Raiffeisen Bank International AG v Asia Coal Energy Ventures Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Males,Lord Justice Baker,Lord Justice Lewison |
| Judgment Date | 21 January 2020 |
| Neutral Citation | [2020] EWCA Civ 11 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A4/2019/0264 |
| Date | 21 January 2020 |
[2020] EWCA Civ 11
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mrs Justice Moulder
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lewison
Lord Justice Baker
and
Lord Justice Males
Case No: A4/2019/0264
David Foxton QC & Emily Wood (instructed by Stephenson Harwood LLP) for the Appellant
David Wolfson QC & Michael Watkins (instructed by Mayer Brown International LLP) for the Second Respondent
The First Respondent took no part in the appeal
Hearing date: 17 th December 2019
Approved Judgment
Introduction
While acting for an Indonesian company which was to provide finance in connection with a share sale agreement, the respondent firm of solicitors (“Ashurst”) provided a written confirmation to the appellant bank (“the Bank”) that it had been put in funds in an amount not less than US $85 million and that it had received irrevocable instructions to transfer these funds into an escrow account or, in the event that the proposed escrow agreement was not signed within 30 days, to continue to hold the funds pending agreement between the parties on an alternative arrangement. The Bank says that, in reliance on that confirmation, it agreed to release its security to enable the transaction to proceed. It is now apparent, however, that although Ashurst did receive the US $85 million into its client account, within about 2 1/2 months the money was no longer there and the balance of the client account had been reduced to zero.
In the event, although it obtained the shares, the buyer failed to pay the agreed price and the Bank has commenced this action, not only against the buyer but also against Ashurst, claiming that by issuing the confirmation, Ashurst undertook obligations of which it is in breach and made representations which were untrue.
This appeal arises as a result of requests by the Bank for disclosure of documents and Further Information relating to the instructions which Ashurst had received from its client. Moulder J ordered Ashurst to disclose the balances on its client account during the relevant period, but otherwise refused the Bank's applications, holding that the material sought was privileged. This is an appeal against that refusal.
The facts
The Bank, Raiffeisen Bank International AG, is a corporate and investment bank registered under the laws of Austria. It had made loans to various entities and, as security for the repayment of those loans, held or controlled a 23.8% shareholding in Asia Resource Minerals Plc (“ARM”), a company traded on the London Stock Exchange which owned indirectly a substantial holding in PT Berau Coal, one of Indonesia's largest coal producers.
The first defendant, Asia Coal Energy Ventures Ltd (“ACE”), is a special purpose vehicle incorporated in the British Virgin Islands on 17 th January 2014 for the purpose of a proposed takeover of ARM.
Finance for this transaction was provided to ACE by an Indonesian company called PT Sinar Mas Multiartha TBK (“SM Multiartha”), for whom Ashurst acted as solicitors.
The Bank was only prepared to release its security over the ARM shares which it controlled if the outstanding loans were purchased. In order to achieve this, a series of connected agreements and documents dated 7 th May 2015 were concluded. These included a “Framework Agreement”, a “Sale and Purchase Agreement”, and a “Solicitor's Confirmation”.
Pursuant to these agreements, ACE was to purchase the 23.8% shareholding in ARM controlled by the Bank together with the loans made by the Bank and other associated collateral for a total price of US $120 million. This comprised two elements. The “Share Purchase Price” was the price to be paid by ACE for the Bank's ARM shares pursuant to a public offer, while the “Purchase Price” was to be US $120 million less whatever the “Share Purchase Price” turned out to be.
Clauses 4.1 and 4.2 of the Sale and Purchase Agreement provided for the setting up of an Escrow Account:
“4.1 As soon as reasonably practicable, the Purchaser and the Seller shall enter into the Escrow Agreement.
4.2 If the Escrow Agreement is not entered into by all parties thereto within 30 days from the date of this Agreement, the parties shall discuss in good faith an alternative arrangement to achieve the same commercial purpose.”
