Ipsofactoj.com: International Cases [2002] Part 2 Case 2 [CAEW]


COURT OF APPEAL, ENGLAND & WALES

Coram

Utrecht-America Finance Co

- vs -

National Westminster Bank Plc

LORD JUSTICE ALDOUS

LORD JUSTICE CLARKE

LORD JUSTICE LAWS

10 MAY 2001


Judgment

Lord Justice Clarke

INTRODUCTION

  1. This is an appeal by Utrecht-America Finance Co ("Utrecht") against an order dated 27 November 2000 made by Mr Peter Gross QC sitting as a deputy judge of the High Court. The appeal is brought with the permission of the judge. The action arises out of an agreement known as a take out agreement ("TOA") between Utrecht, National Westminster Bank PLC ("NWB") and others dated 15 October 1997 under which Utrecht bought NWB's interest in a credit agreement dated 21 March 1996 (as subsequently amended). Utrecht brought proceedings in California in order inter alia to obtain rescission of the TOA. NWB commenced this action in order to obtain declarations that the Californian proceedings were begun in breach of the TOA and sought a permanent injunction to restrain Utrecht from continuing them against NWB in so far as they are in breach of the TOA.

  2. NWB did not seek an interlocutory injunction against Utrecht but issued an application for summary judgment. Utrecht contended that the judge should not entertain the application for summary judgment, that (if he did) he should not give summary judgment and that, in any event, he should not grant an injunction restraining Utrecht from pursuing any part of the proceedings in California. The judge rejected all those submissions, gave summary judgment and granted an injunction.

  3. The judge made declarations that the 9th, 10th and 12th causes of action pleaded in the Californian proceedings were brought by Utrecht in breach of the TOA and that Utrecht is liable to indemnify NWB in respect of all costs and expenses (except for the costs of this action) incurred and to be incurred in defence of the 9th, 10th and 12th causes of action. He also granted an injunction restraining Utrecht from pursuing those causes of action against NWB in California or from taking any further steps in relation to them except as provided in paragraph 4 of his order. Paragraph 4 ordered Utrecht forthwith to withdraw those causes of action as against NWB. The judge further ordered Utrecht to pay damages to NWB in respect of the loss and damage suffered by reason of the commencement and pursuit by Utrecht of the same causes of action together with interest and costs. Utrecht's application for a stay of the action was refused. Utrecht appeals against that order and essentially advances the same arguments as it did before the judge.

    BACKGROUND

  4. The underlying facts are not in dispute. I take them largely from the judgment. Utrecht is a company incorporated under the laws of Delaware with its principal place of business in New York. It is indirectly a wholly owned subsidiary of a Dutch bank called Rabobank Nederland ("Rabobank"). By a written agreement dated 21 March 1996 ("the credit agreement") NWB and Rabobank agreed to provide Yorkshire Food Group PLC ("YFG") and certain subsidiary companies of YFG with a credit facility of up to US$100,000,000, of which NWB and Rabobank each agreed to provide up to US$50,000,000. The subsidiaries were incorporated either in England or in the United States. The total sum of US$100,000,000 was subsequently increased by a further US$19,000,000 in the form of US$9,500,000 from each of NWB and Rabobank.

  5. The parties to the TOA were NWB, Utrecht, Rabobank, YFG and a Delaware subsidiary of YFG called Yorkshire Dried Fruit & Nuts Inc. As already stated, the essential purpose of the TOA was to effect a novation under which Utrecht took out or purchased NWB's interest in the credit agreement. At the time of the TOA the sums advanced under the various facilities in the credit agreement were already due and were unpaid. The price which Utrecht paid NWB to purchase its interest in the credit agreement was at a discount to the outstanding amounts of the loans. In accordance with a pricing letter dated 14 October 1997 Utrecht paid the sum of US$39,525,386.30 which was calculated in such a way as to ensure that the overall discount did not exceed £11,300,000. Whether that discount represented good business for Utrecht or not depended of course upon what the judge called the quality of the debt.

    THE CALIFORNIAN PROCEEDINGS

  6. The Californian proceedings were commenced on 28 October 1999 by Rabobank and Utrecht against NWB and various individual directors and officers of certain subsidiaries of YFG based in California. The case against NWB originally comprised the 9th, 10th, 12th and 14th causes of action pleaded in the complaint. The 14th cause of action has recently been abandoned so that we are concerned only with the 9th, 10th and 12th causes of action. I shall return to them in a little more detail below, but they essentially allege fraudulent concealment of information, negligent failure to disclose information and a breach of good faith or fair dealing in failing to disclose such information. In each case it is alleged that NWB was under a duty to disclose the information to Utrecht.

  7. On 30 December 1999 the solicitors for NWB wrote a letter before action alleging that the commencement and pursuit of the Californian proceedings by Utrecht against NWB were a breach of the TOA on the ground that by clause 8.2(d) Utrecht had agreed to bring no action against NWB in respect of non-disclosure of the classes of information alleged in the complaint. The letter asked for an undertaking from Utrecht that it would withdraw the relevant parts of the proceedings, failing which NWB would commence proceedings in England for appropriate relief. No such undertaking was or has been given and the whole purpose of this appeal is to enable Utrecht to continue to advance the 9th, 10th and 12th causes of action in California against NWB.

  8. On 3 January 2000 NWB filed an answer and cross-complaint in California. However, it did so under cover of a letter from its Californian attorneys indicating in effect that it was doing so without prejudice to its position in the English proceedings which it intended to commence. In short the letter asserted that NWB was advancing certain causes of action in order to preserve its right to assert them under the Californian procedural code and without prejudice to its right to commence proceedings in England and that it would pursue its cross-claims in California only to the extent necessary to preserve its rights to those claims. It is not now in dispute that NWB had to take those steps to preserve its position in California and that it did not make an irrevocable election by doing so. It is right to add that there is no suggestion that the courts of California do not have jurisdiction to determine either the claims or cross-claims in those proceedings.

  9. On 18 January 2000 NWB commenced this action in England and on 9 February it issued its application for summary judgment seeking the declarations and the injunction which the judge subsequently granted. It is important to note (as I have said already) that NWB did not seek an interlocutory injunction prior to the determination of its summary judgment application. Indeed, as I understand it, if summary judgment is refused, NWB intends to obtain directions for the trial of the action in England and does not intend to seek an interlocutory injunction in the meantime. On 1 August 2000 Utrecht served an application for an order staying this action until after the conclusion of the proceedings in California.

    THE TOA

  10. The terms of the TOA are central to the issues in this appeal as they were before the judge. It provides, so far as relevant, as follows:

    1.

    INTERPRETATION

    1.1

    Definitions

    ....

    'Collateral' means any property .... in which or over which an Encumbrance has been .... granted to or for the benefit of the Banks under any Security Document.

    ....

    'Purchaser Warranties' means the warranties, representations and indemnities made by, and the covenants and agreements of, the Purchaser in this Deed.

    'Seller Warranties' means the warranties, representations and indemnities made by, and the covenants and agreements of, the Seller in this Deed.

