this may be because Mr Begg blames Halliwells for the fact that the amended SPA did not accurately express what he says was agreed in relation to the calculation of 2007 EBITDA.

The Claimant has disclosed a number of e-mails passing between Mr Begg and Halliwells, waiving privilege in the same. Neither party has given full disclosure of all communications with their respective solicitors, nor have they provided voluntary disclosure – insofar as they were able to do so - of the contents of their respective solicitors’ files. A point was taken by the Defendants pre-trial that the Claimant was obliged to give full disclosure of all communications with its solicitors relevant to the issues in this case. This was resolved, without the need for a formal application, by the Claimant providing further voluntary disclosure. However nonetheless it remains the position that the court does not have the same full picture as it would have done had the Defendants provided voluntary disclosure of all communications between themselves and their solicitors, had the full contents of all of the solicitors’ files been put before the court, and had all solicitors involved been called to give evidence.

So far as the Claimant is concerned, it appears from the e-mail from Mr Begg to Halliwells of 19/11/07, attaching the further revised Heads of Agreement, that it was he who was dealing with Halliwells on behalf of the Claimant.

It was agreed that the parties and their solicitors should aim to sign contracts unconditionally by 27/11/07. The first draft SPA was produced by Halliwells on 20/11/07. It contains a definition of EBITDA in §4.8 which appears to be drafted principally with the content of post-completion accounts in mind. Further, although it refers to, it does not separately define 2007 EBITDA. There is no reference to any shareholder costs being deducted to arrive at EBITDA, whether consultancy payments or asset costs; indeed there is no reference at all to the assets. Although there is a definition of ‘Consultancy Agreement’ as being ‘the agreement to be entered into between Mr Begg and Global in the agreed form’, there is no provision requiring consultancy payments made under that agreement to be deducted from the earn out consideration payable to the vendors. It is obviously very much a first draft. Although the Defendants suggest that the wording of §4.1 indicates that Halliwells believed that the MEOC should be a specific figure, it seems to me that this is simply reflecting the fact that it is a draft.

It is common ground that subsequently there followed an intensive process of discussions and revisions to the draft. The Defendants observe that the agenda for a meeting scheduled for 21/11/07 shows that the topics of ‘earn out and protection’ and the consultancy agreement were matters for discussion.

There is very little in the way of documentary evidence as to the detail of the negotiations and drafting process from 21/11/07 through to execution of the original SPA on 27/11/07. This may be because the majority of the negotiation process appeared to have occurred at meetings held at Heatons’ offices, rather than by way of exchanges of e-mails and, as I have said, neither of the respective solicitors’ files has been disclosed. Specifically, I have seen no communication between the parties raising the question of the deduction of shareholder costs from 2007 EBITDA. There is a lengthy e-mail from Mr Bender to Mr Krecklenberg dated 24/11/07, recording proposals which Mr Begg was putting to him in relation to the consideration terms, including reference to the £1M pa to be paid to the Claimant / Mr Begg for the 3 years of the earn out period to be divided as to £900,000 advance earn out consideration and £100,000 through a consultancy agreement. There is a reference in that e-mail to consultancy payments having been ‘always added back on for the purpose of calculating the earn out EBITDA’, which appears to demonstrate Mr Bender’s contemporaneous knowledge of the treatment of these consultancy payments historically.

The only explanation from Mr Begg about this is that, due to the pressure of time, he simply did not appreciate that these draft versions of the SPA did not deal with this matter at all. Accordingly, the original SPA as executed made no reference to any specific exclusions from 2007 EBITDA (which was defined in §1 simply by reference to §4.7, which contained a general definition of EBITDA), whether in respect of the 2007 consultancy costs or the 2007 asset costs. It is, as I have said, the Claimant’s case that this was a pure omission, due to the pressures of drafting and completing the transaction in such a short space of time.

The original SPA did provide for the payment of £1M pa in the earn out period to be divided as to £900,000 (which under §3.1.2(c) Stella was to pay as part of the deferred consideration for the 3 years commencing 1/01/08, and for which credit would be given against what would be due under the earn out consideration once calculated) and the remaining £100,000 pa (which was to be paid under the Consultancy Agreement as specifically defined), for which there was no provision for credit to be given against what would be due under the earn out consideration.

In addition to the provisions for earn out consideration to be calculated by reference to 6 x 2010 EBITDA with a minimum earn out of 7 x 2007 EBITDA, there was also a separate provision for the calculation of the earn out consideration in the event of an ‘Exit’, defined as either completion of a sale of a controlling interest in the shares of Stella UK or – in short - a public listing. This is relevant given the subsequent events of early 2008 when CVC acquired MFS’ interest in the Stella group.

It is common ground that the original SPA contained no separate provision in relation to the consideration payable to Mr Botterill, so that he was to receive payment on the same deferred basis as was the Claimant. The guarantor under the original SPA was MFS Limited, the ultimate holding company of Stella UK.

Initially little or no documentary evidence relating to the involvement of the Claimant in the run-up to 27/11/07 was disclosed. The only reference to the position vis-à-vis Mr Begg and the Claimant was in §7 of Mr Begg’s witness statement where he said that he was ‘the Trustee’s representative to [Global]’ and that he ‘had authority to negotiate on behalf of the Trust’. It is not surprising that the matter was dealt with so shortly, because in the Defence no positive case was advanced to contradict the assertion in §3 of the Particulars of Claim that ‘at all material times Mr Begg acted as the Claimant’s representative and in that capacity liaised with the Company and the Defendant’. It was only in the Defendants’ written opening submissions that it was first positively stated that there was an issue as to whether Mr Begg’s intentions could be ascribed to the Claimant. As a result of this issue arising: (1) the Defendants asked for, and the Claimant provided, some further disclosure on the point; (2) the Claimant obtained and disclosed a witness statement from Mr Steven Robinson made 22/01/11; (3) Mr Gourgey QC asked Mr Begg in examination in chief about the basis for his statement in §7.

In his examination in chief, Mr Begg gave a lengthy answer to the effect that: (a) everyone understood at the time that he was the decision maker; (b) up to the meetings of 12-13/11/07 he had no specific authority from the Claimant to do anything; (c) at that point, once it became clear that the outcome of the meetings was that terms had been agreed which were acceptable in principle to those involved in the negotiations, he made contact with the Claimant and ‘it was agreed that we would sell the company so long as I was happy with the terms of the SPA and that I was to agree the terms of the SPA specifically’. He said that there were 2 reasons for this agreement: firstly, that given the anticipated short timescale it would not be possible for him to revert to the Claimant at every stage in the negotiations; secondly, that the Claimant was happy for him to do so, since he had and they did not have the expertise to negotiate and agree the detailed terms, but so long as they were protected by ensuring that, before entering into the SPA, they had his written confirmation that he was happy with the terms of the SPA. He said that, relying on that authority, he instructed Halliwells on behalf of the Claimant and dealt with them on the basis that he was the decision-maker, and also that he did not at any time seek authority from the Claimant on any point arising.

Under cross-examination Mr Begg did not suggest that it was his decision whether or not to enter into the SPA, but he maintained that the terms of the SPA were for him to agree. He appeared at one point in his cross-examination to suggest that, having agreed with the Claimant in principle that the shares would be sold to Stella, once he had agreed the terms of the SPA they would have had no power to prevent the sale, although in fairness to him that was an answer given in response to a hypothetical question put to him. He was cross-examined in relation to §6 and 30 of his witness statement dated 30/03/09 made in earlier proceedings, where he said:

Mr Begg said that §6 was a statement of the general position, which changed after his discussion with Mr Robinson, and §30 was a statement which was specific to the issue which arose in that case. He denied that he had given the evidence about his discussion with Mr Robinson in order to deal with the argument about whether or not he was the decision maker.

Later in his cross-examination he said that he had agreed with Mr Robinson that he ‘should make the agreements for all the matters – and the SPA - and then inform them of that agreement’, and that ‘I could bind the trust on anything to do with the SPA but I couldn’t sign it, I couldn’t execute it’.

I turn then to Mr Robinson’s evidence. Mr Robinson is a professionally qualified trustee who has been with the Claimant since 1997. His witness statement included the following:

Under cross-examination Mr Robinson accepted that the Claimant had never exercised the power conferred by §14 of the trust deed to delegate its power to Mr Begg. He said that the Claimant had through him orally delegated authority to Mr Begg to negotiate the commercial terms of the SPA, but that he had made it clear that the Claimant reserved the right to execute the SPA. He was referred to his second witness statement made in the earlier proceedings, where dealing with an assertion from Mr Botterill that the Claimant had ‘clearly delegated their decision making to Mr Begg’, he stated that whilst the Claimant would when making decisions consider the views of Mr Begg as a beneficiary, on some occasions it would take independent legal advice, and ‘all decisions are taken by the trustees’. He said that it was the Claimant which took the decision to sell the shares, and that the Claimant could not be bound by Mr Begg or other than by its own execution of the SPA.

On the day after he had given evidence Mr Robinson produced 2 ‘billed time and expenses reports’ for the Bald Eagle Trust, which recorded the dates and time spent by the Claimant’s personnel from 9/10/07 to 31/12/07 and from 3/1/08 to 4/3/08, each of which provided a brief narrative against each entry, from which some idea could be gained of what the Claimant was doing over the relevant period. The picture which emerges from this further disclosure, when read with his evidence and the e-mails already disclosed, is that:

From 27/11/07 the parties were engaged in the due diligence process. On 22/12/07 Deloittes’ Sydney office, being Stella Group’s accountants, provided Mr Krecklenberg and Mr Bender with a draft financial due diligence report which included (at p22) a section headed ‘normalised EBITDA’ from which it is clear that the forecast normalised 2007 EBITDA excluded 2007 consultancy costs and asset costs, which were each specifically identified. (This section was not altered in the final version of the report issued on 8/02/08.)

In cross-examination Mr Lion confirmed that he would have seen the final version of the report, and would have been aware from reading it that the normalised EBITDA had been arrived at by adding back the consultancy payments and the asset costs.

At the same time the parties were in negotiations concerning a draft Deed of Variation. This was of relatively limited effect. Principally, it addressed a corporation tax issue which had arisen, but it also contained a provision for Mr Botterill to receive a guaranteed earn out consideration of £2M save in two cases: firstly if the total earn out consideration payable fell below £20M; secondly, if he left Global other than for specified good cause. It was signed by the Claimant and Mr Botterill in late December 2007 but, whilst revisions to its terms as requested by Stella were in progress, events were overtaken in around mid January 2008 when it became known to all parties that CVC were in discussions with MFS to acquire its majority interest in Stella.

So far as the Claimant is concerned, Mr Begg emailed Mr Carr on 21/12/07 to say that there would be a ‘few small changes to the SPA which will be forwarded to you very soon. Can you confirm that you will be able to review it and have it signed before the end of the month’. The draft Deed was then sent to Mr Carr on 24/12/07, and the Claimant’s records show that Mr Bloom spent 30 minutes reviewing it on 28/12/07 and that it was executed on behalf of the Claimant on 31/12/07 and forwarded to Halliwells on the same day. The picture painted therefore is that the Claimant was perfectly willing to enter into the deed on the basis of what it was told by Mr Begg, subject only to a short review by its in-house lawyer Mr Bloom.

