Veranova Bidco LP v Johnson Matthey Plc

Hearing dates: 14 March 2025

Approved Judgment

This judgment was handed down remotely at 10.30am on 25 March 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Sean O'Sullivan KC (sitting as a Deputy High Court Judge):

On 14 March 2025, I heard an application by the Defendants (“the Ds”) for summary judgment/ strike out in respect of one element of the Claimant (“C”)'s claim. At the end of the hearing, I refused the application and indicated that my written reasons would follow. This judgment sets out those reasons.

The background

The background is that, on 16 December 2021, the parties entered into a number of contractual documents pursuant to which the Ds sold a particular business (“the Health Business”) to C. One of these contractual documents was a share purchase agreement (“the SPA”). Another was a disclosure letter (“the Disclosure Letter”). Completion took place on 31 May 2022.

C's core complaint is that it was not told, prior to the transaction, that one of the Health Business's most important customers, Alvogen Incorporated (“Alvogen”), had triggered a price review mechanism in its contract with the Health Business in relation to a particular pharmaceutical product, Buprenorphine HCl (“BHCL”).

As to that, it appears to be common ground that the supply agreement with Alvogen required Alvogen to purchase a minimum of 75% of its annual requirements for active pharmaceutical ingredients from the Health Business. That agreement contained a price adjustment mechanism whereby, upon notification by Alvogen of a bona fide offer from a third-party manufacturer to supply BHCL at a lower price, Alvogen would be entitled to purchase from that alternative supplier if the Health Business failed to match the competing offer.

While the negotiations for the SPA were ongoing, the Health Business was notified by Alvogen of a competing offer from a third party that was very significantly below the existing BHCL price the Health Business charged to Alvogen. This competing offer was verified by the Health Business as bona fide on 10 December 2021 (i.e. six days before the SPA was signed).

C contends that, by at least that date, the Ds were well aware that they would need to match the competing offer in order to retain Alvogen's business, resulting in a price reduction that would have a very serious consequential impact on the value of the Health Business.

On 20 December 2021, two working days after the SPA was signed, the Third Defendant offered to supply BHCL to Alvogen at a price only very slightly above the competing offer. Then, on 22 December 2021, the Third Defendant agreed with Alvogen to match the competing offer.

C says that it was not told about the triggering of the clause by Alvogen or the price which the third party had offered, and hence that it was misled about the price at which the Health Business was expecting to sell BHCL going forwards.

That core complaint gives rise to two different, if overlapping, types of claim. The first is for breach of two warranties given in the SPA. One aspect of this complaint is that disclosures made in the Disclosure Letter are said to have been insufficient adequately to qualify the warranties. It should be noted that the allegation of breach of warranty is alleged to have been fraudulent, in the sense that the relevant individuals had actual knowledge that the content of the warranties was false as at 16 December 2021, or at least were reckless as to whether the warranties were true or false. I understand there to be a limitation on the Ds' liability for claims for breach of warranty, which is said to require that they be “in respect of the fraud or wilful misconduct of any Seller”.

The second type of claim is for deceit. Initially, there were a series of allegations based upon oral statements, said to have been made by representatives of the Ds in telephone calls. Those allegations have now been withdrawn.

What I am concerned with on the present application is the remaining part of that deceit claim as originally pleaded: namely, an allegation that certain representations were made by the Ds in a draft of the Disclosure Letter which was circulated on 15 December 2021 (i.e. the day before signing of the SPA).

The remaining deceit claim

Focussing in on that allegation, it is pleaded at paragraph 87 of the draft APoC that certain passages in “the draft Disclosure Letter circulated by … HSF … to Linklaters … on 15 December 2021” contained three “express and/or implied” representations.

Mr Rainey KC for the Ds emphasises that I needed to understand the purpose of the Disclosure Letter and referred me to section 9.1 of the SPA, which provides as follows:

“The Sellers shall not be liable in respect of a Business Warranty Claim or a Tax Warranty Claim: (i) relating to Business Warranties or Tax Warranties made as at the date of this Agreement; and (ii) relating to Business Warranties or Tax Warranties made immediately before Completion, to the extent that the facts and circumstances giving rise to the Business Warranty Claim or Tax Warranty Claim are:

9.1.1 in the case of the Business Warranties and Tax Warranties made as at the date of this Agreement Disclosed in the Disclosure Letter or are treated as Disclosed pursuant to the terms of the Disclosure Letter…”

The definition of the Disclosure Letter in the SPA was:

“…the letter dated the same date as this Agreement from the Seller to the Purchaser in relation to the Seller Warranties given as at the date of this Agreement”.

I note that the Disclosure Letter stated at paragraph A5 that:

“The disclosure of any matter hereby shall not imply any representation, warranty, undertaking, assurance, covenant, indemnity, guarantee or any other commitment of any nature whatsoever not expressly given in the [SPA] and none of the Business Warranties … shall be extended in scope by any of the disclosures.”

The specific passages in the draft Disclosure Letter which are relied upon have been set out at paragraph 71 of the draft APoC. Mr Rainey pointed out that this part of the letter commenced with the words:

“Without limiting the generality of the disclosures referred to above, we make the following specific disclosures in relation to the Business Warranties”

Then, as regards the Business Warranty in paragraph 1.4.2

“Since the applicable Accounts Date, increased competition in the market for the Businesses' buprenorphine products has adversely impacted, and continues to adversely impact, the Businesses' market share in that market and the prices that the Businesses are able to charge their customers for these products. Pricing discussions in relation to this issue are ongoing with Alvogen. The projected financial impact of this issue cannot be quantified as at the date of this letter but the impact of this issue on the financial performance of the Businesses during the relevant periods is reflected in the Q1 Accounts and the September 2021 Accounts.”

As regards the Business Warranty in paragraph 8.1.2

“The Businesses are engaged in pricing negotiations with Alvogen. Please see the response provided at Question ID 28960140 in the Q&A Report and document 13.1.1.19 in the Data Room for further information.”

In relation to that last part, I am told that the documents in the “Data Room” referred to some earlier negotiations with Alvogen, but not the competing third party offer.

The three express and/or implied representations to which it is pleaded those passages in the Disclosure Letter gave rise are as follows:

“although price negotiations were ongoing with Alvogen, no competing offer for the supply of BHCL below US$12 per gram had been notified to D3 by Alvogen and/or no such offer had been verified by D3 as bona fide for the purposes of the [relevant contractual mechanism]”;

“it was not possible to quantify the impact of the ongoing price negotiations between D3 and Alvogen relating [to] BHCL”; and

“no further disclosure was required in order to render true [the relevant warranties]”.

I should make clear that C contends that senior executives representing the Defendants were well aware that these facts were untrue at the time (or were, at least, reckless in that regard) and hence this is a claim for fraudulent misrepresentation or deceit. All of that is highly controversial. But the Ds say that C can never get to that stage of the analysis, because C's case that providing a draft of the Disclosure Letter involved the Ds making those representations is hopeless.

Summary judgment

There was no dispute about the test for summary judgment. It was expressed neatly by Henshaw J in Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden NV v Société Bengaz SA [2024] EWHC 901 (Comm) at [71]–[72]:

“71. Under CPR 24.3, the court may give summary judgment “against a claimant or defendant on the whole of the claim or on an issue if — (a) it considers that the party has no real prospect of succeeding on the claim, defence or issue; and (b) there is no other compelling reason why the case or issue should be disposed of at a trial”.

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