UCP Plc v Nectrus Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Michael Burton GBE |
| Judgment Date | 29 November 2019 |
| Neutral Citation | [2019] EWHC 3274 (Comm) |
| Date | 29 November 2019 |
| Docket Number | Case No: CL-2017-000542 |
| Court | Queen's Bench Division (Commercial Court) |
[2019] EWHC 3274 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
7 Rolls Buildings, Fetter Lane,
London, EC4A 1NL
Sir Michael Burton GBE
(sitting as a Judge of the High Court)
Case No: CL-2017-000542
Huw Davies QC and Felix Wardle (instructed by Skadden, Arps, Slate, Meagher and Flom (UK) LLP) for the Claimant
Andrew Butler QC, Andrew Legg and Edward Blakeney (instructed by Hugh Cartwright & Amin) for the Defendant
Hearing dates: 12, 13, 14 November 2019
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 has been the second hearing, pursuant to my Order of 31 May 2019, of the claim by UCP against Nectrus, after my Judgment in UCP's favour dated 5 July 2019 [2019] EWHC 1732 (Comm). I refer to and adopt both the facts and abbreviations there set out, and in particular my findings in paragraph 1–5, 8–18 and 30–37 in that Judgment. I concluded that Nectrus owed duties to UCP pursuant to the IMA, of which they were in breach, and I directed this hearing to assess the quantum of loss and consider the relief to be granted. There has been the same representation for both parties, save that Mr Blakeney was added to Mr Legg as one of Mr Butler QC's juniors, and I have been grateful for their assistance, as before by leading counsel, but additionally by junior counsel, who both provided helpful notes at my request.
The loss claimed falls into two categories. The first was described by the Claimant as the “Lost Deposits”, and the second consisted of Recovery Costs.
The Lost Deposits
The claim before me allowed for the fact that I had in the event found no breach in respect of the INR 150 crore invested by Nectrus in SREI (paragraphs 38–41 of the Judgment). Subject to that, the facts appear in paragraph 3 and 4 of my Judgment: the sale of the shares in Candor by UCP to Brookfield involved the deduction from the agreed purchase price of the equivalent of 60% (UCP's share) of INR 243 crore (the Lost Deposits). The relevant provisions, by which the parties agreed that Brookfield would leave UCP to investigate and seek to recover and retain the Lost Deposits invested by Nectrus, at its own cost, and subject to accounting for 40 % (“the recovery rights”), were contained in sub-paragraphs 10.11 and 10.12 of the 10 June 2014 Agreement for the Sale and Purchase of Candor (“the SPA”) — the Seller is of course UCP, and the Purchaser is Brookfield:
“10.11 Subject to the Seller indemnifying the Purchaser or other member of the Purchaser's Group concerned against all costs and expenses (including legal and professional costs and expenses) that may be incurred as a result of undertaking the actions contemplated in this Clause 10.11, at the Seller's sole discretion, the Purchaser undertakes…..to procure, to the extent it or the relevant member of the Purchaser's Group is legally able without breaching any regulation, that all rights of the Indian Subsidiaries and any other Group Company to receive any disbursement, or to otherwise recover, sixty (60) per cent, of the Inter-Corporate Deposits and/or the Additional Inter-Corporate Deposits outstanding at Completion shall either (i) be assigned to the Seller or to any person designated by the Seller, on an unconditional basis, or (ii) if the assignment cannot be effected, the Parties shall, at the Seller's written request, take such other action as may be necessary to transfer to the Seller or to any person designated by the Seller the entitlement to require Aten Group and SREI Infrastructure Finance Limited to repay such deposits and to receive any repayment due under such deposits, in each case, as soon as possible on or after Completion (the Assignment”).
