TP ICAP Ltd v Nex Group Ltd (Rev1)

There are two applications before the Court. The first is an application made by the Defendant, represented by Mr. Joe Smouha QC and Mr. Ciaran Keller, to strike out and/or obtain reverse summary judgment in respect of parts of the Claimant's claim in these proceedings (“the Defendant’s Application”). The second is an application made by the Claimant, represented by Mr. Richard Handyside QC and Mr. Alex Barden, to amend the Particulars of Claim (“the Claimant’s Application”) (together, “the Applications”).

The Applications arise in the context of a claim relating to two contracts which are both governed by English law:

The Claimant, then named Tullett Prebon plc, was the Purchaser under the SPA. It changed its name to TP ICAP plc on 28 December 2016, shortly before Completion under the SPA on 30 December 2016. On 8 March 2021, the Claimant re-registered as a private company and so its name changed once again, this time to TP ICAP Limited.

The Seller under the SPA was ICAP plc. Pursuant to the agreed acquisition process and the Novation Deed, the Defendant assumed the obligations and liabilities of the Seller.

ICAP plc and Tullett Prebon plc were formerly each engaged in, among other things, voice broking. Voice broking is a form of interdealer broking which takes place by telephone, as opposed to other forms of broking which are generally conducted through electronic trading platforms. Voice brokers connect buyers and sellers in markets for derivatives, commodities and other assets and instruments. The two voice broking businesses were effectively merged when Tullett Prebon plc acquired the voice broking business of ICAP plc (“the Voice Group Companies”) under the SPA. Completion took place on 30 December 2016.

By clause 12.1 of the SPA, the Seller gave warranties to the Purchaser that, except as fairly disclosed to the Purchaser in the Seller Data Room or the Disclosure Letter, each of the statements set out in Part 1 of Schedule 4 to the SPA, defined (in Schedule 23) as “Seller Warranties”, was true at the date of the SPA and, so far as material, would be true at Completion (by reference to the facts and circumstances as at that time). By clause 12.2 of the SPA, each of the Seller Warranties is separate and independent and, except as provided to the contrary in the SPA or the Tax Deed, is not limited by reference to any other Seller Warranty or by any other provision of the SPA or the Tax Deed. By clause 12.3 the Seller Warranties and any Seller Warranty Claim (defined as

There are strict time limits for notification of a Seller Warranty Claim (the position is different under the Tax Deed), which are set out in paragraph 5.1 of Part 1 of Schedule 5 as follows:

“5.

TIME LIMITS

The Tax Deed contains further provisions in relation to the tax liabilities of the acquired business, including the circumstances in which the Seller would indemnify the Purchaser for tax liabilities incurred prior to the sale but only recognised after the sale (Footnote: ¹).

The factual matters said to give rise to the claims are, broadly:

The Claimant brings claims under three heads (which shall be addressed in turn below), namely for:

So far as the Seller Warranties Claims are concerned, the three relevant Seller Warranties contained in Part 1 of Schedule 4 of the SPA are:

The Defendant’s Application is made pursuant to CPR 3.4(2)(a) and/or CPR 24.2 to strike out and/or to obtain summary judgment in respect of parts of the claim. The Defendant’s Application is brought on a number of separate and freestanding grounds, which can be broadly summarised as follows:

Each of the individual grounds on which the Defendant’s Application is brought is dealt with in turn below after a consideration of the relevant legal principles.

For the purposes of the Defendant’s Application, there is no material difference in the test to be applied to an application for strike out pursuant to CPR 3.4(2)(a) and that to be applied to an application for summary judgment pursuant to CPR 24.2. The relevant principles were classically summarised by Lewison J (as he then was) in Easyair Limited v Opal Telecom Limited [2009] EWHC 339 (Ch) and I apply them to the issues arising on the Defendant’s application in the present case. In the context of a defendant’s application for strike out or alternatively summary judgment, Lewison J said at [15]:

“…the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows:

i)

The court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman [2001] 2 All ER 91;

ii)

A “realistic” claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]

iii)

In reaching its conclusion the court must not conduct a “mini-trial”: Swain v Hillman

iv)

This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]

v)

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;

vi)

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;

vii)

On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725.”

The applicable principles of construction, so far as the SPA and the Tax Deed are concerned, are well established and were summarised by the Supreme Court in Wood v Capita Insurance Services Limited [2017] AC 1173. In interpreting the objective meaning of the language, the Court may rely on the tools of both textualism and contextualism. Where, as in this case, an agreement is sophisticated and complex and prepared with the assistance of skilled professionals, it is likely to be interpreted principally by textual analysis, see Lord Hodge SCJ at [13]:

“Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type.”

Neither party contended in this case that there was any particular factual matrix which bore upon the proper construction of the relevant agreements (save only in one limited respect concerning the tax warranty in paragraph 22.9 of Schedule 4, Part 1 to the SPA) and the Court accordingly had all the material it required to decide these questions of construction on this application. Notification of a claim

So far as the notification issues (in paragraph 12a(i) and (ii) above) are concerned, it is for the party bringing the claim, here the Claimant, to demonstrate that it has complied with the contractual notification requirement: Laminates Acquisition Co v BTR Australia Limited [2003] EWHC 2540 (Comm) per Cooke J at [30]; RWE Nukem Ltd v AEA Technology Plc [2005] EWHC 78 (Comm) at [10].

So far as the contractual notification requirement is concerned (here, paragraphs 5.1 and 5.2 of part 1, Schedule 5 to the SPA), it was observed by Simon J in Ipsos SA v Dentsu Aegis Network Ltd [2015] EWHC 1171 (Comm) at [16] that the starting point is the statement of Ward LJ in Forrest v Glasser [2006] 2 Lloyd’s Rep 392 at [24] that:

“…the only true principle to be derived from the authorities is that every notification clause turns on its own wording.”

Nevertheless, consideration of such earlier decisions can be instructive, especially where the relevant contractual provision is in the same or substantially similar terms: Dodika Ltd v United Luck Group Holdings Ltd [2020] EWHC 2101 (Comm) at [99]. I address some of those earlier decisions below.

As set out at paragraph 59 of the First Witness Statement of Jonathan Royston Holland

Alternatively to Ground 1, under Ground 2 the Defendant contends that the Tax Investigation Notification failed to state in reasonable detail or at all the nature of a

The Defendant contends that none of those was mentioned at all. Nor could they have been in respect of at least the Cologne Order, the Potential Blackrock Claim, the Investec Claim, or the Potential Warburg Claim: those matters post-dated, or the Claimant’s case is that it learned of those matters only after, the date of the Tax Investigation Notification.

Accordingly, it is said, the Seller Warranties Claims for breach of each of the warranties in paragraphs 9.1, 9.2 and 10.3 of Part 1 of Schedule 4 of the SPA have no real prospect of success insofar as they seek to rely on any such matters, other than the Frankfurt Investigation Matter.

Conceding this point, the Claimant agrees to limit its claim under seller warranties 9.1, 9.2 and 10.3 to the Frankfurt Investigation Matter and it maintains that that is what it sought to do by way of its draft Amended Particulars of Claim (“APOC”). In paragraph 18 of his first witness statement dated 12 February 2021, made on behalf of the Claimant, Mr. Lawson Miles Caisley (“Caisley 1”) says as follows:

“The Claimant accepts in that regard that, as per paragraph 60(a) of Mr Holland’s witness statement (his “Ground 2”), the Cologne Matter, and the three civil claims in respect of the trading which is the subject of the Cologne Matter (by Blackrock, Investec, and Warburg) were not notified in those letters and that accordingly the claims in respect of those matters under warranties 9.1, 9.2 and 10.3 should not proceed as matters stand. However, the Claimant reserves its right to bring these claims in the future in the event that information comes to its attention that would entitle it to invoke Clause 12.4 of the SPA.”

The draft APOC which were served some 10 days after Caisley 1 are, I am told, intended to reflect this concession. However, the Defendant takes issue with the way in which the Claimant purports to address this point in its proposed APOC. Specifically the Defendant highlights paragraph 46A of the draft APOC, which states that the Claimant’s Seller Warranties Claims are now:

“limited to breaches in respect of… those of the German Tax Matters investigated by the Frankfurt Prosecutor and the tax offices supporting the Frankfurt Prosecutor, includingactual or potential civil claims arising therefrom.” (emphasis added)

The “German Tax Matters” are defined in paragraph 23 of the draft APOC, which in turn refers to paragraphs 40 to 42 thereof, and the definition accordingly includes the matters set out in paragraph 21 above.

