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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Powell & Ors v General Electric Company [2005] EWHC 644 (Ch) (18 April 2005) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2005/644.html Cite as: [2005] EWHC 644 (Ch) |
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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(1) Michael Anthony Powell (2) William Graham (3) Hg Investment Managers Limited |
PPt 20 Defendant (First Claim)/ Pt 20 Claimant (Second Claim) |
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- and - |
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General Electric Company |
Pt 20 Claimant (First Claim)/ Pt 20 Defendant (Second Claim) |
____________________
Mayer, Brown, Rowe & Maw LLP) for the Part 20 Claimant
(First Claim)/ Part 20 Defendant (Second Claim)
Michael Lyndon-Stanford QC and Rebecca Stubbs (instructed by Lovells) for the
Part 20 Defendant (First Claim)/ Part 20 Claimant (Second Claim)
Hearing dates : 24th - 25th February 2005
____________________
Crown Copyright ©
Mr Justice Patten :
Introduction
"For the purposes of this Clause the "Maximum Amount" during the First Claim Period shall be £25,000,000, during the Second Claim Period shall be £10,000,000, during the Third Claim Period shall be £5,000,000 and during the Fourth Claim Period shall be £2,500,000. Any amounts payable to the Purchaser, or any Designated Purchaser, or any member of the Purchaser's Group in respect of all Claims shall be recoverable only from and to the extent of:
(a) the sums held from time to time in the Retention Account; and
(b) any sums actually recovered by the Purchaser, or any Designated Purchaser or any member of the Purchaser's Group under the Purchaser Insurance Policy
The Purchaser (on its own behalf and on behalf of any Designated Purchaser or any member of the Purchaser's Group) agrees that it will look solely to the sums referred to in (a) and (b) above and will have no recourse for any Claim to any assets of the Warrantors, other than to the sums held from time to time in the Retention Account."
"Neither of the Warrantors shall have any liability in respect of any claim arising under the Warranties (other than the Tax Warranties) unless the Purchaser has served on them a written notice of that claim on or before the expiry of the First Claim Period (being fifteen calendar months from the Completion Date), or, in respect of a claim arising under the Tax Warranties or the Tax Covenant, six months following the sixth anniversary of the Completion Date.
(a) In each case, the Purchaser shall be required, at the same time as giving such notice of a Claim to give such details of the Claim as the Purchaser then has, including the Purchaser's then best estimate given in good faith of the amount of the liability of the Warrantors in respect thereof.
(b) The Claim shall be deemed to have been withdrawn, and the Warrantors shall no longer be liable in respect thereof, unless the Purchaser has issued and served proceedings in respect thereof within 12 months of the date of such written notice provided that if the relevant notice was given in respect of a Claim which was then contingent only, such period of 12 months shall commence on and from the date on which the relevant Claim ceases to be contingent and becomes actual."
"6.1 For the purposes of this Clause 6:
"Claim Periods" shall mean the First Claim Period, the Second Claim Period, the Third Claim Period and the Fourth Claim Period and "Claim Period" means any of them;
"Claim Period Maximum Released Amounts" means the First Claim Period Maximum Released Amount, the Second Claim Period Maximum Released Amount, the Third Claim Period Maximum Released Amount and the Fourth Claim Period Maximum Released Amount and "Claim Period Maximum Released Amount" means any of them;
"First Claim Period" means the period of fifteen calendar months from the Completion Date;
"First Claim Period Maximum Released Amount" means the sum of £15,000,000 plus all interest accrued on the Retention during the First Claim Period;
"First Claim Period Retention Claim(s)" means any claim(s) under this Agreement (including for the avoidance of doubt any Claim(s)) notified to the Warrantors or the Sellers' Representative (as the case may be) on or before the expiry of the First Claim Period;
"Second Claim Period" means the period between the end of the First Claim Period and the date which falls thirty calendar months from the Completion Date;
"Second Claim Period Maximum Released Amount" means the sum of £5,000,000 plus all interest accrued on the Retention during the Second Claim Period;
