Advinia Care Homes Ltd v (1) BUPA Care Homes Investments (Holdings) Ltd & Ors [2020] EWHC 1563 (Ch)

“Hi Kathryn I was suggesting Advinia make a payment of £3,463,628.25 today, with no need for Bupa to pass through £2.2m tomorrow. Is this acceptable? Otherwise, full payment tomorrow for both parties.”

“Hi Joe, I have just spoken with Kathryn. The “netting” has not been formally agreed within Bupa at present and is not in line with the SPA requirements. Kathryn is pushing given it is in both parties interest.” “Hi Joe, I have just spoken with Kathryn. The “netting” has not been formally agreed within Bupa at present and is not in line with the SPA requirements. Kathryn is pushing given it is in both parties interest.”

“Thanks for the update. Will proceed on the basis that we continue to remit payments as required.”

“Hi Joe, As discussed, attached schedule for the Net Payment as at 4th July. For the record, Bupa will assess the Net Payment position on an ongoing basis and on ad-hoc agreement by both parties, Bupa or Advinia will settle the net position each week. This weekly arrangement is without prejudice to the ongoing rights under clause 6.11 of the TSA, and either party has the right to revert to a process of payments without netting if it wishes to. Please confirm by return you are in agreement with net payment of £1,173,493.34 and we will arrange the payment via CHAPS today. Many thanks Kathryn”

“Netting of Payments Fee income comprises Resident Fees paid by LA/CCGs and Self Funders – to be passed through by Bupa to Advinia Payment consist of invoices submitted to [Advinia] by [the Fifth Defendant] under the Transitional Service Agreement (TSA costs and reimbursements e.g. Payroll) Many thanks Kathryn”

“Hi Kathryn Confirm terms as outlined. Regards Joe”

“Morning Kathryn Coming back to [sic] on the comment to fund next payroll. You will know that the income receipts are used to fund payroll and those funds are now held by Bupa. Excluding the opening balance sheet payments being sought for repayment – Bupa owes Advinia. I am still of the view that those opening balance payments are net off from the completion statement monies owning [sic] to us. That amount needs to be included in the net calculation.”

“As discussed on the Payroll separation meetings and subsequently on last Friday’s call with Charles Richardson, we require you to settle the Payroll amount due to your employees up front from October payroll onwards. For October, the monies need to be cleared funds in Bupa’s bank account by close of business on the 23rd October to enable us to release the BACS file. Subsequent Payroll monies for the remaining period of the TSA will also be required in advance, we will notify you nearer the time as to the timings. Please confirm your acknowledge [sic] and understanding of this request by return of email by end of day, Monday 8th October. Please be advised it is your responsibility to communicate any non payments to your employees directly.”

“The TSA obliges Bupa to provide Payroll administrative services, not to actually pay the Payroll lump sum up front each month. Therefore, we require Advinia to raise a CHAPS at time we raise the BACS payment with effect from October payroll (COB 23rd October).”

“As communicated by email by Kathryn Prayle to Joe Genova on 16 October 2018, Advinia owes [the First Defendant] £16,631,990 (the “Gross Amount”). The Gross Amount includes various pay cycle, payroll, fixed costs TSA payments and opening balance payments which Advinia owes [the First Defendant]. Settlement of the Gross Amount is required immediately. Without prejudice to the amounts owing to [the First Defendant] as set out above, we note that [the First Defendant] has accrued £14,165,067 of fee income (the “Accrued Fee Income”) which it holds on trust for [Advinia] under the BTAs. We are owed a net payment of £2,466,923 (the “Net Amount”), being the Gross Amount less the Accrued Fee Income, in full settlement of the matters referred to above, on the basis that this is to be credited to [the First Defendant’s] account in cleared funds no later than 5pm (London time) on Friday 19 October 2018. Details of [the First Defendant’s] account have already been provided to you. However in the event that full payment of the Net Amount is not received by this date, Bupa will take immediate steps to exercise its legal rights to recover the sums owed to it in full.”