Clause 3 of the Sale and Purchase Agreement provided for Ashurst to provide the Solicitor's Confirmation in the following terms:
“1. We refer to the escrow agreement, the current form of which is set forth as Schedule 2 of the [Sale and Purchase Agreement] (referred to in this letter as the “Escrow Agreement”) …
2. We confirm that:
(a) we have been put in funds in an amount that is not less than US$85,000,000 (the “Escrow Amount”); and
(b) we have irrevocable instructions as follows:
(i) to transfer the Escrow Amount to the Escrow Agent upon the signing of the Escrow Agreement in accordance with the terms thereof; and
(ii) in the event that the Escrow Agreement is not signed within 30 days of the date hereof, to continue to hold the Escrow Amount pending agreement by the Parties contemplated by clause 4.2 of the [Sale and Purchase Agreement].
3. This confirmation and any non-contractual obligations arising out of or in connection with it are governed by English law.”
As is apparent from clause 3 of the Confirmation, although it would be clear in any event, by giving the Confirmation in these terms, as it did, Ashurst would be undertaking legal obligations towards the Bank.
The proposed Escrow Agreement was intended to provide the Bank with security for payment of the amounts due to it up to the sum of US $85 million. This was its obvious commercial purpose. The provision of equivalent security was therefore the “same commercial purpose” which the “alternative arrangement” contemplated by clause 4.2 of the Sale and Purchase Agreement would need to achieve.
In the event the contemplated Escrow Agreement was not entered into by all parties either within 30 days of 7 th May 2015 or at all and the parties did not enter into any such “alternative arrangement”. Despite this, the transaction proceeded.
On 8 th June 2015 ACE's public offer was increased to 56p/share (from its previous level of 41p/share). By 29 th June 2015 the approvals required by the City Code on Takeovers and Mergers had been obtained and the conditions to Completion of the Sale and Purchase Agreement had been satisfied. On or about 30 th June 2015 the Bank released its security over the shares. On 1 st July 2015 ACE announced that its offer had become unconditional. Thereafter the Bank transferred the shares to ACE and received US $50 million. It followed this with a demand dated 9 th July 2015 for payment of the Purchase Price, that is to say for US $70 million (being US $120 million less the US $50 million already received).
However, ACE refused to complete the transaction, claiming that there were various “deliverables” due from the Bank, each of which had to be delivered before ACE was under any obligation to pay the outstanding US $70 million. The Bank denies that ACE was entitled to withhold this payment.
Thus ACE appears to have obtained the ARM shares previously held by the Bank free of the Bank's security, but without having to pay the Bank the sums due in respect of the loans.
The proceedings
The primary claim in this action is a claim by the Bank against ACE for payment of the outstanding Purchase Price.
In addition, the Bank makes a claim against Ashurst. That claim is formulated in what appear to me (with respect) to be somewhat elaborate pleadings, which include claims extending over many pages that Ashurst made various representations about the instructions which it had received from its client and the way in which it intended to act, claims for breach of fiduciary duty and (by an amendment made since the hearing below) claims for rectification of the Solicitor's Confirmation. At the heart of the Bank's case, however, is a claim that, by giving the Solicitor's Confirmation, Ashurst undertook that it would continue to hold the Escrow Amount as security for payment of the Purchase Price unless either (1) the Escrow Agreement was signed or (2) an alternative agreement was concluded as contemplated by clause 4.2 of the Sale and Purchase Agreement; and that, as neither of these things had happened, that security should still have been held by Ashurst and available for enforcement of any judgment against ACE.
