Idemitsu Kosan Co Ltd v Sumitomo Corporation

The Claimant (“Idemitsu”) claims damages for misrepresentation under s.2(1) of the Misrepresentation Act 1967 against the Defendant (“Sumitomo”). Sumitomo applies under CPR Part 24 for summary judgment dismissing that claim, on the basis that it has no real prospect of success and there is no other compelling reason why it should be disposed of at a trial.

Idemitsu and Sumitomo are large Japanese companies with business interests in (it may be amongst others) the energy sector. The Defendant owns Sumitomo Corporation Europe Limited (“SCE”) as a wholly-owned subsidiary, or at any rate it did in November 2009. Sumitomo and SCE between them owned the entire allotted and issued share capital in Petro Summit Investment UK Limited (“the Company”). By a written sale and purchase agreement dated 12 November 2009 (“the SPA”) between Sumitomo and SCE as Sellers and Idemitsu as Buyer, it was agreed that the Sellers would sell their respective shares in the Company, and Idemitsu would buy the same. The sales of shares pursuant to the SPA were completed. The Company thus became a wholly-owned subsidiary of Idemitsu and at some point it was renamed Idemitsu Petroleum UK Limited to reflect its new parentage. Pursuant to Clause 3.1 of the SPA, which provided a formula for calculating the purchase consideration, Idemitsu paid about US$ 575 million for the Company.

The Company had interests in offshore oil and gas fields. In particular, it held a 30.82% interest in the North Sea Ross Field and a 2.4% interest in the adjacent Blake Field. Idemitsu complains that the Company was subject to substantial liabilities arising from a dispute between the respective owners of the Blake and Ross Fields about the sharing of the operating expenses of the “Bleo Holm”, a floating production storage and offshore loading vessel. The detail of Idemitsu’s complaints in that regard does not matter for the purpose of the present application.

Clause 11.1 of the SPA provided that the SPA itself, the documents to be entered into pursuant to it, and all matters arising from or connected with it, were governed by and were to be construed in accordance with English law. Clause 11.2 provided that the courts of England and Wales were to have exclusive jurisdiction to settle any dispute between the parties under the SPA, or arising out of or in connection with it, including any question regarding its existence, validity or termination. Hence this court’s jurisdiction over Idemitsu’s claim in these proceedings, which as I said is a claim for damages for misrepresentation under s.2(1) of the 1967 Act, and that claim falls to be determined under English law.

Clause 6.1 of the SPA provided as follows:

One of the many definitions in Clause 1.1 of the SPA was that of “Warranties”, defined to mean “the warranties given by (i) Sumitomo in Schedule 4 and Part 2 of Schedule 7; and (ii) SCE in paragraphs 1 and 2 of Schedule 4.” The Appendix to this judgment sets out more fully the terms of Clause 6 of the SPA, together with the paragraphs of Schedule 4 relied on by Idemitsu for the content of what it says were misrepresentations by Sumitomo, and also other provisions of the SPA relevant to this application.

The matters thus warranted by Sumitomo on 12 November 2009 were matters of then past or present fact relating to the Company. The common law rule being caveat emptor, no promise about the Company, its activities or finances, its transactions or liabilities, was purchased by Idemitsu for its US$ 575 million except such promises (if any) as might be made by Sumitomo or SCE in the SPA. The Warranties, on the language of Clause 6.1 and the definition in Clause 1.1, were precisely such promises. Each was a promise made by Sumitomo (or SCE) in the SPA – a contractual guarantee given by them – that on 12 November 2009 a certain matter of then past or present fact concerning the Company was the case.

Idemitsu alleges that some of the matters thus warranted by Sumitomo were not the case on 12 November 2009. If so, there were breaches of warranty on the part of Sumitomo. However, Idemitsu accepts that it cannot bring a claim for breach of warranty – it cannot claim on the contractual guarantees Sumitomo gave it. Clause 1.1 defines “Claim” to mean “a claim by the Buyer under the Warranties or a Tax Claim”. It is common ground that a claim by Idemitsu for breach of warranty, founded upon the factual allegations it has made, would be a Claim thus defined, and would not be a Tax Claim. Paragraph 2.2(a) of Schedule 6 to the SPA precludes recovery of any amount in respect of a “Claim, other than a Tax Claim” not notified to Sumitomo within 18 months of completion, and Idemitsu accepts that it did not notify Sumitomo of any claim within that period.

