Macquarie International Investments Ltd v Glencore UK Ltd
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE WALKER |
| Judgment Date | 17 September 2009 |
| Neutral Citation | [2008] EWHC 1716 (Comm),[2009] EWHC 2267 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2007 Folio 1164,Case No: 2007 FOLIO 1164 |
| Date | 17 September 2009 |
[2008] EWHC 1716 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Walker
Case No: 2007 Folio 1164
Approved Judgment
Hearing date: 21 May 2008
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
The claimant (“Macquarie”) applies for an order that Part 20 claims (“the Additional Claims”) brought by the defendant (“Glencore”) be dismissed or stayed. These claims are brought against the Part 20 defendants, Mr Russell and Mr Spellman. Where convenient I shall refer to them together as “the Additional Defendants.” The Additional Defendants apply for summary judgment dismissing the Additional Claims.
The Main Claim
Under a Sale and Purchase Agreement dated 31 July 2006 (“the SPA”) Macquarie agreed to buy and Glencore, Baring European Fund (GP) LP and Flenwood Limited (“the Sellers”) agreed to sell, or procure the sale, to Macquarie of the entire issued share capital in Corona Energy Holdings Limited (“Corona”). Corona was, and under the name Macquarie Corona Energy Holdings Ltd remains, the holding company of subsidiaries that comprise the Corona Group. The Corona Group was, and remains, engaged in the business of supplying gas to business customers in the UK. Under the SPA Macquarie paid the Sellers a price of £5,541,000, determined on the basis of the net asset value as at 31 July 2006 of the Corona Group.
Under the SPA Macquarie has the benefit of various warranties given to it by Glencore. Glencore is the sole warrantor under the SPA pursuant to an arrangement between it and the other Sellers. On 20 July 2007 Macquarie issued proceedings (“the Main Claim”) against Glencore. It is Macquarie's case that the price it paid to the Sellers was in excess of the true net worth as at 31 July 2006 of the Corona Group by some £3.1m. This is said to have arisen from breaches of warranties. The alleged breaches can be broadly summarised as:
i) The Accounts and Management Accounts of Corona and its subsidiaries did not fairly reflect the financial position of those companies; in particular it is said that the Accounts and Management Accounts ought to have included an accrual or provision in respect of certain alleged liabilities to xoserve Ltd (“xoserve”); and
ii) The books and records of Corona and its subsidiaries did not fairly reflect the business affairs and financial position of those companies, in that they did not record that they had alleged liabilities to xoserve.
The Additional Claims
On 4 February 2008 Glencore issued and served on Macquarie an application for permission to issue the Additional Claims against Mr Spellman and Mr Russell. Prior to completion of the sale Mr Russell was the Finance Director of Corona and Mr Spellman was its Managing Director. Mr Russell remains the Finance Director of Corona. On 8 February 2008 Burton J gave permission to issue the Additional Claims, with liberty to Macquarie, Mr Russell and Mr Spellman to apply to set aside that permission.
In the Additional Claims Glencore seeks damages from Mr Russell and Mr Spellman for losses it alleges that it has suffered as a result of entering into the SPA as sole warrantor. Glencore also claims to have suffered loss through agreeing with the other Sellers to be the sole warrantor.
Mr Russell and Mr Spellman are alleged to be liable for breaches of common law duties of care and fiduciary duties owed to Glencore to take reasonable care in the preparation of Corona's accounts and in the provision of information to the Sellers for the purpose of preparing a disclosure letter under the SPA. These duties are said to have arisen because, among other things, Mr Russell and Mr Spellman, as Finance Director and Managing Director respectively, had detailed knowledge of the true financial position of the Corona Group, and knew or ought to have known that the Sellers would be required to give warranties in respect of the Corona Group's accounts and that the Sellers were reliant on the accuracy of information provided to them by Mr Spellman and Mr Russell.
