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(1) Cavendish Square Holding BV (2) Team Y&R Holdings Hong Kong v Talal El Makdessi and (1) Cavendish Square Holdings BV (2) WPP 2005 Ltd

Thursday 2 October 2014

(1) Cavendish Square Holding BV (2) Team Y&R Holdings Hong Kong -v- Talal El Makdessi -and- (1) Cavendish Square Holdings BV (2) WPP 2005 Ltd

Appeal October 2013 – Going to the Supreme Court in July 2015

As the Supreme Court’s first opportunity to consider the law of penalty clauses, whether they should have any application in the modern commercial world, and if so what the extent of that application should be, this is likely to be a case of considerable interest and importance.

It arises out of the acquisition by the WPP group, the world’s leading marketing communications services group, of the majority of the shareholding in the largest advertising and marketing communications group in the Middle East for a sum, depending on the performance of the business, of between around $80m and $150m.

The issue is whether clauses in the agreement providing that in the event that the seller later competed with the business he would (i) not be entitled to any further payment and (ii) would be required to sell his remaining shares for a specified price are unenforceable as penalty clauses.

Opinion in the Courts below was split, with Burton J holding that they were not and the Court of Appeal disagreeing.  The Supreme Court’s judgment will be eagerly awaited by practitioners in many fields of law.