Mr. Smouha QC for the Defendant contends that this proposed amendment therefore impermissibly expands the scope of the Tax Investigation Notification beyond the investigation of the Frankfurt Prosecutor. In his oral submissions, Mr. Handyside QC for the Claimant realistically recognised the problems with the current draft APOC and said that once the court has ruled upon the notification issues the Claimant would go away and seek to plead again its case in this respect. I therefore address this topic in the context of the Claimant’s application for permission to serve its draft APOC below.

In paragraph 60b of Holland 1, Mr. Holland states:

“Paragraph 9.1 of Part 1 of Schedule 4 to the SPA provides that “No Voice Group Company … has contravened any applicable law or regulation, which has in the preceding 18 months resulted or may result in any fine, penalty or other liability or sanction that, in each case, has or would have a material adverse impact on the operation of the Voice Group Business (taken as a whole)” (emphasis added). An essential element of a claim that the warranty in paragraph 9.1 has been breached is that a Voice Group Company has contravened an applicable law or regulation. In that regard:

i.

Ground 3. The Tax Investigation Notification states that the Claimant has become aware of facts and/or circumstances giving rise to one or more Seller Warranties Claims, including under paragraphs 9.1, 9.2 and 10.3, as a result of or in connection with one or more Underlying Claims arising from the Frankfurt Investigation Matter “relating to various allegations of tax-related criminal offences” (emphasis added) (para 3.1). It states in relation to the warranty in paragraph 9.1 that there was a non-routine investigation of a director and this was

“in connection with alleged contraventions of applicable law and/or regulation…” (emphasis added) (para 6). It states that the Claimant “may” incur loss “in the event of an adverse finding” in respect of the Frankfurt Investigation Matter (para 10). It does not state anywhere that a Voice Group Company has breached any applicable law or regulation. Paragraph 12 states that the facts and circumstances set out (i) give rise to a Seller Warranty Claim under paragraphs 9.2 and 10.3, but, in contradistinction, (ii) only “may” also give rise to a Seller Warranty Claim under paragraph 9.1. It does not state that there is a Seller Warranty Claim under paragraph 9.1 or state in reasonable detail the nature of an actual Seller Warranty Claim in respect of paragraph 9.1 of Part 1 of Schedule 4, an essential element of which would be that there was in fact a breach. Accordingly, the claim for breach of the warranty in paragraph 9.1, insofar as it relies on notice having been given by the Tax Investigation Notification, in particular in respect of the Frankfurt Investigation Matter, has no real prospect of success.

ii.

Ground 4. The CFTC Investigation Notification states that the Claimant has become aware of facts and/or circumstances giving rise to one or more “potential” Seller Warranties Claims relating to the CFTC Matter (para 1.2). It states in relation to the warranty in paragraph 9.1 that the CFTC Investigation “might” result in a fine, penalty or other sanction. It states that the Claimant “may” incur loss “in the event that a Governmental Authority makes an adverse finding in connection with the CFTC Matter” (para 10). It does not state anywhere that a

Voice Group Company has breached any applicable law or regulation. Paragraph 12 states that the facts and circumstances relating to the CFTC Matter (i) give rise to a Seller Warranty Claim pursuant to paragraphs 9.2, but, in contradistinction,

(ii)

only “may” also give rise to a Seller Warranty Claim under paragraph 9.1. It does not state that there “is” a Seller Warranty Claim under paragraph 9.1 or state in reasonable detail the nature of an actual Seller Warranty Claim in respect of paragraph 9.1 of Part 1 of Schedule 4, an essential element of which would be that there was in fact a breach. Accordingly, the claim for breach of the warranty in paragraph 9.1, insofar as it relies on notice having been given by the CFTC Investigation Notification, in particular in respect of the CFTC Investigation Matter, has no real prospect of success.”

In oral submissions Mr. Smouha QC added that each of the two notifications does not give notice that any breach of any (identified) applicable law or regulation has resulted or may result in any fine, penalty or other liability or sanction that has or would have a material adverse impact on the operation of the Voice Group Business taken as a whole (in the context of a sale worth $1.5 billion), which he submits is also an essential element of a claim under paragraph 9.1.

The Defendant accordingly maintains that in order to give written notice of a Seller Warranty Claim in respect of paragraph 9.1 it was necessary for the Claimant to assert as a minimum that:

The Defendant argues that none of that was done in either the Tax Investigation Notification (Ground 3) or the CFTC Investigation Notification (Ground 4).

So far as point a) is concerned, the Defendant cites Ipsos SA v Dentsu Aegis Network Ltd [2015] EWHC 1171 (Comm) at [21] in support of the contention that a notification must specify that a claim is actually being made, rather than the possibility that a claim may yet be made. Accordingly, the Defendant maintains that no written notice was given for the purposes of paragraph 5.1 of Part 1 of Schedule 5.

In consequence, Mr. Smouha QC submits that paragraphs 53 and 54 of the Particulars of Claim should be struck out. Those paragraphs read as follows:

“Paragraph 9.1

53.

In relation to the underlying conduct which is the subject of the CFTC/FCA Matter and the German Tax Matters, and the Cum-Ex Conduct, the conclusions of the regulatory authorities and, where relevant, courts, have not yet been reached.

54.

To the extent that regulatory investigations and/or court proceedings establish that some or all of the alleged wrongdoing took place, the Seller is also in breach of the warranty at paragraph 9.1 of Part 1 of Schedule 4 to the SPA, because Voice Group Companies and/or members of the Seller’s Group had contravened applicable laws and/or regulations in a manner which, at the time of Completion, had the potential to result in a fine, penalty or other liability or sanction which would have a material adverse impact on the operation of the Voice Group Business (taken as a whole).”

The Claimant takes issue with this. It contends that it is not barred from bringing claims under paragraph 9.1 if it does not, within the two year period, make a positive assertion that a Voice Group Company has actually breached any applicable law or regulation. It maintains that it is possible to notify a claim dependent upon a contingency. And so, whilst Mr. Handyside QC accepted that the Purchaser did not say in the Notification that there had in fact been an actual contravention of applicable law, he argued that nonetheless a reasonable recipient of the Tax Investigation Notice would understand that what was being said was that if the Frankfurt investigation concluded by finding that there had been a contravention of an applicable law or regulation then the Seller would be in breach of the warranty under paragraph 9.1. The nature of the claim was accordingly sufficiently notified.

Mr. Handyside QC referred to Schedule 5, Part 1, clause 8.1 in support of his submissions. That provides as follows:

“8.

CONDUCT OF THIRD PARTY CLAIMS

8.1

If a Seller Warranty Claim (other than a Seller Tax Warranty Claim) arises as a result of, or in connection with, a liability or alleged liability of a member of the Purchaser's Group or a Voice Group Company to a third party (an Underlying Claim), then until such time as any final compromise, agreement, expert determination or non-appealable decision of a court or tribunal of competent jurisdiction is made in respect of the Underlying Claim or the Underlying Claim is otherwise finally disposed of:

(a)

the Purchaser shall promptly give written notice to the Seller of the matter with respect to the Underlying Claim…”

Mr. Handyside QC submitted that a liability or alleged liability to a public prosecutor would amount to a liability to a third party within the meaning of this clause.

He further submitted that there are obvious reasons (which would have been obvious to the parties at the time of the SPA) as to why, post-SPA and post-Completion, the Claimant would not wish to assert positively, in the absence of regulatory or court findings, that Voice Group Companies – companies which it was acquiring – were guilty of breaches of the law or regulations. Any such assertion would be likely to be taken as an admission of wrongdoing by regulators and third parties, leading to penalties and/or civil claims. The Claimant says that that would be in neither the interests of the Purchaser nor the Seller, since the cost of such matters would (depending on the outcome of these proceedings) be spread between them. On this basis, the Claimant argues that the parties could not have intended that the Purchaser should be required to take that step of notifying the Seller of an actual (or alleged actual) contravention of an applicable law in order to notify a valid warranty claim (“the jeopardy point”).

In oral submissions, Mr. Handyside QC referred me to ROK Plc v S Harrison Group Ltd [2011] EWHC 270 on the issue of adequate notification. In ROK, the relevant notification clause was not dissimilar to the one in this case, providing:

“5.

The Vendor is not liable for a Claim or a claim under the Tax Undertaking or the Indemnities unless the Purchaser has given the Vendor notice in writing of the Claim or the claim under the Tax Undertaking or the Indemnities, specifying in reasonable detail the nature of the Claim or claim under the Tax Undertaking or the Indemnities and the amount claimed (based in each case on the information then available to the Purchaser):

5.1.1

in the case of a Claim made under the Tax Warranties or a claim under the Tax Undertaking, within the period of seven years beginning with the Completion Date; and

5.1.2

in the case of a Claim (other than in respect of the Tax Warranties) or a claim under the Indemnities, on or before 30 June 2009,

and in the case of a Claim legal proceedings have been issued and served on the Vendor within six months of notification of the Claim.”

