BWT Aktiengesellschaft v Force India Formula One Team Ltd ((in Liquidation))
| Jurisdiction | England & Wales |
| Judge | Baister |
| Judgment Date | 23 November 2020 |
| Neutral Citation | [2020] EWHC 3187 (Ch) |
| Date | 23 November 2020 |
| Docket Number | No: CR-2018-006093 |
| Court | Chancery Division |
[2020] EWHC 3187 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF FORCE INDIA FORMULA ONE TEAM LIMITED (IN (LIQUIDATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice
Rolls Building
Fetter Lane
London EC4A 1NL
Deputy ICC Judge Baister
No: CR-2018-006093
Mr Adam Al-Attar (instructed by Onside Law Ltd) for the applicant
Mr James Segan QC (instructed by Eversheds Sutherland (International) LLP) for the respondents
Hearing date: 22 October 2020
Approved Judgment
Deputy Insolvency and Companies Court Judge
The application
This is an application by BWT Aktiengesellschaft appealing under r. 14.8 Insolvency (England and Wales) Rules 2016 the office-holder's rejection of part of its proof of debt in the liquidation of Force India Formula One Team Limited. It is supported by witness statements of Stevie Loughrey and Adam Leadercramer, the applicant's solicitors, the latter made in reply to that of Leslie Ross, a Canadian lawyer who, like Mr Leadercramer, was involved in negotiations which took place in May 2018.
The background
Force India Formula One Team Limited, which I shall now refer to as the company, carried on business as a Formula One racing team. The applicant is a supplier of water treatment products. It wanted to promote its brand through sponsorship. To that end it entered into a sponsorship agreement with the company, the terms of which are set out in a Contribution and Rights Agreement (“C&RA”) dated 10 March 2017. It became the company's principal sponsor, providing the company with about €15m per annum in tranches. The sponsorship payments were “front-loaded” (i.e. not spread evenly over the season) because the majority of the expenditure of running the team was incurred during the first quarter of the year. The C&RA made provisions which reflected the timing of payments and provided for how they should be treated in the event of a termination of the relationship.
By February 2018 the company had begun to experience financial difficulties and was failing to provide promised financial information to the applicant as it was obliged to do. In spite of this the applicant continued to provide support, including additional funding in the form of loans in March and May. On 7 May 2018 the applicant sent the company a draft Deed of Variation, saying it had to be signed “latest today.” In fact it was only executed on 8 May. This and the C&RA are the important documents for the purpose of this application. The Deed provided for the company to enter into a security agreement, but that never happened, which is of some importance. A second deed was drafted but that never came into effect and is not relevant to the issue to be decided.
The applicant terminated the C&RA with effect from 1 July 2018 by notice given pursuant to clause 18.2. (Mr Segan QC refers to this as “termination for convenience” to distinguish it from other circumstances that could have given rise to termination.) There was initially argument about the date of termination, but now none as to either its validity or effective date.
A creditor of the company, Brockstone Limited, applied for an administration order which was made by Barling J on 27 July 2018. The company, with support from the applicant, traded in administration for a time before its assets were sold on 16 August 2018 to Racing Point which continued to provide the sponsorship benefits. Thereafter the company went into liquidation.
The applicant submitted a proof of debt dated 5 June 2019 in the administration. The particulars were amended on 28 August 2019. The amended proof stands as the applicant's proof in the liquidation.
On 28 November 2019 the liquidator admitted the applicant's claim as to £1.264 m odd but rejected it as to the balance of €5.65m odd.
The foregoing is a brief summary of the facts set out in greater detail in the applicant's witness statements. They are, by and large, uncontroversial, as Ms Ross accepts, but in any event much of the background is not relevant to the issue before the court which is one of construction of the terms of the C&RA and the Deed of Variation. Other documents I have mentioned (and some I have not) do not bear directly on the issue. The issue itself involves answering two questions: does the applicant have a claim in the liquidation on the basis contended for in its proof of debt; and if so for how much (i.e. must it give credit for certain sums that the liquidator says are irrecoverable, irrespective of the answer to question one)?
The contractual provisions
The C&RA contains the following relevant provisions:
“ 1. Interpretation The definitions and general provisions in Schedule 1 apply to this agreement.”
[…]
Fees are defined in the schedule as: “The fees to be paid by BWT to Force India as a contribution towards the racing, trackside and hospitality costs incurred by the Team in respect of each year of the Term in accordance with clause 17.1.”
“ 4.5 In the event that Force India ceases to operate a Formula One team competing in the World Championship, this agreement shall be terminated with immediate effect and (subject to clause 18.5) without penalty to any party.”
