WH Holding Limited v London Stadium LLP

Lord Justice Phillips:

1. On 7 February 2025 Paul Mitchell KC, sitting as a High Court Judge (“the Judge”), made an order declaring that an expert determination by Terence Mowschenson KC (“the Expert”) dated 12 February 2023 is affected by manifest error as alleged by the claimant (“WHH”) and, accordingly, is not final or binding on WHH or the defendant (“E20”).

2. The Expert had determined that the “Stadium Premium Amount” payable by WHH to E20 pursuant to the terms of a Concession Agreement dated 22 March 2013 (“the Agreement”) was £6,132,541.65, that is to say, £3,600,000 more than the £2,532,541.65 that WHH contended was due to E20 and had already been paid. In his reserved judgment of 27 January 2025 the Judge found that the amount calculated by WHH was correct applying the words of the agreement and “doing the mathematics”. The Judge concluded that the Expert’s determination that a larger sum was payable was the result of two obvious errors that would admit of no difference of opinion.

3. E20 appeals that decision, permission having been granted by Males LJ. E20 contends that the Judge adopted an incorrect approach, and was in any event wrong, in finding that the Expert’s determination contains manifest errors.

4. I would allow the appeal, and declare that the determination is valid and binding, for the reasons set out below. The essential facts

5. There is no dispute as to the underlying facts. E20, a public body, is the head leaseholder of the London Stadium, constructed using public funds as part of the investment in the 2012 London Olympics. By the Agreement, E20 granted a 99-year concession to WHH, the owner of West Ham United Football Club Limited (“the Club”), to hold football matches at the Stadium. The Club, which is also a party to the Agreement, has used the Stadium as its home ground since 2016.

6. At the date of the Agreement most of the shares in WHH were held, directly or indirectly, by Mr David Sullivan and Mr David Gold (now deceased). Mr Sullivan, Mr Gold, persons owned or controlled by them and their “Family Members” are defined as “Relevant Shareholders” for the purposes of the Agreement.

7. Clause 20 of the Agreement contains what is described as an “overage” or “anti-embarrassment” provision, intended to ensure that E20 could, in WHH’s words, “share in the spoils” of any qualifying share disposition by a Relevant Shareholder.

8. The dispute between the parties concerns the application of the overage provision to a transaction which took place on 11 November 2021 (“the transaction”). The following summary of the transaction is taken from E20’s skeleton argument for the appeal, with which WHH takes no issue: i) The transaction involved 1890 Holdings AS (“1890”) becoming a 27% shareholder in WHH. As part of that transaction, 1890: a) purchased 240 shares from existing shareholders of which 187 were purchased from Relevant Shareholders (Mr Gold, a company owned by Mr Gold and Mr Sullivan) for £138,162 per share (“the Share Purchase”); b) obtained a call option entitling it to purchase a further 1,022 shares from one of those Relevant Shareholders (Mr Sullivan) for £282 million, exercisable on or before 25 March 2022, in exchange for payment of a premium of £18 million (“the Call Option”); and c) subscribed for 688 new shares in WHH for £125m (“the Subscription”). ii) The Share Purchase was given effect through the signature of stock transfer forms. iii) The Call Option and a linked put option were reflected in a written agreement dated 10 November 2021 (“the Option Agreement”). The premium of £18 million was expressly to be paid simultaneously with 1890 becoming the beneficial owner of the 240 shares under the Share Purchase and the holder of the 688 new shares under the Subscription. iv) As a result, it was common ground that: a) the Share Purchase and the Call Option were concluded together as part of one overall commercial arrangement; and b) the Share Purchase would not have been concluded had the Call Option not also been agreed. v) In the event, the Call Option was not exercised but the relevant Shareholder received and retained the £18 million premium, in addition to the purchase price which had been received under the Share Purchase.

9. E20 and WHH are agreed that the sale of 187 shares by Relevant Shareholders would, taken on its own, give rise to a Stadium Premium Amount of £2,532,541.65. The dispute is whether, as E20 contends, the £18m Call Option premium is to be included in the calculation, producing a larger Stadium Premium Amount (which E20 asserts is an additional £3.6 million), or whether that premium is to be assessed separately, in which case it does not meet the threshold for any further Stadium Premium Amount to be paid.

10. That dispute was referred to the Expert under clause 50 of the Agreement, clause 50.5(c) providing that his determination, as expert rather than arbitrator, “shall (in the absence of manifest error) be final and binding” on E20, the Club and WHH. As indicated above, on 12 February 2023 the Expert determined that WHH must pay the additional £3.6m sought by E20, together with interest.

11. On 18 December 2023 WHH issued a Part 8 claim form, seeking declaratory relief that the determination is invalid. The claim was heard by the Judge on 12 December 2024. The relevant terms of the Agreement

12. Clause 20 of the Agreement includes the following: “20.10 [WHH] must notify [E20] of any Qualifying Transaction and, (except for an Excluded Transaction) on the request of [E20] provide all the Relevant Information and information required to accurately calculate the Shareholder Loan Amounts and the Distributions. 20.11 Subject to Clauses 20.12 and 20.13…, if the Adjusted Consideration is equal to, or greater than, the Threshold Amount, [WHH] shall, in respect of payments of Adjusted Consideration payable on or about the date of the Qualifying Transaction, on, or before, the date falling 30 days after the date of the Qualifying Transaction, pay to [E20] an amount equal to the Stadium Premium Amount. 20.12 If any Adjusted Consideration is payable after the date of the Qualifying Transaction, the obligation to pay any further Stadium Premium Amounts in respect of a Qualifying Transaction will arise on the date falling 30 days after payment of the relevant Adjusted Consideration. …… 20.14 The calculations set out in Clauses 20.10 to 20.13 shall be made in a manner that is consistent with the examples set out in paragraph two to three of Schedule 15 (Example calculations)”.

13. A Qualifying Transaction is defined in clause 1 of the Agreement as: “any sale or transfer of any interest in the Club (directly or indirectly) by a Relevant Shareholder (including any sale of any interest in shares, right to purchase shares, share purchase option or similar) or any transaction having the same or a substantially similar effect.”

14. It will be apparent from those provisions that a Stadium Premium Amount is payable whenever a Qualifying Transaction (other than an Exempt Transaction, essentially one between Relevant Shareholders, their companies or relatives) gives rise to an “Adjusted Consideration” which meets the “Threshold Amount”, the latter being defined as £125 million.