As I read Idemitsu’s Particulars of Claim, its claim raised the question whether the Warranties were only contractual promises, or were (also) representations by Sumitomo that could be actionable as misrepresentations in a claim under the 1967 Act. That is an important question as to which there is conflicting authority at first instance in the decisions of Arnold J. in Invertec Ltd v (1) De Mol Holding BV, (2) Henricus Albertus de Mol [2009] EWHC 2471 (Ch) and Mann J. in Sycamore Bidco Ltd v (1) Sean Breslin, (2) Andrew Dawson [2012] EWHC 3443 (Ch). In the latter decision, Mann J. gave fully reasoned consideration to the question, and to the decision of Arnold J. in the earlier case. He refused to follow Arnold J., not on the basis that there was any room to distinguish between the contractual wording in the two cases but because he disagreed with Arnold J.’s view as a matter of principle. Were I minded to prefer the view of Arnold J. on the point, the question would arise whether I should nonetheless follow Mann J.’s decision, treating the law as settled thereby at first instance under the rule of precedent formulated by Nourse J., as he was then, in Colchester Estates (Cardiff) v Carlton Industries Plc [1986] 1 Ch 80 at 84F-85H.

Idemitsu’s response to Sumitomo’s application suggested that Idemitsu intended a different case, perhaps in the alternative or perhaps as its only real case, namely that representations were made by Sumitomo to Idemitsu, prior to the conclusion of the SPA and in order to induce Idemitsu to conclude it, in the terms of the matters warranted by the Warranties when the SPA was concluded. In particular, that by including those matters as matters to be warranted in the SPA in the final document prepared for signature and marked “Execution Copy”, Sumitomo made representations to Idemitsu in those terms. This clarification or possible evolution of Idemitsu’s case was explored in argument, for example in the light of a contention in Idemitsu’s Skeleton Argument that Mann J.’s decision in Sycamore Bidco, supra, could be distinguished because there “Counsel for D had ‘expressly disclaimed the relevant representations being made at any earlier time.’ (before the contract was made [203(vi)]”, but “That is not the case here” (original emphasis).

At my encouragement, without prejudice to any objection that Sumitomo might make upon seeing them, draft Amended Particulars of Claim were provided by Idemitsu following the hearing, setting out with proper clarity how it was intended to put the case. As now pleaded (in draft), Idemitsu’s only case as to how and when any representations were made is that “By providing the [Execution Copy] to Idemitsu and/or by offering to sign [it] and/or by signing [it], Sumitomo thereby made representations to Idemitsu in the terms of the statements of fact contained in Schedule 4 of the [Execution Copy]”. The claim logic is then completed by the allegation that “In reliance upon and induced by [those] representations …, Idemitsu signed the [Execution Copy] and entered into the SPA”, by Idemitsu’s existing case as to falsity, and by its existing allegations as to loss. Idemitsu says its recoverable loss is US$ 105.9 million. In a commendably brief written Note on the draft Amended Particulars of Claim, Sumitomo objected to the proposed amendments, but only on the basis that, for the reasons it put forward at the hearing, the case as re-formulated (still) has no real prospect of success. In a written Note in response, Idemitsu summarised its reasons for saying that its case as re-formulated does have a real prospect of success and so ought to survive Sumitomo’s application. In that Note, Idemitsu contended, contrary I think to its draft Amended Particulars of Claim, that it continues to assert actionable misrepresentations made by the SPA itself (as concluded), as well as pre-contractual misrepresentations made by providing (etc.) the Execution Copy shortly or immediately before the SPA was concluded.

There being no objection to the proposed amendments independent of their viability on the merits, in my judgment the appropriate approach to Sumitomo’s application now is to consider whether Idemitsu’s claim would have a real prospect of success at trial, or for some other compelling reason ought to be disposed of at a trial, if permission to amend were granted. If the answer is yes, there should be permission to amend, Sumitomo’s summary judgment application should not succeed, and the fact that Idemitsu’s case has been clarified, or has evolved, will be relevant (if at all) only to costs. If the answer is no, then the proposal to amend becomes academic and I should simply grant Sumitomo on its application a summary dismissal of Idemitsu’s claim.

I consider first what the Warranties were, and what they were not, as extracted from Sumitomo in the SPA. I do so even though the focus of Idemitsu’s clarified or revised case, as I read the draft Amended Particulars of Claim, is not the Warranties as such but an immediately prior stage in the chronology, since, firstly, Idemitsu says that it does still maintain a case of misrepresentation by the SPA as concluded, and since, secondly, it seems to me essential to start with the Warranties in the SPA as concluded when considering the immediately prior stage because for that Idemitsu relies on their existence, in draft, in the Execution Copy, as providing the content for the pre-contractual representations alleged. An analysis of the nature or effect in law of the prior steps relied on by Idemitsu therefore has to have regard to what the Warranties were, in the SPA as executed, that being, in prospect, what they were to be when they were included, in draft, in the Execution Copy; and the nature and effect in law of the Warranties, as contained in the SPA, was a substantial part of the argument accordingly.