On the issue of reasonable detail as to the nature of the claim, Lewison J noted in ROK at [61]:

“The Notice Clause is, as ROK submitted, a relatively “low threshold” notice clause in comparison with some of the notice clauses that have been before the Courts. It requires written notice of the Claim which specifies, in reasonable detail, the nature of the Claim and the amount claimed. But it does not require details (or particulars) to be given of the grounds on which the Claim is based (as in Senate Electrical), or of the matter (Laminates) or event or circumstances (Bottin) which have given rise to the Claim, or of the specific matter(s) in respect of which the claim is made (RWE Nukem, Curtis). The parties have not provided for that degree of specificity (cf. Ward LJ’s comments in para. 23 of his judgment in Forest v. Glasser). They have chosen an expression, “the nature of the Claim”, which is more general and less prescriptive, as was recognised by Dyson J in Odebrecht, in contrasting the phrase “nature of such breach” with the detail of the breach.”

The overarching question for the court is how each of these Notices would be understood by a reasonable recipient taking into account the relevant objective contextual scene: Stobart Group Ltd v Stobart [2019] EWCA Civ 1376 at [25], citing Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 at 767G.

As is stated in Lewison The Interpretation of Contracts (7th Edn), 12.134-12.135:

“The required contents of a valid notice is a question of interpretation of the clause. Every notification clause turns on its own individual wording. Whether a valid notice has been given in time depends on the meaning of the notice, objectively interpreted, rather than on the subjective understanding of the parties.

Although the usual principles applicable to the interpretation of notices will apply, the clause will nevertheless be treated as a limitation clause for that purpose. The clear commercial purpose of the clause includes that the person to whom the notification is given should know at the earliest practicable date in sufficiently formal written terms that a particularised claim for breach of contract is to be made so that he may take such steps as are available to him to deal with it. Thus the touchstone is “clarity sufficient to achieve certainty rather than a requirement of strict compliance which, if applied inflexibly, can lead to uncommercial results”. A compliant notification will usually refer to the contractual provision that has been broken. But the level of detail required will depend on the wording of the clause. Where the contract provided that “the nature of the Claim” be specified “in reasonable detail”, it required, as a minimum, that the notice should identify the contractual provision under which the claim was said to arise. But where the contract merely required claims to be notified, no detail of the claim was required.”

That the notification clause in paragraph 5.1 of Schedule 5, Part 1 is in the nature of a limitation clause is apparent from its wording: “The Seller is not liable in respect of a

The Clause then goes on to specify the level of detailed required: “stating in reasonable detail the nature of the Seller Warranty Claim and, if practicable, the amount claimed”. A “Seller Warranty Claim” is defined in the SPA as meaning “a claim by the Purchaser the basis of which is that a Seller Warranty is, or is alleged to be, untrue or inaccurate.”

It follows that a determination as to the nature of what is required to be notified under paragraph 5.1 of Schedule 5, Part 1, is to be reached by reference to the terms of the actual Seller Warranty that one is construing, in this case paragraph 9.1 of Schedule 4, Part 1.

The Seller Warranty given in clause 9.1 of Schedule 4, Part 1 to the SPA, relevantly for present purposes, is that no Voice Group Company, nor so far as the Seller is aware, any director of a Voice Group Company, has contravened any applicable law or regulation which may result in any fine, penalty or other liability or sanction which would have a material adverse impact on the operation of the Voice Group Business (taken as a whole).

If the Claimant wishes to allege that Seller Warranty to have been untrue or inaccurate, it must state in reasonable detail the nature of the claim: that is, it must (i) describe the broad nature of the contravention of the law or regulation which it is alleged was not disclosed (identifying the relevant law/regulation), and (ii) make clear that as a result it is making a Seller Warranty claim.

Clause 9.1 focusses on the past contravention of an applicable law or regulation which may result in a fine. It covers a situation, therefore, where a Voice Group Company or member of the Seller’s Group has contravened the law but has not yet been fined (including presumably a situation where the past contravention has not yet been discovered, or where the penalty has not yet been determined). Clause 9.2, in contrast, covers a case where a non-routine investigation has begun but it is not necessary for any contravention of the law to have occurred.

In support of his argument that it was permissible for the Claimant to notify circumstances which may give rise to a Seller Warranties Claim under paragraph 9.1, Mr. Handyside QC sought to rely upon paragraph 8.1 of Part 1 of Schedule 5. But I agree with Mr. Smouha QC that the purpose of notification under this clause – which is to enable the seller to be given the opportunity to be involved in or have conduct of the third party claim – is different from the paragraph 9, Schedule 4 warranties which concern compliance with laws and regulatory compliance and it is paragraph 5.1 of Schedule 5, Part 1 which is relevant to such warranties. Indeed, I do not consider that the language of clause 8.1 – which concerns liability to a third party – can sensibly be said to apply to a criminal case brought against a Voice Group Company by the Frankfurt Prosecutor. But even if the language is strained so as to apply to such a case, the underlying claim would still have to consist of an allegation that a contravention of an applicable law or regulation had occurred; it is not sufficient simply to notify within the relevant time limit that an unspecified contravention might occur at some point in the future.

Indeed, were it possible to notify a Seller Warranty Claim in such a way under paragraph 9.1, the time limit laid down by schedule 5, Part 1, clause 5.1(b) would be rendered redundant, as the Seller could always get around it by purporting to make a general notification of a Seller Warranty Claim prior to 30 December 2018 to the effect that “in so far as a contravention of an unspecified law (or even a specified law) is hereafter found in connection with a particular regulatory investigation to have occurred, then there is a breach of clause 9.1”. That would rob the time limits clause of its purpose. The purpose of a time bar clause such as clause 5.1 was explained in Laminates Acquisition Co v BTR Australia Limited [2003] EWHC 2540 (Comm) per Cooke J at paragraphs 29-30:

“29.

I was referred to Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd[1997] AC 749and encouraged to adopt the more flexible approach to construction of Notices than had previously been the case in the light of the Judgments of Lord Steyn at pages 767 – 8 and Lord Hoffmann at pages 779 –780. The question is how this notice would be understood by a reasonable recipient with knowledge of the context in which it was sent. Reliance was also placed upon the decision of the Court of Appeal in Senate Electrical Wholesalers Ltd v Alcatel Submarine Networks [1999] 2 Lloyd's Reports 243, Odebrecht Oil & Gas Services Ltd v North Sea Production Co Ltd (an unreported decision of Dyson J of 10^th May 1999) and on the House of Lords decision in A/S Rendal v Arcos Ltd (1937) 58 LLR 287 (and in particular the speeches of Lord Wright at page 291, 292 – 4 and Lord Maugham at pages 298 –299). I found these citations of limited help because each notice clause has to be construed for itself and in the light of the commercial context in which it is found and the commercial purpose it is intended to serve. Notice clauses of this kind are usually inserted for a purpose, to give some certainty to the party to be notified and a failure to observe their terms can rarely be dismissed on a technicality. The comments of Stuart-Smith LJ in Senate Electrical are apposite, in the context of a notice clause in a Share Sale Agreement requiring notice to set out "such particulars of the grounds on which such claim is based as are then known to the Purchaser promptly …. ………… and in any event within 18 months". He said:-

“The clear commercial purpose of the clause includes that the vendors should know ……………… in sufficiently formal written terms that a particularised claim for breach of warranty is to be made so that they may take such steps as are available to them to deal with it ……………. The commercial purpose may not be sensibly served if an uninformed and uninformative notice is given …….”

The notice provision here does not require "particulars" of the grounds of claim for breach of warranty but some information relating to the claim, as set out in the paragraph, which can be seen as equivalent, or analogous to that required in Senate Electrical.

30.

The starting point here must be, regardless of the proviso dealing with the need for legal proceedings within a specific time, that the terms of the notice provision are clear in debarring claims which have not been notified within the required period. Thus the clause begins "No claim ……. shall be brought ……… unless …..". A compliant notice is therefore a matter of importance… Thirdly, the purpose of the notice provision, as essentially agreed by both parties is to ensure that BTR is provided with a warning of future legal proceedings against it under the Agreed Assurances with sufficient information and time to enable it to make enquiries, to make an informed assessment of the claim, decide what to do about it, take precautionary steps, (such as notification to insurers and preparation of defence material) make provision in its accounts or obtain withdrawal of the claim or satisfy or settle it before legal proceedings are issued. These purposes can essentially be garnered from the proviso to paragraph 2 and the overall structure and content of paragraph 2 in the light of paragraph 3 of the Schedule and the SPA as a whole. To do any of these things necessitated some particularisation of the claim made by Laminates.”

