Infiniteland Ltd and John Stewart Aviss v Artisan Contracting Ltd and Artisan (UK) Ltd

JurisdictionEngland & Wales
CourtChancery Division
JudgeMr Justice Park
Judgment Date30 Apr 2004
Neutral Citation[2004] EWHC 955 (Ch)
Docket NumberCase No: HC02CO3608 TLC 114/03

[2004] EWHC 955 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Before:

The Honourable Mr Justice Park

Case No: HC02CO3608 TLC 114/03

Between:
(1) Infiniteland Limited
(2) John Stewart Aviss
Claimants
and
(1) Artisan Contracting Limited
(2) Artisan (UK) Plc
Defendants

Paul Downes and Krista Lee (instructed by Bircham Dyson Bell) for the claimants

Robin Hollington QC and Robert S Levy (instructed by Taylor Vintner) for the defendants

Hearing dates: 18–19.11, 21.11.-15.12, 18.12.2003 & 04–09.02.2004

Approved Judgment

Mr Justice Park

Table of Contents

Heading Beginning Paragraph

Abbreviations, dramatis personae, glossary etc. 1

Overview 2

Features which are backgrounds to the facts 12

The principal companies and individuals involved in the events which the case is about 13

Bickerton 14

The Artisan group 17

Mr Stephen Dean 17(i)

Mr Chris Musselle 17(ii)

Mr Alan Brookes 17(iii)

Mr Aviss and his companies 18

Mr Aviss 18(i)

Infiniteland 18(ii)

Mea Corporation Ltd 18(iii)

Zoa Corporation Plc 18(iv)

Mr Bill Berry 19

The statutory profit and loss account for 2000/2001, and the impact of the £1,081,000 upon it 21

The £1,081,000 issue: allegations made by the claimants 24

The facts: a chronological account of the relevant events 28

£1,081,000: Infiniteland's claims based on misrepresentation 84

The £1,081,000 issue: the breach of warranty arguments 98

(1) The no Principal Accounts answer 102

(2) The disclosure answer 110

(3) Knowledge as an overriding answer 113

(4) The clause 7.4 knowledge answer 116

Conclusion on the £1,081,000 issue and the breach of warranty argument 123

The £1,081,000 issue and breach of warranty: quantum 124

The £1,081,000 issue: the price adjustment provisions in the share sale agreement 135

The contracts valuation issue: introduction 139

The contracts valuation issue: is a clause 4 price adjustment claim ruled out because Infiniteland did not follow the procedure in the clause? 147

The contracts valuation issue: were the disputed contract valuations within the range of legitimate differences in opinion? 158

The contracts valuation issue: by how much, if anything, were the four disputed projects overvalued? 164

Bute Street 165

Verulamium 174

Slade Farm School 184

Clarendon Road 188

The contracts valuation issue: conclusion 191

The Artisan indemnity issue 193

Conclusion 196

Abbreviations, dramatis personae, glossary Annex

Mr Justice Park

Mr Justice Park:

Abbreviations, dramatis personae, glossary, etc.

1

These are in the Table annexed at the end of this judgment. A reader who is unfamiliar with the case might find it convenient to detach or copy the Annex, in order to have it immediately to hand while reading the judgment.

Overview

2

The case arises from the sale by ACL (Artisan Contracting Limited, the first defendant) in mid-2001 of a number of companies, including especially Bickerton, to Infiniteland (the first claimant). AUK (Artisan (UK) PLC, the second defendant) was and is the parent company of ACL. Infiniteland is wholly owned by Mr Aviss, the second claimant. Bickerton's trade was that of a building contractor in quite a substantial way of business. The purchase of the company by Infiniteland was not a success. Quite soon after it was purchased the contracting business started to fail. Bickerton ceased trading in early December 2001, and it was placed into creditors' liquidation on 17 January 2002.

3

The failure of Bickerton has led to claims and cross claims between the parties. The main claims are these: Infiniteland claims damages from ACL for misrepresentation and breach of warranty, and from AUK as guarantor of ACL's obligations under the warranties. The Artisan companies dispute Infiniteland's claims, and advance claims of their own. They say that part of the price for Bickerton and the other companies which were sold is still owed by Infiniteland, and that Infiniteland's obligation is guaranteed by Mr Aviss. They counterclaim for the balance of the price against both Infiniteland and Mr Aviss. Since Infiniteland has no assets the effective counterclaim is against Mr Aviss. I will try to give an impression of the claims and counterclaims in the next few paragraphs, in the hope that I will thereby make it easier to understand the detailed account which will follow.

4

The case has centred around two quite distinct issues. One concerns an amount of £1,081,000. It is difficult to select a word or short expression which encapsulates what happened in relation to the £1,081,000. In the hearing Mr Downes, counsel for the claimants, made much play of the variety of descriptions of it given by the defendants and their witnesses. However, in very general terms it was an amount which the Artisan group injected into Bickerton shortly before contracts were exchanged for Bickerton to be sold to a predecessor of Infiniteland.

