Veranova Bidco LP v Johnson Matthey PLC & Ors

This claim has its origins in the disclosure process preceding the sale by the Defendants to the Claimant of the Johnson Matthey Health Business (the “Health Business”). The Claimant alleges that the Defendants were in fraudulent breach of certain warranties contained within the Sale and Purchase Agreement (the “SPA”), which was signed on 16 December 2021. The transaction completed on 31 May 2022.

The Claimant is an affiliate of funds managed by Altaris LLC (“Altaris”) formerly known as Altaris Capital Partners LLC. Altaris is an investment first registered in Delaware, USA, headquartered in New York, USA, founded in 2003 with an exclusive focus on acquiring and building companies in the healthcare industry. The Claimant is a Delaware limited partnership that was formed on 13 December 2021 as a special purpose vehicle for the purpose of purchasing the Health Business. The Claimant was originally called Hermes Bidco LP and changed its name to Veranova Bidco LP (“Veranova”) on 26 April 2022.

The First Defendant, Johnson Matthey Plc is the ultimate holding company for the Johnson Matthey Group (the “JM Group”). The JM Group is a collection of businesses that are principally focused on the transport, energy and chemicals sectors. It is a large group, and the First Defendant was listed on the FTSE100 until 1 December 2021 (and on the FTSE 250 thereafter). In the financial year ending 31 March 2021 (i.e. the last full financial year before the sale of the Health Business), the JM Group generated revenues of £15.7bn and an underlying operating profit of £504m. The Second and Third Defendants, Johnson Matthey Investments Ltd and Johnson Matthey Incorporated, are wholly-owned indirect subsidiaries of the First Defendant. In the rest of this judgment references to the “JM Group” are to the Defendants collectively, save where it is necessary to distinguish between them.

The Health Business manufactured active pharmaceutical ingredients (“API”s) for use in both branded (“originator”) and “generic” drugs. Prior to the completion of the sale it was run by a management team based in the US (the “Health Management Team”) and operated across eight sites via three companies:

The Health Business was a non-core part of the overall JM Group. A financial due diligence report produced for the JM Group by KPMG LLP, dated 14 July 2021 (the “KPMG Report”), stated that in FY21, the Health Business generated a total revenue of £257.3m, of which £157.3m (61.1%) came from the generics division.

One of the major generic APIs manufactured by the Health Business was buprenorphine hydrochloride (“BHCL”), for which its largest customer by value was Alvogen Inc. (“Alvogen”). The contract pursuant to which the Health Business sold BHCL to Alvogen (the “Alvogen Supply Agreement”) required Alvogen to purchase a minimum 75% of its BHCL requirements from the Health Business. It also contained what was referred to during the trial as a price match clause. This (in very broad terms) entitled Alvogen to initiate discussions with the Health Business no more than once a year in the event that it received a bona fide competing offer from a third party manufacturer which was at least 8% lower than the price charged under the Alvogen Supply Agreement. If the Health Business failed to match the offer or come to some other mutually acceptable arrangement, Alvogen would be entitled to source BHCL from an alternative supplier.

JM sold the Health Business to the Claimant via a suite of transaction documents central to which was the SPA. The SPA contained a number of warranties including the following:

Since their numbering changed during the course of the negotiations for the SPA, I shall refer to them in this judgment as the Ordinary and Usual Course Warranty and the Key Contracts Warranty respectively. It is the Claimant’s case that one or other or both of them was false as at 16 December 2021.

The Claimant asserts that the Ordinary and Usual Course Warranty and Key Contracts Warranty were false as at 16 December 2021 because the Health Business was at that date in the process of renegotiating the price under the Alvogen Supply Agreement following the invocation by Alvogen of the price match clause. This was in consequence of an offer made to Alvogen on about 18 October 2021 by an alternative manufacturer (subsequently ascertained to be Chr. Olesen Synthesis A/S) to supply BHCL at around US$8/g (albeit on a tiered basis dependent on volumes purchased). This will be referred to as the “Olesen Offer”. US$8/g was much lower than the price then being charged to Alvogen of US$16/g.

The Claimant accepts that it was informed by the Defendants during the sale process that the Health Business was renegotiating the price of BHCL charged to Alvogen, but says it was given the false impression by the Defendants that those negotiations related only to a proposed reduction in price from US$16/g to around US$12-13/g, rather than the actual reduction which occurred to around US$8/g.

It is submitted by the Claimant that the negotiations which took place following the Olesen Offer would not only have an adverse or detrimental effect on the business, but also amounted to a material alteration to the nature, scope and manner of the business. It is common ground that the Alvogen Supply Agreement was a key contract and that the price was a material term for the purpose of the Key Contracts Warranty.