Were it possible to notify in such a way, then the commercial purpose of such a notification clause would be defeated, that purpose being to ensure that sellers know in sufficiently formal terms that a claim for breach of warranty is being made so that financial provision can be made for it: Ipsos at [19]. As Stuart Smith LJ stated in Senate Electrical Wholesalers Ltd v Alcatel Submarine Networks Ltd [1999] 2 Lloyds Rep 423 at [91]:

“Certainty is only achieved when the vendor is left in no reasonable doubt not only that a claim may be brought but of the particulars of the ground upon which the claim is based. The clause contemplates that the notice will be couched in terms which are sufficiently clear and unambiguous as to leave no such doubt and to leave no room for argument about the particulars of the complaint. Notice in writing is required in order to constitute the record which dispels the need for further argument and creates the certainty.”

It is not legitimate simply to notify the possibility that a Seller Warranty Claim may be made at some point in the future under clause 9.1. The notification must make clear that such a claim is being lodged and pursued now, rather than indicating the possibility that a claim may be made at some point in the future. Contrary to the submission of Mr. Handyside QC, I consider that an analogous notification clause to clause 5.1 of Schedule 5, part 1 to the SPA was under consideration in Laminates, as is recited at [6] of Cooke J’s judgment:

“2.

Time limits for bringing claims

No claim … shall be brought against the Vendor in respect of any Agreed Assurances … unless the Purchaser shall have given to the relevant Vendor written notice of such claim specifying (in reasonable detail, to the extent that such information is available at the time of the claim) the matter which gives rise to the claim, the nature of the claim and the amount claimed in respect thereof (detailing the Purchaser's calculation of the loss thereby alleged to have been suffered by it or the relevant member of the Purchaser's Group): … on or before 31 March 2000.

….

PROVIDED that ... the liability of the Vendor in respect of such claim shall absolutely determine (if such claim has not been previously satisfied, settled or withdrawn) if legal proceedings in respect of such claim shall not have been commenced within 12 months of the expiry of the relevant limitation period referred to in (i), (ii) and (iii) above and for this purpose proceedings shall not be deemed to have been commenced unless they shall have been properly issued and validly served upon the Vendor.”

On the question of whether it was possible to bring a contingent claim under such a clause, Cooke J held at [33]:

“Thus, on any view, a notice which complies with paragraph 2 must make it clear that such a claim is being pursued whatever wording is used, rather than indicating the possibility that a claim may yet be made as a paragraph 3 notice would do. This does not mean that a claim cannot be in respect of a future contingency. A notice could make it plain that a claim was now being made in respect of a breach of Warranty, if for example some third party claim proved to be well founded, whilst it was currently denied that such a claim had any basis. The important feature is however that the notice should makeit clear that a claim is being lodged, not that it might subsequently be lodged.” (emphasis added)

Simon J observed to like effect in Ipsos (which concerned a notification clause in similar terms to paragraph 5.1 of Schedule 5, Part 1) at [21] and [36] that “A general notification that a claim might be brought at some time in the future would not be sufficient”.

In the present case the Tax Investigation Notification (at Appendix 1) is carefully worded with precise definitions:

I agree with Mr. Smouha QC that the letter draws a deliberate and clear distinction in clause 12 between the claim in respect of 9.2 and 10.3 (“give rise to a Seller Warranty Claim”) and the claim in respect of 9.1 (“may give rise to one or more Seller Warranties

This is consistent with the wording in clause 6(ii) of the Tax Investigation Notification: “in relation to paragraph 9.1 of Part 1 of Schedule 4 to the SPA this was in connection with alleged contraventions of applicable law and/or regulation which may result in a fine, penalty or other liability or sanction.” (emphasis added). The reference to “this” is a reference to the non-routine investigation of the director (Tyler Bowen), which “was in connection with alleged contraventions of applicable law and/or regulation”. Those contraventions are set out in paragraph 4.1 and are alleged against Mr. Tyler Bowen. No contravention of any applicable law or regulation is alleged against a Voice Group Company or member of the Seller’s Group and I reject Mr. Handyside QC’s submission that the Tax Investigation Notification should be read as asserting a contravention by both Mr. Tyler Bowen and ISL (Footnote: ³). The Tax Investigation Notification could easily have said that were it intended but it does not do so. Those contraventions of criminal law by Mr. Tyler Bowen may give rise to an administrative corporate fine and/or disgorgement of the proceeds of crime by ISL in connection with the Investigation against Mr. Tyler Bowen, but the contraventions of the criminal law are by him, not ISL. It is no doubt for this reason that the letter concludes in paragraph 12 that so far as paragraph 9.1 of Schedule 4, Part 1 is concerned, “the facts and circumstances relating to the Frankfurt Investigation Matter… may also give rise to one or more Seller Warranties Claims pursuant to [that paragraph]”. The notice is not making it plain that a claim was now being made in respect of a breach of paragraph 9.1; rather it is notice that a claim might subsequently be lodged under clause 9.1 arising out of the facts and circumstances of the Investigation into Mr. Tyler Bowen.

Contrary to Mr. Handyside QC’s submission, I do not consider that this conclusion is altered by the terms of the attached letter of the Frankfurt Prosecutor, where again the emphasis is on the investigation of Edward Tyler Bowen for criminal offences (aiding and abetting tax evasion by Rafael Roth). In any event, it is from the terms of the Tax Investigation Notification itself that a reasonable recipient would gain his understanding of what was being alleged, and that puts the attached letter into context.

Indeed, it is notable the pleaded case in this respect, contained in paragraphs 53-54 of the draft APOC, is unable to say which laws the Voice Group Companies and/or members of the Seller’s group are alleged to have contravened.

It is also the case, as Mr. Smouha QC submitted, that the Tax Investigation Notification fails anywhere to state that any fine, penalty or other liability or sanction which had resulted or may result from any contravention of any applicable law or regulation has or would have a material adverse impact on the operation of the business of the Voice

Finally, so far as the jeopardy point is concerned, I agree with Mr. Smouha QC that there is nothing in this point. If for the Purchaser’s own commercial reasons it does not wish to allege a contravention, that is a matter for it. But it must recognise that the consequence of that decision will be that it has failed to give a valid notice under the SPA in relation to paragraph 9.1 of Schedule 4, Part 1.

In my judgment, the CFTC Notification is also not a valid notification of a Seller Warranty Claim under paragraph 9.1 of Schedule 4, Part 1.

It is right to note that the CFTC Notification begins as follows:

That would, if taken in isolation, suggest that a Seller warranty Claim was being made under paragraph 9.1.

However, the Notification then sets out in some detail in paragraph 4 the CFTC investigation into swaps trading relating to bond issuances, referring to various requests for information made by the CFTC of Voice Group Companies. That is followed by a reference (in clause 5 of the CFTC Notification) to paragraphs 9.1, 9.2 and 10.3 of Schedule 4, Part 1, followed by the following wording in clause 6:

“It is apparent that (i) in relation to paragraph 9.2 of Part 1 of Schedule 4 to the SPA, there was an existing and/or threatened and/or pending investigation, review or enquiry by the CFTC, (ii) in relation to paragraph 9.1 of Part I of Schedule 4 to the SPA this related to conduct in the preceding 18 months and might result in a fine, penalty or other sanction, and (iii) in relation to paragraph 10.3 of Part 1 of Schedule 4 to the SPA there were circumstances which would reasonably be expected to give rise to litigation, arbitration or alternative dispute resolution proceedings against a Voice Group Company.”

It can be seen that in relation to paragraph 9.1, the CFTC Notification does not refer to any contravention of an applicable law or regulation, but rather refers merely to the fact that the CFTC investigation which was underway related to “conduct” in the preceding 18 months (which might result in a fine, penalty or other sanction).

Clauses 9 and 10 of the CFTC Notification then state:

“9.

As matters are still ongoing, the Purchaser is unable at this stage to quantify accurately the liability resulting from the CFTC Matter. The Purchaser has, however, already incurred costs and expenses (including without limitation legal costs) in connection with the CFTC Matter amounting to approximately £1,250,000 and expects to continue to incur costs and expenses.

Again, these two paragraphs make clear that the investigation is continuing and no adverse finding against the Company has yet been made; and no contravention of any law or regulation is referred to. As a result the Purchaser makes no mention at all of any alleged material adverse impact on the operation of the business of the Voice Group Companies (taken as a whole) and it can only point to relatively trivial losses. Again, that is an important part of the notification requirement under paragraph 5 of Schedule 5, Part 1 which is missing from this Notification.

