Takeda Pharmaceutical Company Ltd v Fougera Sweden Holding 2 AB
| Jurisdiction | England & Wales |
| Judge | Mr Justice Arnold |
| Judgment Date | 10 August 2017 |
| Neutral Citation | [2017] EWHC 1995 (Ch) |
| Docket Number | Case No: HC-2017-001235 |
| Court | Chancery Division |
| Date | 10 August 2017 |
[2017] EWHC 1995 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Arnold
Case No: HC-2017-001235
Paul Downes QC and Emily Saunderson (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Claimant
Daniel Toledano QC and Conall Patton (instructed by Freshfields Bruckhaus Derringer LLP) for the Defendant
Hearing dates: 18–21 and 24 July 2017
| Contents | |
| Topic | Paragraphs |
| Introduction | 1–6 |
| The witnesses | 7–13 |
| Factual witnesses | 7–10 |
| Expert witnesses | 11–13 |
| Factual background | 14–59 |
| The loan arrangements | 14–21 |
| The Danish WHT regime | 22–29 |
| The First Assessment | 30–34 |
| The "black box" information | 35–37 |
| Nycomed's appeal | 38–39 |
| Discussions between the parties concerning the WHT issue prior to the SPA | 40–46 |
| Further progress of Nycomed's appeal | 47–50 |
| The Second Assessment | 51 |
| The Letter Agreement | 52 |
| The transfer of the black box information | 53–54 |
| The present dispute | 55–60 |
| Issues as to the factual matrix | 61–117 |
| Necessary? | 63–108 |
| As at 19 May 2011 | 67–90 |
| As at 28 January 2015 | 91–108 |
| Control? | 109–117 |
| As at 19 May 2011 | 111–114 |
| As at 28 January 2015 | 115–117 |
| The SPA | 118–125 |
| Interpretation of the SPA | 126–146 |
| Clause 16.1 | 127–136 |
| An implied duty to cooperate | 137–141 |
| An implied duty not to obstruct | 142–145 |
| Non-derogation from grant | 146 |
| The Letter Agreement | 147–149 |
| Interpretation of the Letter Agreement | 150–151 |
| Conclusion | 152 |
Introduction
These proceedings arise out of the sale of a Danish pharmaceutical company, Nycomed A/S ("Nycomed") for €9.6 billion. The seller was the Defendant ("Fougera"), which is a Swedish subsidiary of Fougera SCA SICAR (previously known as Nycomed SCA SICAR) ("the SICAR"), a Luxembourg limited partnership. The buyer was the Claimant ("Takeda"), a Japanese company. The sale took place pursuant to a sale and purchase agreement dated 19 May 2011 ("the SPA").
There was at the time of the sale, and remains, a live issue as to whether Nycomed was liable to SKAT (referred to in these proceedings as the Danish Tax Authority or "DTA") for withholding tax ("WHT") on interest payable by Nycomed on monies it had borrowed from Fougera. The DTA's claim for WHT arises out of a new financing and holding structure for the Nycomed Group which was put in place in December 2006 in connection with its acquisition of Altana Pharmaceutical AG ("Altana"), a German pharmaceutical company.
The SPA contains indemnity provisions whereby, in certain circumstances, a payment of WHT by Nycomed would fall to be indemnified by Fougera, subject to limitations and exclusions, including a monetary cap of €75 million. Fougera's liability under the indemnity is to cease altogether after the sixth anniversary of Closing as defined in the SPA, namely on 30 September 2017. (Strictly speaking, the provisions in question do not provide for a true indemnity, but nevertheless it is convenient for present purposes to describe them in that way.)
In order for the indemnity to be triggered prior to that cut-off date, the WHT would have to become "finally recoverable" from Nycomed, meaning that it was the subject of a binding agreement with the DTA (i.e. a compromise) or the subject of an unappealable or unappealed decision of a court or tribunal. To date, none of this has happened. In the meantime, the sum of €75 million is standing in an escrow account.
Takeda contends that the SPA, either on its own or in conjunction with a subsequent letter agreement dated 28 January 2015 ("the Letter Agreement"), imposes an obligation on Fougera to provide Takeda with information and documentation about the ultimate investors in the SICAR ("the Investor Information"). Takeda puts its case on the basis both of a positive obligation (to provide the Investor Information as soon as reasonably practicable upon Takeda's request) and a negative obligation (not wrongfully to prevent Takeda from getting the Investor Information or wilfully to delay its provision). Takeda contends that these obligations arise either because this is the meaning of a covenant for further assurance in the SPA, taken together with the indemnity provisions, or because there are implied terms to that effect. Fougera disputes that it is subject to either obligation.
