BAT Industries Plc v (1) Windward Prospects Ltd, (2) Appleton Papers Inc.
| Jurisdiction | England & Wales |
| Judge | Mr Justice Field:,Mr Justice Field |
| Judgment Date | 20 December 2013 |
| Neutral Citation | [2013] EWHC 4087 (Comm) |
| Docket Number | Case No: 2012 Folio No. 213 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 20 December 2013 |
[2013] EWHC 4087 (Comm)
Mr Justice Field
Case No: 2012 Folio No. 213
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Rolls Building
Fetter Lane
London, EC4A 1NL
Gavin Kealey QC, Ben GriffithsandTim Jenns (instructed by Herbert Smith Freehills LLP) for the Claimant
Simon Atrill (instructed by CMS Cameron McKenna LLP) for the 1 st Defendant
Michael Swainston QC and Richard Blakeley (instructed by DLA Piper UK LLP) for the 2 nd Defendant
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an application to set aside the order of Christopher Clarke J dated 12 June 2012 granting permission to the Claimant ("BAT") to serve an Amended Claim Form and Particulars of Claim on the 2 nd Defendant ("API") in Appleton, Wisconsin, USA. The application is made on the sole ground that England is not the proper place for BAT to bring its claims against API and therefore the court should not exercise jurisdiction over those claims. In the submission of API, the proper forum for the trial of BAT's claims is the US District Court for the Southern District of New York ("the New York Court"), a federal court. 1
BAT is a company incorporated and carrying on business in England. The 1 st Defendant ("Windward") is a company incorporated in England and Wales. Its headquarters were formerly in Basingstoke, England, and are presently in London. API is a corporation incorporated in Delaware, USA. Its headquarters are in Appleton, Wisconsin.
BAT's claims against Windward and API
In brief summary, BAT claims: (1) a declaration that each of Windward and API is liable under three separate agreements made respectively in 1990, 1995 and 1999 to indemnify BAT against all costs, losses and liabilities which may be incurred by BAT in connection with a liability it is alleged to owe to NCR Corporation ("NCR") under a 1998 Settlement Agreement and/or a 2005 Arbitration Award including claims made against BAT pursuant to that settlement agreement and arbitration award in connection with the pollution of the Fox River in Wisconsin USA and the Kalamazoo River in Michigan USA; (2) alternatively, a declaration that Windward and API are estopped from denying that they are liable so to indemnify BAT; and (3) a declaration that pursuant to New York law it is entitled, by reason of being subrogated to NCR's rights against API, to be reimbursed by API in respect of the total sum BAT pays to NCR under the 1998 Settlement Agreement and/or the 2005 Arbitration Award.
The Background
A. The 1978 Purchase Agreement
Pursuant to an agreement made in 1978 ("the 1978 Purchase Agreement") API, which at the time was a subsidiary of BAT, purchased from NCR Corporation ("NCR") "the assets, properties and business as a going concern of a Division of NCR, Appleton Papers Division ["APD"]". APD's business was the manufacture of pulp and paper in the course of which it used two plants: (i) a plant at Combined Locks, Wisconsin ("the
CPM plant") acquired by NCR when it purchased Combined Paper Mills ("CPM") in 1969; and (ii) a paper mill adjacent to the Fox River in Appleton, Wisconsin ("the Appleton Mill") acquired by NCR when it purchased Appleton Coated Paper Company ("ACPC") in 1970.Under section 1.4 of the 1978 Purchase Agreement, API agreed, inter alia, to pay, defend and discharge a wide range of NCR's liabilities with respect to: (i) the compliance of assets, properties and business purchased with all governmental laws, ordinances, regulations, rules and standards (section 1.4.3); (ii) any state of facts, matter, event or disclosure set forth in Schedule A (section 1.4.4); (iii) any threatened suit, action, claim, investigation by any governmental body, or legal, administrative or arbitration proceeding set forth in Schedule A (section 1.4.5); (iv) compliance of the Property (as defined) or the products or the operations of APD with all applicable federal, state and local and other governmental environmental and pollution control laws, ordinances, regulations, rules and standards (section 1.4.9).
It is provided in section 1.4.7 that "the Purchaser [API] shall not assume, and shall not be liable for, any liability or obligation of the Seller [NCR] which is not provided for in this Section 1.4 and in Sections 1.2.1.2 and 1.2.2.3".
