COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
THE HON MR JUSTICE ARNOLD
HC07CO1745
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE LLOYD
and
SIR PAUL KENNEDY
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(1)MICHAEL BEER (2) JANE BEER |
Appellants |
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- and - |
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BEXBES LLP |
Respondent |
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WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
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MR JOHN MACHELL (instructed by Bird & Bird) for the Respondent
Hearing date: 7th May 2009
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Crown Copyright ©
Lord Justice Mummery :
Background
"Business goodwill £1.25m
(a) £350 K cash up-front payment
(b) £225K per annum based on maintaining 2005 levels of turnover and profit
(c) 4 year contract Mike Beer and family
Salary-Mike Beer £65,000 per annum, plus performance sharing to a total of £100,000K [sic] per annum
Bonus structure | 60% Mike Beer |
20% Online Euro | |
20% Online Gmbh" |
"the Consideration in relation to the Sale Contract comprises the aggregate of all amounts of whatsoever nature that may be actually received (including any cash, loan notes, shares, profit sharing and earn out arrangements (including any cash, loan notes, shares and profit sharing arrangements comprised in such earn out…"
Judgment of Arnold J
"38. It is common ground that paragraph 1(c) of the Offer Letter provides for a "performance sharing" payment of up to £35,000 per annum for four years i.e. a total of £140,000. Mr and Mrs Beer contend that this constitutes part of the Consideration in relation to the first offer. In support of this contention, counsel for Mr and Mrs Beer pointed out that the definition of Consideration embraces "all amounts of whatsoever nature…including ..profit sharing and earn out arrangements" and argued that the "performance sharing" payment was a profit sharing or earn out arrangement. Against that BexBes contends that the "performance sharing" payment constitutes part of Mr Beer's salary under a four year employment contract and does not constitute part of the Consideration for the sale of MBT.
39. In my judgment BexBes is correct. It is clear as a matter of arithmetic that the business goodwill payment of £1.25 million consists of the two payments listed in paragraphs 1(a) and (b) of the Offer Letter. In my view clause 1(c) represents a separate, although linked, proposal to employ Mr Beer for a period of four years as part of the overall deal. The "salary" offered to Mr Beer consists of two elements. The first is a fixed sum of £65,000 per annum. The second is a performance –related payment of up to £35,000 per annum to make a total of up to £100,000 per annum. Counsel for Mr and Mrs Beer rightly did not suggest that the fixed element comprised part of the Consideration for the sale of MBT: it is plainly remuneration to Mr Beer for his employment. I consider that the performance-related element stands in the same position. The fact that it is performance–related does not make it part of the Consideration for the sale of MBT. This conclusion is supported by the fact that the "bonus structure" quoted envisages that 40% of Mr Beer's "performance sharing" payments will be related to the performance of the two existing Online divisions with which MBT is to be integrated."
The Beers' submissions
Discussion and conclusion
Result
Lord Justice Lloyd:
Sir Paul Kennedy: