Idemitsu Kosan Company, Ltd v Sumitomo Corporation
| Jurisdiction | England & Wales |
| Judge | Mr Andrew Baker QC |
| Judgment Date | 27 July 2016 |
| Neutral Citation | [2016] EWHC 1909 (Comm) |
| Docket Number | Case No: CL-2015-000809 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 27 July 2016 |
[2016] EWHC 1909 (Comm)
Mr Andrew Baker QC
Sitting as a judge of the High Court
Case No: CL-2015-000809
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Alain Choo-Choy QC and Alec Haydon (instructed by Memery Crystal LLP) for the Claimant
Simon Rainey QC and Edward Levey (instructed by Herbert Smith Freehills LLP) for the Defendant
Hearing date: 6 th July 2016
Judgment Approved
Introduction
The Claimant ("Idemitsu") claims damages for misrepresentation under s.2(1) of the Misrepresentation Act 1967 against the Defendant ("Sumitomo"). Sumitomo applies under CPR Part 24 for summary judgment dismissing that claim, on the basis that it has no real prospect of success and there is no other compelling reason why it should be disposed of at a trial.
Idemitsu and Sumitomo are large Japanese companies with business interests in (it may be amongst others) the energy sector. The Defendant owns Sumitomo Corporation Europe Limited ("SCE") as a wholly-owned subsidiary, or at any rate it did in November 2009. Sumitomo and SCE between them owned the entire allotted and issued share capital in Petro Summit Investment UK Limited ("the Company"). By a written sale and purchase agreement dated 12 November 2009 ("the SPA") between Sumitomo and SCE as Sellers and Idemitsu as Buyer, it was agreed that the Sellers would sell their respective shares in the Company, and Idemitsu would buy the same. The sales of shares pursuant to the SPA were completed. The Company thus became a wholly-owned subsidiary of Idemitsu and at some point it was renamed Idemitsu Petroleum UK Limited to reflect its new parentage. Pursuant to Clause 3.1 of the SPA, which provided a formula for calculating the purchase consideration, Idemitsu paid about US$ 575 million for the Company.
The Company had interests in offshore oil and gas fields. In particular, it held a 30.82% interest in the North Sea Ross Field and a 2.4% interest in the adjacent Blake Field. Idemitsu complains that the Company was subject to substantial liabilities arising from a dispute between the respective owners of the Blake and Ross Fields about the sharing of the operating expenses of the " Bleo Holm", a floating production storage and offshore loading vessel. The detail of Idemitsu's complaints in that regard does not matter for the purpose of the present application.
Clause 11.1 of the SPA provided that the SPA itself, the documents to be entered into pursuant to it, and all matters arising from or connected with it, were governed by and were to be construed in accordance with English law. Clause 11.2 provided that the courts of England and Wales were to have exclusive jurisdiction to settle any dispute between the parties under the SPA, or arising out of or in connection with it, including any question regarding its existence, validity or termination. Hence this court's jurisdiction over Idemitsu's claim in these proceedings, which as I said is a claim for damages for misrepresentation under s.2(1) of the 1967 Act, and that claim falls to be determined under English law.
Clause 6.1 of the SPA provided as follows:
6.1 Warranties
6.1.1 Each of the Sellers warrants to the Buyer in respect of itself and its Relevant Shares in the terms of the Warranties in paragraphs 1 and 2 of Schedule 4; and
6.1.2 Sumitomo warrants to the Buyer in the terms of the Warranties in the remaining paragraphs of Schedule 4,
in each case on the date of this Agreement.
One of the many definitions in Clause 1.1 of the SPA was that of " Warranties", defined to mean " the warranties given by (i) Sumitomo in Schedule 4 and Part 2 of Schedule 7; and (ii) SCE in paragraphs 1 and 2 of Schedule 4." The Appendix to this judgment sets out more fully the terms of Clause 6 of the SPA, together with the paragraphs of Schedule 4 relied on by Idemitsu for the content of what it says were misrepresentations by Sumitomo, and also other provisions of the SPA relevant to this application.
The matters thus warranted by Sumitomo on 12 November 2009 were matters of then past or present fact relating to the Company. The common law rule being caveat emptor, no promise about the Company, its activities or finances, its transactions or liabilities, was purchased by Idemitsu for its US$ 575 million except such promises (if any) as might be made by Sumitomo or SCE in the SPA. The Warranties, on the language of Clause 6.1 and the definition in Clause 1.1, were precisely such promises. Each was a promise made by Sumitomo (or SCE) in the SPA – a contractual guarantee given by them – that on 12 November 2009 a certain matter of then past or present fact concerning the Company was the case.
Idemitsu alleges that some of the matters thus warranted by Sumitomo were not the case on 12 November 2009. If so, there were breaches of warranty on the part of Sumitomo. However, Idemitsu accepts that it cannot bring a claim for breach of warranty – it cannot claim on the contractual guarantees Sumitomo gave it. Clause 1.1 defines " Claim" to mean " a claim by the Buyer under the Warranties or a Tax Claim". It is common ground that a claim by Idemitsu for breach of warranty, founded upon the factual allegations it has made, would be a Claim thus defined, and would not be a Tax Claim. Paragraph 2.2(a) of Schedule 6 to the SPA precludes recovery of any amount in respect of a " Claim, other than a Tax Claim" not notified to Sumitomo within 18 months of completion, and Idemitsu accepts that it did not notify Sumitomo of any claim within that period.
As I read Idemitsu's Particulars of Claim, its claim raised the question whether the Warranties were only contractual promises, or were (also) representations by Sumitomo that could be actionable as misrepresentations in a claim under the 1967 Act. That is an important question as to which there is conflicting authority at first instance in the decisions of Arnold J. in Invertec Ltd v (1) De Mol Holding BV, (2) Henricus Albertus de Mol [2009] EWHC 2471 (Ch) and Mann J. in Sycamore Bidco Ltd v (1) Sean Breslin, (2) Andrew Dawson [2012] EWHC 3443 (Ch). In the latter decision, Mann J. gave fully reasoned consideration to the question, and to the decision of Arnold J. in the earlier case. He refused to follow Arnold J., not on the basis that there was any room to distinguish between the contractual wording in the two cases but because he disagreed with Arnold J.'s view as a matter of principle. Were I minded to prefer the view of Arnold J. on the point, the question would arise whether I should nonetheless follow Mann J.'s decision, treating the law as settled thereby at first instance under the rule of precedent formulated by Nourse J., as he was then, in Colchester Estates (Cardiff) v Carlton Industries Plc [1986] 1 Ch 80 at 84F-85H.
Idemitsu's response to Sumitomo's application suggested that Idemitsu intended a different case, perhaps in the alternative or perhaps as its only real case, namely that representations were made by Sumitomo to Idemitsu, prior to the conclusion of the SPA and in order to induce Idemitsu to conclude it, in the terms of the matters warranted by the Warranties when the SPA was concluded. In particular, that by including those matters as matters to be warranted in the SPA in the final document prepared for signature and marked " Execution Copy", Sumitomo made representations to Idemitsu in those terms. This clarification or possible evolution of Idemitsu's case was explored in argument, for example in the light of a contention in Idemitsu's Skeleton Argument that Mann J.'s decision in Sycamore Bidco, supra, could be distinguished because there " Counsel for D had 'expressly disclaimed the relevant representations being made at any earlier time.' (before the contract was made [203(vi)]", but " That is not the case here" (original emphasis).
At my encouragement, without prejudice to any objection that Sumitomo might make upon seeing them, draft Amended Particulars of Claim were provided by Idemitsu following the hearing, setting out with proper clarity how it was intended to put the case. As now pleaded (in draft), Idemitsu's only case as to how and when any representations were made is that " By providing the [Execution Copy] to Idemitsu and/or by offering to sign [it] and/or by signing [it], Sumitomo thereby made representations to Idemitsu in the terms of the statements of fact contained in Schedule 4 of the [Execution Copy]". The claim logic is then completed by the allegation that " In reliance upon and induced by [those] representations …, Idemitsu signed the [Execution Copy] and entered into the SPA", by Idemitsu's existing case as to falsity, and by its existing allegations as to loss. Idemitsu says its recoverable loss is US$ 105.9 million. In a commendably brief written Note on the draft Amended Particulars of Claim, Sumitomo objected to the proposed amendments, but only on the basis that, for the reasons it put forward at the hearing, the case as re-formulated (still) has no real prospect of success. In a written Note in response, Idemitsu summarised its reasons for saying that its case as re-formulated does have a real prospect of success and so ought to survive Sumitomo's application. In that Note, Idemitsu contended, contrary I think to its draft Amended Particulars of Claim, that it continues to assert actionable misrepresentations made by the SPA itself (as concluded), as well as pre-contractual misrepresentations made by providing (etc.) the Execution Copy shortly or immediately before the SPA was concluded.
There being no objection to the proposed amendments independent of their viability on the merits, in my judgment the appropriate approach to...
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