Beer & Anor v Bexbes Llp

Where a contractual fee is calculated by reference to an increase in the consideration for a business sale, a broad definition of consideration is confined by its connection with the sale agreement. Payments made to a vendor under an employment contract for services or duties are remuneration, not sale consideration. A performance-related payment remains salary where it is additional to fixed salary, payable under the employment contract and dependent on continuing employment. Calculation by reference to corporate profits does not alter that character. The appeal was dismissed.

The appellants engaged BexBes LLP to assist with the sale of their transport business. The engagement letter provided for an additional fee equal to 18 per cent of any increase in the sale consideration over the purchaser’s first offer. Arnold J held that performance-sharing payments of up to £140,000 over four years were employment remuneration rather than consideration for the business sale, and awarded £57,780 plus interest.

The appeal concerned whether those payments formed part of the first offer’s sale consideration. The Court of Appeal was required to determine the proper construction of the engagement documents and the character of the payments.

1. Appeal dismissed. The court upheld Arnold J’s construction and the resulting award of £57,780 plus interest.
2. The definition of consideration was broad, but its scope was limited by the words connecting it with the sale agreement. Only sums payable in relation to the hypothetical sale of the business on the terms of the first offer were relevant to calculating the additional fee. Remuneration payable under an employment contract for services or duties did not fall within that definition.
3. The performance-sharing payment was part of Mr Beer’s salary under the proposed four-year employment contract. It was additional to the fixed annual salary of £65,000 and was payable only while he remained employed. The fact that it was calculated by reference to corporate profits did not turn it into a share of profits or deferred consideration for the business, shares or assets.
4. The structure of the first offer supported that conclusion. The £1.25 million goodwill figure comprised the cash and annual payments identified in paragraphs 1(a) and (b), while paragraph 1(c) made a separate, linked proposal for Mr Beer’s employment. The bonus structure also related partly to existing Online divisions.
5. The appellants had not shown that the judge’s construction or its application to the undisputed facts was wrong. The Court of Appeal was therefore not entitled to interfere. BexBes’s appeal costs were summarily assessed at £31,625 inclusive of VAT.

• Court of Appeal (Civil Division): By judgment dated 26 June 2009, the appeal was dismissed. The court summarily assessed the respondent’s appeal costs at £31,625 inclusive of VAT.
• High Court of Justice, Chancery Division: Arnold J’s reserved judgment of 28 October 2008, implemented by order dated 4 November 2008, awarded BexBes LLP £57,780 plus interest for unpaid fees.