This is no doubt why the following conclusion is reached in clause 12:

“Accordingly, the facts and circumstances relating to the CFTC Matter set out at paragraph 4 above give rise to a Seller Warranty Claim against the Seller pursuant to paragraph 9.2 of Part 1 of Schedule 4 to the SPA, and may also give rise to aSeller Warranty Claim pursuant to paragraphs 9.1 and 10.3 of Part 1 of Schedule 4 to the SPA (and potentially other Seller Warranties).” (emphasis added)

As is stated above, if the Claimant wishes to allege the Seller Warranty in paragraph 9.1 of Schedule 4, Part 1 to have been untrue or inaccurate, it must state in reasonable detail the nature of the Seller Warranty Claim: that is, it must describe the broad nature of the contravention of the law or regulation which is alleged was not disclosed (identifying the relevant law/regulation), and make clear that as a result it is making a Seller Warranty Claim. The CFTC Notification does not do that.

Mr. Handyside QC submitted that what this Notification was telling the Seller was that “the nature of the claim here is that, it has come to our attention that your conduct is being investigated in the context of suspected breaches of law and regulation. We are making a claim against you under paragraph 9.1 on a contingent basis. If the regulator makes findings against you, you will be in breach and you will be liable.”

I do not consider that that is the correct, objective reading of the CFTC Notification. As I put to Mr. Handyside QC in argument (Footnote: ⁴), what of a case where an investigation has begun but there is not yet any suggestion that the Seller is in breach of any law or regulation. In that case he accepted that the Purchaser cannot simply say “Well, there is conduct here and that might result in a contravention of applicable law and so you should have disclosed it under 9.1”. He accepted that in such a case there would have to be a claim made under one of the other warranties (presumably 9.2). But that is this case.

In my judgment, if one asks the question how would the CFTC Notification be understood by a reasonable recipient with knowledge of the context in which it was sent, it would clearly be understood as a notification under clause 9.2, referring as it does in some detail to the CFTC non-routine investigation, but, when clause 3 is read together with clauses 6, 9, 10 and 12, it would not be understood that the Purchaser was also making now a Seller Warranty Claim under paragraph 9.1 because there had been a contravention of an applicable law or regulation; rather, it was notifying the fact that an investigation was underway into the conduct of Voice Group Companies which might result in a fine, penalty or other sanction, but whether it would or not and whether any law or regulation had been contravened was not yet known.

It is not open to the Claimant to seek to evade the strict time limits in clause 5.1 of Part 1 of Schedule 5 to the SPA by notifying in this way so far as paragraph 9.1 of Part 1 to Schedule 4 to the SPA is concerned.

In the light of my findings on Grounds 3 and 4, it follows that paragraphs 53-54 of the Particulars of Claim should be struck out as disclosing no reasonable cause of action.

The Defendant’s point under Ground 5 is a short one. It submits that the Claimant failed to make a valid notification of a Seller Warranty Claim under paragraph 9.2 of Part 1 of Schedule 4 (“the Investigations Warranty”) on the basis of a non-routine investigation, review or enquiry (by the Attorney General’s Office of Frankfurt) in the preceding 18 months into a Voice Group Company (as opposed to a director, officer or employee of a Voice Group Company).

The significance of the distinction between a director, officer or employee having been subject to a non-routine investigation, review or enquiry as compared to a Voice Group Company itself being subject to such an investigation is that the Investigations Warranty in respect of the former (i.e. directors, officers, employees) was given subject to the qualification of the Seller’s awareness. By contrast, the Investigations Warranty in respect of a Voice Group Company itself is not subject to the Seller’s awareness.

The Defendant contends that certain parts of the Claimant’s claim impermissibly proceed on the basis of valid notification of a Seller Warranty Claim relating to a nonroutine investigation, review or enquiry into a Voice Group Company, and that the Claimant’s claim in this regard should be struck out or summarily dismissed. Specifically:

Mr. Smouha QC submits that the parenthesis in paragraph 29 of the Particulars of Claim – “(and thus those Voice Group Companies themselves)” – is an illegitimate device to get around the difficulty that the investigation was into Mr. Tyler Bowen and not a Voice Group Company. I agree. As Mr. Smouha QC rightly points out, if it were the case that any investigation into an employee of a Voice Group Company was also necessarily an investigation into a Voice Group Company itself, then the additional element of knowledge in paragraph 9.2 (“so far as the Seller is aware”) would never come into play. It is one thing to warrant this on behalf of the Voice Group Companies; it is quite another matter to warrant this on behalf of all of the employees in a worldwide organisation without the additional requirement of knowledge on the part of the company.

Despite the defective plea of the Claimant, the real issue here is whether or not the Tax Investigation Notification, read objectively, was a notification of a non-routine investigation into a Voice Group Company.

The Defendant’s point is simple: clause 4.1 of the Tax Investigation Notification defines the Investigation as being an investigation into Edward Tyler Bowen and others (“the others”, whom the Claimant pleads consist of natural persons, appear to have been two brokers at ISL: see paragraph 29 of the Particulars of Claim). It was not an investigation into ISL. Clause 6 of the Tax Investigation Notification further makes clear that the investigation was into the director and not the company itself.

The Claimant’s response is that this ignores clause 4.2 of the Tax Investigation Notification, when read together with the attached letter of 19 December 2018 from the Frankfurt Public Prosecutor’s Office. Mr. Handyside QC submits that the combined effect of these two features makes clear that the investigation proceedings cover not only Mr. Tyler Bowen but also ISL itself because the prosecutor was proposing to impose a fine on ISL and confiscate the proceeds of crime. In these circumstances it is impossible to say that ISL is not the subject of the investigation, particularly where the director was acting on behalf of the company.

In my judgment Mr. Smouha QC is right about this:

It follows that the Claimant’s claim in this respect, contained in paragraph 47 of the Particulars of Claim (as well as the parenthesis in paragraph 29), should be struck out.

Under Ground 6, the Defendant contends that the three pleaded claims for damages made pursuant to paragraphs 9.1, 22.1 and 22.9 of Part 1 of Schedule 4 of the SPA are unsustainable as they do not allege any breach of warranty. The point the Defendant seeks to make is that it is an essential element of a claim for damages for breach of contract that there has been a breach of contract, but none of these three claims alleges a breach of warranty. Each is instead put on the basis that if and “to the extent that” indeterminate findings are made in investigations and/or court proceedings at some point in the future there would be a breach.

So far as the claim in respect of the Seller Warranty in paragraph 9.1 of Part 1 of Schedule 4 is concerned, that is pleaded in paragraphs 53 and 54 of the Particulars of Claim which I have already held should be struck out. It follows that this argument does not arise.

Had it arisen, the Defendant notes that the Claimant’s pleaded case is that:

So far as the claim in respect of the Tax Warranty in paragraph 22.1 of Schedule 4, Part 1 is concerned, that is pleaded in paragraph 55 of the Particulars of Claim. The Defendant notes that the Claimant’s pleaded case is merely that if and “to the extent that” regulatory investigations and/or court proceedings ultimately establish that as a result of the German Tax Matters a Voice Group Company was liable (i) to Taxation (Footnote: ⁵) in the 3 years preceding the giving of the warranties for which it had not made appropriate payment etc., or (ii) to pay a penalty, surcharge, fine or interest in connection with Taxation for that period, then the Seller would be in breach. There is no pleaded allegation that the Seller is in breach.

So far as this claim is concerned, the Claimant states in paragraph 8 of its skeleton argument and footnote 4 that it no longer pursues its claim for damages for breach of the Tax Warranty in paragraph 22.1 (paragraph 55 of the Particulars of Claim) and accordingly this should be struck out. This is also relevant to Ground 7 of the application.

Finally, so far as the claim in respect of the Tax Warranty in paragraph 22.9 of

The Defendant refers to the fact that the Claimant has, by a proposed amendment to the first sentence of paragraph 57 of the Particulars of Claim, sought to add an allegation of actual breach in relation to the third claim (in respect of the Tax Warranty in 22.9). It accepts that this is legitimate. However, the Claimant still maintains in the second and third sentences of the proposed amended paragraph 57 a freestanding case claiming damages for breach of warranty without alleging any actual breach and that, it submits, is illegitimate.

The Defendant contends that the only claim made in respect of each of these three warranties is for damages (see paragraphs 64 to 66 of the Particulars of Claim) and that since the Claimant’s case at its highest is that the Seller may or may not be in breach, depending upon whether certain contingencies occur in the future, each of these aspects of the Claimant’s pleaded case falls to be struck out or summarily dismissed.

The Claimant said very little about Ground 6 in its skeleton argument and instead relied upon its arguments on notification in respect of grounds 3 and 4. However, Ground 6 raises arguments which are independent of the notification arguments, and in his oral submissions, Mr. Handyside QC made the following points:

I accept Mr. Smouha QC’s submissions in respect of Ground 6. The time limits in paragraph 5 of Schedule 5, Part 1 are mandatory. The Purchaser must decide when to notify and having been notified, a Seller Warranty Claim is subject to a one year cut off period for the issuing and service of proceedings under paragraph 5.2. That is the commercial deal that the parties have struck which affords them certainty (particularly the Seller), and the Purchaser cannot seek to get around those agreed time limits by notifying and then pleading “contingent claims” in the sense of claims which have not yet arisen and which may never arise.

