England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
		27/07/2016

MR ANDREW BAKER QC:

Introduction

1. The Claimant ("Idemitsu") claims damages for misrepresentation under s.2(1) of the Misrepresentation Act 1967 against the Defendant ("Sumitomo"). Sumitomo applies under CPR Part 24 for summary judgment dismissing that claim, on the basis that it has no real prospect of success and there is no other compelling reason why it should be disposed of at a trial.
2. Idemitsu and Sumitomo are large Japanese companies with business interests in (it may be amongst others) the energy sector. The Defendant owns Sumitomo Corporation Europe Limited ("SCE") as a wholly-owned subsidiary, or at any rate it did in November 2009. Sumitomo and SCE between them owned the entire allotted and issued share capital in Petro Summit Investment UK Limited ("the Company"). By a written sale and purchase agreement dated 12 November 2009 ("the SPA") between Sumitomo and SCE as Sellers and Idemitsu as Buyer, it was agreed that the Sellers would sell their respective shares in the Company, and Idemitsu would buy the same. The sales of shares pursuant to the SPA were completed. The Company thus became a wholly-owned subsidiary of Idemitsu and at some point it was renamed Idemitsu Petroleum UK Limited to reflect its new parentage. Pursuant to Clause 3.1 of the SPA, which provided a formula for calculating the purchase consideration, Idemitsu paid about US$ 575 million for the Company.
3. The Company had interests in offshore oil and gas fields. In particular, it held a 30.82% interest in the North Sea Ross Field and a 2.4% interest in the adjacent Blake Field. Idemitsu complains that the Company was subject to substantial liabilities arising from a dispute between the respective owners of the Blake and Ross Fields about the sharing of the operating expenses of the "Bleo Holm", a floating production storage and offshore loading vessel. The detail of Idemitsu's complaints in that regard does not matter for the purpose of the present application.
4. Clause 11.1 of the SPA provided that the SPA itself, the documents to be entered into pursuant to it, and all matters arising from or connected with it, were governed by and were to be construed in accordance with English law. Clause 11.2 provided that the courts of England and Wales were to have exclusive jurisdiction to settle any dispute between the parties under the SPA, or arising out of or in connection with it, including any question regarding its existence, validity or termination. Hence this court's jurisdiction over Idemitsu's claim in these proceedings, which as I said is a claim for damages for misrepresentation under s.2(1) of the 1967 Act, and that claim falls to be determined under English law.
5. Clause 6.1 of the SPA provided as follows:

6.1 Warranties

6.1.1 Each of the Sellers warrants to the Buyer in respect of itself and its Relevant Shares in the terms of the Warranties in paragraphs 1 and 2 of Schedule 4; and

6.1.2 Sumitomo warrants to the Buyer in the terms of the Warranties in the remaining paragraphs of Schedule 4,

in each case on the date of this Agreement.

6. One of the many definitions in Clause 1.1 of the SPA was that of "Warranties", defined to mean "the warranties given by (i) Sumitomo in Schedule 4 and Part 2 of Schedule 7; and (ii) SCE in paragraphs 1 and 2 of Schedule 4." The Appendix to this judgment sets out more fully the terms of Clause 6 of the SPA, together with the paragraphs of Schedule 4 relied on by Idemitsu for the content of what it says were misrepresentations by Sumitomo, and also other provisions of the SPA relevant to this application.
7. The matters thus warranted by Sumitomo on 12 November 2009 were matters of then past or present fact relating to the Company. The common law rule being caveat emptor, no promise about the Company, its activities or finances, its transactions or liabilities, was purchased by Idemitsu for its US$ 575 million except such promises (if any) as might be made by Sumitomo or SCE in the SPA. The Warranties, on the language of Clause 6.1 and the definition in Clause 1.1, were precisely such promises. Each was a promise made by Sumitomo (or SCE) in the SPA – a contractual guarantee given by them – that on 12 November 2009 a certain matter of then past or present fact concerning the Company was the case.
8. Idemitsu alleges that some of the matters thus warranted by Sumitomo were not the case on 12 November 2009. If so, there were breaches of warranty on the part of Sumitomo. However, Idemitsu accepts that it cannot bring a claim for breach of warranty – it cannot claim on the contractual guarantees Sumitomo gave it. Clause 1.1 defines "Claim" to mean "a claim by the Buyer under the Warranties or a Tax Claim". It is common ground that a claim by Idemitsu for breach of warranty, founded upon the factual allegations it has made, would be a Claim thus defined, and would not be a Tax Claim. Paragraph 2.2(a) of Schedule 6 to the SPA precludes recovery of any amount in respect of a "Claim, other than a Tax Claim" not notified to Sumitomo within 18 months of completion, and Idemitsu accepts that it did not notify Sumitomo of any claim within that period.
9. As I read Idemitsu's Particulars of Claim, its claim raised the question whether the Warranties were only contractual promises, or were (also) representations by Sumitomo that could be actionable as misrepresentations in a claim under the 1967 Act. That is an important question as to which there is conflicting authority at first instance in the decisions of Arnold J. in Invertec Ltd v (1) De Mol Holding BV, (2) Henricus Albertus de Mol [2009] EWHC 2471 (Ch) and Mann J. in Sycamore Bidco Ltd v (1) Sean Breslin, (2) Andrew Dawson [2012] EWHC 3443 (Ch). In the latter decision, Mann J. gave fully reasoned consideration to the question, and to the decision of Arnold J. in the earlier case. He refused to follow Arnold J., not on the basis that there was any room to distinguish between the contractual wording in the two cases but because he disagreed with Arnold J.'s view as a matter of principle. Were I minded to prefer the view of Arnold J. on the point, the question would arise whether I should nonetheless follow Mann J.'s decision, treating the law as settled thereby at first instance under the rule of precedent formulated by Nourse J., as he was then, in Colchester Estates (Cardiff) v Carlton Industries Plc [1986] 1 Ch 80 at 84F-85H.
10. Idemitsu's response to Sumitomo's application suggested that Idemitsu intended a different case, perhaps in the alternative or perhaps as its only real case, namely that representations were made by Sumitomo to Idemitsu, prior to the conclusion of the SPA and in order to induce Idemitsu to conclude it, in the terms of the matters warranted by the Warranties when the SPA was concluded. In particular, that by including those matters as matters to be warranted in the SPA in the final document prepared for signature and marked "Execution Copy", Sumitomo made representations to Idemitsu in those terms. This clarification or possible evolution of Idemitsu's case was explored in argument, for example in the light of a contention in Idemitsu's Skeleton Argument that Mann J.'s decision in Sycamore Bidco, supra, could be distinguished because there "Counsel for D had 'expressly disclaimed the relevant representations being made at any earlier time.' (before the contract was made [203(vi)]", but "That is not the case here" (original emphasis).
11. At my encouragement, without prejudice to any objection that Sumitomo might make upon seeing them, draft Amended Particulars of Claim were provided by Idemitsu following the hearing, setting out with proper clarity how it was intended to put the case. As now pleaded (in draft), Idemitsu's only case as to how and when any representations were made is that "By providing the [Execution Copy] to Idemitsu and/or by offering to sign [it] and/or by signing [it], Sumitomo thereby made representations to Idemitsu in the terms of the statements of fact contained in Schedule 4 of the [Execution Copy]". The claim logic is then completed by the allegation that "In reliance upon and induced by [those] representations …, Idemitsu signed the [Execution Copy] and entered into the SPA", by Idemitsu's existing case as to falsity, and by its existing allegations as to loss. Idemitsu says its recoverable loss is US$ 105.9 million. In a commendably brief written Note on the draft Amended Particulars of Claim, Sumitomo objected to the proposed amendments, but only on the basis that, for the reasons it put forward at the hearing, the case as re-formulated (still) has no real prospect of success. In a written Note in response, Idemitsu summarised its reasons for saying that its case as re-formulated does have a real prospect of success and so ought to survive Sumitomo's application. In that Note, Idemitsu contended, contrary I think to its draft Amended Particulars of Claim, that it continues to assert actionable misrepresentations made by the SPA itself (as concluded), as well as pre-contractual misrepresentations made by providing (etc.) the Execution Copy shortly or immediately before the SPA was concluded.
12. There being no objection to the proposed amendments independent of their viability on the merits, in my judgment the appropriate approach to Sumitomo's application now is to consider whether Idemitsu's claim would have a real prospect of success at trial, or for some other compelling reason ought to be disposed of at a trial, if permission to amend were granted. If the answer is yes, there should be permission to amend, Sumitomo's summary judgment application should not succeed, and the fact that Idemitsu's case has been clarified, or has evolved, will be relevant (if at all) only to costs. If the answer is no, then the proposal to amend becomes academic and I should simply grant Sumitomo on its application a summary dismissal of Idemitsu's claim.

