BTI 2014 Llc v Sequana S.A. and Others
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Rose |
| Judgment Date | 10 February 2017 |
| Neutral Citation | [2017] EWHC 211 (Ch) |
| Court | Chancery Division |
| Docket Number | Case Nos: HC-2014-001215 |
| Date | 10 February 2017 |
[2017] EWHC 211 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building London, EC4A 1NL
Mrs Justice Rose
Case Nos: HC-2014-001215
HC-2013-000376
Andrew Thompson QC and Ciaran Keller (instructed by Debevoise & Plimpton LLP) for the Claimants
David Foxton QC and David Mumford QC (instructed by Freshfields Bruckhaus Deringer) for the Defendants
Hearing dates: 13 th and 16 th January and 3 rd February 2017
Judgment on Remedies
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.
(1) Introduction
I handed down judgment in these two claims on 11 July 2016, [2016] EWHC 1686 (Ch) ('the Main Judgment'). In this judgment I use the same abbreviations as I used in the Main Judgment – indeed this judgment is only comprehensible if read together with that judgment. The Main Judgment disposed of two sets of proceedings heard jointly at the trial last year ('the Trial'). The claim brought by BTI against Sequana and the four directors personally (the 'Dividend Claim') failed in its entirety and will be dismissed. The claim brought by BAT against Sequana and AWA (the 's 423 Claim') was partially successful because although I held that the December Dividend had not been made with the s 423 purpose, I held that the May Dividend had been made with that purpose and fell within section 423.
As regards the May Dividend I held that as a matter of law, a dividend is a transaction entered into at an undervalue within the meaning of section 423(1) and that AWA had the intention when paying that Dividend of putting the dividend monies beyond the reach of BAT or of otherwise prejudicing BAT's interests. It was common ground that BAT was a victim of the transaction within the meaning of section 423(5). The May Dividend was €135,181,358.55 or $182,494,834.04 at 18 May 2009 exchange rates.
I did not deal with the appropriate relief to be granted to BAT in the Main Judgment. In paragraph 525 I said:
"The parties were agreed that, in the event that I found that the claim under section 423 succeeded, I should not attempt to fashion a remedy at this stage. This was in part because in order to do so it is important to understand what has in fact happened in respect of the Lower Fox River and Future Sites liabilities since May 2009. During the course of these proceedings, we have all carefully shielded our eyes from what has happened since then in order to ensure that the assessment of what the directors knew and thought at the relevant times was not coloured by hindsight. However it may be helpful for me to give the following indication. I do not currently have in mind a remedy whereby the May Dividend is simply repaid by Sequana to AWA. In 4Eng Sales J contemplated such a payment in a situation where the transferor has become insolvent so that the transferred money is repaid to the transferor's liquidator or trustee in order to be distributed to the class of creditors. That is not the position here."
The consideration of what relief is appropriate and what other orders should be made to bring the proceedings to a close was the subject of a further two day hearing before me ('the Consequentials Hearing'). A number of issues were raised:
a. the relief that should be granted to BAT pursuant to section 423 in respect of the May Dividend payment;
b. the appropriate order as to the costs of the Dividend Claim and the s 423 Claim up to the Main Judgment, including the size of any interim payment;
c. whether permission to appeal should be granted to both parties. Sequana asked for permission to appeal on the legal issues arising from the s 423 Claim in respect of the May Dividend and BTI sought permission on a range of issues determined against them in the Dividend Claim;
d. Sequana sought a stay of execution in relation to any relief granted under section 423 and to any costs order made against it;
e. BAT sought an order that if Sequana were allowed to pursue its appeal, it should be required to provide security for BAT's costs of opposing that appeal.
After handing down the Main Judgment, I gave directions for the parties to serve evidence in support of any application they wanted to make. A number of witness statements were served by both parties, describing amongst other things the events which have occurred since 18 May 2009 until the present as regards the clean up of the Lower Fox River. There was also evidence from BAT/BTI as to how its legal costs were incurred (in support of its application for costs) and evidence from both parties about Sequana's current financial position (relevant to Sequana's application for a stay of execution and to BAT's application for security for the costs of opposing Sequana's appeal). Sequana did not provide any evidence in relation to its costs.