    ....

    'Transfer Assets' means all rights, title and interests .... of the Seller under the Credit Agreement, the UK Facility Agreement, the Security Documents and any Collateral:

    (a)

    in, under and to:

    (i)

    the Advances;

    (ii)

    .... all interests, fees, costs, expenses and other amounts in relation to the Advances and the Commitments..

    (iii)  

    the Credit Agreement, the UK Facility Agreement, the Security Documents and any Collateral;

    (b)

    to or in respect of any and all other claims, rights or causes of action against persons arising from or otherwise in relation to or in connection with the rights, title and interests described in paragraph (a) ....

    2.

    AGREEMENT TO NOVATE

    2.1

    Agreement to novate

    In consideration of the mutual covenants and agreements contained in this Deed and subject to the terms and conditions of this Deed the Parties .... agree as follows:

    (a)

    that the Seller with full title guarantee, subject to payment of the Purchase Price to the Seller .... will novate .... in favour of the Purchaser .... the Transfer Assets and the Novated Obligations ....

    ....

    7.

     

    REPRESENTATIONS AND WARRANTIES

    7.1

    Representations and warranties of the Seller

    The Seller hereby represents and warrants to the Purchaser that, at the Completion Date:

    ....

    (f)

    .... the Seller will be the sole beneficial owner of, with good title to, the Transfer Assets free and clear of any Encumbrance ....

    7.2

    Representations and warranties of the Purchaser

    ....

    (e)

    the Purchaser is a sophisticated buyer with respect to the Transfer Assets (who has made its own enquiries into, and who has adequate information concerning, the business and financial condition (including without limitation, the creditworthiness) of the Obligors, the value of any Collateral, the perfection, validity and priority of any Security Interest forming part of the Transfer Assets, and the status of, and its rights with respect to the Transfer Assets in, any relevant Insolvency Proceedings or proposed Insolvency Proceedings), the Credit Agreement and the UK Facility to make an informed decision regarding the Novation of the Transfer Assets and the Novated Obligations and has independently and without reliance upon the Seller, and based on such information as the Purchaser has deemed appropriate, made its own analysis and decision to enter into each of the Transfer Documents, except that the Purchaser has relied upon the Seller Warranties:

    8.

    ACKNOWLEDGMENTS

    8.1

    Acknowledgment by the Seller

    ....

    (c)

    the Purchaser may be in possession of material non-public information relating to the Transfer Assets and which may affect the Purchase Price which the Purchaser shall be under no obligation to disclose to the Seller and the Seller hereby acknowledges and agrees that the Purchaser shall have no liability to the Seller, and the Seller shall bring no action against the Purchaser in relation to the non-disclosure of such information, provided that nothing in this sub-clause (c) shall affect the right of the Seller in relation to the Purchaser's Warranties; ....

    8.2

    Acknowledgements by the Purchaser

    The purchaser acknowledges that:

    (a)

    the Seller has not made and does not make any representation or warranty, whether express or implied, of any kind or character except as expressly set forth in the Transfer Documents;

    (b)

    the novation of the Transfer Assets and Novated Obligations is irrevocable and without recourse to the Seller, except with respect to breaches of, or pursuant to, the Seller Warranties and is in any event subject to (e) below;

    (c)

    save for the Seller's Warranties, the Seller makes no representation or warranty, nor assumes any liability for, the due execution, legality, validity, effectiveness, adequacy or enforceability of the Credit Agreement, the UK Facility Agreement, the Security Documents or the collectability or value of the Transfer Assets;

    (d)

    the Seller may be in possession of material non-public information relating to the Transfer Assets and which may affect the Purchase Price which the Seller shall be under no obligation to disclose to the Purchaser and the Purchaser hereby acknowledges and agrees that the Seller shall have no liability to the Purchaser, and the Purchaser shall bring no action against the Seller in relation to the non-disclosure of such information, provided that nothing in this sub-clause (d) shall affect the rights of the Purchaser in relation to the Seller Warranties;

    (e)

    the Seller shall be under no obligation to disclose any documents or correspondence between it and any member of the Group in relation to:

    (i)

    the terms of the Credit Agreement ....; or

    (ii)

    the conduct of the parties in relation to the Credit Agreement (whether in relation to those terms or otherwise),

    and that the Purchaser has received all the documents or correspondence (whether from the Seller, Rabobank .. or any other person) which it requires in respect of (i) and (ii) above for the purposes of the transactions envisaged by the Transfer Documents;

    9.

    INDEMNITIES AND RELEASE

    ....

    9.2

    Indemnity by the Purchaser

    The Purchaser shall indemnify and keep indemnified, and shall defend and hold the Seller .... harmless from and against any liability, claim, cost, loss, damage or expense (including, without limitation, reasonable legal fees and disbursements) or judgments which they (or any of them) incur or suffer as a result of:

    (a)

    the breach of any of the Purchaser Warranties by the Purchaser; ....

    ....

    18.

     

    ENTIRE AGREEMENT

    The Transfer Documents constitute the entire agreement of the Parties about its subject matter and any previous agreements, understandings and negotiations on that subject cease to have any effect ....

    ....

    22.

     

    JURISDICTION AND SERVICE OF PROCESS

    22.1

    Submission

    Each party agrees for the benefit of the other Party, that the courts of England shall have jurisdiction to settle any disputes in connection with this Deed and accordingly, submits to the jurisdiction of the English courts.

    22.2

    Service of process

    The Purchaser irrevocably appoints Rabobank, London Branch .... as agent with full authority to receive, accept and acknowledge .... for the appointor and on the appointor's behalf, service of all process issued out of or relating to any proceedings in England, and .... the Purchaser .... agrees that service on the relevant agent shall be deemed due service for the purposes of proceedings in those courts without prejudice to any other mode of service.

    22.3

    Forum convenience and enforcement abroad

    Each Party:

    (a)

    waives objection to the English courts on grounds of inconvenient forum or otherwise as regards proceedings in connection with this Deed; and

    (b)

    agrees that a judgment or order of an English court in connection with this deed is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction.

    22.4

    Non-exclusivity

    Nothing in this clause 22 limits the right of any Party to bring proceedings in connection with this Deed:

    (a)

    in any other court of competent jurisdiction; or

    (b)

    concurrently in more than one jurisdiction.

    23.

    Governing Law

    This Deed is governed by English law.

    ISSUES ON THE APPEAL

  11. It is clear from Utrecht's skeleton argument and indeed from Mr Brindle's oral submissions that the principal object of this appeal is to remove the injunction in order to enable Utrecht to continue its proceedings against NWB in California. The judge considered first Utrecht's application for a stay of this action before considering whether he should give summary judgment for NWB. He was in my judgment right to do so because, if it were appropriate to grant a stay, it would be wrong to consider the application for summary judgment since no question of giving judgment for NWB (whether summary or otherwise) would then arise. As already stated, the judge refused a stay. I do not understand Utrecht to be formally challenging that refusal on this appeal, but since the purpose of the appeal is to allow the Californian proceedings to continue to judgment ahead of the English action, it seems to me that logically the first question for consideration is indeed whether a stay should be granted or whether the English action should be allowed to proceed to judgment.

