BL-2022-002117 - [2025] EWHC 2794 (Ch)

On 27th May 2016, Trilantic approached 3AAA through Karim Khan. Trilantic proposed to acquire a majority interest in the Company via the acquisition of the Parent Company (the “Trilantic Acquisition”). Mr Joe Cohen, one of Trilantic’s founding partners, was to join the Company’s board as a director, together with Mr Romain Railhac. It was intended that the transaction would complete in late 2016.

The Trilantic Acquisition would have involved Trilantic acquiring around 75 percent of the shares of the Parent Company. At this point Peter Marples and Thomas Marples between them held 50% of the Class A Ordinary Shares (which carried 85% of the voting rights) in the Parent Company, the other 50% being held by Diane McEvoy-Robinson and Adam McEvoy-Robinson. Peter Marples, Thomas Marples, and Sarah Marples held various shares in other classes. Lee Marples did not hold any shares but had an option to acquire certain Class X shares, along with Sarah Marples and various others. The Trilantic Acquisition would have involved Sarah and Lee Marples exercising their share options and Sarah, Lee and Thomas Marples selling all their shares. Peter Marples and Ms McEvoy-Robinson would sell approximately 60 percent of theirs, retaining the balance and retaining management functions in 3AAA for an incentivisation period. The Trilantic Acquisition was to be funded entirely by cash, not debt.

Trilantic carried out due diligence, including with Shoosmiths and Eversheds as solicitors, PwC for commercial and financial due diligence, and Westminster Advisers as political consultant.

Grant Thornton also prepared financial due diligence, officially instructed by the sellers, but provided to Trilantic. Trilantic and Grant Thornton were given full access to 3AAA’s records and accounts. Grant Thornton’s report included an analysis of the financial health of the business and its future financial and growth plans. This included the KPMG Investigation report, which was disclosed, and it, and its effect on 3AAA’s performance in early 2016, were analysed by Trilantic. Trilantic’s email of 16 September 2016 considered issues including 3AAA’s financial health, the KPMG Investigation and the proposed Levy but concluded that there were no significant issues raised by the due diligence.

In September 2016, Peter Marples, Ms McEvoy-Robinson and Mr Mapp met for lunch with Joe Cohen of Trilantic. At that meeting, by which time discussions had been underway for approximately four months, a deal structure was presented by Trilantic, which proposed the acquisition of a majority stake in the Company’s business.

In the very early hours of 23 September 2016, Nick Linford sent Sir Peter an email saying: “Hearing these guys [Trilantic] buy 3aaa tomorrow – probably for over £100m. Guessing you’ll happily novate their £30m allocation. Gutted.”.

Mr Linford’s email caused consternation at the SFA for reasons which have never been explained. Sir Peter saw it when he opened his emails the next morning and forwarded the email to several colleagues asking whether the SFA had “given permission”. Mr Smith replied ‘Karen/Sam – are you aware? If this is correct we need to make urgent contact and remind them that this is not an automatic or guaranteed process/outcome’. As a result, Ms Sherry spoke to Ms McEvoy-Robinson, who was evasive as to Trilantic’s interest and said that there had been no firm approach. Ms Sherry reported back to Mr Smith and Sir Peter that she had reminded Ms McEvoy Robinson of ‘the rules around sale of companies and potential contract novations and that due process would need to be followed. I also reminded her that novating a contract is not an automatic or guaranteed process’. Mr Smith replied, ‘They know the rules too well not to proceed without our agreement. We need to watch this one carefully’.

Sir Peter exchanged emails with Mr Linford to find out the source of his information and forwarded these communications on to Mr Smith and Ms Sherry. Mr Linford said that he had received anonymous tip offs. Sir Peter observed to his colleagues that it was difficult to know who to believe in this situation. Mr Smith responded that if Ms McEvoy-Robinson was misrepresenting the position, ‘their contract will not transfer’. He asked Ms Sherry to tell Ms McEvoy-Robinson that, ‘we must approve any sale’ and ‘we will not consider any retrospective application’. Mr Smith wanted a ‘full due diligence on anything related to this one in a similar way to learndirect’. Sir Peter agreed. (Sir Peter’s assertion in oral evidence that there was never any question of disbelieving Ms McEvoy-Robinson was not compatible with these emails).

