Oliver Nobahar-Cookson and Another v The Hut Group Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Briggs,Mr Justice Moylan,Lady Justice Hallett |
| Judgment Date | 22 March 2016 |
| Neutral Citation | [2016] EWCA Civ 128 |
| Docket Number | Case No: A3/2015/0236 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 March 2016 |
[2016] EWCA Civ 128
Lady Justice Hallett
Lord Justice Briggs
and
Mr Justice Moylan
Case No: A3/2015/0236
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION OF THE HIGH COURT
THE HON MR JUSTICE BLAIR
Royal Courts of Justice
Strand, London, WC2A 2LL
John Odgers QC and George McPherson (instructed by DWF LLP) for the Appellant
Philip Edey QC, Andrew FultonandSarah Tresman (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Respondent
Hearing dates: Wednesday 24 February 2016
This appeal raises a short point of construction relating to a contractual time limit for the making of warranty claims pursuant to a Share Purchase Agreement dated 30 May 2011 ("the SPA"). The answer to the question of construction does not turn upon any detailed appreciation of the factual or commercial background to the making of the SPA, which may be found in the judgment of Blair J [2014] EWHC 3842 (QB), at paragraphs 14–34.
It is sufficient by way of summary for me to say that the SPA provided for the sale of a company called Cend, which carried on an online sport nutrition business, by its shareholders (described as the "Sellers") who are the defendants and appellants in these proceedings, a Mr Nobahar-Cookson and Barclays Private Bank & Trust Limited (now called Zedra Trust Company (Jersey) Limited) to The Hut Group Limited (described as "Buyer") in exchange for consideration consisting partly of cash and partly of shares in the Buyer. The Hut Group Limited is the claimant and respondent in these proceedings.
Both the Buyer and Sellers gave each other detailed warranties which, in the case of the Sellers, included comprehensive warranties about the accounts, business, assets and affairs of Cend.
In due course, both the Buyer and the Sellers made warranty claims against each other, which led to proceedings in the Commercial Court which culminated in a judgment in the sum of £4.3m odd in favour of the Buyer on its claim, and a judgment in the sum of £10.8m odd in favour of the Sellers on their counterclaim.
In finding in the Buyer's favour on its claim, the judge rejected a submission by the Sellers that the claim fell foul of the time limit imposed by clause 5.1 of Schedule 5 to the SPA in the following terms:
"The Sellers will not be liable for any Claim unless the Buyer serves notice of the Claim on the Sellers (specifying in reasonable detail the nature of the Claim and, so far is practicable, the amount claimed in respect it) as soon as reasonably practicable and in any event within 20 Business Days after becoming aware of the matter."
The Buyer's claim was that the Sellers were in breach of warranties that Cend's Management Accounts gave a true and fair view of Cend's financial position, and had been prepared on a basis consistent with that used for its statutory accounts.
The Buyer served notice of its warranty claim pursuant to clause 5.1 on 6 February 2012. It was common ground therefore that, if the Sellers could show that the Buyer had become "aware of the matter" within the meaning of clause 5.1 by 9 January 2012, then its warranty claim would be contractually time-barred.
The judge found that the Buyer had become aware of the facts about Cend's financial position sufficient to prove its breach of warranty claim, when compared with what was stated in the Management Accounts, before 9 January 2012, and that it was by that time aware that it might have a claim under the warranties in the SPA. Nonetheless he found that the Buyer was not aware of the claim identified in the clause 5.1 notice until after that date, because it became so aware only upon receipt thereafter of advice to that effect from its forensic accountants PWC. He concluded that the phrase "aware of the matter" at the end of clause 5.1 meant, in effect, "aware of the Claim". He distinguished between awareness of the facts giving rise to the Claim and awareness that there might be a claim, on the one hand, and awareness of "a proper basis" for the Claim, on the other: see paragraph 79 of the judgment.
There is no appeal against the judge's findings of fact summarised above, about the state of the Buyer's awareness. Rather, the appeal has been presented (and very well argued) upon the basis of an invitation to this court to choose between three alternative constructions of the phrase "aware of the matter", namely:
a) aware of the facts giving rise to the Claim (even if unaware that those facts did give rise to a claim);
b) aware that there might be a claim under the warranties; and,
c) aware of the Claim, in the sense of an awareness that there was a proper basis for the Claim.