What Were The Warranties?

13. I consider first what the Warranties were, and what they were not, as extracted from Sumitomo in the SPA. I do so even though the focus of Idemitsu's clarified or revised case, as I read the draft Amended Particulars of Claim, is not the Warranties as such but an immediately prior stage in the chronology, since, firstly, Idemitsu says that it does still maintain a case of misrepresentation by the SPA as concluded, and since, secondly, it seems to me essential to start with the Warranties in the SPA as concluded when considering the immediately prior stage because for that Idemitsu relies on their existence, in draft, in the Execution Copy, as providing the content for the pre-contractual representations alleged. An analysis of the nature or effect in law of the prior steps relied on by Idemitsu therefore has to have regard to what the Warranties were, in the SPA as executed, that being, in prospect, what they were to be when they were included, in draft, in the Execution Copy; and the nature and effect in law of the Warranties, as contained in the SPA, was a substantial part of the argument accordingly.
14. When a seller, by the terms of the contract under which he sells, "warrants" something about the subject matter sold, he is making a contractual promise. Nothing less. But also I think (and all things being equal) nothing more. That is so just as much for a warranty as to some then present or past matter of fact as it is for a warranty as to the future. By contracting on terms by which he warrants something, the seller is not purporting to impart information; he is not making a statement to his buyer. He is making a promise, to which he will be held as a matter of contract in the sense that any breach of the warranty will be actionable as a breach of contract, subject to any other relevant terms of the contract and to general principles of the law of contract, for example as to remedies. In argument in the present case, I posed the simple case of a seller contracting to sell grain from a warehouse, "warranted at date of contract free from" some identified impurity. It would I think be quite novel, and wrong, to suggest that this would amount to a statement of fact, made by the seller to the buyer, that the grain was then free from the impurity in question. In the absence of additional facts, I do not think there could be any question of claiming rescission for misrepresentation, or damages for misrepresentation under the 1967 Act, if in fact the grain contained the impurity (so that there was a breach of the warranty). The same would be true, I think, in respect of any buyer's warranty given by him by the terms of the contract (for example, in this case Clause 7.1 and Schedule 5 of the SPA contained various warranties by Idemitsu about itself and its entitlement and ability to enter into and complete the transaction).
15. In a useful summary of Idemitsu's argument on the Warranties themselves (as possible alleged representations), Mr Choo-Choy QC formulated the following four propositions:

i) The statements of fact in the Warranties were by nature capable of founding an action for misrepresentation.

ii) The designation of those statements as contractual warranties did not derogate from their inherent quality as representations.

iii) Mann J.'s conclusions in Sycamore Bidco, supra, were therefore wrong in principle; and Arnold J.'s view in Invertec Ltd, supra, is to be preferred, even if Arnold J. expressed himself more briefly or instinctually than Mann J. did in the later decision.

iv) Nothing in the SPA – in particular none of the particular provisions relied on by Sumitomo – robbed the statements made in Schedule 4 to the SPA of their status as representations or excluded liability for misrepresentation, if there were otherwise a viable misrepresentation claim.

16. I agree with Mr Rainey QC for Sumitomo that these propositions beg the real question in this case, because they assume that if "seller warrants X" is a term of a contract of sale, the seller thereby makes a statement, to the effect of X, to the buyer. This question-begging was endemic in the argument for Idemitsu. Thus, for example, it was contended that the matters set out in the paragraphs of Schedule 4 of the SPA upon which Idemitsu relies were all matters of past or present fact (as at 12 November 2009) capable of founding a misrepresentation claim, citing Government of the United Arab Emirates v Allen [2012] EWHC 1712 (Admin), [2012] 1 WLR 3419, per Toulson LJ, as he was then, at [42], and Chitty on Contracts, 32^nd Ed., at §7-006, and it was said to follow that "the statements in Schedule 4" were in law representations of fact. But to my mind that does not follow. The premise, and the authority supporting it, establishes only that if Sumitomo made a statement to Idemitsu, calculated to induce Idemitsu to enter into the SPA, in the terms of (any of) the paragraphs of Schedule 4 now relied on, that statement would have been in law a representation, actionable if false (subject to any term of the contract providing otherwise), because the matters thus stated would have been matters of past or present fact, as opposed to, for example, statements of opinion or as to the future. The question, though, is whether Sumitomo did make any such statement. What is the communication by Sumitomo to Idemitsu that, properly understood, amounts to or involves the making of some relevant statement? As I have indicated (paragraph 14 above), I do not think that by concluding a contract on terms which include contractual warranties the warrantor makes any relevant statement to the counterparty. The act of concluding a contract is constituted by, and amounts to a communication only of, assent to and intention to be bound by the terms agreed.
17. Again, in its written Note in response to Sumitomo's Note on the draft Amended Particulars of Claim, Idemitsu stated this example: prior to A selling his car to B, A tells B – or gives him a piece of paper which states – that the car has done 10,000 miles; B relies on that statement in agreeing to buy the car; A ought reasonably to have known that the car had in fact done 50,000 miles; B has a claim under s.2(1) of the 1967 Act. Idemitsu, arguendo, continued thus: "Why should such a misrepresentation claim become unsustainable merely because A also told B at the time – or added to the piece of paper – that he was prepared to warrant that his statement was true? By the warranty, A did not negate the representation constituted by the statement of fact about the car." This again misses the point, in my judgment. In the example, a statement amounting (all things being equal) to a representation capable of founding a claim under the 1967 Act is made independently of the provision by A, in the contract, of a warranty. That enables the argumentative point to be made, and all things being equal to be well founded. But that is not the case at hand. The case at hand, translated to A's contract to sell his car to B, is one in which an express clause of the contract provides that "A warrants to B total mileage from new of 10,000 miles" and B relies only on that clause to found a claim under the 1967 Act upon learning that the car had done 50,000 miles. A's good defence to that claim is not that B's otherwise sustainable misrepresentation claim became unsustainable because A also warranted that which he had told B at the time, or that by his warranty A negated some representation he had otherwise made by a statement of fact about the car's mileage calculated to induce B to enter into the contract. A's good defence to that claim is simply that he never made any relevant statement to B at all. He sold with a contractual warranty, upon which (if so advised) B could claim. Either that warranty claim is good enough for B or it is not. If for some reason it is not (e.g. if, as in this case, the contract imposed a strict time limit for warranty claims that B did not observe), B has no claim but that is the bargain he struck.
18. That is the fundamental, if perhaps not so explicitly stated, premise of Mann J.'s judgment in Sycamore Bidco, as I read it, and it explains why he refused to follow – I think rightly refused to follow – what Arnold J. had said in Invertec Ltd. In Sycamore Bidco, the claimant had purchased shares in Gissings Group Ltd from the defendants. The claimant alleged that the sale had been induced by misrepresentations about the accounts of Gissings Advisory Services Ltd, a subsidiary of Gissings Group Ltd, and claimed damages at common law and under the 1967 Act. It also alleged, relying on the same facts, that the defendants were in breach of warranties given in the share sale contract. The relevant terms of the contract in that case were materially similar to those of the SPA in this case (if anything, Clause 12.12.3(a) of the SPA in this case is more favourable to Sumitomo than the otherwise equivalent provision, Clause 16.3.2, was to the defendant sellers in Sycamore Bidco). Mann J. held that there was no claim in misrepresentation, because the claimant did not rely on anything other than the warranties in the contract as amounting to representations for the purpose of that claim; but they were warranties only, and not representations. I set out his reasoning in full, [2012] EWHC 3443 (Ch) at [200]-[211]:

Are the warranties capable of supporting a claim in misrepresentation?

200. There is no dispute about the efficacy of the warranties as warranties (in accordance with their terms). The claim that is made in this action is, in part, a contractual one based on the contractual effect of those warranties. However, the claimants also run an additional case in misrepresentation. It is said that the warranties are also capable of being representations so that, if there is a contravention of their terms, there is also a misrepresentation, and claims are made in the tort of negligent misrepresentation and under the Misrepresentation Act 1967. The defendants take the point that the warranties do not contain representations, so this claim fails at that level.

201. The point has a real significance in terms of the measure of damages (and also the date at which damages should or can be assessed), so it is necessary to deal with it. If the claimants are right about it, and can otherwise put their claim successfully in misrepresentation, then they may be entitled to recover damages which would not be available under a contractual claim. At their highest, the misrepresentation claim damages are equivalent to or exceed the consideration paid. At its highest the warranty damages claim is about £6 million. Hence the point's importance.

202. It is to be noted that the claimants do not rely on anything other than the terms of the warranties in the SPA as amounting to representations for this purpose. There is no reliance on any pre-contract representations; the warranties are relied on as both warranties and representations.

203. It does not seem to me that they have that dual quality. I find that they are warranties only, and not representations, for the following reasons:

i) There is a clear distinction in law between representations and warranties, and that would be understood by the draftsman of the SPA. That is likely to be the case in any transaction of this nature, but is also apparent from the SPA itself. Representations are referred to in clause 16.3, and Warranties (with a capital "W") are referred to elsewhere.

ii) The warranties in this case are clearly, and at all times, described as such, and are nowhere described as representations. Those giving the warranties are described as "Warrantors" (again with a capital "W"). The relevant wording is always in terms of warranties.

iii) The words of the warranting provision (clause 5) are words of warranty not representation. There is a legal distinction between the two and (subject to a point made about a later reference to representations, as to which see below) there is no reason to extend the words beyond their natural meaning. In order to make the relevant material a representation one has to find something in the SPA which is capable of doing that. It is not enough that the subject matter of the warranty is capable of being a representation. One has to find out why those words are there. One finds that in clause 5; and what one finds is words of warranty, not words of representation.

iv) The Disclosure Letter (itself referred to in the SPA) also distinguishes between representations and warranties — "The disclosure of any matter shall not imply any representation, warranty or undertaking not expressly given in the Agreement …".

v) Clause 8 of the SPA contains significant limitations on the liability under the "Warranties". It does not refer to representations. The clause is obviously a significant part of the overall structure of liability. If the warranties were capable of amounting to representations as well, then on the strict wording of this clause it would not apply to any such misrepresentation. The sellers would thus be deprived of a large part of their protection and limitation. That would be a strange and uncommercial state of affairs, and can hardly have been intended. This is strikingly so in relation to clause 8.2 containing the overall cap on recoveries and on what could be recovered from each warrantor, (unless, in relation to the overall cap a misrepresentation claim were construed as a claim under the Agreement, which would be a forced construction). If this cap does not apply then Mr Dawson could find himself liable for £17m, when he had contracted for a cap of £317,000. It is also true of clause 8.1. This consequence would be avoided if one construed claims under the "Warranties" as including representations made in the warranty provisions, but again that would, in my view, be a very forced construction.

vi) There is a conceptual problem in characterising provisions in the contract as being representations relied on in entering into the contract. The timing does not work. The normal case in misrepresentation involves the making of a representation, and as a result the entering into of the contract. That does not work where the only representation is said to be in the contract itself. Miss Newman expressly disclaimed the relevant representations being made at any earlier time. In some cases that problem is solved by an express provision making certain contractual statements representations. In such a case the parties have agreed as to their nature and how they should be treated. However, that is not the present case.

204. Miss Newman said that the SPA contained a clear indication that the warranties were capable of amounting to representations. Clause 16.3.2 provided that there had been no reliance on any "representation other than those expressly set out in the Transaction Documents"; and clause 16.3.3 excluded liability for "a representation that is not set out in the Transaction Documents". There was nothing in those documents which expressly described itself as a representation, and in fact there was nothing which was a candidate for a representation other than the warranties. The terms of the SPA just referred to assumed that there was something capable of being a representation (otherwise they were writ in water); so one should construe the only candidates (the warranties) as in fact being representations as well.

205. I disagree. She is right that the provisions just referred to seem to presuppose the possibility of some representation. However, that is not sufficient reason for forcing that characterisation on something that would otherwise not bear it, particularly in the light of the countervailing matters which I have held as pointing firmly the other way. When one looks to the documentation to find representations, there are none.

206. Miss Newman also relied on authority. In particular she relied on Invertec Ltd v De Mol Holding BV and another [2009] EWHC 2471 (Ch), a decision of Arnold J. This case, like the present one, was a claim based on the provisions of warranties in a share sale agreement. Arnold J found that there was a claim for breach of warranty. The claim was also based on misrepresentation, the representations being in the warranty provisions. The judge addressed that claim in paras. 362 and 363 of his judgment:

"Misrepresentation by warranty

362. Counsel for the Defendants argued that, because Invertec's claims are all framed by reference to warranties in the SPA, Invertec cannot have any claim for misrepresentation, fraudulent or otherwise, but only a claim for breach of contract. I do not accept this argument for the following reasons. First, two of the claims (those relating to the July and August 2005 management accounts and its corporation tax liability) concern information which was supplied by DMH to Invertec during the negotiations prior to the SPA, albeit that its correctness was warranted in the SPA. In the case of the first of these Invertec's pleaded case has always clearly relied on the representations made prior to the SPA. As discussed below, the second was only pleaded by amendment at trial.

363. Secondly and more fundamentally, the warranties in question also amount to representations of fact as to the state of Volente on 6 October 2005. The warranties were negotiated between Invertec and DMH over a considerable period prior to the execution of the SPA. As a result, Invertec knew prior to signing that the agreement it was about to enter into contained those warranties. In those circumstances I cannot see any reason in principle why Invertec cannot claim that it was induced to enter into the agreement by the representations made by those warranties so as to found a misrepresentation claim if they were false, particularly if they were fraudulently made."