Ashurst denies that it undertook any such obligation. Its pleaded case is as follows:
“6. Clause 4.1 of the SPA provided that “ as soon as reasonably practicable” RBI and ACE would enter into an escrow agreement for the purpose of funding payment of the Purchase Price. Clause 4.2 of the SPA provided that if RBI and ACE did not enter into the Escrow Agreement within 30 days from the date of the SPA (i.e. by 6 th June 2015) then the parties to the SPA “ shall discuss in good faith an alternative arrangement to achieve the same commercial purpose”. This provision was plainly unenforceable as a matter of English law (being the governing law of the SPA) and if no such arrangements were agreed prior to satisfaction of the conditions precedent to completion in clause 8.1 of the SPA (the “Conditions”), RBI would be left to claim the purchase price directly from ACE, without the protection of an escrow or similar arrangement.
7. The contemplated escrow or similar arrangement was supported by a Solicitor's Confirmation dated 7 th May 2015 (the “Solicitor's Confirmation”), in which Ashurst warranted to RBI as follows …
...
To continue reading
Request your trial
-
Mr M Campbell v Securitas Security Services (UK) Ltd: 4104258/2020
...of more general application than simply to the individual person concerned.” 234. This was applied in Ishola v Transport for London [2020] EWCA Civ 11, Simler, whose reasoning we have applied. It is possible for a PCP to be a “one off” provided it has the character of a PCP, in other words ......
-
The Civil Aviation Authority v R Jet2.com Ltd
...has given the lawyer authority to disclose ( Raiffeisen Bank International AG v Asia Coal Energy Ventures Limited and Ashurst LLP [2020] EWCA Civ 11 at [63]). Proposition 3 46 The privilege applies to communications only for the purpose of obtaining or giving legal advice, and not (e.g.) o......
-
Mr K McDonagh v Greater Glasgow Health Board: 4102606/2020
...by the Employment Appeal Tribunal in Nottingham City Transport Limited v Harvey UKEAT/0032/12 and Ishola v Transport for London [2020] EWCA Civ 11. 223. For the duty to arise, the employee must be subjected to disadvantage in comparison to a person who is not disabled” and with reference to......
-
Ms C Sweeney v Lloyds Bank plc: 4109681/2021
...by the Employment Appeal Tribunal in Nottingham City Transport Limited v Harvey UKEAT/0032/12 and Ishola v Transport for London [2020] EWCA Civ 11, LJ 214. For the duty to arise, the employee must be subjected to “substantial disadvantage in comparison to a person who is not disabled” and w......
-
SL Claimants v Tesco: High Court clarifies the confidentiality of documents referred to in separate criminal proceedings
...(Ch) See also our previous client alert on this case 2 Raffeisen Bank International AG v Asia Coal Energy Ventures Ltd & Ashurst LLP [2020[ EWCA Civ 11 3 Serdar Mohammed v Ministry of Defence [2013] EWHC 4478 (QB) 4 SmithKline Beecham Biologicals SA v Connaught Laboratories Inc [1999] 4 All......
-
Regulators, the professions and their clients: recent guidance on LPP
...1) Lee Victor Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600; Raiffeisen Bank International AG v Asia Coal Energy Ventures & Anor [2020] EWCA Civ 11; R (Jet2.com) v Civil Aviation Authority [2020] EWCA Civ 35. 2) [2020] EWCA Civ 177. 3) The new regulator will be known as the Audit, Repo......
-
RBI v Asia Coal Energy: Court of Appeal confirms that communication of solicitor instructions does not of itself waive underlying privilege
...does not of itself waive underlying privilege' PDF. 1 Raffeisen Bank International AG v Asia Coal Energy Ventures Ltd & Ashurst LLP [2020] EWCA Civ 11 2 Conlon v Conlons Ltd [1952] 2 All ER 462 3 Requests for further information 4 Benecke v National Australia Bank (1993) 35 NSWLR 110; Morea......
-
Legal advice privilege subject to “dominant purpose” test – how to deal with multi-party email communications
...authority to waive privilege and had not done so: Raiffeisen Bank International AG v Asia Coal Energy Ventures Ltd & Ashurst LLP [2020] EWCA Civ 11, 21 January 2020 Jason Rix function JDS_LoadEvent(func) { var existingOnLoad = window.onload; if (typeof window.onload != 'function') { window.......