When a seller, by the terms of the contract under which he sells, “warrants” something about the subject matter sold, he is making a contractual promise. Nothing less. But also I think (and all things being equal) nothing more. That is so just as much for a warranty as to some then present or past matter of fact as it is for a warranty as to the future. By contracting on terms by which he warrants something, the seller is not purporting to impart information; he is not making a statement to his buyer. He is making a promise, to which he will be held as a matter of contract in the sense that any breach of the warranty will be actionable as a breach of contract, subject to any other relevant terms of the contract and to general principles of the law of contract, for example as to remedies. In argument in the present case, I posed the simple case of a seller contracting to sell grain from a warehouse, “warranted at date of contract free from” some identified impurity. It would I think be quite novel, and wrong, to suggest that this would amount to a statement of fact, made by the seller to the buyer, that the grain was then free from the impurity in question. In the absence of additional facts, I do not think there could be any question of claiming rescission for misrepresentation, or damages for misrepresentation under the 1967 Act, if in fact the grain contained the impurity (so that there was a breach of the warranty). The same would be true, I think, in respect of any buyer’s warranty given by him by the terms of the contract (for example, in this case Clause 7.1 and Schedule 5 of the SPA contained various warranties by Idemitsu about itself and its entitlement and ability to enter into and complete the transaction).

In a useful summary of Idemitsu’s argument on the Warranties themselves (as possible alleged representations), Mr Choo-Choy QC formulated the following four propositions:

I agree with Mr Rainey QC for Sumitomo that these propositions beg the real question in this case, because they assume that if “seller warrants X” is a term of a contract of sale, the seller thereby makes a statement, to the effect of X, to the buyer. This question-begging was endemic in the argument for Idemitsu. Thus, for example, it was contended that the matters set out in the paragraphs of Schedule 4 of the SPA upon which Idemitsu relies were all matters of past or present fact (as at 12 November 2009) capable of founding a misrepresentation claim, citing Government of the United Arab Emirates v Allen [2012] EWHC 1712 (Admin), [2012] 1 WLR 3419, per Toulson LJ, as he was then, at [42], and Chitty on Contracts, 32^nd Ed., at §7-006, and it was said to follow that “the statements in Schedule 4” were in law representations of fact. But to my mind that does not follow. The premise, and the authority supporting it, establishes only that if Sumitomo made a statement to Idemitsu, calculated to induce Idemitsu to enter into the SPA, in the terms of (any of) the paragraphs of Schedule 4 now relied on, that statement would have been in law a representation, actionable if false (subject to any term of the contract providing otherwise), because the matters thus stated would have been matters of past or present fact, as opposed to, for example, statements of opinion or as to the future. The question, though, is whether Sumitomo did make any such statement. What is the communication by Sumitomo to Idemitsu that, properly understood, amounts to or involves the making of some relevant statement? As I have indicated (paragraph 14 above), I do not think that by concluding a contract on terms which include contractual warranties the warrantor makes any relevant statement to the counterparty. The act of concluding a contract is constituted by, and amounts to a communication only of, assent to and intention to be bound by the terms agreed.

Again, in its written Note in response to Sumitomo’s Note on the draft Amended Particulars of Claim, Idemitsu stated this example: prior to A selling his car to B, A tells B – or gives him a piece of paper which states – that the car has done 10,000 miles; B relies on that statement in agreeing to buy the car; A ought reasonably to have known that the car had in fact done 50,000 miles; B has a claim under s.2(1) of the 1967 Act. Idemitsu, arguendo, continued thus: “Why should such a misrepresentation claim become unsustainable merely because A also told B at the time – or added to the piece of paper – that he was prepared to warrant that his statement was true? By the warranty, A did not negate the representation constituted by the statement of fact about the car.” This again misses the point, in my judgment. In the example, a statement amounting (all things being equal) to a representation capable of founding a claim under the 1967 Act is made independently of the provision by A, in the contract, of a warranty. That enables the argumentative point to be made, and all things being equal to be well founded. But that is not the case at hand. The case at hand, translated to A’s contract to sell his car to B, is one in which an express clause of the contract provides that “A warrants to B total mileage from new of 10,000 miles” and B relies only on that clause to found a claim under the 1967 Act upon learning that the car had done 50,000 miles. A’s good defence to that claim is not that B’s otherwise sustainable misrepresentation claim became unsustainable because A also warranted that which he had told B at the time, or that by his warranty A negated some representation he had otherwise made by a statement of fact about the car’s mileage calculated to induce B to enter into the contract. A’s good defence to that claim is simply that he never made any relevant statement to B at all. He sold with a contractual warranty, upon which (if so advised) B could claim. Either that warranty claim is good enough for B or it is not. If for some reason it is not (e.g. if, as in this case, the contract imposed a strict time limit for warranty claims that B did not observe), B has no claim but that is the bargain he struck.

