Ife Fund SAv Goldman Sachs International
| Jurisdiction | England & Wales |
| Judge | Lord Justice Waller,Lord Justice Gage,Lord Justice Lawrence Collins |
| Judgment Date | 31 July 2007 |
| Neutral Citation | [2007] EWCA Civ 811 |
| Docket Number | Case No: A3/2006/2603 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 July 2007 |
[2007] EWCA Civ 811
Lord Justice Waller
Vice-President of the Court of Appeal, Civil Division
Lord Justice Gage and
Lord Justice Lawrence Collins
Case No: A3/2006/2603
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Queens Bench Division, Commercial Court
Mr Justice Toulson
Jonathan Nash QC and Rajesh Pillai (instructed by Messrs Fox Williams LLP) for the Appellant
Mark Howard QC and David Quest (instructed by Messrs Herbert Smith LLP) for the Respondent
Hearing dates: 16 th– 18 th July 2007
Judgement
Introduction
This is an appeal from a judgment of Toulson J (as he then was) by which he dismissed a claim for damages by the appellants (IFE), based on an alleged failure by the respondents (GSI) as arrangers and underwriters of a syndicated loan to disclose to them information, obtained after the Syndication Information Memorandum (SIM) had been sent out, but before IFE completed their purchase of bonds from GSI.
The Facts
There is on the appeal no challenge to the judge's findings of fact and the full history can be found in his judgment. For the purposes of the appeal the basic facts can be described fairly shortly. GSI were the underwriters of credit facilities made available to Autodis SA (Autodis). They were also the arranger for syndication of an intermediate tier of credit provided to Autodis for its purchase of shares in a UK listed company, Finelist plc (Finelist). GSI produced a SIM subject to certain standard wording which was distributed on or about 30 March 2000 to possible participants including IFE. The expectation was that all participants and GSI would finally commit themselves during April 2000, but in fact GSI committed themselves as underwriters on 27 April 2000 and there was some delay before other participants committed themselves.
IFE invested Euros 20 million purchasing bonds and warrants issued by Autodis from GSI on 30 May 2000 in reliance on the information in the SIM and on two reports from Arthur Andersen relating to Finelist dated 21 December 1999 and 11 February 2000 which, although they were sent separately, later it is common ground can be treated as if incorporated in the SIM.
Between the sending out of the SIM and 30 May GSI received other information from Arthur Andersen by what are described as reports dated 19 and 26 May 2000. Those reports, on the findings of the judge, disclosed information which showed “that the statements about Finelist's financial performance in the SIM and Arthur Andersen's pre-acquisition reports were or might have been incorrect in [a] material way” [see paragraph 77 of the judgment].
In September 2000 following discovery of accounting frauds committed by the management of Finelist a receiver was appointed over Finelist. The appointment occurring so soon after May 2000, IFE were concerned as to whether they had received all relevant information, and during their inquiries discovered in January 2001 that Arthur Andersen had produced a report to GSI on 19 May 2000which was “much more negative in tone” than the reports referred to in the SIM which had not been disclosed to IFE.
In order to restructure the capital and debt of the Autodis Group in July 2001 the various classes of shareholders and creditors of Autodis including IFE and GSI entered into a Bondholders' Agreement pursuant to which IFE agreed to invest a further £4.5 million in equity and new bonds issued by Autodis. By clause 16.4 of that agreement the parties agreed not to bring proceedings of any kind. All the parties other than IFE signed the agreement at a meeting at the Paris Office of Ashurst Morris Crisp on 29 June 2001. Mr Mitjavile for IFE did not sign at that meeting, exception having been taken to a limit in the Power of Attorney dated 29 June 2001, which IFE had granted to him. The Power of Attorney had been granted “under the limitations stated in the attached letter dated 28 June 2001, addressed to Mr Jean-Luc Sauvage, the appointed bondholders' representative,. .”; the letter stated that IFE's agreement “in no case comprises any waiver of our rights of action ….”.