207. Miss Newman submitted that the facts of that case were in substance, and where relevant, the same as the present case, and that it demonstrated that there was no problem about treating warranties as representations in the present case; she submitted in substance that Arnold J had found that one could.

208. The actual warranties in that case were different, but nothing turns on that. Technically speaking, the relevant factual matters were not precisely the same, because the wording of the warranty provision was different:

"5.1 Accuracy of warranties

The Vendor warrants to the Purchase [sic] that, save as fairly disclosed by the Disclosure Letter, the Warranties are true and accurate in all material respects."

209. That is not the same as the warranty provision in the SPA in this case. However, I do not think that that difference explains the difference between my views expressed above and the determination of Arnold J in that case. I believe that Arnold J would have decided his case the same way even if the wording were the same as in the present case. The difference between the result in that case and in this is because, with respect, I disagree with the views of Arnold J. For the reasons given above, I think that there is no satisfactory answer to be given by those claiming representations to have been made, to the question which has to be asked: Why have the warranty provisions been inserted in the contract? The answer is to be found in clause 5 in each case – they are there because they are warranted. There is nothing more to make them into representations. I do not think it affects the position that in the present case, as in Arnold J's, the parties (and in particular the warrantors) knew what was coming because drafts have been exchanged and the terms of the contract negotiated. What the warrantors knew to be coming, or more precisely knew they were going to be providing, were expressed to be warranties, not representations.

210. The claimants made certain submissions seeking to meet a case which they perceived the defendants to have been making to the effect that clauses 16.3.2 and 16.3.3 of the SPA excluded the right to bring a claim in misrepresentation under section 2(1) of the Misrepresentation Act 1967 , and submitted that if that case was being made then section 3 of the same Act prevented those clauses from so operating because the clauses did not satisfy the test of reasonableness within that section. I am not sure that that was in fact the case of the defendants (their pleaded case was couched in double negatives which were pretty impenetrable), but in any case I do not consider that those clauses have a material effect for the purposes of section 3. What prevents the relevant warranties from being representations is that, on the true construction of the document in which they are contained, they are simply not representations (much less "any misrepresentation made… before the contract was made" within the meaning of the section). I therefore do not think that section 3 has any relevance to this matter. However, were I wrong about that, it is my clear view that, insofar as it operates to prevent anything being a representation which would otherwise have been a representation, it satisfies the requirement of reasonableness within the section. The SPA was part of a suite of documents, negotiated at arms length by commercial parties, one side of which (the purchasers) was highly experienced in such transactions, and where both parties were assisted by experienced professionals (solicitors and accountants). The structure of potential liabilities was clearly set out, and the claimants must be taken to have satisfied themselves as to what they needed. They were content with warranties (and extensive warranties at that). There is nothing at all unreasonable about excluding any parallel liability for misrepresentation in those circumstances.

211. For those reasons, therefore, I hold that there is no claim in misrepresentation in this case. It follows that I do not have to consider questions of duty of care or other questions as to the reasonableness of belief under the Misrepresentation Act which would have arisen had I decided otherwise. I shall hereafter consider only breaches of warranty in relation to the claims of the claimants.

19. As I said before quoting Mann J.'s reasoning, it seems to me its basic underlying premise, I think a sound premise, is that the act of concluding a contract on terms that include contractual warranties does not amount to or involve the making by the warrantor to the counterparty of any relevant statement. That is seen most clearly, perhaps, if even then it is not stated quite so explicitly as I have done, in the following sentences from [203(iii)]: "In order to make the relevant material a representation one has to find something in the SPA which is capable of doing that. It is not enough that the subject matter of the warranty is capable of being a representation. One has to find out why those words are there. One finds that in clause 5; and what one finds is words of warranty, not words of representation."
20. By contrast, in Invertec Ltd at [363], Arnold J. simply asserts the conclusion that contractual warranties, if they be as to matters of past or present fact, "also amount to representations of fact". With respect, it seems to me, as it did to Mann J., that Arnold J. there confused a finding of material that is by nature factual, so that a statement in terms thereof could be in law a representation, with a finding that there was a communication amounting to or involving such a statement in the first place. Arnold J. further concluded that the fact that the warranties in Invertec Ltd had been negotiated over a period prior to the conclusion of the contract (as is typical) might be an answer to the possible conundrum that a representation only made by the act of concluding a contract could not induce that act. That view as to inducement in a claim for damages for misrepresentation may itself be difficult: see, e.g., Leofelis SA et al. v Lonsdale Sports Ltd et al. [2008] EWCA Civ 640, obiter per Lloyd LJ at [140]-[141], and Sycamore Bidco, supra, per Mann J. at [203(vi)]. But even if prior knowledge of what was to be in a contract might be used to claim that representations made by it induced its conclusion, the question will remain whether indeed any representations were so made in any given case. For the reasons I have expressed, and those of Mann J. in Sycamore Bidco, in my judgment if a contractual provision states only that a party gives a warranty, that party does not by concluding the contract make any statement to the counterparty that might found a misrepresentation claim.
21. Mr Choo-Choy QC submitted that Mann J.'s reasoning asserted or assumed either or both of two unsound propositions, and so was erroneous. Mann J., it was said, erred by reasoning that: (1) a statement of fact must be agreed to be, or expressly designated as, a representation in order to be one; or (2) an express agreement to give a statement of fact the status of a contractual warranty excluded it from being or having been (also) a representation. I do not think Mann J. erred in either respect. Rather, he simply searched for a communication that could amount to a statement of fact in the first place. That search was in vain in circumstances where the only material relied on was the existence, in the contract as concluded, of a contractual warranty. In such a case, as I see it and have sought to explain above, there is no representation, at all events in the absence of some provision saying otherwise, i.e. saying (in so many words or in effect) that the warranty is also to take effect as, or to be treated as, a representation. An example of a case involving provisions saying otherwise, decided some months before Sycamore Bidco but not, I think, referred to by Mann J., is the decision of Simon J., as he was then, in Bikam OOD, Central Investment Group SA v Adria Cable S.a.r.l. [2012] EWHC 621 (Comm), another share purchase case. There "Sellers' Warranties" was defined to mean "the representations and warranties of the Sellers contained in Schedule 2 …" (my emphasis), and Clause 7 (the equivalent of Clause 6.1 in the present case) provided that "Each of the Sellers represents and warrants to the Buyer that each Sellers' Warranty is true and accurate as at the date of the Agreement and as at Completion" (my emphasis) and that "The Sellers acknowledge that the Buyer is entering into this Agreement in reliance upon the Sellers' Warranties". But there was nothing like that in Sycamore Bidco and there is nothing like it in the present case.
22. In the circumstances, I do not need to deal with the question whether, had I preferred Arnold J.'s view to Mann J.'s, I should treat myself as free not to follow Mann J. although the rule is that the law is settled at first instance by a considered first instance refusal to follow an earlier first instance decision. That rule is said to be subject to exception "only in the case, which must be rare, where the third judge is convinced that the second judge was wrong in not following the first" (Colchester Estates, supra, [1986] 1 Ch 80 at 85G). There was some rather inconclusive oral argument before me as to the meaning or scope of that exception, neither Skeleton Argument having addressed the point. I shall say no more about it, since I am firmly of the view that Mann J. was right, I am following him in respectfully disagreeing with Arnold J., and were the point to go further the Court of Appeal would be bound by none of our decisions.
23. Upon the Particulars of Claim as they stand, which I read as alleging only that representations in the terms of Schedule 4 were made by the SPA as concluded, my conclusion is therefore that Idemitsu's claim is bound to fail.