Sir Peter then spoke to Mr Mapp of 3AAA. Sir Peter reported ‘He (Derek) absolutely understood that they would need our agreement to going ahead with anything’. This was evidently what Sir Peter had told Mr Mapp was the position. Sir Peter’s explanation in cross-examination that it was what Mr Mapp proposed to him is another example of Sir Peter now reinterpreting the documents to mean something different. Sir Peter asked Mr Smith and Ms Sherry, ‘would 3aaa need our permission to take an equity stake? […] I know they do if there is a sale but what do our rules say about taking an investment’. Mr Smith replied that it depended on whether it changed the legal ownership of the business. Mr Smith told Ms Sherry ‘Its clear these guys [Peter Marples and Ms McEvoy-Robinson] want out and we need to make sure we keep maximum over sight.”

The Claimants say, and I accept, that notwithstanding their denials in evidence, these emails show that at this stage Sir Peter and Mr Smith believed that (1) the SFA had the power to approve or prevent a sale and (2) 3AAA had to seek its permission before the sale. Neither point was correct under the terms of the Funding Agreement.

Mr Smith was, however, quickly disabused of that misconception. On 26 September Ms Sherry reported to him that the only relevant provision in the Funding Agreement and the Funding Rules was clause 5.10 of the Funding Rules and quoted its terms in her email. She recommended tightening up the contract (and the SFA did go on to tighten up its contract for 2017 to 2018 to make a change of ownership only possible with its prior written consent and requiring at least 12 weeks notice of any such plans).

Ms Sherry’s email was not sent to Sir Peter who continued for a time to believe that the SFA’s permission for the sale was required. On 20 October 2016, when Mr Mapp notified Sir Peter that the Trilantic Acquisition would likely go ahead, Sir Peter confirmed their discussion by email and that Mr Mapp ‘understood that SFA agreement would be required’.

Sir Peter had never before been involved in a change of control decision or process. He decided to depart from the SFA’s usual processes. On 21 October 2016, Sir Peter appointed Ms Forton to lead for the SFA on the Trilantic Acquisition. He asked her to involve the Transactions Unit, headed by Mr Atkinson, for due diligence. He continued, ‘This is an important test case for us and it will inevitably attract a lot of media publicity. I make no presumption that we should agree to the transfer’.

On 27 October 2016, the Company wrote to the SFA to request its approval for a change of control. That letter (written on Company headed paper) set out the proposed terms of the acquisition, explaining that they involved Trilantic acquiring 75% of the shares, and the existing directors and management team staying in place. It referred to (and reproduced the text of) clause 5.10 of the Funding Agreement and said: “We look forward to receiving your approval for a change of control at your earliest convenience.”

Ms Forton prepared a draft briefing note and consulted on it with her colleagues at the SFA. Mr Atkinson checked Trilantic’s financial status and received further information from Peter Marples, concluding to Ms Forton that ‘this looks like a strong company buying into a strong company’: and ‘they are well resourced and we have limited reasons to object to any of this’.

On 9 November 2016, Ms Forton emailed Sir Peter with the final briefing note, stating in her covering email that this was a straightforward request and that “the recommendation is that the change of ownership would not prejudice the delivery of our contract”. Mr Smith had confirmed he was comfortable with that recommendation. The briefing note itself:

Sir Peter was not happy with this advice. He responded to Ms Forton saying that he expected her advice to cover:

“• What is the investment being made

• How much is going into the business and how much to buy out existing shareholders

• What are current stakes of shareholders

• What will be future stakes

• What due diligence has been done on 3aaa by Trilantic and what their aspirations are.”