So far as Mr. Handyside QC’s point (f) above is concerned, there is no need to notify “contingently” the tax warranty claim because such a claim is only subject to the relevant statute of limitation in respect of that claim. It follows that once a Tax Warranty Claim arises, at that point the Purchaser notifies it and then it has 12 months under paragraph 5.2 to issue and serve its claim. There is no difficulty. What it cannot do is notify a Tax Warranty Claim before the claim has actually arisen, and then complain that the 12-month period has expired before it is able to plead an actual breach of the warranty. That is a situation of its own making which arises as a result of its own illegitimate attempt to evade the agreed time limits in paragraph 5.

It follows that paragraphs 53-54; 55 (conceded) and 57 should be struck out for this reason (53-54 have been struck out in any event).

Under Ground 7, the Defendant contended that on its true construction the Tax Warranty in paragraph 22.1 is engaged only in respect of the liability of a Voice Group Company for Taxation or to pay a penalty, surcharge, fine or interest in connection with a liability of the Voice Group Company to Taxation. Accordingly, it was said, a case that regulatory investigations and/or court proceedings might establish that as a result of the German Tax Matters and/or the Alleged Cum-Ex Conduct a Voice Group Company was liable to Taxation or a penalty, surcharge, fine or interest in connection with Taxation in the 3 years preceding the giving of the warranty has no real prospect of success in any event insofar as it relies on:

The Defendant noted that the warranty in paragraph 22.1 is concerned with (i) the liability of a Voice Group Company, not any other person, (ii) for Taxation or a penalty, surcharge, fine or interest in connection with Taxation, (iii) in the preceding 3year period. Paragraph 22.1, it was argued, is concerned with the actual tax position of the Voice Group Company at the date of the SPA, not liability in civil proceedings or for a fine at an indeterminate point in the future (even if by reference to matters prior to the SPA).

As regards the “potential civil claims” pleaded in paragraph 23 in particular, the Defendant argued that the Claimant faces an insurmountable timing difficulty since:

In the light of this case, Ground 7 is conceded by the Claimant and accordingly it is accepted that paragraph 55 of the Particulars of Claim falls to be struck out.

Paragraph 22.3 of Part 1 of Schedule 4 to the SPA (“the Tax Investigations Warranty”) provides as follows:

“No Voice Group Company is or has in the past three years been involved in any dispute or non-routine audit, review or investigation in relation to Taxation with a Taxation Authority nor, so far as the Seller is aware, is likely to become involved in such a dispute, audit or investigation.”

So far as this ground is concerned, the Defendant’s case originally had two limbs:

More particularly, the Defendant submits as follows:

The Claimant’s response to this ground takes paragraphs 22.3 and 22.9 of Schedule 4, Part 1 together. The Claimant submits as follows:

Although (as can be seen) the parties advance an array of points about this issue of construction, in my judgment it is relatively straightforward and I accept the Claimant’s submissions. Clause 22 contains essentially two different types of Tax Warranty, namely those which concern the taxation position solely of a Voice Group Company and those which concern the taxation position of a Voice Group Company and a third party. As the Claimant submits, this is not at all commercially surprising. The Voice Group Companies are concerned in the business of voice broking for their clients. It is unsurprising that tax warranties (such as paragraph 22.9) should therefore be given to cover situations where those companies had involved themselves in avoidance/evasion schemes relating to the taxation affairs of third parties. Disputes with Taxation Authorities as to the legitimacy of such schemes might very well expose the business under the Purchaser’s control to both financial liabilities and reputational damage.

Paragraph 22.3 is also clearly concerned with something out of the norm so far as taxation matters are concerned. There must be a dispute with or non-routine audit/review/investigation by a Taxation Authority. In a case where a Voice Group Company is likely to become involved in such a dispute or non-routine audit/review/investigation, that is qualified by the Seller’s awareness. It follows that I reject the Defendant’s suggestion that this is a surprising warranty. In order for the warranty to bite, the Seller must (i) be aware that (ii) it is likely to become involved in (iii) a dispute or non-routine audit in relation to Taxation with a Taxation Authority. There seems to me to be nothing commercially surprising about the giving of such a warranty based upon the Seller’s knowledge, particularly since the relevant knowledge is narrowly circumscribed by reference to the named individuals in paragraph 2 of Schedule 23 to the SPA.

Moreover, where the SPA wishes to make clear that the warranty is concerned with the taxation of a Voice Group Company it makes that clear: see for example paragraph 22.1 (“which it has become liable to pay”; “which it has become liable to account”) and paragraph 22.2 (“as it is required to make”; “served on it”; “and any other requirements lawfully made of it”). In contrast, paragraph 22.3 merely refers to a Voice group Company being “involved in” any dispute (and not “subject to”), which is a much broader concept. It would have been open to the draftsperson to draft this clause as follows, but they did not:

“No Voice Group Company is or has in the past three years been involved in any dispute or non-routine audit, review or investigation [of it] in relation to Taxation with a Taxation Authority nor, so far as the Seller is aware, is likely to become involved in such a dispute, audit or investigation [of it].”

This construction is fortified by the definition of Taxation in Schedule 23 of the SPA, which is very broad and is not limited to Taxation of a Voice Group Company. Mr. Handyside QC rightly points out the importance of textualism when considering a sophisticated, professionally drawn contract such as the SPA: see Wood v Capita (supra). There is no need or warrant to read limiting words into the warranty.

As Mr. Handyside QC argued, the Defendant’s attempt to buttress its construction arguments by reference to the scope of the other Seller Tax Warranties is misconceived. The fact that other of the warranties refer expressly to the Voice Group Companies’ own tax position alone, whereas others do not serves to underline the deliberate difference between these two categories of warranty. In any event, by clause 12.2 of the SPA, each of the Seller Warranties is separate and independent and, except as provided to the contrary in the SPA or the Tax Deed, is not limited by reference to any other Seller Warranty or by any other provision of the SPA or the Tax Deed. So the fact that other of the warranties only deal with the tax position of a Voice Group Company does not undermine the construction that I consider to be correct, i.e. that the Tax Warranties in paragraphs 22.3 and 22.9 apply to the tax position of a third party as well.

It follows that I do not strike out the paragraph 22.3 claim in paragraph 56 of the Particulars of Claim.

Similar arguments apply to the Tax Warranty in paragraph 22.9 of Schedule 4 which reads as follows:

“No Voice Group Company has participated in any transaction, scheme or arrangement of which the or a main purpose or effect is the avoidance or evasion of a liability to Taxation or which could be re-characterised or treated as unenforceable for Taxation purposes.”

A claim in respect of this warranty is advanced in paragraphs 57-58 of the draft APOC. As regards paragraph 22.9 (the Tax Schemes Warranty), the claim relates to two aspects of the Alleged Cum-Ex Conduct. The Claimant contends in the APOC that: (i) tax avoidance (at least) was the or a main purpose or effect of the conduct; and (ii) the transactions could be re-characterised or treated as unenforceable for Taxation purposes.

The Defendant explains that its case in this regard has two limbs, both of which raise essentially the same point as under Ground 8, that the Tax Warranties relate to the Taxation of Voice Group Companies.

The first limb only arises if Ground 6 fails. It relates to paragraph 57 of the Particulars of Claim. A breach of the Tax Warranty in paragraph 22.9 requires a Voice Group Company to have participated in a transaction, scheme or arrangement of which a main purpose or effect was the avoidance or evasion of a liability to Taxation of a Voice Group Company (not a liability to Taxation of a third party). Whilst I do not agree that paragraph 22.9 requires a Voice Group Company to have participated in a transaction, scheme or arrangement of which a main purpose or effect was the avoidance or evasion of a liability to Taxation of a Voice Group Company and not a liability to Taxation of a third party, since I have found that Ground 6 succeeds this point does not arise for determination (I add only that the first sentence of the draft APOC of Claim does not suffer from the same defect as the second and third sentences thereof and it would therefore survive such a challenge).

The second limb relates to paragraph 58 of the Particulars of Claim and does arise for determination. The Defendant makes two points:

So far as the first point (a) is concerned, I reject the Defendant’s submission. Paragraph 22.9 is broadly worded and the same reasoning of the court applies as applies in the case of paragraph 22.3. It would have been open to the draftsperson to word the clause in the following way, but they did not do so:

“No Voice Group Company has participated in any transaction, scheme or arrangement of which the or a main purpose or effect is the avoidance or evasion of a liability to Taxation [by it] or which could be re-characterised or treated as unenforceable for [its] Taxation purposes.”

