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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Advinia Care Homes Ltd v (1) BUPA Care Homes Investments (Holdings) Ltd & Ors [2020] EWHC 1563 (Ch) (19 June 2020) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2020/1563.html Cite as: [2020] EWHC 1563 (Ch) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Rolls Building, Fetter Lane, London, EC4A 1NL |
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B e f o r e :
(sitting as a Deputy Judge of the Chancery Division)
____________________
ADVINIA CARE HOMES LIMITED |
Claimant |
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- and – |
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(1) BUPA CARE HOMES INVESTMENTS (HOLDINGS) LIMITED (2) BUPA CARE HOMES (CFHCARE) LIMITED (3) BUPA CARE HOMES (ANS) LIMITED (4) BUPA CARE HOMES (CARRICK) LIMITED (5) BUPA FINANCE PLC |
Defendants |
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- and - |
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ADVINIA HEALTH CARE LIMITED |
Third Party |
____________________
Mr Edward Cumming QC and Mr Adam Cloherty (instructed by Slaughter and May) for the Defendants
Hearing dates: 3 and 4 June 2020
____________________
Crown Copyright ©
MR MICHAEL GREEN QC:
Introduction
(1) A variation of the Order of Nugee J dated 24 October 2018 (the Nugee J Order) to adjust the fortification of Advinia's cross-undertakings given in relation to the mandatory injunction that was ordered, in particular to release the sum of £3,981,167.31 that had been paid into Court (the Money in Court) (the Variation Application);
(2) An interim payment pursuant to CPR 25.7 from the First Defendant to Advinia Holdings in the sum of £2,131,393 (the Interim Payment Application).
Factual Background
(a) The transactions between the Advinia Parties and the Defendants
(1) Clause 9 provided for the transfer of Relevant Business Contracts from BCH to Advinia with effect from the relevant completion date. Clause 9.5(A) provided that from the date of completion:
"(A) [BCH] shall be treated as holding the benefit of that Relevant Business Contract, to the extent permitted by that Relevant Business Contract, on trust for [Advinia] and any benefit will be promptly paid over to [Advinia]."
(2) Clause 10 provided for BCH's obligations and liabilities in respect of those Relevant Business Contracts to be assumed by Advinia as from 11 November 2016. These are called the "Assumed Obligations" in the BTA but have been referred to by the parties as "Opening Balance Liabilities" and form the subject matter of a continuing dispute between the parties.
(3) Clause 11.4 provided for a trust of monies received by BCH for Advinia after completion. It said as follows:
"11.4 Without limiting clause 9.5(A), all moneys or other items belonging to [Advinia] which are received by [BCH] on or after the Relevant English Completion in connection with the Relevant Business or any Relevant Business Assets shall be held in trust by [BCH] for [Advinia] and shall be promptly paid over to [Advinia]."
(4) Clause 17.2 provided for no set-offs or counterclaims to be applied against sums due under the BTA. It said that:
"17.2 All sums payable under this Agreement shall be paid free and clear of any set-off, counterclaim, deduction or withholding whatsoever, save only as may be required by law."
(5) Clause 19 preserved the parties' rights and remedies even if there is delay in enforcement. It provided:
"19.1 No delay or omission by any party in exercising any right, power, or remedy provided by law or under any Business Transfer Document shall:
(A) Affect such right, power or remedy; or
(B) Operate as a waiver of it.
19.2 The single or partial exercise of any right, power or remedy provided by law or under this Agreement shall not preclude any other or further exercise of it or the exercise of any other right, power or remedy.
19.3 Save as provided in this Agreement, the rights, powers and remedies provided in this Agreement are cumulative and not exclusive of any rights, powers and remedies provided by law."
(6) Curiously, clause 20 provides for BCH's maximum liability under the BTA to be limited to £1 only. It provided as follows:
"20.1 The maximum aggregate liability of [BCH] under or in connection with the Business Transfer Documents and / or the Original English BTA (to the extent that it relates to a Relevant Care Home or any of the Businesses or any of the Business Assets) in respect of all claims on any ground whatsoever (in the absence of [BCH's] own fraud or dishonesty) shall not exceed £1.
20.2 [Advinia] undertakes that it shall not itself…make any claim against [BCH] under or in connection with the Business Transfer Documents unless the maximum amount of that claim is expressly stated and is limited to an amount which…does not exceed [BCH's] maximum aggregate liability as set out in clause 20.1.
