O'Brien & Anor v TTT Moneycorp Ltd

The Claimants’ application dated 5 December 2018 (the “Injunction Application”) seeking an interim injunction (a) requiring the Defendant (“Moneycorp”) to provide certain documents and information to the Claimants, and (b) prohibiting Moneycorp from taking any further steps in relation to the independent accountant procedure under a Share Purchase Agreement dated 1 December 2017 (Footnote: ¹) (the “SPA”) until such date as ordered by the Court;

Moneycorp’s application dated 13 February 2019 (“Moneycorp’s Application”) seeking (inter alia) reverse summary judgment in respect of part of the Claimants’ claim and summary judgment on its counterclaim; and

The Claimants’ cross application dated 1 March 2019 (the “Claimants’ Summary Judgment Application”) seeking the converse relief (summary judgment on their claim and reverse summary judgment in respect of the counterclaim).

An application by Moneycorp to strike out references to correspondence in late June 2018 and in particular an email from Mrs O’Brien dated 25 June 2018 on the basis that it was part of without prejudice correspondence between the parties.

Vendors (“Election Notice”), be referred to the decision of an independent chartered accountant (the “Independent Accountant”) in accordance with part 2 of this schedule 9.”

On 6 April 2018, a version was submitted that did not identify any Alleged Client Money Shortfall (Footnote: ³) and stated that the total sum due to Moneycorp was £255,094.13. In response to this, Mr Rumble of KPMG LLP (“KPMG”), acting on behalf of the Claimants, emailed Mr Chandler of Moneycorp asking for various items of supporting documentation;

On 18 May 2018, following an agreed extension of time for service of a further version, a second set of accounts was served, which identified an Alleged Client Money Shortfall of £969,351.57, with an increase in the total sum said to be due to Moneycorp to £1.074 million;

On 31 May 2018, a third version was served, which identified an Alleged Client Money Shortfall of £1,196,104.30. The total sum now said to be due to Moneycorp had increased to just over £1.3 million; and

On 4 June 2018, a final version was served, which identified an Alleged Client Money Shortfall of £1,058,071.14. The total sum said to be due to Moneycorp had reduced to £1.16 million.

KPMG Report and stating: “With your information requests in 1 and 2 below [i.e., the first two bullet points in the 6 June Request] you are seeking to reperform the work already carried out by the KPMG buyside team for us.”

of reviewing the Draft Completion Accounts. It is her evidence that she made a number of oral requests for documents at this time. I have seen no evidence from Mr Horgan.

Mechanism”) was agreed at this meeting (as the Claimants allege), and (ii) the Claimants may refer to the terms of the Allegedly Agreed Mechanism. In fact, I was not addressed on this to any extent, and I do not consider it is necessary to take a view on this in order to deal with the issues in front of me.

The first is whether paragraph 5 of part 1 of Schedule 9 is a condition precedent to the operation of the remainder of the clause.

The second is whether the provisions of that clause have been complied with.

The court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman [2001] 1 All ER 91;

A “realistic” claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED&F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]

In reaching its conclusion the court must not conduct a “mini-trial”: Swain v Hillman

This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial:

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;

On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE

For its part, Moneycorp relied in particular on paragraph 13, in which Lord Hodge stated:

“The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning … in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause …”

Looking first at the express words of Schedule 9:

If the resolution of disputes about compliance with paragraph 5 were a condition precedent to appointing an Independent Accountant, then the Court would have to decide any issue arising under paragraph 5 first, before the expert determination procedure could begin. That would enable the parties to derail the expert determination procedure simply by making extensive requests and then filing a claim disputing the scope of the documentation provided under paragraph 5, which would mean the adjusted consideration to be paid under Clause 4 of the SPA would not even begin to be finalised by the Independent Accountant until Court proceedings on a satellite point about the scope of a disclosure obligation are resolved by the Court, which could take many months or years, as is evidenced by the facts of the present case.

The Court deciding a claim about the scope of paragraph 5 would inevitably require expert accounting evidence on the documentation reasonably required for an accountant to finalise the Completion Accounts. Expert accountants would accordingly need to be appointed, probably by both sides, to enable the Court to determine a question that would otherwise be capably and quickly determined by an expert accountant.

The parties, as sensible commercial counterparties, would not have intended such a result, because it would occasion considerable delay to the expert adjudication procedure for which they had agreed a tight and streamlined timetable. The parties’ intention can be discerned from the wording of the SPA itself, both from the decision not to make paragraph 5 a condition precedent to appointing the Independent Accountant and because Part 2 of Schedule 9 to the SPA sets up a mechanism for resolving the issue by putting it in the hands of the Independent Accountant to decide what information he reasonably requires.

