RWE Nukem Ltd v AEA Technology Plc
| Jurisdiction | England & Wales |
| Judge | MRS JUSTICE GLOSTER, DBE,Mrs Justice Gloster, DBE |
| Judgment Date | 28 January 2005 |
| Neutral Citation | [2005] EWHC 78 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2004 Folio 242 |
| Date | 28 January 2005 |
[2005] EWHC 78 (Comm)
Mrs Justice Gloster, DBE
Case No: 2004 Folio 242
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Richard Wilmot-Smith QC (instructed by Halliwells) for the Claimant
Mr Keith Rowley QC and Sean Brannigan (instructed by Eversheds LLP) for the Defendant
Hearing dates: 9 th & 10 th November 2004
Approved Judgment
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.
This is a trial of four preliminary issues. The action concerns allegations of breach of warranty made by the Claimant, RWE Nukem Limited ("RWE"), which purchased the nuclear engineering business ("the Business") belonging to the Defendant, AEA Technology Plc ("AEAT") for £23.7 million pursuant to a contract in writing dated 1 June 2001 ("the Agreement").
The relevant factual background to the claim is set out in the pleadings. In summary, however, the essential facts are as follows:
i) The Agreement contained numerous warranties as to the accuracy of information relating to the Business which had been supplied by AEAT prior to the sale thereof. Those warranties were qualified by a detailed contemporaneous disclosure letter ("the Disclosure Letter").
ii) At the date of the Agreement the parties agreed to the completion of the sale of the Business at a future date ("Completion"). Completion was to be one day after various conditions were met by each party. Thereafter, pursuant to Schedule 14 of the Agreement there would be a final sum agreed by way of a completion statement ("the Completion Statement").
iii) Paragraph 2.4 of Schedule 9 to the Agreement provided that, if RWE wished to make any claim ("Claim") for breach of warranties under the Agreement, it would provide written particulars of all such claims within 24 months of Completion and that any intended proceedings would be commenced within six months thereafter. The relevant provisions of the Schedule were in the following terms:
paragraph 2.4:
"the Vendor [the Defendant] will be under no liability in respect of any Claim unless written particulars of such Claim (giving details of the specific matter as are available to the Purchaser [the Claimant] in respect of which such Claim is made) have been given to the Vendor [the Defendant] within a period of 24 months from the date of Completion …"
paragraph 1:
"… 'Claim' means any claim which is or would (but for the provisions of this Schedule 9) be capable of being made against the Vendor [the Defendant] in respect of any liability for breach of the Warranties."
iv) Completion took place on 1 October 2001 and the Completion Statement was agreed on 26 June 2002.
v) On 29 September 2003, the day before the expiry of the 24 month period, RWE's solicitors, Halliwells, wrote to AEAT outlining 19 separate complaints about potential alleged breaches of warranty, of other provisions of the Agreement and of a related Trading Agreement. The extent to which that letter ("the September Letter") provided adequate particulars of the claims now advanced in these proceedings in compliance with Paragraph 2.4 of Schedule 9 is one of the issues which I have to decide.
vi) Despite the fact that 19 separate complaints were put forward in that letter, RWE eventually chose to bring only nine separate claims arising from alleged breaches of the Agreement and the Trading Agreement. In addition, upon AEAT challenging those claims, RWE subsequently abandoned one of them (a claim relating to a company called Transforce) and substantially modified a number of others.
vii) The Preliminary Issues arise out of certain of the eight claims which remain.
AEAT denies the claims being made against it. In particular it denies that it breached the Agreement, any warranties or the Trading Agreement as now alleged by RWE or at all.
Preliminary Issue 1
This is in the following terms:
"Are damages recoverable for breach of warranty on the bases pleaded in paragraphs 19, 32, 48, 57 and 70 of the Re-Amended Particulars of Claim or, alternatively, are they irrecoverable for the reasons set out in paragraphs 15(e), 23(a), 37(b), 48(a) and 59(b) of the Amended Defence?"
