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Cite as: [2012] EWCA Civ 55

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Neutral Citation Number: [2012] EWCA Civ 55
Case No: A3/2011/1055

His Honour Judge Stephen Davies

Royal Courts of Justice
Strand, London, WC2A 2LL
1st February 2012

B e f o r e :



as Trustee of the Bald Eagle Trust

- and -



(Transcript of the Handed Down Judgment of
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Roger Stewart QC and Ben Elkington (instructed by Clifford Chance LLP) for the Appellants
Alan Gourgey QC (instructed by DLA Piper UK LLP) for the Respondent
Hearing date : 29th November 2011



Crown Copyright ©

    Lord Justice Patten :


  1. This is an appeal by the defendants in this action against an order of His Honour Judge Stephen Davies (sitting as a deputy judge of the Chancery Division) dated 25th March 2011. The judge acceded to a claim for the rectification of an amended and restated share purchase agreement dated 28th February 2008 ("the Amended SPA") by ordering the amendment of the definition of "2007 EBITDA" in clause 1.1 of the agreement. The effect of this is to increase substantially the consideration payable to the claimant. The defendants now appeal against the order with the leave of the judge.
  2. The claimant, Hawksford Trustees Jersey Limited ("Hawksford"), operates as a professional corporate trustee based in Jersey. At all times material to this appeal it acted as the sole trustee of the Bald Eagle Trust (the "Trust") which is a discretionary settlement set up in January 2003 for the benefit of Mr George Begg and members of his family.
  3. Mr Begg was the founder of a company called The Global Travel Group plc ("Global") which operated a network of travel agencies and independent travel agents who were franchised to conduct business under the Global name. The majority of the shares in Global (amounting to 97.99% of the issued share capital) were at all material times owned by the Trust. The remaining shares were held by Mr Andrew Botterill who joined Global in 2000 and subsequently became its Chief Executive Officer.
  4. On 27th November 2007 Hawksford entered into a share purchase agreement ("the SPA") under which it and Mr Botterill agreed to sell their shares in Global to the first defendant, Stella Global UK Limited. The SPA was amended and re-stated on 28th February 2008 and the second defendant has guaranteed the obligations of the first defendant under the amended agreement.
  5. Under clause 3 of the Amended SPA the consideration for the sale of the shares was divided into three elements. An initial consideration of £5,041,904.10 was payable to the sellers on completion (which took place on 2nd January 2008). Under clause 3.14 of the agreement Hawksford was to apply its share of this sum in reduction of an existing loan to Global by Barclays Bank.
  6. The second element of the consideration (described in clause 3.1.2 as the Deferred Consideration) was made up of £500,000 payable to Hawksford on or before 31st January 2008; £1m payable to Hawksford (on condition that there was then at least £1m of surplus cash within the company); £2.7m payable in six equal half-yearly instalments of £450,000 on 1st July and 1st January in each year beginning on 1st July 2008; and an amount equal to a tax rebate due to be received by Global.
  7. Finally (and most relevantly for the purposes of this appeal) clause 3.1.3 provided for payment of Earn Out Consideration calculated in accordance with clause 4 of the Amended SPA. Clause 4.1 provided that:
  8. "4.1 The Earn Out Consideration shall be calculated as follows:
    4.1.1 if no Exit has occurred before 31 December 2010, the Earn Out Consideration shall be six times the EBITDA shown in the Relevant 2010 Accounts less all sums paid by the Buyer pursuant to clause 3.1.2(c) provided always that if the product of such calculation is less than the Minimum Earn Out the amount payable to the Sellers in respect of the Earn Out Consideration shall be the Minimum Earn Out and for these purposes the provisions of this clause 4 shall apply mutatis mutandis with regard to the calculation of the 2007 EBITDA;
    4.1.2 notwithstanding the provisions of clause 4.1.1, if the Company's EBITDA in the relevant 2010 Accounts is not at least 10% higher than EBITDA for the year ending 31 December 2009 there shall be deducted from the Earn Out Consideration calculated in accordance with clause 4.1.1 such sum as is equal to the aggregate of all sums paid by the Buyer pursuant to clause 3.1.2(c), the Worldchoice Consideration and the Initial Consideration, subject always to the Sellers being entitled to receive the Minimum Earn Out;
    4.1.3 notwithstanding the provisions of clauses 4.1.1 and 4.1.2, if the Company's EBITDA in the relevant 2010 Accounts is greater than 10% higher but less than 15% higher than EBITDA for the year ending 31 December 2009, there shall be deducted from the Earn Out Consideration calculated in accordance with clause 4.1.1 such sum as equal to the aggregate of all sums paid by the Buyer pursuant to clause 3.1.2(c) and the Initial Consideration; subject always to the Sellers being entitled to receive their Minimum Earn Out;
    4.1.4 notwithstanding the provisions of clauses 4.1.1, 4.1.2 and 4.1.3, if the Company's EBITDA in the relevant 2010 Accounts is equal to or greater than 15% higher than EBITDA for the year ending 31 December 2009 there shall be deducted from the Earn Out Consideration calculated in accordance with clause 4.1.1 such sum as is equal to the aggregate of all sums paid by the Buyer pursuant to clause 3.1.2(c) subject always to the Sellers being entitled to receive the Minimum Earn Out;
  9. "Exit" means a share sale or listing. Subject to that (which did not take place but would have given rise to an amended form of calculation under clause 4.1.5) the Earn Out Consideration is a multiple of the company's EBITDA as shown in the relevant accounts less any sums already paid as instalments of the £2.7m payable under clause 3.1.2(c). The payment can never be less than the Minimum Earn Out which is defined in clause 1.1 as:
  10. "such sum as is equal to seven times the 2007 EBITDA less the Initial Consideration and such sums as are paid to the Sellers pursuant to clause 3.1.2(c)."
