John Dilworth & Anor v Wosskow Brown Solicitors LLP & Ors
[2024] EWHC 903 (Ch)
Ernest Richard Hemmings v Jerome Carl Mathias & Anor
9 March 2023
[2023] EWHC 483 (Ch)
High Court
Two companies had a debt dispute. A buyer of shares agreed to make sure one company repaid a debt to the other. The debt was settled in a wider deal, not with just cash, but by resolving all disputes. The court said this was a valid repayment, so the buyer didn't need to pay extra money.
Key Facts
- •Mr Hemmings transferred construction contracts from Construction to Communications, resulting in payments due to Construction being diverted to Communications.
- •Construction entered administration, and its liquidators pursued claims against Mr Hemmings and Communications.
- •Mr Hemmings sold shares in Holdings and Communications to Mr Mathias under a Share Purchase Agreement (SPA) containing an indemnity clause regarding a debt (BANES Debt) owed by Communications to Construction.
- •A settlement agreement was reached where Communications paid £200,000 to Construction's liquidators, settling all claims between the involved parties.
- •Mr Hemmings subsequently sought indemnity from Mr Mathias under the SPA based on the liquidators' claims.
Legal Principles
Interpretation of contract clauses, specifically the meaning of "repayment" in the context of a debt settlement.
Share Purchase Agreement (SPA) Clause 9.1
Whether a debt is repaid by offsetting cross-claims in a settlement agreement.
Settlement Agreement
The effect of a full and final settlement agreement on the discharge of debts.
Settlement Agreement, Clause 5.1
Outcomes
Mr Mathias procured that Communications repaid the BANES Debt to Construction.
The court found that the settlement agreement constituted repayment of the BANES Debt because the liquidators accepted the payment and release of cross-claims in full and final settlement, effectively discharging the debt. The court rejected the argument that repayment required cash payment only and accepted that offsetting claims could constitute repayment where the creditor agrees to discharge the debt in return for the consideration received.
The second preliminary issue (Mr. Hemmings's indemnity claim) did not arise.
Given the determination of the first issue, the second issue regarding the indemnity was moot.
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