To the extent that a decision by the Independent Accountant as to what information is reasonably required to finalise the Completion Accounts involves any point of construction of the terms of the SPA, it is a mixed question of law and fact that is eminently capable of adjudication by an expert accountant: see Barclays Bank v

Nylon Capital at [31]-[35]. Indeed, an accountant would find the point easier to decide than the Court, which would require assistance from an expert accountant to do so.

The expert adjudication process would not be undermined by the failure to comply with paragraph 5, nor is there any reason to be concerned that the process will need to be ‘run again’. An Independent Accountant, with no ties to either party, will have

If the Independent Accountant does fall into error in a way that is adverse to the Claimants, then it is the Claimants’ own case that they will be able to claim damages for breaches of paragraph 5 in Court. But that itself reveals the prematurity of the Claimants’ attempt to enjoin the Independent Accountant process: it may well be that the Independent Accountant agrees with them, requests production of the relevant documentation and resolves the Completion Accounts Dispute in their favour.

Decide whether to agree the Draft Completion Accounts (or simply do nothing, in which case they would be deemed to have accepted them); or

Prepare a notice under paragraph 4.1 “specifying (i) the item or items disputed;

Moneycorp must procure and prepare the submission to the Vendors of Draft Completion Accounts (paragraph 3);

The Vendors then have a minimum of 20 Business Days (Footnote: ⁶) to review the Draft Completion Accounts and (if so advised) prepare and deliver a notice identifying any disputed item(s) (paragraph 4.1);

The parties must then spend 15 Business Days (Footnote: ⁷) endeavouring to agree the matter(s) in dispute (paragraph 4.2);

It is only if the parties are unable to reach agreement as to the Draft Completion Accounts after these steps that they are entitled to refer the dispute to the Independent Accountant by serving an Election Notice (paragraph 6).

The structure of the clause, taken as a whole, makes clear that the procedure is intended to be a unitary one. There are a series of steps to be taken, and on the face of things, each is, in my view, a necessary precondition to the next.

The authorities to which I was referred, in answer to my question after the hearing, reinforce my view on this, since they indicate that, as long as the steps to be taken prior to the reference to arbitration or adjudication are sufficiently certain, they will be enforced as preconditions to such arbitration or adjudication.

The most relevant and helpful authority, in my judgment, is that of the Court of Appeal in Barclays Bank PLC v Nylon Capital LLP [2011] EWCA Civ 826. That was a case in which the question was whether a determination as to an allocation of profits, which had not yet been made, was a condition precedent to the reference to expert determination. Thomas LJ (as he then was) gave the leading judgment of the Court. He decided, at paragraph 52ff, as follows:

“52 In my view, even if it was appropriate to give cl. 26.1 a wide and generous construction (which for reasons I have set out at paragraphs 25-28 above I do not consider I should), then this particular clause makes it quite clear that the word ‘regarding’ could not be given such a wide construction. Under the clause 30 days were to elapse after the allocation before the reference to the expert. That provision in my judgement makes it clear that the expert determination clause was only to apply to a dispute about the allocation, as the making of an allocation was a condition precedent to the appointment of an expert. Furthermore the clause refers to ‘any affected party’; that can only be a reference to a party affected by the allocation, again making it clear that allocation was a condition precedent to the reference to an expert.

53

Notwithstanding the clarity of that part of the clause, it was argued that cl. 26.1(B) was in such wide terms that the accountant to be appointed as an expert was to have a wide jurisdiction to decide upon his own jurisdiction, even if an allocation had not been made. Again it seems to me that the clear language of the clause points to a contrary conclusion. Clause 26.1(B) begins with the words, ‘Such accountant’. Those words plainly refer back to the provisions of cl. 26.1(A) which therefore make it clear that the person who is to exercise the jurisdiction under 26.1(B) is the person who can be appointed under 26.1(A). In short sub-clause (B) cannot enlarge the jurisdiction of the expert unless the expert can validly be appointed under 26.1(A).

54

This view also accords with the commercial rationale of sensible businessmen. They would have considered it sensible to entrust to an accountant for expert determination questions relating to the allocation once an allocation had been made or it had been determined that Mr Burnell was entitled to make an allocation. The parties would not have gone beyond this. In contradistinction to arbitration, they would not have had any procedural safeguards and would have wanted a tribunal suited to the broader issues, in accordance with cl. 26.2. It was suggested by the LLP that an accountant might be able to take legal advice because of the provisions of cl. 26.1(D) which makes provision for the payment of fees and expenses of the expert. It may be that the clause is wide enough to enable the accountant to employ a lawyer to advise him on the interpretation of the clause, but it is difficult to understand why, save in relation to narrow questions of interpretation relating to the process of allocation, it would have been contemplated by rational and sensible businessmen that general issues of interpretation of the agreement in its contractual matrix would fall to be determined by an expert accountant relying on the advice of a lawyer rather than by a judge to whom the opposing arguments would be put briefly and a decision obtained within the well understood procedures of the Chancery Division or the Commercial Court as the courts chosen by the parties under cl. 26.2.