  12. If the judge was right to refuse a stay, the next question for consideration is whether he was justified in embarking on the NWB's application for summary judgment, if so, whether he was right on the merits and, if so, whether he was right to grant the declarations and/or the injunctions which he did. I shall therefore consider the issues in that order, but before doing so it is I think important to set out in a little more detail the reasons why Utrecht wishes to proceed in California and not in England, which involves some further consideration both of the differences between Californian and English law and of the content of the two sets of proceedings.

    THE LAW OF CALIFORNIA AND ENGLAND COMPARED

  13. In England a contract like the TOA is not a contract uberrimae fidei and neither party owes a duty to disclose material facts to the other. The only bases upon which a party can seek damages from the other or seek rescission of such a contract is by relying upon a misrepresentation, whether innocent, negligent or fraudulent. The law of California is different.

  14. I am not sure to what extent the principles of the law of California are in dispute, but for present purposes it is appropriate to assume that the law is as asserted by Utrecht (as may indeed be the case). As already stated, the relevant assertions can be seen from the 9th, 10th and 12th causes of action alleged in the complaint. As I read them, each of the causes of action alleges a duty to disclose material facts and the difference between them is that the 9th cause of action alleges fraudulent concealment of those facts, the 10th alleges negligent failure to disclose them and the 12th alleges that the failure to disclose them was in breach of a duty of good faith or fair dealing. As I read the 12th cause of action, it does not depend upon fraud or negligence but simply on a failure to disclose facts in circumstances where the facts are material such that it would be a breach of the duty of good faith or fair dealing not to disclose them.

    THE PROCEEDINGS COMPARED

  15. In support of the 9th, 10th and 12th causes of action Utrecht relies upon non-disclosure of facts in circumstances which the judge correctly identified from the following quotation from Utrecht's skeleton argument:

    .... the individual directors or officers of YFI and its subsidiaries who are sued are alleged to have acted in breach of fiduciary duties owed to the lending banks and negligently misrepresented the financial position of their companies to the banks over a period of time. Some of these individuals caused their companies to transfer property and funds for no consideration to three other companies, Almond Farms I, Almond Farms II and White Rose Farming. These transfers were made at a when YFI and Treehouse were insolvent and were not properly reflected in the accounting records of the companies. They also committed YFI to enter into long term leases with Almond Farm I and II. These liabilities (which exceeded US$20 million) were also not reflected in the companies' accounting records.

    Rabobank and Utrecht's case is that NatWest was fully aware of these activities and that it provided additional funds for the Almond Bank ventures .... Rabobank and Utrecht claim that NatWest induced them to enter into the Take Out Agreement. Had NatWest disclosed its knowledge and its involvement in these transactions Utrecht and Rabobank would not have entered into the Take Out Agreement.

  16. In short Utrecht's case in California is that NWB failed to disclose material information of the kind set out in that extract. The 9th, 10th and 12th causes of action all rely upon the same non-disclosure. The difference between them is the mental element. The 9th cause of action alleges fraudulent concealment, which as I understand it involves saying that an honest bank would have disclosed the information, whereas NWB did not and thus acted dishonestly. The 10th cause of action alleges a negligent failure to disclose the information and the 12th cause of action does not allege dishonesty or negligence but simply a failure disclose contrary to a duty of good faith or fair dealing.

  17. As already stated, none of those allegations could be made in an action based on English law because they all depend upon there being a duty to disclose the relevant facts and there is no such duty in English law. Under English law it would be necessary to allege a misrepresentation, which Utrecht has not done, either in California or in England. As I understand it, Utrecht's claim in the Californian proceedings depends entirely on the proposition that NWB owed it a duty to disclose certain facts.

  18. As I said earlier, NWB has brought this action in England in order to obtain a declaration that the Californian proceedings are a breach of the TOA. In paragraph 5 of its defence Utrecht has admitted the novation contained in the TOA, but

    without prejudice to Utrecht's and Rabobank's contentions set out in the Complaint that they were induced to enter into the TOA by fraud on the part of NWB which, if proved, would avoid the TOA in its entirety.

  19. Utrecht was asked for further information and clarification of paragraph 5 of the defence under CPR Part 18. In particular it was asked to clarify whether paragraph 5 was intended to contain an allegation of fraud against NWB and, if not, what, if any reliance it was intended to be placed on the matters alleged in paragraph 5. Utrecht's answer was that it is not intended to establish in these proceedings that NWB has been guilty of fraud, but that that allegation, having been made in the Californian action, ought properly to be determined in that action. Utrecht further asserted that the relevant matter alleged in paragraph 5 is that fraud "in the form of fraudulent concealment of material information" has been "alleged" (the pleader's emphasis) in California. Utrecht concluded its clarification in this way:

    The relevance of the allegation of fraudulent inducement having been made in the Californian action is apparent from the matters contained in paragraphs 6 and 10(iii)(3) and (4) of the Defence, in summary: since Utrecht has made such an allegation in the Californian action it is an issue in these proceedings whether or not NWB can, by the means it has adopted and relied upon in the Particulars of Claim, exclude its liability for its own fraud if proved and can, therefore, prevent the matter being tried out in the Californian action or elsewhere.

  20. It is important to note that (as stated above), although the pleading refers to fraudulent inducement, the pleading itself defines fraudulent inducement as being in the form of fraudulent concealment of material information and not in the form of misrepresentation. It is for that reason that, save for its submissions relating to the TOA itself, Utrecht does not seek to rely upon any principle of English substantive law to avoid liability. Nor does it seek to rely upon any rule of English conflicts of laws in order to assert a right to rely upon the law of California in England.

  21. As to the paragraphs of the defence referred to in the information quoted above, paragraph 6 simply alleges that NWB's claim is premature and contrary to the principles of comity by reason of its direct interference with the Californian proceedings. Paragraph 10(iii) makes a number of points on the true construction of the TOA and asserts that clause 8.2(d) is unreasonable and of no effect pursuant to section 3 of the Misrepresentation act 1967. I shall return to those points below because they are relevant to the question whether the judge should have given summary judgment for NWB.

    SHOULD THE ACTION IN ENGLAND BE STAYED?

  22. The judge considered this question first and held that the action should not be stayed. There were two alternative bases upon which the action could in theory have been stayed. The first was based on principles of forum non conveniens and the second was based on principles of case management.

  23. The judge said that Mr Brindle did not press Utrecht's application for a stay on the ground of forum non conveniens because he recognised the force of the argument based on clauses 22.1 to 22.3 of the TOA. Mr Brindle did not seek a stay on that ground in this court either. He was in my judgment right not to do so because those clauses are fatal to any such case. Their effect is that each party submitted to the jurisdiction of the English courts, waived any objection it might otherwise have to the English courts on the ground of forum non conveniens or otherwise and agreed that any judgment or order of the English court in connection with the TOA would be conclusive and binding on it. Those clauses make any application for a stay on the ground of forum non conveniens unarguable.