"Second Claim Period Retention Claim(s)" means any claim(s) under this Agreement (including for the avoidance of doubt any Claim(s) in relation to the Tax Warranties or the Tax Covenant) notified to the Warrantors or the Sellers' Representative (as the case may be) on or before the expiry of the Second Claim Period but not including any First Claim Period Retention Claim(s);
"Third Claim Period" means the period between the end of the Second Claim Period and the date which falls thirty six months from the Completion Date;
"Third Claim Period Maximum Released Amount" means the sum of £2,500,000 plus all interest accrued on the Retention during the Third Claim Period;
"Third Claim Period Retention Claim(s)" means any claim(s) under this Agreement (including for the avoidance of doubt any Claim(s) in relation to the Tax Warranties or the Tax Covenant) notified to the Warrantors or the Sellers' Representative (as the case may be) on or before the expiry of the Third Claim Period but not including any First Claim Period Retention Claim(s) or any Second Claim Period Retention Claim(s);
"Fourth Claim Period" means the period between the end of the Third Claim Period and the date which falls seventy eight months from the Completion Date;
"Fourth Claim Period Maximum Released Amount" the balance of the funds in the Retention Account at the expiration of the Fourth Claim Period;
"Fourth Claim Period Retention Claim(s)" means any claim(s) under this Agreement (including for the avoidance of doubt any Claim(s) in relation to the Tax Warranties or the Tax Covenant) notified to the Warrantors or the Sellers' Representative (as the case may be) on or before the expiry of the Fourth Claim Period but not including any First Claim Period Retention Claim(s) or any Second Claim Period Retention Claim(s) or any Third Claim Period Retention Claim(s).
"Retention Claims" shall mean during the First Claim Period, any First Claim Period Retention Claim(s), during the Second Claim Period, any Second Claim Period Retention Claim(s), during the Third Claim Period any Third Claim Period Retention Claim(s) or during the Fourth Claim Period any Fourth Claim Period Retention Claim(s);
"Relevant Released Amount" shall mean:
(i) in respect of the First Claim Period the lesser of (i) an amount equal to the amount produced by subtracting from the First Claim Period Maximum Released Amount (a) all payments made under Clause 6.6, (b) all Initial Estimates and Revised Estimates relating to First Claim Period Retention Claim(s) (to the extent the same have not subsequently become, during the First Claim Period, Agreed Retention Amounts, Disputed Retention Amounts or Adjudicated Estimates); and (c) Agreed Retention Amounts, Disputed Retention Amounts or Adjudicated Estimates in each case in respect of First Claim Period Retention Claim(s) and (ii) such amount as leaves in the Retention Account an amount equal to £10,000,000;
(ii) in respect of the Second Claim Period the lesser of (i) an amount equal to the amount produced by subtracting from the Second Claim Period Maximum Released Amount (a) all payments made under Clause 6.6, (b) all Initial Estimates and Revised Estimates relating to Second Claim Period Retention Claim(s) (to the extent the same have not subsequently become, during the Second Claim Period, Agreed Retention Amounts, Disputed Retention Amounts or Adjudicated Estimates); and (c) Agreed Retention Amounts, Disputed Retention Amounts or Adjudicated Estimates in each case in respect of Second Claim Period Retention Claim(s) and (ii) such amount as leaves in the Retention Account an amount equal to £5,000,000;
(iii) in respect of the Third Claim Period the lesser of (i) an amount equal to the amount produced by subtracting from the Third Claim Period Maximum Released Amount (a) all payments made under Clause 6.6, (b) all Initial Estimates and Revised Estimates relating to Third Claim Period Retention Claim(s) (to the extent the same have not subsequently become, during the Third Claim Period, Agreed Retention Amounts, Disputed Retention Amounts or Adjudicated Estimates); and (c) Agreed Retention Amounts, Disputed Retention Amounts or Adjudicated Estimates in each case in respect of Third Claim Period Retention Claim(s) and (ii) such amount as leaves in the Retention Account an amount equal to £2,500,000; or
(iv) in respect of the Fourth Claim Period an amount equal to the amount produced by subtracting from the Fourth Claim Period Maximum Released Amount (a) all payments made under Clause 6.6, (b) all Initial Estimates and Revised Estimates relating to Fourth Claim Period Retention Claim(s) (to the extent the same have not subsequently become, during the Fourth Claim Period, Agreed Retention Amounts, Disputed Retention Amounts or Adjudicated Estimates); and (c) Agreed Retention Amounts, Disputed Retention Amounts or Adjudicated Estimates in each case in respect of Fourth Claim Period Retention Claim(s).
