Ovlas Trading S.A v Strand (London) Ltd and Another
| Jurisdiction | England & Wales |
| Judge | MRS. JUSTICE PROUDMAN |
| Judgment Date | 03 April 2009 |
| Neutral Citation | [2009] EWHC 1564 (Ch) |
| Court | Chancery Division |
| Date | 03 April 2009 |
[2009] EWHC 1564 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Before:MRS. JUSTICE PROUDMAN
MR. P. MARSHALL QC and MR. D. LIGHTMAN (instructed by Field Fisher Waterhouse LLP) appeared on behalf of the Claimant
MR. M. HOWARD QC and MR. C. WEST (instructed by Addleshaw Goddard LLP) appeared on behalf of the Defendants
This is a pre-trial review for a trial listed in a window commencing 27 th April 2009 with a time estimate of 15 days.
Claimant's application to amend
The first application is by the Claimant, Ovlas Trading SA (“Ovlas”), for permission to amend the Particulars of Claim. The proceedings arise out of the acquisition by Ovlas of the entire issued share capital of a company called Golfrate Africa Ltd. (“GAL”), an Isle of Man holding company with an Angolan trading subsidiary, Golfrate Holdings (Angola) Limitada (“GHAL”). The business is cash and carry trading in basic consumer goods in Angola. The company was acquired pursuant to an agreement of 13 th June 2005 (“the Share Sale Agreement”) whereby Ovlas acquired GAL's shares from the First Defendant, Strand (London) Limited (“Strand”), for the total price of US$3million. Ovlas entered into a non-competition agreement with the Second Defendant, Mr. Aziz, on the same day. Ovlas also claims damages against Mr. Aziz for breach of an alleged oral contract whereby he is said to have agreed personally to meet GHAL's corporate tax liability for the year ended 31 st December 2004.
The Defendants rely on the fact that the Share Sale Agreement contained an entire agreement clause and also a single warranty clause relating to entries on a completion balance sheet. There was an agreed expert determination procedure which was invoked soon after completion of the Share Sale Agreement and which resulted in a ruling by which adjustments were made to the purchase price.
Strand is an Isle of Man company that Ovlas contends was owned and controlled by Mr. Aziz. It also contends that prior to the Share Sale Agreement he owned and controlled GAL and GHAL and that he and the Third Defendant, Mr. Noak, were de facto or shadow directors of both companies.
A concurrent action, which has been variously called the misappropriations or improper payments claim, was brought by Ovlas, GAL and GHAL. For convenience sake, I shall call it “the misappropriation action”. It contained claims against Mr. Aziz and Mr. Noak for breaches of fiduciary duty owed to GAL and GHAL involving dishonest appropriations of cash from the companies before conclusion of the Share Sale Agreement. It was alleged that Mr. Aziz and Mr. Noak wanted to milk the companies of cash before they were transferred to Ovlas. That action also contained claims against Mr. Aziz for alleged breaches of the Non-Competition Agreement. That claim was paid by the Defendants in full with compound interest and costs, although specifically without admission of liability and for the stated reason of saving the substantial and what was called disproportionate cost of litigating the misappropriation action.
There is thus no question of issue estoppel, as the issues have never been resolved. The letter from the Claimant's solicitors accepting the offer to settle was expressed, significantly, as acceptance of an offer “to settle all matters arising out of the appropriation claim”. I note that the prayer in that case comprised a compendious claim by all the Claimants in respect of all the relief. In any event, all the Claimants were bound by the outcome of the compromise as parties to the misappropriation action.
Mr. Howard QC for the Defendants also submitted that, as the 100% shareholder in GAL, Ovlas would have been bound as a privy even if it had not been a party.
The Defendants have submitted to judgment dismissing their Counterclaim in these present proceedings. In this action Ovlas seeks damages for losses suffered as a result of an alleged conspiracy to injure by unlawful means. The unlawful means pleaded are misrepresentations said to have been made by the Defendants during the course of the negotiations preceding the Share Sale Agreement. It is said that Mr. Aziz and Mr. Noak combined to defraud Ovlas by making the alleged misrepresentations. First, it is alleged that the Defendants misrepresented the level of GHAL's profits. Secondly, it is alleged that there were misrepresentations about the status of a key Exclusive Distribution Agreement between GHAL and Nestlé SEA Trading (“Nestlé”) lying, in effect, about the fact that Nestlé was likely to terminate that Agreement. Ovlas relies upon email correspondence of Mr. Aziz and Mr. Noak which, it is said, proves dishonesty by the Defendants in misrepresenting GHAL's figures, altering its accounts, deliberately taking steps for Mr. Aziz to set up a competing business in breach of the Non-Competition Agreement, and generally cooking the books.
