ClearCourse Partnership Acqireco Limited & Anor. v Jethwa & Ors.

On summary judgment, the court must decide whether the opposing case has a realistic prospect of success, without conducting a mini-trial. Fanciful factual assertions may be rejected where the evidence lacks reality, but a case should proceed where further evidence could materially affect the result. Short questions of law or construction may be decided summarily.

An agent authorised to negotiate a transaction may bind the principal in respect of fraudulent misrepresentations made during those negotiations, even if the agent lacked authority to conclude the contract or to commit fraud. Contractual earn-out provisions are construed objectively, in their commercial and documentary context.

The judgment determined five applications arising from two sets of proceedings concerning the sale of E-Novations (London) Ltd to ClearCourse under a share purchase agreement dated 30 September 2020.

The applications concerned Palmyra’s liability for alleged deceit, amendments to the pleadings, Mr Jethwa’s earn-out counterclaim, alleged procurement of breach of contract and conspiracy, recovery of a directors’ loan, and alternative warranty and deceit claims concerning ownership of software intellectual property.

The central issues were whether the pleaded cases had a real prospect of success, whether the earn-out provisions had the meaning advanced by the parties, and whether the alleged representations and warranties were untenable on the pleaded facts.

1. First and Second Applications. Palmyra’s application for summary judgment and strike out was dismissed. Permission was granted to re-amend the claim. Authority to negotiate a contract is distinct from authority to bind the principal to the resulting contract. A principal may be liable for fraudulent representations made by an agent within the scope of actual or ostensible authority to conduct negotiations. It is unnecessary for the agent to have authority to make the precise representation or to commit fraud. The proposed pleading gave CPA a real prospect of proving that Mr Jethwa acted as Palmyra’s agent and made representations of the relevant kind. The NDA did not provide a knockout defence to the deceit claim.
2. Third and Fourth Applications. The counterclaim for further EBITDA and revenue earn-out consideration was struck out, and permission to re-amend was refused. The alleged forecast budget did not credibly challenge the actual EBITDA figures, which fell below the contractual threshold. The contractual dispute-resolution procedure had not been invoked. On objective construction, “Online Processing Solution” and “POS Processing Solution” meant the ClearCourse payment processing system, not all payment systems used by E-Novations’ customers. The claims against Mr Gualtieri and Mr Rowe were parasitic upon the alleged breach by CPA and therefore also failed.
3. Fifth Application. The defence to the £200,000 directors’ loan claim had a real prospect of success because an alleged oral compromise could not safely be rejected summarily. Conversely, if E-Novations did not own or control the software rights, the relevant warranties concerning agreements, licences, business assets and intellectual property were breached. The EULA purported to grant software licences and was not merely a restriction on misuse. The deceit defence likewise had no real prospect of success on that hypothesis, and the relevant defence passages were to be struck out. Further submissions were required on the precise form of relief and consequential matters.

First-instance decision. The judgment records earlier interlocutory orders in the separate QB Proceedings, including injunctive relief, but no appellate history for the present decision.