55

In my view, therefore, there can be little doubt about the meaning of the clause, even if a very generous construction is given to it. The expert does not have jurisdiction to determine any issues until there has been an allocation. There has been none. Moreover, the question whether Mr Burnell was entitled to make an allocation which brought into account the profit on Barclays capital investment was an issue which went to the jurisdiction of the expert for the reasons I have explained at paragraphs 46 and 47 above.”

Other authorities to which the Claimants referred me related to the distinct question of whether the preconditions in question were sufficiently clear to be enforceable: see for example Tang Chung v Grant Thornton [2012] EWHC 3198, and Emirates Trading Agency LLC v Prime Mineral Exports Private Ltd [2015] 1 WLR 1145. These authorities are of limited assistance; but they do indicate that where a clause such as the present one is sufficiently clear to be enforceable, it will be construed as a condition precedent to the next step in the dispute resolution procedure.

Moneycorp, for its part, referred me to the case of Heritage Oil and Gas Ltd v Tullow Uganda Ltd [2014] EWCA Civ 1048 as the leading authority in the area (Footnote: ⁸). In fact, however, it seems to me that this authority is distinguishable on a number of bases:

The construction which I prefer, in my judgment, makes good commercial sense. The intent behind the clause is that the precise ambit of any dispute to be referred to an expert determination should be defined prior to such reference. That in turn requires that each party should be apprised of all relevant information in order to define the scope of the issues.

The suggestion that this runs counter to the parties’ choice of an expert determination is in my judgment misconceived. The provisions of this clause are designed to ensure that the scope of the disputes which are for the expert to determine are defined in advance of the reference. The suggestion that it is for the expert to determine what he or she needs to see in order to determine these disputes puts the cart before the horse.

First, what are the relevant facts?

Secondly, what is the test for determining whether the Claimants are entitled to documents?

Thirdly, are the Claimants entitled to refer me to the “without prejudice” correspondence in late June 2018?

The relevant accounts were those produced on 4 June 2018. Time therefore runs from that date. It is common ground that the deadline for the raising of queries would therefore be 58 days from that date, ie 21 August 2018;

The first queries raised were those on 6 and 8 June 2018. Those queries were however answered by emails sent by Moneycorp on 11 June 2018;

No further query was raised until 25 June 2018. However, that query cannot be relied on by the Claimants since it was sent without prejudice;

The Claimants then purported to refer the matter to the independent expert. No further specific dispute had been raised. Instead, all that the Claimants had done was to make generalised complaints about the lack of documentation; and (5)At that stage, the expert determination process was, therefore, commenced.

The initial queries made on 6 and 8 June remained outstanding at all times and were never properly answered;

Further queries were raised, orally, by Mrs O’Brien during the period prior to the termination of Ms Samsudeen’s employment;

There was a further enquiry made on 25 June 2018, which the Claimants are entitled to rely on for the purposes of showing the fact of the enquiry;

Therefore, at the date of the expiry of the relevant period, there was an outstanding request which had not been answered; and

In those circumstances, it was not open to Moneycorp to invoke the expert adjudication procedure.

There were undoubtedly requests for documents in the emails of 6 and 8 June. I have been told that these documents were reasonably required in order to check the accounts, and the independent evidence from Mr Thompson supports this submission. There is contrary evidence from Moneycorp; but this is the type of dispute that is not suitable for summary judgment.

There were also, I am told, requests made orally for further information by Mrs O’Brien during the course of June 2018. I have no countervailing evidence from Moneycorp. Again, therefore, I take the view that this is not an appropriate question for summary determination.

Finally, there was also further correspondence during the relevant period, even if it was marked without prejudice. I do not intend to say anything further about this correspondence, nor do I intend to make any decision on the question of whether it is open to the Claimants to refer to it, since, in my judgment, this is not an appropriate case for summary judgment in any event.

Requiring Moneycorp to provide the Requested Information; and

Restraining the Independent Accountant from proceeding with his adjudication of the Completion Accounts Dispute.

Sections 37(1)-(2) of the Senior Courts Act 1981 state that the High Court may by order grant an injunction in all cases in which it appears “just and convenient” to do so, and any such order may be made either unconditionally or on such terms as the Court thinks just. Interim injunctions are therefore discretionary but the discretion is to be exercised judicially in light of the overriding objective in CPR 1.1.

