The Cobra Beer case BHL v Leumi ABL Limited (2017) concerned a dispute over a clause in a receivables financing agreement which allowed Leumi to require its client to repurchase its receivables and, if it failed to do so within seven days, to charge a collection fee of up to 15 percent of the amounts collected. The clause also affirmed that "[t]he Client expressly acknowledges that such fee constitutes a fair and reasonable pre-estimate of Leumi's likely costs and expenses in providing such service to the Client". Leumi required the client to repurchase the receivables and, when it failed to do so, charged the full 15 percent fee. BHL argued that this was an unenforceable penalty. Judge Waksman QC dismissed this argument, concluding that: (i) the clause created a primary obligation as the other party could choose to purchase the ledger and the collection fee only arose if it did not; (ii) if it was a secondary obligation, the fee was discretionary and not to be imposed in an arbitrary, capricious or irrational manner. It was thus not penal or extortionate. Moreover, Leumi had a legitimate commercial interest in being compensated for the internal costs of the collect-out and it was reasonable to estimate and charge for it at the outset; and (iii) the agreement was negotiated between large commercial entities on an arms-length basis. As appears from the above, Judge Waksman began by considering whether the clause created a primary obligation, before buttressing his conclusion with an analysis of whether it would otherwise be penal. Interestingly, he ignored the last sentence of the clause, which appeared to be included to assist with such an argument. The bad leaver cases Richards v I P Solutions Group Ltd (2016) concerned two shareholders who were required to transfer their shareholding for £1 under the 'bad leaver' provisions of a company's articles of association. While deciding the case on other grounds, Justice May briefly considered whether the clause was an unenforceable penalty: "The arrangement for ''Leavers" as provided for under the Articles of Association thus appears to me to be more akin to a primary obligation agreed between parties for distinct commercial reasons to do with a shareholder leaving the Company. On this basis the price of £1 payable for the aggregate shareholding of a person who is a 'Bad Leaver' is simply the agreed price on transfer." She went on to conclude that even if the clause was a secondary obligation that she would have found nothing unconscionable in the arrangement, as Lord Hodge concluded in Makdessi.
Gray v Braid Group (Holdings) Ltd (2016) considered a similar clause which required a shareholder who ceased to be an employee or director because of fraud or gross misconduct to transfer their shares at par value, which was approximately 7.5 percent of market value. The case was decided on other grounds, but, the Lords nonetheless considered whether it was an unenforceable penalty. Distinguishing the opinion of Lords Neuberger and Sumption in Makdessi and taking a different view to that of Justice May, the Lords concluded that the requirement to sell the shares was triggered by the breach of a primary obligation (i.e., not to commit fraud or gross misconduct). The requirement was therefore a secondary obligation, albeit one which a majority of the Lords (with Lord Menzies dissenting) agreed was not penal because the clause must be judged at the time the agreement was entered into and, considered from that perspective, requiring a shareholder who has been terminated for fraud or gross misconduct to exchange their shares for the funds that they paid to subscribe was not unconscionable.