If the court was to prefer (a) or (b) over (c) then it is common ground that this appeal should be allowed. It is plain that interpretation (a) gives the broadest, and (c) the narrowest, effect to clause 5.1, and it is well-settled that contractual limitation periods for the notification or bringing of claims are forms of exclusion clause.
Counsel helpfully grouped their submissions under three common headings: (i) language, (ii) commercial common sense, and (iii) a label which they chose to use: contra proferentem. It is convenient to address the submissions about the extent, weight and applicability of what they called the contra proferentem principle first.
The judge rejected the submission made to him that the contra proferentem principle supported a narrow interpretation of clause 5.1 in the following terms, at paragraph 79(1) of the judgment.
"(1) THG submitted that since the clause was capable of operating harshly, the time-bar provision should be construed contra proferentem. However, in this contract both parties were subject to time-bars in similar terms, so that each was subject to the same limitation (see e.g. Lewison, The Interpretation of Contracts (5 th ed, 2011) p.619–620). There is no reason to apply such a canon of construction to mutual rights and limitations."
In this court Mr John Odgers QC supported the judge's conclusion on the broader ground that the contra proferentem principle is not now regarded as of any significant weight for the purpose of construing commercial contracts, and that it is a principle of interpretation of last resort. For that purpose he relied upon dicta to that effect in Sinochem International Oil (London) Co Ltd v Mobil Sales & Supply Corporation [2000] 1 Lloyd's Rep. 339, at paragraph 27, per Mance LJ; K/S Victoria Street v House of Fraser (Stores Management) Ltd [2012] Ch 497 at paragraph 68 per Lord Neuberger MR (giving the judgment of this court), and Lewison on The Interpretation of Contracts (6 th ed) at paragraph 7.08(g), on page 395, with its citation of CDV Software Entertainment AG v Gamecock Media Europe Limited [2009] EWHC 2965, and Landlord Protect Ltd v St Anselm Development Co Ltd. [2008] EWHC 1582 (Ch).
It is certainly true that there are dicta in those cases which appear at first sight to be broadly supportive of Mr Odgers' submission. The best example is perhaps the following passage from Lord Neuberger MR in the K/S Victoria Street case at paragraph 68.
"… such rules are rarely if ever of any assistance when it comes to construing commercial contracts. Quite apart from raising abstruse issues as to who is proferens (and, in particular, whether the issue turns on the precise facts of the case or hypothetical analysis), "rules" of interpretation such as contra proferentem are rarely decisive as to the meaning of any provisions of a commercial contract. The words used in a commercial sense, and the documentary and actual context, are, and should be, normally enough to determine the meaning of a factual provision."
But none of those cases was about exclusion clauses, and the contra proferentem rule in its classic form was by no means limited to, or even mainly about, exclusion clauses. It was a rule designed to resolve ambiguities against the party who prepared the document in which the clause appeared, or prepared the particular clause, or against the person for whose benefit the clause operates: see Lewison, (op. cit.) at paragraph 7.08(b) at page 391, and the admirable historical introduction which precedes it.
Taking them in turn, the Sinochem case was about a provision against set-off, which Mance LJ said (at paragraph 27) was not to be regarded as an exclusion clause. The K/S Victoria Street case was about a provision in a lease defining the circumstances in which consent to an assignment had to be obtained: see paragraph 9. The CDV Software Entertainment case was about a termination clause. The Landlord Protect case was, again, about a clause in a lease about consent to assignment.
In contrast, recent decisions about exclusion clauses have continued to affirm the utility of the principle that, if necessary to resolve ambiguity, they should be narrowly construed, including in relation to commercial contracts. Association of British Travel Agents Limited v British Airways Plc [2000] 2 Lloyd's Rep. 209 was about an exclusion clause in a commercial contract. At paragraph 43 Clarke LJ said:
"In my opinion, in all these circumstances, where there is doubt as to the true meaning of the expression "other charges", it should be construed against the airlines contra proferentes both for...
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