  24. Faced with that difficulty, Mr Brindle submitted to the judge that the English action should be stayed under its inherent power to control its proceedings and under its powers of case management and relied upon the decision of this court in Reichhold Norway ASA v Goldman Sachs International [1999] 2 Lloyd's Rep 567. The judge accepted that there was jurisdiction to grant a stay on that basis but rejected the submission that the action should be stayed, essentially because of the express terms of clause 22 of the TOA. He said that, looked at overall, the scheme of clause 22 tells overwhelmingly against a stay of the English proceedings so as to await the outcome of and effectively to grant precedence to proceedings elsewhere. In short, he said, such a stay would not reflect the bargain made by the parties.

  25. I entirely agree with the conclusions of the judge in this regard and it was no doubt because of their undoubted force that Mr Brindle did not submit before us that the judge should have stayed the action. Instead he sought to achieve the same result by a somewhat different route. He did so by submitting that the judge was wrong to approach the applications in the order in which he did and that he should not have entertained the application for summary judgment.

    SHOULD THE JUDGE HAVE ENTERTAINED THE APPLICATION FOR SUMMARY JUDGMENT?

  26. The reasons given in Utrecht's skeleton argument in support of the submission that the answer to that question is no were these:

    (a)

    It would have been consistent with comity to consider the validity of NWB's entitlement to an anti-suit injunction first, before entertaining argument on and deciding issues (raised in the summary judgment application) which the judge accepted were already before the Californian court. This was imperative given that the judge rightly held that California was a natural forum for the resolution of the dispute and that England was not the natural forum.

    (b)

    Utrecht's application for a stay was made simply to ensure that the appropriate remedy was before the court if it declined to grant NWB the anti-suit injunction sought. In such circumstances the judge should have decided to stay the application after or at the same time as deciding NWB's application for an anti-suit injunction.

    (c)

    The judge should not have entertained the summary judgment application by NWB, unless he had been prepared at the first stage of the analysis to grant an anti-suit injunction in favour of NWB. The judge recognised his decision on the application for summary judgment as being critical to the exercise of his discretion to grant an anti-suit injunction, holding that unless he had decided the summary judgment application in favour of NWB he would not have granted the anti-suit injunction. Deciding, in such circumstances, issues which were properly pending before the Californian court was fundamentally inconsistent with the principles of comity, particularly when accompanied by an order restraining those proceedings.

  27. Mr Brindle submitted that the Californian court has jurisdiction to determine the issues raised, that the action in California was already on foot, that the Californian court is just as capable of determining the issues raised by NWB as the English court and that in these circumstances, as it was put in Utrecht's skeleton argument, it was inappropriate and inconsistent with comity for the judge to have interfered with the proceedings before the Californian court and accordingly the judge should have refused the injunction. It was further submitted that it follows that the judge should have refused to entertain the application for summary judgment.

  28. In support of those submissions Utrecht relied upon the principles governing the grant of anti-suit injunctions restraining foreign proceedings stated in a number of cases including Société Nationale Industrielle Aérospatiale v Lee Kui Jak [1987] 1 AC 871, Barclays Bank Plc Homan [1993] BCLC 680 and Airbus Industries GIE v Patel [1999] 1 AC 119. In particular Mr Brindle submitted that such an injunction should only be granted where the foreign proceedings are vexatious or oppressive and that in deciding that question the English court should have regard to the following principles (among others). The jurisdiction should be exercised with caution and having regard to the principles of comity. In a case in which there is a difference of view between the English court and the foreign court as to which is the natural forum the English court cannot arrogate to itself the power to resolve that dispute by granting an injunction. It should allow the foreign court to decide whether or not to stay its own proceedings because it will ordinarily be in a better position than the English court to decide that question. As a general rule the English court should only grant an injunction where it concludes that it is the natural forum for the dispute and that the proceedings in the foreign court are vexatious and oppressive. It should not grant an injunction where to do so will deprive a plaintiff of advantages in the foreign forum. The court must have due regard for the respect owed to the foreign court and should seek to strike a balance between the interests of the parties.

  29. I accept that those are among the considerations which are relevant to the question whether an injunction should be granted at an interlocutory stage. I am also conscious of the principle stated by the Supreme Court of Canada in Amchem Products Inc v British Columbia (Workers Compensation Board) [1993] 1 SCR 897, which was quoted with approval by Lord Goff in the Airbus Industrie case at p 139:

    .... the domestic court as a matter of comity must take cognisance of the fact that the foreign court has assumed jurisdiction. If, applying the principles relating to forum non conveniens .... the foreign court could reasonably have concluded that there was no alternative forum that was clearly more appropriate, the domestic court should respect that decision and the application should be dismissed.

  30. It is common ground that those principles require significant modification where the foreign proceedings are brought in breach of an English jurisdiction clause because the English court will readily grant an injunction restraining a party from commencing or continuing foreign proceedings which are in breach of contract: see eg Continental Bank NA v Aeakos Compania Naviera SA [1994] 1 WLR 588, The Angelic Grace [1995] 1 Lloyd's Rep 87 and Donohue v Armco Inc [2000] 1 Lloyd's Rep 579. Mr Brindle submitted that those principles have no application here because the TOA does not contain an exclusive jurisdiction clause.

  31. Equally, in my opinion, the principles identified above require significant modification in a case where a permanent injunction is sought after a judgment on the merits. If the English court gives judgment for the claimant on the merits and the judgment includes a declaration that the defendant has brought foreign proceedings in breach of contract, and it is asked to exercise its equitable jurisdiction to grant a permanent injunction to restrain a continued breach of contract by further pursuing such foreign proceedings, different considerations arise from those which arise at an interlocutory stage.

  32. Indeed it seems to me that the principles which then become applicable are very similar to those which apply in the case where an interlocutory judgment is sought on the ground that the foreign proceedings are in breach of contract. The relevant principles in that class of case can be seen from the judgments in The Angelic Grace [1995] 1 Lloyd's Rep 87. Although that was a case in which the clause provided for arbitration in London and not for the exclusive jurisdiction of the English courts, it is plain that the same principles apply to both classes of case. Thus in The Angelic Grace Leggatt LJ (at p 94) followed this statement of principle from the judgment of Steyn LJ in Continental Bank NA v Aeakos Compania Naviera SA, as reported in [1994] 1 Lloyd's Rep 505 at 512 (where the report is more accurate than in the WLR):

    In our view the decisive matter is that the bank applied for the injunction to restrain the defendants' clear breach of contract. In the circumstances, a claim for damages for breach of contract would be a relatively ineffective remedy for the defendants' breach of contract. If the injunction is set aside, the defendants will persist in their breach of contract, and the bank's legal rights as enshrined in the jurisdiction agreements will prove to be valueless. Given the total absence of special countervailing factors, this is the paradigm case for the grant of an injunction restraining a party from acting in breach of an exclusive jurisdiction agreement. In our judgment the continuance of the Greek proceedings amounts to vexatious and oppressive conduct on the part of the defendants. The judge exercised his discretion properly.

