Vald. Nielsen Holding A/S v Mr Victor Baldorino
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jacobs |
| Judgment Date | 18 July 2019 |
| Neutral Citation | [2019] EWHC 1926 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2015-000305 |
| Date | 18 July 2019 |
[2019] EWHC 1926 (Comm)
Mr Justice Jacobs
Case No: CL-2015-000305
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Rolls Building,
Fetter Lane,
London, EC4A 1NL
Michael Booth QC and Christopher Lloyd (instructed by Collyer Bristow LLP) for the Claimants
Alain Choo-Choy QC and Nicholas Sloboda (instructed by Cooke Young & Keidan) for the Defendants
Hearing dates: 18 th – 21 st March, 25 th – 28 th March, 1 st – 4 th April, 8 th–12 th April, 15 th–17 th April, 8 th – 10 th May 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.
| INDEX | PARAGRAPH |
| A: Introduction | 1 |
| B: Factual background and broad chronology of relevant events | 39 |
| C: Deceit: the law | 130 |
| D: The 20 April e-mail | 160 |
| E: The 3 June e-mail | 226 |
| E1: The preparation of the Weighted Budget and the information provided to Tenon and LMS. | 230 |
| E2: The background to 3 June e-mail | 253 |
| E3: The allegation of deceit in relation to 3 June e-mail | 283 |
| F: The Defendants' case and evidence: further considerations and conclusions. | 314 |
| F1: The Defendants' case as to fraudulent intent. | 315 |
| F2: Motive and the Defendants' evidence as to their desire to obtain the maximum price | 321 |
| F3: The strike out application | 337 |
| F4: Other relevant conduct at the material time | 359 |
| F5: Specific arguments advanced by the Defendants | 362 |
| F6: Legal responsibility for the deceit | 372 |
| F7: Conspiracy | 387 |
| G: Inducement | 391 |
| H: Causation and Loss | |
| H1: The shape of the parties' arguments | 425 |
| H2: The facts relevant to the causation and loss arguments | 437 |
| H3: The parties' arguments in more detail | 462 |
| H4: Analysis and conclusions: legal principles | 484 |
| H5: Analysis and conclusions: Causation | 492 |
| H6: Analysis and conclusions: quantification | 541 |
| I: Fair value of Updata UK | 568 |
| J: Assignment | |
| J1: The shape of the arguments | 621 |
| J2: The facts | 631 |
| J3: Danish law | 658 |
| J4: Analysis and conclusions | 678 |
| K: Breach of fiduciary duty | 716 |
| L: Conclusion | 764 |
A: Introduction
The claims made in the proceedings
This case, involving allegations of fraud, arises out of the sale of a business to its management and private equity investors in July 2009. The courts are familiar with claims made by buyers of businesses against sellers who are alleged to have given the buyers far too rosy a picture of the business being sold. The present case is unusual because it is the converse. The basis of The Claimants' claim is that the business being sold was far more successful than the sellers had been led by the management to believe, and that the sellers were misled into selling at the time when they did, and for the price which they received. The sellers contend that if the true picture had been presented to them, they would not have been willing to sell at that time at the price which was being offered.
The business in question was a company called Updata Infrastructure (UK) Ltd (“Updata UK”). This was an English company whose majority shareholder was Updata Europe A/S (“Updata Europe”), which in 2009 owned 60% of its shares. The majority of the shares in Updata Europe were owned by members of the family of its founder, Mr. Peter Johnsen (“Mr. Johnsen”), directly or via a long-established company, the First Claimant (“Vald. Nielsen”). There were two other shareholders in Updata Europe, Mr. Henrik Hildebrandt and Mr. Henrik Bremerskov. A further 12.4% of the shares were held by the Second Claimant, Newwatch Limited (“Newwatch”). This was a Jersey company which was owned by Mr. Johnsen and Mr. Hildebrandt. Updata Europe and Newwatch were referred to at trial as the “European vendors” or “EVs”.
The three Defendants were the executive management team of Updata UK, and their management buyout (“MBO”) was backed by a private equity house called LMS Capital Plc (“LMS”). The sale was successfully completed in July 2009. This was after a bidding process where there was a competing potential purchaser, Mr. Jens Nielsen and interests which he represented. Mr. Nielsen was a former chairman of Updata UK. The final LMS offer was considered more attractive by Updata Europe than the proposals which were forthcoming from Mr. Nielsen, and the sale took place. The entire issued share capital of Updata UK was purchased by a new company, Updata Infrastructure Holdings Limited (“Updata Holdings” or “newco”), in which the Defendants and LMS had significant stakes. For that purpose, a sale and purchase agreement (“SPA”), and various associated documents, were signed on 11 July 2009.
The sale price received by Updata Europe for its 60% share was £ 5.244 million. The Claimants contend that the true value of this stake, at the time of the sale, was £ 22 million. The success of the business was such that in March 2014, less than 5 years after the sale, Updata Holdings was sold to Capita IT Services Holdings Ltd. (“Capita”) for £ 80 million, and the Defendants together received at least £ 21 million for their shares in that sale. Long before that sale, however, Mr. Johnsen and Mr. Hildebrandt had come to believe that they had been misled in the course of the negotiations for sale in 2009.