As specified in Clause 5.13, the Retention shall be paid into a designated, interest-bearing account with Barclays Bank PLC, in the joint names of the Sellers' Solicitors and the Purchaser's Solicitors (the "Retention Account") on Completion and the Retention (together with interest accrued thereon) shall be applied in accordance with the provisions of this Clause. The instructions given to Barclays Bank PLC on the setting up of the Retention Account shall include an instruction that no sums may be released from the Retention Account at any time without the authority of both the Purchaser's Solicitors and the Sellers' Solicitors.
6.2 If no Retention Claims are made in the relevant Claim Period then (without prejudice to the provisions of Clause 8.1);
(a) if the Purchaser or Designated Purchaser has not made any First Claim Period Retention Claim(s) prior to the expiry of the First Claim Period the First Claim Period Maximum Released Amount shall be released to the Sellers' Solicitors on behalf of the Sellers on the second Business Day following the expiry of the First Claim Period;
(b) If the Purchaser or Designated Purchaser has not made any Second Claim Period Retention Claim(s) prior to the expiry of the Second Claim Period and there are no First Claim Period Retention Claim(s) that have not been determined or settled in accordance with Clause 6.6 as at the end of the Second Claim Period, there shall be released to the Sellers' Solicitors on behalf of the Sellers on the second Business Day following the expiry of the Second Claim Period, an amount equal to the lesser of (i) the Second Claim Period Maximum Released Amount and (ii) such amount as leaves in the Retention Account an amount equal to £5,000,000;
(c) If the Purchaser or Designated Purchaser has not made any Third Claim Period Retention Claim(s) prior to the expiry of the Third Claim Period and there are no First Claim Period Retention Claim(s) or any Second Claim Period Retention Claim(s) that have not been determined or settled in accordance with Clause 6.6 as at the end of the Third Claim Period, there shall be released to the Sellers' Solicitors on the second Business Day following the expiry of the Third Claim Period an amount equal to the lesser of (i) the Third Claim Period Maximum Released Amount and (ii) such amount as leaves in the Retention Account an amount equal to £2,500,000;
(d) If the Purchaser or Designated Purchaser has not made any Fourth Claim Period Retention Claim(s) prior to the expiry of the Fourth Claim Period and there are no First Claim Period Retention Claim(s), Second Claim Period Retention Claim(s) or any Third Claim Period Retention Claim(s) that have not been determined or settled in accordance with Clause 6.6 as at the end of the Fourth Claim Period the Fourth Claim Period Maximum Released Amount shall be released to the Sellers' Solicitors on the second Business Day following the expiry of the Fourth Claim Period.
6.3 If Retention Claims are made in a relevant Claim Period then:
In respect of each First Claim Period Retention Claim(s), each Second Claim Period Retention Claim(s), each Third Claim Period Retention Claim(s) or each Fourth Claim Period Retention Claim(s), the Purchaser or Designated Purchaser shall as soon as is practicable during the Claim Period during which the Relevant Claim is made provide a bona fide and reasonable estimate in writing of the maximum aggregate amount of each such Retention Claim (which for the avoidance of doubt, shall include a reasonable estimate of the costs likely to be incurred by the Purchaser and/or the Designated Purchaser or any member of the Purchaser's Group or any Group member in pursuing each such Retention Claim) ("the Initial Estimate") and shall notify the Warrantors or the Sellers' Representative (as the case may be) accordingly. The Purchaser or Designated Purchaser shall be at liberty to notify the Warrantors or the Sellers' Representative (as the case may be) that it has revised its estimate ("the Revised Estimate") at any time during respectively the First Claim Period (in respect of a First Claim Period Retention Claim(s)), the Second Claim Period (in respect of a Second Claim Period Retention Claim(s)), the Third Claim Period (in respect of a Third Claim Period Retention Claim(s)) and the Fourth Claim Period (in respect of a Fourth Claim Period Retention Claim(s)) if facts or circumstances come to light justifying any such revisions, any such revisions being bona fide and reasonable.