A fresh unlimited power of attorney was obtained dated 3 July 2001 replacing that of 29 June 2001. But before signing the agreement Mr Mitjavile on behalf of IFE sought to preserve IFE's position by a letter faxed to Mr Jean-Luc Sauvage on 3 July 2001. Before any response was obtained to that letter Mr Mitjavile on behalf of IFE signed the agreement on 4 July 2001. By letter dated 9 July 2001 Mr Sauvage rejected the attempt to reserve the position. IFE went ahead with its investment and the agreement was ultimately approved by the French Court.
The action
IFE brought this action against GSI in September 2005. The essence of the claim was to assert that GSI had failed to reveal the further information on Finelist obtained from Arthur Andersen prior to 30 th May 2000. The primary way in which that case was made was to assert that GSI had impliedly made certain representations. Paragraphs 9 and 10 of the Re-amended Particulars of Claim asserted:—
“9. Further, by referring to Finelist's financial performance and to the Memorandum Reports in the Memorandum, and by arranging with Arthur Andersen that copies of the Memorandum Reports should be sent to IFE, GSI impliedly represented to IFE and/or represented by its conduct to IFE that:
(1) GSI was not aware of any facts which showed that the statements about Finelist's financial performance made in the Memorandum were or might be incorrect in any material way; and/or
(2) GSI was not aware of any facts which showed that the facts stated in the Memorandum Reports were or might be incorrect in any material way, and/or which showed that the opinions expressed in the Memorandum Reports were not or might not be reasonable; and/or
(3) So far as GSI was aware, Arthur Andersen considered that the facts stated in the Memorandum Reports were correct and that its opinions stated therein were reasonable.
10. The representations referred to in paragraph 9 above were continuing representations which IFE was entitled to and did in fact regard as remaining true until completion of the transaction on 30 May 2000.”
In the original pleading IFE asserted that the representations became false and that GSI had no reasonable grounds for believing that they were or remained true by reference to the Arthur Andersen Report of 19 May 2000. Only after commencement of the action did IFE become aware of the further report of 26 May 2000and the pleading was amended to allege falsity by reference to that report as well.
Shortly before trial IFE made a further amendment to the pleading alleging a duty of care and by paragraph 10A alleged:
“10A. Further or alternatively, by reason of the facts and matters pleaded in paragraphs 2 to 8 above, GSI owed a duty of care to IFE to take reasonable care that if before completion of the transaction GSI became aware of any facts and matters which showed that (1) the statements about Finelist's financial performance made in the Memorandum were or might be incorrect in any material way; and/or (2) the facts stated in the Memorandum Reports were or might be incorrect in any material way, and/or which showed that the opinions expressed in the Memorandum Reports were not or might not be reasonable; and/or (3) that Arthur Andersen no longer considered that the facts stated in the memorandum Reports were correct and that its opinions stated therein were reasonable, GSI would inform IFE that this was the case and/or would inform IFE of the relevant facts and matters.”
By its defence GSI relied on clause 16.4 of the Bondholders' Agreement by which GSI asserted it was clear as a matter of French law that IFE were precluded from bringing the proceedings. That clause provides as follows:—
“16.4 Waiver and recourse and action
(a) The Parties, both on their own behalf and for and on behalf of their Affiliates, for which they shall be answerable, undertake (i) to co-operate and provide every assistance with the preparation and conduct of Proceedings, (ii) not to conduct proceedings relating to the Proceedings and, more generally, to any facts and circumstances which may be the subject of the Proceedings other than in the context of and in accordance with the provisions of the Participating Capital Loan and (iii) not to bring any proceedings of any kind whatsoever against (x) Autodis or its subsidiaries, (y) any of the members of the supervising board or managing board of Autodis or Autodistribution, or (z) any of the Parties, or their Affiliates, with regard to the Finelist Group plc, its acquisition and all events, actions or omissions linked to this acquisition which have preceded or followed this (including with regard to the corporate offices within the Finelist Group plc)
(b) Any Party having brought legal proceedings in breach of Section 16.4 (a) shall lose, and the transferee receiving all or part of its Securities shall lose, all rights or benefits resulting for said Party from the present Agreement, including all rights to payments of Remuneration or to transfers of Shares pursuant to the present Article XVI, while remaining bound by all the obligations resulting for said Party from the present Agreement, just as the transferee receiving all or said part of its Securities shall remain bound by all the obligations resulting for said transferee from the present Agreement.”
IFE's response was to take a point on construction under French law on which the judge...
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