“As we have already communicated by email on 4 October 2018, Bupa is not prepared to extend credit to or incur additional costs on behalf of Advinia any longer. This is particularly the case in light of Advinia’s persistent delays in paying amounts owed to Bupa and the terms of the letter sent by Advinia’s advisers to Slaughter and May dated 9 October 2018 (to which we will respond separately). Therefore, Bupa requires you to transfer the amount that will be notified to you by 2pm on Monday 22 October 2018 in respect of the October payroll amount (the “October Payroll Amount”) in cleared funds into [the First Defendant’s] bank account by 5pm (London time) on Tuesday 23 October 2018. To the extent you require Bupa to continue to provide payroll administrative services going forward, we will notify you of the relevant payroll payment dates for subsequent months in due course. Bupa will not make goodwill payments on your behalf in respect of payroll for October unless it has received both the Net Amount and the October Payroll Amount within the timeframes set out above, nor will it make goodwill or any other payments on your behalf in respect of the payroll for any future months unless it receives the requisite funds in advance of the payment date.”

“(A) Your letter wholly disregards the practical arrangement adopted by Advinia and Bupa in preceding months of paying “net” amounts to each other rather than swapping gross amounts owed. Further, and, contrary to what is set out in your letter, these net amounts did not just set off amounts due from Advinia to fund its payroll obligations, but also included amounts owed by Advinia in respect of other liabilities including pay cycle, fixed costs and opening balance amounts. An example of this netting occurred on 20 June 2018, where Bupa accepted a net payment on the request of Advinia. Since then, in emails between Kathryn Prayle and Joe Genova on 4 July 2018, it was agreed, again on the request of Advinia, that “Bupa will assess the Net Payment position on an ongoing basis and on ad-hoc agreement by both parties, Bupa or Advinia will settle the net position each week”, and subsequent payments have conformed to this arrangement.”

“9. All those are matters which are not suitable for resolution on this application. They all seem to me to raise questions that could be characterised as triable issues. They all seem to me questions of some difficulty. If the question is whether they raise serious issues to be tried, they do. If the question is whether I can have a high degree of assurance that the applicant will succeed at trial then I have to say, at the moment, I do not feel that high degree of assurance. … 11. As I have said, I do not regard the facts, which have been put before me at very short order and necessarily leave something to be desired as to the evidence, as sufficient to give me a high degree of assurance that the claimant will establish that there is currently, sitting in the hands of Bupa, a trust fund of more than £3.9 million which is available for the applicant to draw on at will. That is undoubtedly something that is seriously arguable and there is a serious issue to be tried but I do not regard it as something which, at this stage, I can say the claimant is very likely to succeed on.”

“1. The [Defendants] shall and shall take such steps as may be necessary to discharge [Advinia’s] payroll liability in respect of the month of October 2018 (the “October Payroll Liability”), using such sums as they may continue to hold (if any) that were originally paid to any of them to hold on behalf of [Advinia], or such traceable proceeds as they may continue to hold of any sums (if any) that were originally paid to any of them to hold on behalf of [Advinia], and (to the extent necessary) such of the [Defendants’] own funds as may be required. 2. Following discharge of the October Payroll Liability under paragraph 1: a. As security for [Advinia’s] undertaking set out in paragraph 1 of Schedule 2 to this Order, and subject only to sub-paragraph 2(c) below, each of the [Defendants] may retain any further sums that they have received on behalf of [Advinia] since receipt by email of [Advinia’s] application at 12.12pm on Monday 22 October 2018 and might receive on behalf of [Advinia] from the date of this Order on the basis that the [Defendants] shall, on [Advinia’s] behalf, then pay any such sums into court (where, for the avoidance of doubt, they shall stand as security for [Advinia’s] undertaking set out in paragraph 1 of Schedule 2 to this Order). b. Each of the [Defendants] shall serve notice on [Advinia] upon paying any sums into court. c. Once a total of £3,981,167.31 has been paid into court pursuant to this Order (whether under this paragraph 2 or by [Advinia] under its undertaking set out in paragraph 2 of Schedule 2 to this Order), the [Defendants] will have no further right to retain any sums received on behalf of [Advinia] as security under paragraph 2 of this Order, or any further obligation to pay sums into court under paragraph 2 of this Order.” a. As security for [Advinia’s] undertaking set out in paragraph 1 of Schedule 2 to this Order, and subject only to sub-paragraph 2(c) below, each of the [Defendants] may retain any further sums that they have received on behalf of [Advinia] since receipt by email of [Advinia’s] application at 12.12pm on Monday 22 October 2018 and might receive on behalf of [Advinia] from the date of this Order on the basis that the [Defendants] shall, on [Advinia’s] behalf, then pay any such sums into court (where, for the avoidance of doubt, they shall stand as security for [Advinia’s] undertaking set out in paragraph 1 of Schedule 2 to this Order). b. Each of the [Defendants] shall serve notice on [Advinia] upon paying any sums into court. c. Once a total of £3,981,167.31 has been paid into court pursuant to this Order (whether under this paragraph 2 or by [Advinia] under its undertaking set out in paragraph 2 of Schedule 2 to this Order), the [Defendants] will have no further right to retain any sums received on behalf of [Advinia] as security under paragraph 2 of this Order, or any further obligation to pay sums into court under paragraph 2 of this Order.”