The liabilities within (i), (ii) and (iii) were those that related to the period after the Closing Date and the liabilities within (iv) were those arising from transactions, events or conditions occurring prior to or after the Closing Date.
API's above-stated obligations were repeated in an Assumption Agreement ("the 1978 Assumption Agreement") entered into in connection with the 1978 Purchase Agreement. The 1978 Assumption Agreement contains no express choice of law provision but since it is provided for within the 1978 Purchase Agreement, the likelihood is that its governing law is the law of New York.
By section 9.2 of the 1978 Purchase Agreement, BAT agreed to indemnify and hold harmless NCR from and against any losses it incurred as a result of any failure of API to perform its obligations in respect of the debts, obligations, contracts and liabilities of NCR assumed by API pursuant to, inter alia, section 1.4 of the 1978 Purchase Agreement and the 1978 Assumption Agreement.
By section 10.11, the 1978 Purchase Agreement is governed by the law of New York.
B. The Demerger of Windward and API from the BAT Group
In 1990 API and Windward and a number of other non-core BAT subsidiaries became independent of the BAT Group, with API becoming an indirect subsidiary of Windward. The demerger was achieved in part by a Demerger Agreement dated 10 May 1990 ("the 1990 Demerger Agreement") which contained, inter alia, provisions designed to pass on BAT's liability to NCR under Section 9.2 of the 1978 Purchase Agreement to the demerged companies ("the New Group"), including Windward and API. The provisions in question are:
Clause 11.1.1
The relevant members of the New Group agree with BAT … to indemnify and hold harmless BAT and other members of the Retained Group and each of their directors, officers, employees or agents (together "the Indemnified Persons") … from and against any and all losses, claims, proceedings, damages, actions, demands, and liabilities whatsoever and all reasonably necessary costs associated therewith, which are suffered or incurred by or instituted or alleged against, any of the Indemnified Persons by any person whomsoever … in any jurisdiction to the extent that they relate to or arise out of any neglect or default in the business and operations carried on by the New Group prior to the Effective Date …
Clause 7.2
Save as disclosed in a letter of even date from [Windward] to BAT, [Windward] represents and warrants that it is not at the date hereof aware of any guarantee or other obligation by any member of the Retained Group in respect of the obligations of any member of the New Group and undertakes that, in any event, [Windward] will use its best endeavours to procure the release of each of the members of the Retained Group from its obligations (if any) as guarantor of the obligations of the New Group and the relevant members of the New Group will as from the Effective Date indemnify each member of the Retained Group against all losses suffered by it arising from any breach of the obligations of any of the New Group in respect of such obligations whether before or after the Effective Date.
Clause 11.1.2 of the 1990 Demerger Agreement provided that Windward would have the option, subject to giving BAT Industries such indemnities and security as BAT Industries may reasonably require, to assume the defence of any claim or proceeding within the scope of Clause 11.1.1, including the instruction of legal advisers reasonably satisfactory to BAT Industries to represent BAT Industries, and that Windward should pay the fees and disbursements of such legal advisers related to such proceedings.
By Clause 9.2, the 1990 Demerger Agreement is expressly governed by English law.
C. NCR is notified that it is a potentially responsible party in respect of the pollution of the Fox River
In September 1994, NCR was notified by the Wisconsin Department of Justice under the Federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") that it was likely to be named as a "potentially responsible party" ("PRP") in respect of the pollution of the Fox River located near Appleton ("the Fox River Site"). (It will be recalled that the Appleton paper mill purchased by API under the 1978 Purchase Agreement was adjacent to the Fox River.) BAT alleges that API was also so notified at the same time, but this is disputed by API.
D. The contamination of the Fox River by PCBs
The Fox River had become contaminated with polychlorinated biphenyls ("PCBs") which are now known to be toxic and persistent in the environment. PCBs had been used in an emulsion developed by NCR and employed by ACPC in the manufacture of carbonless copy paper ("CCP") for NCR to sell under the NCR brand. Writing on a sheet of paper treated with the emulsion appeared on that sheet and was copied onto an underlying sheet without the need to use carbon paper.
It appears that PCBs got into the Lower Fox River in two ways: (i) PCBs lost in the course of manufacture were sluiced away into publically owned sewage-treatment plants and thence into the river; (ii) scraps of CCP left over from the manufacturing process ("broke") were sold to...
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