The SPA
In the SPA Macquarie is described as “the Purchaser”. Relevant provisions of the SPA included:
1.1 Defined Terms
In this Agreement…:
…
“ Company” means Corona Energy Holdings Limited …
…
“Completion” means completion of the sale and purchase of the Shares under this Agreement;
…
“Core Warranties” means the warranties set out in Paragraphs 1 (Company Returns and Records), 2 (Shares and Share Capital), 3 (Subsidiaries, Partnerships etc.), 4 (Accounts and Management Accounts), 9 (Insolvency), 18.1 (Interests), 18.2 (Title) and 18.7 (Other involvement in relation to property) of Schedule 3 (Warranties);
…
“ Deed of Tax Covenant” means the deed of that name … to be entered into between the Warrantors and the Purchaser at Completion and where appropriate references to the Deed of Tax Covenant shall mean the tax covenant as executed by the parties to it;
…
“ Directors” means the directors of the Company and each of the Subsidiaries …;
“ Disclosure Documents” means the documents appended to the Disclosure Letter;
“Disclosure Letter” means the disclosure letter together with its annexures in the Agreed Terms having the same date as this Agreement from the Warrantors to the Purchaser;
…
“Management Incentive Arrangements” means the incentive arrangements entered into by the Company pursuant to the agreements between:
(a) the Company and John Ashley Spellman
(b) the Company and Gary Russell; and …
…
“ Non-Core Warranties” means each of the warranties set out in Schedule 3 (Warranties) but excluding the Core Warranties;
“ Proceedings” means any proceedings, suit or action arising out of or in connection with this Agreement;
…
“ Shares” means all the issued shares in the capital of the Company …;
…
“ Subsidiaries” means the companies details of which are given in Schedule 1, Part 2 (Details of the Subsidiaries) and any reference to a Subsidiary is a reference to any one of them;
…
“Warranties” means the Core Warranties and the Non-Core Warranties; and
“Warrantor” means Glencore.
…
1.2 Contents page and headings
In this Agreement, the contents page and headings are included for convenience only and shall not affect the interpretation or construction of this Agreement.
…
1.4 No restrictive interpretations
In this Agreement, general words shall not be given a restrictive interpretation by reason of their being preceded or followed by words indicating a particular class of acts, matters or things.
…
2.1 Sale and purchase
Each of the Sellers shall sell and transfer or procure the sale and transfer of, with full title guarantee and the Purchaser shall purchase free from encumbrances the entire legal and beneficial ownership in the number of Shares set opposite the respective names of the Sellers in Schedule 1, Part 3 (The Sellers), together with all rights attached or accruing to them at Completion.
…
6.1 Warranties
(a) As at the date of the Agreement, the Warrantor warrants to the Purchaser in terms of the Non-Core Warranties and the Core Warranties.
(b) The Warrantor warrants to the Purchaser that the Core Warranties will be true and accurate at Completion by reference to the facts and circumstances then subsisting and, for this purpose, the Core Warranties shall be deemed to be repeated at Completion as if any express or implied reference in the Core Warranties to the date of this Agreement was replaced by a reference to the Completion Date.
…
6.5 Meaning of “so far as the Warrantor is aware”
If any of the Warranties are expressed to be given “so far as the Warrantor is aware” or “to the best of the knowledge information and belief of the Warrantors”, or words to that effect the Warrantor shall be deemed only to have knowledge of the facts, matters and circumstances actually known by the individuals listed in Schedule 6 (Persons of whom enquiry was made) and the Warrantor shall be deemed not to have any other actual, imputed or constructive knowledge. …
6.6 Sellers' knowledge
The Sellers shall immediately disclose to the Purchaser any matter or thing which arises or of which any of them becomes aware between the date of this Agreement and Completion which is a breach of any of the Warranties.
6.7 Purchaser's Reliance
The Sellers acknowledge that, in entering into this Agreement, the Purchaser has relied upon the Warranties.
…
6.8 No claims against the Group
The Sellers shall not (if a claim is made against any of them in connection with the sale of the Shares to the Purchaser) make any claim against the Company or any of the Subsidiaries or against any director, employee, agent or officer of the Company or any of the Subsidiaries on whom any of the Sellers may have relied before agreeing to any term of this Agreement or the Deed of Tax Covenant or authorising any statement in the Disclosure Letter. The Sellers acknowledge that they have no rights to make any such claim. This shall not prevent any Seller from claiming against any other Seller under any right of contribution or indemnity to which he may be entitled. The rights of the Company or any of the Subsidiaries and any director, employee, agent or officer of the Company or any of the Subsidiaries under this clause are subject to the...
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