“3. The Defendants shall, within 21 days, pay [Advinia] the sum of £15,885,964.70, being the amount of Trust Money received by the Defendants since 12 August 2018 and not paid to [Advinia] or paid into Court pursuant to the [Nugee J Order]. 4. The Defendants shall pay [Advinia] [ ] in respect of interest on the amount set out at paragraph 3 above, up to 4 June 2020.”

“The court may give summary judgment against a ... defendant on ...a particular issue if – (a) it considers that – ... (ii) that defendant has no real prospect of successfully defending the claim or issue; and (b) there is no other compelling reason why the case or issue should be disposed of at a trial.” (a) it considers that – ... (ii) that defendant has no real prospect of successfully defending the claim or issue; and (b) there is no other compelling reason why the case or issue should be disposed of at a trial.”

“12. In my view the judge should have followed his original instinct. It is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. 13. In cases where the issue is one of construction the respondent often seeks to persuade the court that the case should go to trial by arguing that in due course evidence may be called that will shed a different light on the document in question. In my view, however, any such submission should be approached with a degree of caution. It is the responsibility of the respondent to an application of this kind to place before the court, in the form of a witness statement, whatever evidence he thinks necessary to support his case. Where it is said that the circumstances in which a document came to be written are relevant to its construction, particularly if they are said to point to a construction which is not that which the document would naturally bear, the respondent must provide sufficient evidence of those circumstances to enable the court to see that if the relevant facts are established at trial they may have a bearing on the outcome. 14. Sometimes it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial. In such a case it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction.”

“11. Neither party has pleaded as the relevant factual matrix any background facts which existed in 1984, when the contract was made. When a party wishes to rely on relevant background facts known to the parties at the time of an agreement, it must plead them…”

“Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.”

“In construing any written agreement the court is entitled to look at evidence of the objective factual background known to the parties or reasonably available to them at or before the date of the contract. This principle applies even if the contract appears to be unambiguous. There is no conceptual limit to background. It can include anything relevant which would have affected the way in which the document would have been understood by a reasonable person. However, this does not entitle the court to look at evidence of the parties’ subjective intentions; nor to ascribe to the words of the contract a meaning that they cannot legitimately bear.”

“13. Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correctinterpretation of other contracts may be achieved by a greater emphasis onthe factual matrix, for example because of their informality, brevity or theabsence of skilled professional assistance…”

“The first is that it prevents attempts to undermine agreements by informal means, a possibility which is open to abuse, for example in raising defences to summary judgment. Secondly, in circumstances where oral discussions can easily give rise to misunderstandings and crossed purposes, it avoids disputes not just about whether a variation was intended but also about its exact terms. Thirdly, a measure of formality in recording variations makes it easier for corporations to police internal rules restricting the authority to agree them.”

“33. In June 2018 (including during a telephone call between Mr Genovaand Ms Prayle on or before 28 June 2018), [Advinia] (acting by Mr Genova) asked the Defendants to agree to a netting arrangement to avoid both [Advinia], on the one hand, and the Defendants, on the other, both having to make gross payments to each other every week. 34. By an agreement in writing (the “Netting-Off Agreement”) concluded on 4 July 2018 between the Defendants (acting by Ms Prayle) and [Advinia] (acting by Mr Genova) the parties agreed that: 34.1 the Defendants would, on a weekly basis, net off (a) all sums due from [Advinia] to the Defendants under the Agreements, against (b) all sums due from the Defendants to [Advinia] under the Agreements (including sums held on trust for [Advinia]); and 34.2 whichever of (a) [Advinia] or (b) the Defendants owed more to the other would make a payment to the other of the net sum due.” 35. The Netting-Off Agreement was concluded by and contained in an exchange of email correspondence between Ms Prayle and Mr Genova…” 34.1 the Defendants would, on a weekly basis, net off (a) all sums due from [Advinia] to the Defendants under the Agreements, against (b) all sums due from the Defendants to [Advinia] under the Agreements (including sums held on trust for [Advinia]); and 34.2 whichever of (a) [Advinia] or (b) the Defendants owed more to the other would make a payment to the other of the net sum due.” (2) The underlined words above show that the Defendants rely on both oral and written communications between the parties in June and July 2018 as the crucial context for the Netting-Off Agreement. That Agreement was said to have been “concluded” on 4 July 2018 by the exchange of emails, which suggests that the emails in question were the end of a process. This does not mean that pre-contractual negotiations are being relied upon (Mr Cumming QC accepted that pre-contractual negotiations and the parties’ subjective intentions would not be admissible for the purposes of construction) but rather it is to understand the background to the exchange of the emails. (3) Ms Prayle’s 4 July 2018 email referred to their previous discussions which she wanted to record in the email (“For the record…”) and Mr Genova responded by saying: “Confirm terms as outlined” which also suggests that the email was the culmination of their discussions. (4) In Ms Prayle’s witness statement (which was produced at very short notice for the hearing before Nugee J), she referred to the telephone call she had with Mr Genova prior to 28 June 2018 in which he “requested an ongoing netting arrangement”