15. The key definition for present purposes, again found in clause 1, is that of “Consideration” (there being no dispute as to the relatively minor adjustments that fall to be made to the Consideration in terms of distributions and shareholder loans to arrive at Adjusted Consideration in the present case). The definition reads as follows: “Consideration means, for a Qualifying Transaction: (a) the amount paid or to be paid by a purchaser in that Qualifying Transaction for 100% of the share capital in the Club (to be calculated net of legal and advisory costs (but only to the extent that they are reasonable) incurred in relation to the Qualifying Transaction); (b) if 100% of the share capital in the Club is not sold in that Qualifying Transaction, an extrapolation of the value of 100% of the share capital in the Club on the basis of the consideration paid (or to be paid) for the percentage of the shares sold or to be sold; or (c) if any share purchase option (or similar) in the Club is being sold in that Qualifying Transaction, an extrapolation of the value of 100% of the share capital in the Club on the basis of the consideration paid (or to be paid) for the shares sold [or] the consideration to be paid for the share purchase option (or similar)” The parties are agreed that the word “of” in the original text was a typographical error.

16. If the Consideration extrapolated from a Qualifying Transaction, duly adjusted, meets the Threshold Amount of £125 million, the “Agreed Percentage Amount” is then calculated (as per the definition in clause 1) by taking an increasing percentage of the excess over £125 million as follows: “Agreed Percentage Amount means for a Qualifying Transaction, the aggregate of the following amounts, calculated by reference to the Adjusted Consideration: (a) 7.5% of the amount by which the Adjusted Consideration is greater than the Threshold Amount up to £150,000,000; (b) 10% of the amount by which the Adjusted Consideration is greater than £150,000,000 up to £200,000,000; (c) (i) 20%, if the Qualifying Transaction is signed on a date falling during the first five years of the Qualifying Period [defined as the 10 years following the date of the Agreement]; or (ii) 12.5%, if the Qualifying Transaction is signed on a date falling between the 6th and 10th years (inclusive) of the Qualifying Period, of the amount by which the Adjusted Consideration is greater than £200,000,000 up to £300,000,000 and (d) (i) 30% if the Qualifying Transaction is signed on a date falling during the first five years of the Qualifying Period; or (ii) 20% if the Qualifying Transaction is signed on a date falling between the 6th and 10th years (inclusive) of the Qualifying Period, of the amount by which the Adjusted Consideration is greater than £300,000,000.”

17. Once the Agreed Percentage Amount is calculated, it is then pro-rated according to the formula set out in the definition of the Stadium Premium Amount in clause 1 to produce the amount payable: “Stadium Premium Amount means the Agreed Percentage Amount multiplied by the ratio of A:B, where ‘A’ is the shares or rights to shares in the Club that are the subject of the Qualifying Transaction and ‘B’ is the total issued shareholding in the Club.” The calculations

18. The agreed calculation of the Stadium Premium Amount for the Share Purchase alone is to the following effect: i) Each of the 187 shares in WHH sold by Relevant Shareholders was priced at £138,162, or a total of £25,836,294. It is common ground that this amounted to a disposal or disposals by Relevant Shareholders of an indirect interest in the Club, therefore constituting a Qualifying Transaction which was not an Excluded Transaction. ii) As the sale was of 187 of the 3,438 shares in WHH (that total including the Subscription shares), sub-clause (b) of the definition of Consideration applies: the extrapolation of the value of 100% of the share capital of the Club is £475,000,956. iii) Excess Loan Amounts of £71,515 fall to be added, so that the Adjusted Consideration is £475,072,471. This is greater than the Threshold Amount of £125 million, so a Stadium Premium Amount is payable. iv) Applying the rules and percentages in the relevant definition, and recognising that the transaction took place between the 6 th and 10 th years of the Qualifying Period, the Agreed Percentage Amount is £46,560,846. v) The Stadium Premium Amount payable is therefore £46,560,846 reduced in proportion to the portion of total shares sold by Relevant Shareholders, namely 187/3438. The result is £2,532,541. vi) As the sales were at the same price, it mattered not that the three share sales were treated as one in the calculation above. As illustrated by examples in Schedule 15 to the Agreement, the same Stadium Premium Amount would result if shares are sold in multiple tranches: the Consideration, and so the Agreed Percentage Amount is the same for each tranche as it would be for a single tranche, and the resulting Stadium Premium Amounts are the same in total for the multi tranches as for the single tranche.

19. The calculation in relation to the Call Option, if it stood alone, was agreed to be as follows: i) The Call Option was a right to purchase shares or a share purchase option granted by a Relevant Shareholder and so would in itself be a Qualifying Transaction (and was not an Excluded Transaction); ii) The Consideration, being a share purchase option under sub-clause (c) of the definition, was £18 million in respect of 1,022 shares, a price of £17,612.52 per share, therefore extrapolated to £60,551,859 in respect of 100% of the share capital of WHH. iii) The parties do not add excess loan amounts again to that sum. The Adjusted Consideration is therefore unchanged at £60,551,859, well below the Threshold Amount. Taken on its own, the Call Option would therefore not require the payment of a Stadium Premium Amount.

20. E20’s contention, however, is that the transaction is a single Qualifying Transaction, in which Relevant Shareholders received not only the price of the shares they sold, but also the £18 million premium for the Call Option. E20 maintains that both elements are to be taken into account in the calculation of the Consideration, engaging both sub-clauses (b) and (c) of the definition of Consideration and adding the two resulting figures. E20’s calculation is therefore as follows: i) The value extrapolated under sub-clause (c) of £60,551,859 is added to the value extrapolated under sub-clause (b) (as adjusted), making a total of £535,624,330. ii) That total is above the Threshold Amount. The additional £60,551,859 attracts the highest rate (20%), adding £12,110,372 to the Agreed Percentage Amount. iii) The Stadium Premium Amount for that portion of the Agreed Percentage Amount is the number of shares subject to the Call Option (1,022) divided by the total number of shares in WHH (3,438), producing an additional sum of £3.6 million, in addition to the sum for the Share Purchase element calculated as above.

21. It will be appreciated that the above calculation assumes that the Consideration extrapolated in respect of the Call Option is to be treated as being “on top of” that for the Share Purchase, and so attracting the highest rate in reaching the Agreed Percentage Amount. If the extrapolated amounts were “reversed” for the purposes of the calculation, the Call Option Adjusted Consideration would attract lower rates (7.5% and 10%). As the pro rata reduction at the last stage of the calculation is smaller in relation to the Call Option Adjusted Consideration than in relation to the Share Purchase Adjusted Consideration, the reversal would produce a lower Stadium Premium Amount than claimed by E20.

22. WHH’s contention is that there is no justification for: i) treating the Share Purchase and the Call Option as one Qualifying Transaction; ii) applying both sub-clause (b) and sub-clause (c) in relation to one Qualifying Transaction when those clauses are alternatives, separated by the word “or”; iii) adding the product of those two clauses, both of which are expressed as intended to extrapolate 100% of the value of the Club; or iv) dividing the Agreed Percentage Amount into two portions and applying different multipliers to each, taking a different value for “A” in the calculation, then adding the two results to arrive at the Stadium Premium Amount. The Expert’s determination

23. The Expert identified the main issue between the parties as being whether or not the transaction in issue was a single Qualifying Transaction, explaining the dispute as follows: “25. … the issue between the parties is whether the transaction for the sale of the 187 shares and the grant of the option for £18 million amount to a single Qualifying Transaction. The grossed-up consideration for the Option (£18 million) equates to £60,551,859.10 i.e., the equivalent of £18 million for 1,022 shares grossed up to 3,438 shares. £60,551,859.10 is well below the Threshold level of £125 million if the option agreement is not treated as being part of the same Qualifying Transaction as the sale of the 187 shares. On that basis no Stadium Premium Amount would be payable in relation to the £18 million paid for the option. If the £18 million option payment is treated as being part of the same Qualifying Transaction as that of the sale of the 187 shares then a Stadium Premium Amount of £3,600,000 is payable as the Adjusted Consideration for the Option (£60,551,859 – no actual adjustment being required as the adjustments were made in relation to the Adjusted Consideration for the 187 shares) is subject to the formula provided in the Agreed Percentage Amount (20%) as the Adjusted Consideration for the shares and the Option is in excess of £300 million, which amounts to £12,110,372 , and then prorates back as the Option related to 1022 out of 3438 shares resulting in a Stadium Premium Amount of £3,600,000.

26. [WHH] agrees that the agreement covers a disposal by way of an option. However it contends that in this case unless the value of the Option itself exceeds £45,454.55 per share (i.e., the Option is granted for a sum which when grossed up exceeds £125,000,000 or the value of the Option and strike price (if the Option is exercised) exceeds this level no Stadium Premium Amount can be due in respect of the Option.”

24. Explaining and discounting WHH’s contention that only one of the sub-clauses of the definition of Consideration can be applied to a single Qualifying Transaction, the Expert stated: “32. To assist its contention that Transaction had a narrow meaning [WHH] referred to the definition of Consideration and submitted that in relation to the Consideration applicable to a partial sale (b) or an Option (c) that the provision could only apply if one treated a partial sale as a separate Transaction to an Option even if an option was being granted as part of a sale and relied on the expression “that Qualifying Transaction” in the definition; i.e., a single Qualifying Transaction could not involve the application of more than one of the formulae in (a), (b) or (c) of the definition of consideration. E20’s submission was that that Qualifying Transaction comprised more than one element set out in the definition of Qualifying Transaction namely a sale and grant of the Option and that the expression “that Qualifying Transaction” referred to the same transaction (i.e., Qualifying Transaction) to which the component parts formed part. I consider that the function of (a), (b) and (c) of the definition of Consideration is to describe how the consideration is to be calculated according to the different forms a transaction might take (100 per cent, less than 100 per cent or the grant of an option which might lead to a sale if it is exercised or a combination of (a) (with an option to call on the seller to buy back shares) (b) or (c)) and does not assist the exercise of interpreting the expression Qualifying Transaction. The definition of Consideration does not lead to the conclusion that an option to purchase other shares in an agreement or arrangement to sell share[s] must be treated as a separate Qualifying Transaction.”

25. Turning to consider the commercial purpose of the provisions, the Expert stated: “36. The purpose of the Stadium Premium Amount was intended to afford some protection to the E20 if [WHH] realised monies in excess of the Threshold. The expression Qualifying Transaction as “any sale or transfer of any interest in the Club (directly or indirectly) by a Relevant Shareholder (including any sale of any interest in shares, rights to purchase shares, sale purchase options or similar) or any transaction having the same or substantially similar effect” was intended to apply to a wide range of transactions by which interests in the Club could be sold or transferred. The expression “Transaction” is broad. As a matter of language, it can – at least – refer to a contract, a deal, a disposition or conveyance. Depending on the context, in the not uncommon situation where one party sells shares to another party there might well be an agreement to grant an option over the balance of the shares to the purchaser in the same agreement and to describe the two components as being part and parcel of the same transaction might well be appropriate. Similarly, if two separate, but linked agreements are entered into or part of the same arrangement it may not be a misuse of language – depending on the context – to describe the two agreements as being part of one transaction.”

26. The Expert’s conclusion, that there was one Qualifying Transaction and that E20’s interpretation and implementation of the provision was correct, was expressed as follows: “37. I determine that in the context of the Agreement and the purpose of the provision for the payment of the stadium Premium Amount, the expression “any” in Qualifying Transaction is to be construed as “one or more” and not “one” as the intention of the parties was to bring a broad range of actions within the ambit of a Qualifying Transaction. Accordingly, the expression Transaction can embrace one or more of the factors described in the definition of Qualifying Transaction. Further the sale of the 187 shares and the grant of the Option are to be regarded as being part of the same transaction and hence the same Qualifying Transaction. The fact that there were three Relevant Shareholders selling shares to 1890 and only one of the Relevant Shareholders was a party to the Option Agreement (with an additional party to the Option Agreement as guarantor) does not prevent the sale of the 187 shares and the Option Agreement falling within the expression Qualifying Transaction as the sale of the 187 shares and the Option Agreement were part of the same deal or arrangement. Furthermore, the definition of Consideration in relation to a Qualifying Transaction requires the application of (a), (b) or (c) to each component of a Qualified Transaction if there are more than one and, in this case, requires the application of (b) and (c) so that the Additional Premium Amount must be aggregated with the Additional Premium Amount paid in respect of the sale of the 187 shares.

38. There is no dispute between the parties as to the effect of the Option Agreement being treated as part of the same Qualifying Transaction as the sale of the shares. The additional sum of £3,600,000 must be paid by WHHL pursuant to Clause 20.11 of the Agreement….” The Judge’s decision

27. The Judge first considered whether the Expert’s determination was in error in either or both of two respects alleged by WHH, leaving for separate consideration whether any error he accepted was “manifest”.

28. At [64] he explained that WHH’s first complaint was that “E20’s calculation applied the percentage scale to two extrapolated 100% valuations of WHH”.

29. The Judge then considered the definition of Consideration and concluded that: “66. The definition self-evidently covers three alternative transaction types: (a), (b), (c). The use of the disjunctive “or” shows that Consideration may mean one of three things in relation to any given Qualifying Transaction. There is nothing in the wording of the definition that indicates that Consideration may mean any one or more of the three alternatives for any given Qualifying Transaction.

67. That being so, E20’s approach to determining the Stadium Premium Amount by undertaking two separate calculations, each on a different basis, but then blending them into a hybrid calculation, can only be justified if there are words elsewhere in the Agreement that justify such an approach.”

30. The Judge noted at [68] E20’s acceptance that there were no express words that compel the approach of undertaking separate calculations, each on a different basis, but rather relied on the nature of the overage provision and the need to capture a proportion of the entirety of the value realised by the Relevant Shareholders.

31. The Judge, however, saw no basis for the “blended valuation”, rejecting that approach in the following terms: “70. In my judgment, the fundamental difficulty with E20’s approach is that it requires treating the calculation of the Share Sale Adjusted Consideration and the Option Adjusted Consideration as in some respects linked and in other respects separate. i) The Share Sale Adjusted Consideration (£475,072,471) is the product of a calculation based on the sale of 187 shares, i.e., 5.44% of the total number of shares in WHH. ii) The Option Adjusted Consideration (£60,551,859) is the product of a calculation based on the granting of option in relation to 1,022 shares, i.e., 29.72% of the total number of shares in WHH. iii) The bases of the two Adjusted Consideration figures are thus different: they give notional valuations for the 100% shareholding of two conceptually separate notions. The Share Sale Adjusted Consideration leads to a notional valuation of the entire shareholding of WHH on the assumption that every share had the same value as the 187 that were sold. The Option Adjusted Consideration leads to a notional valuation of the entire shareholding of WHH on the assumption that every share, were it subject to the Option, would have the same value as the 1,022 shares which were subject to the Option. iv) To add the Option Adjusted Consideration to the Share Sale Adjusted Consideration is to give an Adjusted Consideration for a transaction which never took place.

71. I cannot, accordingly, see any basis in the Agreement to arrive at the blended valuation for which E20 contended and which the expert accepted. In my judgment, the expert was in error in this respect.”

32. The Judge then turned to WHH’s second complaint, namely, that the Expert wrongly regarded the Share Purchase and the Call Option as a single Qualifying Transaction. He first rejected at [73] WHH’s broad submission that a series of transactions cannot be termed a single transaction, recognising that a series of linked transactions may, depending on their nature, be a regarded as single transaction without doing any violence to language.

33. The Judge then recorded WHH’s arguments based on the wording of the Agreement, and in particular the fact that the definition of Consideration refers to the Stadium Premium Amount being calculated by applying a single ratio to the Agreed Percentage Amount.

34. The Judge concluded that the Expert was again in error in finding that there was one Qualifying Transaction, stating as follows: “77. I have already held above that the expert’s acceptance of E20’s calculation of the blended Stadium Premium Amount was erroneous; to the extent the expert’s reasoning in relation to whether two or more transactions can be treated as one Qualifying Transaction relies on the analysis that underpinned E20’s calculations, then in my judgment, his reasoning on that point too is undermined.

78. Furthermore, I consider that E20’s own approach to calculating the Stadium Premium Amount in this case in fact recognises that the share sales and the Option are indeed separate transactions. As discussed above, E20’s calculation involves pro-rating the Stadium Premium Amount due on the share sales on a different basis to the amount due on the Option. Even if one could say that the share sales and the Option should be categorised together as one Qualifying Transaction, it is not possible to proceed from there to the calculation of one Stadium Premium Amount using any mechanism contained within the Agreement.

79. Accordingly, in my judgment WHH has proved that the expert fell into error in his determination that the share sales and the Option fall to be characterised as one Qualifying Transaction with the result that the amount calculated by E20 falls due for payment by WHH.”

35. Turning to the question of whether the errors he had found in the determination were manifest errors, the Judge first addressed the test to be applied. At [81] he rejected the contention that, where the point was one of contractual construction, a party asserting manifest error is obliged to prove that the expert has committed a “blunder”, let alone a “howler”, holding at [83] that it was safer to focus on the guidance in the authorities (discussed below) that to be “manifest” errors “must be so obvious and obviously capable of affecting the determination as to admit of no difference of opinion”.

36. The Judge then explained at [84] of his judgment that the errors he had found proved are obvious and obviously capable of affecting the determination: “i) The expert’s error in adopting the blended calculation proffered by E20 was that he simply misread the word “or” in the definition of Consideration to mean “and”. I asked [counsel for E20] if reading the word “or” to mean “and” could amount to a manifest error. He fairly accepted that it could but insisted that in the instant case the position was “much more complex”. He said that in order for E20 to capture some of the value of the £18,000,000 option fee, it must be the case that “or” in the definition of Consideration should effectively be read as “and”. In my judgment, however, there is nothing complex here that requires the drastic step of mutating a disjunctive word into a conjunctive one. [Counsel for E20’s] concession was right and is apt here because, putting matters simply, the error would have been avoided entirely if the expert had accepted that “or” meant what it said. ii) The blending of the Share Sale Adjusted Consideration and the Option Adjusted Consideration, followed by the calculation of the Stadium Premium Amount by using two different values for “A” in the formula was, in my judgment, an impossible step having regard to the rules contained in the Agreement for the calculation of Stadium Premium Amount. In my judgment, in accepting E20’s calculation as correct, the expert committed an error which was obvious: it can be seen from the Agreement that E20’s calculation has no basis in the rules. iii) If the errors I have found were not made, then the result of the expert determination would have been that E20’s claim to £3,600,000 would have been rejected and WHH would not have been ordered to pay E20’s costs. The errors went to the heart of the expert’s determination.”

37. At [85] the Judge then asked whether these obvious errors are such as admit of no difference of opinion, stating that: “(ii) In my judgment, the errors I have identified are such as are unlikely to admit any difference of opinion: the reasoning above involves applying the words of the Agreement and doing the mathematics, not exercising fine judgment in relation to a difficult argument regarding construction. In that respect, I reject a contention made in E20’s written evidence for these proceedings that the Agreement was “poorly drafted and ambiguous” and that the expert had reached a reasonable construction; in my judgment, the provisions of the Agreement which I have had to consider are admirably clear.” The issues on appeal

38. E20’s broadly stated ground of appeal is that the Judge was wrong to find that the Expert’s determination contained manifest errors, asserting that the Expert’s conclusions were at a minimum not so obviously wrong as to admit of no difference of opinion.

39. By way of specific criticism of the Judge, E20 first highlighted in its Grounds of Appeal the Judge’s conclusion at [85(ii)] that the errors he found were “unlikely” to admit of any difference of opinion, thereby understating the legal test discussed below. But Mr Rabinowitz KC, leading counsel for E20, did not press that argument in his oral submissions. It is clear from the context that the Judge was finding that the error would admit of no difference of opinion, the correct test. The real question is whether he was right to do so.

40. Secondly, E20 assert that the Judge mischaracterised the errors he found as relating only to applying the words of the Agreement and doing the mathematics, and not exercising judgment in relation to difficult arguments regarding the construction.

41. By way of Respondent’s Notice, WHH asserted that the Judge’s decision should be upheld on the additional ground that it was in accordance with commercial common sense. The formula in the Agreement is effectively based on price per share, providing (through the extrapolation of value in the definition of Consideration and the Threshold amount) that overage is due when the price is £38,358.35 per share or greater, and increasing as the price rises above that amount. As the Call Option was at a price per share less than half that amount, there is nothing commercially nonsensical about a result where no overage is payable for the option. The price was not high enough to trigger one. The legal principles

42. Where parties have simply agreed to be bound by an expert’s determination, they cannot challenge the outcome, provided that the expert has not departed from his instructions in any material respect (and absent fraud), even if the expert makes a mistake in reaching it: Campbell v Edwards [1976] 1 WLR 40 ; Jones v Sherwood Computer Services plc [1992] 1 WLR 277 .

43. As explained by Simon Brown LJ in Veba Oil Supply and Trading GMbH v Petrotrade Inc (“The Robin”) [2001] EWCA Civ 1832 , [2002] CLC 405 at [33], it is therefore necessary for parties who wish to contract on the basis that they will not be held to mistakes made by the expert in the course of carrying out his instructions to include an exception for a determination affected by “manifest error”. In the same paragraph Simon Brown LJ gave an extended “definition” of manifest error in the following terms: “[O]versights and blunders so obvious and obviously capable of affecting the determination as to admit of no difference of opinion”.

44. Simon Brown LJ’s definition was obiter , but it was expressly approved by the Supreme Court in Sara & Hossein Holdings Ltd v Blacks Outdoor Retail Ltd [2023] UKSC 2 , [2023] 1 WLR 575 . Lord Hamblen JSC, delivering the majority judgment, held that the permitted defence of “manifest” error was narrow. Whilst recognising at [30] that the precise meaning may depend on the particular contract and its context, Lord Hamblen referred to a number of authorities which had considered its meaning in conclusive evidence clauses, in the following terms: “31. An often cited and applied explanation of the meaning of “manifest error” is that given by Lewison J in IIG Capital LLC v Van Der Merwe [2007] EWHC 2631 (Ch) , [2008] 1 All ER (Comm) 435 at para 52: “A ‘manifest error’ is one that is obvious or easily demonstrable without extensive investigation”. This formulation was approved by the Court of Appeal in the same case [2008] EWCA Civ 542 , [2008] 2 Lloyd’s Rep 187 (per Waller LJ at paras 33-35) and more recently in Amey Birmingham Highways Ltd v Birmingham City Council [2018] EWCA Civ 264 , [2018] BLR 225 (per Jackson LJ at paras 83-87).

32. Guidance as to what is meant by being “obvious or easily demonstrable” is provided by the Court of Appeal’s decision in in Veba Oil Supply & Trading GmbH v Petrotrade Inc [2001] EWCA Civ 1832 , [2002] 1 Lloyd’s Rep 295 in which it was stated that manifest errors were “oversights and blunders so obvious and obviously capable of affecting the determination as to admit of no difference of opinion ” (per Simon Brown LJ at para 33, his emphasis)….

33. What is meant by being demonstrable “without extensive investigation” may depend on the context. Unless the contract makes it clear that only the certificate can be considered, extrinsic evidence will be admissible – see Amey Birmingham at para 87. Although it may not be necessary to be able to demonstrate the error immediately, in most cases this will need to be done readily – ie by an investigation limited in both time and extent. In so far as the decision of the Court of Appeal in North Shore Ventures Ltd v Anstead Holdings Inc [2011] EWCA Civ 230 , [2012] Ch 31 suggests otherwise, I agree with Flaux J’s observation in ABM Amro Commercial Finance plc v McGinn [2014] EWHC 1674 (Comm) ; [2014] 2 Lloyd’s Rep 33 , at paras 51 to 52 that it “has to be viewed with some circumspection” and that on any view it cannot depend on “a full blown trial”.

34. It is therefore clear that the permitted defences of “manifest or mathematical error or fraud” are indeed narrow. An arguable error will not suffice, however well founded the allegation of error may ultimately prove to be.”

45. The combined effect of the above may be summarised as follows. Absent contractual terms which provide differently when interpreted in context, an error will be manifest if, after investigation limited in time and extent, it is so obvious (and obviously capable of affecting the determination) as to admit of no difference of opinion.

46. Neither party to this appeal disagreed with the above as representing the basic test, but each proposed one or more refinement or qualification. (i) The scope of argument permitted to establish a manifest error.

