BWT Aktiengesellschaft v Force India Formula One Team Ltd ((in Liquidation))
| Jurisdiction | England & Wales |
| Judge | Mr Justice Miles |
| Judgment Date | 18 May 2021 |
| Neutral Citation | [2021] EWHC 1314 (Ch) |
| Date | 18 May 2021 |
| Docket Number | Appeal No. CH-2020-000296 |
| Court | Chancery Division |
[2021] EWHC 1314 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
ON APPEAL FROM THE INSOLVENCY AND COMPANIES LIST (ChD)
Royal Courts of Justice
Rolls Building
London, EC4A 1NL
Mr Justice Miles
Appeal No. CH-2020-000296
Case No: CR-2018-006093
Adam Al-Attar (instructed by Onside Law LLP) for the Appellant
James Segan QC (instructed by Eversheds Sutherland (International) LLP) for the Respondents
Hearing date: 5 May 2021
APPROVED JUDGMENT
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”) of part of BWT's proof of debt in the liquidation of Force India Formula One Team Limited (“Force India” or “the company”).
The facts
The company carried on business as a Formula One racing team. BWT, a supplier of water treatment products, wanted to promote its brand through sponsorship. The parties therefore entered a Contribution and Rights Agreement (“CRA”) dated 10 March 2017. BWT became the company's principal sponsor, providing about €15m per annum in tranches. The CRA, which was for a five-year term, recited that BWT wished to contribute to the racing, trackside and hospitality costs incurred by the team. The sponsorship payments were “front-loaded” (rather than being spread evenly) because much of the cost of running a F1 team is incurred between seasons: the racing season runs from about March to late November each year and the development and testing of a new car for the season is done in the downtime (between December and February). This is the main expense of a F1 team.
By February 2018 the company had begun to get into financial straits and was failing to provide promised information to BWT. BWT nonetheless continued to provide support, including by giving the company a bridging loan in March 2018. BWT was concerned about the company's ability to continue in business and race and sought to bolster its contractual rights. On 7 May 2018 its solicitors sent the company a draft Deed of Variation (“the DOV”). This was executed on 8 May 2018. It was drafted by BWT's solicitors and presented to the company for signature. The terms were not negotiated.
The DOV amended the terms of the CRA. It also provided for the company to grant security to BWT, but in the event that never happened.
BWT terminated the CRA with effect from 1 July 2018 by notice given on 28 May 2018 under an express power contained in clause 18.2 of the CRA.
A creditor of the company then applied for an administration order. This was made on 27 July 2018. The company, with support from BWT, traded in administration before its business and assets were sold, on 16 August 2018, to a company called Racing Point. The company later went into liquidation.
BWT submitted a proof of debt dated 5 June 2019 in the company's administration. The particulars were amended on 28 August 2019. The amended proof stands as BWT's proof in the liquidation. On 28 November 2019 the liquidator admitted the proof as to £1.264 million odd but rejected the balance. The parties are now agreed that the amount of BWT's disputed claim is €4.25 million.
The relevant contractual terms
The CRA contained the following relevant terms:
1. Interpretation
The definitions and general provisions in Schedule 1 apply to this agreement.
“Fees” were defined in Schedule 1 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.”
3. Grant of rights from Force India
3.1 In consideration of and subject to the payment of the Fees by BWT in accordance with clause 17 hereunder, Force India grants to BWT, on a royalty free and (unless otherwise expressly stated) non-exclusive basis, the following BWT Rights for use during the Term: [ there then follows a description of the rights granted to BWT].
4. Force India's obligations and rights
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: [ three tranches as for the 2018 Fees, but one year later in each case]
17.1.4 In 2020, fifteen million Euros (€15,000,000) to be received as follows: [ three tranches as for the 2019 Fees, but one year later in each case]
17.1.5 In 2021, fifteen million Euros (€15,000,000) to be received as follows: [ three tranches as for the 2020 Fees, but one year later in each case]
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.
18. 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 to in clauses 17.1.2.3 – 17.1.5 and the payments referred to in 17.2.3 – 17.2.5 and 17.3.1.3 – 17.3.4 shall not be payable where a party terminates pursuant to this clause 18.2; and (b) in the event BWT terminates pursuant to this clause 18.2, the payments referred to in clause 17.1.2.1, 17.1.2.2, 17.2.2 and 17.3.1.1–17.3.1.2 shall be retained by Force India and no pro rata reimbursement of such Fees and payments, whether in accordance with clause 18.5 or otherwise, shall apply.
[…]
18.5 In the event of any termination of this Agreement pursuant to clause 4.5, or by BWT pursuant to clause 18.1, the total aggregate Fees, Helmet Logo Fees and Driver Drink Bottle Branding Fees payable by BWT to Force India over the entire Term shall be deemed to accrue on a daily basis during the Term and shall be pro-rated to the Termination Date. Any such pro-rated sums paid in relation to any period after the Termination Date shall be reimbursed by Force India to BWT within thirty (30) days after the Termination Date.
The DOV was signed on 8 May 2018. That was after BWT had paid the first and second tranches for 2018 under clause 17.1.2 of the CRA, but before the third.
The DOV included these terms (corrected for typos):
2.1 With effect from the Effective Date, the Parties agree that the C&R Agreement shall be varied as follows:
2.1.1 Subject to paragraph 2.4 below, Clause 18.2 of the C&R Agreement shall be deleted and replaced with the following:
“18.2 Notwithstanding any other provision of this agreement, this agreement may be terminated by either party with effect from 30 November 2018 upon the provision of written notice to be received by the non-terminating party at any time prior to 30 November 2018. For the avoidance of doubt the instalments...
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