On 3 April 2025, Alexander appeared before the Court of Appeal in an appeal from the decision of Mr Justice Roth in the case of Syspal Capital Limited v Truman and Another [2024] EWHC 1561 (Ch). As a student currently undertaking the Bar Training Course, I relished the opportunity to accompany Alexander to the hearing in the Royal Courts of Justice and witness first-hand the advocates’ thorough submissions and their Lord and Ladyship’s thoughtful interventions.
By Alexander Heylin, No5 Chambers and Natasha Bowater, BTC Student.
The appeal, brought by Syspal Capital Limited (“SCL”), concerned the construction of the Articles of Association (the “Articles”) of Syspal Holdings Limited (“SHL”), the unrepresented Second Respondent. Alexander appeared on behalf of the First Respondent, Mr Christopher Truman, a former director of SHL and a former employee and director of one of its subsidiaries, Syspal Limited (“SL”).
The case speaks to the importance of using precise language when drafting Company Articles. At the heart of the dispute was one article in particular and, to some extent, one word within that article – “that”. In dismissing the appeal, Lord Justice Zacaroli clarified the approach to be taken when interpreting such articles and set a clear precedent for how similar provisions should be construed going forward.
Factual Background
The dispute centred around SHL, the holding company of a group of manufacturing companies. SHL has been owned 24% by Mr Truman and 76% by SCL, controlled by Mr Anthony Roberjot, since the current version of the Articles was adopted in December 2015. As aforementioned, Mr Truman also served as director of SHL until 24 May 2023, when he resigned upon reaching his 65th birthday. Mr Truman was also an employee of SL, from 1980 until he was dismissed on 10 October 2022, and a director of SL, until he was removed as a director on 3 November 2022.
The core issues in this case were as follows:
- whether the termination of Mr Truman’s employment by SL, whilst he retained his position as a director of SL, triggered a deemed Transfer Notice under the Articles; and
- the appropriate valuation of the shares, whether at “Fair Value” or “Market Value”.
The Articles included provisions for the pre-emption of shares and the determination of their sale price. This dispute concerned the application of these pre-emption provisions to the shares of an “Employee Member”, defined in Article 1.1 as:
“a Member who is also an employee, consultant or director of a Group Company (with the exception of Mr A Roberjot)”.
What was particularly significant in respect of Article 1.1 was that, at all times since the adoption of the Articles, Mr Truman had been the sole Employee Member.
The key provision in this dispute was Article 11.3:
“If any Employee Member shall cease for any reason (including but not limited to death or termination of employment by the Employee Member or Company) to be employed as an employee, director or consultant of a Group Company (and does not continue in that capacity in relation to any Group Company) then a Transfer Notice shall be deemed to have been served in accordance with Article 10 1 on the date of such cessation.” (emphasis added)
In Mr Truman’s case, whether or not a deemed Transfer Notice was triggered upon his dismissal as an employee of SL on 10 October 2022 would have an impact on the sale price of his shares. If it was triggered, then the sale for his shares would be at “Market Value”. If it was not, and instead a deemed Transfer Notice was only triggered upon his resignation as a director of SHL on 24 May 2023, then the sale price for his shares would be at “Fair Value” and, therefore, significantly greater.
Opposing Interpretations
There was no real issue between the parties on the governing approach to the interpretation of the Articles. Both parties sought to advance their interpretation of as the more natural reading of the language of the Articles and as more in accordance with commercial common sense.
SCL contended that the wording “in that capacity” in Article 11.3 referred to the singular capacity in which the Employee Member ceased to be “employed”, in the broader sense of the word within the Articles. On the basis of such a construction, when Mr Truman was dismissed from his employment by SL, Article 11.3 was engaged and a Transfer Notice was deemed to be served. This would result in the sale price for his shares being the lesser “Market Value”.
Mr Truman’s position was that the wording “in that capacity” referred back to any of the three alternative ways in which an Employee Member might be engaged to work for a Group Company. Therefore, when Mr Truman’s employment with SL ceased, the terms of the provision did not apply because he continued to be a director of SHL. As such, a Transfer Notice was not deemed to be served on that occasion, and the sale price for his shares would be the greater “Fair Value”.
First Instance
Mr Justice Roth ruled in favour of the interpretation presented on behalf of Mr Truman, concluding that the relevant provision was not triggered by Mr Truman’s dismissal as an employee of SL.