…
20.4 In the event of any conflict or inconsistency between this clause and any other provisions of this Agreement, this clause 20 shall prevail."
(7) Clause 22 contained entire agreement and no oral variation provisions as follows:
"22.1 The Business Transfer Documents constitute the whole and only agreement between the parties relating to the sale of the Businesses and the Business Assets from [BCH] to [Advinia].
…
22.5 This Agreement may only be varied in writing signed by or on behalf of all of the parties. For this purpose, a variation to this Agreement shall include any addition, deletion, supplement or replacement, howsoever effected."
"6.11 All payments made by [Advinia] to [the Fifth Defendant] under this Agreement shall be made in full without any set-off, restriction or condition and without any deduction for or on account of any counterclaim or Tax…"
(1) The First Defendant must prepare a prescribed form of balance sheet that specifies figures for certain items; these are called the "Draft Completion Accounts" (clause 1.1);
(2) Within 30 Business Days (as defined) of receiving the Draft Completion Accounts, Advinia Holdings can serve a "Disputes Notice" that specifies items in dispute and puts forward its reasons and the monetary adjustments required (clause 1.2); the length of time was subsequently increased from 30 to 50 Business Days;
(3) If Advinia Holdings does not serve a Disputes Notice, then the Draft Completion Accounts become the "Completion Accounts" and the sums become due either way on certain specified dates (clauses 1.3(A) and 2);
(4) If Advinia Holdings does serve a Disputes Notice, the parties are obliged to use their reasonable endeavours to resolve the dispute; if they do reach agreement within 20 business days of the service of the Disputes Notice, then the agreement is incorporated in the Draft Completion Accounts which then become the Completion Accounts and the sums become due on the same basis as above (Clauses 1.3(B)(i) and 2);
(5) If no agreement is reached, the dispute has to be referred to an accounting expert whose decision "shall in the absence of fraud or manifest error be final and binding on the parties"; that expert's decision will adjust the Draft Completion Accounts which will then become the Completion Accounts with sums payable as above (Clauses 1.3(B)(ii), 1.4 and 2).
(b) The "Netting-Off Agreement"
"Hi Kathryn
Would it be acceptable to pay the net amount instead of Advinia sending £5.6m and BUPA sending £2.2m?
Please advise so I can make payment and bring the account up to date.
Income receipts Owing from BUPA 2,172,536.00 Payable to BUPA -5,636,164.25 -3,463,628.25 Regards Joe"
"Hi Kathryn
I was suggesting Advinia make a payment of £3,463,628.25 today, with no need for Bupa to pass through £2.2m tomorrow.
Is this acceptable? Otherwise, full payment tomorrow for both parties."
"Hi Joe,
I have just spoken with Kathryn.
The "netting" has not been formally agreed within Bupa at present and is not in line with the SPA requirements. Kathryn is pushing given it is in both parties interest."
"Hi Joe,
As discussed, attached schedule for the Net Payment as at 4th July.
For the record, Bupa will assess the Net Payment position on an ongoing basis and on ad-hoc agreement by both parties, Bupa or Advinia will settle the net position each week. This weekly arrangement is without prejudice to the ongoing rights under clause 6.11 of the TSA, and either party has the right to revert to a process of payments without netting if it wishes to.
Please confirm by return you are in agreement with net payment of £1,173,493.34 and we will arrange the payment via CHAPS today.
Many thanks
Kathryn"
The attached schedule was headed "Advinia Net Payment & Receipts - Status as at 4th July 2018". It recorded that the fee income collected by the Defendants on behalf of Advinia for the week ending 1 July 2018 was £2,687,199.94, and that the "Payments" which were described as "overdue" that Advinia owed to the Defendants amounted to £1,513,706.60. There was therefore a "Net Amount to be Paid by BUPA" of £1,173,493.34. The Schedule concluded with a box containing the following:
"Netting of Payments
Fee income comprises Resident Fees paid by LA/CCGs and Self Funders – to be passed through by Bupa to Advinia
Payment consist of invoices submitted to [Advinia] by [the Fifth Defendant] under the Transitional Service Agreement (TSA costs and reimbursements e.g. Payroll)
Net Payment = Receipts less Payments
Bupa will assess the Net Payment position on an ongoing basis and on ad hoc agreement by both parties, Bupa or Advinia will settle the net position each week. This weekly arrangement is without prejudice to the ongoing rights under clause 6.11 of the TSA, and either party has the right to revert to a process of payments without netting if it wishes to."