47. Mr Rabinowitz first submitted that “limited investigation” means “without the need for adversarial argument”. He relied primarily on a dictum of Lord Diplock in Pioneer Shipping Ltd. v B.T.P. Tioxide Ltd. (“the Nema”) [1982] AC 724 HL, in which Robert Goff J had given leave to appeal an arbitration award under s.1 of the Arbitration Act 1979 on the ground that the arbitrators’ decision that a charterparty was divisible and frustrated only in part was “obviously wrong”. The House of Lords criticised the decision to grant leave, Lord Diplock stating at 742H as follows: The current equivalent provision, reflecting Lord Diplock’s distinction between one-off cases and cases of general public importance, is now s.69(3) (c)(i) of the Arbitration Act 1996 . “Where, as in the instant case, a question of law involved is one of construction of a “one-off” clause the application of which to the particular facts of the case is an issue in the arbitration, leave should not normally be given unless it is apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument, that the meaning ascribed to the clause by the arbitrator is obviously wrong. But if on such perusal it appears to the judge that it is possible that argument might persuade him, despite first impression to the contrary, that the arbitrator might be right, he should not grant leave...”

48. In my judgment, however, reliance on The Nema in this context is inapposite. That decision, as well as two Australian decisions to which Mr Rabinowitz referred, dealt with applications for leave to appeal arbitration awards purely on points of law. In the Commercial Court, at any rate, such applications are habitually considered by the judge on the papers. Lord Diplock’s formulation of the test, directed specifically to the interpretation of “one-off” contractual clauses, was clearly directed to that strictly limited jurisdiction and streamlined procedure.

49. In contrast, a challenge to an expert determination on the grounds of manifest error will be made by originating claim or by way of defence to a claim made to enforce the determination, in either case coming before the court for oral hearing by way of application or full hearing of a Part 8 claim. As recognised by Lord Hamblen in Sara and Hossein , extrinsic evidence will be admissible in such proceedings (absent agreement to the contrary) and there is no suggestion that the usual process of adversarial argument would not be followed, each party being entitled to address the Judge on whether the relevant test discussed above was met.

50. It follows that I see no merit in E20’s first proposed refinement, which seems to me to find no support in the authorities. Indeed, it is contrary to the approach endorsed by the Supreme Court and is contrary to the basic principles and procedures applicable to proceedings involving a challenge to the validity of an award, as opposed to those governing a preliminary question (arising in a different context) of whether leave to appeal should be granted. (ii) The reasoning a judge may adopt in finding a manifest error

51. Mr Rabinowitz’s second contention was that it is wrong for a judge first to consider whether the expert made a mistake, and then to consider whether the mistake was manifest, criticising the Judge for having adopted that approach in the present case. Mr Rabinowitz submitted that the court’s task was not to decide whether the expert was right or wrong, but only whether they had made a mistake that “leaps out at you”. Deciding first that the expert’s determination contained a mistake would make it more likely that the judge would find that the alleged mistake was obvious.

52. There is, however, no support in the authorities for restricting the process of reasoning by which a judge reaches the overall conclusion required by the legal test. Further, the test applicable for manifest error invites a two-stage approach, namely, (i) whether there was “an oversight or blunder” and (ii) whether that error was so obvious as to admit of no difference of opinion. Indeed, a party challenging an award on the basis of manifest error will first have to identify the error, and there may well be a dispute as to whether the expert made an error at all (as was the case before the Judge in this case). A judge cannot be criticised for answering that question first before turning to the further question of obviousness, if an error is found to have been made. Judges are often required to consider whether their own decided views are open to contrary argument, as when considering granting permission to appeal. I see no difficulty in a test which permits a judge to consider the element of obviousness after first finding there to be a mistake. (iii) Whether the wrong interpretation of a contractual mathematical formula is necessarily a manifest error

53. Mr Downes KC, leading counsel for WHH, submitted that where parties agree a contractual mathematical formula as the basis to calculate their future payment obligations, they expect that formula to be correctly applied by an expert appointed for that purpose. From that he drew the proposition, which he placed at the heart of WHH’s opposition to this appeal, that if the expert incorrectly understands or applies the formula and produces a wrong answer, that answer is not binding. That is the case, Mr Downes submitted, even if the expert’s error is in relation to the interpretation of a moderately complex formula. It is only if the contractual formula is found to be genuinely ambiguous (as opposed to being susceptible to an arguable alternative interpretation that is found to be wrong) that the expert could reach more than one answer which would be binding.

54. There are, in my judgment, two complete answers to that submission. The first is that the starting premise is both inapplicable and in any event incorrect. The reference to what parties “expect” of an expert is an impermissible attempt to import into the test of manifest error the separate question of whether the expert has complied with his instructions, a failure in that regard rendering the award invalid provided the departure is material (see for example Veba ). A departure from instructions does not have to be “manifest”, that being a concept applied solely to the concept of whether the expert, in following his instructions, has made an obvious error which is material to the outcome. Mr Downes did not shy away from the effect of his argument in this regard, submitting that if parties could not succeed in challenging the incorrect interpretation of a mathematical formula on the ground of manifest error, they would simply re-frame the challenge as being a failure to follow instructions to apply that formula.

55. That, however, mischaracterises the nature of the expert’s instructions, at least in the present case. The Expert is not instructed to apply the formula in the Agreement (or, at an even higher level of abstraction, to “get the right answer”), but to determine a dispute between the parties, in this case as to the interpretation and application of the formula, without making a manifest error. There is no doubt that the Expert followed those instructions by determining the dispute (and WHH have not contended otherwise), the only issue being whether the Expert, in favouring E20’s interpretation, made a manifest error.

56. The fundamental difficulty in Mr Downes’ suggested premise, therefore, is that parties do not instruct (or “expect”) an expert they appoint to interpret and apply the contractual formula correctly, but instruct him to determine the dispute between them in that regard and to do so without making a manifest error. Framing the issue as one of instruction or expectation does not, accordingly, advance the question as to the meaning of manifest error, which remains as per the general definition discussed above.

57. The second complete answer is that it is plain from the authorities that the general test for whether an expert has made a manifest error is fully applicable to a decision as to the interpretation of a contact: it is necessary to show not only that the expert has reached the wrong interpretation, but that his interpretation is so obviously wrong that it will admit of no difference of opinion. I see no basis for recognising and treating differently a separate category of contractual terms which may be regarded as containing a “formula”. A large proportion of contracts contain provisions as to when payments from one party to the other will arise and how they are to be calculated. When and if those terms should be regarded as a formula as opposed to simply terms would seem to be an open-textured and meaningless question. In either event the terms fall to be interpreted according to the same principles and the test for manifest error must be the same. As will be seen, several of the authorities referred to below relate to contractual clauses which might be viewed as containing a formula, and there is rightly no suggestion that they are to receive different treatment as a result.

