ON APPEAL FROM
THE QUEEN'S BENCH DIVISION (Commercial Court)
Mr Justice Blair
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LLOYD
LORD JUSTICE AIKENS
| Georgi Velichkov Barbudev
|- and -
|Eurocom Cable Management Bulgaria Eood & Ors
Mr Conall Patton (instructed by Freshfields Bruckhaus Deringer LLP) for the Respondent
Hearing date : 7th February 2012
Crown Copyright ©
Lord Justice Aikens :
"Closing shall be conditional on the following Conditions having been fulfilled or waived in accordance with this Agreement .(e) the Purchaser, [Mr Barbudev] (and if applicable any entity nominated by [Mr Barbudev] which is acceptable to the Purchaser) having legally, duly and validly executed the Investment Agreement conditional only upon closing".
In the draft SPA the term "Investment Agreement" was defined as "the investment and shareholder's agreement to be entered into between the Purchaser and [Mr Barbudev] in relation to the Investment". The term "Investment" was defined as "the 1,650,000 investment by George Barbudev in consideration for a combination of shareholder debt and registered share capital of the Purchaser which shall represent ten (10) per cent of the registered share capital of the Purchaser as at the date of the Investment Agreement". It was accepted at the trial that, at some point, Mr Barbudev and WPG had agreed the figure of 1,650,000 as the price of Mr Barbudev's investment and 10% of the registered share capital as the extent of his investment.
"I am not satisfied that anything was said to him one way or the other as to [the Side Letter's] binding nature. I find that Mr Feuer used the Side Letter to reassure [Mr Barbudev] that the intention was that his investment would go ahead, and in the light of that Mr Barbudev signed the SPA, even though [WPG] retained the unilateral right to waive the requirement that the execution of the ISA was a precondition of the closing".
"[ECMB] and [Mr Barbudev] shall continue their negotiations for the determination of the structure and the entering into an investment agreement immediately after the Closing with a view of having the said agreement executed as soon as reasonably possible".
"The Seller confirms that once the payments identified in the preceding clauses 1 3 have been made all of the obligations (of payment or otherwise) of the Purchaser [ie. ECMB] towards the Seller under the [SPA] shall be fully performed and neither the Seller nor any other Party shall have any claim of any nature against the Purchaser whatsoever under the [SPA] or otherwise".
The arguments before the judge and his conclusions concerning the Side Letter
The arguments of the parties and the issues arising on the appeal
Issue One: Was there an oral assurance?
Issue Two: Intention to create legal relations
Issue Three: the nature of the Side Letter in its context: was it an "agreement to agree" or an enforceable contract?
Issue Four: certainty of terms
Conclusion and disposal
Lord Justice Lloyd
President of the Queen's Bench Division
3, Z. Stoyanov str
12 April 2006
We refer to the proposed acquisition of the entire registered capital of Eurocom Plovdiv EOOD pursuant to a sale and purchase agreement dated on or around 12 April 2006 between Tracer (software) Europe B.V. (the Seller), Eurocom Cable Management Bulgaria EOOD (the Purchaser), and the Warrantors (as such term is defined therein) (the Agreement).
Save as otherwise defined herein, words and expressions defined in the Agreement shall have the same meanings in this letter.
In consideration for you agreeing to enter into the Proposed Transaction and to sign the Transaction Documents, the Purchaser hereby agrees that, as soon as reasonably practicable after the signing of the Agreement by all Parties, we shall offer you the opportunity to invest in the Purchaser on the terms to be agreed between us which shall be set out in the Investment Agreement and we agree to negotiate the Investment Agreement in good faith with you. Such terms shall include, without limitation, the following:
1. you shall invest an aggregate amount of not less than 1,650,000 in consideration for a combination of shareholder debt and registered shares which shall represent ten (10) percent of the registered share capital of the Purchaser on the date of the Investment Agreement;
2. we shall use reasonable commercial endeavours to obtain debt financing, where reasonably practicable, for the purpose of making further acquisitions and, in turn, to enable the shareholders of the Purchaser from time to time to make financial savings; and
3. tag along and drag along provisions which are customary for a transaction of this nature shall be included in the Investment Agreement.
We also agree that you shall be offered the opportunity to continue as the manager of the Company on the terms and basis set out in the Management Agreement from the Closing Date.
The existence and terms of this letter are strictly confidential and we and you agree not to disclose the existence or terms of this letter (other than with the prior written consent of the other party hereto) to any individual, body corporate, company partnership, fund, joint venture, trust or any other entity or organisation, other than to its legal advisers or to the extent required by law or any government or regulatory authority (in which case the relevant party shall inform the other party hereto in writing prior to such disclosure, unless prohibited by law o otherwise from doing so) or, in the Purchaser's case, to any member of the Purchaser's Group.
For the avoidance of doubt, the terms of this letter shall not prevent the Purchaser or any of its Affiliates or Connected Persons or any of their respective Representatives from referring to or producing this letter in any dispute resolution or legal proceedings.
No person who is not a party to this letter shall have any rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.
This letter shall be governed by, and interpreted in accordance with, English law and the courts of England shall have exclusive jurisdiction to settle any disputes arising under or in connection with this letter.
This letter may be executed in any number of counterparts, but will not take effect until each party has executed at least one counterpart. Each counterpart will constitute an original, but all the counterparts together will constitute a single agreement.
Please confirm your agreement to the terms of this letter by signing the enclosed copy and returning it to us.
|Robert Feuer||Lorαnd Horvath|
|for and on behalf of||for and on behalf of|
|EUROCOM CABLE MANAGEMENT||EUROCOM CABLE MANAGEMENT|
Acknowledged and Agreed:SIGNED by ) Signature
Date: 12 April 2006