  11. It is also subject to the deductions provided for in sub-clauses 4.1.2 to 4.1.4 based on a comparison between the company's performance in 2009 and its performance in 2010. But again the sellers are guaranteed the Minimum Earn Out as defined.
  12. "2007 EBITDA" is defined in clause 1.1 to mean:
  13. "the EBITDA (as defined in clause 4.7 but specially excluding all costs incurred by the Company in connection with any of the two jet planes, the helicopter, catamaran or the two cars which were transferred out of the Company in accordance with clause 8.1.4) of the Company for the year ended 31 December 2007."
  14. The assets referred to were acquired by Global for the use of Mr Begg. I shall refer to them as the 2007 Assets. He was not a director of Global but acted as a consultant and advisor to the board under a written consultancy agreement dated 1st February 2003. In the year ending 31st December 2007 the consultancy fees under this agreement amounted to £708,800. In addition the company incurred costs of £228,100 in connection with the 2007 Assets. These costs are expressly excluded from the calculation of the 2007 EBITDA as defined in clause 1.1 but there is no similar exclusion in the definition for the consultancy fees.
  15. EBITDA is relevant for the purposes of the calculation of the Earn Out Consideration and the Minimum Earn Out. It is defined in both clauses 4.7 and 4.8 of the Amended SPA as the consolidated earnings of Global before interest, taxation, depreciation and amortisation subject to certain specified disregards and before charging dividends and certain other payments. These include (under clause "any payment made pursuant to the Consultancy Agreement".
  16. "Consultancy Agreement" is a defined term meaning: "the agreement to be entered into between George Begg and the Company in the agreed form": see clause 1.1. The judge held that this could not be construed so as to refer to the 2003 agreement under which the 2007 payments were made and there is no appeal against his decision on that point. The consequence of this is that the payments of consultancy fees in 2007 fall to be deducted from Global's earnings as part of the calculation of 2007 EBITDA and so reduce the amount of the Minimum Earn Out for the purposes of clause 4.1. The adding back of the 2007 consultancy fees paid to Mr Begg would therefore increase the Minimum Earn Out by about £5 million.
  17. There are a number of disputes between the parties about the operation of the Amended SPA but on 30th September 2010 the judge ordered an expedited trial of what is defined in the order as the 2007 Consultancy Payment Claim as set out in paragraphs 30-36 of the particulars of claim. The claimant's pleaded case was that although the definition of the Consultancy Agreement for the purposes of clause 4.8.1 referred, if literally construed, to a future agreement and therefore did not catch the payments made in 2007, it had been the parties' common expressed intention that all consultancy payments made to Mr Begg should be disregarded for purposes of calculating EBITDA under the agreement. This remained the parties' common intention both when they executed the SPA and subsequently on the execution of the Amended SPA.
  18. The Amended SPA was prepared by the claimant's then solicitors (Halliwells LLP) but no amendments were made to the draft to deal with the 2007 consultancy payments in the definition of 2007 EBITDA. The claimant alleged that the Amended SPA did not therefore give effect to the parties' expressed joint intention which was that any consultancy payments made in 2007 should be disregarded (and therefore added back) to Global's consolidated earnings in order to calculate the 2007 EBITDA for the purpose of the Minimum Earn Out.
  19. The defendants resisted rectification of the Amended SPA. They conceded that Mr Begg may have been operating under some kind of mistake or misapprehension but contended that he was not the relevant decision-maker so far as the claimant was concerned. They also disputed the claim that the mistake was common to both parties or to all the parties to the Amended SPA including Mr Botterill who was not a defendant to the claim.