It is clear that, for their own separate reasons, both Mr Begg and Mr Krecklenberg were keen to ensure that if the CVC transaction proceeded it would not fall within the definition of an Exit under the SPA. To that end, negotiations were re-opened with a view to re-defining an Exit both to secure this objective and to ensure that for the future there was more clarity as to what would and what would not fall within this definition. It appears that at the same time the opportunity was taken by both the Claimant and Stella to propose other amendments to the SPA to pick up other matters which it was considered had been overlooked in November 2007. Both Mr Begg and Mr Krecklenberg said that it had always been recognised that because the original SPA had been driven through at such speed there might be a need for this to be done.

Thus by e-mail of 12/2/08 Heatons identified four particular matters which Stella wished to address, and on 13/2/08 Mr Begg sent an e-mail to Mr Bender identifying 7 items which he said had been ‘agreed but not incorporated properly’. The first item stated:

On 14/02/08 Heatons sent a first draft amended SPA to Halliwells. The proposed amendments contained nothing of relevance to the calculation of 2007 EBITDA. The covering e-mail revealed that CVC’s lawyers Mallesons, a Sydney law firm, were already involved in the process. Although it did not suggest that any amendment was subject to their approval, Mr Krecklenberg confirmed under cross-examination that he was aware that ‘unless CVC was happy with the terms of the deal he could not enter into it’. When asked whether he made this abundantly plain to Mr Begg he said that ‘Mr Begg was party to all the conversations’. He said that the contact person at CVC was Mr Lion, and that he was the person who would have given Mr Bender the green light to sign off the amended SPA.

Mr Begg’s evidence was that it was only on reviewing the draft amended SPA produced by Heatons that he first became aware that the original SPA had not made provision for the 2007 consultancy payments or the 2007 asset costs to be excluded from the 2007 EBITDA or, indeed, for the post-completion consultancy payments to be deducted from subsequent years’ EBITDA. He was not seriously challenged on this evidence, and I accept it.

On 17/2/08 Mr Begg sent what I regard as an important e-mail to Mr Bender providing his initial comments in 14 separate numbered paragraphs on the draft amended SPA. He was careful to explain that they were without the benefit of legal advice and also that he was not speaking for Mr Botterill, who would want to ‘take his own advice and make his own comments’. Points 1-3 are material to this case, and state as follows:

Point 1 arose because it was appreciated by Mr Begg that the existing guarantor, MFS, would have no significant continuing interest in or responsibility for Global if and when it sold its majority shareholding to CVC. It is readily apparent that point 2 is referring to the position in relation to the consultancy payments and the asset costs in relation to 2007 EBITDA, whereas point 3 is referring to the position in relation to payments to be made under the 2008 Consultancy Agreement. It is also to be noted that Mr Begg was making the financial significance of point 2 quite clear – i.e. that the point was ‘worth’ £7M.

Mr Bender forwarded this on to Mr Krecklenberg, who replied with a copy to Mr Begg to the effect that all these points needed to be resolved between Mr Begg and Mr Bender so that the agreement could be finalised and signed within 24 hours.

On 18/02/08 Mr Bender re-sent the e-mail to Mr Krecklenberg with his comments on each point attached, having as he said in the e-mail spoken to Mr Begg in the meantime. The comment against points 1- 3 read respectively:

AS FOR 2 ABOVE.

Mr Begg confirmed that he had indeed discussed the issues raised in his e-mail with Mr Bender and that they had agreed all matters save for one, which was the issue of the replacement guarantor. He confirmed this in an e-mail sent directly by Mr Begg to Mr Krecklenberg on 19/02/08 (Footnote: ⁷). He said that point 2 did not even need debating, because it was accepted as having been part of the original deal. When asked about this, Mr Lion said that Mr Bender had ‘broad instructions as to the issues we wanted clarified’ and otherwise that Mr Bender would have contacted him if there was something which he needed his input on. He said that although he could not specifically recall seeing this e-mail, he could recall discussions about excluding costs from 2007 EBITDA.

On the balance of probabilities I conclude from Mr Lion’s evidence that this is something which Mr Bender discussed and agreed with Mr Lion before speaking to Mr Begg. It is clearly not something which was part of CVC’s shopping list of matters requiring clarification, because it was not raised by Heatons on 12/02/08. I also consider that, although Mr Krecklenberg had authorised Mr Bender to agree all matters with Mr Begg, and although it appears that Mr Bender would not have regarded this as controversial, it is unlikely that Mr Bender would have wanted to agree this point, given that it was flagged up as being worth approximately £7M, without prior reference to Mr Lion. In any event, it is clear from Mr Krecklenberg’s e-mail that Mr Bender was being given specific authority to resolve these outstanding matters.

I am satisfied that, consistent with what he reported to Mr Krecklenberg in his e-mail, Mr Bender agreed with Mr Begg that the contract would be amended so as to make clear that Mr Begg’s costs, which as Mr Bender must have known from his involvement since November 2007 included both consultancy costs and asset costs, would be excluded when calculating 2007 EBITDA. It is clear in my judgment that Mr Bender must have known about both the consultancy and the asset costs together forming part of the c£1M 2007 shareholder costs, because he was present at the meetings of 12-13/11/07, where Mr Krecklenberg accepts he was made aware of both costs, and he was shown and presumably would have read the Deloittes’ due diligence report, and noted what was said about 2007 EBITDA. It is clear from his subsequent involvement in events later in 2008 that he was fully aware of and did not disagree with the principle that both costs should be excluded from 2007 EBITDA.

On 20/2/08 Mr Bender sent an e-mail to Mr Begg enclosing a further revised amended SPA as drafted by Mallesons. There was no revision to the definition of 2007 EBITDA, but there was a new §4.1.15, which provided that ‘any payment made pursuant to the Consultancy Agreement … will be deducted from the earn out consideration due to the Trust Seller’, and there was also a new §4.8.1.1(h), which made it clear that there should be deducted for the purposes of calculating EBITDA ‘any payment made pursuant to the Consultancy Agreement’. Because Consultancy Agreement was in title case, it clearly referred back to the definition in §1, which was unchanged from the original SPA. Thus it can be seen that Mallesons had taken on board point 3 made in Mr Begg’s e-mail of 17/02/08, which of course it was in their client’s interests to ensure was in the amended SPA. Although they had not made any express amendments to take on board point 2, there was no suggestion in the covering e-mail that there was any issue about that.

On 22/02/08 at 12:42 Karen Procter sent an email to Mr Begg where she included her own comments on his e-mail of 17/02/08. In relation to points 1-3 her comments were as follows:

On 22/2/08 at 13:41 Mr Begg sent what I regard, together with its reply, as perhaps the most important e-mail in the case, to Mr Bender copied to Karen Procter and Mr Botterill. As material it reads as follows:

Mr Begg’s evidence was that he sent this before he had read Karen Procter’s e-mail of earlier that day. Mr Begg said that on reading Karen Procter’s e-mail of 22/02/08 he failed to appreciate the significance of the use of title case in Consultancy Agreement. Accordingly, he said that he assumed that this referred to the 2007 consultancy payments as well as those payable under the 2008 Consultancy Agreement. He said that accordingly, whilst he picked up from Karen Procter’s question that the draft still did not include the asset costs, he did not pick up that it did not include the 2007 consultancy payments. He said that he spoke to Karen Procter and instructed her accordingly.

Mr Botterill accepted in cross-examination that he had read that e-mail at the time and that if he had disagreed with anything in the e-mail he would have communicated his disagreement to Karen Procter. He accepted he did not do so. He said that he did not specifically agree or disagree with point 2, on the basis that if – as appeared from the face of the e-mail - Mr Begg and Stella had agreed about this then he was happy with it. He disputed that he had indicated to Mr Begg that he was happy with these principles, saying that he would only have discussed matters with Karen Procter not with Mr Begg at that stage. He agreed however he had not contested the statement to that effect in Mr Begg’s e-mail at that time. The conclusion I draw is that, whilst I accept that there is no evidence that Mr Begg had sent him the e-mail and he had approved its contents before it was sent to Mr Bender, Mr Botterill did on receipt take the view that if Stella was happy with it then so was he.

The subsequent e-mail from Karen Procter to Mr Begg dated 22/02/08 and timed 17:12 enclosed a revised draft SPA which, for the first time, included an amendment to the definition of 2007 EBITDA so that it read (new text underlined):

I should record that §7.1.4 referred to the transfer of the assets at market value from Global to a company of Mr Begg’s choosing.

That produced a reply from Mr Botterill which said simply ‘Looks fine for me Karen’. Mr Botterill accepted after some questioning that he had assumed, on reading the e-mail from Karen Procter which itself referred to the comments made by Mr Begg in his previous e-mail, that she had taken into account those comments in her attached draft. He also accepted that his reply indicated that he was happy for her to have done so.

The e-mail records show that Mr Bender forwarded Mr Begg’s e-mail of 22/02/08 on to Mr Lion, asking for his comments ‘asap’, who replied to say ‘Going through it now. Will call shortly.’

On 23/2/08 Mr Bender responded to Mr Begg’s e-mail of 22/02/08 at 13:41. His response, which as I say I also regard as of crucial importance in this case, was copied to Karen Procter and to Mr Botterill, and read ‘I have spoke to CVC about these points and set out replies below’. The original version of Mr Begg’s e-mail of 22/02/08 was set out below with replies in upper case added to the end of each numbered paragraph. The reply to point 1 was simply ‘NOTED’, whereas the reply to point 2 was ‘AGREED….WILL WAIT TO SEE THE DRAFTING’. It is worth observing that as against points 3 and 4 there were similar but not identical references to awaiting the drafting.

When asked about this Mr Lion said that he would have discussed this with Mr Bender, and that Mr Bender would have responded on the basis of what they had discussed. When asked whether this meant that he agreed with the principle that Mr Begg’s costs should be added back to the 2007 EBITDA he agreed that that sounded reasonable, and that itself appears to me to be a perfectly reasonable assumption. He was asked by Mr Stewart what, on the assumption he used the words which Mr Bender included in the e-mail, he meant, and he suggested that he meant that he wanted to reserve the position until he had actually seen the words on the page.

In his evidence Mr Botterill said that he was fully aware that the reference to £1M costs included both the 2007 consultancy payments and the 2007 asset costs.

On 24/2/08 Mr Begg replied to Mr Bender, copied to Mr Botterill, attaching Halliwells’ revised SPA. He said ‘I hope you will be able to agree all points now, other than the exit clause’. The reference to the exit clause was a reference to the one matter which remained in issue, about which he had already e-mailed Mr Krecklenberg that day. He added:

The outstanding point still related to the issue of the exit, and negotiations relating to this continued into the weekend. On 24/02/08 Mr Begg proposed an alternative provision which it appeared was acceptable to the other side, so that Mr Bender wrote ‘I think we now have agreed on 5’, and asked for a copy of the redrafted contract. Mr Begg re-sent Halliwells’ earlier draft under cover of an e-mail from Mr Begg confirming that it had not yet dealt with the catamaran but that ‘otherwise I am happy with her drafting’, subject also to some changes to the wording of the exit clause.