The information was already in Ms Forton’s advice note, as Sir Peter accepted in cross-examination, and the email suggests that Sir Peter had not digested and understood the briefing note. In any event, it was clearly important to Sir Peter that he understood what value was being extracted from the Company for the benefit of the existing shareholders, and what the investment objectives of the new shareholders were going to be after the acquisition.

Ms Forton put these questions to Peter Marples, who answered them the same day. He said that Trilantic would pay shareholders £42 million, of which shareholders would re-invest £18 million into 3AAA and £8 million would be used for working capital. He also made clear the due diligence which Trilantic had undertaken, that their intentions were ‘investing for the long term’ to support 3AAA develop its levy business, and 3AAA’s management team would remain in the business for at least three years. Ms Forton updated her advice with these answers and the sellers’ shareholdings. She maintained her recommendation that the SFA agree the change of control.

Sir Peter continued to ask Ms Forton questions to understand how much cash the existing shareholders were “taking… out of the deal” and how much was remaining invested by them. He questioned what this meant for the financial operation of the new business and whether that was not something the SFA should be assessing. He wanted to see Trilantic’s due diligence. Ms Forton tried to answer his questions with the assistance of her colleagues. She complained to Ms Sherry: ‘Having to be a flippin investment banker here!!! We are going into so much detail – we have never gone to this granularity’.

Sir Peter also asked ‘And what do our rules say about this kind of transaction? What scope do we have for discretion?’. Ms Forton’s reply on 10 November 2016 quoted clauses 5.9 and 5.10 but then misstated slightly their effect. ‘In terms of discretion we can refuse the change of ownership if we choose to do so should we believe this prejudices the new owners ability to deliver our contract’. In fact, the SFA did not have a power to refuse the change of ownership, only a power to terminate the contract. Ms Forton drew attention to the fact that the Funding Agreement terminated on 31 July 2017 in any event.

Around this time, Trilantic learnt of the proposed Non-Levy Cap from the SFA. Although it had been announced on 25 October 2016, Peter Marples and Ms McEvoy-Robinson had agreed not to tell Mr Cohen of Trilantic about it until it was “resolved”. On 14 November 2016 Mr Cohen emailed them saying that it was unfortunate that Trilantic had learnt about the cap from the SFA and not from the Company, and that the business plan was “centred on a core assumption that the non-levy business [would] not simply stay stable but actually grow”. Without more clarity, he said, the deal could not proceed further.

The Trilantic Acquisition briefly stalled but revived with a revised proposal from Trilantic, including less cash upfront. The revised offer included Trilantic’s understanding of the SFA’s position.

“There is a concern within the SFA around three topics: (i) the ability of private providers to what was described as “excessive profiteers”[sic] from tax payers investment, (ii) providers getting too big within the non-levy market and all the associated risks to learners if something goes wrong (e.g. they continue to site [sic] Carter & Carter) and (iii) allowing the FE Colleges to survive given their heavier cost structure and asset base. We have no doubt that the wish of the SFA to see Trilantic’s internal memos is driven by their wish to understand profitability.”

Mr Marples duly emailed the SFA on 8 December 2016, asking to “reinstate the change of control process”. In that email he said: “The aim is to conclude the transaction by the 21/12 and whilst the timescale is tight we would appreciate your continued support to work to this timetable”. He envisaged that the process would involve a meeting between the SFA and Trilantic, with either Ms McEvoy-Robinson or Mr Mapp in attendance.

Ms Forton emailed Sir Peter to update him. In her email she correctly described the SFA’s clause 5.10 rights as follows:

“The SFA requires providers that it holds direct contracts with to notify us if there is a change in its name and/or ownership. We reserve the right to terminate the Contract if we consider in our absolute discretion that the change in ownership would prejudice the provider’s ability to deliver the Services”.