UTB LLC v Sheffield United Ltd

The court refused relief against sanctions under CPR r.3.9 and r.32.19 to permit a late challenge to the authenticity of two disclosed share sale agreements. The judge applied the Denton test and held the failure to give timely notice disputing authenticity was a serious breach, unjustified by the explanation given. The disputed documents were deemed irrelevant or collateral to the central issues concerning the operation of clause 9.1.12 of the Investment and Shareholders' Agreement (ISA) and to the pleaded conspiracy, because UTB had accepted that it became beneficial owner of SUL's shares on service of the counter-notice and any sub-sales were res inter alios acta. Granting relief would disrupt a tightly scheduled, complex trial and impose disproportionate cost and delay.

Background and parties: This is a first instance Chancery trial between UTB LLC (respondent/claimant in the earlier proceedings) and Sheffield United Limited (petitioner/defendant) arising in the context of Blades Leisure Limited and a petition under section 994 of the Companies Act 2006. During trial SUL sought relief against sanctions to challenge the authenticity of two share sale agreements disclosed by UTB and to call handwriting expert evidence.

Nature of the application: SUL applied for relief against sanctions under CPR r.3.9 to permit a late challenge to the authenticity of two documents disclosed on 2 November 2018 (and deemed admitted under CPR r.32.19 by failure to serve notice by the exchange date). The relief sought included permission to adduce expert handwriting evidence and to investigate alleged forgery.

Issues framed by the court:

• whether UTB acquired 75% or more of Blades' shares for the purposes of ISA clause 9.1.12 on service of the counter-notice,
• the relevance and authenticity of two share sale agreements said to show sub-sales or nominee arrangements, and
• whether the authenticity challenge should be permitted despite the deemed admission under CPR r.32.19, applying the Denton approach to relief against sanctions.

Reasoning and findings: The judge found that UTB had accepted it became the beneficial owner of SUL's shares upon service of the counter-notice and that as between buyer and seller a constructive trust arose; any sub-sale arrangements were res inter alios acta and therefore had no bearing on whether UTB had 'acquired' the shares under clause 9.1.12. The alleged conspiracy did not depend on executed sub-sales; the scheme of nominating transferees could be effected by directions without valid sub-sales and the validity of the disputed documents was collateral to the core allegations. Applying the Denton two-stage/three-stage approach, the court held the failure to challenge authenticity in time was a serious breach with an unsatisfactory explanation, and granting relief would cause disproportionate disruption and expense to a complex, time-sensitive trial. The application for relief against sanctions was therefore refused and the late challenge to authenticity disallowed.

Application for relief against sanctions refused. The court applied the Denton principles and concluded the late challenge to the authenticity of disclosed share sale agreements was a serious, unjustified default, the disputed documents were collateral to the central issues under ISA clause 9.1.12 and the conspiracy claim, and permitting late investigation would unfairly disrupt and delay a complex trial.