By virtue of certain contractual limitations in the SPA, the Claimant can only succeed in a claim for breach of warranty if it can prove that the claim arose from the fraud or wilful misconduct of the Defendants. For this purpose, it relies on the state of mind of the following four senior individuals within the JM Group (the “JM Executives”):

Other individuals who featured prominently in the events giving rise to this claim are four members of the Health Business Management team at the material time: (i) Niek Stapel, the Sector CEO of the Health Business; (ii) Nick Shackley, the Vice President of Strategic Marketing, Generics Products and Solutions; (iii) Andrew Wesztergom, the Vice President of Finance; and (iv) Ross Oehler, the General Counsel. The documents also contain references to Kenneth Zrebiec, the Vice President for Manufacturing Operations, and Alex Zahiri, Vice President of Innovator Products and Solutions.

The claim was commenced on 22 May 2023. As well as asserting a cause of action for breach of warranty, it initially also pleaded a claim in deceit against the JM Executives as well as alleging fraudulent misrepresentation by Mr Stapel and Mr Lyons. However, the allegations of fraudulent misrepresentation were subsequently dropped on 17 March 2025 and the deceit claim was withdrawn on 23 October 2025, on the basis that the Claimant would pay the Defendants’ costs of that claim in any event, and on the indemnity basis in certain scenarios.

Accordingly, none of Health Management Team is now accused of behaving fraudulently.

The Defendants dispute that there has been any breach of warranty. They say that discussions with a purchaser on price pursuant to a contractual term are within the ordinary and usual course of business and that the Health Business had therefore been carried on in the “ordinary and usual course consistent with past practice, without any material alteration to the nature, scope or manner of the business”. Moreover, there was no breach of the Key Contracts Warranty because negotiations with Alvogen did not commence until after 16 December 2021.

In any event, the Defendants submit that the warranties were adequately qualified by disclosures and that there was no fraud because none of the JM Executives possessed the required knowledge and intention.

The allegations of fraudulent breach of warranties in this claim require careful examination of the elements that need to be proved and, in making their submissions, the Claimant advanced a primary case along with three alternative cases. At my request, the parties helpfully agreed the following List of Issues:

At the outset of the trial, the Claimant indicated that, unless agreement could be reached, it might in due course seek permission to amend its Particulars of Claim in response to a complaint by the Defendants that it was unclear as currently pleaded. Agreement could not be reached and a draft pleading was put before the court at the conclusion of the evidence. The putative application was unusual since both parties maintained that the amendment did not materially add to the existing pleading. The Claimant therefore put it forward on the basis that, in those circumstances, there was no particular reason to refuse it. The Defendants, however, submitted that, on one reading at least, the draft pleading contemplated that the warranties could be independently rendered false because one or more of the “commercial implications” of the Olesen Offer had not been disclosed. Mr Rainey argued with some force that this had never previously been suggested, and that it was unclear what specific commercial implications were being referred to. Moreover, this was not the case that the Defendants’ witnesses had come to court to meet and it would be unfair to allow such an amendment to be made after they had completed their evidence. He accordingly resisted it for that reason. Alternatively, he submitted that if this was not the purpose of the amendment then it changed nothing and was unnecessary.

Having heard submissions and scrutinised the pleading, the court expressed certain non-definitive views as a result of which the application was not pursued further. It is therefore not necessary to say anything further save that, particularly in a case involving allegations of dishonesty and fraud, it is particularly important that the Claimant is confined to its pleaded case.

As I explained to the parties at the conclusion of the hearing, as a result of unfortunate scheduling, there would inevitably be a considerable delay before I was able to produce this judgment. I am indebted to them for their considerable assistance in producing a joint Factual Narrative. This was largely agreed and forms the basis of the Factual Synopsis set out in the attached Appendix. I do not therefore set out the course of events in any detail here and reference should be made to the Appendix as necessary which, where there was a dispute, represents the facts as I find them to be.

On behalf of the Claimant, I heard oral evidence from Mr Fulco, Mr Stapel, Mr Shackley and Mr Chatzivasileidis, all of whom appeared in person. The written evidence of Mr David Payne and Mr Donald LaFerle was admitted without them being required to give oral evidence. The Defendants called oral evidence from Mr MacLeod, Mr Oxley, Mr Martin, Mr Lyons, Ms Vawda and Mr Oehler, all of whom appeared in person.

