CL-2022-000025 - [2025] EWHC 2331 (Comm)

Mr Kerr relied on what he said was the proper interpretation of the Model Code (viz. that the act of settlement of a previously agreed contractually binding transaction constituted “dealing” for the purposes of the Model Code and was therefore a breach of the Model Code if it took place during a prohibited period) primarily in relation to his case that the SPA was not intended to be legally enforceable, though as I have noted it is also potentially relevant to the question of specific performance as an appropriate remedy. As I have explained above, even if Mr Kerr was right in relation to the proper interpretation of the Model Code, I would have held that the SPA was intended to be legally enforceable, and also that specific performance was an appropriate remedy. The point on the meaning of the Model Code in this respect therefore does not affect the outcome on these issues.

The experts called by the parties were:

Mr Cordle was, as I have noted, a corporate lawyer, who has advised on the application of the Model Code. He gave his evidence in a straightforward and professional manner, and had an obvious familiarity with the Model Code. Mr Bamford is a litigator, who (by contrast with Mr Cordle) appeared to lack the same degree of familiarity with the Model Code and the Listing Rules more generally.

That having been said, the evidence given by the Guernsey lawyers was of relatively limited relevance. They each gave their opinion on whether “dealing” under the Model Code included the settlement of a trade (as opposed to the date when the agreement to trade was made). However, neither suggested there was any particular canon of interpretation arising from the law of Guernsey, or that a particular approach to interpretation of the Model Code was required under the law of Guernsey. Neither did either of them refer in their written reports to any material outside the Model Code itself which was said to bear upon its meaning or scope, such as any case-law, any guidance from any regulatory authority or any commentary. Rather, each of them simply gave their interpretation of the words of the Model Code.

I have already identified, at paragraphs 64 to 70 above, the framework of the Model Code insofar as it is relevant to the issue, and set out what it defines as a prohibited period. Mr Kerr contended that in the period from PGC’s 2021 balance date (30 June 2021) to the date on which PGC’s annual results were published (22/23 November 2021) he had inside information, the effect of which was that the period 30 June 2021 to 22/23 November 2021 was a prohibited period and that, accordingly, in that period, he was not entitled to deal in PGC shares. The issue between the parties was whether the settlement of the SPA would constitute “dealing” within the meaning of the Model Code or not.

The definition of “dealing” included:

“i.

any acquisition or disposal of, or agreement to acquire or dispose of, any of the securities of the issuer;

ii.

entering into a contract (including a contract for difference) the purpose of which is to secure a profit or avoid a loss by reference to fluctuations in the price of any of the securities of the issuer;

iii.

the grant, acceptance, acquisition, disposal, exercise or discharge of any option (whether for the call, or put or both) to acquire or dispose of any of the securities of the issuer;

iv.

entering into, or terminating, assigning or novating any stock lending agreement in respect of the securities of the issuer;

v.

using as security, or otherwise granting a charge, lien or other encumbrance over the securities of the issuer;

vi.

any transaction, including a transfer for nil consideration, or the exercise of any power or discretion effecting a change of ownership of a beneficial interest in the securities of the issuer; or

vii.

any other right or obligation, present or future, conditional or unconditional, to acquire or dispose of any securities of the issuer.”

The definition is certainly broad, and the language of sub-paragraph (i) might well be read as encompassing not only the agreement to acquire, but also the actual acquisition under a pre-existing agreement. There was, however, something to be said for Mr Cordle’s explanation, given in his oral evidence of the rationale for the rule as follows:

“My opinion is that there has to be some sort of investment discretion being exercised in order for dealing to take place. The reason being is that the code is there, has been put in place to prevent people from seeking to trade on inside information. So if there is no inside information at hand at the time when the investment decision is made, then the code doesn't bite, it doesn't bind anyone. So if say, you are, seeking to settle a transaction which was agreed several months before when it was actually written up into the company's books, that would not be part of the dealing definition, because the dealing that happened at the time when the investment agreement, the agreement to sell was actually binding on the parties.”

It is also fair to say that Mr Bamford’s interpretation would have potentially odd results. During his oral evidence, Mr Bamford accepted that the definition of “prohibited period” is such that a prohibited period could arise at any time because a PDMR could obtain inside information at any time, and that there could be a gap between the date on which a contract for the sale of shares is entered into and the date on which the transfer of title required by the contract occurs. He also accepted that, as a result, on his interpretation of “dealing”, there could be a position in which parties (one of whom is a PDMR) enter into a share purchase agreement with no idea that there might be a prohibited period before settlement, only to find that one has arisen before the contractually agreed transfer takes place meaning that no transfer, or execution of the contract, could take place without a breach of the Model Code. If it was the purchaser that was the PDMR, the problem could not even be solved by a request for clearance.

The answer to this point may be one with far reaching consequences if one was considering all situations where shares listed on TISE were sold. However, I do not need to determine what the general position is in relation to the meaning of “dealing” under the Model Code in respect of most share transactions, and as a result I do not set out here the parties’ or their experts’ arguments in full. Not only (as I have already stated) does the point not matter to the analysis of the legal enforceability of the SPA, but also in the circumstances of this case, it is clear that whatever the scope of “dealing” generally, it does not apply to the settlement of the SPA here. That is because under the sub-heading “Dealings not subject to the provisions of this code”, the Model Code identifies “dealing where the beneficial interest in the relevant security of the issuer does not change”. As I have held, the SPA is specifically enforceable (perhaps unusually for a contract for the sale of shares in listed securities) with the result that beneficial title passed to Mr Kerr when the SPA was entered into: see e.g. Mills v Sportsdirect at paragraphs 74-75. As a result, settlement of the SPA will not change the beneficial interest in the shares (which has already passed), such that the Model Code states expressly that it will not constitute a “dealing”.

The fact that Mr Kerr might have, before settlement, nominated another entity as the buyer does not disturb that analysis. That took effect as an option for Mr Kerr to replace himself with another party as the buyer (though Mr Kerr would retain the ultimate obligation to ensure payment of the price was made) which, if he had exercised it, may have had the effect that the beneficial interest then passed to the newly nominated buyer. But unless and until he made such a nomination (which he has not done), he was the buyer under the SPA.

As a result, although I was attracted by Mr Cordle’s analysis (which, as I say, I have not set out in full), I do not need for the purposes of this case to determine or consider further the more general point as to whether “dealing” generally, or in other situations, includes the settlement of a transaction as well as the entering into the contract.