On the Monday 25/02/08 Mr Begg e-mailed Halliwells, with a copy to Mr Botterill, saying that agreement had just been reached on the exit clause. He said ‘you need to hear from Mr Botterill to confirm his views’, asked Halliwells to expect a final draft from Mallesons, and noted that he had asked them to incorporate the catamaran into the list of assets for 2007 EBITDA. Later that day Mallesons sent to Halliwells a revised version of the amended SPA together with a group structure chart. This showed in effect that the new proposed guarantor, the Second Defendant (Stella Holdings No 1), was currently one of the intermediate companies between the ultimate holding company MFS Limited and the Stella Group Companies (of which the First Defendant, Stella UK, was one), whereas following the sale by MFS to CVC of a 65% interest in Stella the structure would be that the Stella Group Companies would be directly wholly owned by Stella Holdings No 1, whose ultimate holding company would be owned as to 65% by CVC through 2 intermediate companies and 35% by MFS through 1 intermediate company. The significant point about this was that the guarantor was still part of the Stella Group of companies, of whom Mr Krecklenberg was CEO, and he was also a director of Stella Holdings No 1. Indeed it appears that he was one of the two executive directors on the board of MFS. Moreover Mr Bender was general counsel therefore for Stella Holdings No 1 as well as for the other companies within the Stella Group.

The revised version of the SPA contained an amended version of the definition of 2007 EBITDA, by adding in the ‘catamaran’ to the list of assets, but otherwise contained no amendment relevant to this case. It appears that discussions continued on the terms of the exit clause and agreement was finally reached, whereupon the amended SPA was executed on 28/02/08.

The structure of the amended SPA was that there was a short Amending and Restating Agreement, which in summary provided for the amended SPA attached to the Amending and Restating Agreement to come into effect upon the date when CVC’s subsidiary acquired the 65% shareholding in the Stella Group. From that date MFS as original guarantor would be released and Stella Holdings No 1 would replace it as guarantor. The amended SPA was executed by Stella UK by Mr Bender as its ‘duly authorised attorney’, and by Stella Holdings No 1 by someone called Sunny Yang, who describes himself or herself as a director. No evidence has been disclosed by the Second Defendant about its corporate constitution, its officers or its management at the relevant time, nor as to what – if anything – was said or done internally prior to its entering into the amended SPA. The same, it should be said, is also true of the First Defendant, Stella UK. There has been no suggestion whatsoever in this case that at any time any limit on the authority of Mr Krecklenberg and/or Mr Bender was notified to Mr Begg or to anyone else for that matter.

The terms of the amended SPA were, as material to this case, unchanged from the final draft; thus there was the definition of 2007 EBITDA which made no mention of the 2007 consultancy payments and there were the provisions in §5.1.15 and §4.8.1(h) relating to the Consultancy Agreement (which remained defined as the agreement to be entered into in the agreed form and, thus, did not on its plain words extend to the consultancy agreement entered into in 2003.

The picture is similar to that which emerges in relation to the original SPA and the deed of variation, although the extent of the Claimant’s involvement appears even less than for the draft deed of variation and significantly less than for the original SPA. Thus the time report records and the email from Mr Begg to Mr Carr of 25/02/08 suggest that no advance notice of the intention to amend the SPA was given to the Claimant until 25/2/08, with Mr Begg asking the Claimant to ‘action it ASAP’, and that following a review of only 15 minutes by Mr Carr the amended SPA was executed by the Claimant on receipt of an e-mail from Mr Begg stating:

Before that, in his e-mail of 19/2/08 to Mr Krecklenberg, Mr Begg referring to his resolution of all but one point with Mr Bender, said ‘as far as I am concerned if they are incorporated into the new agreement as discussed the trustees will sign straight away’. There is also a line in Mr Begg’s e-mail of 22/2/08 to similar effect where, under item 5 point b) Mr Begg, referring to a commercial decision which was plainly taken by him as opposed to the Claimant, says ‘Andrew has agreed that this decision is made by the trust and he will go along with it’ (emphasis added).

The Claimant has been able to produce a draft resolution dated 26/02/08 which notes the reason for the amendment as being the introduction of a new guarantor, resolves that the amended SPA as prepared by Heatons be approved and authorises Mr Robinson and Mr Carr to execute the amended SPA. It appears that no signed resolution can be found at the Claimant’s offices.

In his evidence Mr Lion confirmed that CVC completed the purchase of 65% of the shareholding in the Stella Group on 29/02/08, contracts having been signed in late January 2008.

These are relevant only for the limited purpose of considering the reliability of Mr Botterill as a witness, so that I will deal with them in that section rather than prolonging this recital of the relevant events. I should simply record that it was not until 2009, when Mr Begg was already in dispute with CVC as the new owners of Stella, Mr Krecklenberg and Mr Bender having departed from the scene in the meantime, that it was asserted for the first time that the 2007 consultancy payments should not be excluded when calculating 2007 EBITDA.

Construction of the relevant terms of the SPA

I can deal with this shortly. It is necessary only to say that, for the reasons summarised in paragraph 2 above and set out in more detail in the Defendants’ opening and closing written submissions (at §42-49 and §12-19 respectively), the case on construction is really quite hopeless, and must be rejected. There is simply no proper basis for reading §4.8.1.1(h) as meaning all consultancy payments, whether made in 2007 pursuant to the earlier 2003 consultancy agreement, or – as the clause actually says - made pursuant to the Consultancy Agreement as expressly defined. On its clear and plain wording, it is expressly limited only to the latter. By reference to the terms of the SPA as a whole either by itself or when read in the context of the factual matrix (other than the pre-contractual negotiations, which as I have said and is common ground are relevant and admissible only on the question of rectification), it cannot be said that it is obvious that §4.8.1.1(h) could only have been intended to mean all consultancy payments or that not to read it that way would produce a nonsensical or obviously un-commercial result.

Conclusions in relation to the witnesses

In preparing this judgment I experienced some difficulty in reaching a firm conclusion as to how much weight I could place on Mr Begg’s unsupported evidence. My general impression of him was favourable; he listened carefully to the questions he was asked and gave what appeared to be careful, considered answers without appearing unwilling to answer difficult questions or to be selective in his recollection or obviously arguing his case as opposed to giving his genuine recollection. He also appeared to have a good recall of events, which generally appeared consistent with the contemporaneous documents. However, there was one aspect of his evidence about which I was not wholly convinced.

That was his assertion that he had agreed with Mr Robinson not only that he was authorised to negotiate with Stella but also to bind the Claimant to the terms which he had negotiated. That evidence was inconsistent with the evidence of Mr Robinson, and it was also inconsistent with the general thrust of his previous witness statement in the earlier proceedings. It was not supported by the contemporaneous evidence and, it seems to me, inherently unlikely to have been something which would have been discussed, let alone agreed by Mr Robinson, at the time. I find it difficult to accept that in or around mid-November 2007, before any issues arose as to the extent of his authority, Mr Begg and Mr Robinson would have had the foresight to have agreed what seems to me at least to be a subtle distinction between Mr Begg having authority to negotiate the terms and also to bind the Claimant to the terms, but not having authority to bind the Claimant to enter into the contract. As I hold later, I accept that this is what actually happened, i.e. that Mr Begg did indeed negotiate the SPA and did proceed on the basis that he had authority to agree the terms because the Claimant had no intention of reviewing his agreement to any terms other than those which directly affected its position, in particular the warranties which it was giving, but that is different from saying that this was something which was specifically agreed in advance. On the balance of probabilities I am satisfied that Mr Begg, as is not unusual in a case such as the present, has come to convince himself that something which actually did happen was agreed in advance.

I am therefore unable to place complete reliance on Mr Begg’s evidence by itself, particularly on that particular issue. However it is fair to say that in the main his evidence is supported by other evidence, either contemporaneous documentary evidence or other oral evidence which I accept, so that in general I do accept his evidence to the court.

I am afraid to say that for a number of reasons I found Mr Botterill’s evidence thoroughly unconvincing. Before descending into the detail of why that is so, I should record my general impression of him, which is that whilst giving evidence he unsuccessfully attempted to conceal what I am satisfied was a real personal antagonism towards Mr Begg, which made him determined to do him down in his evidence, and to support the defence being run by CVC as Stella’s ultimate owner, and of course therefore in substance his ultimate employer. He was also a thoroughly unsatisfactory witness because, despite repeated requests from Mr Gourgey QC and from me, he persistently failed to give straight answers to straight questions in cross-examination when he considered that to do so would not support his position. Instead he frequently took refuge in lengthy, evasive, irrelevant and argumentative answers. There were a number of respects in which his evidence was inconsistent with the contemporaneous evidence, and even with his evidence in his witness statement. Indeed, remarkably given the importance attached to it by the Defendants at trial, his statement contained no more than a passing reference to the £2M issue, and then one which in my judgment was inconsistent with the evidence he gave. I now refer to the following particular areas where I found Mr Botterill’s evidence unsatisfactory.

In §24 of his witness statement Mr Botterill appeared to me to be suggesting that at this point in negotiations a distinction was actually being drawn by the parties between the consultancy payments and the asset costs, because he said that ‘the principle of adding back costs was in fact agreed, but people’s views were different as to what costs were covered’. His evidence in §30 was to similar effect, and in §32 and §34 he advanced an explanation as to why the consultancy payments should have been regarded as different to the asset costs, so it is clear that this was not simply an infelicity of expression in his statement. In fact, however, there was absolutely no evidence that anyone had ever argued, either at this time or any other time during the negotiations either for the original or the amended SPA, that a distinction should be drawn between the two kinds of costs. There was no documentary evidence or witness evidence to support Mr Botterill’s evidence in this regard. Indeed, when he was asked about it under cross-examination he accepted that he was not aware of anyone taking issue at the time with the consultancy payments being added back. It seemed to me to be quite clear that what Mr Botterill was doing in his witness statement was to seek to advance this as a retrospective rationalisation for the fact that the amended SPA did distinguish between the two, even though – as he must have known – this was not something which had ever been articulated by anyone at any stage at the time.

When under cross-examination on this point Mr Botterill, when asked about §32, suggested that he was referring there not to the calculation of EBITDA for the purposes of the proposed SPA, but to the calculation of ‘statutory’ EBITDA, i.e. the figures used in the statutory accounts. It appeared clear to me however that §32 had clearly been intended as a reference to the former calculation, and that Mr Botterill’s answer was an attempt to avoid having to accept that this was a retrospective reconstruction of events by him to advance the Defendants’ case and damage that of Mr Begg. On any view it ignored the fact that he was quite happy at the time to be associated with the production and dissemination of financial information which did add back these costs to arrive at ‘underlying EBITDA’, both historical and projected.