Vald. Nielsen claims to be the assignee of the rights of Updata Europe to bring claims in fraud and for other remedies against the management who are alleged to have been party to the deception. There is a significant issue in the case as to the validity of the assignment agreements pursuant to which Vald. Nielsen allege that they acquired the rights of Updata Europe, and the Defendants make allegations of fraud against certain individuals involved in the assignment, including Mr. Johnsen. This allegation of fraud was ultimately the only point relied upon by way of an attack on the validity of the assignment, since other arguments based upon champerty and a “non-assignment” clause in the SPA were abandoned by the Defendants in closing argument. The allegation of fraud focused on the backdating of the assignment documents so as to record a date of 19 November 2010 instead of the actual date of signature which was January 2011.
Newwatch does not bring a claim in fraud, since such claims were struck out by order of Sir Richard Field in 2016. Newwatch cannot claim to have suffered loss by fraud because it was able to roll over its prior investment in Updata UK into an equivalent shareholding in Updata Holdings. This meant that in due course Newwatch was able to benefit from the sale to Capita. However, Newwatch makes various equitable claims based upon the proposition that the Defendants acted in breach of fiduciary duty.
The witnesses called and the important areas of factual dispute
The trial occupied 23 days, including just over 18 days of factual and expert evidence. A large number of factual witnesses gave evidence at trial, and the evidence covered the history of Updata Europe and Updata UK over many years in a very considerable amount of detail.
The factual witnesses who gave evidence on behalf of the Claimants were: Mr. Johnsen, Mr. Henrik Hildebrandt, Mr. Flemming Holm and Mr. Jorgen Johnsen, all of whom had been the Danish directors of Updata UK at various times in the period prior to the sale in July 2009. The other factual witnesses were:
i) Mr. Jens Nielsen (the former chairman of Updata UK who was interested in purchasing the business in 2009);
ii) Mr. Esben Bigaard (whose company purchased Updata Europe in late 2009, and who was a signatory to the assignment documentation);
iii) Mr. Mads Birkeland, a dual-qualified Danish lawyer and English solicitor who worked in London for the law firm Corren Troen, and who acted on behalf of Updata Europe and Newwatch in connection with the sale, and subsequently on behalf of Vald. Nielsen in connection with the assignment;
iv) Mr. Henrik Bremerskov, who was a 5% shareholder in Updata Europe and worked in Denmark for the Updata group;
v) Mr. Thomas Nyegaard, an investment banker by profession, and a shareholder in Updata UK by virtue of having provided some initial funding at the request of Mr. Johnsen who was a childhood friend;
vi) Mr. Lynge Thang Jorgensen, who was a senior officer within the bank which had extended loan facilities to Updata Europe and its Danish subsidiary; and
vii) Ms. Tina Kambo (nee Rana), who was in 2009 a junior solicitor at Corren Troen. She assisted Mr. Birkeland with certain administrative but nevertheless important aspects of the transaction. This included the gathering of materials for a data room (“the Data Room”) in connection with the bidding process and the eventual sale.
In addition, a number of Civil Evidence Act statements were adduced, most notably a statement given by Mr. Helge Homann prior to his death in 2017. Mr. Homann was a senior partner with KPMG in Denmark, and played various roles in the events leading to the sale. He was responsible for the audit of Updata Europe, but he also provided assistance to Mr. Nielsen in connection with his proposed bid and due diligence work.
On the Defendants' side, the principal factual witnesses were the Defendants themselves. Each of them was cross-examined at considerable length. The only other factual witnesses were:
i) Mr. Pieter Hooft, who had been responsible for the MBO transaction on behalf of LMS; and
ii) Mr. Finn Jepsen who had briefly been appointed...
To continue reading
Request your trial
-
J T Kelly v B E Baker
...directors' duties arise in very different circumstances to the present; and as noted by Jacobs J in Vald Nielsen v Baldorino [2019] EWHC (Comm) 1926 at [744]: “the mere fact that a director has more knowledge than (or indeed exclusive knowledge compared to) the shareholders of the company'......
-
SK Shipping Europe Plc v Capital VLCC 3 Corporation
...gratefully adopted the following summary of the law from the judgment of Mr Justice Jacobs in Vald, Nielsen Holding A/S v Baldorino [2019] EWHC 1926 (Comm), [131–157], which draws on earlier authority, and which I have supplemented by the further authority cited to me by the 113 First, the......
-
IVY Technology Ltd v Mr Barry Martin
...the representation; and v) as a result the claimant has suffered loss and damage. (See, e.g., Vald Nielsen Holding AS v. Baldorino [2019] EWHC 1926 (Comm) § 131). Representation 339 A representation is a statement of fact made by the representor to the representee on which the representee ......
-
Mr. Serg Bell (formerly known as Serguei Beloussov) v Ms. Ratna Singh
...was made. What is required is dishonest knowledge, in the sense of an absence of belief in truth; Vald Nielsen v. Baldorino [2019] EWHC 1926 (Comm) at 155 As to recklessness, even if the representor has no knowledge of the falsity of their statement, they will still be responsible if they ......
-
2019 Half-year in review: M&A legal and market developments
...shareholders to push through the deal. Permission has be en requested to appeal the judgment. (ValdNielsen Holding A /S v Baldorino [2019] EWHC 1926 (Comm))Key lessons Limited ci rcumstances in whi ch directors owe fiduciary duties to shareholders: The judgment affirms previous case law ......