At the start of the Consequentials Hearing I told the parties that I was minded to grant both sides permission to appeal on the matters that they wanted to challenge. Both sides then withdrew their opposition to the other's application for permission to appeal.
(2) Relief under section 423
(a) Developments since May 2009
The remediation of OU1 of the Lower Fox River was completed in 2009, mostly by dredging. The total cost was $82 million. The remediation of OUs 2 -5 started in May 2009 and is expected to be completed by the end of 2018. This has been accomplished by a combination of capping and dredging. It is expected that there will be ongoing monitoring costs until 2050.
Between November 2007 and April 2012, NCR and AWA funded the majority of the costs for the remediation of the Lower Fox River. From April 2009, this was done through a special purpose vehicle called Lower Fox River Remediation LLC. Between 18 May 2009 and 30 April 2012 AWA spent $131.4 million on the clean up and a further $25 million in defence costs. NCR paid $91.6 million towards remediation. According to BAT's evidence, the total cost of the clean up of the Lower Fox River is likely to be more than was anticipated in May 2009. According to a recent press release by the US Department of Justice it is expected to exceed $1 billion.
At the end of April 2012, AWA told NCR and API that it was not going to pay for any further clean up costs for the Lower Fox River. This sparked a complicated series of claims and counterclaims in several sets of court and arbitration proceedings between NCR, API, BAT and AWA. Many of these proceedings were ultimately settled by the terms of a Funding Agreement entered into between NCR, API, BAT and AWA dated 30 September 2014. Mr Lloyd's evidence on behalf of BAT was that this was the most complicated and difficult negotiation he had ever taken part in and the terms finally arrived at were the culmination of seven weeks of intensive negotiation.
The terms of the Funding Agreement are very important to the parties' submissions on the proper form of relief under s 423 and I will need to go into some aspects of them in more detail later. The recitals at the front of the agreement refer to the large number of different legal proceedings between these parties and against third parties including, in the 6th preamble, the s 423 Claim issued in the High Court on 9 December 2013 and in the 8th preamble, the Dividend Claim issued by AWA – ultimately assigned to BTI. The final recital refers to the parties' common interest in maximising recoveries from certain third parties to aid the funding of the clean up costs of the Lower Fox River and Future Sites and in minimising their own transaction costs, leading to a wish to resolve disputes between them.
In broad terms, the Funding Agreement means that:
a. BAT (through BTI), API and AWA agree to pay a contribution to NCR's past costs incurred in the clean up. The sums agreed to be paid are $77 million for BAT, $6 million for API and $10 million for AWA. Those payments were made on 30 September 2014 and relate to the period 10 April 2012 to 1 October 2014.
b. As to ongoing funding:
i. BAT agrees that as from 30 September 2014, it will pay 50 per cent of NCR's Fox River costs after API had paid an additional $19 million. NCR will pay the other 50 per cent. This was a change from the 60:40 split that was described as applying in the Main Judgment. The payments by BAT are made via BTI on a monthly basis.
ii. API agrees to pay 50 per cent of what BAT has paid to BTI but capped at a total of $25 million. Clause 13.3 of the Funding Agreement provides that API does not have a right to an indemnity against AWA for this $25 million.
iii. AWA has three payment obligations which I will describe in more detail later. These include a small up-front payment, an annual interest payment and a staged contribution towards monies that BAT has to pay out and for which BAT is not reimbursed by other PRPs.
iv. However, AWA is protected from insolvency by the Funding Agreement because section 12.3(a) provides that AWA's liability to BAT under the agreement is such that AWA's assets cannot fall below $25 million. That figure of $25 million can increase over the years in accordance with a formula set out in the agreement but for ease of exposition I shall refer to it as "the $25 million AWA Floor".
c. Most of the litigation among the parties is stayed or discontinued.
d. Provision is made as to what is to happen to the proceeds of the Dividend Claim and the s 423 Claim if any. Broadly, whoever recovers any money from the s 423 Claim is obliged to pay it to BTI and,...
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