Furthermore in §25 of his witness statement Mr Botterill said that he had read the reference in one of the drafts to ‘all EBITDA calculations historical and future are free and clear of abnormals and are not normalised, save for George’s consulting costs’ as meaning that Mr Begg’s consulting costs were not to be added back. Whilst I am prepared to accept that this passage is not completely clear, if anything is clear in my judgment it is that the intention being demonstrated was that Mr Begg’s consulting costs would be normalised, i.e. added back, and that the only reason why Mr Botterill was advancing a meaning which he must – I am satisfied – have known was not maintainable was because it would harm Mr Begg’s case.

As I have already recorded, the evidence which Mr Botterill gave at trial on this issue was not addressed in his witness statement save only in passing terms, which itself was inconsistent with the evidence he gave orally. I refer to §22, which conveys the impression that the agreement as to the £2M was initially made during the negotiations leading up to the original SPA rather than, as he said in evidence, many months before in early 2007, before Stella had come onto the scene. I refer also to §39 which records, without disputing, the explanation he says was given by Mr Begg as to why the original SPA had not included the £2M upfront consideration, which was simply that it had been ‘missed’.

I am satisfied that Mr Begg’s evidence on this issue is more convincing and, significantly, is more consistent with the contemporaneous documentation than is that of Mr Botterill. Thus:

In §44 of his witness statement Mr Botterill said that when he saw the revised draft from Karen Procter which made the changes to the definition of 2007 EBITDA he ‘assumed that [Mr Begg] was happy to proceed with just the costs of his toys being added back’. When asked about this in cross-examination he initially said that he had not made any assumption that there had been any change in Mr Begg’s position when he saw this draft. When taken to his witness statement he then said that he had assumed that Stella had changed their position. He then said that he had noticed the difference between Mr Begg’s earlier e-mail and the draft amended SPA at the time. He said he assumed it must have been Stella because he was ‘acutely aware that Mr Begg wanted all of those costs added back on’. He accepted that he would not have thought that Mr Begg would have made that type of concession. He said that nonetheless he assumed that he had done so. When asked about Mr Begg’s e-mail of 25/2/08 where he had said that Stella had accepted all of the points he wanted except the most important one, he suggested that this must have meant the consultancy costs even though the e-mail continued by making it clear that Mr Begg was referring to the exit clause. By this stage Mr Botterill’s evidence had become so inconsistent with his witness statement and his earlier answers that I am afraid I began to form the opinion that he was simply making up his evidence as he went along. I regarded his evidence that at the time he genuinely believed that Mr Begg had knowingly abandoned his intention to have the 2007 consultancy payments added back when calculating 2007 EBITDA as quite incredible. Mr Botterill’s suggestion that he genuinely believed at the time that Stella had suddenly, and contrary to its earlier stance, decided to object to this and that Mr Begg had simply accepted this without a protest, when all involved would have known that this was worth a significant amount of money if the consideration was to be paid on the minimum earn out basis by reference to 2007 EBITDA, is in my judgment quite risible.

A particular difficulty which Mr Botterill had to deal with under cross-examination was that his evidence about his understanding in February 2008 was completely inconsistent with his actual approach in July 2008 when, on being asked by Mr Bender what Global’s non-statutory EBITDA was for 2007, he was copied in with a reply from Mr Penny which showed that Mr Begg’s costs of £936,900 had been added back to arrive at underlying EBITDA. Mr Botterill initially accepted he was aware that the purpose of this request was for Mr Bender to understand what the EBITDA figure was for the purpose of the amended SPA, although he then sought to resile from that answer. He accepted that he had approved the reply from Mr Penny. It is quite apparent of course that this figure included, and must have been known by Mr Botterill to include, not just the 2007 asset costs but also the consultancy payments. He attempted to explain this, but I am afraid I found his answers completely unconvincing.

Although Mr Botterill had clearly anticipated this line of cross-examination, I note that he did not even attempt to deal with this in his witness statement (see §47, which was his only reference to post-amended SPA events).

This contemporaneous evidence, in my judgment, is completely inconsistent with his evidence that at the time of the amended SPA he genuinely believed that Mr Begg had abandoned his clearly communicated earlier position that his 2007 consultancy payments should be added back when calculating 2007 EBITDA.

It follows that, save where consistent with the contemporaneous evidence or where it is unchallenged, I am unable to place any reliance on Mr Botterill’s evidence.

I found all of the remaining witnesses genuine, credible, intent on assisting the court and, within the understandable limits of their recollection now in 2011 of the detailed events of 2007-2008, reliable.

Mr Gourgey QC submitted that Mr Fleetwood was an unsatisfactory witness by reason of comments he made about Mr Begg in his witness statement, concerning his suspicion that Mr Begg had been involved in pilfering from Global’s client account. Since Mr Fleetwood’s evidence was of no particular assistance to me in relation to the issues I have to decide I need not express an opinion one way or another as to whether the articulation of those suspicions adversely affects my view as to Mr Fleetwood’s credibility as a witness. It suffices for me to say that, whilst I have no doubt that they represent Mr Fleetwood’s genuine belief, there was no obvious factual basis for them on the material before me, and it is a source of surprise to me that Mr Fleetwood as a solicitor should have thought it appropriate to make reference to them in his witness statement when they were of no obvious relevance to the matters with which his statement ought to have been concerned. If they were intended as an exercise in mudslinging, they failed to achieve their desired effect.

Requirements for common mistake rectification

There was no dispute between counsel as to the applicable requirements for common mistake rectification.

Thus, quoting from the Claimant’s closing submissions:

And quoting from the Defendant’s closing submissions:

Did the Claimant enter into the amended SPA under a mistake?

Who was the decision-maker?

This has proved to be a question of particular controversy and significance in this case. The particular issue to which this point is relevant is whether the Claimant was operating under a mistake about whether or not the relevant terms of the SPA accorded with what it contends was the parties’ common continuing intention that Mr Begg’s 2007 consultancy payments would be added back when calculating 2007 EBITDA.

The relevant legal principles are referred to in the recently published textbook by HHJ David Hodge QC, Rectification – The Modern Law and Practice Governing Claims for Rectification for Mistake (1^st edition, 2010), to which I have been extensively referred by counsel. In the section entitled ‘The Relevant Mind’ at §3-144 and following he identifies the relevant principles and refers to the more important authorities on the subject. In the introductory statement of principle at §3-144 he says:

The Defendants’ position, as set out in §30 of their closing submissions, is as follows:

The Claimant’s position is as contained in a detailed section (§19-30 of its closing submissions), which requires setting out in full:

In their supplementary submissions the Defendants contended that:

By way of response, the Claimant submitted that the decision in MGFM was of general application, as recognised by the House of Lords in Stone & Rolls Ltd v Moore Stephens [2009] UKHL 39 and by the Court of Appeal in Liverpool CC v Chavasse.

In my judgment what was said by Lord Hoffman in MGFM is of general application, in that the relevant passage was concerned with the position generally as opposed to the position in relation to the particular statute with which that case was concerned. It is therefore, in my judgment, strong authority for the proposition that when considering who is the relevant decision maker one does not look purely at the primary rules of attribution applicable to a company, but also at the general rules of attribution which are applicable to companies and individuals alike. Thus in an appropriate case one looks not only at actual authority, but also at ostensible authority.

In my judgment what was said by the Court of Appeal in El Ajou is also of general application, not limited to constructive trust knowing receipt claims. It is authority for the proposition that one looks at the matter in the context of the particular act or omission in point, not generally or in the round, and also that it is permissible to consider who had the de facto management and control of the particular transaction in issue, even though the executive directors may commit a breach of duty by permitting an unauthorised person to undertake that role.

These decisions also explain why it is not invariably the case, as Sir Raymond Evershed MR observed in George Cohen v Docks & Inland Waterways Executive (1950) 84 Lloyds Rep 97 CA, that one considers only the mind of the officers of the company, and this also explains why – as HHJ Hodge QC suggests in his textbook (Footnote: ⁸), a suggestion with which I agree – the identity of the decision maker may often be a question of fact which falls to be decided on the evidence.

It also appears to me that Liverpool CC v Chavasse shows that it is not always a simple matter of distinguishing between ‘the negotiator’ and the ‘decision maker’, with the intention of the former always being of no relevance. In §39 and §42 Morritt LJ clearly considered that the intentions of the in-house solicitor Mr Kelly were relevant, even though the authority of Mr Kelly through his superior was limited to preparing a draft contract and, it appears, using that as a basis for further negotiations (see §14).

London Borough of Barnet v Barnet Football Holdings Limited was a unilateral mistake case. In that case it appears that although the claimant had pleaded its case on the basis that Mr Stephens as the officer negotiating the contract was the natural person having the relevant intention, that case was fatally undermined by the fact that the report, which he had drafted and which went for approval, did not clearly demonstrate the relevant intention, and no evidence was adduced to the effect that those within the claimant who did read the report and who authorised the transaction shared his relevant intention. It does not appear to me that this case establishes any general principle to the effect that the intention of a ‘negotiator’ can never be relevant, indeed both the judge below (§134 – see §45 of the Court of Appeal judgment) and Peter Gibson LJ (§57) appear to have considered that it might be relevant in certain circumstances. It is also true that in this case the limit on Mr Stephen’s authority was communicated to the other party at the time.

George Wimpey UK Ltd v V.I. Construction Ltd was also a unilateral mistake case where, again, it appears that the other party was aware that the negotiator, a Mr Ketteridge, needed board approval for the purchase [§47]. It is also a case where the claimant decided, for reasons which were not explained, to adduce no evidence from anyone at board level, and the documentary evidence did not show that they were advised that Mr Ketteridge intended that the effect of the contract would be ‘X’, when that was not its true effect. It is nonetheless true that at §48 Gibson LJ held in terms that it was not sufficient for a claimant to plead and prove that the negotiator, who is not also the decision maker, has made an error, unless it can also be shown by evidence that the decision maker shared that intention. Blackburn J (concurring), observed that the claimant had failed to produce material to show that ‘Mr Ketteridge’s mind was Wimpey’s mind’.

I also consider that Mr Gourgey QC is right to submit that the references in MGFM and Liverpool CC v Rosemary Chavasse to ostensible as well as to actual authority demonstrate that the inquiry is not necessarily limited to enquiring what the position was internally in relation to the decision-making authority but may, in an appropriate case, extend to what authority the person whose intention is said to be relevant was held out as having by the company. That does appear to be consistent with the objective approach to common mistake rectification as explained by Lord Hoffman in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38.

The Claimant contends that Mr Begg was and/or was held out as being the decision maker in relation to the original SPA and in relation to the amended SPA. It contends that he took the decision whether or not the Claimant should sell its shares on the terms of the SPA, and that approval and execution by the Claimant was a matter of formality.

The Defendants contend that Mr Begg was merely the negotiator of the contract, and that the Claimant is unable to prove that the relevant decision maker was operating under the mistake for which it contends. They say (§43 of their closing submissions) that:

The starting point is the constitutional position so far as the Claimant is concerned. Since the shares were held by the Claimant on trust, the decision to sell is the exercise of an administrative power, involving the exercise of a discretion, which can only be exercised by the Claimant unless validly delegated to another either in accordance with the general law or by powers conferred by the trust deed (see for example Lewin on Trusts 18^th edition §29-83, §36-09).