  33. In The Angelic Grace this court rejected in robust terms the argument that the grant of an injunction to restrain foreign proceedings which were in clear breach of contract would offend against comity. It did so on the basis that it is vexatious and oppressive for a party to maintain proceedings in breach of its agreement not to do so: see eg per Leggatt LJ at p 96. Millett LJ expressed his views in the following passages (at p 86) which have been much quoted since:

    In my judgment, the time has come to lay aside the ritual incantation that this is a jurisdiction which should only be exercised sparingly and with great caution. There have been many statements of great authority warning of the danger of giving an appearance of undue interference with the proceedings of a foreign Court. Such sensitivity to the feelings of a foreign Court has much to commend it where the injunction is sought on the ground of forum non conveniens or on the general ground that the foreign proceedings are vexatious or oppressive but where no breach of contract is involved. In the former case, great care may be needed to avoid casting doubt on the fairness or adequacy of the procedures of the foreign Court. In the later case, the question whether proceedings are vexatious or oppressive is primarily a matter for the Court before which they are pending. But in my judgment there is no good reason for diffidence in granting an injunction to restrain foreign proceedings on the clear and simple ground that the defendant has promised not to being them.

    ....

    I cannot accept the proposition that any Court would be offended by the grant of an injunction to restrain a party from invoking a jurisdiction which he had promised not to invoke and which it was its own duty to decline.

    ....

    In my judgment, where an injunction is sought to restrain a party from proceeding in a foreign Court in breach of an arbitration agreement governed by English law, the English Court need feel no diffidence in granting the injunction, provided that it is sought promptly and before the foreign proceedings are too far advanced. I see no difference in principle between an injunction to restrain proceedings in breach of an arbitration clause and one to restrain proceedings in breach of an exclusive jurisdiction clause as in Continental Bank NA v Aeakos Compania Naviera SA, [1994] 1WLR 588. The justification for the grant of the injunction in either case is that without it the plaintiff will be deprived of its contractual rights in a situation in which damages are manifestly an inadequate remedy. The jurisdiction is, of course, discretionary and is not exercised as a matter of course, but good reason needs to be shown why it should not be exercised in any given case.

  34. In Donohue v Armco [2000] 1 Lloyd's Rep 579 Stuart-Smith LJ adopted those principles, although he said that he thought that we should adhere to the expressions 'strong cause' or 'strong reason' rather than good reason. I should add that it seems to me that the English court should not feel diffidence in granting such an injunction in order to restrain a breach of contract whether or not it would be the duty of the foreign court to decline jurisdiction.

  35. Those principles apply to the granting of an interlocutory injunction to restrain foreign proceedings which are brought in breach of an exclusive jurisdiction clause. Mr Brindle correctly submitted that in this case clause 8.2(d) is not an exclusive jurisdiction clause. However, once it is held that Utrecht were in breach of the TOA in commencing the Californian proceedings and that they remain in breach of the TOA in continuing to pursue them, as held by the judge, it seems to me that essentially the same principles apply. Thus it would be vexatious to allow Utrecht to continue its breach in circumstances where damages would not be an adequate remedy. As Millett LJ put it, there is no good reason for diffidence on the clear and simple ground that Utrecht promised not to do what it is now doing. I can see no reason in principle why comity should stand in the way of the granting of an injunction.

  36. In these circumstances I am unable to accept Utrecht's submissions which I quoted in paragraph 26 above. I should add that almost all the submissions advanced in this regard rely upon what are essentially forum non conveniens points. They include the submission that it is significant that proceedings are pending in California. However, the authorities show that the existence and state of foreign proceedings are relevant to the exercise of the court's discretion to stay an action on the ground of forum non conveniens: see eg de Dampierre v de Dampierre [1988] 1 AC 92 per Lord Goff at 108.

  37. The position as I see it may be summarised in this way. Utrecht cannot obtain a stay of these proceedings because of its promise in clause 22.3 to waive objection to the English courts on grounds of forum non conveniens or otherwise. Further, given that clause, Utrecht cannot rely upon such grounds to resist the granting a permanent injunction once it is held that the foreign proceedings are being pursued in breach of contract, especially in the light of clause 22.3(b). It would no doubt have been inappropriate to grant an interlocutory injunction to restrain the Californian proceedings at a time when it was no more than arguable that they were brought in breach of contract because it could not be said that they were vexatious or oppressive, especially in the light of the many factors connecting the case with California and having regard to clause 22.4 of the TOA, which expressly permits a party to bring proceedings in connection with the TOA in any court other than England.

  38. However, for the reasons I have given, the position is radically different once it is held that Utrecht are in breach of contract in pursuing their claim in California. It follows that the question whether the judge was right to hold that Utrecht were in breach of the TOA in that regard is crucial to the outcome of this appeal and that the judge was entirely justified in embarking on NWB's summary judgment application.

    SUMMARY JUDGMENT  –  THE MERITS

  39. The essential question under this head is whether the proceedings in California are in breach of clause 8.2(d) of the TOA. That question must, in my judgment, be determined by reference to English law because clause 23 provides that the TOA is governed by English law. The correct approach seems to me to be to identify the nature of the claims being advanced in California and to decide whether to pursue them amounts to a breach of clause 8.2(d). In this regard the role of Californian law is limited because it does not seem to me to be relevant how the claims would be classified as a matter of that law.

  40. NWB's case is straightforward. It is that by clauses 8.1(c) and 8.2(d) of the TOA both parties respectively agreed that neither would be under any obligation to disclose to the other 'material non-public information relating to the Transfer Assets and which may affect the purchase price', that neither would have any liability to the other in relation to the non-disclosure of such information and that neither would bring an action against the other in relation to such non-disclosure. NWB says that all Utrecht's claims in California allege just such non-disclosure and that it follows that it is bringing that action in breach of the TOA.

  41. Utrecht takes three points by way of response. The first is that on the true construction of clause 8.2(d) it is not wide enough to exclude claims in negligence, let alone fraud. The second is that, if the clause is wide enough to exclude claims in negligence, it is wide enough to exclude claims in fraud and is therefore unreasonable and thus contrary to section 3 of the Misrepresentation Act 1967. In that regard it was submitted that the burden of satisfying the test of reasonableness is on NWB and that it has failed to discharge it. The third point is that clause 8.2(d) does not apply to the claims in California because the alleged non-disclosure is not of information 'relating to the Transfer Assets' within the meaning of the clause. I shall address each of these points in turn in the order in which they were advanced in argument before us.

    Scope of Clause 8.2(d)

  42. Mr Brindle submitted that this clause is an exclusion clause because it purports to exclude NWB's liability for non-disclosure and that, since it is relied upon by NWB as excluding negligent and fraudulent non-disclosure, in order to be effective it must satisfy the well-known tests laid down by Lord Morton in Canada Steamship Lines Ltd v The King [1952] AC 192 at 208, which were approved by the House of Lords in Smith v South Wales Switchgear [1978] 1 WLR 165.