Ovlas's application to amend concerns, first, the pleaded loss said to have resulted from the alleged conspiracy and misrepresentations claims and, secondly, a plea of misrepresentation in connection with a claim for breach by Mr. Aziz of a collateral agreement to pay GHAL's corporate tax liability. As to this latter claim, an alternative analysis is introduced by way of a proposed amendment, that Mr. Aziz misrepresented in an email of 8 th June 2005 that he had already discharged this tax liability from his own resources. This is simply an alternative way of analysing the same facts as are already pleaded and involves no new evidence. The Defendants do not oppose this amendment at para.39(A) to (B) of the proposed amended pleading, on the usual terms as to costs, and I propose to allow it on those terms.
The contentious amendment relates to how the difference between the price paid by Ovlas under the Share Sale Agreement and the true value of GHAL should be quantified. The particulars of loss and damage have now been entirely re-cast over five pages. The amended pleading contends that the true value of GHAL is to be determined on a liquidation basis. In other words, by reference to the value of the various underlying assets of the company's business, assuming that they would have to be realised separately in a liquidation because the business could not be sold as a going concern.
The proposed basis for the amendment is as follows:
(1) Ovlas says there was in fact no alternative purchaser for the company other than Ovlas, and that there is support for this allegation in the Defendants' instructions to their valuation expert, as appears in the report itself. The Defendants deny that this is the meaning of what is said in the report.
(2) Under the control of Mr. Aziz and Mr. Noak, GHAL had been engaged in corruption and had itself been the victim of fraud by its existing management. Again it is said that in these proceedings there has been an admission that corrupt payments were made, and again it is denied by the Defendants that that is the effect of what was said.
The alleged corruption relied on in the pleading is largely, although not entirely, constituted by the improper payments alleged in the misappropriation action. The new para.37.1.6 seeks to incorporate by reference the entirety of the Claimant's pleading in that action. It is alleged that in the proposed pleaded circumstances no reasonable, prudent and lawful purchaser would have been prepared to purchase GHAL as a going concern. In assessing loss, the Court considers what a reasonable, prudent and lawful purchaser would be prepared to pay. The Court is entitled to take into account the impact of corruption and fraud on the footing that such a purchaser knew the true facts. The net loss now claimed amounts to some $22.1 million. This follows the contention that the liquidation basis produces a figure of some $9.2 million as the true value of GHAL, as compared with the price paid of $32 million. The figure of $9.2 million is, as yet, unsupported by any evidence.
The amendment pleads an alternative case on the footing that GHAL's business falls to be valued as a going concern but taking into account the impact of the absence of an Exclusive Distribution Agreement with Nestlé. On this basis, losses are claimed of some $9 million. Although the Defendants' case is that this figure is unsustainable, they do not object to the alternative case as proposed.
Discretionary basis
The Defendants object to the amendment relating to a liquidation basis on two grounds. First, they say that the Court ought not, in the exercise of its discretion, to allow the amendment. Mr. Howard, on behalf of the Defendants, went in some detail through the history of the way in which the Claimants have pleaded loss, with the aim of showing that the case has been a moving target from the beginning. Soon after the Share Sale Agreement was entered into, there was an expert determination about the single balance sheet warranty contained in the Share Sale Agreement. Then the present proceedings were issued, but the answer to a request for information about how the quantification of pleaded loss was arrived at was found to be wrong by the Claimant's own expert. He agreed that on an assets basis valuation a loan between GAL and GHAL had to be disregarded because control of both companies was in effect passed on sale. The experts agreed that the assets-based value of the company on completion of the Share Sale Agreement was in excess of $36.6 million.
On the exchange of experts' reports, the Claimant's expert produced new figures for loss. The present application is, submitted Mr. Howard, an...
To continue reading
Request your trial
-
Marathon Asset Management LLP and Another v James Seddon and Others
...which the parties had agreed in that case, interpreted in the light of the relevant factual background. The same applies to Ovlas SA v Strand (London) Ltd [2009] EWHC 1564 (Ch), on which Mr Griffiths also relied, where it was held that renewing allegations made in earlier proceedings which ......
-
Mount Wellington Mine Ltd v Renewable Energy Co-Operative Ltd
...the parties, including that the subject of the arbitration, MWML relies in particular on the decision of Proudman J in Ovlas Trading SA v Strand (London) Ltd [2009] EWHC 1564 (Ch). In that case Ovlas purchased the share capital of another company (GAL), which had a subsidiary trading compa......