Bottin (International) Investments Ltd v Venson Group Plc and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Peter Gibson,Lord Justice Longmore,Mr. Justice Lindsay,LORD JUSTICE PETER GIBSON |
| Judgment Date | 22 October 2004 |
| Neutral Citation | [2004] EWCA Civ 1368,[2004] EWCA Civ 1427 |
| Docket Number | A3/2004/0331 A3/2004/0331(C),Case No: A3/2004/0331/0331B/0331C |
| Court | Court of Appeal (Civil Division) |
| Date | 22 October 2004 |
[2004] EWCA Civ 1368
Lord Justice Peter Gibson
Lord Justice Longmore and
Mr. Justice Lindsay
Case No: A3/2004/0331/0331B/0331C
HC03C01009
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
Peter Smith J
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. John Wardell Q.C. and Mr. Tom Lowe (instructed by Messrs DLA LPP of Finsbury Park) for the Appellant
Mr. Ian Glick Q.C. and Mr. Charles Samek (instructed by Messrs Wallace & Partners of Mayfair) for the Respondents
We have before us an appeal and a cross-appeal from the order made by Peter Smith J. on 3 February 2004 in a dispute between the parties to, and arising out of, a share purchase agreement. The Claimant, Bottin (International) Investments Ltd. ("Bottin"), appeals against parts of that order, and the First Defendant, Venson Group plc ("Venson", in which term I will include the other companies in the group of companies of which it is the parent) by a Respondent's Notice, cross-appeals against another part of the order. The judge refused Bottin permission to appeal. Such permission was given by Arden L.J.
The facts
Bottin is an investment company owned by Dermot Desmond. His corporate investment adviser was John Bateson.
Venson is an English company which specialises in the outsourcing of vehicle maintenance and fleet servicing. Its most important customer from April 1999 onwards was the Metropolitan Police. In 1990 and 2000 the Second Defendant, Grant Scriven, was the Chairman and Chief Executive Officer of Venson, the Third Defendant, Clive Lawson Smith, the Deputy Chief Executive Officer and Simon Frost the Finance Director.
In September or October 1999 an approach was made to Bottin to invest in Venson. On 14 October Mr. Bateson met Mr. Scriven, Mr. Lawson Smith and Mr. Frost. Mr. Bateson was given a 5-year financial summary for the years 1996 to 2000. This single sheet included a forecast of pre-tax profits for the calendar years 1999 and 2000 ("the October forecast") . The summary showed that Venson had been loss-making but forecast that in 1999 it would more than double the turnover achieved for 1998 and that it would make a pre-tax profit of £1,051,000. In 2000 its turnover would go up from £11,633,000 to £21,451,000 and Venson would make a profit that year of £2,674,000. On the basis of that, Mr. Bateson valued Venson, before an investment was made in it, at between £21.7 million and £25.5 million, and so reported to Mr. Desmond on 25 October 1999, suggesting that a 25%-35% stake in Venson was available for around £10 million.
On 5 November 1999 Mr. Bateson was supplied with a document called the Information Memorandum containing detailed information about Venson. This included, in a section headed "Financial Performance", a statement that the budgeted profits for 2000 were forecast at £2,585,000, and this was supported by an elaborate break-down of the figures involved in reaching that figure.
In December 1999 Mr. Bateson carried out a due diligence exercise in respect of Venson. He was supplied with an extract from Venson's profit and loss account for 1999 showing that at 31 October 1999 profits thus far achieved totalled £566,544. This was confirmed by way of a single sheet headed "Forecast Outline for 1999" ("the December forecast") which was handed to Mr. Bateson by Venson on 8 or 9 December. This showed as the "Results to October 1999" a profit of £567,000 and forecast for November and December 1999 a profit of £170,000. The total for the year was said to be a profit of £717,000. Those figures in fact add up to £737,000. It may be that the forecast profit for the last two months should have been £150,000. Certainly under "Reconciliation" three specified one-off adjustments to the 5-year profit for 1999 of £1,051,000 contained in the October forecast were quantified which would leave a total of £711,000 as the profit for that year and that is close enough to £717,000 to suggest that £717,000 was intended to be the correct forecast for the year rather than a total £20,000 higher.
On 20 December 1999 Mr. Bateson was also given the management accounts for the period ended 31 October 1999. This compared the actual results achieved up to the end of October 1999 with the budgeted profit, and repeated that the actual profit thus far was £566,544.
