Kevin Lee Rice v Napril Holding Ltd

On a summary judgment application involving contractual construction, a court should decide a short point where the agreement and necessary objective background are before it, provided the opposing case has no realistic prospect of success and no other compelling reason for trial. Contractual interpretation is a unitary, objective exercise. The court considers the words, the agreement as a whole and the relevant background. Commercial common sense cannot override clear language or insert a financial threshold which the parties omitted. An express reference to renewal covers renewed existing business; it cannot be excluded by relabelling that business as maintenance. Pre-contract negotiations and subjective intentions are generally inadmissible for interpretation. Declaratory relief requires a separate assessment of whether the declaration is just and useful.

The claimant sought summary judgment by declarations on the construction of an earn-out mechanism in a share purchase agreement under which the defendant could owe quarterly payments. The underlying transaction involved the sale of an umbrella payroll company. The dispute concerned whether ‘New Revenue’ captured ordinary revenue from existing clients renewing business and whether the agreement contained an implied threshold based on turnover.

The defendant resisted summary determination, relying on disputed negotiation evidence, a spreadsheet and a related Part 20 claim against its transaction solicitors. It also sought relief from sanctions for late evidence. The central issues were whether that evidence could affect objective construction, whether the defendant had a real prospect of defending the construction point, and whether declaratory relief should be granted.

Applications. The court granted relief from sanctions and allowed the late evidence to be considered. The claimant’s summary judgment application also succeeded, and the declaration sought was made subject to a minor amendment.

1. Relief from sanctions. Applying rule 3.9 of the Civil Procedure Rules 1998 and the three-stage approach in Denton v TH White Ltd [2014] EWCA Civ 906, the court treated the breach as significant, accepted a reasonably cogent explanation arising from changes in management and legal representation, and considered all the circumstances. The claimant suffered limited prejudice, no trial date was lost, and refusal would prevent consideration of evidence relevant to the counterclaim and related claims. Refusal would therefore be disproportionate.
2. Summary judgment. Under Part 24 of the Civil Procedure Rules 1998, the question was whether the defendant had a real prospect of success and whether there was any other compelling reason for trial. The principles in Easyair Ltd (t/a Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch) and AC Ward & Son Ltd v Catlin (Five) Ltd [2009] EWCA Civ 1098 required the court to distinguish a realistic case from a merely arguable one, without conducting a mini-trial. A short construction issue should ordinarily be decided where the necessary evidence is before the court.
3. Contractual interpretation. The court applied the objective and unitary approach described in Arnold v Britton [2015] AC 1619, Wood v Capita Insurance Services Ltd [2017] AC 1173 and Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, with the further guidance in Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2023] UKSC 2. The language, the agreement as a whole and the relevant factual background had to be considered together. Commercial common sense could not justify rewriting clear wording or inserting an omitted threshold.
4. Construction of ‘New Revenue’. The four contractual categories were apt to cover the material ways in which revenue could be generated. In particular, renewal and increase were separate concepts. Revenue from existing clients renewing business through Requirement documents was therefore included. The agreement contained no 25 per cent threshold, and the separate provision in paragraph 5.2 served a similar purpose by a different route. The defendant’s proposed threshold and exclusion of renewed business had no textual support and no realistic prospect of success.
5. Declaratory relief. Following the two-stage approach explained in Abaidildinov v Amin [2020] 1 WLR 5120 and applied in Friend v Friend Media Technology Systems Limited [2026] EWHC 43, the court first determined the merits question and then considered whether a declaration should be granted under rule 40.20 of the Civil Procedure Rules 1998. The declaration would narrow the issues and further the overriding objective.

not stated in the judgment.