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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Bartercard Plc v Nabarro Wells & Co Ltd. [2007] EWHC 2687 (Comm) (12 October 2007) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2007/2687.html Cite as: [2007] EWHC 2687 (Comm)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH
COMMERCIAL DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		12th October 2007

MR JUSTICE WALKER:

1. The London Stock Exchange ("LSE") operates an alternative investment market ("AIM"). The July 2005 AIM Rules ("The Rules") provided that in order for a company to be listed on the AIM it must retain a nominated advisor ("Nomad") at all times.
2. The claim in the present case is a claim by a formerly listed company ("Bartercard") against its former Nomad ("Nabarro Wells"). Nabarro Wells acted as Nomad to Bartercard from 10^th November 2005, under a written engagement letter dated 2^nd November 2005, accompanied by Nabarro Wells's standard terms ("The Terms"). The engagement was for a term of one year from the date of appointment, then continuing until terminated on three months written notice by either party.
3. However, on 27^th October 2006 Nabarro Wells resigned as Nomad with immediate effect. Bartercard says that this was a breach of contract with devastating consequences, among them its suspension from the AIM. In their defence Nabarro Wells say in broad summary that the conduct of Bartercard's executive chairman and majority shareholder, Mr Wayne Sharpe, amounted to a repudiatory breach of the engagement and amply warranted Nabarro Wells's decision to resign with immediate effect.
4. Today Miss Hannah Brown on behalf of Bartercard seeks summary judgment on liability. In the alternative she asks that particular paragraphs of the defence be struck out. At the conclusion of her oral submissions I indicated that I did not need to call on Mr Matthew Parker, who appears for Nabarro Wells, as I had concluded that Bartercard's applications must be dismissed. I now give my reasons.
5. I deal first with the application for summary judgment on liability. Here, Bartercard advances three contentions. The first contention for Bartercard relies on clause 4 of the terms. This read:

"4. Termination. Either of Nabarro Wells or the Company may terminate the engagement by giving to the other three months written notice without liability if the other party is in breach of the terms of this engagement or the AIM rules..."

Bartercard contend that in clause 4 the parties have expressly provided for termination on notice in the event of breach and it follows that Nabarro Wells had no entitlement to terminate the engagement without notice on the basis that Bartercard was in "repudiatory" breach.