  20. The judge rejected these arguments and found that it was the parties' common expressed intention (including that of Mr Botterill) that the 2007 consultancy payments should be excluded for purposes of calculating Global's 2007 EBITDA. In a long and detailed judgment he analysed the history of the negotiations leading up to both the SPA and the Amended SPA. It is unnecessary to do more than to outline the facts as found by the judge because his analysis of the parties' objectively expressed intentions at the time are not under appeal. The appeal relates only to his treatment of Mr Begg as the relevant decision-maker for the purpose of attributing to Hawksford as the contracting party the common expressed intention that the definition of 2007 EBITDA should ignore not only the 2007 asset costs but also the 2007 consultancy payments. The outline which follows is merely for the purpose of setting that issue in context.
  21. Mr Begg's evidence was that he agreed with the representatives of Stella in November 2007 that the consultancy payments and the costs of running the 2007 Assets (totalling some £1 million) should be excluded from the calculation of EBITDA. Halliwells acted for the claimant and produced the first draft of the SPA on 20th November on the basis of information and instructions received from Mr Begg. This contained no separation definition of 2007 EBITDA and did not expressly refer to the deduction of either the consultancy payments or the asset costs.
  22. The draft was then discussed and revised but as executed it contained no specific exclusions from 2007 EBITDA. Nor did it make any separate provision in respect of payment for Mr Botterill's shares. He was also to receive payment by way of deferred consideration as opposed to a cash settlement which it was his evidence that he was intended to receive.
  23. The judge summarised the reasons for the first of these omissions in paragraphs 32-33 of his judgment:
  24. "32. There is very little in the way of documentary evidence as to the detail of the negotiations and drafting process from 21/11/07 through to execution of the original SPA on 27/11/07. This may be because the majority of the negotiation process appeared to have occurred at meetings held at Heatons' offices, rather than by way of exchanges of e-mails and, as I have said, neither of the respective solicitors' files has been disclosed. Specifically, I have seen no communication between the parties raising the question of the deduction of shareholder costs from 2007 EBITDA. There is a lengthy e-mail from Mr Bender to Mr Krecklenberg dated 24/11/07, recording proposals which Mr Begg was putting to him in relation to the consideration terms, including reference to the £1M pa to be paid to the Claimant / Mr Begg for the 3 years of the earn out period to be divided as to £900,000 advance earn out consideration and £100,000 through a consultancy agreement. There is a reference in that e-mail to consultancy payments having been 'always added back on for the purpose of calculating the earn out EBITDA', which appears to demonstrate Mr Bender's contemporaneous knowledge of the treatment of these consultancy payments historically.
    33. The only explanation from Mr Begg about this is that, due to the pressure of time, he simply did not appreciate that these draft versions of the SPA did not deal with this matter at all. Accordingly, the original SPA as executed made no reference to any specific exclusions from 2007 EBITDA (which was defined in §1 simply by reference to §4.7, which contained a general definition of EBITDA), whether in respect of the 2007 consultancy costs or the 2007 asset costs. It is, as I have said, the Claimant's case that this was a pure omission, due to the pressures of drafting and completing the transaction in such a short space of time."
  25. The imperative behind the negotiations for the Amended SPA was not the inadequacy or otherwise of the provisions for deferred consideration but the possibility of the acquisition of a majority interest in the First Defendant by a third party (CVC). Mr Begg and Mr Krecklenberg were keen to ensure that an acquisition by CVC should not be treated as an Exit under the SPA and negotiations commenced to that end. But the opportunity was also taken to propose other amendments.
  26. As part of this process, Mr Begg said that the agreement should make it clear that his "costs" should be excluded from the EBITDA. His evidence (which the judge accepted) was that on reviewing the draft Amended SPA he realised that the 2007 consultancy payments had not been discounted for this purpose. He therefore sent an e-mail to Mr Bender on 17th February 2008 stating:
  27. "1. Who is the new guarantor to be? CVC? Bank?
    2. 2007 EBITDA still seems to include all my costs (about £1M), which should be excluded. (This is used to calculate the minimum earn out price, which is consequently £7M down.)
    3. Actually, the EBITDA description in 4.7 doesn't deduct my costs at all, I think. Although £900k is already outside the global EBITDA, there is still £100k included. This should be excluded from EBITDA but the net cost to Stella (£100k plus any NI less any tax deduction) should be deducted from the earnout as well as the £2.7m already shown in 3.1.2(c)."
  28. This was forwarded by Mr Bender to Mr Krecklenberg and, after a further discussion with Mr Begg, the issue was then resolved. The judge said in paragraph 59 of his judgment that:
  29. "I am satisfied that, consistent with what he reported to Mr Krecklenberg in his e-mail, Mr Bender agreed with Mr Begg that the contract would be amended so as to make clear that Mr Begg's costs, which as Mr Bender must have known from his involvement since November 2007 included both consultancy costs and asset costs, would be excluded when calculating 2007 EBITDA. It is clear in my judgment that Mr Bender must have known about both the consultancy and the asset costs together forming part of the c£1M 2007 shareholder costs, because he was present at the meetings of 12-13/11/07, where Mr Krecklenberg accepts he was made aware of both costs, and he was shown and presumably would have read the Deloittes' due diligence report, and noted what was said about 2007 EBITDA. It is clear from his subsequent involvement in events later in 2008 that he was fully aware of and did not disagree with the principle that both costs should be excluded from 2007 EBITDA."
