The pension fund was the answer
An old established engineering company was sold, with a review of the goodwill value after two years, dependent on how many customers had been retained.
Customers had been lost: the vendors thought because the new owners didn’t know how to handle them, but the purchasers were suspicious that the vendors knew which customers would be lost. They refused to pay the final instalment of the purchase price. Both parties took an entrenched stance.
How does the mediator break deadlock?
The differences were narrowed, but agreement could not be reached. Then it emerged that the purchasers wanted to exercise an option to buy the freehold factory at £600,000, but through their pension fund, not by the new company which held the option.
For the new company to exercise the option the Stamp Duty would have been £24,000 at 4%, with a second £24,000 payable when the factory was sold to the pension fund by the company. Chris saw that a simple change could be made to the option, which would cost the vendors nothing and save the purchasers £24,000.
This encouraged the habit of saying yes
The vendors agreed to have the option clause extended to the pension fund – that was no loss to them and the saving of £24,000 engendered such goodwill that the parties agreed the remaining points at issue, so that agreement on the whole case was quickly reached.
Meeting the true needs of the parties
A family company was owned by two brothers who had had very different careers. One had made a lot of money working abroad; the other had run a hardware store for many years in a shop forming part of the company’s freehold, but he was desperate to retire. The rich brother wished to buy the shopkeeper brother’s shares so that the company’s main asset, the property, could be redeveloped.
Discussions were difficult
The main problem was that the shopkeeper had a fixation that the rich brother would make a fortune out of the redevelopment, but there were two problems with that idea: in that neighbourhood the chances of making a fortune were remote, and the shopkeeper didn’t have the funds to develop anything. All he had, apart from shares in the company, was a company pension scheme which he couldn’t draw because that required the consent of both directors, the brothers. They were both stuck.
Let’s sign up and go home!
The key to breaking the deadlock was for rich brother to buy the other’s shares at a reasonable price, and for the shopkeeper to draw his pension. The developer brother came along with a fat cheque book, and the other brother with a form requiring signatures so that he could draw his company pension. Agreement was reached; a cheque for the shares and signed pension consent were passed to the shopkeeper brother, and the rich brother received a signed stock transfer form, and could now develop the property.
This is the only occasion on which Chris drew up a settlement agreement setting out, not what the parties promised to do in future, but what they had already done some minutes earlier!