Cavendish Square Holdings BV & Anor v El Makdessi

Cavendish Square Holdings BV & Anor v El Makdessi

Clause 11.2 is not an unreasonable restraint of trade given the nature of the transaction, the parties' equal bargaining power, and the legitimate interest in protecting goodwill. Clause 5.6 is not a penalty; it serves a commercial purpose of decoupling the parties and is not oppressive. Clause 5.1, when combined with the Company's recovery of damages, would result in double recovery and is a penalty unless Cavendish gives credit for the $500,000 already received. The Defendant is obliged to transfer his shares upon valid notice; the obligation is not contingent on prior tender of the exact price.

Parties
Claimant: Cavendish Square Holdings BV; Claimant: Team Y&R Holdings Hong Kong Ltd; Defendant: Talal El Makdessi
Jurisdiction
England and Wales
Judgment Date
14 December 2012
Procedural Posture
Commercial Contract Dispute / Judgment After Trial
Outcome
Declaration granted in principle; specific performance of share transfer ordered subject to Cavendish giving credit for $500,000 received by the Company; Clause 5.1 only enforceable if credit is given; Clause 5.6 enforceable; Defendant's construction argument rejected.
Legal Topics
Restraint of Trade, Penalty Clauses, Share Purchase Agreements, Specific Performance
Contract Law Commercial Law Restraint of Trade Penalty Clauses Share Purchase Agreements Specific Performance

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Parties

Cavendish Square Holdings BV

Claimant

Team Y&R Holdings Hong Kong Ltd

Claimant

Talal El Makdessi

Defendant

Procedural Posture

Commercial Contract Dispute / Judgment After Trial

Legal Issues

  1. 1 Whether Clause 11.2 of the Agreement is an unreasonable restraint of trade and thus unenforceable
  2. 2 Whether Clauses 5.1 and/or 5.6 of the Agreement are unenforceable penalty clauses
  3. 3 Proper construction and enforceability of Clause 5.6 regarding the obligation to transfer shares

Ratio Decidendi

Clause 11.2 is not an unreasonable restraint of trade given the nature of the transaction, the parties' equal bargaining power, and the legitimate interest in protecting goodwill. Clause 5.6 is not a penalty; it serves a commercial purpose of decoupling the parties and is not oppressive. Clause 5.1, when combined with the Company's recovery of damages, would result in double recovery and is a penalty unless Cavendish gives credit for the $500,000 already received. The Defendant is obliged to transfer his shares upon valid notice; the obligation is not contingent on prior tender of the exact price.

Court Disposition

Declaration granted in principle; specific performance of share transfer ordered subject to Cavendish giving credit for $500,000 received by the Company; Clause 5.1 only enforceable if credit is given; Clause 5.6 enforceable; Defendant's construction argument rejected.

Orders

  • Declaration that Defendant is a Defaulting Shareholder and not entitled to Interim or Final Payment unless Cavendish gives credit for $500,000 received by the Company.
  • Order for specific performance of Defendant's obligation to transfer shares under Clause 5.6 at the Defaulting Shareholder Option Price, with $500,000 added to the price if credit is given.