BSA International SA v Irvine
| Jurisdiction | Scotland |
| Judge | Lord Glennie |
| Neutral Citation | [2010] CSOH 78,[2009] CSOH 77 |
| Docket Number | CA52/08 |
| Date | 23 June 2010 |
| Published date | 23 June 2010 |
| Court | Court of Session (Outer House) |
| OUTER HOUSE, COURT OF SESSION [2010] CSOH 78 | |
| CA52/08 | SUPPLEMENTARY OPINION OF LORD GLENNIE in the cause B.S.A. INTERNATIONAL S.A. Pursuers; against (FIRST) HUGH McLELLAND IRVINE; (SECOND) JOHN ALASTAIR IRVINE; and (THIRD) DOUGLAS FORBES IRVINE Defenders: ________________ |
Pursuers: Lake QC; Burness LLP
Defenders: Dean of Faculty, Mure QC; MacRoberts
23 June 2010
Introduction
[1] This Supplementary Opinion, the third issued so far in this case, deals with certain points which were left open at the end of the debate leading to my Further Opinion dated 28 January 2010 ([2010] CSOH 12). The points left open concerned the pursuers' claim for damages for negligent misrepresentation, whereas the earlier debate had considered their claim for breach of warranty. It was agreed that the points on the claim for misrepresentation should be dealt with before I pronounced an interlocutor capable of being reclaimed to the Inner House.
[2] The representation relied upon is in the same terms as the warranty founding the claim for breach of warranty. It is contained in clause 13 of Part 3 of the Schedule to the Share Purchase Agreement (the "SPA"), which provides as follows:
"13 COMPETITION
No Group Company has received any process, notice or communication, formal or informal, by or on behalf of the Office of Fair Trading or the European Commission or any other authority of any country ... having jurisdiction in anti-competitive matters in relation to any aspect of the business of that Group Company or any agreement of arrangement to which that Group Company is, or is alleged to be, a party, and so far as the Warrantors are aware, there are no subsisting circumstances that may give rise to any such process, notice or communication being received by any Group Company."
I shall refer to this as "the clause 13 warranty".
[3] Two matters of principle were raised as to the claim in misrepresentation. The first was as to the meaning, or the construction to be given to, the representation. This raised the same issues as dealt with in my Further Opinion at paras.[33] - [40] under the heading of Relevancy and Specification. At para.[39] I held that, for the claim for breach of warranty to succeed, the pursuer needed to establish not only that the defenders (as Warrantors) were aware of the facts which in the event did give rise to communication from the OFT, but also that they were, or ought reasonably to have been, aware that those circumstances might lead to such communication. Mr Lake QC, who again appeared for the pursuers, accepted that his clients could be no better off as regards the proper construction to be given to clause 13 if the claim was for misrepresentation rather than for breach of warranty. I need therefore say no more about this aspect. As things stand at present, and on the basis of my construction of the clause, the pursuers do not make averments to instruct a relevant claim for misrepresentation or for breach of warranty. It is open to the pursuers to reclaim this part of my decision along with that relating to the claim for breach of warranty. Should my decision be upheld, then, as already indicated in my Further Opinion, the pursuers would wish to consider whether to amend their pleadings.
[4] The other point took a curious turn. It had been anticipated at the end of the last debate that the only live issue (in addition to that mentioned above) was whether the time-bar provisions in Clause 2 of Part 4B of the Schedule to the SPA applied to misrepresentation in the same way as they applied to the claim for breach of warranty. I had held that the breach of warranty claim, if otherwise relevant, was not time-barred: see para.[31]. However, as the arguments were laid out before me by the Dean of Faculty on behalf of the defenders, it became clear that they raised a number of points.
[5] The claim for damages for negligent misrepresentation founds upon the same facts as that for breach of warranty. The relevant averments are sufficiently identified in my Further Opinion. In para.33 of my Further Opinion, I quoted from Article 17 of the Summons. Since that Further Opinion, the opening part of Article 17 has been amended by the pursuers and the relevant part now reads as follows:
"17. In the foregoing circumstances the representation given by the defenders that the facts were as stated in Clause 13 of Part 3 of the Schedule to the Share Purchase Agreement was false. Having regard to (a) of their active involvement and participation in the various matters set out above and (b) the provisions of the Share Purchase Agreement indicating what is meant by references to an awareness or knowledge of the defenders, the defenders and/or the persons identified in Clause 9.7 were aware at the date of the Share Purchase Agreement that there were subsisting circumstances which might give rise to the SO - being a process, notice or communication by or on behalf of the OFT - being received by McClelland. Accordingly, they failed to exercise reasonable care. The defenders knew or should have known that the representations made by them as to the absence of such subsisting circumstances was false. ..."
I have italicised the passage brought in by amendment. In Article 19 the pursuers aver that as a result of the defenders' negligent misrepresentation they have suffered loss and damage. They aver that had the facts not been misrepresented they would have paid less to acquire McClelland. They would have sought, and the vendors would have agreed, to include within the Share Purchase Agreement an indemnity provision which would have entitled them to seek reimbursement of any sums paid in respect of liabilities incurred by McClelland arising from the proceedings against them by the OFT, together with the costs arising out of such proceedings.
[6] On behalf of the defenders, the Dean of Faculty presented three main arguments. Although they overlapped, it is convenient to identify them separately. The first was that, standing the provisions of clauses 21.5 and 21.7 of the SPA, which contain an entire agreement clause, there was no scope for the pursuers to put forward a claim for negligent misrepresentation. Unless fraud was alleged, which it was not in this case, their only remedy lay for breach of warranty. Secondly, he submitted that it was necessary for the pursuers, in advancing a case in negligent misrepresentation, to plead and establish both (a) that the defenders owed a duty of care to the pursuers in respect of the accuracy of any representations made by them and (b) that the pursuers relied upon the representations in entering into the SPA. There were no relevant averments in support of such case. Thirdly, he referred to the difficulties faced by the pursuers in putting forward such a case, which difficulties, he submitted, were highlighted by the recent amendment to the averments in Article 17. To establish the representation, they had to resort to reliance upon the terms of the SPA itself. So also, to establish the requisite knowledge on the part of the defenders, they had to rely on clause 9.7 of the SPA, in terms of which the defenders were deemed to have the "awareness, knowledge, information [and] belief" of a number of people, including the Vendors, their solicitors and auditors, certain of their directors and three of the senior managers of companies within the group. How, he asked rhetorically, could the terms of the contract be prayed in aid to establish the very things upon which the pursuers claimed to have relied in entering into it?
[7] This last point has some superficial attraction. However, I do not think that it is right. The pursuers' case, as amended, is that the defenders represented, in terms of clause 13 of Part 3 of the Schedule, that, so far as they (the Warrantors) were aware - and I paraphrase rather than offer a construction of the clause - there were no subsisting circumstances which might give rise to the institution of any proceedings against McClelland by the competition authorities. Clause 9.7 explains what is meant by the words "so far as the Warrantors are aware". The awareness of the Warrantors includes the awareness of all the persons identified therein. In making the representation in terms of clause 13, therefore, the defenders are representing that neither they nor the various persons identified in clause 9.7 have any knowledge or awareness of such circumstances. That is something which the pursuers say they relied upon in entering into the SPA, which contained both the representation in clause 13 and the amplification of that representation in clause 9.7. I see no conceptual difficulty with that...
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