“27. Subsequently, during a telephone conversation between Mr Genova and Ms Prayle on or around 28 June 2018, Mr Genovasuggested that for reasons of practical convenience the parties might repeat the arrangement discussed in paragraph 26 above, such that subject to agreement of the amounts, where in a particular week the sum owed by [the First Defendant] to [Advinia] in respect of Fee Income was greater than that owed by Advinia to [the Fifth Defendant] in respect of TSA Amounts, the BUPA Group would make a net payment to [Advinia].”

“35. It is further specifically denied that the parties agreed that the Defendants were entitled to net-off alleged Opening Balance Liabilities against sums which the Defendants (or any of them) owed to [Advinia]. At the time of their discussions in late June and earlyJuly 2018 about netting off, the sums which the parties contemplatedmight be netted off against each other (subject to agreement to do so in respect of a particular week) were the Fee Income, on the one hand, and the TSA Amounts, on the other. The parties did not contemplatethat any netting off agreement in respect of a particular week mightextend to any Opening Balance Liabilities. In support of its case in this regard [Advinia] will rely, inter alia, on Ms Prayle’s email of 4 July 2018 which stated, in a schedule thereto,…”

“The order made by the court should reflect the net financial position, as at the date it is made, between [Advinia] and the Defendants”

“(ii) …the jurisprudence has laid down firm guidance as to the primary circumstances in which the discretion may, as a matter of principle, be appropriately exercised, namely normally only (a) where there has been a material change of circumstances since the order was made, or (b) where the facts on which the original decision was made were (innocently or otherwise) misstated. (vii). The cases considered above suggest that the successful invocation of the rule is rare. Exceptional is a dangerous and sometimes misleading word: however, such is the interest of justice in the finality of a Court's orders that it ought normally to take something out of the ordinary to lead to variation or revocation of an order, especially in the absence of a change of circumstances in an interlocutory situation.”

“26 …That principle requires good cause to be shown for a person to be released from an undertaking. What is good cause will depend upon all the circumstances of the case though typically a change of circumstances or the discovery of some new fact will be required. A person will only be released from an undertaking if it would otherwise be unjust to hold him to his undertaking Although an order resulting from the court's exercise of a discretion and a consent order resulting from the parties' agreement are both orders of the court, a consent order has a feature which is lacking in an order which results from the court's exercise of a discretion, namely, it is the product of careful negotiation and agreement between the parties themselves. That additional factor is, it seems to me, relevant when considering whether it is just to set aside the order. It is a factor in favour of holding the parties to their agreement... before a party may be released from an undertaking good cause must be established.”

“25.7-(1) The court may only make an order for an interim payment where any of the following conditions are satisfied – (a) the defendant against whom the order is sought has admitted liability to pay damages or some other sum of money to the claimant…” (a) the defendant against whom the order is sought has admitted liability to pay damages or some other sum of money to the claimant…”

“14. For the avoidance of doubt, [the First Defendant] has confirmed (including in letters to [Advinia Holdings] dated 26 July 2018, 15 August 2018 and 29 October 2018) that, if [Advinia Holdings] accepts that the Draft Completion Accounts are the Completion Accounts, [the First Defendant] stands ready and willing to pay it the £2,131,393.00 that it will thereupon owe to [Advinia Holdings] (pursuant to paragraphs 1.3(A) and 2 of Part A of Schedule 6 to the SPA).”