So far as the general law is concerned, it has not been suggested that the Claimant was authorised under the general law to delegate its decision to sell to Mr Begg. In a single trustee case, such as the present, that appears to be correct as a matter of law.

So far as the trust deed is concerned, it is clear that at no time did the Claimant purport to exercise its power under §14 by instrument in writing so as to delegate its power to sell the shares to Mr Begg. Although by reason of the provisions I have mentioned it is clear that the Claimant could act through its officers, and could employ agents to perform ministerial acts or investment advisers to provide investment advice, it has not been suggested by the Claimant, rightly in my judgment, that anything other than §14 of the trust deed would authorise the delegation to Mr Begg of its discretion in relation to the power of sale of the shares.

In my judgment it is quite clear that Mr Begg was authorised by Mr Robinson of the Claimant to enter into negotiations with Stella with a view to selling the Claimant’s shares in Global to Stella. I am also satisfied on the balance of probabilities that sometime in mid-November 2007, at a point when Mr Begg became satisfied that the terms being offered by Stella were acceptable to him, he reported this to Mr Robinson and was authorised to: (a) conclude an agreement in principle to sell the shares on the basis of the commercial terms which Mr Begg was willing to accept; (b) negotiate the terms of the SPA and, for that purpose, to instruct solicitors on behalf of the Claimant; (c) reach agreement in principle on the detailed terms of the SPA. Insofar as Mr Begg suggested that his authority went further than this, I do not accept that he was authorised to bind the Claimant in relation to any matter, whether as to the commercial terms of the transaction, or the detailed terms of the SPA, or otherwise. I am satisfied however that Mr Begg was authorised to negotiate and agree in principle the terms of the SPA on the clear understanding that the Claimant would accept the terms as negotiated and agreed by Mr Begg, specifically the commercial terms including the detailed payment provisions, so that so long as the Claimant was satisfied that its own interests would not be prejudiced by entering into the SPA on the terms negotiated and agreed by Mr Begg it would follow his recommendation.

These conclusions appear to me to be consistent with the evidence of Mr Begg and Mr Robinson both in the present and the earlier proceedings and also with the contemporaneous documentation. Thus I am satisfied that both Mr Begg and Mr Robinson knew that the final decision as to whether or not to execute the SPA, either at all or on the terms negotiated by Mr Begg, had to be a matter for the Claimant. Equally I am satisfied that they both knew that the Claimant had no wish to interfere in matters about which it did not have the same detailed knowledge or expertise as did Mr Begg, specifically the commercial terms including the terms on which Stella would be obliged to pay the consideration for the shares to the Claimant, and that it would follow his recommendations subject to receiving an assurance from him that he was happy for it to enter into the SPA on the terms which he had negotiated and agreed.

In particular, it is quite clear from the contemporaneous e-mails from November 2007 onwards that the Claimant and Mr Begg were both proceeding on the basis that it was the latter who was conducting all dealings with Stella and Halliwells. The e-mails of 26/11/07 and 27/11/07 are particularly significant in my view as they are entirely consistent with the evidence of Mr Begg to the effect that both he and the Claimant had agreed that it was for him to agree all of the contractual issues and for the Claimant simply to sign. The e-mail of 14:23 hrs on 27/11/07 from Mr Begg supports his evidence that the Claimant was content so long as it had his written assurance that he was satisfied with the terms of the SPA, and was happy for the Claimant to execute it. The resolution of 28/11/07 shows in my judgment that the Claimant’s role in the negotiation and agreement of the sale and the terms of the SPA was essentially a passive one, limited to reviewing the SPA and receiving and accepting advice from their professional advisers and, importantly, ‘the principals associated with the Trust’ which it is agreed was a reference to Mr Begg. I do not consider that this conclusion is inconsistent with the fact that the representatives of the Claimant, including their in-house lawyer, spent some considerable time reviewing the draft SPA before executing it. That is entirely consistent with their wanting to ensure that its terms were not prejudicial to the Claimant’s own interests. There is no evidence to suggest that in reviewing the terms of the SPA they were reviewing the commercial terms, including the terms as to payment. Insofar as it might be objected that the Claimant has failed to adduce evidence from those involved with this process, bearing in mind that Mr Robinson himself appears not to have been directly involved at this stage, I do not consider I should draw any adverse inference from that given the late stage at which this point was first raised by the Defendants.

I consider that on balance this division of roles is not inconsistent with the terms of the trust deed, because it seems to me that what was agreed and done was not inconsistent with §14. I consider that §7 of Schedule 1 authorised what was done in this case, which was the informal instruction of Mr Begg by the Claimant to provide advice as to the sale of the shares and the terms of such sale. In my judgment a power to invest extends to a power to sell investments (see Lewin §35-42), and ‘investment policy’ would include deciding when and on what terms to sell the shares. Even if I am wrong about this, however, and the extent of the delegation of responsibility to Mr Begg was contrary to §14, that does not seem to me to invalidate what was actually done.

Given those conclusions, in my judgment Mr Begg can fairly and properly be regarded as the relevant decision maker for the Claimant in relation to the agreement of the detailed terms of the SPA. I consider that this is not one of those cases where there is a clear demarcation line between the ‘negotiator’ and the ‘decision maker’. It is a case where the Claimant can properly be said to have left the decision to Mr Begg, subject only to formal approval of the decision remaining with the Claimant. I do consider that there is a real difference between a case such as this, where although the Claimant remained the formal decision maker, in reality it delegated all but formal approval to Mr Begg as negotiator, and cases such as Barnet or Wimpey, where it was always the position - and known by the other party to be the position - that the decision-maker was separate from the negotiator and was the body who would be taking the decision, not just in name only. I do not consider that the crucial question in a case like this is whether or not the ‘negotiator’ does or does not have the authority to bind his principal to the contract; I consider that it is a question of identifying who in substance is – or is held out as being – the person who took the decision in relation to the contract.

Furthermore, when it comes to considering the position in relation to the amended SPA, which is of course the crucial document so far as the claim for rectification is concerned, the case is even stronger in my judgment that it was Mr Begg who was the decision maker. It is quite clear that the Claimant left everything to Mr Begg in relation to the amendments and that the review which was undertaken on 26/02/08 could only have been of the most cursory kind, given the time recorded for that exercise.

Further, if one considers the question not by reference to the actual authority which Mr Begg had but to his ostensible authority, the evidence is really overwhelming in my judgment that it was Mr Begg who was held out as having full authority to negotiate and agree the terms of the SPA. It appears that there was no direct contact at all between the Claimant itself and Stella (or Mr Botterill, for that matter) prior to the execution of the original SPA. There was no suggestion by anyone that Mr Begg’s authority was in any way limited or subject to final authorisation by the Claimant, or that anyone regarded the Claimant as anything more then the mere signatory. The evidence from anyone from the Defendants’ side on this point came first from Mr Fleetwood, who said in his witness statement that ‘it was however clear that although the Bald Eagle Trust was the vendor, Mr Begg was giving all of the instructions in relation to the SPA’. In his witness statement Mr Botterill said that Mr Begg ‘effectively represented the Trust in negotiations … The negotiations relating to the SPA were led by Mr Begg with little or no input from Mr Robinson or the trustees to my knowledge’.

If one looks for communication from the Claimant to Stella in relation to Mr Begg’s authority, it seems to me that by allowing Mr Begg to instruct Halliwells as its solicitors, when Halliwells were clearly taking instructions from Mr Begg in relation to the negotiation and agreement of the detailed terms of the SPA, suffices to communicate the Claimant’s authorisation to Mr Begg to deal with all matters other than execution on its behalf. Again the position is even stronger in relation to the amended SPA. As I have noted, in communications with Stella Mr Begg clearly stated that once the points he had agreed with Mr Bender were incorporated into the new agreement, which included the revisions to 2007 EBITDA to exclude his costs, the Claimant as trustee would sign immediately. That in my judgment reinforces the impression already conveyed from the circumstances of the original SPA, which is that the Claimant was happy to authorise Mr Begg to make the decisions on its behalf in relation to the amendments to the SPA. Again, it seems to me that the Claimant, by leaving it to Mr Begg to deal on their behalf in relation to the direct dealings with Stella and in giving instructions to Halliwells as their solicitors, represented Mr Begg as the decision maker.

The Defendants have submitted that to reach such a conclusion would be unfair and illogical, because if the boot was on the other foot the Claimant would have been able successfully to resist rectification by relying on the absence of delegation under §14, and asserting that it was and remained the decision-maker throughout, so that Mr Begg’s intention, as a mere negotiator, was not to be ascribed to it. I do not accept this argument, because I do not accept that the court would have allowed the Claimant to resist rectification on those grounds; I consider that the Defendants could and would have been able to persuade the court that on the evidence of what happened the Claimant had given Mr Begg, and had held him out as having, authority to do everything other than formally approve and execute the original and amended SPA, so that his intention was to be ascribed to it.

Was the decision-maker acting under a mistake?

Given the conclusions I have reached, this question must be answered by reference to Mr Begg, rather than by reference to Mr Robinson or some other officer or employee of the Claimant.

It is common ground between the parties that this question must be answered as at the date of execution of the amended SPA, because that completely superseded the original SPA. It is however also common ground that it is material to consider the position as at the date of execution of the original SPA, because to some extent at least that informs the position as at the later date. It is also common ground that this question cannot be answered by reference to the subjective intentions of, in this case, Mr Begg, but by reference to what he said and did. Although it is right to say, as Mr Gourgey QC did, that evidence as to subjective intentions and evidence as to subsequent conduct may be relevant in assisting the court to reach a conclusion as to what a party said and did, it is equally true to say that where the issue turns solely or even principally on written exchanges between the parties, that evidence is unlikely to be of any real assistance. In this case, whilst the position as at the date of execution of the original SPA is dependent to some extent on my assessment of the evidence of Mr Begg and Mr Krecklenberg as to what was said and agreed orally, that is not the case in relation to the position as at the date of execution of the amended SPA, where all relevant exchanges are written.

I may express my conclusions relatively shortly.

The position up to the point where lawyers were instructed to begin drafting in my judgment is as follows:

The position from the time lawyers were instructed down to the time of execution of the original SPA is a little unclear. I accept that there is no evidence of any communicated change of intention from any of the parties. Equally there is no evidence that the parties communicated to each other that they continued to hold the same intention. This is most obviously apparent from the fact that the point never made an appearance in any of the drafts of the SPA which were produced. Thus, notwithstanding that lawyers were involved, drafts were produced (seemingly 6 in total), a huge amount of time and effort was taken by all concerned in working through the drafts, and indeed considering the provisions relating to earn out consideration and EBITDA, no-one specifically raised the question of shareholder costs in relation to 2007 EBITDA, nor identified the fact that there was no provision in the drafts for these costs to be deducted from 2007 EBITDA.