  30. The preparation of the Amended SPA was complicated by the fact that the draft amendments were also being put forward by the solicitors acting for CVC. They were the source of the new clause excluding payments made "pursuant to the Consultancy Agreement". On 22nd February Halliwells queried whether this was sufficient and Mr Begg indicated that they were to re-draft the Minimum Earn Out provisions to exclude all his 2007 costs. They then re-drafted the definition of 2007 EBITDA so as to refer to the asset costs but did not include the 2007 consultancy payments. No further changes were made to the definition before the Amended SPA was executed on 28th February 2008.
  31. The judge rejected the defendants' submission that the solicitors' failure to include the 2007 consultancy payments in the definition of 2007 EBITDA was in some way attributable to a change of mind on the part of Mr Begg. He found that Mr Begg's own intention remained that of excluding all the 2007 payments to him and that at no time did he instruct Halliwells to the contrary. His outwardly expressed intention as set out in the February e-mails to the defendants was to the same effect. In summary, the judge was satisfied that:
  32. "…..there is clear and compelling, or put another way convincing, proof that when the Claimant entered into the amended SPA Mr Begg as the relevant decision maker was, considered objectively, operating under a mistaken belief that the contract as executed accorded with his outwardly expressed continuing intention that his 2007 consultancy payments should be excluded when calculating 2007 EBITDA."
  33. He then went on to make similar findings in respect of the defendants and Mr Botterill. There is no challenge to his attribution to the defendants of the common intention expressed by the decision-makers whom the judge identified.
  34. The appeal centres on the lack of any identifiable legal relationship between Mr Begg and Hawksford. Under the terms of the Bald Eagle Trust, the trustee as a company was empowered to act by its proper officers and to delegate (by written instrument) the exercise of all or any of its powers. There is also an express power contained in paragraph 6 of the First Schedule to transact any business or do any act required to be transacted in the execution of the trust through an agent employed for that purpose.
  35. But there was no express delegation of any power to Mr Begg nor was he employed as an agent in connection with the sale of the shares. On the contrary, the trustee's resolution to accept Stella's offer for the shares and to approve their sale on the terms of the original SPA expressly provided that the agreement should be executed by a director and a representative of the corporate secretary of the company. Although Mr Begg remained at all times a discretionary beneficiary and the trustee's decision to sell the shares on the basis of a deferred consideration was reached after discussion with him (and following his agreement to the terms which had been negotiated by him with Stella), the decision to go ahead was ultimately one for the trustee and it was the trustee and not Mr Begg who was the contracting party. The same applied in relation to the Amended SPA. Again the trustee had no input into the negotiation of the revised terms but the agreement was signed on behalf of Hawksford by two of its employees who were duly authorised to do so. There was no delegation of power or any agency in respect of Mr Begg's involvement. Once he had indicated to the trustee that he was content for the matter to go ahead the Amended SPA was then signed.
  36. The judge recognised that if the relevant common intention shared by Mr Begg cannot be attributed to the claimant as the contracting party then it cannot be established on the basis of the limited involvement of the trustee's own officers. This is because they took no part in the negotiations with Stella and took little more than a formal part or interest in the execution of the Amended SPA. The judge set out his findings on this at paragraphs 143-145 of his judgment as follows:
  37. "143. For completeness I should state my conclusion if I had concluded that the only question was whether or not the Claimant itself, without any reference to Mr Begg's intentions, had the requisite intention?
    144. On the evidence which is before me I would have had no hesitation in coming to the conclusion that the Claimant itself had no intention whatsoever, whether subjective or objectively expressed, in relation to the question of whether or not the 2007 consultancy payments should or should not be excluded when calculating 2007 EBITDA. There is no evidence that Mr Begg or anyone else drew this issue to their attention, whether orally or in writing, whether in the run-up to the execution of the original SPA or in the run-up to the execution of the amended SPA. There is no suggestion that anyone at the Claimant was aware of, let alone alert to, the amendments relating to EBITDA introduced into the amended SPA.
    145. On that hypothesis, the position of the Claimant as trustee in this case would be similar to the position of the trustees as found by Rimer J (as he then was) in the case of Lansing Linde v Alber [2000] PLR 15, referred to in §4-61 of Lewin (18th edition), where they were wholly ignorant of the point in issue and thus could not be said to have had any intention at all on the point, so that the claim to rectification failed."
  38. No criticism is made of the judge's directions as to the general test to be applied in cases of rectification. The judge (quoting from the claimant's closing submissions) said that:
  39. "12. The remedy of rectification is one permitted by the Court not for the purpose of altering the terms of an agreement entered into between two or more parties, but for that of correcting a written instrument which, by mistake in verbal expression, does not reflect that agreement: see Chitty on Contracts, 30th edition, at para 5-107 citing The Nai Genova [1984] 1 LL Rep 353, 359.