In order for paragraph 22.9 to bite, the Voice Group Company must have participated in a transaction, scheme or arrangement whose main purpose is the avoidance/evasion of a liability to Taxation. I consider it not at all commercially surprising that such a warranty should be given by the Seller. If a Voice Group Company participates in a scheme whose main purpose is tax avoidance/evasion, regardless of whether it concerns the tax affairs of a Voice Group Company itself or a third party, there is an obvious exposure of the business under the Purchaser’s control to both financial liabilities and reputational damage and it is neither unreasonable nor surprising that the burden of disclosure of such a scheme should fall upon the Seller under the SPA. If the main purpose of the scheme is tax avoidance/evasion, any claim by the participating Voice Group Company that it did not realise that fact might be viewed with a degree of scepticism and in any event thought to be undeserving of much sympathy.

So far as the second point (b) is concerned (that the potential civil claims (Investec, Blackrock Warburg) would not result in any re-characterisation or retreatment for Taxation purposes and the claim made on that basis (via the “German Tax Matters” definition) should be dismissed), the Claimant says that it does not understand the point

In the light of the Claimant’s clarification, it does not seem to me therefore that this point requires any determination from the court and it is certainly not suitable for summary determination in any respect.

Grounds 10 and 11 concern claims under the Tax Deed.

They concern paragraphs 59-62 of the Particulars of Claim as follows:

“Claim under the Tax Deed

59.

Any liability of any Voice Group Company to make a payment of any sum by way of tax (for example, by way of accessory liability or joint debtor status under the German Fiscal Code) and/or by way of any interest, penalty, surcharge or fine in relation to the CumEx Conduct and/or arising from the German Tax Matters, is an Actual Taxation Liability within the meaning of that term in the Tax Deed.

60.

Pursuant to Clause 2.1(a) of the Tax Deed, the Defendant is obliged to indemnify the Claimant in respect of any such liability arising from the Cum-Ex Conduct and/or the German Tax Matters, in that: a. it is a result of Transactions occurring before Completion; and/or b. insofar as it relates to profits, it is in respect of profits earned before Completion; and/or c. in respect of such liability incurred in any prior accounting period, it relates to a period ended on or before Completion.

61.

Pursuant to Clause 2.1(g) of the Tax Deed, the Defendant is obliged to indemnify the

Claimant in respect of any such liability arising from the Cum-Ex Conduct and/or the German Tax Matters, in that it is chargeable directly or primarily against, or arises directly or primarily in consequence of or by reference to something done by a person other than a Group Company, namely the activities of the relevant clients/counterparties, and would not have arisen but for the relationship between the relevant Group Company (being the relevant Cum-Ex VGC) and that person (being the clients/counterparties).

62.

Pursuant to Clause 2.1(h) of the Tax Deed, the Defendant is obliged to indemnify the Claimant in respect of the costs and expenses reasonably incurred by the Claimant and/or Group Companies in connection with the Taxation Liability allegedly arising as a result of the Cum-Ex Conduct and/or the German Tax Matters, including in relation to avoiding, resisting or settling such Taxation Liability and in successfully taking or defending any action under the Tax Deed.”

(emphasis added)

The relevant provisions of the Tax Deed for the purposes of Grounds 10 and 11 are accordingly:

“2.1

The [Defendant] covenants with the [Claimant], subject to the following provisions of this deed, to pay to the [Claimant] […] an amount equal to:

(a)

any Actual Taxation Liability of any [Voice] Group Company […] which arises:

(i)

as a result of any Transaction or Transactions occurring on or before Completion (other than an Actual Taxation Liability arising in respect of profits earned after Completion as a result of any such Transaction or Transactions); or

(ii)

in respect of any profits earned on or before Completion; or

(iii)

in respect of any period ended on or before Completion; or

[…]

(h)

any Actual Taxation Liability of a [Voice] Group Company or a member of the Purchaser’s Group that:

(i)

is chargeable directly or primarily against, or arises directly or primarily in consequence of or by reference to anything done by, any other person other than a [Voice] Group Company or a member of the Purchaser's Group; and

(ii)

would not have arisen but for the relationship, at any time

before Completion, of a [Voice] Group Company with such a

person as is described in clause 2.1(g)(i) above; and

(i)

costs or expenses reasonably and properly incurred by the Purchaser or a [Voice] Group Company in connection with (i) a Taxation Liability […] or in connection with any action taken in avoiding, resisting or settling any such

Taxation Liability […] or (ii) in successfully taking or defending any action under this deed […]”

“Actual Taxation Liability” is defined in clause 1.1 of the Tax Deed as meaning “a liability to make a payment of, or on account of, Taxation.” “Taxation” is very widely defined and includes all forms of taxation. It follows that there must be an actual liability to make a tax payment.

In summary, the Claimant contends that:

The Defendant’s objection in Ground 10 to the declaratory relief in paragraphs 59-62 of the Points of Claim has two limbs:

The Defendant suggests that the Claimant in fact accepts the prematurity of these pleas, and that no Actual Taxation Liability has crystallised (Claimant’s Skeleton para 86). That paragraph of the Claimant’s skeleton argument reads as follows:

“Alternatively, if the Court were against the Purchaser on Ground 10, the Court should either (a) stay the Tax Deed claims, or (ii) if they were to be struck out, make clear that the Tax Deed claims were being rejected as premature and not as a matter of substance – since on any view the Purchaser should be entitled to make such claims as and when an Actual Taxation Liability crystallises.”

In oral submissions, Mr. Handyside QC stated that he accepted that “for there to be an Actual Taxation Liability under the Tax Deed there must in fact be a liability which has come home to roost,” and that is reinforced by clause 3.1(a) of the Tax Deed, which refers to payment of an Actual Taxation Liability within clauses 2.1(a) and 2.1(g) having to be made on the date which is five business days prior to the date on which payment is due. He accepted that “we don’t say that an Actual Taxation Liability has yet arisen.”

Instead, Mr. Handyside QC submitted that the claim that the Claimant seeks to bring is a claim for:

Mr. Handyside QC submits that, since other issues concerning the German Tax Matters are going forward to trial, the court should allow paragraphs 59-62 to go forwards as well. He asks the following rhetorical questions:

“Why, for example, can’t the court decide whether the types of liabilities that are sought to be imposed under the investigations and the proceedings which have already been intimated would amount to an Actual Taxation Liability such that the Purchaser would be entitled to an indemnity in respect of any such liabilities as are established? And why shouldn’t the court be able to declare now that the actions that the Purchaser or other group company take or has taken or are taking now to avoid those liabilities fall within the scope of the costs indemnity under paragraph 2.1(h)? Those are matters which the court could decide at a trial and we say it could usefully and should usefully decide at a trial… Why should and how can the court rule out now the possibility that the court will consider that declaratory relief should appropriately be granted having regard to the full facts as they appear at trial?” Discussion

I accept Mr. Smouha’s submission in respect of the declaratory relief sought in paragraphs 59-62 of the Particulars of Claim. Since no Actual Taxation Liability has yet arisen and therefore no cause of action has yet arisen, the plea is premature. Paragraph 46 of the Particulars of Claim reinforces this point, as there the Claimant pleads only that “The German Tax Matters and the Cum-Ex Conduct had, at the date of Completion, and continue to have, the potential to result in fines, penalties or other liabilities that were very substantial” (emphasis added).

The problem with the approach of the Claimant to these issues is tied up with the way in which it has pleaded its case in this respect. As pleaded, it is too vague for the court to make any useful declaration. That is no doubt precisely because no Actual Taxation Liability has yet arisen. It would not be right to compel the Defendant to have to go to trial to meet these issues in their currently pleaded state which is vague and imprecise. For example, the plea that the Defendant is obliged to indemnify the Claimant in respect of any Actual Taxation Liability arising from the Alleged Cum-Ex Conduct and/or the German Tax Matters takes the reader back to paragraphs 22 and 23 of the Particulars of Claim. In those paragraphs are listed a whole variety of investigations of different tax offices and public prosecutors’ offices in relation to a whole variety of clients and counterparties, as well as various potential civil claims. In those circumstances the reader might very reasonably ask: what is the Actual Taxation Liability relied upon?

The same objection applies to the claim for costs and expenses in paragraph 62 of the Particulars of Claim in respect of clause 2.1(h) of the Tax Deed.

Nor do I consider it appropriate to allow these premature claims (which may never arise) to go forward simply on the basis that there are some other claims going forward in this action. Moreover, as Mr. Smouha QC pointed out, claims under the Tax Deed, if they exist, should be straightforward: if there is an Actual Taxation Liability which is identified, there is a liability to indemnify, whereas the Seller Warranty Claims are more complex. There is no justification for allowing premature Tax Deed claims to piggy-back on the Seller Warranty Claims.

