Syspal Capital Limited vs Truman

This case concerned the correct interpretation of a provision in the Articles of Association of Syspal Holdings Limited (SHL) regarding the valuation of shares following the dismissal and resignation of a director.

TLDR:

• Syspal Capital Limited (SCL) filed a Part 8 claim against Mr. Christopher Truman and Syspal Holdings Limited (SHL).
• The dispute centered on the interpretation of the Articles of SHL concerning share valuation mechanisms.
• The court ruled that a Transfer Notice was deemed served when Mr. Truman resigned as a director on his 65th birthday, not when he was dismissed as an employee.
• The shares were to be valued at Fair Value, not Market Value.

Syspal Capital Limited (SCL) owned 76% of the shares of Syspal Holdings Limited (SHL), which in turn held 100% of the share capital of Syspal Limited (SL), an engineering company. Mr. Christopher Truman, the First Defendant, held 24% of SHL's shares and had been a managing director of SL until his dismissal in October 2022 and subsequent removal as a director in November 2022.

The Articles of SHL, adopted in December 2015, provided mechanisms for share transfer and valuation. Article 11.3 was at the core of the dispute, stating that a Transfer Notice would be deemed served if an Employee Member ceased to be employed by any Group Company. The interpretation of this provision would determine whether Mr. Truman's shares would be valued at Fair Value or Market Value.

Mr. Mundy, representing SCL, argued that the deemed Transfer Notice was triggered when Mr. Truman was dismissed as an employee of SL in October 2022, meaning the shares should be valued at Market Value. Conversely, Mr. Heylin, representing Mr. Truman, contended that the Transfer Notice was only triggered when Mr. Truman resigned as a director of SHL in May 2023, thus the shares should be valued at Fair Value.

The court examined the language of Article 11.3 and the broader context of the Articles. It found that the reference to 'in that capacity' related to the capacities of employee, director, or consultant, and since Mr. Truman continued as a director of SHL after his dismissal from SL, Article 11.3 was not triggered at that time.

The court also considered commercial common sense, noting that it would be unreasonable to force a shareholder to sell their shares at a lower value simply because they ceased to be an employee while remaining a director. The Articles were designed to protect the minority shareholder, Mr. Truman, ensuring Fair Value for his shares in most circumstances.

Ultimately, the court ruled that the deemed Transfer Notice was served when Mr. Truman resigned as a director on his 65th birthday, and the shares should be valued at Fair Value. This interpretation avoided potential manipulation by the majority shareholder to force a sale at a lower price.

The court directed an inquiry into the valuation of the shares based on this judgment, as the auditors of SHL were unable to carry out the valuation.

Legal representatives: Robert Mundy (instructed by George Green LLP) for the Claimant, Alexander Heylin (instructed by Field Fisher LLP) for the First Defendant. The Second Defendant did not appear and was not represented.

Judicial Panel: The Honourable Mr. Justice Roth

Case Citation Reference: [2024] EWHC 1561 (Ch)