That is the fundamental, if perhaps not so explicitly stated, premise of Mann J.’s judgment in Sycamore Bidco, as I read it, and it explains why he refused to follow – I think rightly refused to follow – what Arnold J. had said in Invertec Ltd. In Sycamore Bidco, the claimant had purchased shares in Gissings Group Ltd from the defendants. The claimant alleged that the sale had been induced by misrepresentations about the accounts of Gissings Advisory Services Ltd, a subsidiary of Gissings Group Ltd, and claimed damages at common law and under the 1967 Act. It also alleged, relying on the same facts, that the defendants were in breach of warranties given in the share sale contract. The relevant terms of the contract in that case were materially similar to those of the SPA in this case (if anything, Clause 12.12.3(a) of the SPA in this case is more favourable to Sumitomo than the otherwise equivalent provision, Clause 16.3.2, was to the defendant sellers in Sycamore Bidco). Mann J. held that there was no claim in misrepresentation, because the claimant did not rely on anything other than the warranties in the contract as amounting to representations for the purpose of that claim; but they were warranties only, and not representations. I set out his reasoning in full, [2012] EWHC 3443 (Ch) at [200]-[211]:

As I said before quoting Mann J.’s reasoning, it seems to me its basic underlying premise, I think a sound premise, is that the act of concluding a contract on terms that include contractual warranties does not amount to or involve the making by the warrantor to the counterparty of any relevant statement. That is seen most clearly, perhaps, if even then it is not stated quite so explicitly as I have done, in the following sentences from [203(iii)]: “In order to make the relevant material a representation one has to find something in the SPA which is capable of doing that. It is not enough that the subject matter of the warranty is capable of being a representation. One has to find out why those words are there. One finds that in clause 5; and what one finds is words of warranty, not words of representation.”

By contrast, in Invertec Ltd at [363], Arnold J. simply asserts the conclusion that contractual warranties, if they be as to matters of past or present fact, “also amount to representations of fact”. With respect, it seems to me, as it did to Mann J., that Arnold J. there confused a finding of material that is by nature factual, so that a statement in terms thereof could be in law a representation, with a finding that there was a communication amounting to or involving such a statement in the first place. Arnold J. further concluded that the fact that the warranties in Invertec Ltd had been negotiated over a period prior to the conclusion of the contract (as is typical) might be an answer to the possible conundrum that a representation only made by the act of concluding a contract could not induce that act. That view as to inducement in a claim for damages for misrepresentation may itself be difficult: see, e.g., Leofelis SA et al. v Lonsdale Sports Ltd et al. [2008] EWCA Civ 640, obiter per Lloyd LJ at [140]-[141], and Sycamore Bidco, supra, per Mann J. at [203(vi)]. But even if prior knowledge of what was to be in a contract might be used to claim that representations made by it induced its conclusion, the question will remain whether indeed any representations were so made in any given case. For the reasons I have expressed, and those of Mann J. in Sycamore Bidco, in my judgment if a contractual provision states only that a party gives a warranty, that party does not by concluding the contract make any statement to the counterparty that might found a misrepresentation claim.

Mr Choo-Choy QC submitted that Mann J.’s reasoning asserted or assumed either or both of two unsound propositions, and so was erroneous. Mann J., it was said, erred by reasoning that: (1) a statement of fact must be agreed to be, or expressly designated as, a representation in order to be one; or (2) an express agreement to give a statement of fact the status of a contractual warranty excluded it from being or having been (also) a representation. I do not think Mann J. erred in either respect. Rather, he simply searched for a communication that could amount to a statement of fact in the first place. That search was in vain in circumstances where the only material relied on was the existence, in the contract as concluded, of a contractual warranty. In such a case, as I see it and have sought to explain above, there is no representation, at all events in the absence of some provision saying otherwise, i.e. saying (in so many words or in effect) that the warranty is also to take effect as, or to be treated as, a representation. An example of a case involving provisions saying otherwise, decided some months before Sycamore Bidco but not, I think, referred to by Mann J., is the decision of Simon J., as he was then, in Bikam OOD, Central Investment Group SA v Adria Cable S.a.r.l. [2012] EWHC 621 (Comm), another share purchase case. There “Sellers’ Warranties” was defined to mean “the representations and warranties of the Sellers contained in Schedule 2 …” (my emphasis), and Clause 7 (the equivalent of Clause 6.1 in the present case) provided that “Each of the Sellers represents and warrants to the Buyer that each Sellers’ Warranty is true and accurate as at the date of the Agreement and as at Completion” (my emphasis) and that “The Sellers acknowledge that the Buyer is entering into this Agreement in reliance upon the Sellers’ Warranties”. But there was nothing like that in Sycamore Bidco and there is nothing like it in the present case.

