Infiniteland Ltd and Another and Artisan Contracting Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Chadwick,Lord Justice Carnwath,Lord Justice Pill |
| Judgment Date | 22 June 2005 |
| Neutral Citation | [2005] EWCA Civ 758 |
| Docket Number | Case No: A3/2004/1257 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 June 2005 |
[2005] EWCA Civ 758
Lord Justice Pill
Lord Justice Chadwick and
Lord Justice Carnwath
Case No: A3/2004/1257
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE PARK)
HC02C03608
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Alan Steinfeld QC and Mr Paul Downes (instructed by Bircham Dyson Bell of 50 Broadway, Westminster, London SW1H 0BL) for the Appellants
Mr Robin Hollington QC and Mr Robert Levy (instructed by Taylor Vinters of Merlin Place, Milton Road, Cambridge CB4 4DP) for the Respondents
This is an appeal from an order made on 28 May 2004 by Mr Justice Park in proceedings arising from a share sale agreement dated 24 May 2001 and made between the first respondent, Artisan Contracting Limited (as Vendor), and Mea Corporation Limited (as Purchaser). The second respondent, Artisan (UK) Limited was made a party to that agreement in order that it could join with the Vendor in giving the warranties contained in clause 7—and for other purposes which are not material in the context of this appeal. On 24 July 2001 the Purchaser's rights and obligations under the agreement were assigned by Mea Corporation, with the consent of the Vendor and Artisan UK, to the first appellant, Infiniteland Limited, a company wholly owned by the second appellant, Mr John Aviss. On the same day Mr Aviss guaranteed to the Vendor the due payment by Infiniteland of the deferred consideration payable under the agreement.
The terms of the share sale agreement
The agreement was for the sale of the whole of the issued capital of three companies, Bickerton Construction Limited ("Bickerton"), Driver Construction Limited and Yeadon Air Structures Limited. The purchase consideration was stated in the agreement, as made on 24 May 2001, to be £1,233,411. But, as appears from a variation agreement made on 14 June 2001 between the same parties (the Vendor, Mea Corporation and Artisan UK), that figure reflected their intention that the price for the shares in the three companies ("the Shares") was to be £1 million "plus the aggregate value of the net assets of the Group Companies as at 31 March 2001". In that context "the Group Companies" means Bickerton, Driver Construction and Yeadon Air Structures and their subsidiaries (if any) for the time being—clause 1.1.1 of the agreement. 31 March 2001 was the "Last Accounts Date" for the purposes of the agreement. In the variation agreement the parties increased the purchase price to £1,402,948. The date of the variation agreement, 14 June 2001, was the date upon which completion took place—recital B to the variation agreement.
Clause 3.1 of the agreement of 24 May 2001, as varied by the agreement of 14 June 2001, was in these terms (so far as material):
"The purchase consideration for the Shares shall (subject to adjustment pursuant to the provisions of clause 4) be the sum of [£1,402,948] which shall be paid or satisfied by:
3.1.1. a deposit of £90,000 to be paid in cash to the Vendor's Solicitors on the date of this agreement and to be held by the Vendor's Solicitors as stakeholder pending Completion;
3.1.2 the sum of £810,000 [to be paid in cash on 29 June 2001 …]
3.1.3 the balance of [£502,948], subject to any adjustment, being paid in cash on the first anniversary of Completion;"
Clause 4.1 of the agreement provided for an adjustment to the purchase price if the aggregate value of the net assets of the Group Companies proved to be substantially more or less than the estimate which the parties had made. The clause, as varied on 14 June 2001, was in these terms:
"The Vendor agrees that, subject to clause 4.2, if the Net Asset Value is lower than [£402,948] by £50,000 or more then the Vendor shall reimburse to the Purchaser the total of such shortfall (including, for the avoidance of doubt, the £50,000) and the Purchaser agrees that, subject to clause 4.2, if the Net Asset Value is greater than [£402,948] by £50,000 or more then the amount of such excess (including, for the avoidance of doubt, the £50,000) shall be added to the balance of the consideration payable under clause 3.1.3."
