The Witz Company LLC & Anor v Edmund Truell

The court construed a bespoke contract for difference (CFD) between the parties and held that the CFD was intended to mirror an actual shareholding in a protected cell company (Zedra). The contemporaneous email exchanges were admissible background or factual matrix material. The allocation of bonus shares by Zedra in May 2015 fell within the CFD provision for "payments received" and the CFD must be read so that the CFD shares include any replacement or bonus shares. The CFD was rectified to replace the named entity with Zedra and the earlier strike-out of the defendant's denial that the CFD was binding meant only quantum remained in issue. On the limited valuation evidence available the court assessed the net asset value of the relevant class A shares at £360 on 31 January 2019 and awarded a fixed sum of £130,427.55 to TWC, payable on 1 March 2019, with interest at 3 percentage points above the Bank of England base rate from 2 March 2019 until judgment.

Background and parties: The claimants are The Witz Company LLC (TWC) and Richard Hurwitz; the defendant is Edmund Truell. The dispute concerned a private investment structured as a contract for difference created in April 2015. Judgment on liability was entered by consent on 20 June 2022 following a successful summary judgment application; only the amount payable remained for determination.

Nature of the hearing: A two-day assessment hearing to decide whether the claim was a fixed sum due under the CFD or damages for breach and to quantify the sum due. The defendant had been debarred from giving evidence for non-compliance with disclosure orders.

Issues framed:

1. How the CFD should be interpreted, including whether the CFD was intended to mirror an actual shareholding in the Guernsey protected cell company now called Zedra.
2. Whether the automatic bonus share issue of May 2015 constituted a "payment" or replacement shares for the purposes of the CFD and therefore whether TWC was entitled to credit for those bonus shares.
3. The appropriate valuation date and the correct net asset value (NAV) per class A share on that date, given disclosure failures and competing contentions as to the relevant NAV (31 January 2019 was the contractual reference date; the defendant argued for 31 March 2019).

Court's reasoning and findings: The court applied established principles of contractual interpretation (including consideration of the factual matrix and commercial common sense). Contemporaneous emails between the parties were treated as admissible background and showed the CFD was intended to replicate a direct investment by Hurwitz in the cell company. The court held that the allocation of bonus shares in May 2015 amounted to a capital "payment" or, alternatively, replacement shares which must be treated as part of the CFD shares. The court also accepted that an implied term to achieve the same result would have been agreed if asked, although the point did not need to be decided on implication. On valuation, the court had three firm datum points from contemporaneous material (30.09.18: £542; 31.12.18: £376; 31.03.19: £149). Because the defendant failed to disclose documents and was debarred, the court drew an adverse inference consistent with Bahia v Sidhu and concluded on the balance of probabilities that the NAV on 31.01.19 was no lower than £360 per class A share.

Result: The court assessed the sum due as £360 multiplied by 362.298752 class A shares = £130,427.55, due and payable on 1 March 2019. Interest was awarded at 3 percentage points above Bank of England base rate from 2 March 2019 until judgment.

Judgment for the claimants. The court construed the CFD as intended to mirror a direct shareholding in Zedra and held that the May 2015 bonus share issue fell within the CFD as a capital payment or replacement shares; on the limited evidence and inferences drawn from the defendant's disclosure failures the NAV per relevant class A share on 31 January 2019 was assessed at £360, giving a payable sum of £130,427.55, with interest at base plus 3% from 2 March 2019 until judgment.