That last paragraph is identical to the wording in the main body of the email.
"Hi Kathryn
Confirm terms as outlined.
Regards
Joe"
(1) On a weekly basis, the Defendants would net off (a) all sums due from Advinia to the Defendants under any of the Agreements (ie the TSA, BTA and SPA), against (b) all sums due from the Defendants to Advinia under those Agreements, including the fees received and held on trust for Advinia;
(2) Whichever of Advinia or the Defendants owed more to the other would make a payment of the net sum; but
(3) Both parties had the right to withdraw from the netting-off process by giving notice to the other side.
(c) Events leading to the Nugee J Order
"Morning Kathryn
Coming back to [sic] on the comment to fund next payroll.
You will know that the income receipts are used to fund payroll and those funds are now held by Bupa.
Excluding the opening balance sheet payments being sought for repayment – Bupa owes Advinia.
I am still of the view that those opening balance payments are net off from the completion statement monies owning [sic] to us. That amount needs to be included in the net calculation."
There was no indication in that email that there was no netting-off arrangement in place between the parties or that it had been brought to an end. Mr Genova appears to be questioning some of the items used in the netting-off process, namely the Opening Balance Liabilities. Ms Prayle responded by email the same day to say that such liabilities had been properly included.
"As discussed on the Payroll separation meetings and subsequently on last Friday's call with Charles Richardson, we require you to settle the Payroll amount due to your employees up front from October payroll onwards.
For October, the monies need to be cleared funds in Bupa's bank account by close of business on the 23rd October to enable us to release the BACS file.
Subsequent Payroll monies for the remaining period of the TSA will also be required in advance, we will notify you nearer the time as to the timings.
Please confirm your acknowledge [sic] and understanding of this request by return of email by end of day, Monday 8th October.
Please be advised it is your responsibility to communicate any non payments to your employees directly."
"The TSA obliges Bupa to provide Payroll administrative services, not to actually pay the Payroll lump sum up front each month.
Therefore, we require Advinia to raise a CHAPS at time we raise the BACS payment with effect from October payroll (COB 23rd October)."
"As communicated by email by Kathryn Prayle to Joe Genova on 16 October 2018, Advinia owes [the First Defendant] £16,631,990 (the "Gross Amount"). The Gross Amount includes various pay cycle, payroll, fixed costs TSA payments and opening balance payments which Advinia owes [the First Defendant]. Settlement of the Gross Amount is required immediately.
Without prejudice to the amounts owing to [the First Defendant] as set out above, we note that [the First Defendant] has accrued £14,165,067 of fee income (the "Accrued Fee Income") which it holds on trust for [Advinia] under the BTAs.
We are owed a net payment of £2,466,923 (the "Net Amount"), being the Gross Amount less the Accrued Fee Income, in full settlement of the matters referred to above, on the basis that this is to be credited to [the First Defendant's] account in cleared funds no later than 5pm (London time) on Friday 19 October 2018. Details of [the First Defendant's] account have already been provided to you.
However in the event that full payment of the Net Amount is not received by this date, Bupa will take immediate steps to exercise its legal rights to recover the sums owed to it in full."
"As we have already communicated by email on 4 October 2018, Bupa is not prepared to extend credit to or incur additional costs on behalf of Advinia any longer. This is particularly the case in light of Advinia's persistent delays in paying amounts owed to Bupa and the terms of the letter sent by Advinia's advisers to Slaughter and May dated 9 October 2018 (to which we will respond separately). Therefore, Bupa requires you to transfer the amount that will be notified to you by 2pm on Monday 22 October 2018 in respect of the October payroll amount (the "October Payroll Amount") in cleared funds into [the First Defendant's] bank account by 5pm (London time) on Tuesday 23 October 2018. To the extent you require Bupa to continue to provide payroll administrative services going forward, we will notify you of the relevant payroll payment dates for subsequent months in due course.
Bupa will not make goodwill payments on your behalf in respect of payroll for October unless it has received both the Net Amount and the October Payroll Amount within the timeframes set out above, nor will it make goodwill or any other payments on your behalf in respect of the payroll for any future months unless it receives the requisite funds in advance of the payment date."