58. The starting point, and entirely apposite in this context, is Lord Diplock’s dictum in The Nema (see above) as to the leave to appeal test of “obviously wrong” in the context of the interpretation of a one-off contractual clause. All that is necessary to render an interpretation not obviously wrong is that it is possible that argument might persuade a judge, despite his view to the contrary, that that interpretation is correct.

59. The “obviously wrong” test in the arbitration appeal context was again considered in HMV UK v Propinvest Friar Limited Partnership [2011] EWCA Civ 1708 , [2012] Lloyd’s Rep 416. Parties to a lease were unable to agree rent payable in part due to issues as to the interpretation of the rent review clause. In particular, certain assumptions were required to be made in applying the formula for calculating Market Rental Value and Comparable Market Value. An arbitrator having determined those issues (which might be considered to be part of a formula), the landlord sought leave to appeal the award. At [8] Arden LJ, after referring to The Nema in relation to the meaning of “obviously wrong” , referred further to a helpful analysis by Akenhead J in Braes of Doune Wind Farm (Scotland) Ltd v Alfred McAlpine business Services Ltd [2008 1 Lloyd’s Rep 608, stating: “He uses the memorable phrase “a major intellectual aberration”… which I have found a useful way of bringing to mind that the error on which we are concerned, if there be an error, must be an obvious one.”

60. At [34] Arden LJ concluded in relation to the award in question: “…I take the view that the interpretation to which the arbitrator came in this case was one which did not meet the test of being unarguable or making a false leap in logic or reaching a result for which there was no reasonable explanation. I am not, therefore, able to conclude that this conclusion was “obviously wrong”.”

61. Longmore LJ agreed with the conclusion, stating at [42] that “Having read the award, I can readily see that the decision of the arbitrator was not obviously right but I might be persuaded that it was either right or wrong...”

62. The same approach has been adopted in several first-instance decisions considering whether an expert’s determination of issues of contractual interpretation is manifestly in error. In Invensys plc v Automotive Sealing Systems Ltd [2002] 1 All ER (Comm) 222 a purchaser alleged that an expert had made two manifest errors in determining the consideration payable under a sale and purchase agreement, one of which was as to the interpretation of the agreement as to how the final external debt/cash balance should be determined. Thomas J rejected the challenge, stating “48. Thus although I see considerable force in the argument [for the purchaser] before me, I can see that another interpretation of the agreement was permissible. I cannot say that that other interpretation arrived at by the expert should be characterised as giving rise to ‘a manifest error’. It is not enough for the purchasers to show that their interpretation of the agreement is right; they have to show that the expert’s interpretation of the agreement was obviously wrong. I do not consider that they have shown this.”

63. The same reasoning was applied in Walton Homes Ltd v Staffordshire County Council [2014] 1 P.&C.R. 10, in which a sale contract provided for the payment of additional consideration by the purchaser (Walton), calculated on the difference between market value with planning permission and on the basis that “permission does not exist”. The expert surveyor (advised by counsel, Mr Tanney) recognised that the literal meaning of that clause would exclude only formal planning permission and so would require the surveyor to take into account a planning officer’s recommendation that permission be granted. He made an interim determination, however, that that literal meaning should be ignored as commercially absurd and that his valuation should be on the basis that the recommendation had not been made. Peter Smith J saw force in the purchaser’s submissions that the surveyor’s determination was wrong, but dismissed the challenge in the following terms: “46. However it is impossible in my view to say that that reasoning is manifestly erroneous. To my mind Walton’s submissions are classic examples of every mistake becoming “manifest” when it is discovered. Manifest is a word which gives a very limited window of opportunity to challenge. The examples given in the various authorities above show that it is something like an arithmetical error, or a reference to a non existent building and the like. There is nothing “manifestly wrong” about the decision of Mr Tanney. This is well demonstrated by the fact that the competing arguments put forward in this case were in my view very strong on both sides. This is not merely a situation where a dispute is created so as to lead to a suggestion that it cannot be manifestly wrong. There was merit and is merit in both sides’ arguments. The parties by the Agreement gave the Surveyor the power to determine that Decision in law and in fact. I do not see that his reasoning provided as set out above is manifestly erroneous. It might be wrong if one was pressed to argue it but that as I have said that is not sufficient. It does not look obvious when reading his analysis. It is not obvious that he is disentitled from looking to the factual matrix outwith the four corners of the Agreement. It is not manifestly erroneous for him to do that because the limited construction put forward by Walton produces a commercially absurd result. It is not manifestly erroneous for him to apply the principles in Chartbrook and apply that to the words “ the Permission ” and come up with a wording which reflects the intent namely that the parties were to share equally the planning gain obtained in respect of this site. It was not intended for the planning gain to be largely pocketed by Walton which is the logical conclusion of the application of the literal wording in the Agreement. As Lord Hoffmann said something must have gone wrong. These are perfectly acceptable reasons for his conclusion. They are not manifestly erroneous.”

64. Permission to appeal Peter Smith J’s decision was refused by the Court of Appeal ( [2014] EWCA Civ 696 ), Kitchin LJ applying the basic test for manifest error outlined above to the question of contractual interpretation determined by the surveyor.

65. In Flowgroup plc v Co-operative Energy Ltd [2021] EWHC 344 (Comm) , [2021] Bus LR 755 a purchase price under a company acquisition agreement was subject to a working capital adjustment in accordance with detailed provisions in a schedule to the agreement (that is to say, a formula). The seller challenged the expert’s determination of the adjustment, arguing that (i) no matter how complex or difficult the question was, an error would be manifest if it could be shown when set against the correct answer and (ii) since there was only one correct interpretation of a contract, where an expert misconstrued the contract and made a determination founded on such a mistake, there was by definition a manifest error. Those submissions, which were effectively the same as those now advanced by WHH, were rejected by Adrian Beltrami QC (sitting as a Deputy High Court Judge) as follows: “32… I consider that the correct approach will necessarily turn on the scope of the expert engagement. If, pursuant to the contract, the expert is engaged, as in Invensys… and Walton Homes… , to make determinations on matters of contractual interpretation, I see no reason why a challenge should not have to circumvent the manifest error test as I have enunciated it. That is to be distinguished from the situation…. where the role of the expert is more circumscribed and where different considerations might therefore arise. I do not doubt that there may in some cases be a fine line to draw but that is itself a question of contractual interpretation.”

