Bikam OOD and Another v Adria Cable S.a.r.l.
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE SIMON,Mr Justice Simon |
| Judgment Date | 15 March 2012 |
| Neutral Citation | [2012] EWHC 621 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2011 FOLIO 888 |
| Date | 15 March 2012 |
[2012] EWHC 621 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Simon
Case No: 2011 FOLIO 888
Mr Chirag Karia (instructed by Bryan Cave) for the Claimants
Mr Daniel Toledano QC and Mr Adam Rushworth (instructed by Freshfields Bruckhaus Deringer) for the Defendant
Hearing date: 28 February 2012
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 the Claimants' application to strike out paragraphs 33–39 of the counterclaim pursuant to CPR Part 3.4(2)(a) or for summary judgment under CPR Part 24 in relation to these paragraphs (point 1) or alternatively a declaration that the Defendant's counterclaim is subject to a contractual limitation of liability (point 2).
The facts
The parties entered into a Share Purchase Agreement ('the SPA') dated 7 October 2009 by which the Claimants agreed to sell and the Defendant agreed to buy a 68.5% shareholding in a Bulgarian company, Interactivni Technologii AD, which provided direct to home satellite broadcasting in Bulgaria. The total price was €6,450,000 (subject to post completion adjustments), which was to be payable in 2 tranches. Tranche 1 (€850,000) was payable on completion, and tranche 2 (€5,600,000, subject to adjustment) was payable within 30 days of the sale of the shares to a third party.
It is common ground that the Defendant paid the first tranche, and sold the shares to a third party on 8 November 2010, thereby triggering the obligation to pay the second tranche.
The Defendant contends that the circumstances of the sale throw a startling light on the value of the shareholding which it had acquired just over a year earlier. Despite a cash injection of almost €7m, the shareholding (and other shares which it subsequently acquired) were sold for less than €1.
On 22 July 2011, the Claimants began proceedings for the recovery of the second tranche.
By its Defence, the Defendant has admitted the debt, but relies on a counterclaim (which includes a claim for damages for misrepresentation under s.2(1) of the Misrepresentation Act 1967). So far as material to the present application, its case is that the Claimants made a number of representations which were not true, that the Defendant was induced by those representations to enter into the SPA and that it is entitled to damages on a basis which is not confined by the contractual cap on recoverable damages.
The Claimants deny any breach of contract or misrepresentations and contend that the bringing of a claim for misrepresentation is precluded by the terms of the SPA, and for this reason bring the present application.
The SPA
The SPA, which was governed by English Law (clause 22) and was subject to the exclusive jurisdiction of the English Courts (clause 23), contained a number of warranties given by the Sellers and the Buyer. The 'Sellers' Warranties' were defined in Clause 1.1 of the SPA:
'Sellers' Warranties' means the representations and warranties of the Sellers contained in Schedule 2 …
Clause 7 dealt specifically with 'Sellers' Warranties':
7.1 Each of the Sellers represents and warrants to the Buyer that each Sellers' Warranty is true and accurate as at the date of the Agreement and as at Completion [7 October 2009].
…
7.3 The Sellers acknowledge that the Buyer is entering into this Agreement in reliance upon the Sellers' Warranties.
Clause 8 dealt with 'Buyer's Warranties' in similar terms. The Buyer's Warranties were set out in Schedule 1 of the SPA.
Clause 9 was headed 'Indemnification':
9.1 From and after the date of this Agreement, and subject to the provisions of this Clause 9, the Sellers shall indemnify fully and hold harmless the Buyer from and against any and all claims, liabilities, damages, penalties, judgments, assessments, losses, costs and expenses (including, but not limited to, legal fees but excluding lost profits or other consequential damages incurred by the Buyer, the Company or their respective Affiliates) (collectively, 'Damages') arising out of:
9.1.1 any breach of any Sellers' Warranty; and
9.1.2 any breach of any covenant or agreement of a Seller set out in this Agreement.
…
9.3 Subject to Clause 9.4, the Indemnifying Party shall not be required to indemnify the Indemnified Party for any Damages arising under this Clause 9, except:
9.3.1 where the Damages relating to an individual claim exceed Euro 20,000 (twenty thousand);
9.3.2 where the aggregate amount of Damages for which the Indemnified Party is entitled to indemnification pursuant to this Clause exceeds Euro 75,000 (seventy five thousand), in which event the Indemnifying Party shall be liable for the full amount of the Damages; and
9.3.3 where the aggregate amount payable with respect to all claims by the Buyer for indemnification from the Sellers shall not exceed the amount which is equal to the aggregate of the Tranche 1 Purchase Price and the Tranche 2 Purchase Price.