The judge found that Mr Truman’s interpretation was the more natural meaning of the wording of the Articles and aligned with commercial common sense for the following reasons:
i. the reference in parentheses to not continuing “in that capacity” related back to the three capacities set out immediately beforehand, rather than only to the singular capacity which the Employee Member previously held;
ii. it is not uncommon for a senior employee to retire from full-time employment but continue as a consultant, and commercial common sense does not suggest that in such circumstances that individual would be required to sell their shares at the lower valuation;
iii. “Fair Value” is the default basis of valuation in the Articles for the shares of one not involved in the conduct of any Group Company;
iv. SCL’s interpretation creates the potential for an employee to be dismissed for no good reason in order to trigger a forced sale of their shares at the lower price, a possibility unlikely to accord with the intention of the shareholders when adopting the Articles; and
v. the surrounding circumstances that were publicly ascertainable at the time when the Articles were adopted show that the Articles were clearly drafted to protect Mr Truman (and his family)’s position as regards the valuation of his shares.
The court determined that the deemed Transfer Notice would be effective on Mr Truman’s 65th birthday, coinciding with his resignation as a director. Consequently, Mr Truman was entitled to receive Fair Value for his shares.
Court of Appeal
SCL’s appeal on a single ground, namely that Mr Justice Roth should have interpreted Article 11.3 as deeming a Transfer Notice served when an Employee Member ceases to be employed in any one of the three capacities identified, was dismissed.
In his judgment, Lord Justice Zacaroli (with whom Lady Justice Asplin and Lord Justice Birss agreed), identified that the appeal turned on the meaning of the phrase “does not continue in that capacity” in Article 11.3. His Lordship judged that Mr Justice Roth reached the right conclusion, largely for the reasons set out above, and provided the following additional justifications:
i. the use of the singular “that capacity” as referring back to the (single) capacity of being “employed” is a better reading of Article 11.3, and makes more commercial sense, than SCL’s submission that it refers back to only one of the specific capacities in which an Employee Member might be employed;
ii. the ability to sell the shares at Fair Value is best viewed as a positive benefit to an outgoing Employee Member;
iii. SCL’s construction gives rise to outcomes which make little commercial sense, particularly given that it was accepted at least part of the purpose of Article 11.3 was to provide the option for a clean break with a Employee Member who ceased to be involved in the day to day running of the business;
iv. the fact that Article 11.3 envisaged service of a deemed Transfer Notice upon an Employee Member ceasing to be employed as a “consultant” at all supports Mr Truman’s interpretation as:
a. when the Articles were adopted, Mr Truman was the only shareholder who could even potentially fulfil the role of Employee Member;
b. the only circumstances in which the “consultant” limb of Article 11.3 could ever apply to Mr Truman was if he changed his status from employee to consultant;
c. on SCL’s case, in those circumstances a deemed Transfer Notice would be triggered;
d. on that basis, there could never be a circumstance when a deemed Transfer Notice could be triggered by Mr Truman ceasing to be a consultant; and
e. the “consultant” part of Article 11.3 would be “otiose”;
v. other provisions within the Articles only make sense on Mr Truman’s construction of Article 11.3; and
vi. Mr Truman’s reading of Article 11.3 is more consistent with the repetition of the word “any” within the provision than that proposed by SCL.
Reflection
The Court of Appeal’s ruling is significant in clarifying the relevant considerations in interpreting Articles relating to the valuation of shares, and the emphasis to be placed on each. The decision sets a clear precedent for how similar provisions in Articles of Association should be construed going forward.
The Court’s findings also underscore the protection of minority shareholders and place an emphasis on ensuring that the rights of minority shareholders are upheld in corporate governance.
The case serves to highlight not only the importance of using precise language when drafting Company Articles, but also the need for interpretations that align with commercial realities and fairness.
Witnessing the judges and advocates debate the significance of the word “that”, in the context of determining how a commercial relationship of 45 years should be brought to an end, shone a light on the importance of good drafting and demonstrated how fundamental the court’s intricate interpretative exercise is in the resolution of commercial disputes.
Alexander Heylin, No5 Chambers, acted for the First Respondent. Co-authored by Natasha Bowater, BTC Student.
