Brown-Forman Beverages Europe, Ltd v Bacardi UK Ltd
| Jurisdiction | England & Wales |
| Judge | Pelling |
| Judgment Date | 19 May 2021 |
| Neutral Citation | [2021] EWHC 1259 (Comm) |
| Date | 19 May 2021 |
| Docket Number | Case No: CL-2020-000533 |
| Court | Queen's Bench Division (Commercial Court) |
[2021] EWHC 1259 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
HIS HONOUR JUDGE Pelling QC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: CL-2020-000533
Mr Charles Graham QC and Mr Alexander Brown (instructed by Eversheds Sutherland (International) Limited) for the Claimant
Mr Jonathan Davies-Jones QC and Mr Christopher Bond (instructed by DLA Piper UK LLP) for the Defendant
Hearing dates: 15–18 March 2021
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.
HIS HONOUR JUDGE Pelling QC, SITTING AS A JUDGE OF THE HIGH COURT
HH Judge Pelling QC:
Introduction
This is the trial of various preliminary issues in a claim by the claimant (“BFBE”) against the defendant (“BUKL”) under a contract of suretyship pursuant to Paragraph 5 of a Case Management Order made on 11 December 2020 by Andrew Baker J. The issues directed to be tried are the issues identified as Issues 1 to 10 and 12(a) on the List of Issues although in practical terms these issues that arise go to three broad questions identified below. Although this is a trial, no oral evidence was adduced by either party and the trial proceeded by way of submission alone – see T1/5/14 – 6/13.
Background
BUKL is part of the global Bacardi group of companies and is the parent company of Bacardi-Martini Limited (“BML”). By an agreement made on 21 November 2016 entitled “AMENDED AND RESTATED UNITED KINGDOM COST-SHARING AGREEMENT” (“Agreement”) the parties agreed to share costs in relation to the provision of certain services. By clause 6.2 of the Agreement:
“Bacardi U.K. Limited agrees to guarantee the payment and related obligations of BML under this Agreement. BML agrees to cause a duly authorized officer of Bacardi U.K. Limited to execute the form of guarantee attached to, and incorporated into, this Agreement as Schedule 6.2 to document such guarantee obligations. Bacardi U.K. Limited agrees to indemnify and hold BFBE, BFC, and their respective Associated Companies, harmless from and against and in respect of any and all losses, liabilities, claims, judgments, expenses, costs (including attorneys' fees) and settlements incurred in connection with any failure by BML to timely fulfil its payment obligations to BFBE and BFC under this Agreement.”
Schedule 6.2 of the Agreement, entitled “FORM OF BACARDI U.K. LIMITED GUARANTEE” it was agreed that the guarantee to be given by BUKL would be to the following effect:
“1. Bacardi U.K. Limited shall procure that any obligation or requirement which is expressed in this Agreement to be an obligation or requirement of BML be performed or discharged.
2. In consideration of BFBE and BFC entering into and extending the amended and restated cost-sharing arrangement with BML for the United Kingdom operations on the terms set out in the Amended and Restated United Kingdom Cost-Sharing Agreement initially effective as of 1 May 2017 and valid until 30 April 2020 (the “Agreement”), Bacardi U.K. Limited hereby unconditionally and irrevocably guarantees to BFBE and BFC the due and punctual performance and observance by BML of all of its obligations, commitments and undertakings under or pursuant to the Agreement or any other document entered into pursuant to the Agreement.
3. If and whenever BML defaults for any reason whatsoever in the performance of any obligation, commitment or undertaking undertaken or expressed to be undertaken under or pursuant to the Agreement or any other document referred to in it, Bacardi UK. Limited shall upon demand unconditionally perform (or procure performance of) and satisfy (or procure satisfaction of) the obligation, commitment or undertaking in regard to which such default has been made in the manner prescribed by the Agreement or any other document referred to in it and so that the same benefits shall be conferred on BFBE and BFC as would have been received if such obligation, commitment or undertaking had been duly performed and satisfied by BML.
4. This guarantee is to be effective as of the date of conclusion of the Agreement and shall be a continuing guarantee and accordingly is to remain in force until all obligations of BML shall have been performed or satisfied, regardless of the legality, validity or enforceability of any provisions of the Agreement and notwithstanding the winding-up, liquidation, dissolution or other incapacity of BML or any change in the status, control or ownership of BML. This guarantee is in addition to, without limiting and not in substitution for, any rights or security that BFBE or BFC may now or after the date of the Agreement have or hold for the performance and observance of the obligations, commitments and undertakings of BML under or in connection with the Agreement or any other document referred to in it.
