Laminates Acquisition Company v BTR Australia Ltd
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Cooke,Mr Justice Cooke |
| Judgment Date | 31 October 2003 |
| Neutral Citation | [2003] EWHC 2540 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2001/358 |
| Date | 31 October 2003 |
[2003] EWHC 2540 (Comm)
THE HONOURABLE MR JUSTICE COOKE
Case No: 2001/358
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Charles Flint, Q.C., and Andrew Green (instructed by Clifford Chance LLP, London) for the Claimant
Elizabeth Gloster, Q.C. and Michael Fealy (instructed by Slaughter & May, London) for the Defendant
Approved Judgment
Hearing dates: 27 th, 28 th and 29 th October
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
In this action the claimant (Laminates) sues the defendant (BTR) for breach of warranties to be found in a Share Sale and Purchase Agreement (SPA) dated 16 th March 1998, under which Laminates acquired BTR's shareholding in FM Holdings Inc and its subsidiary companies, including Formica Corporation (Formica) a company incorporated in Delaware in the USA. The principal business of Formica was and remains the manufacture of high-pressure laminates (HPL). The warranties allegedly broken are those to be found in Schedule 7 to the Agreement in paragraphs 10 (D), 15(A), (B), (C), (D) and (E). All of those breaches relate to the business of Formica.
On 11 th December 2002, Cresswell J reformulated a preliminary issue for decision by the Court as follows:
"Whether the claimant is precluded, in the events that have happened, from bringing a claim in respect of BTR's alleged breach of the Agreed Assurance at paragraph 10(D) of Schedule 7 of the SPA by any failure to comply with the requirements of paragraph 2 of Schedule 8 to that Agreement."
Under the terms of the SPA, the price payable was US$415M, subject to adjustment. BTR gave a series of warranties, representations and indemnities under the SPA which were referred to as "Agreed Assurances". By clause 9A BTR warranted to Laminates that, at the date of the SPA, each warranty was true and accurate. By Clause 9(D) BTR's liability under or in relation to the warranties was expressly limited as set out in Schedule 8, and by Clause 9(G), save as otherwise provided, each of the warranties was to be construed as a separate and independent warranty, not limited or restricted by reference to any other warranty or any other provision of the SPA except as provided for in Schedule 8.
The warranties set out in Schedule 7 included the following:
"10. Contracts
(A) No contract to which any of the Companies is a party:
(iv) is unusual in the context of the business;
(D) No Company is a party to an agreement or arrangement:
(i) which has been notified to any competition or authority;
………….
(iii) which is prohibited by competition law in any jurisdiction and which is any case material to the Business or the separate Businesses of any one or more of: ………..
(c) Formica North America (which includedFormica).
15 Litigation
(D) Except in relation to Intellectual Property or Proprietary Know-how so far as the vendor is aware no Company conducts or has conducted its Business or deals or has dealt with its assets in a manner which is not in accordance with all applicable legal and administrative requirements in any jurisdiction where such conduct or dealing is reasonably likely to have a material adverse effect on the Business.
(E) Except in relation to Intellectual Property or Proprietary Know-how there is and has in the last five years been no governmental or other investigation, inquiry or disciplinary proceeding concerning any agreement, arrangement or conduct (by omission or otherwise) of a Company in any jurisdiction and none is pending or threatened. So far as the vendor is aware, no fact or circumstances exists which might give rise to an investigation, inquiry or proceeding of that type."
Schedule 8, which was headed "Limitations on Liability" provided that the purchaser should not be entitled to damages in respect of any individual claim for less than $125,000 nor liable unless and until the aggregate amount of all individual claims in excess of $125,000 exceeded $3M, in which event BTR's liability should be limited to the excess of that aggregate figure. The total aggregate liability of BTR under the Agreed Assurances was not however to exceed 75% of the final cash consideration (i.e. approximately $305M). Paragraph 1(D) of Schedule 8 provided that each provision of the Schedule should be read and construed without prejudice to each of the other provisions of the Schedule.