6. For these purposes of this first contention only, Miss Brown is content to assume against Bartercard that Bartercard was, in fact, guilty of a repudiatory breach. She submits as to the interpretation and effect of clause 4, rightly, that any contract should be construed against the objective factual background of which the parties were aware at the date of the contract. The background she relies on is that both parties would have been aware of the severe consequences to an AIM company, and accordingly to its investors, of ceasing to have a Nomad. Against that background she comments that the parties did not identify any particular term of the engagement, the breach of which would have any different and more severe consequences than provided for under clause 4. The words of that clause on their ordinary meaning, she says, should not be read as subject to any qualification in relation to some unidentified category of more serious or, "repudiatory" breach. The Court, on established principles, should not imply a term into the engagement which is inconsistent with the express wording of the agreement. She adds that where the parties have set out in some detail the express terms of their agreement and, in particular, the obligations of each party as to the circumstances in which there is an entitlement to terminate, the Court should be slow to imply any additional terms or obligations.
7. Her final point in her skeleton argument on this contention was that clause 4 is contained in Nabarro Wells's standard terms and conditions. If there is any room for doubt as to the meaning and effect of clause 4, it should therefore be construed against Nabarro Wells. In reply to a question from me Miss Brown added that the purpose of the AIM rules was to protect investors. She submitted that, even if there were a very serious breach by Bartercard, the Nomad's appropriate course, at least where there is an agreement of the present kind, is to stay on.
8. I am willing to accept for the purposes of today that both parties would have been aware of the severe consequences to an AIM company, and accordingly to its investors, of ceasing to have a Nomad. I also accept for the purposes of today the propositions of law advanced by Miss Brown. I cannot however; say that these matters are sufficient to compel a conclusion, at the summary judgment stage, that clause 4 should be read as excluding the right to terminate for repudiatory breach.
9. This is a case where the parties have permission to adduce expert evidence about the AIM. One does not need to have more than an elementary knowledge of that market to appreciate that it may well be at least arguable that on occasion a Nomad might have very good reason indeed for wishing to be able to rely upon repudiatory breaches to terminate an engagement. As to whether that would be consistent with the purpose of the AIM in protecting investors and as to whether the appropriate course for a Nomad would be nevertheless to stay on, it seems to me that those matters could, at trial, be significantly affected by a consideration of the expert evidence. That evidence would go, I believe, to the objective factual background of which the parties were aware at the date of the contract. It could, as it seems to me, have a strong bearing on the assertions put forward by Bartercard in relation to this first contention and accordingly, I conclude that this first contention must await trial in the light of expert evidence and should not be resolved now.
10. Bartercard's second contention concerns reliance by Nabarro Wells on an implied term "not to do anything to damage the relationship of trust and confidence" between the parties. Miss Brown submits that, as the parties have set out in detail their respective obligations, there is no room to imply into the agreement an additional amorphous obligation. She adds that if, as Bartercard contends, there was no breach by it of express obligations, it is not open to Nabarro Wells to say that the sum of the conduct of Bartercard amounted to a breach of the implied term contended for.
11. As to that last point, it seems to me that it over complicates matters. If there is an implied term not to damage the relationship of trust and confidence, then it seems to me that the only question that I need to go on to consider at the present stage will be whether there is an arguable case for Nabarro Wells that there was a repudiatory breach of the implied term. I cannot see at the present stage that the mere fact, if it were right, that there was not also a breach of some express term, can really affect the matter. Thus, I cannot agree with Miss Brown that at the present stage the argument that there was an implied term is, as she would contend, no more than a red herring. As to that argument it is true that the parties have set out in detail various obligations. There may well be scope for argument as to exactly how "amorphous" the suggested implied term may be.
12. As with Bartercard's first contention, an important task for the Court when considering the proposed implied term will be the consideration of the objective factual background of which the parties were aware at the date of the contract. As I mentioned earlier, an order has been made for expert evidence, which will be highly relevant to the determination of that objective factual background. Accordingly, on this contention, as with the first contention, it seems to me to be impossible to resolve the matter against Nabarro Wells at the summary judgment stage. It must await expert evidence about the AIM so that the case for an implied term can be properly assessed.
13. Bartercard's third contention is that it can demonstrate today that there was no breach of the engagement. There are sometimes cases in which contested disputes as to the facts or the characterisation of the facts can be resolved at the summary judgment stage. This case, however, in my view, is not one of them. By way of example, Nabarro Wells say that, one of their major concerns was a breakdown in relations between Mr Sharpe and two non-executive directors, Mr Smith and Hufkens, with an intention on the part of Mr Sharpe to get rid of the non-executive directors. Mr Sharpe, in a witness statement, says that Nabarro Wells cannot possibly rely on this as warranting immediate termination, for Nabarro Wells had known about his views some weeks before 27^th October 2006.
14. In response, however, Nabarro Wells recite a history where points legitimately raised by the non-executive directors led Mr Sharpe to take personal offence, initially seeking to pressurise Mr Smith and Mr Hufkens to resign and even threatening to resign himself. Nabarro Wells accept that they were aware of this, something which they describe as "extraordinary" reaction. They say, however, that by the time of a meeting of Bartercard's board on 28^th September 2006 the issue appeared to have been resolved. There was no apparent personal animosity by Mr Sharpe against Mr Smith and Mr Hufkens. They add that when the proposed resolution for the AGM proposing that Mr Smith and Mr Hufkens be re-elected was discussed, there was no intimation by Mr Sharpe that he intended to use his majority share to vote them off the board, yet at the annual general meeting on 27^th October 2007, Mr Sharpe did exactly that.
15. On this third contention Bartercard has a high hurdle to surmount. It must show that there are no possible facts which could reasonably lead a Court to hold that Bartercard was in repudiatory breach of express or implied terms of the engagement. I suggested to Miss Brown that if the history put forward by Nabarro Wells were proved, this one aspect alone could warrant a Court concluding that Bartercard was in repudiatory breach of the implied term alleged by Nabarro Wells. In characteristically clear and vigorous submissions, Miss Brown put forward two observations to the contrary effect. First, she contrasted the way in which this aspect had been put at an earlier stage on behalf of Nabarro Wells with the way in which it was put now.
16. On 13^th September 2007, Mr Oram, a director of Nabarro Wells, made his first witness statement. At paragraph 14 he said this:

"Bartercard's Annual General Meeting took place on 27 October 2006. Although as Nomad I often do attend AGMs, I did not attend in this case because, knowing that Mr Sharpe held the majority of the votes, I did not anticipate that there would be any issue with the resolutions proposed by the Board, of which Mr Sharpe was Chairman, being passed. The resolutions were all apparently straightforward and we had not been told by Bartercard that there was likely to be any possibility of them all not being passed. Therefore, it was entirely reasonable to conclude that Mr Sharpe would support the resolutions at the AGM."