6.4 If any Retention Claim is outstanding at the end of the Claim Period in which it was made and the Initial Estimate or Revised Estimate of any such Retention Claim or any part of it is disputed by the Warrantors during such Claim Period, (a "Disputed Retention Amount") then the Warrantors shall give notice in respect of the amount disputed to the Purchaser (a "Dispute Notice"). In such event, the Warrantors and the Purchaser shall refer the matter to an independent Counsel (of Queen's Counsel rank) agreed between the Warrantors and the Purchaser, or in the event of failure by the Warrantors and the Purchaser to so agree within 5 days of the date of the Dispute Notice, either party may request that the President of the Law Society shall appoint such Counsel (the "Independent Counsel"). If any Retention Claim notified in accordance with this Agreement is outstanding at the end of the Claim Period in which it was made and the Initial Estimate or Revised Estimate (which for the avoidance of doubt, shall include a reasonable estimate of the costs likely to be incurred by the Purchaser and/or the Designated Purchaser or any member of the Purchaser's Group or any Group member in pursuing such Retention Claim) or any part of it is not disputed by the Warrantors then the amount of such Retention Claim or the part not disputed shall be the "Agreed Retention Amount".
6.5 The Independent Counsel appointed pursuant to Clause 6.4 shall only determine whether the Disputed Retention Amount (which for the avoidance of doubt, shall include a reasonable estimate of the costs likely to be incurred by the Purchaser and/or the Designated Purchaser or any member of the Purchaser's Group or any Group member in pursuing the relevant Retention Claim) is fair and reasonable in all of the circumstances. The costs of the Independent Counsel shall be borne by the Sellers. The Independent Counsel will make his determination as to whether the Disputed Retention Amount is fair and reasonable in all of the circumstances. If he decides it is not he shall increase or decrease the Disputed Retention Amount to an amount which he believes is fair and reasonable in all the circumstances (the "Adjudicated Estimate") within 21 days of being so appointed. Once the Independent Counsel has so determined, the Relevant Released Amount shall be paid forthwith from the Retention Account to the Sellers' Solicitors Account. In respect of each relevant Retention Claim, the Agreed Retention Amounts, together with either (as the case may be), the Disputed Retention Amount or the Adjudicated Estimates plus any interest accrued in respect of that remaining balance shall be held in the Retention Account pending final determination of the relevant Retention Claim(s).
If, upon final determination or settlement of a relevant Retention Claim(s), any amount that has been retained at the end of a Retention Period which, had it not been so retained as a result of such Relevant Claim, would have been released at the end of that Retention Period (the "Potentially Releasable Amount"), then any amount of that Potentially Releasable Amount ("the amount in question") that does not constitute or would not be needed for all or part of an Initial Estimate or Revised Estimate (to the extent the same have not become Agreed Retention Amounts, Disputed Retention Amounts or Adjudicated Estimates), an Agreed Retention Amount, a Disputed Retention Amount or an Adjudicated Estimate and which would (i) if it arises in the First Claim Period not have the effect at the end of the First Claim Period of reducing the amount in the Retention to below £10,000,000, or (ii) if it arises in the Second Claim Period not have the effect at the end of the Second Claim Period of reducing the amount in the Retention to below £5,000,000, or (iii) if it arises in the Third Claim Period not have the effect at the end of the Third Claim Period of reducing the amount in the Retention to below £2,500,000, or (iv) if it arises in the Fourth Claim Period not have the effect of reducing the amount in the Retention whilst any Retention Claim has not been finally determined or settled, then the amount in question shall be released to the Sellers' Solicitors.
The Independent Counsel's determination shall not prejudice the rights of any of the parties in respect of any subsequent proceedings in respect of such Retention Claim. The Independent Counsel shall act as an expert and not as an arbitrator. Each party shall provide the Independent Counsel with all information and documentation reasonably requested by him for the performance of his duties pursuant to this Clause 6.5.