Net Asset Value is a defined term. It means:
"… in relation to the Group Companies the aggregate value of their fixed assets plus their current assets less the aggregate of their liabilities at 31 st May 2001 such value to be calculated consistently with and on the same basis and accounting policies as were applied in the Principal Accounts "
And, in that context, the Principal Accounts means:
"… the audited balance sheet as at the Last Accounts Date and the audited profit and loss account for the year ended on the Last Accounts date of each Group Company including the directors' report and notes"
As I have said, the Last Accounts Date was 31 March 2001. Clause 4.2 provided that certain items—goodwill, adjustments made by the Purchaser on acquisition and any asset revaluation—should be disregarded when calculating Net Asset Value for the purposes of adjustment to the purchase price under clause 4.1.
Clause 4.3 required the Purchaser to prepare a calculation of the Net Asset Value before 1 September 2001 and contained provisions for verification of that calculation by the Vendor. Clause 4.4 provided for certification of the Net Asset Value, in default of agreement, by an independent accountant. Clause 4.7 was in these terms:
"The calculation of the Net Asset Value shall be without prejudice to any Warranty Claim provided that the Warrantors shall not be liable to the extent that the Purchaser has been compensated by any adjustment under this clause."
A Warranty Claim was any claim for breach of the warranties and undertakings given by the Vendor and Artisan UK ("the Warrantors") in clause 7 and schedule 3.
Clause 5.1 of the agreement provided that completion should take place on 8 June 2001 provided that a number of conditions precedent were satisfied. Those conditions included, at clause 5.2.6:
"The purchaser not having discovered before Completion through reasonable and proper due diligence (with which the Vendor and Artisan will give reasonable and proper co-operation) any facts or circumstances which would or might have a material adverse effect on the value of the Group Companies (material in this context meaning £75,000 or more) unless the Vendor makes good to the Purchaser such adverse effect prior to Completion."
Clause 5.6.11 required that the documents to be delivered by the Vendor to the Purchaser upon completion included "the Principal Accounts of each Group Company".
Clause 7 set out warranties and undertakings given by the Vendor and Artisan UK. Clause 7.1.8 was in these terms (so far as material):
"The Warrantors warrant to the Purchaser that … save as set out in the Disclosure Letter, the Warranties in Schedule 3 are true and accurate in all respects; … "
Paragraph 1.1.2 in schedule 3 contained a warranty that:
"The Principal Accounts (a) give a true and fair view of the assets and liabilities of each Group Company at the Last Accounts Date and its profits for the financial period ended on that date; … "
By clause 7.1.9 the Vendor and Artisan UK warranted that the contents of the Disclosure Letter and of all accompanying documents were true and accurate in all respects and fully, clearly and accurately disclosed every matter to which they related.
At clause 7.7 the parties acknowledged that the Purchaser had entered into the agreement on the basis of and in reliance upon the truth and accuracy of the Warranties—that is to say, the warranties set out in clause 7.1 and in schedule 3 (subject to the Disclosure Letter); and the Purchaser acknowledged that it had not been induced to enter into the agreement by any representation or warranty other than those warranties. Clause 7.4 provided that the rights and remedies of the Purchaser in respect of any breach of the Warranties should not be affected by completion; and it went on to provide (so far as material) that the Purchaser's rights in respect of breach of warranty should not be affected:
"… by any investigation made by it or on its behalf into the affairs of any Group Company (except to the extent that such investigation gives the Purchaser actual knowledge of the relevant facts or circumstances) …"
The Disclosure Letter
The Disclosure Letter bears the same date as the agreement, 24 May 2001: it refers to the agreement "to be entered into today" and was addressed to Mea Corporation by the Vendor and Artisan UK. It includes both general and specific disclosure.
General disclosure is made in a paragraph which includes the following:
"This letter shall be deemed to include, and there are hereby incorporated into it by reference and generally disclosed, the following matters:
…
4. all matters from the documents and written information supplied by us to your reporting accountants, Pridie Brewster;
5. all matters contained or referred to in the following documents supplied by us to you in the green lever arch files
…
(b) Bickerton—board meeting packs for 30 th January 2001, 27 th February 2001 and 27 th March 2001
…
and from the board meeting pack[s] for Bickerton for 30 th April 2001 …
…
7. all matters contained or referred to in the documents contained in the Disclosure Bundle, a list of which documents is attached to this letter."