However it must be acknowledged that the same is apparently true of the position in relation to the consultancy payments to be made under the intended 2008 Consultancy Agreement, notwithstanding that this was something which was the subject of specific discussion at the time – see Mr Bender’s e-mail of 24/11/07 referred to above. The fact that the consultancy payments – both present and future – were referred to in the Heads of Agreement, and that the future consultancy payments were the subject of discussion, yet neither were referred to in the original SPA, tends to support the Claimant’s argument that the reason for that was sheer oversight by all concerned (understandably perhaps given the time pressures) rather than a deliberate change of intention by one or both. Further support for this analysis is to be found in the subsequent correspondence of February 2008 where Mr Begg states that it had always been agreed that the consultancy payments both 2007 and future were to be deducted from EBITDA and this was not only not disputed, but the amended SPA was specifically amended by the Defendants to address future consultancy payments and, as is clear, it was agreed that the amended SPA should be amended to bring in the 2007 consultancy payments as well.

In those circumstances, considered objectively, I am satisfied on the balance of probabilities that the intention continued unchanged down to the date of execution of the original SPA. A more difficult question, which happily I am not required to answer, is whether that evidence would be sufficient to amount to ‘convincing proof’ so as to justify rectification of the original SPA had it not been amended. As was observed in Snamprogetti, strong evidence is required to justify re-writing a professionally drawn formal agreement, which was intended to be binding, by reference to a loosely expressed non-contractually binding Heads of Agreement produced without legal input.

The answer to this question involves a consideration of the events of February 2008. So far as Mr Begg’s subjective intention is concerned, although not directly relevant given the objective nature of the exercise, it is quite clear to me that he continued throughout to have the clear intention that the 2007 consultancy payments should be excluded when calculating 2007 EBITDA. There are really only two explanations: the first is that he was mistaken about the effect of the draft amended SPA produced by Halliwells because he believed that they were caught by the reference to ‘any payment made pursuant to the Consultancy Agreement’ in §4.8.1.1(h); the second is that at some point Mr Begg changed his mind and accepted that they should not be excluded even though the 2007 asset costs would be excluded and even though he must have been aware that the ‘cost’ to the Claimant of not excluding the 2007 consultancy payments would be in the region of £5M if the earn out consideration fell to be ascertained by reference to 2007 EBITDA. In my judgment the second explanation it is quite incredible and I do not accept it as being remotely possible. Instead, I accept his evidence that it was a genuine mistake on his part, and that he genuinely but wrongly assumed – as it appears did Halliwells – that the reference to the ‘Consultancy Agreement’ in §4.8.1.1(h) included the 2007 consultancy payments.

In particular, it is quite clear that at no time did Mr Begg instruct Karen Procter to include only the 2007 asset costs in the revised draft. Thus: (a) it is quite clear from the e-mail of 17/02/08 to Mr Bender that he considered that the agreement extended to his costs of ‘about £1m’, which was obviously a reference to both the 2007 consultancy payments and the 2007 asset costs; (b) Mr Begg’s e-mail of 22/02/08 could hardly be plainer in using the words ‘all my costs which add up to about £1m as you know’.

When the question is considered from an objective standpoint, it is quite clear in my judgment that the same answer must be given. The e-mails of 17/02/08 and 22/02/08 cannot be read in isolation. Thus although neither refer in terms to the 2007 consultancy payments, when read in the context of the information provided to Stella from August 2007 onwards, including the information provided which formed the basis of the relevant section of the Deloittes’ due diligence report, it must have been quite clear to any informed reader in the position of those to whom it was directed, including for present purposes Mr Krecklenberg and Mr Bender, that he is referring both to the 2007 consultancy payments and the 2007 asset costs. This conclusion is reinforced by the fact that this is obviously how they did read it as, indeed, did Mr Lion.

The Defendants’ argument is that, judged objectively, this is inconsistent with and must be regarded as having been superseded by the terms of the draft amended SPA submitted by Halliwells with Mr Begg’s express communicated approval, which made no reference to the 2007 consultancy payments in the revised definition of ‘2007 EBITDA’ or elsewhere. However, again it seems to me that the fatal flaw in this argument is that the only other possible explanation which could have occurred to the informed reader was that Mr Begg had consciously decided to abandon approximately £700,000 of the £1M (and thus approximately £5M of the £7M when multiplied by the multiplier of 7) known to be riding on this point, even though the principle of excluding ‘all my costs which add up to about £1M as you know’ (quoting from his e-mail of 22/02/08) had been agreed not just once on 18/02/08 but again on 23/02/08. No informed reader could, in my judgment, have regarded that explanation as remotely possible and, thus, could only have concluded that there had been some mistake in the drafting.

The Defendants argue that this explanation itself is implausible because the wording of the relevant draft is so clear that any informed reader would have found it difficult to see how the mistake could have come to have been made. However, whilst that may be so with the benefit of hindsight, I do not consider that the same would necessarily have applied at the time, because it would have been necessary to note that ‘Consultancy Payment’ was in title case, appreciated that this referred back to a definition, gone back to the definition, and then appreciated that it referred only to the consultancy agreement to be entered into as opposed to the existing agreement. Whilst that all may now with the benefit of hindsight seem relatively straightforward to an experienced contract lawyer, it does not seem to me that the informed reader at the time knowing what he knew would have concluded that it must have been intended. Again, it is worth noting that on the evidence before me in the light of the conclusions I have reached that does not appear to have been what anyone thought at the time. There is no positive case advanced by the Defendants to the effect that they were aware of the fact that the revised draft did not capture the 2007 consultancy payments, but assumed that this was simply a commercial decision made by Mr Begg for reasons of his own. There is certainly no suggestion that this is something which Mr Krecklenberg or anyone else demanded of Mr Begg as the price for some other concession, such as Mr Botterill claimed to have surmised at the time.

In the circumstances I am quite satisfied that there is clear and compelling, or put another way convincing, proof that when the Claimant entered into the amended SPA Mr Begg as the relevant decision maker was, considered objectively, operating under a mistaken belief that the contract as executed accorded with his outwardly expressed continuing intention that his 2007 consultancy payments should be excluded when calculating 2007 EBITDA.

For completeness I should state my conclusion if I had concluded that the only question was whether or not the Claimant itself, without any reference to Mr Begg’s intentions, had the requisite intention?

On the evidence which is before me I would have had no hesitation in coming to the conclusion that the Claimant itself had no intention whatsoever, whether subjective or objectively expressed, in relation to the question of whether or not the 2007 consultancy payments should or should not be excluded when calculating 2007 EBITDA. There is no evidence that Mr Begg or anyone else drew this issue to their attention, whether orally or in writing, whether in the run-up to the execution of the original SPA or in the run-up to the execution of the amended SPA. There is no suggestion that anyone at the Claimant was aware of, let alone alert to, the amendments relating to EBITDA introduced into the amended SPA.

On that hypothesis, the position of the Claimant as trustee in this case would be similar to the position of the trustees as found by Rimer J (as he then was) in the case of Lansing Linde v Alber [2000] PLR 15, referred to in §4-61 of Lewin (18^th edition), where they were wholly ignorant of the point in issue and thus could not be said to have had any intention at all on the point, so that the claim to rectification failed.

Did the First Defendant enter into the SPA under a mistake?

Who was the decision-maker?

In their closing submissions the Defendants contended that Mr Krecklenberg, whilst admittedly a director of Stella UK, was not the relevant decision maker because (1) he did not sign the amended SPA; and (2) he was not involved in the final approval of the amended SPA. They do not make a positive submission as to who was the relevant decision maker and, as I have noted, the Defendants have made no disclosure and adduced no evidence as to the position internally so far as the constitution, officers, management or decision-making process of either Defendant is concerned, whether generally at the time or by reference to this particular transaction. In particular, they do not advance a case to the effect that there was some limitation of the authority of Mr Krecklenberg (acting with or without Mr Bender) to make the decision to enter into the original and the amended SPA without reference to, for example, a full board meeting.

In its closing submissions the Claimant contends that Mr Krecklenberg as the CEO of the whole Stella Group, including Stella UK, and as the man who led the negotiations, was the decision-maker. They say that even if it was not Mr Krecklenberg, then the only other obvious contender is Mr Bender, and he had precisely the same common continuing intention as did Mr Krecklenberg.

In §7 of his witness statement Mr Krecklenberg said that whilst he ‘left most of the meetings and communications to [Mr Laurie] and [Mr Bender]’ he ‘was however as CEO of Stella the key decision maker and all points of principle and detail of the proposed transaction were subject to my confirmation’. He was not challenged on this under cross-examination. It is known that apart from Mr Laurie, who for all practical purposes dropped out of the picture from mid November 2007 onwards, the only two people within the Stella Group dealing with the original and the amended SPA were Mr Krecklenberg as CEO and Mr Bender as general counsel. It was Mr Bender who executed the original and the amended SPA on behalf of Stella UK as its ‘duly authorised attorney’. Contrary to the Defendants’ submission, it is apparent from the contemporaneous documents that Mr Krecklenberg was involved in relation to the amended SPA right up until the final agreement was reached, although it is true that in the final stages he tended to leave matters of detail to Mr Bender, who also of course was receiving input behind the scenes from CVC and its Australian lawyers. There is no basis however in my judgment for a suggestion that he was not still involved in any meaningful way at this stage.

In those circumstances and on the evidence before me I am quite satisfied that the decision-maker for the First Defendant was either Mr Krecklenberg alone or, more probably, Mr Krecklenberg and – to the extent that matters of detail were left by Mr Krecklenberg to him to deal with - Mr Bender.

Was the decision-maker acting under a mistake?

The answer to this question can be stated relatively shortly, because it involves an examination of the same material as examined when asking whether Mr Begg as the decision maker of the Claimant was operating under a mistake at the time the amended SPA was entered into. Thus on the balance of probabilities the position as at the date of execution of the original SPA was that the intention of Mr Krecklenberg and Mr Bender, as expressed to Mr Begg, was that the shareholder costs, comprising the 2007 consultancy payments and the 2007 asset costs, should be excluded when calculating 2007 EBITDA. More significantly for present purposes, that was also their intention, as communicated by Mr Bender to Mr Begg, when the question was raised by Mr Begg in his e-mail of 17/02/08 and when Mr Bender discussed and agreed this with Mr Begg the following day. Insofar as necessary, it was confirmed by Mr Krecklenberg in that he had by his e-mail of 18/02/08 requested Mr Begg and Mr Bender to agree the outstanding points between themselves and had by e-mail from Mr Begg the following day been informed that these had all been agreed (save in relation to the guarantor, which was subsequently agreed), and did not seek to disturb the agreements already reached.

In my judgment the real question is what would the informed observer have made of Mr Bender’s reply to Mr Begg’s e-mail of 22/02/08 and, in particular, would he have regarded it as establishing beyond sensible argument to the contrary that those making the decisions for Stella UK also held a clear and continuing intention that the 2007 consultancy payments as well as the asset costs should be excluded when calculating 2007 EBITDA. I should say at this point that although Mr Bender’s response indicates that the replies follow on from his having spoken to CVC, it is not and could not seriously be suggested either that they were not being adopted by Mr Bender himself or that they did not represent Mr Krecklenberg’s position as well – see for example Mr Begg’s e-mail to Mr Krecklenberg of 24/02/08 where he refers to the only remaining ‘single but sticky’ point on the basis that Mr Krecklenberg is clearly aware of what is happening in relation to the ongoing discussions.