"(A) Your letter wholly disregards the practical arrangement adopted by Advinia and Bupa in preceding months of paying "net" amounts to each other rather than swapping gross amounts owed. Further, and, contrary to what is set out in your letter, these net amounts did not just set off amounts due from Advinia to fund its payroll obligations, but also included amounts owed by Advinia in respect of other liabilities including pay cycle, fixed costs and opening balance amounts. An example of this netting occurred on 20 June 2018, where Bupa accepted a net payment on the request of Advinia. Since then, in emails between Kathryn Prayle and Joe Genova on 4 July 2018, it was agreed, again on the request of Advinia, that "Bupa will assess the Net Payment position on an ongoing basis and on ad-hoc agreement by both parties, Bupa or Advinia will settle the net position each week", and subsequent payments have conformed to this arrangement."
Mr Dale QC submitted that this letter was also inconsistent with the Defendants' current position on the Netting-Off Agreement.
(d) The ex parte application to Nugee J
"9. All those are matters which are not suitable for resolution on this application. They all seem to me to raise questions that could be characterised as triable issues. They all seem to me questions of some difficulty. If the question is whether they raise serious issues to be tried, they do. If the question is whether I can have a high degree of assurance that the applicant will succeed at trial then I have to say, at the moment, I do not feel that high degree of assurance.
…
11. As I have said, I do not regard the facts, which have been put before me at very short order and necessarily leave something to be desired as to the evidence, as sufficient to give me a high degree of assurance that the claimant will establish that there is currently, sitting in the hands of Bupa, a trust fund of more than £3.9 million which is available for the applicant to draw on at will. That is undoubtedly something that is seriously arguable and there is a serious issue to be tried but I do not regard it as something which, at this stage, I can say the claimant is very likely to succeed on."
"1. The [Defendants] shall and shall take such steps as may be necessary to discharge [Advinia's] payroll liability in respect of the month of October 2018 (the "October Payroll Liability"), using such sums as they may continue to hold (if any) that were originally paid to any of them to hold on behalf of [Advinia], or such traceable proceeds as they may continue to hold of any sums (if any) that were originally paid to any of them to hold on behalf of [Advinia], and (to the extent necessary) such of the [Defendants'] own funds as may be required.
2. Following discharge of the October Payroll Liability under paragraph 1:
a. As security for [Advinia's] undertaking set out in paragraph 1 of Schedule 2 to this Order, and subject only to sub-paragraph 2(c) below, each of the [Defendants] may retain any further sums that they have received on behalf of [Advinia] since receipt by email of [Advinia's] application at 12.12pm on Monday 22 October 2018 and might receive on behalf of [Advinia] from the date of this Order on the basis that the [Defendants] shall, on [Advinia's] behalf, then pay any such sums into court (where, for the avoidance of doubt, they shall stand as security for [Advinia's] undertaking set out in paragraph 1 of Schedule 2 to this Order).
b. Each of the [Defendants] shall serve notice on [Advinia] upon paying any sums into court.
c. Once a total of £3,981,167.31 has been paid into court pursuant to this Order (whether under this paragraph 2 or by [Advinia] under its undertaking set out in paragraph 2 of Schedule 2 to this Order), the [Defendants] will have no further right to retain any sums received on behalf of [Advinia] as security under paragraph 2 of this Order, or any further obligation to pay sums into court under paragraph 2 of this Order."
(e) The Pleaded Cases
(1) A declaration that the Defendants hold or held the monies received by them in connection Advinia's business, on or after completion, on trust for Advinia;
(2) An account as to the quantum of such sums held by each Defendant and an account as to what has happened to such sums insofar as they are not still held by the Defendants;
(3) An order that any monies held on trust by the Defendants be paid over to Advinia or as Advinia may direct;
(4) An order that the Money in Court be paid out to Advinia or as it may direct.
(f) Further relevant procedural history
The Summary Judgment Application
(a) The Application
(1) A declaration that the BTAs were not varied so as to permit the First Defendant, without first obtaining the agreement of Advinia in respect of each such transaction, to set-off sums which Advinia owed to one or more of the Defendants against sums which the First Defendant held on trust for Advinia;
(2) A declaration that the First Defendant was and is obliged to pay Advinia all Trust Money received by the First Defendant in respect of the period after 8 August 2018 without any set-off, deduction or withholding;
(3) To the extent that it has used any Trust Money referred to in paragraph 2 other than by way of payment to or in accordance with the directions of Advinia, the First Defendant shall (in so far as it has not already done so) restore the Trust Money out of its own funds.
(4) The Nugee J Order is discharged;
(5) The sum of £3,981,167.31 paid into Court in accordance with paragraph 2 of the Nugee J Order be paid to Advinia within 14 days of the date of this Order.
