The Witz Company LLC & Anor v Edmund Truell

A contract for difference must be construed objectively, having regard to its language, the agreement as a whole, the admissible factual matrix and commercial consequences. Where the contract was intended to mirror a direct shareholding, its provisions should ordinarily be construed to preserve that economic equivalence. A payment may be made in kind, including by issuing bonus shares, and the contractual entitlement may extend to replacement or bonus shares where that is the natural effect of the agreed structure.

Commercial common sense may assist where competing constructions are available, but it cannot be used retrospectively to rewrite an improvident bargain. A claimant seeking a valuation must prove the amount due on the balance of probabilities. The court may draw an adverse inference from unexplained failures to disclose relevant valuation evidence.

The claim arose from a private contract for difference between The Witz Company LLC and Edmund Truell. The contract required Mr Truell to provide rights reflecting the performance of specified shares in a Guernsey protected cell company.

Following summary judgment, judgment was entered by consent that the contract had been validly terminated and that a payment was due. The assessment hearing concerned whether the claim was for a fixed debt or damages and, in either event, the amount payable. The central issues were the effect of bonus shares issued during the contractual term, the correct number of shares to be valued, the valuation date and the appropriate interest.

1. The court construed the CFD by applying the objective approach summarised in The Ocean Neptune [2018] EWHC 163 (Comm). The contemporaneous communications formed admissible background knowledge and showed that the CFD was intended to mirror, as far as possible, a direct investment in the relevant shares.
2. Clauses 3.2.1 and 3.2.2 had complementary functions. Payments received in respect of the shares included capital or income benefits, and the termination entitlement was the value attributable to the relevant shareholding at the contractual valuation date.
3. The bonus issue was a payment in kind. The allocation of 59 bonus shares for each existing class A share was a financial benefit of share ownership and fell within the contractual reference to payments of a capital or income nature. Alternatively, “CFD shares” included replacement or bonus shares. The entitlement therefore related to 362.298752 class A shares.
4. The court rejected a construction under which the CFD holder would lose the economic benefit of the bonus issue and the value of the investment would be reduced by a factor of 60. That construction was inconsistent with the agreed purpose and commercial consequences of the contract. The judge also considered, obiter, that an implied term to the same effect would have satisfied the relevant test.
5. The class A shares were valued at £360 each on 31 January 2019. The sum due was therefore £130,427.55, payable as a fixed sum on 1 March 2019. The valuation was assessed on the balance of probabilities. The court drew an inference against Mr Truell from his unexplained failure to disclose relevant valuation documents, applying the approach in Bahia v Sidhu [2022] EWHC 875 (Ch).
6. Interest was awarded at three percentage points above the Bank of England base rate from 2 March 2019 until judgment, applying the principles summarised in Carrasco v Johnson [2018] EWCA Civ 87.

The judgment records that summary judgment was obtained by TWC and that judgment was entered by consent on 20 June 2022. The present hearing assessed the sum due under that consent order. No appeal was determined.