If the alleged obligations do exist, then further issues arise between the parties concerning breach, causation and loss. Recognising that it would be helpful for the parties to know where they stand prior to the 30 September 2017 cut-off date, on 12 May 2017 Birss J directed an expedited trial of the following preliminary issues:
i) Is Fougera (as contended by Takeda) obliged under the express and/or implied terms of the SPA and/or the Letter Agreement to provide Takeda with information within its control about its own investors and the entities lying behind them at Takeda's request as soon as is reasonably practicable?
ii) Is Fougera (as contended by Takeda) obliged under the express and/or implied terms of the SPA and/or the Letter Agreement not wrongfully to interfere with, impede, hinder or obstruct Takeda's efforts to obtain or procure such information or obliged not wilfully to delay the provision of such information?
The witnesses
Factual witnesses
Takeda served witness statements from four factual witnesses:
i) Scott Dessing is Takeda's Vice President, Head of Global Tax. He has been employed by the Takeda group since 1999. As Takeda's most senior tax specialist, Mr Dessing had overall responsibility for the tax aspects of Takeda's acquisition of Nycomed. He was involved in the meetings with representatives from Fougera in December 2010 and in March, April and May 2011 in respect of the SPA.
ii) Anders Endicott Pedersen is a tax partner in a leading Danish law firm, Plesner. He has the conduct of Nycomed's defence of the DTA's claim, and he has also been involved in a number of similar cases proceeding through the Danish tribunals and courts.
iii) Andre Mueller is a US Certified Public Accountant and former German Certified Tax Advisor. He worked for KPMG from 2002 to 2010 and was a tax adviser to the Nycomed Group from 2006 to 2010. In that capacity, he was involved in implementing the new financing and holding structure for the Nycomed Group in December 2006 in connection with its acquisition of Altana. Mr Mueller was Nycomed Group's Director of Corporate Tax from 1 November 2010 until after the SPA. Mr Mueller was therefore on the seller's side of the discussions between the parties which led to the SPA.
iv) Kyle Woitel has been a partner in the merger and acquisitions transaction services practice of Deloitte Tax LLP ("Deloitte") since 2006. Mr Woitel was involved in discussions between the parties relating to the WHT liability in March, April and May 2011, and he oversaw the production of due diligence reports by Deloitte for Takeda. Mr Woitel was therefore on the buyer's side of the discussions between the parties which led to the SPA.
Fougera contends that large swathes of all four of these statements are inadmissible in evidence at this trial on one or more of the following grounds: (i) they contain statements of subjective intention in relation to the SPA and/or opinion and/or legal argument, (ii) they concern the negotiation of the SPA, (iii) they concern facts which were only available to one of the contracting parties and (iv) they concern the conduct of the parties after the SPA. Consistently with that contention, counsel for Fougera elected not to cross-examine any of the witnesses.
Takeda disputes that any parts of the statements are inadmissible. In order to reduce the ambit of the dispute, Takeda has elected not to rely upon some of paragraphs objected to by Fougera. Nevertheless, Takeda does rely upon a fairly large number of paragraphs in all four statements which are objected to. I do not propose to lengthen this judgment by considering each paragraph and each objection seriatim. I consider that, on the whole, Fougera's objections are justified. Even if all the evidence relied on by Takeda were admitted, however, I do not consider that it would affect the conclusions which I have reached.
Fougera called two factual witnesses to deal with the issue of control (as to which, see below):
i) Kristoffer Melinder, a director of Fougera nominated by NC Advisory AB, an advisor to the Nordic Capital Funds, which hold the largest stake in the SICAR. Mr Melinder signed the SPA and the Letter Agreement on behalf of Fougera. Counsel for Takeda accepted that Mr Melinder was both a truthful and a reliable witness.
ii) Maximilian Hofert, a partner and Managing Director of aPriori Capital Partners, the manager of the DLJ Funds, which hold the second largest stake in the SICAR ("aPriori"). Counsel for Takeda submitted that some of Mr Hofert's evidence was unreliable. I do not accept this, although it is fair to say that Mr Hofert was more guarded in his answers than Mr Melinder.
Expert witnesses
Both parties adduced expert evidence as to Danish tax law and practice as at the dates of the SPA and the Letter Agreement. Takeda's expert, Anders Oreby Hansen, has been a partner in a Danish law firm, Bech-Bruun, since 2005. He obtained an LLM from the University of Copenhagen in 1991 and has been a member of the Danish Bar Association since 1994. He has worked on Danish tax matters for more than 25 years. He is the author or co-author of five books and over 50 articles.
Fougera's expert, Niels Winther-Sørensen, has been a tax partner at PriceWaterhouseCoopers since 2013. He obtained a Master of Laws in 1989 and a...
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