I should clarify that, despite my ruling on this part of the application, it remains open to the Claimant to plead claims under the Tax Deed once (if) they have arisen and once

It follows that Ground 11, which concerns the claim for an indemnity under the Tax Deed in relation to costs, accordingly does not arise. Had it arisen, in view of the factual issues which arise, as well as issues of joint and several liability under German law, I would not have considered this ground to be suitable for summary judgment for the reasons set out in paragraphs 87-91 of the Claimant’s skeleton argument.

Finally, the Claimant has an application before the Court to amend its Particulars of Claim. That is opposed in part by the Defendant, in particular in relation to paragraphs 46A and 23.

In paragraph 46A of the draft APOC it is pleaded as follows:

“Breaches of Warranty

46A In relation to the warranties given under paragraphs 9.1, 9.2 and 10.3 of Part 1 ofSchedule 4 to the SPA, the Claimant’s claims are limited to breaches in respect of theCFTC/FCA Matters and those of the German Tax Matters investigated by the FrankfurtProsecutor and the tax offices supporting the Frankfurt Prosecutor, including actual orpotential civil claims arising therefrom.”

To seek to understand this plea requires the reader to look back at the definition of “German Tax Matters”. That takes one to paragraphs 22 and 23 of the APOC:

“22.

The German Tax Matters (as defined below) relate to the underlying conduct of Voice Group Companies and members of the Seller’s Group in relation to cum-ex trading of German securities (the “Cum-Ex Conduct”), being that, at least:

a.

One or more Voice Group Companies (the “Cum-Ex VGCs”), including at least ICAP Securities Limited (“ISL”), The Link Asset and Securities Company Limited (“Link”), ICAP Corporates LLC, Linkbrokers Derivatives LLC, and members of the Seller’s Group (being at least ICAP plc) (i) approved and/or (ii) carried out or participated in cum-ex trades, including by acting as short seller and/or as broker in matching the trade of cum-ex participants.

b.

One or more Voice Group Companies and/or members of the Seller’s Group were involved in planning such transactions and/or sharing the profits.

23.

The Claimant is presently aware of reviews, enquiries, investigations and/or proceedings by relevant authorities involving (i) the German Federal Tax Office andvarious regional tax offices and investigation groups, (ii) the Public Prosecutor of Frankfurt, and (iii) the Public Prosecutor of Cologne and (iv) the Public Prosecutor ofMunich, in relation to cum-ex trading involving Rafael Roth Financial Enterprises GmbH

(“Rafael Roth”), HypoVereinsbank Munich/London AG (“HypoVereinsbank”), SerivaVermoegensvewaltungs GmbH (“Seriva”), 27 clients/counterparties or groups (referred to as “complexes”) as listed in Appendix 1, and 39 counterparties referred to in the Cologne Order (referred to at paragraph 39 below) and Varengold

Verwaltungsgesellschaft AG (“Varengold”), CACEIS (a custodian bank) and 3investment funds (the “AVANA Funds”) and others as referred to at paragraph 29Bbelow. It has also been notified of potential civil claims as set out in paragraphs 40 to 42 below. The matters referred to in this paragraph are referred to herein as the “German Tax Matters.”

It follows that the German Tax Matters as pleaded in the APOC include not only investigations and proceedings of the Public Prosecutor of Frankfurt but also of the Public Prosecutor of Cologne and the Public Prosecutor of Munich, and involving

Rafael Roth, HypoVereinsbank, Seriva, Varengold and AVANA Funds, as well as

“potential civil claims”.

The potential civil claims pleaded in paragraphs 40 to 42 include claims by Investec, Warburg and Blackrock, which claims appear to post-date 30 December 2018, as follows:

“40.

On 20 March 2020, Investec Bank plc (“Investec”) made an application in Germany for the initiation of extrajudicial dispute resolution proceedings against Link. This application related to a liability of CACEIS, a custodian bank, to the German tax authorities in relation to EUR 155m of tax reclaims (plus EUR 69m of interest) allegedly arising from cum-ex transactions carried out with the support of Investec and Link. The application noted that CACEIS was asserting claims against Investec in the same amount, and asserted that insofar as such claims were well-founded, Link would be liable to Investec in respect of them. On 25 September 2020, Investec also filed third partynotices of claim against ISL and Link in relation to two sets of litigation proceedings inthe Munich Regional Court between (among others) (i) CACEIS and Varengold; and (ii)CACEIS and the AVANA Funds, contending that if certain third parties succeeded inclaims against Investec, Investec would have claims against ISL and Link based onadjustment between joint and several debtors, the law governing unjust enrichment, andtort.

41.

In March 2019, Blackrock Asset Management Deutschland AG (“Blackrock”) notified claims against ISL allegedly arising from cum-ex transactions. In a draft Tolling Agreement, Blackrock described such claims, which were also notified on behalf of its legal predecessors INDEXCHANGE Investment AG and Barclays Global Investors (Deutschland) AG. These claims relate to Market Participant Agreements with ISL dated

3 June 2008 and 31 March 2010 relating to exchange-traded funds (“ETFs”) managed by Blackrock and its predecessors. Blackrock contends that during the creation of these ETFs, ISL was involved in the creation of ETF units which contained shares being, or to be, traded on a cum-ex basis. Blackrock contends that the tax authorities and/or third parties may seek to hold Blackrock liable, and that it would have claims against ISL in respect of any claims by the authorities or by third parties.

42.

On 23 September 2020, Warburg Bank issued a press release announcing that the Frankfurt Court had concluded that Warburg Bank was jointly and severally liable with the custodian bank, Deutsche Bank, in connection with certain cum-ex transactions. The press release set out Warburg Bank’s position that other parties, including ISL, were involved in planning the transactions and had achieved very substantial profits from them. It said that claims were now being pursued vigorously against such parties. Warburg Bank’s German lawyers, Raue, issued a similar statement. Further:

a.

By a letter of 2 December 2020, M.M Warburg & Co Gruppe GmBH and WarburgBank notified claims against ISL arising from alleged cum-ex trading. Their lettersreferred to a confiscation order from the Bonn Court in the sum of EUR 176.7m

and tax assessments from the Hamburg tax office in the sum of EUR 157.9m, andasserted potential recourse claims against ISL in respect of these amounts.

b.

By a letter of 2 December 2020, Warburg Invest Kapitalanlagegesellschaft mbHnotified claims against ISL arising from alleged cum-ex trading. Its letter referredto acting on behalf of funds, one of which had received a notice of liability fromthe Federal Central Tax Office of EUR 60.8m, and another which had received taxrefunds from the Federal Central Tax Office in the amount of EUR 48.8m, andasserted potential recourse claims against ISL in respect of these amounts.

c.

On 19 January 2021 Bloomberg reported that “Warburg” had filed a claim at acourt in Hamburg naming ISL and Link as defendants in relation to transactionswhere the lender had paid an additional EUR 111m to the tax authorities.”140.This is, therefore, extremely confusing.

Mr. Handyside QC in oral submissions explained that the purpose of pleading matters in this way was to first set out in paragraph 23 all of the investigations which might give rise to claims not only under the Seller Warranties but also under the Tax Warranties and under the Tax Deed, and then to cut the width of that paragraph down in paragraph 46A by limiting the claims under the Seller Warranties in paragraphs 9.1, 9.2 and 10.3 of Part 1 of Schedule 4 to the German Tax Matters (as defined) investigated by the Frankfurt Prosecutor and the tax offices supporting the Frankfurt Prosecutor, including actual or potential civil claims arising therefrom.

However, whilst that may have been the intention, it is not what the draft APOC apparently says. The reader is driven to look in a number of different paragraphs of the pleading in an attempt to understand the plea (46A; 22-29; 29A-29C; 39A; 40; 41; 42) and even then it is unclear what the precise nature of the claim might be. Moreover, the potential civil claims which fall within the definition of “German Tax Matters” in paragraph 23 and which are then referred to in paragraphs 40-42 do not, or at least do not all arise out of the German Tax Matters investigated by the Frankfurt Prosecutor which are referred to in paragraph 46A. Indeed, it is wholly unclear what “actual or potential civil claims arising therefrom” are being referred to in paragraph 46A of the draft APOC.

In consequence, I refuse the Claimant permission to make the proposed amendments to paragraphs 46A and 23 in their current form (which may also have knock-on consequences for paragraphs 40, 41 and 42 etc.).

Finally, I should like to thank counsel and the solicitors for both parties for the clarity and succinctness of their respective arguments in view of the myriad of issues with which these applications were concerned. I shall leave to it the parties to agree the form of an order which reflects my findings in this Judgment.