Forrest and Others v Glasser and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Ward,Lord Justice Laws,Lord Justice Longmore |
| Judgment Date | 31 July 2006 |
| Neutral Citation | [2006] EWCA Civ 1086 |
| Docket Number | Case No: A2/2005/2890 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 July 2006 |
[2006] EWCA Civ 1086
The Rt Hon. Lord Justice Ward
The Rt Hon. Lord Justice Laws and
The Rt Hon. Lord Justice Longmore
Case No: A2/2005/2890
Tllc160/05
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
MR JUSTICE STANLEY BURNTON
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Stephen Houseman (instructed by Slaughter & May) for the appellant
Mr Matthew Reeve (instructed by Matthew Arnold & Baldwin) for the respondents
Lord Justice Ward
Introduction
In issue in this appeal is the construction of contractual time-bar clauses in commercial agreements.
By an agreement dated 24th November 2000 the six appellants, an investment syndicate led by Mr Henrik Kjellin, subscribed for ninety-six shares representing 48.95% of the issued shared capital in a company called Glasser Whitley Ltd at a price of £700,000. By a second agreement dated 2nd January 2001 they acquired further shares in the company from the respondents for £900,000. It is common ground that the two agreements are to all intents and purposes in similar terms and I shall confine myself to reciting the terms of the subscription agreement.
Unfortunately for the subscribers, their hopes and expectations of good fortune were dashed as the company failed to perform satisfactorily with the result that it entered into a creditors' voluntary liquidation on 1st August 2003 and has since been wound up.
The appellants were aggrieved and in the autumn of 2003 they began to question whether there had been full compliance by the respondents with their contractual obligations. Legal advice was taken on both sides and there was an exchange of correspondence and emails between Mr Kjellin and Mr Glasser about a "potential warranty claim".
The respondents had entered into a number of warranties – 29 in one agreement and 32 in the other, so we were told – particularly as set out in clause 5 and schedules 2 and 4 of the subscription and acquisition agreements respectively. They included warranties that the audited accounts gave a true and fair picture of the assets, liabilities, commitments and profits of the company as at the end of the last accounting year, 31st December 1999, and also that the accounts had been prepared in accordance with generally accepted accounting principles. The relevant warranty contained in paragraph 5.3 of schedule 2 was this:
"The Management Accounts have been prepared in accordance with generally accepted accounting principles and to the best of the Warrantor's knowledge and belief reflect the state of affairs of the Company in all respects and the profits/losses of the Company during the period to which they relate and adequately disclose all assets and liabilities of the Company at the relevant balance sheet date to which they relate and applied bases and policies of accounting which have been consistently apply in the Accounts …"
On 24th November 2003 the appellants' solicitors wrote to each of the respondents' saying:
"We hereby give notice on behalf of the [appellants], of their intention to make a claim against you …
The claim arises out of the fact that the management accounts of Glasser Whitley Limited dated 31st October 2000 and provided to our above named clients by you … were not in accordance with the warranties given in clause 5 of the Subscription Agreement dated 24th November 2000 and paragraph 5 of schedule 2 thereto and as repeated in clause 5 and schedule 4 of the Agreement for the Acquisition of part of the issued shared in Glasser Whitley Limited dated 2nd January 2001.
We shall be writing to you further in due course, however, the purpose of this letter is formally to notify you of the claim."
On 17th November 2004 the appellants issued a claim for the recovery of their investment based on breach of warranty. An amended Particulars of Claim allege that the warranted management accounts dated 31st October 2000 had not been prepared in accordance with generally accepted accounting principles, did not reflect the state of affairs of the company in respect of the profits/losses of the company during the period to which they were related, did not accurately or adequately disclose all assets and liabilities of the company and did not apply bases and policies of accounting which had been consistently applied in the accounts. The particulars were these:
"(e) The balance sheet as at 31st October 2000 incorrectly valued work in progress at £148,000, whereas it should have valued the same at between £76,465 and £38,215. Accordingly, the value of the company's work in progress was overstated by not less than £71,535.
(f) The balance sheet as at 31st October 2000 stated that the company owed creditors £21,000, whereas it should have stated that the company owed trade creditors around £43,134 and that there was deferred income of around £130,148. Accordingly, the company's liabilities to creditors were understated by £135,282."
The respondents denied being in breach as alleged and by an amendment to the Defence made on 14th September 2005 for the first time took the further point that the claim was time-barred under clause 6.3.1 of the agreement. The material clauses are these:
"6.3 Any Claim by the Subscribers:
6.3.1 which shall not have been notified in writing to the Company on or before the third anniversary of the Completion Date, or the sixth anniversary in the case of matters relating to Taxation; and
6.3.2 in respect of which court proceedings have not been issued and served on the Warrantors within 12 months of the date of notification of such claim to the Company
(except that the time limits shall not apply in respect of Claims arising from fraud or wilful misconduct or wilful concealment by the Warrantors, the Company or any of its officers or employees) shall be deemed to have been waived.