Execution Copy Representations?

24. It seems to me right in principle that language found in the communication of a negotiating position, or in draft wording for a contract, or in an entire draft contract, passing between the parties during the negotiation of a contract, might amount to or form the content of a pre-contractual representation capable of being actionable under the 1967 Act. That possibility was recognised by the Court of Appeal in Eurovideo Bildprogramm Gmbh v Pulse Entertainment Ltd [2002] EWCA Civ 1235, to which Peter Gibson LJ referred in Leofelis v Lonsdale, supra, at [141], where he emphasised that all would depend on the particular facts of any given case. Therefore, turning to Idemitsu's proposed amended case, the specific pre-contractual facts now proposed to be relied on must be considered to see whether, as Sumitomo contends, there is no real prospect of Idemitsu securing at trial a finding of a pre-contractual representation capable in principle of founding a damages claim under s.2(1) of the Act.
25. As I noted in paragraph 11 above, the proposed plea (by paragraph 6B of the draft Amended Particulars of Claim) is that representations were made by Sumitomo by: (i) providing the Execution Copy as the contract to be signed by both parties on 12 November 2009; (ii) offering to sign the Execution Copy; or (iii) signing the Execution Copy. Those are alleged to have been representations "in the terms of the statements of fact contained in Schedule 4 of the [Execution Copy], including in particular as follows:-" where what follows is some of the content of Schedule 4 of the Execution Copy, set out by way of quotation from Schedule 4.
26. For present purposes, I can see no difference between Sumitomo (i) providing the Execution Copy, (ii) offering to sign it, or (iii) signing it, at all events assuming Sumitomo signed first so that there is no chronological difficulty for (iii) in claiming that Idemitsu was induced by Sumitomo's conduct to sign the Execution Copy so as to conclude the SPA. Since that is the plea, to be supported by a Statement of Truth were I to give permission to amend, and the witness statement evidence has not descended into the precise chronological details of the execution of the SPA on 12 November 2009, I proceed on the basis that Idemitsu would have at least a real prospect of success in proving at trial that Sumitomo (i) provided the Execution Copy, as the contract document to be signed by the parties, (ii) offered to sign it, and (iii) signed it, all before (it may be in the case of (iii) only just before) Idemitsu signed.
27. What then was communicated, by Sumitomo to Idemitsu, by providing the Execution Copy, offering to sign it, or signing it, given that the Execution Copy included Clause 6.1, Schedule 4 and the definition of Warranties (together with other provisions affecting the nature or extent of Sumitomo's putative liability as warrantor under the Warranties if the SPA was concluded on the terms of the Execution Copy)? Nothing is relied on beyond the bare fact of providing / offering to sign / signing the document, and the contents of the document. There is no factual allegation requiring to be investigated further, through pre-trial processes and a full trial hearing. Either provision of (or offer to sign, or signature of) the Execution Copy involved Sumitomo making representations of fact or it did not. The question is one of analysis that can and should be determined now, at all events if the answer is such that all the time, cost and inconvenience of pre-trial processes and a full trial hearing can be avoided.
28. At a first level of analysis, Sumitomo's provision (etc.) of the Execution Copy conveyed simply a then present willingness and intention to conclude a contract on the terms there set out. It may be that is not necessarily fatal to the notion that representations of fact concerning the Company might (also) have been involved (subject to considering the terms of the document): see Eurovideo Bildprogramm, supra, in which Rix LJ, with whom the Vice-Chancellor and Jonathan Parker LJ agreed, rejected at [18] the absolute proposition that "where language is proffered as to what is intended to become a term of the contract under negotiation it cannot be relied upon as a representation of fact", and held at [21]-[22] that the trial judge had been entitled to find that representations of fact had been made in the negotiation correspondence where the language being proffered for the contract was language by which the defendant would make representations of fact. That approach may explain what seem to me to be the key allegations proposed by Idemitsu, without which the plea of pre-contractual representations in paragraph 6B of the draft Amended Particulars of Claim has no foundation or content. Those allegations are the following:-

i) in paragraph 6 of the draft Amended Particulars of Claim, that "The Warranties were given in the form of statements of fact made by Sumitomo to Idemitsu which were, by clause 6.1 of the SPA, warranted by Sumitomo to be true";

ii) in paragraph 6A of the draft Amended Particulars of Claim, that Schedule 4 to the Execution Copy "contained statements of fact (i) made by Sumitomo to Idemitsu, (ii) which Sumitomo intended Idemitsu to rely upon, and (iii) on which Idemitsu was entitled to rely in determining whether to sign the [Execution Copy] and enter into the SPA".

29. The question is whether either of those allegations has any real prospect of success at trial.
30. For the reasons I have given in the previous section of this judgment, I reject the first allegation, concerning the Warranties in the executed SPA. The subtlety of the second allegation is that it seeks to divorce Schedule 4 from Clause 6.1 (and the related definition of Warranties and other provisions concerning Sumitomo's putative liability under the Warranties). Read without reference to Clause 6.1, as if it had been sent by Sumitomo to Idemitsu without context, it is proposed that Schedule 4 is to be characterised as a series of statements of fact made by Sumitomo to Idemitsu. But I think it is artificial and wrong in principle to read Schedule 4 like that, as if it had an existence independent of its function in the Execution Copy, which was to provide content to the Warranties (as defined by Clause 1.1 and as to be given by Sumitomo under Clause 6.1, if the SPA be concluded). This is therefore a case in which Sumitomo's provision (etc.) of the Execution Copy communicated, so far as material, no more than a willingness to give a certain set of contractual warranties in a concluded contract and that distinguishes the case from Eurovideo Bildprogramm, supra. Whilst not precisely the same point, it is closely related to one of the points made by Mann J. in Sycamore Bidco, supra. Responding to Arnold J.'s reference in Invertec Ltd to the fact that the buyer had prior knowledge, from the contract negotiations, of the content of the warranties, but focusing on whether any representations were made by the warranties (whereas (to be fair) Arnold J. had raised the matter of prior knowledge in the context of inducement), Mann J. said at [209] that "I do not think it affects the position that in the present case, as in Arnold J's, the parties (and in particular the warrantors) knew what was coming because drafts [had] been exchanged and the terms of the contract negotiated. What the warrantors knew to be coming, or more precisely knew they were going to be providing, were expressed to be warranties, not representations."
31. Through the SPA as signed, Sumitomo made no representation to Idemitsu by Schedule 4, because Schedule 4 was not by nature a set of statements of fact made by Sumitomo to Idemitsu but was the agreed means by which the parties together chose to define the content of the Warranties, being certain of Sumitomo's contractual promises made under the SPA. In my judgment, Sumitomo's prior provision of, or offer to sign, or signature of, the Execution Copy, proffering such a Schedule 4, cannot give it (Schedule 4) a different character at that stage than it was to have, and in the event did have, when the SPA was duly concluded on the terms of the Execution Copy.
32. I therefore conclude that the proposed amendment of the Particulars of Claim will not save Idemitsu's claim from being bound to fail. Adopting the approach I stated at the outset (paragraph 12 above), Sumitomo's application therefore succeeds and there will be summary judgment under CPR Part 24 dismissing Idemitsu's claim, unless there is some compelling reason why it should be disposed of at a trial even though it has no real prospect of success. Before I consider that possibility, I should deal with Sumitomo's alternative argument for saying that Idemitsu's claim has no real prospect of success.