"3. The Defendants shall, within 21 days, pay [Advinia] the sum of £15,885,964.70, being the amount of Trust Money received by the Defendants since 12 August 2018 and not paid to [Advinia] or paid into Court pursuant to the [Nugee J Order].
4. The Defendants shall pay [Advinia] [ ] in respect of interest on the amount set out at paragraph 3 above, up to 4 June 2020."
(b) The relevant test for summary judgment
"The court may give summary judgment against a ... defendant on ...a particular issue if –
(a) it considers that –
...
(ii) that defendant has no real prospect of successfully defending the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
(1) Advinia has the burden of proving that the Defendants have no real prospect of success and that there is no other compelling reason for a trial;
(2) A real prospect of success is one which is more than fanciful, the applicable criterion being not one of probability, but an absence of reality;
(3) The proper disposal of an application under CPR Part 24 does not and should not require the court to conduct a mini-trial; and
(4) In reaching its conclusion the Court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial.
"12. In my view the judge should have followed his original instinct. It is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better.
13. In cases where the issue is one of construction the respondent often seeks to persuade the court that the case should go to trial by arguing that in due course evidence may be called that will shed a different light on the document in question. In my view, however, any such submission should be approached with a degree of caution. It is the responsibility of the respondent to an application of this kind to place before the court, in the form of a witness statement, whatever evidence he thinks necessary to support his case. Where it is said that the circumstances in which a document came to be written are relevant to its construction, particularly if they are said to point to a construction which is not that which the document would naturally bear, the respondent must provide sufficient evidence of those circumstances to enable the court to see that if the relevant facts are established at trial they may have a bearing on the outcome.
14. Sometimes it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial. In such a case it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction."
"11. Neither party has pleaded as the relevant factual matrix any background facts which existed in 1984, when the contract was made. When a party wishes to rely on relevant background facts known to the parties at the time of an agreement, it must plead them…"
(c) Principles of contractual construction
"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."
In the next subparagraph, Lord Hoffmann defined the relevant "background knowledge" as follows:
"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."
(The exception is the previous negotiations of the parties and their declarations of subjective intent.)
"In construing any written agreement the court is entitled to look at evidence of the objective factual background known to the parties or reasonably available to them at or before the date of the contract. This principle applies even if the contract appears to be unambiguous. There is no conceptual limit to background. It can include anything relevant which would have affected the way in which the document would have been understood by a reasonable person. However, this does not entitle the court to look at evidence of the parties' subjective intentions; nor to ascribe to the words of the contract a meaning that they cannot legitimately bear."
(1) The natural and ordinary meaning of the clause;
(2) The overall purpose of the clause;
(3) Any other relevant provisions of the contract;
(4) The facts and circumstances known or assumed by the parties at the time the contract was executed; and
(5) Commercial common sense.
"13. Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance…"
(1) Post-contractual conduct is inadmissible as an aid to construction - see eg Whitworth Street Estates (Manchester) Limited v James Miller & Partners Limited [1970] AC 583, 603E per Lord Reid;
(2) The subjective intentions of the parties are inadmissible and irrelevant;
(3) The pre-contractual negotiations are similarly inadmissible on a question of construction; and
(4) Parties do not normally give up valuable rights without making clear by express words that they intend to do so – see eg Briggs LJ (as he then was) in Nobahar-Cookson and ors v The Hut Group Limited [2016] EWCA Civ 128 and Moore-Bick LJ in Seadrill Management Services Ltd v OAO Gazprom [2010] EWCA Civ 691 at para [29].
"The first is that it prevents attempts to undermine agreements by informal means, a possibility which is open to abuse, for example in raising defences to summary judgment. Secondly, in circumstances where oral discussions can easily give rise to misunderstandings and crossed purposes, it avoids disputes not just about whether a variation was intended but also about its exact terms. Thirdly, a measure of formality in recording variations makes it easier for corporations to police internal rules restricting the authority to agree them."
However, at the hearing, Mr Dale QC said that Advinia was not contesting the fact that the Netting-Off Agreement contained in the 4 July 2018 emails did not infringe clause 22.5 of the BTA, in that the emails would be treated as "in writing signed by or on behalf of all of the parties". (Mr Cumming QC referred to C&S Associates UK Ltd v Enterprise Insurance Company Plc [2015] EWHC 3757 (Comm) and Neocleous v Rees [2019] EWHC 2462 (Ch) to make good that proposition because it was challenged in Advinia's Amended Reply and Defence to Counterclaim.) Mr Dale QC was not of course conceding that, on their proper construction, the emails constituted a variation of the BTA.