66. In my judgment the above first instance decisions correctly state the law as to the meaning of manifest error in expert determinations considering issues of contractual interpretation, mirroring the “obviously wrong” test in the Nema . There is no justification for regarding manifest error in that context as differing from the general test stated in Sara & Hossein: “An arguable error will not suffice, however well founded the allegation of error may ultimately prove to be”. Applying the legal principles, was the Expert’s determination affected by manifest error?

67. The calculation of the Stadium Premium Amount is indeed a straightforward application of the words of the Agreement, and a consequent mathematical exercise, if it is being calculated in relation to a single sale of shares or multiple tranches, each at the same price. The examples appended to the Agreement demonstrate the process and, notably, expressly point out, by way of illustration, that it makes no difference whether the sale of multiple tranches is treated as one single Qualifying Transaction or several.

68. The position is perhaps not quite so straightforward, however, if the commercial transaction involves the sale of shares at different prices, in particular where one or more tranche would, if taken on their own, extrapolate to a value below the Threshold and some above. In that situation it might matter a great deal whether the commercial transaction was treated as one Qualifying Transaction (perhaps requiring some form of blending of the prices not expressly provided for) or several. Treating the tranches separately and at different prices might enable the Relevant Shareholders and the purchaser to structure a sale so as to reduce the total Stadium Premium Amount payable. The position may be even less clear if the commercial transaction includes a share option, such as the Call Option in the present case, which accounts for significant additional consideration (in the usual sense), but (despite the rubric in sub-clause (c) of the definition of Consideration) does not, on any analysis, in fact enable an extrapolation of the actual value of 100% of the Club, at least where an option is unexercised.

69. The answer given by WHH, and accepted by the Judge, is that the contractual formula is obviously designed to extrapolate one and only one value for 100% of the shares of the Club, both because the wording of the sub-clauses (a) to (c) of the definition of Consideration (“or” rather than “and”) so provides and also because it simply does not make sense to extrapolate two different 100% values and then combine them in some manner not provided for in the express provisions. To do so, it is said, is the first obvious error made by the Expert.

70. The consequence of the above proposed analysis, as Mr Downes emphasised, is that the Share Purchase and the Call Option cannot be one single Qualifying Transaction, as the contractual formula simply does not work if a Qualifying Transaction comprises more than one element which extrapolates to 100%. There is no basis in the mechanism for adding the two extrapolated sums together to reach a single Adjusted Consideration to feed into the percentage ratchet in unspecified order, nor for then separating the two products and applying different pro-rating ratios, before adding the results together again. Regarding the transaction as a single Qualifying Transaction was therefore the Expert’s second manifest error (and the Judge so found), although it is not really said by WHH to be a distinct error, but an inevitable conclusion from finding the first error.

71. Mr Downes supported the above argument and the Judge’s conclusion with the point made in WHH’s Respondent’s Notice, namely, that it makes commercial sense for a Premium to be payable in respect of the Share Purchase, above the price which exceeds the Threshold when extrapolated to 100%, but not for the Share Option, which does not.

72. I accept the force of the above arguments and the Judge’s analysis, and if I were determining the proper interpretation of the Agreement, I might arrive at the conclusion that they are correct.

73. However, WHH’s interpretation, accepted by the Judge, starts from a close analysis of the definition of Consideration and the mathematical route to finding the Stadium Premium Amount, and concludes that the transaction could not be a single Qualifying Transaction. Mr Downes was unwilling to engage in argument with the question of whether the transaction could be regarded as a Qualifying Transaction if that is taken as the starting point, and the Judge did not do so. Yet it is perfectly sensible (and probably required as part of the iterative process of interpretation) to consider whether the transaction might be regarded as a single Qualifying Transaction and how, if at all, the overage provisions would work if it were, taking into account both the text and the context.

74. The definition of Qualifying Transaction is certainly wide enough to encompass the whole transaction, being a sale of shares and including a share purchase option, particularly as the definition includes “any transaction having the same or substantially similar effect”. Further, sub-clause (c) of the definition of Consideration begins with the words “if any share purchase option …is being sold in that Qualifying Transaction…” which provides at least some support for the argument that an option may be one part of a larger transaction.

75. If it is accepted that it is arguable that a single Qualifying Transaction may include a share purchase and a share option, it is then by no means clear to me (contrary to the Judge’s view) that the definition of Consideration cannot be read as providing that sub-clause (b) deals with the share sale element and sub-clause (c) with the option. The word “or” can be read as providing alternative provisions for different elements of one Qualifying Transaction, but not necessarily exclusive of each other. As recognised in Bennion, Bailey and Norbury on Statutory Interpretation 8 th ed para 17-11, “or” may be used in a conjunctive sense in certain contexts. Indeed, WHH accepted that both the premium for an option and the price if that option were exercised would fall within sub-clause (c), meaning that the word “or” in the last line of that (c) (replacing the wrongly typed “of”) must mean “and/or”.

76. The expert was further entitled to take into account the purpose of the overage provision and to take the view that the intention of the parties was to take into account any monies received by Relevant Shareholders in excess of the Threshold, not to exclude some receipts from the transaction.

77. It is true that the contractual provisions did not stipulate how to add or how to pro-rate the Adjusted Consideration arising from more than one element of a Qualifying Transaction, but that issue would seem to arise, or arguably so, in relation to any sale of multiple tranches at different prices. Again contrary to the Judge’s view, I do not consider that the overage provisions in the Agreement are clear, nor that their application is straightforward in the situation under consideration. The Expert added the Adjusted Considerations in the order (b) plus (c) and pro-rated the Agreed Percentage Amounts for each element to reflect the number of shares in each transaction. If there was one Qualifying Transaction, that appears to have been an arguably sensible interpretation of how to apply the provisions to that situation.

78. The approach taken by the Expert was based on an arguable finding that there was one Qualifying Transaction. That was a different starting point from that which WHH and the Judge would prefer, but not so obviously wrong as to admit of no difference of opinion. The rest of his analysis follows from that conclusion in a manner which also cannot be said to be obviously wrong, producing a determination which was not, in my judgment, manifestly in error. Lady Justice Falk

79. I agree. Lord Justice Zacaroli

80. I also agree.