    13. The requirements for a claim in rectification are well settled:
    (1) The parties had a common intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified.
    (2) There was an outward expression of accord.
    (3) The intention continued at the time of the execution of the instrument sought to be rectified.
    (4) By mistake, the instrument did not reflect the common intention.
    See Swainland Builders v Freehold Properties Limited [2002] EGLR 71, per Gibson LJ at para. 33.
    14. The process of ascertaining whether the written instrument reflects the prior consensus is an objective one. The court examines what passed between the parties. The court is not concerned with what the parties thought they had agreed or what they thought their agreement meant — a subjective inquiry. What it is concerned with is what the parties said and did, and what that would convey to a reasonable person in their position — an objective question: see PT Berlin Laju Tanker TBK v Nuse Shipping Ltd [2008] EWHC 1330 at para 38."
  40. But if companies (or other non-human entities with a legal persona) are to take advantage of this equitable jurisdiction then it becomes necessary to ascertain the individual or individuals whose expressed intentions qualify as those of the contracting party. Problems of attribution populate large areas of the law. Companies can only act through a human agency and tests have therefore been devised to identify the degree of control and responsibility that is required for the actions of the individual to be treated as those of the company.
  41. A familiar but instructive analysis of these principles can be found in the judgment of the Privy Council in Meridian Global Funds Management Asia Ltd. v Securities Commission [1995] 2 AC 500 where Lord Hoffmann (at p. 506) said that:
  42. "The company's primary rules of attribution will generally be found in its constitution, typically the articles of association, and will say things such as "for the purpose of appointing members of the board, a majority vote of the shareholders shall be a decision of the company" or "the decisions of the board in managing the company's business shall be the decisions of the company." There are also primary rules of attribution which are not expressly stated in the articles but implied by company law, such as "the unanimous decision of all the shareholders in a solvent company about anything which the company under its memorandum of association has power to do shall be the decision of the company:" see Multinational Gas and Petrochemical Co. v. Multinational Gas and Petrochemical Services Ltd. [1983] Ch. 258.
    These primary rules of attribution are obviously not enough to enable a company to go out into the world and do business. Not every act on behalf of the company could be expected to be the subject of a resolution of the board or a unanimous decision of the shareholders. The company therefore builds upon the primary rules of attribution by using general rules of attribution which are equally available to natural persons, namely, the principles of agency. It will appoint servants and agents whose acts, by a combination of the general principles of agency and the company's primary rules of attribution, count as the acts of the company. And having done so, it will also make itself subject to the general rules by which liability for the acts of others can be attributed to natural persons, such as estoppel or ostensible authority in contract and vicarious liability in tort.
    It is worth pausing at this stage to make what may seem an obvious point. Any statement about what a company has or has not done, or can or cannot do, is necessarily a reference to the rules of attribution (primary and general) as they apply to that company. Judges sometimes say that a company "as such" cannot do anything; it must act by servants or agents. This may seem an unexceptionable, even banal remark. And of course the meaning is usually perfectly clear. But a reference to a company "as such" might suggest that there is something out there called the company of which one can meaningfully say that it can or cannot do something. There is in fact no such thing as the company as such, only the applicable rules. To say that a company cannot do something means only that there is no one whose doing of that act would, under the applicable rules of attribution, count as an act of the company."
  43. It was common ground before the judge that in order for Hawksford to be entitled to rectification of the definition of 2007 EBITDA in the Amended SPA it was necessary to treat Mr Begg as the decision-maker. This phrase has an obvious connection with the "directing mind and will" test used to identify the person whose actions or knowledge is regarded as that of the company itself: see Lennard's Carrying Co, Ltd v Asiatic Petroleum Co, Ltd [1915] AC 705. In an ordinary case this will be a director of the company but it may include an agent who is invested with the necessary authority to manage or control the particular aspect of the company's business to which the issue of liability relates.
  44. Since the court's power to rectify a written contract operates to align the document with the parties' expressed contractual intentions there is an obvious case for limiting the decision-maker to the person who was authorised to make the contract on behalf of the company. But if this is right then Mr Begg does not qualify. He was not a director of Hawksford nor was he authorised as its agent to enter into the SPA and the Amended SPA on its behalf. The Amended SPA was signed by the claimant's duly authorised representatives, Mr Robinson and Mr Carr, albeit after no more than a cursory review of its contents. The judge's findings about its execution are set out in paragraphs 78-80 of his judgment:
  45. "78. The picture is similar to that which emerges in relation to the original SPA and the deed of variation, although the extent of the Claimant's involvement appears even less than for the draft deed of variation and significantly less than for the original SPA. Thus the time report records and the email from Mr Begg to Mr Carr of 25/02/08 suggest that no advance notice of the intention to amend the SPA was given to the Claimant until 25/2/08, with Mr Begg asking the Claimant to 'action it ASAP', and that following a review of only 15 minutes by Mr Carr the amended SPA was executed by the Claimant on receipt of an e-mail from Mr Begg stating:
    'I confirm that the revised SPA [is] agreed by me and I have no objections to you signing them. Please let me know when this has been done.'