(e) Factual matrix and other relevant factual issues
(1) In their Defence and Counterclaim, the Defendants plead as follows in relation to the Netting-Off Agreement (underlining added):
"33. In June 2018 (including during a telephone call between Mr Genova and Ms Prayle on or before 28 June 2018), [Advinia] (acting by Mr Genova) asked the Defendants to agree to a netting arrangement to avoid both [Advinia], on the one hand, and the Defendants, on the other, both having to make gross payments to each other every week.
34. By an agreement in writing (the "Netting-Off Agreement") concluded on 4 July 2018 between the Defendants (acting by Ms Prayle) and [Advinia] (acting by Mr Genova) the parties agreed that:
34.1 the Defendants would, on a weekly basis, net off (a) all sums due from [Advinia] to the Defendants under the Agreements, against (b) all sums due from the Defendants to [Advinia] under the Agreements (including sums held on trust for [Advinia]); and
34.2 whichever of (a) [Advinia] or (b) the Defendants owed more to the other would make a payment to the other of the net sum due."
35. The Netting-Off Agreement was concluded by and contained in an exchange of email correspondence between Ms Prayle and Mr Genova…"
(2) The underlined words above show that the Defendants rely on both oral and written communications between the parties in June and July 2018 as the crucial context for the Netting-Off Agreement. That Agreement was said to have been "concluded" on 4 July 2018 by the exchange of emails, which suggests that the emails in question were the end of a process. This does not mean that pre-contractual negotiations are being relied upon (Mr Cumming QC accepted that pre-contractual negotiations and the parties' subjective intentions would not be admissible for the purposes of construction) but rather it is to understand the background to the exchange of the emails.
(3) Ms Prayle's 4 July 2018 email referred to their previous discussions which she wanted to record in the email ("For the record…") and Mr Genova responded by saying: "Confirm terms as outlined" which also suggests that the email was the culmination of their discussions.
(4) In Ms Prayle's witness statement (which was produced at very short notice for the hearing before Nugee J), she referred to the telephone call she had with Mr Genova prior to 28 June 2018 in which he "requested an ongoing netting arrangement". She also challenged the suggestion that the Netting-Off Agreement came to an end on or around 12 August 2018 and says that Advinia never objected and indeed seemed to accept that the Netting-Off Agreement continued until it made the ex parte application to Nugee J.
(5) Mr Genova's first witness statement, prepared for the ex parte application, did not refer to the telephone conversations with Ms Prayle; nor did it refer to the 28 June 2018 emails. (He has not put in any witness statement since the Nugee J Order and so has never dealt with those telephone conversations in evidence.) Nevertheless, he did refer to the Netting-Off Agreement as an "ad hoc arrangement [that] persisted until 12 August 2018 but ceased thereafter". That seems to me to be arguably more consistent with the Defendants' view of the Netting-Off Agreement than Advinia's current position as it suggests that the agreement or arrangement set out in the 4 July 2018 emails was itself the "ad hoc agreement" referred to in Ms Prayle's email. In other words, there was no requirement for there to be a weekly "ad hoc agreement" to a netting-off, which is how Advinia now seeks to interpret it.
(6) In its Amended Reply and Defence to Counterclaim, Advinia admitted the telephone conversation between Ms Prayle and Mr Genova and the fact that the suggestion of an ongoing netting-off arrangement came from Mr Genova. In paragraph 27, Advinia pleaded (underlining added):
"27. Subsequently, during a telephone conversation between Mr Genova and Ms Prayle on or around 28 June 2018, Mr Genova suggested that for reasons of practical convenience the parties might repeat the arrangement discussed in paragraph 26 above, such that subject to agreement of the amounts, where in a particular week the sum owed by [the First Defendant] to [Advinia] in respect of Fee Income was greater than that owed by Advinia to [the Fifth Defendant] in respect of TSA Amounts, the BUPA Group would make a net payment to [Advinia]."
That is a fairly clear recognition by Advinia that the telephone conversation is relevant factual matrix evidence. It also indicates that any such ongoing arrangements were subject only to agreement on the figures, not to the principle of netting-off. The Defendants should be entitled to test Advinia's case at trial as to the actual contents of the telephone conversation and its impact on the interpretation of the 4 July 2018 emails.
