Ortiz-Patino v MGI Golf & Leisure Opportunities Fund Ltd [2024] EWCA Civ 862

Peter Knox KC and Daniel Goldblatt (instructed by RHF Solicitors LLP) for the Respondent

Sir Christopher Floyd:

Introduction

• This appeal concerns the interpretation of a profit-sharing agreement. The claimant/appellant’s father, the late Mr Jaime Ortiz-Patino (“JOP”), entered into such an agreement with the defendant/respondent in October 2012 (“the PSA”) at the same time as selling to it his shares in two Swiss companies, Soto Properties SA (“Soto”) and Campo Alto SA (“Campo”). Soto and Campo owned or controlled Spanish companies which in turn owned real estate assets in Spain and trade marks. The real estate included the well-known Valderrama golf course in Spain, and the trade marks related to the golf course business. The course hosted the 32^nd Ryder Cup tournament in 1997.

• The PSA provided for JOP (or the appellant and his children in the event of JOP’s death) to be paid a profit share calculated by reference to the consideration received in the event of a future sale by the respondent of the real estate assets, as defined in the PSA. In November 2015 the respondent sold on the shares in Soto to a third party purchaser, Zagaleta International United Kingdom Inc (“Zagaleta”). The central question on this appeal is whether the profit share is triggered, on a proper construction of the PSA, by the onward sale of the shares in Soto or only by the sale of the real estate assets themselves.

• By his order dated 27 June 2023, Mr Ashley Greenbank, sitting as a deputy High Court judge, dismissed the appellant’s claim for a share of the profit made on the onward sale of the shares in Soto to Zagaleta. In case the matter went further, however, he went on to hear argument and make certain findings as to the amount recoverable under the PSA on the hypothesis that he was wrong about the construction of the PSA. The appellant appeals the judge’s order dismissing the claim, and, in the event that the appeal is successful, challenges two deductions made by the judge in assessing the quantum of the putative claim. By a respondent’s notice, the respondent contends that the judge should have allowed certain claims to be set off or allowed additional deductions.

Background

• The judge made very extensive findings about the background to the sale of the shares in Soto and the PSA which can be found in his judgment at [2023] EWHC 1203 (Ch). Not all of this background is still material. For present purposes the following summary should be sufficient for an understanding of the issues that arise on appeal.

• From about the middle of 2010, JOP was the sole owner of the entire issued share capital of Soto and Campo. Soto was the holding company of the Spanish companies Valderrama SA (“Valsa”) and Valderrama Estates SA (“Vesa”).

• Soto held A, C and D shares in Valsa representing approximately 94% of the share capital. The B shares in Valsa, representing approximately 6% of the shares, were owned by certain members of the golf club Real Club Valderrama (“RCV”) which operated on the Valderrama golf course. Valsa owned the land comprising the Valderrama golf course, certain other plots of land close to the course, and some trade marks relating to the Valderrama golf course. RCV operated on the Valderrama golf course with the benefit of a lease granted to it by Valsa, as well as a licence under the trade marks for the duration of the lease. The rent paid to Valsa under the lease was €800,000 per year, index-linked from 2010.

• The arrangements between Valsa and RCV included an agreement not to transfer the title to the golf course to a third party during the term of the lease without first offering RCV the opportunity to purchase the title on the same terms. A similar agreement related to the trade marks owned by Valsa.

• Soto also held the entire issued share capital in Vesa. Vesa owned various plots of land close to the Valderrama golf course and certain other trade marks.

• Campo owned the entire issued share capital of Valderrama 07 SL (“VO7”). V07 owned land at Castellar de la Frontera, a few kilometres away from the Valderrama golf course. JOP at one time had a plan to build his own golf course on the land at Castellar de la Frontera.

• The judge referred to the group of companies comprising Soto, Campo, Valsa, Vesa and V07 as “the Valderrama Companies” and I will adopt the same nomenclature.

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