6.4 Without prejudice to the provisions of Clause 6.3 hereof, the Subscribers will notify the Company and the Warrantors in writing as soon as reasonably practicable after the date upon which the Subscribers became aware of a Claim against the Warrantors, such notification to be in sufficient detail to enable the Company and the Warrantors to identify the Claim and to respond to it."
On an application to strike out, Stanley Burnton J. decided without objection to resolve the matter by a trial of preliminary issues which were formulated as follows:
"(A) Does the content of the letters dated 24th November 2003, sent by Clifton Ingram on behalf of the Claimants to the Defendants and Glasser Whitley Limited, comply with the requirements of clause 6.3 of the Subscription Agreement dated 24th November 2000 and Clause 6.3 of the Acquisition Agreement dated 2nd January 2001, and,
(B) If the answer to (A) above is negative, are the claims made in these proceedings deemed to have been waived by the Claimants pursuant to those clauses."
On 7th December 2005 he ordered that the answer to preliminary issue A was negative and the answer to preliminary issue B was positive. However, he gave permission to appeal.
The judgment
Stanley Burnton J. held that the first question to consider was:
"whether the earlier correspondence, and indeed the later correspondence, is to be taken into account in deciding whether there has been a compliant notification in writing by the letters of 24th November 2003."
He decided:
"34. The letters of 24 November 2003 are the only claim letters relied upon. In my judgment those letters fall to be considered and interpreted in their own terms. Had they expressly, or by implication, referred to earlier correspondence the position, as I have already said, would have been different, but they do not. They give notice of an intention to make a claim arising out of the fact that the management accounts were not in accordance with the warranties and no more. Looking at those letters it seems to me that a recipient could not know which aspect of the management accounts were to be the subject of the claim which was referred to, so that, for example, if a claim had been asserted three months later in respect of something other than the value of work in progress or creditors, or anything else that had not been touched on in earlier correspondence, the recipient would be unable to say that the matter had, or had not, been the subject of the letters of 24 November 2003.
35. Since it is the letters of 24 November 2003 which are relied upon as the claim letter, it must be interpreted in their terms, and in their terms they do not call up or refer to any antecedent correspondence."
He thought the commercial purpose of the provisions was obvious, namely that:
"37. … It is to draw a line above the liability of the warrantors in the event that clause 6.3 is not complied with. It introduces a contractual limitation period. In terms, in this case, the provision is a deemed waiver of a claim, but it seems to me that that can make no difference to the operation of this clause as against other clauses which have been considered by the court.
38. Parties to contracts such as this are entitled to contract for a degree of certainty in their financial positions after an agreed period of time has elapsed, here, effectively, three years from completion. What was negotiated by the company and the defendants … was certainty as to their position after three years or, if there was a claim, notify them under 6.3.1 after four years if proceedings seeking a remedy in respect of that claim had not been issued."
He considered clause 6.4 and held:
"41. Clause 6.4...
To continue reading
Request your trial
-
Mur Shipping B.v v. Louis Dreyfus Company Suisse S.A.
...and resolution while a claim is fresh and that is the same regardless of the time period. 33 Mr. Young, QC, for MUR, referred me to Forrest v Glasser [2006] 2 Lloyd's Rep 392, a case arising out of a share sale with a clause barring claims not presented within 12 months, noting that it was......
-
Dodika Ltd v United Luck Group Holdings Ltd
...general guidelines to construction emerge from the authorities: (a) Every notification clause turns on its own individual wording ( Forrest v Glasser [2006] EWCA Civ 1086; [2006] 2 Lloyd's Rep 392, para 24; Ipsos SA v Dentsu Aegis Network Ltd [2015] EWHC 1171 (Comm), para. 16). (b) The a......
-
Mid Essex Hospital Services Nhs Trust v Compass Group Uk and Ireland Ltd (trading as Medirest)
...that the Trust was submitting that Medirest in the 28 August letter should have met the standards required in pleading a case. In Forrest v Glasser [2006] EWCA Civ 1086; [2006] 2 Lloyd's LR 392, the Court of Appeal approved what Gloster J said in RWE Nukem Ltd v AEA Technology plc [2005] EW......
-
Mid Essex Hospital Services Nhs Trust v Compass Group Uk and Ireland Ltd (trading as Medirest)
... ... had intended to impose a general duty to co-operate with one another in good faith, they would have stated this in a stand alone sentence with ... He accepted that the language of this clause (unlike others) was expressed in terms of entitlement rather than obligation. But he said ... ...