Applying the well-known approach deriving from American Cyanamid [1975]

On an application for an interim injunction, the Court should not attempt to resolve “critical disputed questions of fact or difficult points of law” on which the claim of either party may ultimately depend, particularly where the point of law “turns on fine questions of fact which are in dispute or are presently obscure”: Sukhoruchkin v Van Bekestein [2014] EWCA Civ 399 at [32] (Sir Terence Etherton C).

In the exercise of its discretion to grant an injunction, and consistently with the overriding objective, the Court will not grant an injunction where it would be futile or serve no purpose: Mosley v News Group Newspapers [2008] EWHC 687 (QB).

A mandatory injunction is less likely to be granted on an interim basis. This is because, where other factors appear to be evenly balanced, the Court “should take whatever course seems likely to cause the least irremediable prejudice to one party or the other”: National Commercial Bank Jamaica Ltd v Olint Corp Ltd (Practice Note) [2009] 1 WLR 1405 (PC). A mandatory injunction requiring a party to take some positive step at an interlocutory stage will usually carry a greater risk of injustice if it turns out to have been wrongly made. It is therefore legitimate in such cases to require a “high degree of assurance” that the interim relief would ultimately be granted at trial: Shepherd Homes Ltd v Sandham [1971] Ch 340 at 351 (Megarry J).

Furthermore, where the grant of interim relief will have the practical effect of giving the applicant the final relief that it is seeking in the case, the Court will be more reluctant to grant such relief: Films Rover Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670 at 680.

Where an interim injunction is granted, the usual practice is to make this subject to a condition requiring the applicant to offer a cross-undertaking to pay damages for any losses sustained by reason of the injunction in the event that it transpires that it ought not have been granted.

First, it was submitted that the mandatory injunction should be rejected because it would amount to giving the Claimants the full relief that they seek at trial.

Secondly, it was submitted that damages were an adequate remedy, since:

the course which would be least likely to cause irremediable prejudice to one party or the other (National Commercial Bank Jamaica Ltd v. Olint [2009] 1 WLR 1405 at [19]):

There would unquestionably be (at least) a serious issue to be tried as to whether Moneycorp was obliged to provide such documents and information;

Damages would not be an adequate remedy for the alleged breach since absent an interim injunction the Claimants would be left either in limbo without the ability to propose adjustments to the Draft Completion Accounts or safely trigger the Independent Accountant procedure, or unable to make submissions to the Independent Accountant on a properly informed basis and without any basis for formulating a damages claim after the Independent Accountant made his decision;

In contrast, damages would plainly be an adequate remedy for the prejudice that complying with such an interim injunction would cause Moneycorp, and readily capable of assessment (by reference to the cost of providing the required documents and information); and

The balance of convenience favours the grant of the injunction.

I accept that there is clearly a serious issue to be tried as to whether Moneycorp has to supply the various identified documents;

Prior to the trial of this issue, then I take the view that the independent adjudication procedure cannot proceed further, since the question of whether the necessary condition precedent to the reference to the adjudicator has been satisfied has not yet been determined;

That in turn means that there will have to be a determination of whether the documents so far provided satisfy the condition precedent, so as to trigger the right to initiate the independent adjudication procedure;

Prior to the determination of that dispute, then I take the view that it would be wrong to allow the independent adjudication process to go further; but also wrong to prejudge the issue of whether there has in fact been provision of the necessary documents to enable that process to be initiated;

Accordingly, I am prepared to order (if necessary) that the expert adjudication process should be halted. My understanding is that this has been done by consent; but if any further order is required, I am persuaded that I should grant

Conversely, I am not prepared to grant a mandatory injunction requiring the delivery up of the various documents requested, since this would be to prejudge the issue of whether those documents are in fact necessary, and would be to give the Claimants at an interlocutory stage what they seek after a final trial.

In my judgment, the provisions of paragraph 5 of part 1 of Schedule 9 are a condition precedent to a reference pursuant to the independent expert procedure. I will therefore grant the declaration to that effect sought by the Claimants in the Claimants’ Summary Judgment Application.

I do not have sufficient material to make a summary determination of the question of whether or not there has been sufficient compliance with the clause. This dispute must therefore proceed to trial. Save as set out in the paragraph immediately above, both applications for summary judgment are therefore refused.

The striking out application should be dealt with by the trial judge or another judge in the light of fuller information.

Pending the resolution of the question of whether the condition precedent to the reference has been satisfied, I would if necessary grant injunctive relief preventing the expert determination procedure going further. At present, this result is being achieved by consent; but if an order is necessary, I would make such an order.