  43. Those tests were:

    (1)

    If the clause contains language which expressly exempts the person in whose favour it is made (hereafter called the 'the proferens') from the consequences of his own servants, effect must be given to that provision ....

    (2)

    If there is no express reference to negligence, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants of the proferens ....

    (3)

    If the words used are wide enough for the above purpose, the court must then consider whether 'the head of damage may be based on some ground other than negligence' .... The 'other ground' must not be so fanciful or remote that the proferens cannot be supposed to have desired protection against it; but subject to this qualification, .... the existence of a possible head of damage other then that of negligence is fatal to the proferens even if the words used are prima facie wide enough to cover negligence on the part of his servants.

  44. Mr Brindle submitted that those principles apply as, Lord Fraser put it in Smith v South Wales Switchgear at p 172, to "clauses which purport to exempt one party to a contract from liability". He further submitted that in order to decide whether the clause in question is such a clause it is necessary to look at the effect of the clause and not its form. In this regard he relied upon the following statement made by Slade LJ giving the judgment of this court in Phillips Products Ltd v Hyland [1987] 1 WLR 659 at 666:

    There is no mystique about 'exclusion' or 'restriction' clauses. To decide whether a person 'excludes' liability by reference to a contract term, you look at the effect of the term. You look at its substance.

    Slade LJ was there considering the question whether the clause in question could properly be said to 'exclude or restrict' liability within the meaning of section 2(2) of the Unfair Contract Terms Act 1977 ("the 1977 Act").

  45. Mr Brindle also relied upon Smith v Bush [1990] 1 AC 831, where the House of Lords was also considering the 1977 Act. In particular he relied upon this statement by Lord Jauncey at p 873:

    The words 'liability' for negligence in section 2(2) must be read together with section 13(1) which states that the former section prevents the exclusion of liability of 'notices which exclude or restrict the relevant obligation or duty'. These words are unambiguous and are entirely appropriate to cover a disclaimer which prevents a duty coming into existence. It follows that the disclaimers here given are subject to the provisions of the Act and will therefore only be effective if they satisfy the requirements of reasonableness.

    Mr Brindle recognised that those statements were made in the context of the 1977 Act but submitted that they reflect the general law.

  46. He submitted that they support the conclusion that clause 8.2(d) is, as Lord Fraser put it, a clause which purports to exclude liability and that, on NWB's case, it excludes liability for negligence even though it does so by providing that no duty to disclose is owed. Thus it expressly exempts NWB in relation to non-disclosure of relevant facts and is relied upon to exempt it from liability to Utrecht in California, where the 9th and 10th causes of action depend upon fraud and negligence. It follows, Mr Brindle submitted that, since clause 8.2(d) does not satisfy Lord Morton's tests, it cannot protect NWB from liability in California.

  47. I see the force of that submission, which was attractively presented on behalf of Utrecht and I entirely accept that there may be many cases in which a clause excluding the existence of a duty is properly treated as an exclusion or exemption clause to which Lord Morton's tests should be applied in their full rigour. I am, however, unable to accept that this is such a case. Lord Morton's tests are essentially rules or principles of construction. They are valuable tools to that end but, in every case where the question is one of construction of the contract, the role of the court is to try to identify what the parties intended by the words that they have used. In HIH Casualty v Chase Manhattan Bank, an unreported decision given on 31 July 2000, Aikens J said with regard to the rules in the context of a contract of insurance, (at p 18):

    The court's task is still to discern what the parties intended by the wording they have agreed in the context of the particular type of contract under consideration. But although 'rules' of construction area guide to the intention of the parties, they are not the masters of the parties' intention ....

    I agree.

  48. Like any clause, clause 8.2(d) must be construed in its context and in the context of the contract as a whole having regard to its factual matrix or surrounding circumstances. Moreover, as Lord Hoffmann put it in ICS Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912:

    Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

  49. Clause 8.2(d) seems to me to be a far cry from the kind of clause which the courts have had in mind in the kind of case in which they have applied Lord Morton's tests. The background to this contract may be summarised in this way. The contract was negotiated at arm's length by two large banks, both of which were advised by skilled commercial lawyers. Each bank knew that the other might have information of the type described in the clause which would affect the price if it were disclosed. Yet each bank expressly agreed that there would be no duty on the part of either bank to disclose the information. It was thus agreed by each that the other could deliberately keep to itself information which it knew would assist it to negotiate the price or indeed to decide whether to enter into the contract at all.

  50. Clause 8 must be construed in the light of clause 7, which includes in clause 7.2(e), quoted above, a representation that Utrecht is a sophisticated buyer which has made its own enquiries into and has adequate information concerning the business and financial condition of the borrowers and others, and that it has independently and without reliance on NWB made its own analysis and made a decision to enter into the TOA based on such information as it deemed appropriate.

  51. In these circumstances it appears to me to be plain that each agreed that there was no question of the other acting fraudulently or negligently or in breach of a duty of good faith or fair dealing, as alleged in the Californian proceedings. They simply agreed that neither need disclose the information to the other. Their motives for not disclosing the information are entirely irrelevant. Applying Lord Hoffmann's approach, it seems to me that the meaning which the TOA (and in particular clauses 8.1(c) and 8.2(d)) conveys to a reasonable person with knowledge of the background is that, whatever its reasons, each was absolutely entitled to keep important information to itself and that each agreed that the other would not be liable for failing to disclose such information and that it would not bring an action anywhere in relation to such non-disclosure. On the true construction of the clause no question of negligence or fraud can arise.

  52. In these circumstances there is no room for the application of Lord Morton's tests. The agreement is clear and unambiguous and protects both banks from liability for non-disclosure, however much each might be liable for negligence or fraud under Californian law if there were a duty of disclosure. If there is no duty to disclose I do not see how either bank can be liable for breach of it, whatever its intentions and wherever the action is brought. Moreover each expressly agreed not to sue the other anywhere relying upon non-disclosure of the information referred to in clause 8.1(c) and 8.2(d). Yet, subject to Mr Brindle's third point, Utrecht has sued NWB in America alleging just such non-disclosure. The fact that it has done so in order to seek rescission of the contract is to my mind irrelevant, just as it is irrelevant that Californian law may classify its cause of action otherwise than in contract.

  53. The judge reached the same conclusion. For example, he said:

    To my mind, against the background of no pre-existing duty of disclosure under the general law, the scheme of clauses 7.1(e) and 8.2(a)-(e) serves to emphasise the importance placed by the contracting parties on

    (i)

    the principle of caveat emptor;

    (ii)

    a clear allocation of risk based on the principle of caveat emptor, no doubt reflected in or capable of being reflected in the pricing of the TOA; and

    (iii)

    with reference in particular to clause 8.2(d), certainty, finality and the avoidance of litigation.

    I agree.

