Estera Trust (Jersey) Ltd.& Anor v Singh & Ors

Where two defendants are jointly and severally liable to purchase shares, each has the right to complete the purchase as against the claimant. The claimant cannot determine how the defendants divide that obligation between themselves, provided the transfer remains to one of the liable defendants. A defendant may not unilaterally require transfer to a different person without the claimant’s agreement or the court’s approval.

The court may require further argument on whether the mechanics of completion should be varied, including to address legitimate tax consequences. Delay requested by the claimant should not prejudice the defendants, but the claimant should not bear avoidable tax prejudice without the court considering whether a proper and non-prejudicial solution is available.

The petitioners sought relief concerning the completion of an order made after an earlier liability trial. The first respondent and the fourth respondent company had been ordered jointly and severally to purchase the petitioners’ shares. A later trial determined the purchase price, payment timetable and interest.

Before the final order was sealed, the petitioners sought time to obtain tax advice and to explore alternative structures which might reduce a substantial tax liability. They also argued that they should decide which respondent acquired the shares. The respondents maintained that the issue had already been determined and that they were entitled to decide between themselves how to perform the joint and several obligation. The immediate issues were the correct wording of the order and whether the court retained a discretion concerning the mechanics of completion.

1. Joint and several right to perform. The first respondent and the company were jointly and severally liable to purchase the shares. That liability gave each respondent the corresponding right to complete the purchase. If one respondent purchased all the shares before the deadline, the other would be discharged. If one purchased only part, the other would remain liable and entitled to purchase the balance.
2. Division of performance. The petitioners could not refuse an offer by either respondent to complete within the specified period. Nor could they determine how the respondents divided the purchase between themselves. The respondents were therefore entitled, by agreement between them, to complete in the proportions they considered appropriate. The transfer could not, however, be directed to a person other than one of the liable respondents without the petitioners’ agreement or the court’s approval.
3. Default position. If both respondents defaulted, the petitioners could enforce the joint and several liability against either or both respondents as they chose. That situation did not arise because the respondents had offered to complete the purchase within time.
4. Further argument and prejudice. The court made no final decision on whether to vary the mechanics of purchase or structure the sale differently. The petitioners were to have further time to seek tax clearance and advice concerning legitimate tax mitigation. The respondents were directed to engage constructively with proposals which could not prejudice them. The short delay was not shown to cause substantial prejudice to the respondents, but the petitioners were not permitted to benefit from delay which they had requested. Interest was therefore not to accrue after 3 May 2019, subject to further order, and the respondents could not rely on the missed 6 May payment date to alter their legal position because they had been ready and willing to pay on 3 May.
5. The application was adjourned with the remaining consequential matters. The petitioners were required to provide their proposed structure and supporting evidence 14 days before the hearing, and the respondents were given seven days to respond.

The judgment describes earlier stages in the same proceedings:

• Trial 1: On 5 July 2018, the court determined essentially the liability issues and ordered the first respondent and the company jointly and severally to purchase the petitioners’ shares.
• Trial 2: Judgment was handed down on 8 April 2019, determining the purchase price, payment timetable and interest.
• Present hearing: The court determined the principle governing which respondent could complete the purchase, adjourned the issue of any further variation of the completion mechanics, and gave consequential directions.