(7) Advinia has also challenged the liabilities that can properly be netted-off pursuant to the arrangements. In paragraph 35 of the Amended Reply and Defence to Counterclaim, Advinia pleaded (underlining added):
"35. It is further specifically denied that the parties agreed that the Defendants were entitled to net-off alleged Opening Balance Liabilities against sums which the Defendants (or any of them) owed to [Advinia]. At the time of their discussions in late June and early July 2018 about netting off, the sums which the parties contemplated might be netted off against each other (subject to agreement to do so in respect of a particular week) were the Fee Income, on the one hand, and the TSA Amounts, on the other. The parties did not contemplate that any netting off agreement in respect of a particular week might extend to any Opening Balance Liabilities. In support of its case in this regard [Advinia] will rely, inter alia, on Ms Prayle's email of 4 July 2018 which stated, in a schedule thereto,…"
Advinia itself therefore relies on what the parties allegedly contemplated would be included within the netting-off arrangement. Quite obviously, the Defendants must be entitled to test that after full disclosure and cross examination at a trial. In paragraph 36 of the same pleading, Advinia relies on Mr Genova's "mistaken belief" as to the inclusion of Opening Balance Liabilities in one of the net payments, and this too must be susceptible to challenge at the trial, the Defendants arguing that this was not mistaken at all but a correct application of the Netting-Off Agreement by Mr Genova.
(f) The meaning of the 4 July 2018 email exchange
(1) The Defendants accept that this was an "agreement in writing" and therefore the established canons of construction apply;
(2) The words "on ad hoc agreement by both parties" in Ms Prayle's email of 4 July 2018 are crucial and the Defendants simply ignore them; those words together with the reference in the next sentence to "this weekly arrangement" make clear that any netting-off was subject to agreement of the parties each week;
(3) There was accordingly no automatic netting off allowed and the 4 July 2018 emails merely set out a framework for future weekly agreements to net-off liabilities;
(4) The words "…either party has the right to revert to a process of payments without netting if it wishes to" are not otiose on Advinia's construction because they refer to each party's right to stop the weekly process of attempting to agree a net position;
(5) The Defendants' interpretation lacks commercial common sense in that it involves Advinia giving up its "extremely valuable right promptly to receive Trust Money free from any set-off" without anything in return; it is inherently unlikely that Advinia would have agreed to do that and it would have required clear words for it to do so – see the Seadrill Management Services case (supra);
(6) As the 4 July 2018 email preserved the Defendants' rights under clause 6.11 of the TSA, there was no consideration moving from the Defendants for Advinia's agreement to give up its right promptly to receive Trust Money.
(1) The email exchange of 4 July 2018 was, at the suggestion of Mr Genova, to record the parties' agreement to provide for an ongoing netting-off arrangement whereby the Defendants would, on a weekly basis, net off all sums due from Advinia to the Defendants against all sums due from the Defendants to Advinia, including Trust Money and for payment by whoever owed more;
(2) Ms Prayle and Mr Genova are not lawyers but they wanted to record in writing something that they had agreed and which would be a practical arrangement that avoided excess money being placed in the banking system; even if a lawyer might have worded the agreement differently, it is clear that something of significance was being put into writing – "For the record…" – albeit in an informal way – "Hi Joe";
(3) The words "on ad hoc agreement by both parties" refers to the Netting-Off Agreement itself and not to separate weekly agreements that had to be reached in relation to netting-off;
(4) In order to end the Netting-Off Agreement, both parties had the right to do so but they would have to give notice to the other party that they wished to do so; in the absence of any such notice, the Agreement would continue and a netting-off would take place based on the figures produced by the Defendants;
(5) No valuable right of Advinia was being given up because it could end the arrangement at any time;
(6) There was consideration provided by both parties because it was in their mutually beneficial interests not to have to put the gross amounts of their respective liabilities into the banking system and losing interest and the use of that money as a result.
(g) Other compelling reason for a trial
"The order made by the court should reflect the net financial position, as at the date it is made, between [Advinia] and the Defendants".
Accordingly, until then, both parties had been proceeding, and agreeing the extent of their disclosure obligations, on the basis that there would be a trial at which the "net financial position" would be determined. If that approach was accepted by Advinia, it had also implicitly accepted that the Trust Money would be part of that ultimate setting-off and so would not be payable until the account had been done.
