High Court grants summary judgement in Kevin Lee Rice v Napril Holding earn-out dispute

The High Court has granted summary judgement on a contested point of contractual construction arising from a share purchase agreement's earn-out mechanism, in a dispute over how much a business seller was owed following the sale of an umbrella payroll company.

In Kevin Lee Rice v Napril Holding Ltd [2026] EWHC 1897 (KB), Mr Justice Sweeting was asked to determine the meaning of "New Revenue" under Schedule 7 to a share purchase agreement (SPA) dated 14 July 2023, by which Kevin Rice sold the entire issued share capital of Core Management Group Limited to Napril Holding Ltd. The agreement provided for quarterly "Stretch Value Payments" during a three-year earn-out period, calculated by reference to New Revenue.

Before addressing the substantive issue, the judge dealt with an application by the defendant for relief from sanctions after it failed to serve evidence in time. Applying the three-stage test in Denton v TH White Ltd [2014] EWCA Civ 906, the judge accepted that the breach was significant but found a reasonably cogent explanation: a newly appointed director had only assumed his duties shortly before the hearing and the defendant had instructed new solicitors just over two weeks before the application. Given limited prejudice to the claimant and the value of the claims involved, relief was granted.

On the central issue, the defendant contended that Stretch Value Payments should only be calculated on revenue exceeding a quarterly baseline equivalent to 25 per cent of the company's annualised turnover at completion, and that revenue from existing clients merely maintaining rather than increasing business fell outside the definition of New Revenue. The claimant argued that the definition captured all revenue generated through the company's ordinary trading, with no textual basis for any threshold.

Applying the approach in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) and AC Ward & Son Ltd v Catlin (Five) Ltd [2009] EWCA Civ 1098, the judge found the case suitable for summary determination, describing it as a short point of construction on which all necessary evidence was before the court. Drawing on Arnold v Britton [2015] AC 1619, Wood v Capita Insurance Services Ltd [2017] AC 1173 and Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2023] UKSC 2, he held that the claimant's construction was plainly correct. The definition's four limbs were drafted to capture all material sources of revenue, and the express reference in limb (d) to a client "renewing" business could not sensibly exclude renewed business from the definition without depriving that limb of independent content.

The judge rejected the defendant's reliance on alleged pre-contractual discussions and a spreadsheet said to evidence an agreed threshold, holding that such material was inadmissible on a question of interpretation under Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, and noting the SPA's entire agreement clause. No threshold language appeared anywhere in Schedule 7, despite the SPA elsewhere defining financial metrics with precision.

Applying the two-stage approach to declaratory relief set out in Abaidildinov v Amin [2020] 1 WLR 5120, the judge concluded that a declaration would usefully narrow the issues in both the main claim and the defendant's Part 20 negligence claim against its former transaction solicitors, Fieldfisher LLP. Summary judgement was granted in the claimant's favour, subject to a minor amendment to the declaration discussed during argument.