5. As a separate and independent stipulation, Bacardi U.K. Limited agrees that any obligation, commitment or undertaking expressed to be undertaken by BML (including, without limitation, any moneys expressed to be payable under the Agreement) which may not be enforceable against or recoverable from BML by reason of any legal disability or incapacity on or of BML or any fact or circumstance (other than any limitation imposed by the Agreement) shall nevertheless be enforceable against and recoverable from Bacardi U.K. Limited as though the same had been incurred by Bacardi U.K. Limited and Bacardi U.K. Limited were the sole or principal obligor in respect thereof and shall be performed or paid by Bacardi U.K. Limited on demand.”
By clause 13.8 of the Agreement, it was agreed that:
“As of the Effective Date, this Agreement shall supersede and cancel all prior written or oral contracts, agreements, and understandings of the parties with respect to the subject matter covered by this Agreement. This Agreement can be amended only in writing, and then only if the amendment is executed by all parties affected by the amendment. This Agreement is the product of arms-length negotiation between the parties and will not be construed against any party as the “drafter” of the document.”
The Agreement was executed on behalf of BUKL under a statement that:
“Bacardi UK Limited hereby signs this Agreement to agree to be bound by the obligations and undertakings set forth in section 6.2 (Parent Guarantee) and agrees to execute the Guarantee in the form attached as Schedule 6.2.”
It is common ground that BUKL was not a party to the Agreement, but it signed it specifically to signify its assent to being bound by the surety obligations set out in section 6.2 and Schedule 6.2 alone.
On 31 January 2019, an agreement entitled “ADDENDUM AGREEMENT” (“AA”) was made between BFBE, BML and BFBE's parent company (“BFC”) by which the terms of the Agreement were varied. By clause 4 of the AA, it was agreed that:
“Each of the parties agrees that it has received adequate and independent consideration for entering into this Addendum Agreement on behalf of itself and its Associated Companies. All provisions of the Agreement not subject to amendment under this Addendum remain in full force and effect.”
The AA was signed on behalf of (a) BFBE, (b) its parent and (c) on behalf of BML by its managing director and by its finance director on 8 January 2019. BUKL was not a party to the AA, nor a signatory to it.
BML has failed to pay BFBE £51,499,402 under the terms of the Agreement. BML has refused to pay this sum on the basis that it has claims against BFBE under the Agreement, which equal or exceed the sums claimed by BFBE, that it relies on as supporting a defence of equitable set off. BFBE accepts (for the purposes of these proceedings) that BML has validly asserted its equitable set off defence reasonably and in good faith. The Agreement contains an arbitration agreement that applies as between BFBE and BML. The claim and cross claims between BML and BFBE have been referred to arbitration in accordance with that agreement.
The Issues
Given that the claims and cross claims between BFBE and BML are the subject of an arbitration in which (BFBE accepts for the purposes of these proceedings that) BML has pleaded a valid equitable set off, this trial is concerned with whether BUKL is liable to BFBE for the sums claimed by BFBE against BML that have been referred to arbitration under either:
i) The third sentence of clause 6.2 of the Agreement (“the Clause 6.2 claim”); and/or
ii) Paragraph 5 of Schedule 6.2 (“the paragraph 5 claim”).
— see T1/8/3–17.
BUKL summarises its defences to BFBE's claim to recover the sums it claims from BML in the arbitration under each of the provisions of the Agreement referred to above at paragraph 6 of its written opening as being first that it relies on BML's assertion of equitable set off on the basis of “… the general principle that a surety may rely on an [equitable set off] asserted by the principal debtor, and as a matter of the proper construction of its obligations under the guarantee, BUKL contends that none of its obligations has been triggered …” and independently it denies that it is liable “… on the basis that its surety obligations were automatically discharged by a variation to the Agreement effected by …” the AA, applying the rule in Holme v Brunskill (1878) 3 QBD 495.
BFBE submits that these defences should be rejected because (a) the relevant obligations are primary obligations, (b) as a matter of construction the obligation to pay under those provisions has been triggered by the refusal of BML to pay in reliance on its equitable set off defence and (c) the rule in Holme v Brunskill does not apply to primary obligations...
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