Aircare Ltd v Sellyeh

• Jurisdiction: Bermuda
• Judge: Baker P,Kay JA,Bell JA
• Judgment Date: 20 March 2015
• Court: Court of Appeal (Bermuda)
• Docket Number: Civil Appeal 2014 No 13
• Date: 20 March 2015

[2015] Bda LR 32

In The Court of Appeal for Bermuda

Before:

Baker P; Kay JA; Bell JA

Civil Appeal 2014 No 13

Between:

Aircare Ltd

Appellant

and

Wyatt Sellyeh

Respondent

Mr N Hargun and Mr B Adamson for the Appellant

Mr T Marshall for the Respondent

The following cases were referred to in the judgment:

Investments Compensation Scheme Ltd v West Bromwich Building SocietyWLR [1998] 1 WLR 896

Rainy Sky v Kookmin [2011] UKSC 50

Share purchase agreement — Construction of agreement —‘Two meanings’ case — Clawback

JUDGMENT of Kay JA

Introduction

1. This appeal is concerned with the construction of a provision in a share purchase agreement (‘The Agreement’) whereby Aircare Limited (‘Aircare’) agreed to repurchase for cancellation Aircare shares which were then held mainly by its managers and employees. There were two outside shareholders, one of whom was Mr Wyatt Sellyeh. Under the agreement, the shares were to be repurchased in four tranches. We are concerned with the price to be paid by Aircare for the first tranche. The Agreement, which was dated 30 May 2012, was made between Aircare, its shareholders and two other companies, inVenture Limited (‘inVenture’) and iAcquisition Limited (‘iAcquisition’). The context was a merger, pursuant to a separate contract, of Aircare and iAcquisition.

2. The price to be paid for the repurchase of the first tranche of shares was covered by clause 3.2 of the agreement. Clause 3.2(i) provided:

‘for each First Tranche Share to be repurchased by [Aircare] on the First Tranche Repurchase date [ie June 1 2012], an initial Share Purchase Price of BD$1,485.64 (One Thousand Four Hundred Eighty Five Bermuda Dollars and Sixty four cents): PROVIDED that, upon receipt of the audited financial statements of [Aircare] for the year ended March 31, 2012 (expected on or about August 1, 2012), the Share Purchase Price paid for the First Tranche Shares shall be recalculated using a price equal to 4.7529 times the average EBIDA of the audited financial statements of [Aircare] for the years ended March 31, 2011 and March 31, 2012 and where such recalculation results in additional monies owed to the First Tranche Shareholders, such monies shall be paid to the First Tranche Shareholders on the Second Tranche Share Repurchase Date…’

3. The price to be paid for the repurchase of the second, third and fourth tranches, which were to take place in August 2012, August 2013, and August 2014 respectively, were to be calculated by reference to the audited financial statements of Aircare for the year ending 31 March 2012, 31 March 2013 and 31 March 2014. In respect of the second, third and fourth tranches, there was no provision for the recalculation of the repurchase price.

4. The reason for the recalculation provision in clause 3.2 (i) was that at the date of the Agreement (30 May 2012), the audited financial statements for Aircare for the year ending on 31 March 2011 were available, along with management projections for the year ending 31 March 2012, but the audited financial statements for that year were not expected to be available until 1 August 2012. The management projections had been prepared in August 2011.

5. Pursuant to clause 3.2(i) of the agreement, Aircare paid Mr Sellyeh $1,485.64 for each of his 600 shares. Following receipt of the audited accounts, Aircare recalculated the price using the formula set out in clause 3.2(i). The recalculated price was $1,376.69 – a significant reduction. Aircare claims that Mr Sellyeh was only entitled to be paid this recalculated price and that it is entitled to recover $65,369.91 as an overpayment. Mr Sellyeh, on the other hand, contends that clause 3.2(i), properly construed, had the effect that the ‘initial’ price was a minimum price which could only be recalculated upwards and not downwards following receipt of the audited financial statements for the year ending 31 March 2012.

6. Following a hearing in the Supreme Court on 7th and 8th April 2014, in a judgment handed down on 20 May 2014, Hellman J held that the proper construction of clause 3.2(i) was the one advanced on behalf of Mr Sellyeh. He dismissed Aircare's claim for recovery of the alleged over-payment. There is now before us an appeal by Aircare, represented by Mr Narinder Hargun...