CR-2024-006692 - [2025] EWHC 2120 (Ch)

In their letter dated 1 November 2024 challenging the statutory demands, the Second Applicant says “following a review, it has been determined that no formal approval for this payment was issued by our Board…”. The point is not expanded further there.

In his evidence in support of the application, Mr Swarup says that the Turnover Statement was not formally agreed by either the First or Second Applicants because:

Mr Swarup says this means that the Turnover Statement has not yet been agreed or determined in accordance with the APA.

The First Applicant has Model Articles of Association under the Companies Act 2006, which includes the following provisions:

“7.

Directors to take decisions collectively

(1)

The general rule about decision-making by directors is that any decision of the directors must be either a majority decision at a meeting or a decision taken in accordance with article 8.

8.

Unanimous decisions

(1)

A decision of the directors is taken in accordance with this article when all eligible directors indicate to each other by any means that they share a common view on a matter.

(2)

Such a decision may take the form of a resolution in writing, copies of which have been signed by each eligible director or to which each eligible director has otherwise indicated agreement in writing.

(3)

References in this article to eligible directors are to directors who would have been entitled to vote on the matter had it been proposed as a resolution at a directors’ meeting.

(4)

A decision may not be taken in accordance with this article if the eligible directors would not have formed a quorum at such a meeting.

11.

Quorum for directors’ meetings

(1)

At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting.

(2)

The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two.

(3)

If the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision—

(a)

to appoint further directors, or

(b)

to call a general meeting so as to enable the shareholders to appoint further directors.

14.

Conflicts of interest

(1)

If a proposed decision of the directors is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director is not to be counted as participating in the decision-making process for quorum or voting purposes.”

The Second Applicant’s articles are a modified form of the Model Articles. It includes a provision at article 7(2) that if the Second Applicant “only has one director for the time-being, … [then] the general rule [at regulation 7(1) above] does not apply, and the director may for so long as he remains the sole director take decisions without regard to any of the provisions of the articles relating to directors’ decision-making.”

Mr Swarup says (at paragraph 38 of his second statement) that he has not “formally authorised the issue of the Turnover Statement, on behalf of the Second Applicant because it has not been approved by the Executive Management Team and Kartesia.”

Mr Fagan, in his careful submissions, described the First Applicant’s obligation to pay the Year 1 Consideration payment as being subject to a condition precedent which had not yet been triggered. He argued that paragraph 4 of Schedule 5 of the APA requires the First and Second Applicants to act “independently but in unison” to procure a turnover statement. The Applicants will each need to make a decision, he argues, that the Turnover Statement is approved and its delivery is also approved. Such a condition can only be made in accordance with each of the Applicants’ articles of association and requiring either a board resolution or a shareholder resolution. The Second Applicant cannot bind the First Applicant as they are separate entities and the true primary obligation to pay the Year 1 Consideration lies with the First Applicant, who must therefore authorise the Draft Turnover Statement itself. Accordingly, the argument continues, as no authorised procurement and delivery of a Turnover Statement has taken place, no agreement under paragraph 4 of Schedule 5, APA has taken place, the condition precedent under clause 3.1.2, APA has not been triggered and, therefore, no debt is due from the First Applicant.

In considering this ground, I return to the terms of the APA itself. There is simply no requirement in clause 3.1, clause 3.2 or Schedule 5 for there to be any board resolution or shareholder approval. The APA is, in my view, perfectly clear in its terms. It is a professionally prepared and highly detailed document. The parties must be taken to have meant what they have agreed to in their written contract. Schedule 5, paragraph 4 sets out a clear process requiring both the First and Second Applicants (“the Buyer and the Buyer Guarantor”) to procure that a Turnover Statement is prepared (paragraph 4) and then delivered (paragraph 4.3) to the Respondent within 20 Business Days of the last day of the relevant Turnover Period. Mr Sahota (as “Seller Representative”) then has 20 Business Days from receipt of the Turnover Statement (the “Review Period”) to deliver to the First Applicant a written notice stating whether or not he agrees with the Turnover Statement. If Mr Sahota failed to deliver an “Objection Notice” within the Review Period, then the Turnover Statement is contractually deemed to be agreed pursuant to paragraph 4.5.

In my judgment, the Statement plainly constitutes a Turnover Statement for the purposes of paragraph 4 of Schedule 5. I reject as wholly unrealistic and inherently implausible the Applicants’ assertion that the Statement was merely a draft Turnover Statement because:

It is relevant to note that Mr Swarup was copied into the emails on 14 and 17 May 2024. He was therefore (or should have been) fully aware of the discussions that were taking place and the production of the turnover statement, as well as the fact that there was no reference to it being a draft. It is clear from the subsequent emails and messages from Mr Sahota that he believed that the Statement was not a draft document and that the Turnover Statement had been agreed. Despite being aware of this, it is telling that Mr Swarup did not correct Mr Sahota in that belief.

Furthermore, the Microsoft Teams exchange between Mr Sahota and Mr Swarup on 1 July 2025 and the Whatsapp message from Mr Swarup on 2 July 2025 each demonstrate that Mr Swarup was telling Mr Sahota that payment would be made, which can be only referring to the Year 1 Consideration which was now due following the agreement of the Year 1 Turnover Statement. It is completely implausible to suggest that these exchanges have any other meaning. There is no evidence before me to suggest otherwise.

The subsequent communications between Mr Sahota and Mr Grant/Mr Gretton after 2 July 2024 are of little assistance to the Applicants given that by this stage the Turnover Statement had been agreed in accordance with the APA, either by actual agreement from Mr Sahota or by deemed consent upon the expiry of the period of 20 Business Days following receipt of the Turnover Statement. In my judgment, the evidence of Mr Swarup that Mr Grant and Mr Gretton did not approve the Turnover Statement are entirely besides the point. By this time, the Turnover Statement had been agreed in accordance with the contractual mechanism provided for by the APA. In light of Mr Swarup’s messages dated 1 and 2 July 2024, this evidence appears to be a self-serving attempt retrospectively to change what had already been agreed.

It follows from this that I do not need to decide the various technical points raised by the Applicants concerning the applicability of section 40 of the Companies Act 2006, the rule in Turquand’s case (Royal British Bank v Turquand 119 ER 886) or the Applicants’ submissions on agency. In my judgment, these arguments all pre-suppose the necessity of prior board approval for the provision of a Turnover Statement under paragraph 4 of Schedule 5, APA, which I have rejected above. I also do not need to consider for the purposes of this application the question of ratification which the Respondent relies on in the alternative.