In the circumstances, I do not need to deal with the question whether, had I preferred Arnold J.’s view to Mann J.’s, I should treat myself as free not to follow Mann J. although the rule is that the law is settled at first instance by a considered first instance refusal to follow an earlier first instance decision. That rule is said to be subject to exception “only in the case, which must be rare, where the third judge is convinced that the second judge was wrong in not following the first” (Colchester Estates, supra, [1986] 1 Ch 80 at 85G). There was some rather inconclusive oral argument before me as to the meaning or scope of that exception, neither Skeleton Argument having addressed the point. I shall say no more about it, since I am firmly of the view that Mann J. was right, I am following him in respectfully disagreeing with Arnold J., and were the point to go further the Court of Appeal would be bound by none of our decisions.

Upon the Particulars of Claim as they stand, which I read as alleging only that representations in the terms of Schedule 4 were made by the SPA as concluded, my conclusion is therefore that Idemitsu’s claim is bound to fail.

It seems to me right in principle that language found in the communication of a negotiating position, or in draft wording for a contract, or in an entire draft contract, passing between the parties during the negotiation of a contract, might amount to or form the content of a pre-contractual representation capable of being actionable under the 1967 Act. That possibility was recognised by the Court of Appeal in Eurovideo Bildprogramm Gmbh v Pulse Entertainment Ltd [2002] EWCA Civ 1235, to which Peter Gibson LJ referred in Leofelis v Lonsdale, supra, at [141], where he emphasised that all would depend on the particular facts of any given case. Therefore, turning to Idemitsu’s proposed amended case, the specific pre-contractual facts now proposed to be relied on must be considered to see whether, as Sumitomo contends, there is no real prospect of Idemitsu securing at trial a finding of a pre-contractual representation capable in principle of founding a damages claim under s.2(1) of the Act.

As I noted in paragraph 11 above, the proposed plea (by paragraph 6B of the draft Amended Particulars of Claim) is that representations were made by Sumitomo by: (i) providing the Execution Copy as the contract to be signed by both parties on 12 November 2009; (ii) offering to sign the Execution Copy; or (iii) signing the Execution Copy. Those are alleged to have been representations “in the terms of the statements of fact contained in Schedule 4 of the [Execution Copy], including in particular as follows:-” where what follows is some of the content of Schedule 4 of the Execution Copy, set out by way of quotation from Schedule 4.

For present purposes, I can see no difference between Sumitomo (i) providing the Execution Copy, (ii) offering to sign it, or (iii) signing it, at all events assuming Sumitomo signed first so that there is no chronological difficulty for (iii) in claiming that Idemitsu was induced by Sumitomo’s conduct to sign the Execution Copy so as to conclude the SPA. Since that is the plea, to be supported by a Statement of Truth were I to give permission to amend, and the witness statement evidence has not descended into the precise chronological details of the execution of the SPA on 12 November 2009, I proceed on the basis that Idemitsu would have at least a real prospect of success in proving at trial that Sumitomo (i) provided the Execution Copy, as the contract document to be signed by the parties, (ii) offered to sign it, and (iii) signed it, all before (it may be in the case of (iii) only just before) Idemitsu signed.

What then was communicated, by Sumitomo to Idemitsu, by providing the Execution Copy, offering to sign it, or signing it, given that the Execution Copy included Clause 6.1, Schedule 4 and the definition of Warranties (together with other provisions affecting the nature or extent of Sumitomo’s putative liability as warrantor under the Warranties if the SPA was concluded on the terms of the Execution Copy)? Nothing is relied on beyond the bare fact of providing / offering to sign / signing the document, and the contents of the document. There is no factual allegation requiring to be investigated further, through pre-trial processes and a full trial hearing. Either provision of (or offer to sign, or signature of) the Execution Copy involved Sumitomo making representations of fact or it did not. The question is one of analysis that can and should be determined now, at all events if the answer is such that all the time, cost and inconvenience of pre-trial processes and a full trial hearing can be avoided.

At a first level of analysis, Sumitomo’s provision (etc.) of the Execution Copy conveyed simply a then present willingness and intention to conclude a contract on the terms there set out. It may be that is not necessarily fatal to the notion that representations of fact concerning the Company might (also) have been involved (subject to considering the terms of the document): see Eurovideo Bildprogramm, supra, in which Rix LJ, with whom the Vice-Chancellor and Jonathan Parker LJ agreed, rejected at [18] the absolute proposition that “where language is proffered as to what is intended to become a term of the contract under negotiation it cannot be relied upon as a representation of fact”, and held at [21]-[22] that the trial judge had been entitled to find that representations of fact had been made in the negotiation correspondence where the language being proffered for the contract was language by which the defendant would make representations of fact. That approach may explain what seem to me to be the key allegations proposed by Idemitsu, without which the plea of pre-contractual representations in paragraph 6B of the draft Amended Particulars of Claim has no foundation or content. Those allegations are the following:-

The question is whether either of those allegations has any real prospect of success at trial.