Contractual Defences

33. Sumitomo contends, in the alternative, that Idemitsu's claim has no real prospect of success because it will be defeated either by Clause 12.12 of the SPA or by paragraph 2.2(a) of Schedule 6 to the SPA. I have included those provisions in the Appendix to this judgment and I can take the points arising quite briefly.
34. By Clause 12.12.3(a), Idemitsu acknowledged and agreed with Sumitomo that it had not "relied on, or been induced to enter into, this Agreement by any representations, warranties or undertakings of any kind other than the Warranties (as modified by the Disclosure Letter)". Mr Choo-Choy QC for Idemitsu accepted that without the closing words, "other than the Warranties (as modified …)", Clause 12.12.3(a) would be effective to defeat Idemitsu's claim, because the claim requires Idemitsu to allege, contrary to Clause 12.12.3(a) if it stopped there, that it had relied on or been induced to enter into the SPA by representations. However, he contended that Idemitsu's claim is safe because, more specifically, it alleges reliance upon representations in the terms of Schedule 4, which also provides the content of the Warranties. He said that Clause 12.12.3(a) therefore does not defeat the claim, given that it expressly saves, i.e. does not preclude proof of, reliance upon or inducement by "the Warranties (as modified by the Disclosure Letter)". I think that is a non sequitur. The "Warranties (as modified by the Disclosure Letter)" are, by definition, Sumitomo's contractual warranties. Reliance upon a representation the content of which coincides with the content of one of those Warranties is not reliance upon the Warranty in question. It seems to me that is so even if the allegation is that the representation was made by the conclusion of the SPA containing that Warranty. It is all the more so for the claim in the draft Amended Particulars of Claim that the representation was made prior to, and independently of, the granting of the Warranties upon the conclusion of the SPA.
35. Mr Choo-Choy QC further submitted as to Clause 12.12.3(a) that it implicitly acknowledged that Idemitsu was relying on, and was induced to enter into the SPA by, the Warranties and that, as he put it in his Skeleton Argument, "these may be regarded as "representations, warranties or undertakings"". It was then said that the Warranties as such, i.e. the contractual promises, coming into existence only when the SPA was executed, could not have been relied on by Idemitsu in entering into the SPA and could not have induced the conclusion of the SPA. Accordingly, so the argument went, "The natural meaning of the clause is to acknowledge that [Idemitsu] was induced to enter into the SPA by the representations which became incorporated in the contract as warranties but not by any other representations". Thus, Idemitsu was not precluded from contending that it had relied "on the statements constituting the Warranties (and hence on the representations inherently reflected in them) in deciding to enter into the SPA". By contrast, Mr Rainey QC argued that Clause 12.12.3(a) was a simple and plain undertaking by Idemitsu not to claim that it had relied on or been induced to enter into the SPA by anything other than the Warranties, i.e. the contractual promises by way of warranties as to the matters set out in Schedule 4 (and Part 2 of Schedule 7). He put it thus in his Skeleton Argument: "The purpose and language of the Clause (as with Clause 12.12.3(b)) is to confine [Idemitsu] solely to the Warranties given in and as part of the [SPA] and to exclude recourse to any arguments as to representations, however and whenever allegedly made." I prefer Mr Rainey QC's submission:

i) Firstly, that is how the language of Clause 12.12.3(a) strikes me, and it strikes me as clear and unambiguous in that regard. That is so reading Clause 12.12.3(a) on its own. It is reinforced when it is read together with Clauses 12.12.1, 12.12.2 and 12.12.3(b).

ii) Secondly, Mr Choo-Choy QC's argument, interposing as it does the idea of "representations inherently reflected in the Warranties" derived from "the statements constituting the Warranties", involves, to my mind, a sophisticated and artificial construct, designed as a vehicle for the contention that Clause 12.12.3(a) does not catch the claim now brought. It does not strike me as something that would naturally occur to business people considering Clause 12.12 and asking whether it left Idemitsu free to pursue non-contractual claims alleging misrepresentation (in the absence of fraud, wilful misconduct or wilful concealment, as referred to in Clause 12.12.4). The notion of "representations inherently reflected in" the Warranties also, in my judgment, involves the question-begging I referred to in paragraph 16 above.

iii) Thirdly, as regards the particular points raised on the language used: (a) the recognition by Clause 12.12.3(a) that the Warranties are some kind or other of representations, warranties or undertakings is a simple truism and does not convey that they are, or were, or were derived from, representations; (b) it is natural and common to speak of a party entering into a contract in reliance upon what he will get upon doing so, by way of promises from his counterparty, so that the acceptance that Idemitsu was, or may say it was, relying on "the Warranties" in entering into the SPA does not convey that it was relying upon something pre-contractual or non-contractual, as opposed to the contractual promises by way of warranties it got from the SPA.

36. In my judgment, therefore, Clause 12.12.3(a) is bound to defeat Idemitsu's claim, whether that be the claim as originally pleaded, alleging representations by the Warranties themselves as contained in the SPA, or the claim as proposed to be pleaded in the draft Amended Particulars of Claim, alleging representations made prior to (it may be only immediately prior to) and independently of (albeit in immediate anticipation of) the conclusion of the SPA.
37. That clarified or revised claim – the Execution Copy claim – is also, in my judgment, defeated by Clause 12.12.2. The immediate context is Clause 12.12.1, by which the parties sought to ensure that there would be nothing between them having contractual force other than the final contractual documents. Clause 12.12.2 reinforces and supplements that by providing that "All prior written or oral understandings, offers or other communications of every kind pertaining to this Agreement are abrogated and withdrawn." By Clause 1.2.1(f), the parties disapplied the ejusdem generis principle of construction, by which the meaning of general words introduced by the word "other" can be restricted to matters similar in kind to those of the preceding words. The argument for Idemitsu was that even without resort to that principle, "other communications of every kind pertaining to this Agreement" could not extend to "the very document which, when signed, became the Agreement". That document, it was said, i.e. the Execution Copy, "could not in any proper sense be described as a communication "prior to" the Agreement". I disagree. The Execution Copy claim asserts communication before the SPA was concluded, relied on by Idemitsu in signing the document so as to conclude the SPA, by the provision (for signature by the parties) of, or the offer to sign, or the signature of, the Execution Copy. If that conduct communicated something that might otherwise have or have had some legal effect, it was agreed by Clause 12.12.2 that such communication was "abrogated and withdrawn". The Execution Copy claim is therefore bound to fail because of Clause 12.12.2, as well as being defeated by Clause 12.12.3(a).
38. As regards paragraph 2.2(a) of Schedule 6, the question is whether a claim by Idemitsu for damages for misrepresentation under s.2(1) of the 1967 Act is a "Claim, other than a Tax Claim", in other words a "claim by [Idemitsu] under the Warranties", given that the content of each of the representations alleged is also the subject matter of one of the Warranties. A superficially similar question was answered favourably to the warrantors, so that contractual provisions concerning warranty claims also applied to claims for misrepresentation, by the Court of Appeal in Bottin (International) Investments Ltd v Venson Group plc et al. [2004] EWCA Civ 1368 and by Simon J., as he was then, in the Bikam OOD case, supra. The question in those cases was only superficially similar, however, because in Bottin it was expressly agreed that "the Investor may treat [the Warranties] as representations inducing them to enter into this agreement" and in Bikam OOD, as noted above, "Warranties" as a defined term included representations and the primary provision was that the sellers represented and warranted various matters. Here, however, as in Sycamore Bidco, supra, I think it a "very forced construction" (per Mann J. at [203(v)]) to construe "Claim", i.e. "a claim by Idemitsu under the Warranties" as anything other than a claim upon the Warranties as such, in other words a claim upon them as the contractual warranties they were. The oddity the Court of Appeal saw in Bottin of contemplating a carefully constructed regime, similar to Schedule 6 of the SPA in particular, applying only to claims for breach of warranty and not to claims framed in misrepresentation founded upon the matters warranted, does not arise where, as here, the SPA is instead constructed so that no such claims (in misrepresentation) are ever available in the first place. That comforts me that my construction of Clause 12.12.3(a) is correct, and that my conclusion (like that of Mann J.) that no representations were made by the Warranties themselves is also correct.
39. It may be the oddity or inconsistency of concluding (as I have) that Idemitsu's claim is to be regarded as not a claim "under the Warranties", so that it is outside the definition of Claim, yet at the same time concluding (as Idemitsu argued I should) that it is a claim, in a sense, upon the Warranties – being a claim alleging reliance on or inducement by the Warranties – so that it escapes Clause 12.12.3(a), would be enough to drive me to accept Sumitomo's construction of the definition of Claim had I been with Idemitsu as regards the meaning of Clause 12.12.3(a), even though the former would otherwise have seemed a strained construction. As it is I do not need to form any final view on that and do not do so.