    79. Before that, in his e-mail of 19/2/08 to Mr Krecklenberg, Mr Begg referring to his resolution of all but one point with Mr Bender, said 'as far as I am concerned if they are incorporated into the new agreement as discussed the trustees will sign straight away'. There is also a line in Mr Begg's e-mail of 22/2/08 to similar effect where, under item 5 point b) Mr Begg, referring to a commercial decision which was plainly taken by him as opposed to the Claimant, says 'Andrew has agreed that this decision is made by the trust and he will go along with it' (emphasis added).
    80. The Claimant has been able to produce a draft resolution dated 26/02/08 which notes the reason for the amendment as being the introduction of a new guarantor, resolves that the amended SPA as prepared by Heatons be approved and authorises Mr Robinson and Mr Carr to execute the amended SPA. It appears that no signed resolution can be found at the Claimant's offices."
  46. It is apparent from this that Hawksford was content to sell the shares on the terms which Mr Begg had negotiated and which he had approved. There is no suggestion that the officers of the trustee company applied any independent judgment in the matter. But the defendants' case is that this is not enough. The decision whether to go ahead with the transaction was one which rested with the trustee and which was taken by it even if it involved little more than rubber-stamping what Mr Begg had agreed. Mr Stewart QC submits that Mr Begg was not the decision-maker for a number of reasons. He was not an employee of Hawksford. He had no delegated authority to sell the shares or to bind Hawksford to the contract. His only authority was to negotiate the terms of the sale. The final decision whether or not to execute the SPA rested with the claimant.
  47. He referred us to the decision of this court where the negotiator of a contract was held not to be the relevant decision-maker for the purpose of a claim to rectify the written instrument which had been executed. In Barnet LBC v Barnet Football Club Holdings Ltd [2004] EWCA Civ 1191 the council entered into a contract to sell a football ground to the defendant. The terms of the contract were negotiated by the council's property services and valuation manager, a Mr Stephens, but he had no authority to conclude a sale on the terms he had provisionally agreed. That decision rested with one of the council's committees which delegated the necessary authority to a particular councillor.
  48. The contract as finally executed was alleged not to conform with what Mr Stephens had agreed during the negotiations but the judge took the view that his state of mind and intention was immaterial because what mattered for the purpose of rectification was what the council intended. This was to be judged by reference to the council members who were authorised to make the decision to sell. Peter Gibson LJ (at paragraphs 56-7) said that:
  49. 56. ….. It is clear that the sale needed to be proposed to and sanctioned by the elected members, by an appropriate organ or individual, and that the sanction, once given, would delegate to some officer the further conduct of the sale authorising that officer to conclude the sale. Mr Stephens' role was merely that of negotiator and preparer of the relevant proposal. Of the two procedures for obtaining the sanction of elected members, the delegated powers procedure was the one adopted and under that, whilst the proposal would be considered and commented on by senior officers and an elected member, with the agreement of the elected member the proposal would then be decided upon by a senior officer. Mr Stephens was not one of the senior officers, nor of course was the elected member concerned. Therefore, Mr Stephens' intention was immaterial, as the judge rightly found in para 129. That was the only case pleaded on behalf of the Borough and with its failure the case for rectification fails.
    57. Of course if Mr Stephens' intention, as the person involved on behalf of the Borough in the accord, had been shared by the persons concerned in the delegated powers procedure to comment on and consent to and to give the sanction for the sale, then his intention might have been relevant in that indirect way. But the Borough would have had to show that that was the intention of those persons. It was never the pleaded case of the Borough that such persons' intentions were relevant. Nor did any of such persons give evidence, although there is nothing to suggest that they were not available to do so."
  50. To the same effect is George Wimpey UK Ltd v V I Construction Ltd [2005] EWCA Civ 77 where the person negotiating the purchase of some land on behalf of Wimpey failed to notice that the contract had mis-stated the provisions for overage which had been agreed. Again the point was missed by those who were responsible for entering into the contract on the company's behalf. Peter Gibson LJ at paragraph 48 said that:
  51. "Thus far I have proceeded on the footing that Wimpey made the relevant mistake. The second ground of appeal raises the question whether Wimpey at the time it entered into the contract did not intend to agree the formula without "+ E". In this context it is important to identify the person who is the decision-taker in the corporate body which entered the contract and to see whether he was making a mistake. Prima facie a person who enters a contract intends to be bound by all its terms. The fact that the contract has been negotiated by a person who is not the decision-taker and has made an error is irrelevant unless it can be shown that the decision-taker shared the intention of the negotiator; but that requires evidence. That elementary proposition is illustrated by the recent case of The London Borough of Barnet v Barnet Football Club Holdings Ltd [2004] EWCA Civ 1191. The details of the circumstances of that case differ from those of the present case, as Mr Fetherstonhaugh pointed out, but the essential facts are the same, if Mr Wardell is right in his submission: there the negotiator for the Borough made an error in the drafting of the contract, but he was not the decision-taker; those who took the decision for the Borough were not called to give evidence and it could not be inferred that they intended the Borough to contract other than in the form of the contract which the Borough executed."
