UK: Information After Completion: Buyer Reliance On A Further Assurance Clause And Implied Terms

The High Court has recently had to consider whether a further assurance clause in a share purchase agreement required the seller to provide the buyer with information after completion and whether, alternatively, there was an implied term in the agreement that it would do so.

Facts

The proceedings arose out of the sale of a Danish company (target) by a Swedish company (seller) to a Japanese company (buyer). At the time of the sale in 2011, the target had appealed against an assessment by the Danish tax authorities that the target should have paid Danish withholding tax on interest on money it had borrowed from the seller. That appeal was still outstanding.

The agreement contained a detailed indemnity in favour of the buyer to deal with this. Under this the seller agreed to indemnify the buyer in respect of any payment of the disputed withholding tax to the Danish tax authorities. This was subject to various limitations and exclusions, including a time limit of 30 September 2017 and various conduct of claims provisions which operated for the seller's benefit. The indemnity clause also contained an acknowledgment by the buyer that KPMG had collected confidential "black box" information from the ultimate owners of the seller and various undertakings not to undermine the confidentiality of that information.

Elsewhere, the agreement also contained a general further assurance clause under the terms of which each party agreed to "... do or procure the doing of all such acts and/or execute or use reasonable endeavours to procure the execution of all such documents as are reasonably necessary for giving full effect to this Agreement, including the sale of the Shares."

The withholding tax dispute continued and in October 2015 the black box information was released to the buyer's Danish tax advisers. They concluded that the information was inadequate to begin negotiations with the Danish tax authorities. As a result, in December 2015, the buyer wrote to the seller asking for certain further information (the further information). However, the seller denied any obligation to provide the further information and in April 2017 the buyer started proceedings.

The buyer argued that the agreement imposed an obligation on the seller to provide the further information to the buyer. It contended that the obligation arose either because this was the meaning of the further assurance clause in the agreement read with the indemnity or because there were implied terms to that effect.

Held

The court rejected the buyer's arguments. The court held there was nothing in the express terms of the agreement that required the seller to provide the further information. There was therefore nothing in the agreement for the further assurance clause to bite on.

The court also rejected the buyer's submission that, either as an aid to interpreting the further assurance clause or as a free-standing implied term, the seller had a duty to co-operate by providing the further information. The court found that it was not necessary to imply such a term to make the agreement workable. Further, there was no room to imply a term dealing with providing investor information. The "black box" clause expressly addressed that issue, and it was not possible to imply a duty of co-operation when other parts of the agreement expressly provided for duties of co-operation on other matters.

Comment

The decision illustrates the importance of considering what information or co-operation a party may need from another party after a transaction completes and of ensuring that, insofar as is possible, the agreement expressly covers this. Where there is a sophisticated and complex agreement which commercial parties have negotiated with the benefit of legal advice it may, as in this case, be difficult to persuade a court to imply terms. And a further assurance clause will only help the party wishing to rely on it if it can point to the obligations in the agreement which the further assurance clause supports.

Takeda Pharmaceutical Company Limited v. Fougera Sweden Holding 2AB [2017] EWHC 1995 (Ch)

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