The first argument advanced by the Defendants is that the response ‘AGREED’ is equivocal, in that it is not clear whether it is intended as a reference to the whole of Mr Begg’s paragraph 2, or only some part of it, and if the latter which part. They suggest that it could for example be read as meaning no more than a non-committal agreement with the suggestion that Karen Procter should redraft the draft amended SPA to address this point, at which point they would consider the redraft. I do not consider this a reading that any sensible informed observer could have arrived at. This is not a question of legal construction, it is a question of what meaning or range of meanings could sensibly be conveyed by this response given the relevant background. My reasons are as follows:

The second argument advanced by the Defendants is that since the word ‘agreed’ is followed by the words ‘will wait to see the drafting’, this makes it clear that it is not giving agreement in itself or agreeing to something which required no more to put the agreement into effect. Again I do not consider that a sensible informed reader could have attached such weight to these words in context. My reasons are:

Finally, there was nothing said or done by Stella or CVC or their respective lawyers which could have led a sensible informed observer to consider that they were questioning whether this principle or agreement should apply only to the 2007 asset costs, or they were suggesting that Mr Begg should forego his request to include the 2007 consultancy payments as the price for obtaining a concession in relation to some other point still in issue. There has never been any suggestion by Stella UK, nor hint in their evidence, that they or their advisers had noticed that the revised draft submitted by Halliwells had the effect of not including the 2007 consultancy payments as something to be excluded when calculating 2007 EBITDA and genuinely believed that it was a genuine concession or oversight which they had no contractual or other obligation to draw to Mr Begg’s attention.

For all of those reasons I am satisfied that the relevant decision-makers at Stella UK shared the same intention as the Claimant’s decision maker Mr Begg that his 2007 consultancy costs as well as the 2007 asset costs should be excluded when calculating 2007 EBITDA, and that this intention was both communicated by them to Mr Begg and that it continued up to the time of execution of the amended SPA.

The position of CVC

I have already found that Mr Lion had discussed Mr Begg’s e-mail of 17/02/08 with Mr Bender before the latter spoke to Mr Begg, agreed point 2, and agreed that the contract should be amended accordingly. It is not known whether or not Mr Bender mentioned to Mr Begg that he had spoken to Mr Lion, but what is clear is that Mr Bender’s subsequent e-mail of 23/02/08 made it clear to Mr Begg, as was indeed the case, that he had discussed Mr Begg’s e-mail of 22/02/08 with CVC before sending their response.

In those circumstances it seems to me to be quite clear that: (1) CVC was aware of and agreed that the amended SPA should make express provision for the 2007 consultancy payments and the 2007 asset costs to be excluded from the calculation of 2007 EBITDA; (2) this is the intention that was communicated to Mr Begg in February 2008. So far as CVC’s own intention is concerned, no-one has suggested to the contrary in evidence. Mr Lion accepted as much. So far as the latter point is concerned, the Defendants’ argument really stands or falls on the conclusion to be drawn from the words ‘agreed - will wait to see the drafting’ in the e-mail of 23/02/08, as to which I have already expressed my conclusion above.

Accordingly, I am satisfied that the Defendants can gain no assistance from the involvement of CVC in this transaction.

I should briefly state what my conclusion would have been had I concluded that there was no evidence that CVC either shared in, or at least was aware of, the common intention that the amended SPA should make provision for the 2007 consultancy payments as well as the 2007 asset costs to be deducted from 2007 EBITDA. It appears that the Defendants’ argument is that since on Mr Krecklenberg’s evidence he was aware, and made Mr Begg aware, that CVC would need to approve the amended SPA before it could be concluded, and since Mr Begg would have been aware that CVC would be relying on the terms of the amended SPA when deciding whether or not to acquire a controlling interest in the Stella Group, that would be a powerful reason against allowing rectification. That is because this would militate against the common continuing intention being anything other than that it was the terms of the agreement as executed, as opposed to any antecedent non-binding consensus, which would bind them post CVC’s acquisition of the controlling interest. Another way of arguing the point might be to say that this would be a reason for refusing to exercise the discretion to order rectification.

Whilst I see the force of the argument, ultimately I would not have acceded to it. In my judgment the position is that since CVC allowed Stella to continue to negotiate and enter into the amended SPA even after they had exchanged contracts for the acquisition of a controlling interest in Stella, they cannot complain if the amended SPA falls to be rectified by reference to a common continuing intention shared by the Claimant and those who fall to be treated as the decision-makers within Stella. It does not seem to me that the involvement of CVC behind the scenes could have disentitled the Claimant from claiming rectification in such circumstances.

Did the Second Defendant enter into the SPA under a mistake?

Who was the decision-maker?

The Defendants submit that the burden of proof is on the Claimant, and that here the only hard evidence about the involvement of Stella Holdings No 1 is that it was introduced into the proceedings only after the original SPA had been signed and only after it became apparent that once MFS had sold its majority shareholding to CVC it was inappropriate for it to continue to guarantee Stella UK’s performance of the SPA, so that it did not have the same background knowledge of the transaction as did Stella UK. They submit that it executed the amended SPA by the signature of a director known as Sunny Yang, as to which nothing is known. They submit, therefore, that there is no evidence that either he or the relevant decision-maker, if different, had any outwardly expressed intention in relation to the calculation of 2007 EBITDA other than was expressed in the amended SPA. Accordingly, they submit, rectification cannot be ordered as against Stella Holdings No 1.

In support of their argument they refer me to the decision of HHJ Waksman QC in the case of Notiondial v Beazer Homes Limited & Beazer Group Limited [2009] EWHC 3333 (Ch). In that case Judge Waksman was considering the case for rectification on a hypothetical basis, because he had already decided the case against the defendants on the question of construction. He held that he would have ordered rectification as against the first defendant, the principal. As against the second defendant, the parent company guarantor of the principal, he held that even though the director and company secretary who signed the contract on behalf of the principal were also the director and company secretary who signed the contract on behalf of the guarantor, nonetheless there was insufficient evidence to attribute their knowledge and intentions to the guarantor. However it is right to record that in that case, as Judge Waksman observed [§109], there was written and oral evidence that head office approval was required and no evidence that head office had been told anything about the terms the subject of the claim for rectification.

The Claimant submits that the evidence here shows that Mr Krecklenberg was the CEO of the whole Stella Group, including therefore Stella Holdings No 1, and that it is accepted that he was also a director of that company. They say that Mr Bender was also the general counsel for the Stella Group, and also therefore was general counsel for Stella Holdings No 1 as well. Again they observe that the Defendants have failed to disclose any documents or file any evidence as to the constitution, officers, management or decision-making process of Stella Holdings No 1, whether generally at the time or by reference to this particular transaction. Indeed in the case of Stella Holdings No 1 it is striking that they tendered no witness who was a current or past officer or representative of that company, whether Mr Yang or anyone else. They advanced no case to the effect that there was some limitation of the authority of Mr Krecklenberg as CEO of the Group and director of the company (with or without Mr Bender as general counsel) to make the decision to enter into the amended SPA without reference to, for example, a full board meeting. There was no cross-examination of Mr Krecklenberg to this effect.

In my judgment the following matters are pertinent:

Was the decision-maker under a mistake?

In my judgment it is clear that Mr Krecklenberg (and Mr Bender) as the relevant decision makers for Stella Holdings No 1 shared the same common intention as the other parties, and were operating under the same mistake when they caused Stella Holdings No 1 to enter into the amended SPA.

The argument successfully advanced in Notiondial does not assist the Defendants on the facts of this case, because they cannot credibly submit that the knowledge of Mr Krecklenberg and Mr Bender should not be attributed to Stella Holdings No 1 in circumstances where they have produced no evidence to the effect that they were not the decision makers, unlike the position in Notiondial where the evidence disclosed that the decision makers at head office were not the same as the company director and company secretary who signed the contract.

If the answer to this question is no, what is the consequence on the claim for rectification?

Although this question does not arise for determination given the conclusions I have reached, I should deal with it because it is relevant not only to this issue but also to the issue in relation to Mr Botterill, and because the general issues raised will be relevant if this case should go further and my primary conclusions in relation to the Second Defendant or Mr Botterill are overturned.

I have been referred by Mr Gourgey QC to the decision of Buckley J in Wilson v Wilson [1969] 3 All ER 945, where rectification of a transfer containing a declaration of beneficial ownership as between the joint purchasers was ordered notwithstanding the absence from the proceedings of the vendor as a party to the proceedings, on the basis that he was not affected by the declaration of trust, which was separate from the remainder of the transfer, and which could have been contained in a separate document. Mr Stewart QC and Mr Elkington submitted that the crucial factors in that case, which led to Buckley J considering that rectification was appropriate, were that the vendor had no interest in the issue and that the declaration of trust was separate from the conveyance. They submitted that neither applies here. Mr Gourgey QC responded by saying that the separateness of the declaration of trust was not the essential feature of the case.

In Notiondial HHJ Waksman QC recorded (§105) that it had not been submitted before him that the mere existence of the parent company guarantor as a further party to the contract meant that the court had to be satisfied that rectification could be ordered as against the parent before it could be ordered at all. Judge Waksman clearly regarded that implicit concession as rightly made, because he held that the question as to whether rectification could be ordered as against each party had to be considered separately, and the failure of the claim as against the parent would not be fatal to the success of the claim as against the principal. He did however say that if, as he would have held, rectification succeeded as against the principal but failed as against the parent guarantor he would not have held the parent liable as guarantor on the basis of the unrectified principal obligation, which would have had the effect therefore of discharging the guarantor completely. That however appears to have proceeded on the basis that rectification of the principal obligation would, or at least could, have had a material effect on the guarantor, thus causing the guarantee to be discharged in accordance with well-known principles. In his textbook HHJ Hodge QC suggests that this would not necessarily be the case, especially in cases where, as is common, the guarantee contains express provision excluding the operation of that principle. Mr Gourgey QC relies on this and urges me to follow that approach. It does not seem to me to be necessary to prolong this judgment by considering this point in any detail; it suffices for me to: (a) observe that in the relevant section of the amended SPA §19.4 appears to be such a clause as is mentioned by HHJ Hodge QC; (b) indicate that if I had to decide this point I would have held that the guarantee remained in force but limited to the obligation as unrectified.

More generally, it appears to me that in such cases rectification, being a equitable remedy which operates only against the person against whom the order is made, will be ordered only when it would be equitable to do so notwithstanding the presence of the further party to the contract in question. Thus if the particular part of the contract sought to be rectified is separate and distinct from the parts affecting the further party, or if the further party would not be prejudiced in any way by an order for rectification being made against the defendant (whether or not the claim for rectification had also been unsuccessfully advanced against the further party), then the court would be inclined to order rectification despite the presence of that further party as a party to the contract. Where however it is impossible to disentangle the terms sought to be rectified from other terms in which the further party is interested, or where the further party would or might be substantially prejudiced by the order for rectification, then the court would be disinclined to order rectification.