Schedule 8 paragraph 2 reads as follows:
"2. Time limits for bringing claims
No claim ……… shall be brought against the Vendor in respect of any Agreed Assurances ……… unless the Purchaser shall have given to the relevant Vendor written notice of such claim specifying (in reasonable detail, to the extent that such information is available at the time of the claim) the matter which gives rise to the claim, the nature of the claim and the amount claimed in respect thereof (detailing the Purchaser's calculation of the loss thereby alleged to have been suffered by it or the relevant member of the Purchaser's Group): …………….…….. on or before 31 March 2000.
……………….
PROVIDED that ……….. the liability of the Vendor in respect of such claim shall absolutely determine (if such claim has not been previously satisfied, settled or withdrawn) if legal proceedings in respect of such claim shall not have been commenced within 12 months of the expiry of the relevant limitation period referred to in (i), (ii) and (iii) above and for this purpose proceedings shall not be deemed to have been commenced unless they shall have been properly issued and validly served upon the Vendor."
Paragraph 3 of Schedule 8 provided as follows:
"3. Conduct of Litigation
(A) Upon the Purchaser or any member of the Purchaser's Group becoming aware of any claim, action or demand against it or any other matter likely to give rise to any claim in respect of any of the Agreed Assurances (other than under the Tax Warranties (in which case the provisions of the Tax Covenant will apply) or under the Environmental Covenant), the Purchaser shall:
(i) within 30 days thereof notify the Vendor by written notice that such assessment or claim of a third party received by or coming to the notice of any director or other officer of any member of the Purchaser's Group may result in a claim under the Agreed Assurances;
(ii) take such action and give such information and access to personnel, premises, chattels, documents and records to the Vendor and its professional advisers as the Vendor may reasonably request (and the Vendor shall reimburse the Purchaser's out of pocket costs in doing so) and the Vendor shall be entitled to require any relevant member of the Purchaser's Group to take such action and give such information and assistance in order to avoid, dispute, resist, mitigate, settle, compromise, defend or appeal any claim in respect thereof or adjudication with respect thereto;
(iii) at the request of the Vendor, allow the Vendor to take the sole conduct of such actions as the Vendor may deem appropriate in connection with any such assessment or claim in the name of the Purchaser or any member of the Purchaser's Group and in that connection the Purchaser shall give or cause to be given to the Vendor all such assistance as it may require………………
(iv) make no admission of liability, agreement, settlement or compromise with any third party in relation to any such claim or adjudication without the prior written consent of the relevant Vendor; and
(v) take all reasonable action to mitigate any loss suffered by it or any member of the Purchaser's Group in respect of which a claim could be made under the Agreed Assurances.
(B) If the Purchaser fails to give the Vendor notice of a claim, action or demand in accordance with paragraph (A)(i) then, to the extent that the Vendor's defence of such claim has been prejudiced or its liability in respect of such claim increased as a result thereof, the liability of the Vendor in respect of such claim, action or demand shall be reduced to compensate it for any such increased liability.
(C) In relation to matters to which paragraph (A)(i) applies, the Vendor shall be entitled at any stage (i) at its absolute discretion to settle any such third party assessment or claim for which they have accepted liability and (ii) with the prior written consent of the Purchaser (not to be unreasonably withheld or delayed) to settle any other such third party claim or assessment."
Thus, in order to bring warranty claims, the purchaser had to comply with the requirements of paragraph 2 of Schedule 8 and give notice of such a claim on or before 31 st March 2000. Additionally, proceedings had to be commenced on or before 31 st March 2001. It is the former provision and the terms of letters written by Laminates to BTR which form the subject of the preliminary point for determination.
The Facts
On about 12 th April 1999, Formica Corporation received a subpoena to produce documents to the US Department of Justice in connection with a Grand Jury Antitrust Investigation into price fixing in the US HPL market during the period lst January 1994 to 1st April 199It is plain from an examination of that subpoena that the Department of Justice suspected that some of the four competitors in the HPL market in the US were involved in price fixing arrangements. Formica had the second largest market share of these four entities, the largest market share being owned by Wilsonart International Inc.
The subpoena served upon Formica required it to produce a large range of documents relating to HPL pricing, price announcements and any actual possible or proposed agreements,...
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