Syspal Capital Limited v Christopher John Truman & Anor

The Court of Appeal upheld the judge's construction of Article 11.3 of the articles of association. The phrase "does not continue in that capacity" was held to refer to continuing to be employed in that capacity in the round (that is, being employed by the group at all, whether as employee, director or consultant) rather than to cessation of any one of those capacities. The interpretation was reached by applying contractual interpretation principles, including the text of Articles 10 and 11 read as a whole, commercial common sense and the surrounding circumstances (in particular that the relevant shareholder was the only Employee Member when the Articles were adopted). As a result, a deemed Transfer Notice arises only when the Employee Member ceases to be employed by the Group in any capacity, and not merely when he ceases in one of several capacities. The court rejected the argument that an implied qualification should be read into Article 11.3.

Background and parties:

• SHL is a holding company whose shares are held 76% by SCL (the appellant) and 24% by Mr Truman (the first respondent). SHL owns 100% of Syspal Limited (SL). Mr Truman was an employee of SL until his dismissal on 10 October 2022 and was a director of SHL until he resigned on 24 May 2023. The Articles define an "Employee Member" and contain pre-emption and deemed transfer provisions relevant to the pricing of any forced sale of shares.

Nature of the dispute and relief sought:

• The appeal concerned the correct construction of Article 11.3 of SHL's Articles of Association and the date on which a Transfer Notice was deemed served. The determination of that trigger date affected whether the sale price for Mr Truman's shares should be calculated at Market Value (the lower valuation) or Fair Value (the higher valuation). The appellant appealed the High Court's decision that the deemed notice arose only on resignation as director on 24 May 2023, entitling the respondent to Fair Value.

Issues framed by the court:

• Whether the phrase "does not continue in that capacity" in Article 11.3 refers back to continuing to be employed in the specific capacity that ceased (so that cessation in any one capacity triggers a deemed Transfer Notice), or whether it refers to continuing to be employed in that capacity in the broader sense of being employed by the Group at all (so that a deemed Transfer Notice arises only when employment by the Group in all such capacities has ended).

Procedural posture:

• Appeal from Roth J ([2024] EWHC 1561 (Ch)). Permission to appeal was granted by Newey LJ on 23 September 2024. The Court of Appeal heard argument on 3 April 2025 and delivered judgment on 14 April 2025.

Court's reasoning and conclusions:

• The court treated interpretation as a question of law to be resolved by reference to the Articles as a whole, commercially sensible construction and reasonably ascertainable background facts. The singular phrase "that capacity" could grammatically refer either to a specific capacity or to the capacity of being employed generally; the court concluded the latter is the better reading.
• The default pricing mechanism in Article 10.4(3) is Fair Value, with Article 10.4(2) (Market Value) being the specific exception. Reading Article 11.3 so as to trigger the lower valuation whenever any one of several roles ceased produced commercially implausible outcomes and would render parts of the Article otiose, particularly given that Mr Truman was the only Employee Member when the Articles were adopted. Surrounding provisions (including Article 9.2) and the likely commercial expectations supported the High Court's construction.
• The Court of Appeal therefore dismissed the appeal, holding that a deemed Transfer Notice under Article 11.3 was triggered only when the Employee Member ceased to be employed by the Group in any capacity, and not merely when he ceased in one of several concurrent capacities. The court also observed that it would have rejected an implied qualification to Article 11.3 had it been necessary to decide that point.

The appeal is dismissed. The Court of Appeal agreed with Roth J that the words "does not continue in that capacity" in Article 11.3 should be read as referring to the Employee Member continuing to be employed by the Group at all (whether as employee, director or consultant). On that construction a deemed Transfer Notice was only served when the Employee Member ceased to be employed by the Group in any capacity, which produces the commercially sensible result and preserves the operation of the Articles as a whole. The court rejected the appellant's alternative construction and the suggested implied term.

Appeal from the High Court (Chancery Division, Insolvency and Companies List) decision of Roth J: [2024] EWHC 1561 (Ch). Permission to appeal granted by Newey LJ on 23 September 2024. Hearing in the Court of Appeal on 3 April 2025; judgment delivered 14 April 2025 ([2025] EWCA Civ 469).