Mr. Bateson sent what he called a Pre-Investment Report to Mr. Desmond, plainly relying on the December forecast and on the budgeted forecast for 2000 contained in the Information Memorandum. The reduction in the forecast profit for 1999 did not affect Mr. Bateson's valuation of Venson.
Bottin decided to proceed with the proposed investment. Two documents came into effect on 22 December 1999. One was the share purchase agreement ("the Agreement") entered into by Bottin (therein called "the Investor") and Venson (therein called "the Company"), Mr. Scriven and Mr. Lawson Smith. The other was a Disclosure Letter signed by or on behalf of the Defendants, receipt of which was acknowledged by Bottin.
By the Agreement, Bottin agreed to subscribe for one million A Preference shares in Venson for £10 million. The shares are convertible shares, and the formula for conversion into ordinary shares meant that Bottin would eventually have 28.57% of Venson's equity.
By cl. 3 of the Agreement, each of the Defendants (called in the Agreement "the Warrantors") gave warranties to Bottin in terms set out in Sch. 3 to the Agreement. The following provisions of cl. 3 are relevant:
"(a) Subject to the following provisions of this clause, each of the Warrantors warrants in the terms set out in Schedule 3 to the Investor …. The Warrantors acknowledge that the Investor is entering into this Agreement in reliance upon the Warranties and agree that the Investor may treat them as representations inducing them to enter into this agreement.
(b) Each of the Warranties is without prejudice to any other of them and no paragraph or sub-paragraph of Schedule 3 shall limit or govern the extent or application of any other paragraph or sub-paragraph.
(c) Each of the Warranties shall be construed as a separate and independent warranty to the intent that the Investor shall have a separate right of action in respect of each of them.
….
(g) Where any Warranty is qualified by the expression 'to the best of the knowledge, information and belief of …' or 'as far as … is aware' or any similar expression it shall be deemed to include an additional statement that it has been made after due and careful enquiry of appropriate officers, employees and such of the Company's professional advisors as the Warrantors consider appropriate in the circumstances.
(h) A Warrantor shall be liable for breach of a Warranty …. only if notice of a claim is given to him, specifying such details of the event or circumstance giving rise to such claim as are available to the Investor and estimating (if capable of estimation by the Investor) its quantum, prior to the third anniversary of Completion.
….
(j) No liability shall arise under the Warranties if and to the extent that the matter giving rise to the claim is fairly disclosed in the Disclosure Letter….
….
(o) No claim under the Warranties shall be deemed to have been made unless notice of such claim was made in writing to the Warrantors specifying such detail of the event or circumstances giving rise to such claim as are available to the Investor and an estimate (if capable of preparation by the Investor) of the total amount of the Warrantors' liabilities therefor claimed."
[The word "detail" should obviously be read as "details": see the similar wording in cl. 3(h) and the plural verb "are".]
"(p) Any claim in respect of which notice shall have been given in accordance with Clause 3(o) above shall be deemed to have been irrevocably withdrawn and lapsed (not having been previously satisfied settled or withdrawn) if proceedings in respect of such claim have not been issued and served on the Warrantors not later than the expiry of the period of 12 months after the date of such notice.
….
(u) The Investor shall upon it becoming aware of any event or matter ("the Matter") which gives rise to a claim under the Warranties give notice in writing to the Warrantors of the Matter provided that any notice pursuant to this Clause 3(u) shall not be deemed to be notice for the purposes of Clauses 3(h), …., 3(o) …."
Limits were imposed on the liability of the Warrantors in other paragraphs of cl. 3. The maximum aggregate liability was fixed at £10 million, Venson being solely liable up to that sum and Mr. Scriven and Mr. Lawson Smith up to lesser amounts.
The warranties set out in Sch. 3 were the following so far as relevant:
(1) (under para. 1(a)) to the best of the Warrantors' knowledge, all written information given to Bottin by the Warrantors or their professional advisers in the course of the negotiations leading up to the Agreement as listed in Sch. 1 to the Disclosure Letter was, at the date when given and at the date of the Agreement, true and accurate and not misleading and, so far as such information was expressed as a matter of opinion, such opinions were at those dates, truly and honestly held;
(2) (under para. 1(b)) the Budget for 2000, as set out at document 8 of Schedule 1 to the Disclosure Letter, and the Outline Strategic Plan as set out in document 7 of that Schedule, had been carefully and diligently prepared on a basis consistent with that...
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