  54. For these reasons I would hold that there is nothing in Lord Morton's tests which requires the court to reach a conclusion that the contract does not mean what it says, namely that neither bank owed a duty to disclose information of the kind identified in the clause to the other. This reasoning seems to me to be similar to that of Aikens J in HIH Casualty v Chase Manhattan Bank. It follows from the agreement that there was no duty to disclose that neither bank can be liable for breach of a duty to disclose, whether the failure to disclose is categorised by a foreign law as negligent, fraudulent or otherwise.

  55. The position would be different if it were alleged that NWB made a material misrepresentation which induced the contract, whether innocent, negligent or fraudulent. In that event clause 8.2(d) would not be relevant because it is concerned only with non-disclosure. However, since (as explained earlier) each of Utrecht's allegations in California against NWB allege not misrepresentation but non-disclosure, albeit with a different mens rea in each case, in bringing and pursuing the Californian action, subject to what follows, Utrecht is in breach of the clause.

  56. The judge I think regarded Lord Morton's tests as applicable only to what may be called English law negligence or fraud. I see the force of that approach, but for myself I would not so restrict them. They are simply principles of construction which apply in appropriate cases to aid the court in its attempt to discover what the parties intended. It is no doubt possible to think of cases in which they would apply to negligence as it is understood under a system of foreign law. However, for the reasons which I have tried to give, I do not think that they assist in the construction of clauses 8.1(c) and 8.2(d) here.

    Reasonableness

  57. The judge held that if NWB is to be entitled to rely upon clause 8.2(d), it must satisfy the test of reasonableness, whether under section 3 of the Misrepresentation Act 1967 or section 2(2) of the Unfair Contract Terms Act 1977. NWB has served a respondent's notice which challenges that conclusion if it is necessary to do so. However, I shall assume for present purposes that the clause must indeed satisfy that test and, indeed, that the burden of doing so is on NWB. The test of reasonableness is stated in section 11(1) of the Unfair Contract Terms Act 1977 as follows:

    In relation to a contract term, the requirement of reasonableness .... is that the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably have been, known to or in the contemplation of the parties when the contract was made.

  58. Mr Brindle submitted that if the effect of the clause is to exclude NWB's fraud it must fail the test of reasonableness. The judge rejected that submission and held that the clause satisfied the test. He accepted Lord Grabiner's submissions that the parties were sophisticated and of equal bargaining power, that the clause was tailor-made for the transaction, that the TOA included both clause 8.2(d) and 8.1(c) so that it might in other circumstances have been Utrecht and not NWB that was relying upon it, that there was nothing unreasonable in giving effect to the principle caveat emptor and that the price was substantially discounted.

  59. I entirely agree with the judge. There was nothing unreasonable about either clause 8.1(c) or clause 8.2(d), freely negotiated as they were between banks of this kind. It should be noted that the clauses do not purport to exclude liability for negligent or fraudulent misrepresentation or, indeed, any notion of fraud as it is known to English law. Some reliance was placed upon the decision of this court in Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] 1 QB 600 but, given that the clause is concerned only with non-disclosure and not misrepresentation, I can see nothing in that decision which leads to the conclusion that these clauses were not reasonable. Nor is there anything in the decision of Jacob J in Thomas Witter v TBP Industries Ltd [1996] 2 All ER 573 which leads to the conclusion that clause 8.2(d) is unreasonable.

  60. The judge placed some reliance upon these observations made by Chadwick LJ in the unreported decision of this court made on 27 October 1999:

    There are .... at least two good reasons why the courts should not refuse to give effect to an acknowledgment of non-reliance in a commercial contract between experienced parties of equal bargaining power – a fortiori, where those parties have the benefit of professional advice. First, it is reasonable to assume that the parties desire commercial certainty. They want to order their affairs on the basis that the bargain between them can be found within the document which they have signed. They want to avoid the uncertainty of litigation based on allegations as to the content of oral discussions at pre-contractual meetings. Second, it is reasonable to assume that the price to be paid reflects the commercial risk which each party – or, more usually, the purchaser – is willing to accept. The risk is determined, in part at least, by the warranties which the vendor is prepared to give. The tighter the warranties, the less the risk and (in principle at least) the greater the price the vendor will require and which the purchaser will be prepared to pay. It is legitimate and commercially desirable, that both parties should be able to measure the risk, and agree the price, on the basis of the warranties which have been given and accepted.

  61. I respectfully agree with those views. Although this case is not of course the same as that, the TOA contains a non-reliance clause in clause 7.2(e) to which very similar considerations apply. They also seem to me to support the general proposition that commercial parties are likely to desire certainty. Clause 8.2(d), if construed as in my view it should be in accordance with its express terms, helps to achieve certainty (as indeed does its counterpart clause 8.1(c)) because it prevents either party from alleging non-disclosure of relevant facts against the other and avoids (or should avoid) litigation.

  62. In all the circumstances I entirely agree with the judge that NWB has established that clause 8.2(d) satisfies the test of reasonableness. It follows that it is not necessary to determine the question whether section 2(2) of the 1977 Act or section 3 of the Misrepresentation Act 1967 applies and I shall not further add to the length of this already excessively long judgment by doing so.

    Transfer Assets

  63. The remaining question is whether the information which it is alleged in California that NWB failed to disclose is 'information relating to the Transfer Assets and which may affect the Purchase Price' within the meaning of clause 8.2(d) of the TOA. The judge said that he had no doubt that it is. In reaching that conclusion the judge was willing to assume that the clause should be construed contra proferentem. He presumably did so on the assumption that NWB was the proferens. Mr Brindle submitted to us that NWB was indeed the proferens and that that the judge construed the clause too widely.

  64. For my part, I am not persuaded that NWB was the proferens in this regard any more than Utrecht. As I have stressed earlier, clause 8.2(d) has its counterpart in clause 8.1(c) so that it is by no means clear which party proposed the clauses or indeed the definition of 'Transfer Assets'. On the other hand I too am willing to assume that the clause should be construed on the assumption that NWB was the proferens. I should add that the burden is in any event upon NWB to establish the breach of clause 8.2(d) which it alleges and it must therefore satisfy the court that Utrecht is relying on non-disclosure of information within the meaning of the clause.

  65. In Utrecht's skeleton argument it summarises the information which it says that NWB wrongfully failed to disclose as information relating to:

    (a)

    the interests of YFI and some of YFI's officers in California corporations described in the complaint as 'White Rose' and 'Almond Farms I and II';

    (b)

    loans for US$1.2 million made by NWB indirectly through an Isle of Man trust of which the family of Michael Firth (YFG's chairman and a director of YFI and some of its subsidiaries) were beneficiaries. The purpose of these loans was to enable officers of YFI to buy property through the medium of White Rose Farming LLC (a Californian limited liability corporation) and Almond Farms I and II using inside information acquired as officers of YFI and Treehouse;

    (c)

    irrecoverable sums amounting to US$600,000 expended by YFI in relation to the purchase of property ultimately acquired by Almond Farms I and II;

    (d)

    leases by which YFI agreed to pay Almond Farms I and II approximately US$20 million over a number of years which were above the market rate and were made at a time when YFI was insolvent;

    (e)

    [a YFI company] Treehouse's payment of US$233,000 from its NWB account in December 1996 to cover certain White Rose expenses relating to the Almond Farm property at a time when Treehouse was insolvent and for which Treehouse received no consideration;

    (f)

    NWB's attempts in or about April 1997 to secure repayment of its advances to the Isle of Man trust and other loans to officers of YFI in preference to the sums due to YFI.