  52. The judge in this case analysed what Mr Begg was authorised to do in the following paragraphs of his judgment. Since most of the argument turned on these findings I set them out in full:
  53. "121. In my judgment it is quite clear that Mr Begg was authorised by Mr Robinson of the Claimant to enter into negotiations with Stella with a view to selling the Claimant's shares in Global to Stella. I am also satisfied on the balance of probabilities that sometime in mid-November 2007, at a point when Mr Begg became satisfied that the terms being offered by Stella were acceptable to him, he reported this to Mr Robinson and was authorised to: (a) conclude an agreement in principle to sell the shares on the basis of the commercial terms which Mr Begg was willing to accept; (b) negotiate the terms of the SPA and, for that purpose, to instruct solicitors on behalf of the Claimant; (c) reach agreement in principle on the detailed terms of the SPA. Insofar as Mr Begg suggested that his authority went further than this, I do not accept that he was authorised to bind the Claimant in relation to any matter, whether as to the commercial terms of the transaction, or the detailed terms of the SPA, or otherwise. I am satisfied however that Mr Begg was authorised to negotiate and agree in principle the terms of the SPA on the clear understanding that the Claimant would accept the terms as negotiated and agreed by Mr Begg, specifically the commercial terms including the detailed payment provisions, so that so long as the Claimant was satisfied that its own interests would not be prejudiced by entering into the SPA on the terms negotiated and agreed by Mr Begg it would follow his recommendation.
    122. These conclusions appear to me to be consistent with the evidence of Mr Begg and Mr Robinson both in the present and the earlier proceedings and also with the contemporaneous documentation. Thus I am satisfied that both Mr Begg and Mr Robinson knew that the final decision as to whether or not to execute the SPA, either at all or on the terms negotiated by Mr Begg, had to be a matter for the Claimant. Equally I am satisfied that they both knew that the Claimant had no wish to interfere in matters about which it did not have the same detailed knowledge or expertise as did Mr Begg, specifically the commercial terms including the terms on which Stella would be obliged to pay the consideration for the shares to the Claimant, and that it would follow his recommendations subject to receiving an assurance from him that he was happy for it to enter into the SPA on the terms which he had negotiated and agreed.
    123. In particular, it is quite clear from the contemporaneous e-mails from November 2007 onwards that the Claimant and Mr Begg were both proceeding on the basis that it was the latter who was conducting all dealings with Stella and Halliwells. The e-mails of 26/11/07 and 27/11/07 are particularly significant in my view as they are entirely consistent with the evidence of Mr Begg to the effect that both he and the Claimant had agreed that it was for him to agree all of the contractual issues and for the Claimant simply to sign. The e-mail of 14:23 hrs on 27/11/07 from Mr Begg supports his evidence that the Claimant was content so long as it had his written assurance that he was satisfied with the terms of the SPA, and was happy for the Claimant to execute it. The resolution of 28/11/07 shows in my judgment that the Claimant's role in the negotiation and agreement of the sale and the terms of the SPA was essentially a passive one, limited to reviewing the SPA and receiving and accepting advice from their professional advisers and, importantly, 'the principals associated with the Trust' which it is agreed was a reference to Mr Begg. I do not consider that this conclusion is inconsistent with the fact that the representatives of the Claimant, including their in-house lawyer, spent some considerable time reviewing the draft SPA before executing it. That is entirely consistent with their wanting to ensure that its terms were not prejudicial to the Claimant's own interests. There is no evidence to suggest that in reviewing the terms of the SPA they were reviewing the commercial terms, including the terms as to payment. Insofar as it might be objected that the Claimant has failed to adduce evidence from those involved with this process, bearing in mind that Mr Robinson himself appears not to have been directly involved at this stage, I do not consider I should draw any adverse inference from that given the late stage at which this point was first raised by the Defendants.
    124. I consider that on balance this division of roles is not inconsistent with the terms of the trust deed, because it seems to me that what was agreed and done was not inconsistent with §14. I consider that §7 of Schedule 1 authorised what was done in this case, which was the informal instruction of Mr Begg by the Claimant to provide advice as to the sale of the shares and the terms of such sale. In my judgment a power to invest extends to a power to sell investments (see Lewin §35-42), and 'investment policy' would include deciding when and on what terms to sell the shares. Even if I am wrong about this, however, and the extent of the delegation of responsibility to Mr Begg was contrary to §14, that does not seem to me to invalidate what was actually done.
