Knatchbull -Hugessen & Ors v SISU Capital Ltd (No 2), Court of Appeal - Mercantile Court, April 03, 2014, [2014] EWHC 1195 (Mercantile)

Resolution Date:April 03, 2014
Issuing Organization:Mercantile Court
Actores:Knatchbull -Hugessen & Ors v SISU Capital Ltd (No 2)

Neutral Citation Number: [2014] EWHC 1195 (Mercantile)Case No: A40BM014IN THE HIGH COURT OF JUSTICEQUEEN'S BENCH DIVISIONBIRMINGHAM DISTRICT REGISTRYMERCANTILE COURTRoyal Courts of JusticeStrand, London, WC2A 2LLDate: 03/04/2014Before :MR JUSTICE LEGGATT- - - - - - - - - - - - - - - - - - - - -Between :- - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - -John Brennan for the ClaimantsRhodri Thompson QC & Christopher Brown for the DefendantsHearing dates: 1-3 April 2014- - - - - - - - - - - - - - - - - - - - -Mr Justice Leggatt : 1. In the judgment which I gave yesterday morning, I summarised the background, both factual and legal, to the proposed transaction by which it was contemplated that SISU would purchase from the Charity Trustees their 50 per cent interest in ACL. I will not repeat that background now, but will take it as read. 2. The negotiations which took place principally between Mr Harris on behalf of the Trustees and Ms Seppala on behalf of SISU between March and June 2012 led to an outline agreement in principle, which was recorded in the indicative term sheet dated 18 June 2012. All the terms set out in that document were agreed not to be contractually binding with the exception of the two provisions concerning costs and exclusivity. 3. The claim by the Trustees to recover various professional fees and expenses is based on the costs provision. In that provision, SISU acknowledged that the Charity would incur significant costs, fees and expenses in evaluating SISU's offer to purchase the shares and in negotiating the transaction with SISU and its advisers. It was then agreed that: "In the event that SISU withdraws its offer to purchase the shares, or the Charity withdraws from negotiations as a result of SISU seeking a reduction in the purchase price or seeking unreasonable terms, or the Conditions Precedent cannot be met (`Aborted Transaction'), SISU agrees to underwrite and be responsible for all the Charity's reasonable costs and expenses ... incurred up to the point of a transaction with Clydesdale Bank plc to a maximum of £29,000."4. It is under that provision that the Charity Trustees make their claim in this action for costs in the maximum amount of £29,000. It is not in dispute that the Charity incurred such costs in evaluating SISU's offer and in negotiating the transaction, nor has it been disputed that those costs were reasonable. The sole issue is whether SISU is liable to pay the costs. That depends upon, in the first place, how the costs provision which I have just read is properly to be interpreted and, secondly, on the facts of what happened after the contract was made and whether, in the events which happened, a liability has arisen. 5. In interpreting the document, it is important to keep in mind, as was not always done in the course of argument and cross-examination in this case, that the task of the court when interpreting a contract is an objective task. What the parties who made the contract thought it meant or hoped it meant is not a consideration which is relevant to the court's exercise. Evidence about that is accordingly not admissible in court proceedings. 6. What the court must do is to seek to read the language as a reasonable person would understand the words who has in mind the background to the transaction and an understanding of its commercial purpose. It is important in that regard to seek to understand what is the rationale or purpose which underlies the costs provision. It seems to me that an important part of the provision is the term "Aborted Transaction", which appears in the middle of the clause. As I construe the costs provision, what was being looked...

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