6.6 Upon the final settlement or determination of any Retention Claim(s) the Warrantors or the Sellers' Representative (as the case may be) and the Purchaser shall procure that any amount retained in the Retention Account (and all interest accrued thereon) shall forthwith be applied in or towards the discharge of the amount(s) agreed or determined to be payable to the Purchaser or Designated Purchaser in respect of such Retention Claim(s). Following the final determination or settlement of all Retention Claim(s) in the period following the expiration of the Fourth Claim Period the balance of the Retention Account, after the complete discharge of all such Retention Claim(s) in respect of all relevant Claim Periods, shall be released to the Sellers' Solicitors on behalf of the Sellers.
6.7 The Warrantors and the Purchaser shall promptly give to the Sellers' Solicitors and the Purchaser's Solicitors respectively all such written instructions as shall be necessary to give effect to the provisions of this Clause.
6.8 Pipeline Integrity International Trustees Limited shall not be required to contribute any money to the Retention Account."
i) First Claim Period: 18th March 2002 to 17th June 2002: £15m plus interest;
ii) Second Claim Period: 18th June 2002 to 17th September 2004: £5m plus interest;
iii) Third Claim Period: 18th September 2004 to 17th March 2005: £2.5m plus interest; and
iv) Fourth Claim Period: 18th March 2005 to 17th March 2008: Balance of funds.
The Issue
Clause 6.2(b)
i) that clause 6.2(b) of the Agreement, literally construed, does have the meaning and effect for which Mr Dutton contends; and
ii) that a claim pursued by action following a determination by the Independent Counsel may be satisfied out of the funds remaining in the Retention Account at the time when the claim comes to be finally determined or settled under clause 6.6, regardless of whether the sums remaining in the account at that time represent the Maximum Released Amount for the period in which the claim was first notified. This follows from the reference in clause 6.6 to the discharge of the amounts agreed or determined from "any amount" retained in the account at the relevant time.
"If the Purchaser or Designated Purchaser has not made any Second Claim Period Retention Claim(s) prior to the expiry of the Second Claim Period . . . there shall be released to the Sellers' Solicitors on behalf of the Sellers on the second Business Day following the expiry of the Second Claim Period, an amount equal to the lesser of (i) the Second Claim Period Maximum Released Amount and (ii) such amount as leaves in the Retention Account an amount equal to £5,000,000"
"Finally, on this part of the case, I must make some comments upon the judgment of the Court of Appeal. Leggatt LJ said that his construction was 'the natural and ordinary meaning of the words used'. I do not think that the concept of natural and ordinary meaning is very helpful when, on any view, the words have not been used in a natural and ordinary way. In a case like this, the court is inevitably engaged in choosing between competing unnatural meanings. Secondly, Leggatt LJ said that the judge's construction was not an 'available meaning' of the words. If this means that judges cannot, short of rectification, decide that the parties must have made mistakes of meaning or syntax, I respectfully think he was wrong. The proposition is not, I would suggest, borne out by his citation from Alice Through the Looking Glass. Alice and Humpty Dumpty were agreed that the word 'glory' did not mean 'a nice knock-down argument'. Anyone with a dictionary could see that. Humpty Dumpty's point was that 'a nice knock-down argument' was what he meant by using the word 'glory'. He very fairly acknowledged that Alice, as a reasonable young woman, could not have realised this until he told her, but once he had told her, or if, without being expressly told, she could have inferred it from the background, she would have had no difficulty in understanding what he meant."
"It is not for a party who relies upon the words actually used to establish that those words effect a sensible commercial purpose. It should be assumed, as a starting point, that the parties understood the purpose which was effected by the words they used; and that they used those words because, to them, that was a sensible commercial purpose. Before the court can introduce words which the parties have not used, it is necessary to be satisfied (i) that the words actually used produce a result which is so commercially nonsensical that the parties could not have intended it, and (ii) that they did intend some other commercial purpose which can be identified with confidence. If, and only if, those two conditions are satisfied, is it open to the court to introduce words which the parties have not used in order to construe the agreement. It is then permissible to do so because, if those conditions are satisfied, the additional words give to the agreement or clause the meaning which the parties must have intended."
The same principle must, I think, apply to a construction which involves the deletion of words.
Conclusions