10.12 Subject to the Seller indemnifying the Purchaser or other member of the Purchaser's Group concerned against all costs and expenses (including legal and professional costs and expenses) that may be incurred as a result of undertaking the actions contemplated in this Clause 10.12, at the Seller's sole discretion, the Purchaser further agrees to, and shall procure that any member of the Purchaser's Group shall, to the extent that it is legally able to, with effect from Completion:
(a) execute any assignment agreement or other equivalent or ancillary instrument and take any other action that may be necessary to effect the Assignment, including requesting the approval of, and providing any information requested in connection with such approval by, the Reserve Bank of India;
(b) provide the Seller or any person designated by the Seller, with any information and assistance (including defending and commencing any legal proceedings) that they can reasonably require for the purposes of recovering any Inter-Corporate Deposits and/or the Additional Inter-Corporate Deposits that remain outstanding at the relevant time post Completion; and
(c) pay to the Seller, or to any person designated by the Seller, an amount equivalent to sixty (60) per cent of any amounts recovered by a member of the Purchaser's Group (post Completion) from or on behalf of SREI Infrastructure Finance Limited or any member of the Aten Group (including via Unitech Limited (or any of its Affiliates)) with respect to any outstanding Inter-Corporate Deposits (in excess of the Repaid Inter-Corporate Deposits) or Additional Inter-Corporate Deposits (it being agreed that the reference to amounts recovered above shall include any amount which has been set-off against (or waived in exchange of) any amount due by any member of the Purchaser Group to any of the entities listed above), less (i) any Tax due or payable in respect of such amount or required to be withheld by the Purchaser or member of the Purchaser's Group; and (ii) any costs incurred by the Purchaser or member of the Purchaser's Group in recovering such amount or making the payment to the Seller or such person designated by the Seller (the ‘Deferred Payment’).”
Mr Lake, to whom I refer in paragraphs 12 and 13 of the Judgment, said as follows in his third witness statement for the purposes of this hearing, on which he was not in the end cross examined because he was prevented by an emergency from attending the hearing, but his evidence was not in the event challenged before me:
“12. As I described in my First Witness Statement, it was during the due diligence process that scrutiny of the monies placed with SREI and Aten increased and indications began to be made that the monies may not be returned at face value ahead of the completion of the sale. However, at this stage, the situation remained unclear to UCP: we were receiving conflicting (and, as it turned out, misleading) messages from Nectrus/Unitech as to whether the deposits could be broken and returned ahead of their apparent maturity dates (we were still under the impression that the monies were as good as cash). For example, by a 21 May 2014 email Graham Smith reported to me that he had been told that breaking the deposits “is possible”, while on 23 May 2014 Ajay Chandra indicated to me by email that “it may be tough” for the deposits to be broken and returned before they matured.
….
14. The minutes of the 5 June 2014 meeting of Independent Directors, which was the last meeting before the signing of the SPA (and the first meeting to discuss the unfolding situation with the SREI and Aten monies), record our understanding of the situation as at the time of the finalisation of the wording of the soon-to-be-signed SPA:
Based on the information we had from Nectrus, it appeared that INR 243 crore (then c. £25m, of which UCP's 60% share was c. £15m) was due to be repaid before completion: the maturity date for the SREI monies was understood to be in July 2014 and for Aten Capital to have been in March or May 2014 (we did not yet properly understand that substantially all of the monies placed with Aten Capital had apparently been transferred to Aten PM and the onward transfer to the ‘Sham Entities’ was not yet known to us).
……
d) In light of the uncertainty regarding the status of the SREI and Aten monies, the SPA would provide that the consideration be reduced by any deposit monies not received back before completion, with the right to recover any such monies to be left with UCP.
e) If the monies were not returned (and the consideration paid by Brookfield was therefore correspondingly reduced on completion), UCP would have to seek the loss from Nectrus, for example by set-off against any outstanding IMA fee or amounts payable to Nectrus as shareholder on distribution. Pursuit of Nectrus was the preferred route given its obligations to UCP under the IMA, and on the same day as the meeting, UCP sent to Nectrus (on its and Candor's behalf) a letter seeking confirmation as to whether any breaches of the IMA/Treasury Policy had occurred.
15. Thus, although we were optimistic about the prospect of recovery of the monies from SREI and Aten prior to completion, we had discussed and agreed with Brookfield the manner in which recovery would take place, if necessary, post-completion, which was reflected in the terms of the SPA.
a) Brookfield made clear to UCP that it wanted no part in the process of recovery of the Stranded Deposits and was not prepared to attribute any value to, or pay for any rights of recovery that Candor or the Indian SPVs may have had. UCP therefore agreed that Brookfield would receive a discount on the sale price of Candor reflecting the value of the monies, but on the understanding that UCP would solely be entitled to recover in respect of those amounts, whether from SREI, Aten or Nectrus. In exchange for the discount, Brookfield also...
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