In the case of Stella Holdings No 1 it is clear that §19 is quite separate and distinct from the remainder of the amended SPA, so that even if the claim for rectification had failed as against it there would have been no prejudice had its liability been limited to the un-rectified primary obligations. Alternatively and at worst I would have adopted the approach favoured by HHJ Waksman QC and directed that the price to be paid by the Claimant for rectifying as against Stella UK would be the complete discharge of Stella Holdings No 1.

Did Mr Botterill enter into the amended SPA under a mistake?

It is obvious that Mr Botterill never had the same direct interest as did Mr Begg and Stella in relation to whether or not the 2007 consultancy payments and the 2007 asset costs should be excluded when calculating 2007 EBITDA. That is because he always intended that he should receive a fixed £2M consideration for the sale of his shares, and thus the question was not one that was of pressing concern to him. However, I am quite satisfied that at all stages up to the execution of the original SPA he knew, from his involvement in the negotiations from the outset, that it was a matter of importance to Mr Begg and he also knew that it was something which Mr Krecklenberg was quite happy to agree and had done so. Of course insofar as under the original SPA he was not entitled to a fixed consideration and was subject to the deferred earn out consideration arrangement, he would have had an interest in maximising the earn out consideration and thus would have had an interest in supporting Mr Begg’s position, so that even though - as I accept - he never adopted the approach of actively supporting that position, there would have been no reason for him to be, and he was not, antipathetic to it.

Once negotiations for the amended SPA commenced, and once it had been agreed that under the amended SPA Mr Botterill would after all receive his fixed £2M, I am satisfied that such interest as he had in the matter would have diminished for obvious reasons. However I am also quite satisfied that his position was, as he admitted during cross-examination in relation to Mr Begg’s e-mail of 22/02/08, that so long as Mr Begg and Stella were agreed that the 2007 consultancy payments and the 2007 asset costs should be excluded when calculating 2007 EBITDA then he was perfectly happy to enter into the amended SPA on that basis. I am also quite satisfied that from an objective standpoint he communicated that intention to the other parties. I reach that conclusion because he never challenged or communicated any disagreement with the consensus as expressed by the other parties. I consider that the other parties would reasonably have expected him to have done so in terms had he disagreed with the position ascribed to him by Mr Begg in his e-mail of 22/02/08. His communicated willingness to enter into the amended SPA (‘Looks fine for me, Karen’) cannot be read as limited to communicating his agreement with the SPA as drafted, but in context must be read as communicating his agreement with the draft on the basis that he agreed – as I am satisfied he did - with Karen Procter’s draft on the assumption that it brought into effect the stated agreement of Mr Begg and Stella in relation to point 2 of that e-mail. I am quite satisfied that his evidence that he was aware at the time that the redrafted amended SPA did not have that effect, and that he assumed that this was because Mr Begg and Stella had agreed that the 2007 consultancy payments should not be excluded, is not true.

It follows in my judgment that he, just as much as the other parties, entered into the amended SPA in the mistaken belief that it corresponded with the common communicated intentions of the parties that it did operate so as to exclude the 2007 consultancy payments from the calculation of 2007 EBITDA. In my judgment it is not necessary to demonstrate that he positively supported and endorsed that position; it is sufficient that he was aware that this was the agreed position of the other parties who it directly affected, and communicated that he was quite happy to agree with that on the basis that it did not affect his interests away.

If the answer to issue (H) is that Mr Botterill was not mistaken, what is the consequence on the claim for rectification?

I have already referred to and expressed my opinion as to the legal issues above. It is necessary for me only therefore to explain my brief conclusions as to the consequence if, contrary to my finding of fact, Mr Botterill did not share the same common continuing intention as the Claimant and the Defendants.

The Claimant’s case is that since Mr Botterill has no interest in the method of calculation of 2007 EBITDA, and since he cannot in any event be prejudiced by an order for rectification as between the parties to this litigation, there would be no objection to ordering rectification against the Defendants alone.

In their closing submissions [§60-64] the Defendants suggested 4 reasons as to why Mr Botterill has, or might be said to have had, an interest in the method of calculation of 2007 EBITDA, with the result that it would be unfair as against him to order rectification as against the Defendants. I am afraid that I found them all implausible. None of them were suggested by Mr Botterill in his evidence. Indeed they are inconsistent with §45 of his witness statement, adopted by him as his evidence, that ‘if the draft had provided that [the 2007 consultancy payments] should be added back, I would have signed the [amended SPA] in any event, because it was not for me to make commercial points for Stella and CVC at the time’. This of course was entirely realistic, because so far as Mr Botterill was concerned once he had gained his objective of receiving his fixed £2M he had no interest in the mechanics of the earn out consideration at all.

Taking the objections in turn:

Accordingly I would have been satisfied that there would have been no prejudice to Mr Botterill in my ordering rectification as against the Defendants, and I would have ordered rectification on that basis.

Is the evidence as to mistake sufficient to support a case of rectification in all of the circumstances? If so, what order should be made?

I am satisfied based on the findings that I have made that there is convincing proof in this case that all parties entered into the amended SPA under the mistake that it expressed their common continuing intention in relation to the exclusion of the 2007 consultancy payments as well as the 2007 asset costs when calculating 2007 EBITDA.

Nonetheless the Defendants rely on a number of matters in support of their contention that rectification should not be ordered.

Firstly, in their written closing submissions the Defendants submitted [§3-11] that there was an obvious difference between the payments to be made under the 2008 Consultancy Agreement and the payments made in 2007 under the 2003 Consultancy Agreement, which explained their different treatment, and which – if rectification was granted as claimed – would produce an odd result which the parties could not have intended. This submission in then deployed [§94-95] in support of a further submission that since in order to grant rectification it is necessary to show that the parties positively intended to enter into an agreement in the terms put forwards by the Claimant, that cannot be demonstrated on the facts of this case where, they say, the Claimant’s suggested rectified agreement would produce oddities such as cannot have been intended by the parties.

Whilst I accept the premise, I do not accept that the Claimant’s proposed rectified agreement – subject to some correction to which I refer in the final section below – produces odd or unintended consequences. Thus the Defendants submit, and I agree, that it was always understood and agreed that the £100,000 pa payable under the 2008 Consultancy Agreement was part of the deferred consideration payable to the Claimant, and this is why the amended SPA introduced clauses 4.1.15 and 4.8.1.1(h). They submit that the payments made under the 2007 consultancy agreement were, as Mr Begg accepted, genuine charges for work genuinely undertaken for Global’s benefit, which explains why the SPA made no provision for them to be added back when calculating 2007 EBITDA. They also submit that if the SPA was rectified as contended for by the Claimant then the 2007 consultancy payments would: (a) be deducted to calculate 2007 EBITDA which leads to the calculation of the minimum earn out consideration; but (b) not be deducted from the minimum earn out consideration actually payable, which would produce an odd result about which there had been no outwardly expressed agreement.

In my judgment neither of these arguments have merit. So far as the first is concerned, this is essentially the argument advanced by Mr Botterill in §32 of his witness statement. Whilst I agree that is an argument which could have been advanced at the time by Stella to justify not adding back some or all of the 2007 consultancy payments, the plain fact is that it was not advanced by anyone at the time. No-one else suggested that it was, and even Mr Botterill when cross-examined did not suggest that it had been. That is because no-one at the time was contesting the principle that the 2007 consultancy payments should be added back, and there are two principal reasons for that. The first, about which I am quite satisfied even though Mr Begg might understandably have been reluctant to say so in court, is that everyone knew full well that the consultancy payments paid under the 2003 consultancy agreement, whilst justifiable in the sense that Mr Begg did indeed perform valuable services for Global, were nonetheless always viewed (and recorded) as a ‘perk’ of being associated with the major shareholder, which is why they were described in the accounts as ‘shareholder costs’. It is clear that this enabled monies - which he might otherwise have received as beneficiary of the trust on dividends being declared - to be paid to him in a tax efficient manner, and of course the same would not happen once Stella had acquired Global. The second is that the high level strategic services provided by Mr Begg would not in fact be provided post acquisition at any identifiable cost to Global, because they would be provided by Stella’s management team, no doubt with the assistance of Mr Botterill and with the continued assistance of Mr Begg under the 2008 consultancy agreement, the ‘cost’ of which would be subsumed within and deducted from the earn out consideration in any event.

So far as the second argument is concerned, it ignores the fact that there was always an obvious difference between the 2007 consultancy payments and the 2008-2010 consultancy payments, which is that by the time the SPA was to come into effect the former were already historic, i.e. they had been paid by Global to Mr Begg from pre-takeover turnover and thus, insofar as they depressed the profits otherwise available for distribution, did not hit Stella in its pocket. There was no reason, therefore, why Stella should consider itself entitled to credit for these historic payments when the time came to pay deferred consideration, and the result therefore does not seem to me to be at all odd. It was in my judgment a consequence which flowed naturally from the agreement which had been reached that all 2007 shareholder costs should be deducted from 2007 EBITDA, so that it was not something which required further specific consensus.

Secondly, a point strongly made by the Defendants is that the court should be extremely cautious about concluding that there should be rectification in a case, such as the present, which as they have said involves a complex commercial agreement negotiated between experienced businessmen and drafted by experienced commercial lawyers, proceeding through a number of versions, where the relevant terms are not the subject of any apparent ambiguity, where there is an entire agreement clause, and where the relevant version is itself a revision designed to deal with flaws in the initial agreement.

I accept all of the points made. However, they are not in my judgment sufficiently strong, whether singly or collectively, to militate against an order for rectification being made in this case. Although this is indeed a complex commercial agreement, arrived at with the benefit of legal input and passing through a number of drafts and versions, even such agreements are not immune from error. Indeed the very length and detail of such agreements can often lead to errors. I refer for example to what Lord Mance recently said in Re Sigma Finance Corp [2009] UKSC 2 at paragraph 12, albeit in the context of a point of construction:

“… Like [Lord Neuberger, who dissented in the Court of Appeal], I also think that caution is appropriate about the weight capable of being placed on the consideration that this was a long and carefully drafted document, containing sentences or phrases which it can, with hindsight, be seen could have been made clearer, had the meaning now sought to be attached to them been specifically in mind…. Even the most skilled drafters sometimes fail to see the wood for the trees, and the present document on any view contains certain infelicities, as those in the majority below acknowledged….”

As I have already explained, whilst I agree that there is no ambiguity in the relevant terms, that does not mean that it was not, genuinely, misunderstood by the parties at the time, given the process that had to be gone through of referring and cross-referring to different parts of the SPA to see that the meaning was in fact clear. In those circumstances, where I am quite satisfied that all parties were operating under a material mistake when entering into the amended SPA, these general considerations, including the fact that there was an entire agreement clause, do not go far enough to counter-balance the strength of the case for rectification.

In this case, therefore, notwithstanding these entirely appropriate cautionary points, I am satisfied that rectification should be ordered as against both Defendants.

In my judgment, subject to hearing counsel on this point, the most appropriate means of rectifying the amended SPA to reflect the parties’ common intention is to amend the definition of 2007 EBITDA, so that it reads (with additions in bold and underlined):