For the reasons I have given in the previous section of this judgment, I reject the first allegation, concerning the Warranties in the executed SPA. The subtlety of the second allegation is that it seeks to divorce Schedule 4 from Clause 6.1 (and the related definition of Warranties and other provisions concerning Sumitomo’s putative liability under the Warranties). Read without reference to Clause 6.1, as if it had been sent by Sumitomo to Idemitsu without context, it is proposed that Schedule 4 is to be characterised as a series of statements of fact made by Sumitomo to Idemitsu. But I think it is artificial and wrong in principle to read Schedule 4 like that, as if it had an existence independent of its function in the Execution Copy, which was to provide content to the Warranties (as defined by Clause 1.1 and as to be given by Sumitomo under Clause 6.1, if the SPA be concluded). This is therefore a case in which Sumitomo’s provision (etc.) of the Execution Copy communicated, so far as material, no more than a willingness to give a certain set of contractual warranties in a concluded contract and that distinguishes the case from Eurovideo Bildprogramm, supra. Whilst not precisely the same point, it is closely related to one of the points made by Mann J. in Sycamore Bidco, supra. Responding to Arnold J.’s reference in Invertec Ltd to the fact that the buyer had prior knowledge, from the contract negotiations, of the content of the warranties, but focusing on whether any representations were made by the warranties (whereas (to be fair) Arnold J. had raised the matter of prior knowledge in the context of inducement), Mann J. said at [209] that “I do not think it affects the position that in the present case, as in Arnold J’s, the parties (and in particular the warrantors) knew what was coming because drafts [had] been exchanged and the terms of the contract negotiated. What the warrantors knew to be coming, or more precisely knew they were going to be providing, were expressed to be warranties, not representations.”

Through the SPA as signed, Sumitomo made no representation to Idemitsu by Schedule 4, because Schedule 4 was not by nature a set of statements of fact made by Sumitomo to Idemitsu but was the agreed means by which the parties together chose to define the content of the Warranties, being certain of Sumitomo’s contractual promises made under the SPA. In my judgment, Sumitomo’s prior provision of, or offer to sign, or signature of, the Execution Copy, proffering such a Schedule 4, cannot give it (Schedule 4) a different character at that stage than it was to have, and in the event did have, when the SPA was duly concluded on the terms of the Execution Copy.

I therefore conclude that the proposed amendment of the Particulars of Claim will not save Idemitsu’s claim from being bound to fail. Adopting the approach I stated at the outset (paragraph 12 above), Sumitomo’s application therefore succeeds and there will be summary judgment under CPR Part 24 dismissing Idemitsu’s claim, unless there is some compelling reason why it should be disposed of at a trial even though it has no real prospect of success. Before I consider that possibility, I should deal with Sumitomo’s alternative argument for saying that Idemitsu’s claim has no real prospect of success.

Sumitomo contends, in the alternative, that Idemitsu’s claim has no real prospect of success because it will be defeated either by Clause 12.12 of the SPA or by paragraph 2.2(a) of Schedule 6 to the SPA. I have included those provisions in the Appendix to this judgment and I can take the points arising quite briefly.

By Clause 12.12.3(a), Idemitsu acknowledged and agreed with Sumitomo that it had not “relied on, or been induced to enter into, this Agreement by any representations, warranties or undertakings of any kind other than the Warranties (as modified by the Disclosure Letter)”. Mr Choo-Choy QC for Idemitsu accepted that without the closing words, “other than the Warranties (as modified …)”, Clause 12.12.3(a) would be effective to defeat Idemitsu’s claim, because the claim requires Idemitsu to allege, contrary to Clause 12.12.3(a) if it stopped there, that it had relied on or been induced to enter into the SPA by representations. However, he contended that Idemitsu’s claim is safe because, more specifically, it alleges reliance upon representations in the terms of Schedule 4, which also provides the content of the Warranties. He said that Clause 12.12.3(a) therefore does not defeat the claim, given that it expressly saves, i.e. does not preclude proof of, reliance upon or inducement by “the Warranties (as modified by the Disclosure Letter)”. I think that is a non sequitur. The “Warranties (as modified by the Disclosure Letter)” are, by definition, Sumitomo’s contractual warranties. Reliance upon a representation the content of which coincides with the content of one of those Warranties is not reliance upon the Warranty in question. It seems to me that is so even if the allegation is that the representation was made by the conclusion of the SPA containing that Warranty. It is all the more so for the claim in the draft Amended Particulars of Claim that the representation was made prior to, and independently of, the granting of the Warranties upon the conclusion of the SPA.