It is common ground that there was a Disclosure Bundle, which included documents to which I shall refer later in this judgment.
Specific disclosure was introduced with the sentence:
...
To continue reading
Request your trial
-
Douglas Macduff Wemyss v Sameer Karim and Another
...anything to put him on notice that it was not correct. Mr Dean submitted on the basis of Infiniteland Ltd v Artisan Contracting Ltd [2005] EWCA Civ 758 that the documents that would have shown the true position were available in the office in which Rafik Karim sat for two weeks and it could......
-
Triumph Controls – UK Ltd v Primus International Holding Company
...details to identify the nature and scope of the matter disclosed.” 333 The case of Infiniteland Ltd v Artisan Contracting Ltd [2005] EWCA Civ 758 concerned the construction of a share purchase agreement under which the seller warranted that: “the contents of the Disclosure Letter and of al......
- Satin Straits Sdn Bhd v Seng San Bing
-
Fons HF ((in Liquidation)) v Corporal Ltd and Another
...therefore interpreted in the way a reasonable commercial person would construe them 43 In Infiniteland Ltd v. Artisan Contracting Ltd [2006] 1 BCLC 632, at [88], Carnwath L.J. said that:- "In the context of a professionally drawn legal document such as this, the Court should start from a st......
-
A Little Knowledge Can Be A Dangerous Thing: Sandbagging Clauses In Acquisition Agreements
...Operating LLC v. James Crystal Enterprises LLC, 2007 WL 2142926 (Del. Ch. 2007). 5 Infiniteland Ltd. v. Artisan Contracting Ltd., [2005] EWCA Civ 758. See also Eurocopy plc v. Teesdale, [1992] BCLC 1067 and Lonedale Ltd. & Ors v. Scottish Motor Auctions (Holdings) Ltd., [2011] CSOH 04 (......
-
M&A Dispute Provides Rare Glimpse Into English Courts’ Approach to Breach of Warranty Claims
...EWHC 2101 (Comm) and Towergate Financial (Group) Ltd v Hopkinson [2020] EWHC 984 (Comm) Infiniteland Ltd v Artisan Contracting Ltd (2005) EWCA Civ 758 At pp. Unlike the wording of the relevant provision in the agreement considered in New Hearts Ltd v Cosmopolitan Investments Ltd [1997] 2 BC......
-
International Legal News Volume 1 Issue 3 - June 20, 2006
...EUROPE Bankruptcy -A New Guise The Dutch Go Into the Offensive Infiniteland Ltd and John Steward Aviss v Artisan Contracting Ltd [2005] EWCA Civ 758 Commercial agents -a new beginning? Principles of new corporate income tax regime to become effective on 2009 disclosed for public debate in E......
-
Purchaser's Knowledge Of Inaccurate Vendor Representations & Sandbagging Tactics
...36 Delaware Journal of Corporate Law 1081. 7 See for example, Infiniteland Ltd and another v. Artisan Contracting Limited and another, [2005] EWCA Civ 758. 8 John F Clifford, Freek Jonkhart, and Jessica Pearlman, "What's the Market for that Cross-Border Deal? The European, US and Canadian P......
-
Trade Secrets' Under New Zealand Law
...35 29 IDC Group Ltd v Clark [1992] 2 EGLR 187 cited in Lewison, above n 28, at 234. 30 Infiniteland Ltd v Artisan Contracting Ltd [2005] EWCA Civ 758, (2006) 1 BCLC 632 cited in Lewison, above n 28, at 235. 31 Bedfordshire Police Authority v Constable [2009] EWCA Civ 64, [2009] 2 All ER 200......
-
Navigating trans‐atlantic deals: warranties, disclosure and material adverse change
...not disclosed inthe Disclosure Letter.Comments by way of obiter dicta in Infiniteland and another v. Artisan ContractingLtd [2005] EWCA Civ. 758 seemed to bolster the view that a buyer will not be able torely upon this type of provision.The Infiniteland case concerned a warranty claim that th......