Other Compelling Reason?

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

40. ... the circumstances in which the Disclosure Letter came to be modified prior to finalisation so as to delete the text "a possible dispute has arisen in connection with the Blake share of the Bleo Holm opex" is a matter that requires to be investigated. As Idemitsu has acknowledged, it does not currently have sufficient evidence to plead a claim in fraud but has reserved its right to do so should the position change following disclosure.

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

Conclusion

42. In conclusion, Idemitsu's claim, whether as originally pleaded or as proposed to be pleaded in the draft Amended Particulars of Claim, involves allegations that Sumitomo made representations to Idemitsu, in respect of which a claim for damages under s.2(1) of the Misrepresentation Act 1967 might lie, which do not have any real prospect of success at trial. The claim, again however pleaded, is in any event bound to be defeated by Clause 12.12.3(a) of the SPA. If that were wrong, that is if, contrary to my conclusion, the claim could survive Clause 12.12.3(a), that could only be on a basis that might well mean it was bound to be defeated instead, however pleaded, by paragraph 2.2(a) of Schedule 6 to the SPA, although I have not formed a final view as to that. The claim as proposed to be pleaded in the draft Amended Particulars of Claim, alleging representations by providing (for signature by the parties), offering to sign, or signing, the Execution Copy, is also bound to be defeated in any event by Clause 12.12.2 of the SPA.
43. There being no other compelling reason why Idemitsu's claim should be disposed of at a trial, there will be judgment for Sumitomo under CPR Part 24 dismissing the claim.

CL-2015-000809

Idemitsu Kosan Co., Ltd -v- Sumitomo Corporation Appendix to Judgment Relevant Provisions of the SPA

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

In this Agreement:

…

Claim means a claim by the Buyer under the Warranties or a Tax Claim;

…

Warranties means the warranties given by (i) Sumitomo in Schedule 4 and Part 2 of Schedule 7; and (ii) SCE in paragraphs 1 and 2 of Schedule 4;

…

1.2 Interpretation

1.2.1 In this Agreement:

…

(f) the rule known as the ejusdem generis rule shall not apply and accordingly:

(i) general words introduced by the word other shall not be given a restrictive meaning by means of the fact that they are preceded by words indicating a particular class of acts, matters of things; and

(ii) any phrase introduced by the words include, including or in particular or any similar words or expression shall be construed as illustrative and shall not be given a restrictive meaning by means of the fact that they are followed by particular examples intended to be embraced by the general words;

…

6. WARRANTIES

6.1 Warranties

6.1.1 Each of the Sellers warrants to the Buyer in respect of itself and its Relevant Shares in the terms of the Warranties in paragraphs 1 and 2 of Schedule 4; and

6.1.2 Sumitomo warrants to the Buyer in the terms of the Warranties in the remaining paragraphs of Schedule 4,

in each case on the date of this Agreement.

6.2 Warranties not Affected by Completion

The Warranties shall not in any respect be extinguished or affected by Completion.

6.3 Knowledge, Information and Belief and Disclosure

The Warranties:

(a) where qualified by the expression "so far as Sumitomo knows" or by a similar expression shall mean the actual knowledge or awareness of David Roy Phillips and Tatsusaburo Kimura, having made no enquiry, regarding the subject matter of the Warranty; and

(b) are qualified by reference to those matters fairly disclosed (with sufficient details so as to enable a reasonable buyer to make a reasonable assessment of the nature and scope of the matter disclosed or referred to) in or under this Agreement, any Agreed Form Document, the Disclosure Lttter or the Data Room.

6.4 Separate and Independent Warranty

Each of the Warranties shall be construed as a separate and independent warranty and (except where this Agreement provides otherwise), shall not be limited or restricted in its scope by reference to, or inference from, the terms of any of the other Warranties.

6.5 Limitations

The Buyer acknowledges and agrees that:

(a) notwithstanding the provisions of this Clause 6, the provisions of Schedule 6 shall operate to limit the liability of Sumitomo in respect of any Claim and, where applicable, any Tax Claim;

(b) neither of the Sellers make [sic] any warranty or other representation as to:

[various matters listed],

and, in each case, the Buyer further acknowledged and agrees that it will not be entitled to bring any Claim in respect of such matters; and

(c) it has been provided with access to the Data Room and has been given the opportunity to raise questions in respect of any of the information therein and is acquiring the Company with the full knowledge of all matters fairly disclosed in the Data Room (with sufficient details so as to enable a reasonable buyer to make a reasonable assessment of the nature and scope of the matter disclosed).

6.5 Exception to Limitations

The provisions of Schedule 6 shall not apply to exclude or limit any Claim for fraud on the part of the Sellers.

…

12.12 Entirety

12.12.1 This Agreement, the documents referred to herein, the documents in the Agreed Form, and the Schedules are intended by the Parties as the final expression of their agreement and are intended also as a complete and exclusive statement of the terms of that agreement and all warranties, undertakings, covenants and promises on which they are relying to enter into this Agreement.

12.12.2 All prior written or oral understandings, offers or other communications of every kind pertaining to this Agreement are abrogated and withdrawn.

12.12.3 The Buyer acknowledges and agrees with the Sellers that:

(a) it has not relied on, or been induced to enter into, this Agreement by any representations, warranties or undertakings of any kind other than the Warranties (as modified by the Disclosure Letter); and

(b) the Sellers shall not be liable to the Buyer (whether in equity, contract, tort or under the Misrepresentation Act 1967 or otherwise) for any warranty or undertaking which is not set out in this Agreement and the Buyer shall not be entitled to terminate or rescind this Agreement as a result of a breach of this Agreement, including the Warranties (for which the Buyer's only remedy shall be in damages for breach of contract).

12.12.4 Nothing in this Agreement shall affect any Party's liability or rights or remedies in respect of fraud, wilful misconduct or wilful concealment.

…

SCHEDULE 4

SELLERS' WARRANTIES

…

3. LICENCE INTERESTS

…

3.2 Licence Interest Documents

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

…

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

…

5. LITIGATION

5.1.1 No Group Company is at the date of this Agreement subject to any outstanding order or judgment of any court or engaged in any civil, criminal or arbitration proceedings, nor have any such proceedings been threatened against the Company in writing and, so far as Sumitomo is aware, there are no material circumstances likely to give rise to any such proceeding.

