CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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KEITH WILLIAM JEFFRIES |
Claimant |
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- and - |
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JEAN ROSEANN ARCHER |
Defendant |
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Mr Alexander Wright (instructed by Hammonds LLP) for the Defendant
Hearing date: 9th February 2010
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Crown Copyright ©
Mrs Justice Proudman:
The facts
"For the purposes of this clause 3 and of clause 9 below 'Company Refinancing' shall mean that (whether it chooses to do so or not) the Company is able to repay the KJ Loan in full which fact shall be taken to be conclusively proven by either Shareholder producing an unconditional offer from a commercial lender of a loan to the Company of an amount equal to that then outstanding under the KJ Loan upon reasonable commercial terms at the time such offer is made."
The KJ loan was a loan made by the claimant to the Company in accordance with Clause 3(a) of the Agreement as amended by a Supplemental Shareholders' Agreement of 19 July 2005.
"The Shareholders agree that during the continuance of this Agreement none of them will without the prior written consent of the other sell, mortgage, charge, pledge or otherwise encumber any of his shares in the Company or any interest therein."
"9. GET OUT CLAUSE
(a) In the event that at any time before Company Refinancing (as defined in clause 3(g) above);
(i) KJ shall serve a Transfer Notice in respect of all the shares in the Company held by him or shall be deemed to have served a Transfer Notice for any reason;
(ii) JA shall be unable to [sic] unwilling to purchase the Sale Shares; and
(iii) KJ shall find a third party purchaser for the Sale Shares under clause 7(b)(viii) above
then KJ shall be entitled by notice served on JA to require that JA shall also transfer all her shares in the Company to that third party purchaser at the same price provided that the amount to be paid by the third party purchaser for the shares held by JA shall be not less than £100,000 and that the JA loan shall be repaid in full.
(b) For the avoidance of doubt the provisions of clause 9(a) shall cease to apply forthwith upon Company Refinancing."
"As you are no doubt aware, on the 6th December 2006, the Company received an unconditional offer of facilities in the aggregate amount of £400,000 from Lloyds TSB ("the Bank").
The receipt of such an unconditional offer constituted a "Company Refinancing" as defined in the Shareholders' Agreement.
In those circumstances, Clause 9 of the Shareholders' Agreement is no longer applicable, and the stated effect of and course of action suggested in your letter are both misconceived."
The issues
Company Refinancing
The Company
Conclusive proof because unconditional offer
First and second Possibilities: conditional while subject to binding contract
Preconditions in the loan document
"the loan may not be borrowed unless all the PRECONDITIONS set out below have been satisfied and until the Bank has received in a form acceptable to it and at your expense such evidence as the Bank may require to confirm that the security value requirements set out in the SECURITY COVENANTS below will be met."
The clause headed PRECONDITIONS provided:
"…the Bank is to receive in form and substance acceptable to the Bank the security and other documents (if any) listed in the Security Schedule to this agreement … Any security received should be accompanied by such evidence as the Bank may reasonably require to confirm the value of such security and to confirm that such security is fully effective."
Ability to repay in the absence of deemed conclusive proof
Notice under clause 9
"on JA to require that JA shall also transfer all her shares in Company [sic] to that third party purchaser…".
The defendant relies on the simple point that although the claimant found a "third party purchaser for the Sale Shares under clause 7(b)(viii)", the purported notice dated 14th November 2008 did not identify the purchaser. Mr Wright submitted that the notice was plainly defective, both because of the use of the word "that" in "that third party purchaser" and also because the defendant could not be required to transfer her shares to a person whose identity was undisclosed.
Conclusion