On 26 July 2024, the Court of Appeal (Asplin LJ, Snowden LJ and Sir Christopher Floyd) handed down judgment in a dispute concerning a profit-sharing agreement in relation to the world-famous Valderrama golf course, the site of the 32nd Ryder Cup in 1997, in Sotogrande in Southern Spain.
Under the agreement, a profit-share was expressed to be triggered in the event of the sale of real estate assets. However, what was eventually sold was not the real estate assets themselves, but the shares of a holding company which owned the entity which in turn owned the real estate assets. The parties were in dispute over whether the profit-sharing agreement was engaged in the circumstances.
The Court of Appeal held that the process of contractual interpretation must begin with considering the language used by the parties, and that the natural meaning of the contractual words should rarely be discarded in favour of a different interpretation in line with commercial common sense.
The Court further distinguished between an asset sale and a share sale, pointing to various differences that it considered to exist between the two concepts.
The Court concluded that the profit-sharing agreement was not engaged upon the sale of the shares in the entity which owned the assets (or indeed upon the sale of that entity’s holding company).
The case is likely to be of interest to practitioners when drafting and negotiating asset sale or share sale agreements, anti-embarrassment clauses, joint venture or partnership agreements and profit-sharing agreements.
Gary Blaker KC and Oberon Kwok acted for the Appellant and were instructed by Richard Marshall, Oliver Cooke and Manon Huckle of Penningtons Manches Cooper LLP.