…

6. THE ACCOUNTS AND RECORDS

6.1 The Accounts

The Accounts:

(a) have been prepared in accordance with CA 1985 and CA 2006 (where applicable) and UK GAAP applicable to a company incorporated in the United Kingdom at the time they were audited;

(b) show a true and fair view of the assets and liabilities of the Group as at the Accounts Date and of the profits and losses of the Group for the accounting period ended on that date;

(c) are not affected by any unusual or non-recurring items that would make the financial position and results shown by the Accounts unusual or misleading in any material respect; and

(d) have been prepared on a basis consistent with the audited accounts of the Company for the two prior accounting periods without any change in accounting policies used.

…

9. MATERIAL CONTRACTS

9.1.1 The Material Contracts (and the Licence Interest Documents) comprise all of the material agreements to which any Group Company is a party. The Material Contracts are currently in full force and effect, are disclosed in the Data Room and are free from Encumbrances.

…

SCHEDULE 6

LIMITATIONS ON LIABILITY

2. LIMITATION ON LIABILITY

The Sellers and the Buyer agree that any Claim made by the Buyer shall be governed by and shall be dealt with in accordance with the provisions of this Schedule, except that in the case of any Tax Claim the provisions of paragraphs 2.8, 2.11, 2.15, 2.20, 3, 4, 5 and 6 shall not apply and the corresponding provisions of Schedule 7 shall apply instead. Sumitomo shall be solely liable for any Claim and SCE shall have no liability whatsoever for any Claim. The liability of Sumitomo in respect of any Claim shall be limited as set out below.

2.1 Financial Limits

2.1.1 Sumitomo shall not be liable in respect of any individual Claim unless the amount of the Claim (but for the provisions of this paragraph 2.1.1) exceeds US$500,000 provided that for the avoidance of doubt, a number of Claims arising from the same or similar facts or circumstances may be aggregated so as to constitute a Claim.

2.1.2 Subject to paragraph 2.1.1, Sumitomo shall not be liable in respect of any Claim unless the amount of the Claim (when aggregated with all other Claims) exceeds US$1,500,000, in which case this limitation shall cease to apply and Sumitomo shall (subject to the other provisions hereof) be liable for the whole amount of such sums and not merely the excess.

2.1.3 Subject to paragraph 2.1.4, the aggregate liability of Sumitomo in respect of all and any Claims shall be limited to and shall not exceed fifty per cent (50%) … of the Consideration.

2.1.4 Subject to paragraph 2.1.3, the aggregate liability of Sumitomo in respect of all and any Claims under the Warranties in paragraphs 1.1.1 and 2.1 shall be limited to and shall not exceed one hundred per cent (100%) of the Consideration.

2.2 Time Limits

The Buyer shall not be entitled to recover any amount in respect of any Claim or a Tax Claim, as the case may be, unless notice of such Claim is given by the Buyer to Sumitomo in accordance with paragraph 3.1:

(a) in the case of a Claim, other than a Tax Claim, (and subject as provided in paragraph 2.4) within eighteen (18) Months of Completion; and

(b) in the case of a Tax Claim (and subject as provided in paragraph 2.4.1), within three (3) years from the Completion Date.

2.3 No Liability Unless Proceedings Commenced

Subject to paragraph 2.4, any Claim (unless it has not been previously satisfied, settled or withdrawn) shall be deemed to have been withdrawn and Sumitomo's liability in respect of such Claim shall terminate absolutely, unless legal proceedings in respcct of such Claim have been commenced by being both issued and served within the period of six (6) Months from the date on which notice of such Claim has been given by the Buyer to Sumitomo pursuant to paragraph 3.1. No new Claim may be made in respect of the facts, matters of circumstances giving rise to any such withdrawn Claim.

2.4 Contingent Liabilities

2.4.1 In the event that a Claim arises as a result of a contingent liability or is otherwise not capable of being quantified, the Seller shall not be liable for such Claim unless (i) the Buyer gives notice (in accordance with paragraph 3.1) of the Claim within eighteen (18) Months of Completion, and provided such notice has been given, (ii) the Buyer gives further notice that such contingent liability has become an actual liability or has been quantified (as the case may be) and the Buyer issues and serves proceedings within the period of three (3) years after the expiry of the eighteen (18) Month period referred to in sub-paragraph (i) above.

2.4.2 For the purposes of paragraphs 2.3 and 2.4.1, legal proceedings shall not be deemed to have commenced, unless they shall have been properly issued and validly served upon Sumitomo.

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2.7 Events Prior to Sumitomo's Ownership

Sumitomo shall not be liable in respect of any Claim if, and to the extent that the liability or other matter giving rise to the Claim is attributable to any act, event or omission or default which in respect of any Claim relating to the Company or any of the assets owned by the Company as at 20 May 2004, occurred prior to such date.

2.8 Matters Disclosed or Provided For

Sumitomo shall not be liable in respect of any Claim if and to the extent that the fact, matter or circumstance giving rise to the Claim is:

(a) provided or reserved for, or has otherwise been reflected, or the actual or assumed payment or discharge of the amount of loss or damage which is the subject of the Claim is taken into account in the Accounts or the Management Accounts or is specifically referred to in the notes to them; or

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

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2.13 Buyer's Knowledge

2.13.1 Sumitomo shall not be liable in respect of any Claim if and to the extent that the fact, matter or circumstance giving rise to the Claim was known or ought to have been known (had reasonable enquiry been made) to the Buyer, Idemitsu E&P UK Ltd and Idemitsu Oil & Gas Company Ltd (or their respective officers, senior management (including Katsuhiko Sakamoto and Mitsuki Matsubara) or professional advisers) at the date of this Agreement, whether as a result of its investigation of the Group or otherwise.

2.13.2 For the purposes of paragraph 2.13.1, the Buyer shall be deemed to have knowledge of those matters disclosed as referred to in Clause 6.3(b) and all such matters within the actual knowledge of the Buyer shall be deemed to be disclosed against all of the Warranties and Sumitomo shall not be liable in respect of any Claim if and to the extent that the fact, matter or circumstance giving rise to the Claim is set out in the documents so disclosed.

2.14 Sale Following Completion

Sumitomo shall not be liable in respect of any Claim if the Claim is made after the date on which any member of the Group ceases to be an Affiliate of the Buyer.

2.15 Cessation of the Business

Sumitomo shall not be liable in respect of any Claim to the extent that such Claim would not have arisen but for the winding up or cessation of any trade or business of any Group Company after Completion.

2.16 Sumitomo's Right to Remedy

Sumitomo shall not be liable in respect of any Claim to the extent that the fact, matter or circumstance giving rise to such Claim is remediable, unless within a period of thirty five (35) Business Days of the Buyer becoming aware of such fact, matter or circumstance and that such fact, matter or circumstance may give rise to a Claim, the Buyer shall have given notice thereof to Sumitomo pursuant to paragraph 3.1 and such matter shall not have been remedied to the reasonable satisfaction of the Buyer within a period of 30 Days following the date on which such notice has been served.

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2.20 Insurance

2.20.1 Sumitomo shall not be liable in respect of any Claim to the extent that the amount of such Claim is covered by any policy of insurance in force on the date of this Agreement or would have been so insured had any insurance cover current at Completion been maintained in force on no less favourable terms than those in force at the date of this Agreement.

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