5

The claimants say that the £1,081,000 transaction was not properly disclosed in Bickerton's accounts, on the basis of which they purchased the company. They say that they did not understand about the transaction, and that, if they had understood about it, they would not have gone ahead with the purchase. They believed that Bickerton and another contracting company sold with it (Driver) had, in the previous accounting year, earned ordinary trading profits of over £0.5m; whereas the true result of ordinary trading had not been a profit at all, but rather a loss of around £0.5m. It was the £1,081,000 which accounted for the difference between a profit of around £0.5m and a loss of around the same amount: the £1,081,000 was a receipt of Bickerton, but it was non-recurring and it did not arise from the company's ordinary trading. The claimants say that the true position was misrepresented to them by Artisan, and they claim relief for misrepresentation. They also say that the accounting treatment of the £1,081,000 was wrong; that the incorrect treatment gave rise to a breach of warranty under the share sale agreement; that damages are payable in consequence; and that Infiniteland and its guarantor, Mr Aviss, should be released from liability to pay the outstanding part of the price.

6

The position of the defendants (the Artisan companies) on the £1,081,000 issue is in outline as follows. They accept that the £1,081,000 was not correctly shown in the accounts: it ought to have been separately identified, but it was not. However, they deny that in consequence they are liable in damages to Infiniteland, and they assert that Infiniteland and Mr Aviss are still liable to ACL for the balance of the share price. The detailed reasons on which the defendants rely for those conclusions are too complicated to summarise in an overview at this stage of the judgment. An important element in the defendants' case, however, is that, although the accounts did not treat the £1,081,000 correctly, the purchaser and the professional team which advised the purchaser knew all about it. There was never any misrepresentation about it, and even if there had been the terms of the share sale agreement ruled out any recovery by the claimants on misrepresentation grounds. Further, having regard to the detailed terms of the agreement, the knowledge which the purchasers and/or their agents had about the £1,081,000 prevented there being any claim for breach of warranty.

7

The defendants also have a point, of a detailed and somewhat technical nature, that the claimants' contentions based on the warranties in the share sale agreement misfire: the warranties were given by reference to the audited accounts to 31 March 2001, and at the time of the share sale agreement no such accounts existed. There were draft accounts in existence, and the audited accounts came into existence before completion. However, or so the defendants argue, on the only maintainable constructions of the share sale agreement the warranties could only take effect by reference to audited accounts which existed as such at the time of the agreement. They cannot take effect by reference either to unaudited accounts which existed in draft at the time of the agreement, or to audited accounts which did not exist at the time of the agreement and only came into existence subsequently.

8

The arguments about the £1,081,000 issue are not easy, and they were strongly presented by both parties in the course of a long trial. However, my conclusions are in favour of the defendants. For the reasons which I will give as this judgment progresses, I do not think that the admittedly incorrect accounting treatment of the £1,081,000 entitles the claimants to any damages from the defendants or frees them from liability to pay the outstanding part of the purchase price.

9

The second issue around which the case has centred concerns the figures in the trading accounts of Bickerton at which some major contracts were valued. I will refer to this as the contracts valuation issue. It revolved around contracts which the company had undertaken in fairly recent years, being contracts under which there were still some outstanding issues of how much would fall to be paid to Bickerton by the customers, or in some instances of how much might fall to be paid by Bickerton to the customers. The expert witnesses disagreed in detail about many contracts, but they wrote a most helpful joint report in which they noted that the differences between them were only substantial on four contracts. The parties sensibly confined their arguments to those four contracts.

10

The share sale agreement contains a clause...

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4 cases
  • Ageas (UK) Ltd v Kwik-Fit (GB) Ltd and Another
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    • Queen's Bench Division
    • 4 July 2014
    ...not therefore found this dictum of great assistance in resolving the current dispute. 26 In Infiniteland Ltd v Artisan Contracting Ltd [2004] EWHC 955 (Ch), Infiniteland brought a breach of warranty claim arising from its purchase of a number of companies from Artisan including in particula......
  • Infiniteland Ltd and Another and Artisan Contracting Ltd and Another
    • United Kingdom
    • Court of Appeal
    • 22 June 2005
    ...complete description of the circumstances in which the credit came to be made is set out in paragraphs 31 and 32 of his judgment, [2004] EWHC 955 (Ch): "31. In the first year after [its] acquisition [of Bickerton in March 2000] Artisan formed the view that Bickerton had not previously......
  • Abu Dhabi Investment Company v H Clarkson & Company Ltd
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    • Queen's Bench Division (Commercial Court)
    • 25 May 2007
    ...such as Arnison v Smith (1888) 41 ChD 348. He cited in particular observations of Park J in Infiniteland Limited v Artisan Contracting [2004] EWHC 955 (Ch). In that case, as in this, a long time elapsed between an alleged misrepresentation and the conclusion of a contract, in the course of ......
  • Infiniteland Ltd and John Stewart Aviss v Artisan Contracting Ltd and Artisan (UK) Ltd
    • United Kingdom
    • Court of Appeal
    • 23 June 2005

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