Syspal Capital Limited v Christopher John Truman & Anor
[2024] EWHC 1561 (Ch)
Daniel Lee & Anor v GSquare Capital II LP & Ors
30 November 2023
[2023] EWHC 3017 (Ch)
High Court
A company bought another. A disagreement arose about a share transfer and whether a price of £1 for the shares was unfair. The court decided the transfer was valid and the £1 price was fair as it was a pre-agreed price in the contract, not a punishment for breaking rules.
Key Facts
- •Application by First and Second Defendants (GSquare and P2U Holdings) to strike out or obtain reverse summary judgment on certain paragraphs in the Particulars of Claim and Reply.
- •Dispute centers around the validity of a July 2020 Transfer Notice and whether clause 16.3(d) of P2U Holdings' Articles of Association is an unenforceable penalty clause.
- •Claimants (Mr. Lee and the Trustees) allege the Transfer Notice inaccurately identified Mr. Lee's Leaver status and that clause 16.3(d) imposes a penalty.
- •Mr. Lee founded Pharmacy2U (P2U), later sold to GSquare, receiving shares and cash consideration.
- •Mr. Lee's employment with P2U ended, triggering Article 16 of the Articles of Association, resulting in the transfer of shares to GSquare.
- •The price payable for the shares depends on Mr. Lee's Leaver classification (Good, Bad, Intermediate, Very Bad), with £1 payable if Very Bad.
Legal Principles
Strike out: A statement of case can be struck out if it discloses no reasonable grounds for bringing or defending a claim or is an abuse of process.
CPR r. 3.4(2)
Summary Judgment: The court should not grant summary judgment unless the claim has no real prospect of success. A 'realistic' claim carries some degree of conviction and is more than merely arguable.
Standard Life Assurance Ltd v Building Design Partnership Ltd [2021] EWCA Civ 1793; Swain v Hillman [2001] 1 All ER 91; Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch)
Contract Interpretation: The court's task is to ascertain the objective meaning of the language chosen by the parties, considering the contract as a whole.
Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd [2018] 1 CLC 94
Penalty Clauses: The true test is whether a provision is a secondary obligation imposing a detriment out of all proportion to the innocent party's legitimate interest in enforcing the primary obligation.
Cavendish Square Holdings v Makdessi [2016] AC 1172 (SC)
Outcomes
The July 2020 Transfer Notice was valid.
Article 16.1 only requires specification of the number of shares and the transferee. The Leaver type is relevant for pricing (Article 16.3), but not the initial transfer directive. The notice did specify Mr. Lee's Leaver type, and there's no requirement for perfect accuracy at that stage.
Article 16.3(d) is not a penalty clause.
Article 16.1 is a primary obligation triggered by Mr. Lee becoming a Leaver, not a breach of contract. Article 16.3 is a price adjustment mechanism, not a penalty. Finding it a penalty would require rewriting the contract, which the court cannot do. Authorities post-Cavendish support this conclusion.