17. Mr Oram went on to say at paragraph 15:

"I was never made aware of Mr Sharpe's voting intentions and did not discuss with him at any time either the shareholder resolutions to re-elect Mr Smith and Mr Hufkens or his intentions in relation to voting on those resolutions. Although I knew that Mr Sharpe had been unhappy with the scrutiny to which Mr Smith and Mr Hufkens subjected Bartercard, I had no inkling that he intended to use his majority vote to remove them as non-executive directors. As David Nabarro says, this is pretty much unprecedented."

18. That, said Miss Brown, was to be contrasted with a second witness statement of Mr Oram made on 9^th October 2007. At paragraph 10 of that second witness statement Mr Oram says this:

"At paragraph 16, Mr Sharpe says that his emails made it clear that David Nabarro and I knew there was a real possibility that he would exercise his right to vote against the resolutions to reappoint Mr Hufkens and Mr Smith. This is simply untrue. David Nabarro and I were never aware of that possibility and had we been so, our actions in advance of the AGM would have been very different. We would have been working with the company to ensure that suitable independent non-executive director representation was on the board post the AGM. The fact remains that at the board meeting which took place on 28 September, at which I was present, Mr Sharpe, whilst we were discussing the resolutions to be put forward at the AGM, did not make any indication or representation to me of his position."

19. Miss Brown submits that this second version of what happened is inconsistent with the first. She took me to a note of what occurred in the form of minutes of the directors' meeting of 28^th September 2006. This document deals with the forthcoming AGM at paragraph 2.5 and it notes discussion of two matters only in this way:

"Discussion on date and whether necessary to be held in UK. Also discussed times convenient for UK and Australia - no date or time decided upon."

20. Thus the record refers only to discussion of the timing and whether the meeting needed to be held in the United Kingdom. Miss Brown submits there was no representation by the company that its shareholders will support the proposed resolutions for the AGM. She acknowledged that it might be different if there had been explicit discussion and implicit misleading about personal intentions. This led to her second point, however, which was that Bartercard could not make a representation as to how its shareholder would vote. The key point in the history relied on by Nabarro Wells in this regard was a supposed failure by Bartercard to inform Nabarro Wells in advance of the AGM as to how Mr Sharpe intended to exercise his vote as a shareholder. There were express provisions in the engagement letter, and the Terms, as to what information Bartercard must provide to Nabarro Wells. All that the history amounted to, submitted Miss Brown, was non-communication by Bartercard of something that Mr Sharpe knew as a shareholder in relation to his intentions as a shareholder. That did not mean that Bartercard knew of Mr Sharpe's intentions prior to the AGM.
21. I do not find it possible to say, at the present stage, that there is any such significant inconsistency between Mr Oram's first and second witness statements as to warrant the conclusion that the assertions at paragraph 10 of the second witness statement are so obviously unsustainable as to entitle the Court to regard them as unfounded for the purposes of a summary judgment application. His essential point is that by the time of the board meeting on 28^th September, the proposed resolution for the re-appointment of the non-executive directors had been formulated, and nothing was said on 28^th September, by anybody on behalf of Bartercard, that there was anything in the offing to prevent that resolution being passed. It may be that Mr Oram's first witness statement might offer some basis for cross-examination. On that I make no comment. I am quite satisfied, however, that any such points are not so strong as to entitle me to disregard what is said at paragraph 10 of the second witness statement.
22. As to what it was that a Nomad in the position of Nabarro Wells could, in relation to the implied term "not to do anything to damage the relationship of trust and confidence," have expected from Bartercard, I do not consider that at the present stage one can rule out knowledge on the part of Mr Sharpe as to his voting intentions being knowledge of the Company. That, as it seems to me, must depend upon factual and expert evidence which must await the trial.
23. Accordingly, my conclusion is that if the history put forward by Nabarro Wells were proved, this one aspect alone could warrant a Court concluding that Bartercard was in repudiatory breach of the implied term alleged by Nabarro Wells. I stress that I say, "could," I do not say, "must," for that is not my role at the present stage. Miss Brown's skeleton argument submitted that any breach proved by Nabarro Wells would not be sufficiently serious to justify termination. Again, that seems to me to be a matter which must depend upon factual and expert evidence at trial. I shall say more about this when I come to the alternative application on the part of Bartercard.
24. The conclusion I reach on the single aspect of the history that I have described above is accordingly that at least in that regard, it is impossible today for Bartercard to surmount the high hurdle that I mentioned earlier. I am satisfied that there are possible facts which could reasonably lead a Court to hold that Bartercard was in repudiatory breach of the alleged implied term. That conclusion makes it unnecessary to examine the factual case on other alleged breaches. I think it highly undesirable to conduct a detailed examination of the facts at the summary judgment stage and I do not do so. For these reasons I conclude that the summary judgment application is not sustainable.
25. I turn to the alternative application. It focuses on paragraph 9 of the defence, which is in these terms:

"9. Although they are not themselves relied upon as breaches justifying the subsequent termination of the Engagement, Bartercard had, in June 2006, committed further serious breaches of the Engagement, which form part of the background to the events of October 2006:

(1) At 7.00am on 16 June 2006, Bartercard (through its executive chairman Wayne Sharpe) made an announcement on the Regulatory News Service that it had referred matters relating to a proposed management buy-out, made by certain former directors of the company, to the appropriate regulatory authorities.

(2) In breach of the express terms at paragraphs 4(2) and (5) above and the implied term at paragraph 5 above, Bartercard failed properly to consult Nabarro Wells or to permit Nabarro Wells to review and comment on this announcement before it was made and it was not made through Nabarro Wells.

(3) Mr Sharpe had on 14 June 2006 confirmed Hugh Dram of Nabarro Wells (whilst he was on business in Madagascar) about the possibility of making an announcement. During a short telephone conversation, over a poor line, Mr Oram strongly advised against this. Mr Sharpe did not provide the text of any proposed announcement, but Mr Oram said that he would review any such text on his return to England on 19 June 2006. Instead, Bartercard issued the above announcement without confirmation or approval.

(4) In further breach of the implied term in paragraph 5 above, Mr Sharpe falsely informed College Hill, Bartercard's public relations advisors, that Nabarro Wells had approved that announcement in order to induce them to make that announcement for Bartercard."

Miss Brown submits that the assertions in this paragraph are irrelevant to the real issues in the case and, that if they are allowed to remain in the defendant's statement of case, they will require rebuttal from the claimant and involve both the parties and the Court in a significant waste of time and expense. As a consequence paragraph 9 and sub-paragraphs 2 and 5 of paragraph 4, which are only in the statement of case in order to support paragraph 9, should be struck out.

26. I observed to Miss Brown that one of her client's contentions, no doubt, would be that if the history I described earlier were a breach of the implied term, nevertheless, that breach would not be sufficiently serious to amount to a repudiation. Miss Brown agreed that indeed, that would be one of Bartercard's contentions. I then asked her whether in that event, would not this background of an earlier alleged failing on the part of Bartercard be relevant background in assessing the seriousness of what happened later? As to that, Miss Brown's first point relied upon the opening words of paragraph 9. It begins:

"Although they are not themselves relied upon as breaches justifying the subsequent termination of the engagement..."

27. That meant, said Miss Brown, that Nabarro Wells were not asserting that these breaches were relevant to the issue that I have described. That, as it seems to me, involves a distortion of the obvious purpose of this part of the statement of case. What the statement of case is doing at this point is giving notice to Bartercard that relevant background includes the matters set out at sub-paragraphs 1 to 4. Are they at least arguably relevant background? Miss Brown submitted that the answer to this question must be, "no." She said it was a different and separate incident four months previously. Had Nabarro Wells issued a warning notice that would be one thing, but they did not and the matter was over and done with by the time of Nabarro Wells's decision to terminate at the end of October 2006. Miss Brown drew my attention to an email from Mr Sharpe dated 22^nd June 2006, sent to Mr Oram and entitled "Announcement saga." This, Miss Brown submitted, showed that the events of June 2006 were complicated and that Bartercard did not accept that there had been any breach. Thus, she submitted, not only was this saga immaterial, it would be a potentially protracted issue causing significant unnecessary time and expense to be incurred.
28. It seems to me, however, that this alternative application on the part of Bartercard suffers from the same difficulties as the main application. Until the factual and expert evidence has been considered at trial, it seems to me impossible to say that what happened in June can have no relevance to the issues which arise as to the consequences of what occurred in October 2006. In this regard I have particularly in mind the alleged implied term, where it seems to me that assessing the significance of any breach is an exercise which will require careful consideration of the context and history. That, of course is by no means a definitive view. All these matters will be for the trial judge. It may well be that the events in June have some relevance to other aspects of the matters to be determined by the judge, but I do not need to go into this now. It suffices for present purposes that it may have relevance to the question of whether a breach of the implied term was sufficiently serious as to amount to a repudiation. Accordingly, I conclude that I must decline the alternative application. That means that today I refuse to grant Bartercard the orders which it seeks.