    125. Given those conclusions, in my judgment Mr Begg can fairly and properly be regarded as the relevant decision maker for the Claimant in relation to the agreement of the detailed terms of the SPA. I consider that this is not one of those cases where there is a clear demarcation line between the 'negotiator' and the 'decision maker'. It is a case where the Claimant can properly be said to have left the decision to Mr Begg, subject only to formal approval of the decision remaining with the Claimant. I do consider that there is a real difference between a case such as this, where although the Claimant remained the formal decision maker, in reality it delegated all but formal approval to Mr Begg as negotiator, and cases such as Barnet or Wimpey, where it was always the position - and known by the other party to be the position - that the decision-maker was separate from the negotiator and was the body who would be taking the decision, not just in name only. I do not consider that the crucial question in a case like this is whether or not the 'negotiator' does or does not have the authority to bind his principal to the contract; I consider that it is a question of identifying who in substance is – or is held out as being – the person who took the decision in relation to the contract.
    126. Furthermore, when it comes to considering the position in relation to the amended SPA, which is of course the crucial document so far as the claim for rectification is concerned, the case is even stronger in my judgment that it was Mr Begg who was the decision maker. It is quite clear that the Claimant left everything to Mr Begg in relation to the amendments and that the review which was undertaken on 26/02/08 could only have been of the most cursory kind, given the time recorded for that exercise."
  54. Mr Stewart's principal criticism of the judge is that having accepted that the only person authorised to enter into the contract on the terms agreed was the trustee, he failed to follow this through in his analysis of whether Mr Begg was the decision-maker. The position of the trustee was no different, he submits, from that of the council in Barnet LBC v Barnet Football Holdings Ltd. The attention paid to the officer's recommendation was equally superficial but the decision of responsibility was material to the outcome.
  55. Mr Stewart is, I think, right in his submission that the decision-maker ought in principle to be the person who has the authority to bind the company to the contract. The expressed intentions of a mere negotiator will therefore be immaterial unless he is also the decision-maker or shares in a relevant way those intentions with the person who is the decision-maker on behalf of the company. But, whilst those principles are easily stated, their application to the facts of any given case may be less straightforward. In a corporation with a defined and well-understood decision-making structure the division of responsibility should be readily apparent at least if the prescribed procedures are followed. But this is not a case of that kind. Although the trustee alone by its officers had the power to enter into the SPA and the Amended SPA, it is clear from the judge's findings of fact that this decision was largely a formality provided that the terms of the sale were acceptable to Mr Begg. His role as a negotiator was therefore critical both to his own willingness to see the shares sold on the terms he had agreed and to the trustee's decision to sell them on that basis.
  56. Consistently with the understanding and modus operandi agreed between Hawksford and Mr Begg, the judge has found that Mr Robinson and Mr Carr gave no thought to the definition of 2007 EBITDA in the Amended SPA and, as decision-makers, were not actually privy to what those provisions about Minimum Earn Out were intended to achieve in relation to the 2007 consultancy payments. But it is, I think, also apparent from paragraphs 121-122 of his judgment that they authorised Mr Begg to negotiate the terms of both versions of the SPA (and to instruct Halliwells to produce a contract which contained them) on what the judge described as the clear understanding that Hawksford would agree to sell on those terms unless its own interests would thereby be prejudiced. In practice this meant (as the judge records in paragraph 122) that Hawksford would follow Mr Begg's recommendations if he was happy to enter into the SPA on the terms he had negotiated.
  57. Even if this does not make Mr Begg the decision-maker, what it does, I think, do is to demonstrate, when looked at objectively, that the trustee entered into the Amended SPA with the positive intention that it should give effect to the terms which Mr Begg had negotiated and agreed. On the judge's findings of fact it would not have agreed to sell on any other terms. Hawksford did nothing to indicate to the defendants that it intended to contract on any different terms from whose which Mr Begg had agreed and which the judge found constituted the common intention of both parties. It merely proceeded to execute the document which both sides believed contained those terms. The actual expression of accord which the judge found existed in the e-mails and other communications passing between Mr Begg and the defendants therefore continued up to the execution of the Amended SPA because that was the only and apparent basis on which the trustee and the defendants entered into the contract. Mr Robinson and Mr Carr made no amendments of their own to the Amended SPA and were clearly seen and understood to be giving legal effect to what Mr Begg had agreed. The fact that they were in error in this respect entitles the trustee, in my view, to obtain rectification of the Amended SPA in the form ordered by the judge. It is therefore a case where, on the facts, the mistaken assumption on the part of Mr Begg was shared by Hawksford. The fact that Mr Robinson and Mr Carr gave no specific thought to the definition of 2007 EBITDA is irrelevant.
  58. I would therefore dismiss this appeal.
  59. Lord Justice Etherton :

  60. I agree.
  61. Lord Justice Rix :

  62. I also agree.

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