Mr Choo-Choy QC further submitted as to Clause 12.12.3(a) that it implicitly acknowledged that Idemitsu was relying on, and was induced to enter into the SPA by, the Warranties and that, as he put it in his Skeleton Argument, “these may be regarded as “representations, warranties or undertakings””. It was then said that the Warranties as such, i.e. the contractual promises, coming into existence only when the SPA was executed, could not have been relied on by Idemitsu in entering into the SPA and could not have induced the conclusion of the SPA. Accordingly, so the argument went, “The natural meaning of the clause is to acknowledge that [Idemitsu] was induced to enter into the SPA by the representations which became incorporated in the contract as warranties but not by any other representations”. Thus, Idemitsu was not precluded from contending that it had relied “on the statements constituting the Warranties (and hence on the representations inherently reflected in them) in deciding to enter into the SPA”. By contrast, Mr Rainey QC argued that Clause 12.12.3(a) was a simple and plain undertaking by Idemitsu not to claim that it had relied on or been induced to enter into the SPA by anything other than the Warranties, i.e. the contractual promises by way of warranties as to the matters set out in Schedule 4 (and Part 2 of Schedule 7). He put it thus in his Skeleton Argument: “The purpose and language of the Clause (as with Clause 12.12.3(b)) is to confine [Idemitsu] solely to the Warranties given in and as part of the [SPA] and to exclude recourse to any arguments as to representations, however and whenever allegedly made.” I prefer Mr Rainey QC’s submission:

In my judgment, therefore, Clause 12.12.3(a) is bound to defeat Idemitsu’s claim, whether that be the claim as originally pleaded, alleging representations by the Warranties themselves as contained in the SPA, or the claim as proposed to be pleaded in the draft Amended Particulars of Claim, alleging representations made prior to (it may be only immediately prior to) and independently of (albeit in immediate anticipation of) the conclusion of the SPA.

That clarified or revised claim – the Execution Copy claim – is also, in my judgment, defeated by Clause 12.12.2. The immediate context is Clause 12.12.1, by which the parties sought to ensure that there would be nothing between them having contractual force other than the final contractual documents. Clause 12.12.2 reinforces and supplements that by providing that “All prior written or oral understandings, offers or other communications of every kind pertaining to this Agreement are abrogated and withdrawn.” By Clause 1.2.1(f), the parties disapplied the ejusdem generis principle of construction, by which the meaning of general words introduced by the word “other” can be restricted to matters similar in kind to those of the preceding words. The argument for Idemitsu was that even without resort to that principle, “other communications of every kind pertaining to this Agreement” could not extend to “the very document which, when signed, became the Agreement”. That document, it was said, i.e. the Execution Copy, “could not in any proper sense be described as a communication “prior to” the Agreement”. I disagree. The Execution Copy claim asserts communication before the SPA was concluded, relied on by Idemitsu in signing the document so as to conclude the SPA, by the provision (for signature by the parties) of, or the offer to sign, or the signature of, the Execution Copy. If that conduct communicated something that might otherwise have or have had some legal effect, it was agreed by Clause 12.12.2 that such communication was “abrogated and withdrawn”. The Execution Copy claim is therefore bound to fail because of Clause 12.12.2, as well as being defeated by Clause 12.12.3(a).

As regards paragraph 2.2(a) of Schedule 6, the question is whether a claim by Idemitsu for damages for misrepresentation under s.2(1) of the 1967 Act is a “Claim, other than a Tax Claim”, in other words a “claim by [Idemitsu] under the Warranties”, given that the content of each of the representations alleged is also the subject matter of one of the Warranties. A superficially similar question was answered favourably to the warrantors, so that contractual provisions concerning warranty claims also applied to claims for misrepresentation, by the Court of Appeal in Bottin (International) Investments Ltd v Venson Group plc et al. [2004] EWCA Civ 1368 and by Simon J., as he was then, in the Bikam OOD case, supra. The question in those cases was only superficially similar, however, because in Bottin it was expressly agreed that “the Investor may treat [the Warranties] as representations inducing them to enter into this agreement” and in Bikam OOD, as noted above, “Warranties” as a defined term included representations and the primary provision was that the sellers represented and warranted various matters. Here, however, as in Sycamore Bidco, supra, I think it a “very forced construction” (per Mann J. at [203(v)]) to construe “Claim”, i.e. “a claim by Idemitsu under the Warranties” as anything other than a claim upon the Warranties as such, in other words a claim upon them as the contractual warranties they were. The oddity the Court of Appeal saw in Bottin of contemplating a carefully constructed regime, similar to Schedule 6 of the SPA in particular, applying only to claims for breach of warranty and not to claims framed in misrepresentation founded upon the matters warranted, does not arise where, as here, the SPA is instead constructed so that no such claims (in misrepresentation) are ever available in the first place. That comforts me that my construction of Clause 12.12.3(a) is correct, and that my conclusion (like that of Mann J.) that no representations were made by the Warranties themselves is also correct.

