ON APPEAL FROM
THE MAYOR'S AND CITY OF LONDON COUNTY COURT
HIS HONOUR JUDGE BIRTLES QC
Strand, London, WC2A 2LL
B e f o r e :
LADY JUSTICE ARDEN
MR JUSTICE DAVID RICHARDS
| Bright Asset Limited
|- and -
Ms Rachel Sleeman (instructed by Coleman-CTTS) for the Respondent
Hearing date : 1 February 2011
Crown Copyright ©
Lady Justice Arden (giving the judgment of the Court):
Issue (1) (the 'which obligor?' issue): whether under the agreement the index debt committed was not only that of HG but also that of the vehicle used to acquire its business and assets, namely Cool Brands Ltd ("CB"); and
Issue (2) (the 'which indebtedness?' issue) if the answer to Issue (1) is yes:
(i) (the IDF issue) whether under the agreement the index debt committed included the amount of funding which CB obtained by way of an invoice discounting facility ("IDF"), which involved not the raising of loans by CB but the sale of its invoices for cash, and
(ii) (the deferred purchase price issue) whether under the agreement the index debt committed included the amount of purchase price paid by CB for the business of HG on the grounds that it was not payable immediately but deferred.
i. the £100,000 loan made by CPL;
ii. the £800,000 purchase price paid to the administrators; and
iii. the £2m IDF.
"Following our recent discussions, we write to confirm the terms and conditions upon which we will provide you with consultancy services, in relation to your interests in [HG] and its subsidiaries ("the Business")."
"comprise advising you in connection with the debts of the Business, specifically in relation to the full or partial repayment and/or exit of the incumbent debt provider, possibly via an insolvency process. In this connection, we will target and canvas new debt providers, facilitate the provision of information and assist you with negotiations."
2. We will not provide investment advice and issues relating to equity are beyond the scope of our Services.
3. We confirm that, in connection with the Financial Services and Markets Act 2000 ("the Act"):
3.1 The debt providers to whom we will introduce you will be authorised, exempt from authorisation or not otherwise unlawfully carrying on regulated services.
3.2 The debt instruments which are the subject of our Services are not specified investments for the purposes of section 22 of the Act.
Fees and expenses
4. Success fees, payable upon completion and subject to a minimum of £25,000 of:
4.1 1.5% of the aggregate replacement and new debt committed by sources introduced by you; and
4.2 2.5% of the aggregate replacement and new debt committed by other sources, and
for the purposes of calculating our success fees, we will exclude funds disbursed at completion by an asset based lender introduced by you or by UHY Hacker Young.
5. In the event that:
5.1 all of the replacement and new debt is committed by sources introduced by you; or
5.2 a satisfactory financial restructuring is completed without the commitment of new or replacement debt by a funder other than HSBC,
then no success fees shall be payable, instead an advisory of £25,000 shall be payable upon completion.
6. A retainer of £4,000 per month, either deductible from our success fees or advisory fee or treated as an abort fee if no transaction is concluded, payable initially upon commencement of this agreement and thereafter on the 1st of each month."
The judge's judgment
General points on the interpretation of the agreement
"(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the 'matrix of fact', but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent…"
"the actual raising of funds by the Claimant, although a possibility, would not be a requirement for the Claimant to earn a success fee. Mr Gullan proposed to base the quantum of the success fee on the debt funding committed to any transaction by the Defendant and by third parties. Mr Lewis asked Mr Gullan to forward him a draft engagement letter reflecting the discussion." (judgment, paragraph 21)
Issue (1): whose debt?
"target and canvas new debt providers, facilitate the provision of information and assist you with negotiations."
Issue (2): which indebtedness?
Sub-issue (2)(i): the IDF issue
Sub-issue (2)(ii): the deferred purchase price issue
Disposal of this appeal