(h) Conclusion on the Summary Judgment Application
The Variation Application
(a) Introduction
(1) The Money in Court to be paid out to Advinia within 14 days;
(2) The Kanoria Foundation be discharged from its undertakings;
(3) Advinia Holdings be substituted for the Kanoria Foundation and provide a cross-undertaking in its place.
(b) Legal Principles
"(ii) …the jurisprudence has laid down firm guidance as to the primary circumstances in which the discretion may, as a matter of principle, be appropriately exercised, namely normally only (a) where there has been a material change of circumstances since the order was made, or (b) where the facts on which the original decision was made were (innocently or otherwise) misstated.
…
(vii) The cases considered above suggest that the successful invocation of the rule is rare. Exceptional is a dangerous and sometimes misleading word: however, such is the interest of justice in the finality of a Court's orders that it ought normally to take something out of the ordinary to lead to variation or revocation of an order, especially in the absence of a change of circumstances in an interlocutory situation."
"The defendants are seeking a rehearing on evidence which, or much of which, so far as one can tell, they could have adduced on the earlier occasion if they had sought an adequate adjournment, which they would probably have obtained. Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter. The fact that he capitulated at the first encounter cannot improve a party's position."
(Chanel v Woolworth and Tibbles v SIG plc have been expressly approved by the Supreme Court in Thevarajah v Riordan [2016] 1 WLR 76.)
"26 …That principle requires good cause to be shown for a person to be released from an undertaking. What is good cause will depend upon all the circumstances of the case though typically a change of circumstances or the discovery of some new fact will be required. A person will only be released from an undertaking if it would otherwise be unjust to hold him to his undertaking
Although an order resulting from the court's exercise of a discretion and a consent order resulting from the parties' agreement are both orders of the court, a consent order has a feature which is lacking in an order which results from the court's exercise of a discretion, namely, it is the product of careful negotiation and agreement between the parties themselves. That additional factor is, it seems to me, relevant when considering whether it is just to set aside the order. It is a factor in favour of holding the parties to their agreement... before a party may be released from an undertaking good cause must be established."
(c) The Change of Circumstances relied upon
(1) That Trust Money has been paid into Court, as directed (ie the Money in Court);
(2) Advinia Holdings has been joined to the proceedings and has offered to provide a cross-undertaking; Advinia Holdings is said to have substantial net assets; and
(3) Advinia's need for cash to deal with the Wet Rooms Issue.
(1) It was part of the Nugee J Order itself that the Money in Court be paid in. It is difficult to see how compliance with the Order means that the Order should be varied.
(2) Advinia Holdings offering to provide a cross-undertaking in place of both the Money in Court and the Kanoria Foundation's cross-undertaking is not a change in circumstances relevant to the basis upon which the Nugee J Order was made. It is merely what the Advinia Parties want to happen.
(3) While the Advinia Parties' need for cash to deal with the Wet Rooms Issue may be real, they have known about this issue for over two years and from well before the Nugee J Order. It is also curious that the Advinia Parties say they have insufficient cash to fund the investment required but say that the Court and the Defendants should accept Advinia Holdings' cross-undertaking because it will be good for the money.
(d) The Money in Court
(e) Substitution of Advinia Holdings for the Kanoria Foundation
The Interim Payment Application
"25.7-(1) The court may only make an order for an interim payment where any of the following conditions are satisfied –
(a) the defendant against whom the order is sought has admitted liability to pay damages or some other sum of money to the claimant…"
(1) The Additional Claim Form shows a value of the claim as being £2,131,393.
(2) The Particulars of Additional Claim assert that the First Defendant served the Draft Completion Accounts on 19 April 2018 but that the Disputes Notice from Advinia Holdings was served more than 50 Business Days later and so was invalid.
(3) The First Defendant's position is that the Draft Completion Accounts are the Completion Accounts and Advinia Holdings is not allowed to challenge them.
(4) The First Defendant claims a declaration that there was no valid Disputes Notice and that the Draft Completion Accounts have become the Completion Accounts for the purposes of the SPA.
"14. For the avoidance of doubt, [the First Defendant] has confirmed (including in letters to [Advinia Holdings] dated 26 July 2018, 15 August 2018 and 29 October 2018) that, if [Advinia Holdings] accepts that the Draft Completion Accounts are the Completion Accounts, [the First Defendant] stands ready and willing to pay it the £2,131,393.00 that it will thereupon owe to [Advinia Holdings] (pursuant to paragraphs 1.3(A) and 2 of Part A of Schedule 6 to the SPA)."
Conclusion