  66. Mr Brindle conceded that that information was relevant to the purchase price but submitted that none of those matters related to 'rights, title and interests' of NWB within the meaning the definition of 'Transfer Assets' in clause 1.1 of the TOA quoted in paragraph 10 above. He submitted that it related only to the conduct and quality of the underlying loans and that clause 8.2(d) was directed at matters relevant to the transferability of the Transfer Assets rather than the quality of the loans which NWB was transferring to Utrecht and which Utrecht was taking out under the TOA.

  67. The judge rejected those submissions having regard to four particular considerations.

    • First, he observed that clause 8.2(d) refers to information 'relating to' the Transfer Assets.

    • Secondly, he concluded that there was a close relation between the information which is the subject of the Californian proceedings and the Transfer Assets, having regard in particular to paragraph (b) of the definition of Transfer Assets, which extends the definition to NWB's rights title and interests 'to or in respect of any and all other claims, rights and causes of action against persons arising from or otherwise in relation to or in connection with the rights title and interest described in paragraph (a)'.

    • Thirdly, the judge said that the relation between the information in question and the Transfer Assets was underlined by Utrecht's case in California because that case depends upon the linkage between the information allegedly not disclosed and Utrecht being induced to enter into the TOA.

    • Fourthly, he expressed the view that information which was said to undermine the value of the Transfer Assets and hence the 'worth' of the TOA was information which related to the Transfer Assets.

  68. Mr Brindle submitted that the judge was wrong because he failed to appreciate that the expression 'Transfer Assets' was concerned with NWB's title and not with their value and that all the points made by the judge merely showed that the information in question might 'affect the Purchase Price' but were not relevant to NWB's title to the assets as defined.

  69. In my judgment the conclusions reached by the judge were correct. I do not think that the expression 'relating to the Transfer Assets' should be construed as narrowly as Mr Brindle submitted. I agree with the judge that information relevant to the likelihood or otherwise of the borrowers repaying the loans is directly relevant to the value of the Transfer Assets as defined and is thus 'information relating to the Transfer Assets and which may affect the Purchase Price' (my emphasis) within the meaning of 8.2(d) (and indeed clause 8.1(c)).

  70. The rights of NWB to recover the amounts advanced under the 'Credit Agreement' and the other agreements referred to in the definition to my mind include rights to recover from the borrowers. They are within the expression 'all rights, title and interests .... of NWB .... (b) to or in respect of any and all other claims, rights or causes of action against persons arising from or otherwise in connection with the rights, title and interests in paragraph (a) ....' in the definition. The prospects of the borrowers repaying the loans seem to me crucially important factors in any consideration of the value of the assets being transferred. In these circumstances any information which is relevant to the value of those rights must be information 'relating to' the rights and thus to the Transfer Assets as defined. For these reasons I would uphold the decision of the judge on this point.

    Conclusion on the Merits

  71. For the reasons which I have tried to give I have reached the conclusion that the judge was right to hold that Utrecht was in breach of the TOA in bringing the proceedings in California and because it promised 'to bring no action against NWB in relation to non-disclosure' of 'information relating to the Transfer Assets and which may affect the Purchase Price' and yet did so.

  72. I should add in this regard that I do not accept a final point made by Mr Brindle, which was that NWB cannot rely upon the terms of the TOA to lead to that conclusion because it involves relying upon the very contract the validity of which Utrecht impeaches in order to defeat the claim for rescission. The TOA is governed by English law. It is valid by English law since no relevant misrepresentation is alleged which might enable Utrecht to challenge it. It follows that, if the contract forbids the action being taken in California, NWB is entitled to a declaration to that effect. Since, in my judgment, the TOA does forbid that action, it also follows that the judge was entitled to grant the declaration which he did. Moreover he was entitled to do so by way of summary judgment because Utrecht would have no realistic prospect of success at a trial.

    PERRMANENT INJUNCTION

  73. I have already set out in some detail the principles which govern the grant of an injunction once it is held that proceedings are being brought in breach of contract. The grant of an injunction is of course an equitable remedy and the court thus had a discretion whether or not to grant it. However, the conclusions that Utrecht is in breach of contract in bringing the proceedings in California and that it would be in continued breach of contract if it were to continue with them make such proceedings vexatious and oppressive. There is a plain risk that, unless restrained, Utrecht will continue with them.

  74. The grant of an injunction in these circumstances does not offend the principles of comity in any way. The application of the principles discussed in paragraphs 31 to 38 above leads to the conclusion that the judge was right to grant the injunction and to make the orders which he did. In these circumstances there is no question of NWB being required to elect whether to rely upon its claims in these proceedings or its cross-claims in California, as is suggested in Utrecht's skeleton argument.

    CONCLUSION

  75. For these reasons I would dismiss the appeal. Finally I would like to record that both counsel expressly paid tribute to the high quality of the judge's judgment and I would like to add my own tribute to theirs.

    Lord Justice Laws

  76. I agree.

    Lord Justice Aldous

  77. I also agree.


Cases

Reichhold Norway ASA v Goldman Sachs International [1999] 2 Lloyd's Rep 567; Société Nationale Industrielle Aérospatiale v Lee Kui Jak [1987] 1 AC 871; Barclays Bank Plc Homan [1993] BCLC 680 and Airbus Industries GIE v Patel [1999] 1 AC 119; Amchem Products Inc v British Columbia (Workers Compensation Board) [1993] 1 SCR 897; Continental Bank NA v Aeakos Compania Naviera SA [1994] 1 WLR 588; The Angelic Grace [1995] 1 Lloyd's Rep 87; Donohue v Armco Inc [2000] 1 Lloyd's Rep 579; de Dampierre v de Dampierre [1988] 1 AC 92; Canada Steamship Lines Ltd v The King [1952] AC 192; Smith v South Wales Switchgear [1978] 1 WLR 165; Phillips Products Ltd v Hyland [1987] 1 WLR 659; Smith v Bush [1990] 1 AC 831; HIH Casualty v Chase Manhattan Bank, unreported, 31 July 2000; ICS Ltd v West Bromwich Building Society [1998] 1 WLR 896; Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] 1 QB 600; Thomas Witter v TBP Industries Ltd [1996] 2 All ER 573

Legislations

Unfair Contract Terms Act 1977, s.11(1)

Representations

Mr Michael Brindle QC and Mr Bankim Thanki for the Appellant (instructed by Herbert Smith)
Lord Grabiner QC and Mr Robin Dicker QC for the Respondent (instructed by Allen & Overy)


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