I need spend little time on this issue. The claim made in paragraph 57 was in any event abandoned prior to the hearing and, in the course of argument before me, Mr Richard Wilmot-Smith QC for the claimant rightly conceded that the remaining paragraphs relevant to this issue (other than paragraph 70(1)) were indeed demurrable in the form in which they then stood, largely for the reasons set out in the skeleton argument of Mr Keith Rowley QC for the Defendant. (I should mention that Mr Rowley QC conceded in his skeleton argument that paragraph 70(1) of the Re-Amended Particulars of Claim (which, as renumbered became paragraph 68 of the draft Re-Re-Amended Particulars of Claim) did disclose an arguable claim for damages on the basis there alleged.) These were as follows.
i) As a matter of logic or causation it is not possible that a breach of a warranty contained in the Agreement caused RWE to miss an opportunity to obtain an Agreement on more advantageous terms, which is what is pleaded in the Re-Amended Particulars of Claim. Such a case fundamentally confuses the sequence of events: the Warranties relied upon only become binding and/or capable of founding an action for breach of contract at the moment when the Agreement was made. By definition, however, that is the precise point when any opportunity for making alterations to such an Agreement ceased. In short RWE cannot rely upon a breach of a contract as founding a claim for damages representing the loss of an opportunity to enter into that contract on different terms.
ii) Secondly, it is trite law that damages for breach of a warranty are damages for breach of contract and that such damages are to be assessed on the basis of putting a claimant into the position he would have been in had the contractual promise been fulfilled. They are not to be assessed on the tortious common law basis of putting the claimant in the position he would have been in had the contractual promise not been made; see e.g. McGregor on Damages, 17th Edition: para. 19–003, pp. 672–673; Chitty on Contracts, 29th Edition, Vol. I: para. 1–101, pp. 62–63.
iii) RWE's claim in these paragraphs either ignores or confuses this distinction. If RWE is correct and AEAT has broken its warranty as to the accuracy of the information supplied by it, RWE's claim would be for damages to put it into the same position it would have been if the warranty was not broken. The correct manner of calculating such damages is the difference, if any, between the value of the Business as warranted and its actual market value—see for example: McGregor at paras. 24–006 to 24–007 (and in particular the decision of the Privy Council there mentioned Lion Nathan v. CC Bottlers [1996] 1 W.L.R. 1438); The Encyclopaedia of Forms and Precedents (5 th ed.) Vol. 11, paras. 17–19.
iv) However, RWE's claim as originally formulated in these paragraphs, is of a diametrically opposed nature. RWE does not seek damages to put it into the position it would have been in had the warranty been complied with—bound by the Agreement but with a business worth more. Instead it seeks damages on the basis of the position it would have been in had it managed instead to enter into an agreement on fundamentally different terms. That, patently, is not a breach of warranty claim.
I indicated in the course of argument that I agreed with those submissions. Mr Wilmot-Smith applied for permission to re-re-amend the Particulars of Claim. Mr Rowley did not in principle oppose these re-amendments, but contended that I should not formally rule on the amendment until I had dealt with the submissions on the remaining issues. I adopted this course.
Preliminary Issue 2
This is in the following terms:
"Is the Claimant precluded from bringing claims in respect of the Defendant's alleged breaches of warranty pleaded in the following paragraphs of the Amended Particulars of Claim (now Re-Amended Particulars of Claim), namely paragraphs 15 to 21, 23 to 26 and 28 to 33, and 38 to 40 and 45 to 49 by reason of the Claimant's failures to comply with the requirements of paragraph 2.4 of Schedule 9 to the Agreement as alleged in paragraphs 18(c), 25(c) and 38(c) of the Defence respectively and/or in any Amended Defence served pursuant to the Order of Mr Justice Colman dated 23 July 2004?"
The issue for determination here is, shortly stated, whether the September Letter contained adequate written particulars of the claim for breach of warranty now made by RWE in its current draft Re-Re-Amended Particulars of Claim ("RRAPC"), including "details of the specific matter as are available to the Purchaser in respect of which such Claim is made", as provided in paragraph 2.4 of Schedule 9.
The law was in all material respects common ground between the parties. I was referred to the following cases, which dealt with similar (though in some respects materially different) clauses:
Senate Electrical v STC [1999] 2 Lloyds Rep. 423 ;
Laminates Acquisition Co v BTR Australia Ltd [2003] EWHC 2540 and
Bottin (International) Investments Ltd v Venson Group Plc and others [2004] EWCA Civ 1368 ).
From these cases the following propositions can be distilled.
i) Every notification clause turns on its own individual wording.
ii) In particular due regard must be had to the fact that where such notification clauses operate as a condition precedent to liability (as in this case) it is for the party bringing a claim to demonstrate...
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