Key Facts
- •Syspal Capital Limited (SCL) brought a Part 8 claim against Christopher Truman and Syspal Holdings Limited (SHL) regarding the interpretation of SHL's articles of association.
- •SHL is a holding company with SCL owning 76% and Truman owning 24% of its shares.
- •Truman was a director and employee of SHL's subsidiary, Syspal Limited (SL), until his dismissal from SL in October 2022 and resignation from SHL in May 2023.
- •The articles of association contained a pre-emption clause (Art. 10) and a deemed transfer notice clause (Art. 11.3) that determined the price of shares upon a shareholder's cessation of employment, directorship, or consultancy with a Group Company.
- •The dispute centered on whether Art. 11.3 was triggered by Truman's dismissal from SL in October 2022 or his resignation from SHL in May 2023, impacting the valuation of his shares (Market Value vs. Fair Value).
Legal Principles
Contract interpretation must be objective, considering the contract as a whole and the background knowledge available to the parties.
Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2023] UKSC 2 and Wood v Capita Insurance Services Ltd [2017] UKSC 24
Interpreting articles of association requires focusing on the natural and ordinary meaning of the words, the scheme and purpose of the articles, ascertainable extrinsic facts, and commercial common sense.
Re Euro Accessories Ltd [2021] EWHC 47 (Ch) and Ventura Capital GP Ltd v DnaNudge Ltd [2023] EWCA Civ 1142
Implied terms should be approached cautiously; business efficacy and the officious bystander test are relevant, but mere reasonableness is insufficient.
Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72
Outcomes
The court found that Art. 11.3 was triggered by Truman's resignation from SHL in May 2023, not his dismissal from SL in October 2022.
The court determined that the phrase 'in that capacity' in Art. 11.3 refers to all three capacities (employee, director, consultant) and that Truman continued as a director of SHL after his dismissal from SL. This interpretation aligns with commercial common sense and prevents the possibility of forced share sales at a lower price due to unfair dismissals.
The sale price for Truman's shares is 'Fair Value' as defined in the articles.
This follows directly from the court's interpretation of Art. 11.3 and Art. 10.4.3.
A court inquiry was ordered to determine the valuation of Truman's shares based on 'Fair Value'.
The SHL auditors were unable to perform the valuation.