“ 17. Fees and Payments
17.1 In consideration of Force India's obligations BWT will pay to Force India the Fees, to be received by Force India, subject to BWT having received an invoice from Force India at least thirty (30) days in advance (other than in relation to the instalment referred to in clause 17.1.1.1) as follows:
17.1.1 In 2017, twelve million five hundred thousand Euros (€12,500,000) to be received as follows:
17.1.1.1 ten million Euros (€10,000,000) on or before 17 March 2017; and
17.1.1.2 two million five hundred thousand Euros (€2,500,000) on or before 1 July 2017.
17.1.2 In 2018, fifteen million Euros (€15,000,000) to be received as follows:
17.1.2.1 seven million five hundred thousand Euros (€7,500,000) on or before 1 December 2017;
17.1.2.2. three million seven hundred and fifty thousand Euros (€3,750,000) on or before 1 February 2018; and
17.1.2.3 three million seven hundred and fifty thousand Euros (€3,750,000) on or before 1 July 2018.
17.1.3 In 2019, fifteen million Euros (€15,000,000) to be received as follows:
17.1.3.1 seven million five hundred thousand Euros (€7,500,000) on or before 1 December 2018;
17.1.3.2 three million seven hundred and fifty thousand Euros (€3,750,000) on or before 1 February 2019; and
17.1.3.3 three million seven hundred and fifty thousand Euros, (€3,750,000) on or before 1 July 2019.
17.1.4 In 2020, fifteen million Euros (€15,000,000) to be received as follows:
17.1.4.1 seven million five hundred thousand Euros (€7,500,000) on or before 1 December 2019;
17.1.4.2 three million seven hundred and fifty thousand Euros (€3,750,000) on or before 1 February 2020; and
17.1.4.3 three million seven hundred and fifty thousand Euros (€3,750,000) on or before 1 July 2020.
17.1.5 In 2021, fifteen million Euros (€15,000,000) to be received as follows:
17.1.5.1 seven million five hundred thousand Euros (€7,500,000) on or before 1 December 2020;
17.1.5.2 three million seven hundred and fifty thousand Euros (€3,750,000) on or before 1 February 202; and
17.1.5.3 three million seven hundred and fifty thousand Euros (€3,750,000) on or before 1 July 2021.
17.2 In consideration of Force India procuring the application of the BWT Logo to the Drivers Race helmets, as referenced in clause 7.1.3, BWT will pay to Force India the Helmet Logo Fees, to be received by Force India subject to BWT having received an invoice from Force India at least thirty (30) days in advance (other than in relation to the instalment referred to in clause 17.2.1) as follows:
17.2.1 In 2017, three hundred and twenty-five thousand Euros (€325,000) to be received on or before 17 March 2017;
17.2.2 In 2018, three hundred and twenty-five thousand Euros (€325,000) to be received on or before 1 December 2017;
17.2.3 In 2019, three hundred and twenty-five thousand Euros (€325,000) to be received on or before 1 December 2018;
17.2.4 In 2020, three hundred and twenty-five thousand Euros (€325,000) to be received on or before 1 December 2019; and
17.2.5 In 2021, three hundred and twenty-five thousand Euros (€325,000) to be received on or before 1 December 2020.
[17.3–17.7]”
“ 18.1 Termination
18.1 Either party ( Initiating Party) may terminate this agreement with immediate effect on the giving of written notice to the other party ( Defaulting Party) at any time on the happening of the following events by or in relation to the other party:
18.1.1 An Insolvency Event;
18.1.2 Default; or
18.1.3 The Defaulting Party failing to pay any sum due under this agreement within ten (10) Business Days after the due date and subject to the Initiating Party having provided to the Defaulting Party a written reminder notice between one (1) and five (5) Business Days after the relevant due date.”
“ 18.2 Notwithstanding any other provision of this agreement, it may be terminated by either party with effect from 1 July 2018 upon the provision of written notice to be received by the non-terminating party at any time during the period commencing on 15 May 2018 and ending on 31 May 2018 (both dates inclusive). For the avoidance of doubt: (a) the instalments of the Fees referred...
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BWT Aktiengesellschaft v Force India Formula One Team Ltd ((in Liquidation))
...Mr Justice Miles 1 BWT Aktiengesellschaft (“BWT”) appeals from a decision of Deputy ICC Judge Baister dated 23 November 2020 ( [2020] EWHC 3187 (Ch)). He dismissed an appeal by BWT under r.14.8 of the Insolvency Rules 2016 against the rejection by the Second Respondent (“the liquidator”) o......