Chen & Anor v Chui & Ors

The Court of Appeal refused permission to appeal against HHJ McCahill QC's decision that the cooperation agreement of January 1999 gave the claimants an immediate, beneficial and equal interest in the company and that the defendants' allotment of shares was in breach of that agreement. The judge's construction of the written agreement as expressing joint ownership was held to be plainly open on the document as a whole. Findings that there was an express oral agreement, that the claimants had an immediate vested property right, and that there was no repudiatory breach by the claimants were treated as factual conclusions which an appellate court should not lightly disturb. The application to admit fresh witness evidence failed under the Ladd v Marshall tests and was not likely to have affected the outcome.

Background and parties: The claimants and the defendants entered discussions that developed into a business venture culminating in the incorporation of Herbmagic (UK) Limited. A written cooperation agreement was executed in January 1999. Dispute arose over whether the issued share capital was to be held equally by the claimants and defendants and over subsequent allotments of shares.

Procedural posture: The claimants sought specific performance of the January 1999 agreement, rectification of the register and an order for transfer of shares; they indicated an intention to petition under section 459 of the Companies Act 1985 if the register were rectified. The defendants denied the agreement or pleaded that any obligation to transfer depended on the claimants obtaining long-term residence, and alleged repudiation by the claimants.

Issues for decision:

• Construction of the cooperation agreement: whether it created an immediate equal ownership or merely contemplated future registration upon the claimants obtaining long-term residence;
• Existence of an express oral agreement to share ownership equally;
• Whether the claimants had repudiated the agreement;
• Admissibility of fresh evidence (witness statements) under the Ladd v Marshall tests.

Court's reasoning and conclusions: The judge concluded, on the proper construction of the agreement read as a whole (including clauses concerning funding, sharing of profits, joint decision-making and risk), that it clearly expressed joint ownership and that the claimants were beneficially entitled to half the shares with an immediate vested right. The Court of Appeal held that this construction was plainly open on the document and that the trial judge was entitled to make the factual findings about an oral agreement and the absence of a repudiatory breach; such findings are not readily disturbed on appeal. The application to admit new witness evidence failed the established Ladd v Marshall criteria and was unlikely to have changed the result. The application for permission to appeal was therefore refused.

Appeal permission refused. The Court of Appeal accepted the trial judge's construction that the cooperation agreement evidenced immediate joint ownership and affirmed his factual findings on the existence of an oral agreement and absence of repudiation; the proposed fresh evidence did not meet the Ladd v Marshall tests and was unlikely to have affected the outcome.

Appeal from HHJ McCahill QC (Chancery Division, Bristol District Registry), order dated 14 September 2007; application for permission to appeal heard in the Court of Appeal (Lawrence Collins LJ) on 18 June 2008 (this judgment: [2008] EWCA Civ 970).