It may be the oddity or inconsistency of concluding (as I have) that Idemitsu’s claim is to be regarded as not a claim “under the Warranties”, so that it is outside the definition of Claim, yet at the same time concluding (as Idemitsu argued I should) that it is a claim, in a sense, upon the Warranties – being a claim alleging reliance on or inducement by the Warranties – so that it escapes Clause 12.12.3(a), would be enough to drive me to accept Sumitomo’s construction of the definition of Claim had I been with Idemitsu as regards the meaning of Clause 12.12.3(a), even though the former would otherwise have seemed a strained construction. As it is I do not need to form any final view on that and do not do so.

The SPA was concluded over 7½ years ago. It is accepted by Idemitsu that it has no basis for alleging fraud, wilful misconduct or wilful concealment, but it says that it cannot wholly rule the same out. The highest it is put, by Ms Marsden of Idemitsu’s solicitors is this, in her witness statement opposing summary judgment:

No inference of fraud, wilful misconduct or wilful concealment arises out of the finalisation of the Disclosure Letter referred to by Ms Marsden, as Idemitsu accepts by saying it cannot plead any such case based upon it. Therefore, with respect, Ms Marden is wrong to assert that there is something that “requires to be investigated”, unless she means by that only that she has been required by her client, Idemitsu, to investigate it. There is, to the contrary, nothing requiring investigation, at all events there is nothing requiring investigation by proceedings in this court, and the argument of other compelling reason for a trial amounts to bare speculation that if I allowed proceedings upon Idemitsu’s unsound misrepresentation claims to proceed to disclosure, something might turn up giving it a different, but sound, claim involving conscious wrongdoing. No authority was cited to me suggesting that such a speculative hope could be sufficient to avoid the summary dismissal of unsound claims under CPR Part 24; in my judgment it would be a bad precedent to set to say that it was.

In conclusion, Idemitsu’s claim, whether as originally pleaded or as proposed to be pleaded in the draft Amended Particulars of Claim, involves allegations that Sumitomo made representations to Idemitsu, in respect of which a claim for damages under s.2(1) of the Misrepresentation Act 1967 might lie, which do not have any real prospect of success at trial. The claim, again however pleaded, is in any event bound to be defeated by Clause 12.12.3(a) of the SPA. If that were wrong, that is if, contrary to my conclusion, the claim could survive Clause 12.12.3(a), that could only be on a basis that might well mean it was bound to be defeated instead, however pleaded, by paragraph 2.2(a) of Schedule 6 to the SPA, although I have not formed a final view as to that. The claim as proposed to be pleaded in the draft Amended Particulars of Claim, alleging representations by providing (for signature by the parties), offering to sign, or signing, the Execution Copy, is also bound to be defeated in any event by Clause 12.12.2 of the SPA.

There being no other compelling reason why Idemitsu’s claim should be disposed of at a trial, there will be judgment for Sumitomo under CPR Part 24 dismissing the claim.

DEFINITIONS AND INTERPRETATION

Definitions

Interpretation

In this Agreement:

WARRANTIES

Warranties

Warranties not Affected by Completion

Knowledge, Information and Belief and Disclosure

Separate and Independent Warranty

Limitations

Exception to Limitations

Entirety

The Buyer acknowledges and agrees with the Sellers that:

LICENCE INTERESTS

Licence Interest Documents

The Licence Interest Documents and any extensions thereto are in full force and effect and neither any Group Company nor, so far as Sumitomo is aware, any other party to the Licence Interest Documents is in breach of its material obligations under any of them in any material respect.

The Licence Interest Documents in the form made available to the Buyer are, so far as Sumitomo is aware, in all material respects, complete and up-to-date copies of the material agreements relating to the Licence Interests to which any Group Company is a party, and no Group Company is under any legally binding obligation to enter into any further material agreement in relation to the Licence Interests.

LITIGATION

THE ACCOUNTS AND RECORDS

The Accounts

MATERIAL CONTRACTS

LIMITATION ON LIABILITY

Financial Limits

Time Limits

No Liability Unless Proceedings Commenced

Contingent Liabilities

Events Prior to Sumitomo’s Ownership

Matters Disclosed or Provided For

is disclosed as referred to in Clause 6.3(b).

Buyer’s Knowledge

Sale Following Completion

Cessation of the Business

Sumitomo’s Right to Remedy

Insurance