…
9.10 The Buyer acknowledges and agrees that its sole remedy against Sellers for any breach of the Sellers' Warranties is set out in this Clause 9 and that, except to the extent that the Buyer has asserted a claim for indemnification prior to the relevant Liability Termination Date, the Buyer shall have no remedy against the Sellers for any breach of the Sellers' Warranties.
Clause 17 dealt with 'Cumulative Rights and Remedies':
The rights, powers and remedies provided in this Agreement are cumulative and not exclusive of any rights and remedies provided by law and no single or partial exercise of any right or remedy under this Agreement or provided by law shall hinder or prevent further exercise of such or other rights or remedies.
Clause 21 provided, under the heading, 'Entire Agreement':
21.1 This Agreement (together with all the documents to be entered into under it) contains the complete agreement between the parties on the matters to which it relates, and supersedes all prior agreements and understandings (whether written or oral) between the parties in respect of such matters.
21.2 Each party waives its rights against the other in respect of warranties and representations (whether written or oral) not expressly set out in this Agreement.
21.3 Nothing in this Clause 21 limits or excludes the liability of any party for fraud or wilful misconduct.
The Defendant (Buyer's) case
The relevant part of the counterclaim for misrepresentation is contained in a few short paragraphs of the Defence:
33. Prior to the conclusion of the SPA, the Sellers represented to Adria, in order to induce Adria to enter into the SPA, that the representations set out in paragraph 18 above ('the Relevant Representations') were true and accurate as at the date of the SPA and as at Completion.
34. The Relevant Representations were false, for the reasons set out in paragraphs 23 to 32 above.
35. Adria entered into the SPA in reliance on the Relevant Representations, as stated in clause 7.3
36. As a result of the Sellers' misrepresentations, Adria has suffered loss and damage.
…
39. Adria's claim in relation to the Relevant Representations is therefore approximately EUR 8,578,999.05. Adria is entitled to and claims damages in this amount under section 2(1) of the Misrepresentation Act 1967.
The 'Relevant Representations' were those set out in Schedule 2 of the SPA.
The Defendant contends in its counterclaim that the representations in Schedule 2 were made by Claimants' representatives to the Defendant's representatives in the course of exchanging drafts of the SPA, by email and in the course of a meeting between the parties on 7 October 2009, as well as in Schedule 2 itself.
It is unnecessary for present purposes to set out all the particular ways in which it is said they were false and inaccurate because the arguments on this application relate not to the facts but to the construction of the contract. However, and by way of illustration, one of the allegations relates to paragraphs 1 and 20 of the Schedule 2 'Sellers' Warranties'.
Paragraphs 1 and 20 provided:
1. General
The information disclosed in the Due Diligence Documents is in all material respects true and correct, and such information fairly presents the legal and financial situation of the Company. All material facts about, or circumstances, relating to, the assets, business or financial condition of the Company have been fairly disclosed in the Due Diligence Documents.
…
20. DTH [Direct to Home] Subscribers
(a) for the purposes of this paragraph 20, 'DTH subscribers' means Subscribers who have contracted directly or indirectly with the Company to subscribe to the lowest package of the Company …
(b) As at the date hereof, there are a total of at least 80,000 DTH Subscribers.
In Paragraph 24 of the Defence the Buyer has pleaded that in breach of the Sellers' Warranties there were approximately 65,000 or fewer DTH Subscribers
In addition to the plea of misrepresentation as set out above, at paragraph 40 of the counterclaim the Buyer pleads that the facts relied on constituted breaches of the Schedule 2 'Sellers' Warranties'.
The Sellers deny there has been any breach of the Sellers' Warranties and, as already noted, contend that the case advanced under the Misrepresentation Act 1967 is an illegitimate means of getting around the parties' agreement that claims are confined to breach of the Sellers' Warranties and by the terms of Clause 9.3.3. They point out that the Buyer's counterclaim of over €12m (€8.5m claimed as damages and €4.2m,...
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