In assessing their testimony, I bear very much in mind the fact that the events in question took place some years ago and that the JM Executives, in particular, had other priorities which were occupying them to a greater or lesser extent so that they were not solely focused on this particular transaction. It is now generally accepted that all “memory” of distant events in fact depends on a process of reconstruction which is inevitably influenced, whether consciously or not, by a multitude of factors: see, for example, Gestmin SGPS SA v Credit Suisse (UK) Ltd, [2013] EWHC 3560 (Comm) at [15]-[22], including the particular materials from which the witness may have been invited to refresh his or her memory as well as the fact that preparation for trial may result in the witness becoming increasingly reliant on the reconstructed memory rather than on his or her original experience of events. Indeed, many of the witnesses who gave evidence before me frankly recognised the limits of their actual recollection in this regard.

A further factor is the very natural human instinct for a witness, when their past behaviour is subjected to critical scrutiny, to reconstruct events in such a way as to put themselves in the most favourable light possible, especially when they have a stake in the outcome of the proceedings through a concern for their own reputation. This is a particularly pertinent consideration here, where the allegations are ones of fraud and where Mr Stapel and Mr Shackley must have found themselves in a very difficult position as retained employees of the Health Business after the sale to the Claimant.

For these reasons, the court will be particularly astute to test the witness evidence carefully by reference to the contemporaneous documentation: see the valuable guidance provided by Leggatt J (as he then was), in Gestmin (supra) at [20]:

Both parties also relied on expert pharmaceutical evidence to assess the expected pricing trajectory of BHCL. The Claimant’s expert was Mr Edric Engert, an independent consultant for Valere Capital Partners LLP, while the Defendants called Dr. Fintan Walton, Chief Executive of PharmaVentures Ltd.

Separate quantum experts were engaged to assess quantum in light of the projections made by the pharmaceutical experts but in the event they were not called to give oral evidence as the parties were able to agree the financial consequences which flowed from each side’s case on the pharmaceutical issues. I address the expert evidence in section H below.

Nicholas Fulco: Mr Fulco’s evidence was high-level. He was assertive and at times overly confident in the strength of his recollection from which he frequently had subsequently to retreat. In particular, he was obliged to resile from the “strong recollection” of a call with Mr Lyons which he described in his witness statement when this was undermined by contemporaneous emails. He admitted that he had confused the sequence of events and conflated a series of communications. While I had no reason to doubt his honesty, he was not always able to support his assertions and I found his recollection to be generally unreliable. This is not surprising. He was a busy investment professional, and it was noticeable that he had a much more detailed recollection regarding the various financial updates, which perhaps gives some indication of where his primary focus was directed. He was surprisingly reluctant to state clearly in response to cross-examination whether he did or did not consider Mr Oehler to be honest.

Nicolaas Stapel: As Chief Executive Officer of the Health Business, one could expect Mr Stapel to possess the best knowledge of what was happening on the ground and to take responsibility accordingly. Yet Mr Stapel was a very defensive witness who demonstrated a marked tendency to minimise his role in the sale of the Health Business and an equally marked tendency to deflect criticism on to others. He was inconsistent in his responses and wholly unreliable in his recollection of dates and timings which gave the lie to his claims to have a “vivid recollection”. Much of his evidence amounted to a reconstruction of what he thought he must have done or said or thought, which was frequently exposed as being simply wrong. This very much suggests a witness who is trying with hindsight to justify their conduct and it was difficult to avoid the conclusion that his evidence had been influenced by the charges of fraudulent misrepresentation which had been levelled against him (albeit subsequently withdrawn). Indeed, he accepted that this was preying on his mind when he prepared his first witness statement.

Four aspects of Mr Stapel’s evidence gave particular cause for concern. First, it became clear during cross-examination that his witness statements were misleading as regards the onus on the Health Management Team to review the relevant disclosures for accuracy. Having said in his written evidence that he and Mr Oehler had agreed it was not their role to report the Olesen Offer to Herbert Smith Freehills Kramer LLP (as it then was) (“HSF”) since it was the responsibility of CorpDev to manage and approve the warranties, he was forced to accept that the accuracy and truthfulness of the warranties was in fact a matter for him and the other members of the Health Management Team and not CorpDev. Moreover, there were examples in the documents of him correcting information on other occasions where he felt it necessary to do so. I was left with the impression that large parts of his written evidence were simply untrue and had been put forward in an attempt to pass all responsibility on to CorpDev. Secondly, Mr Stapel struggled to answer and contradicted himself when asked to confirm whether his own response in approving the disclosures had been truthful and honest. Thirdly, his recollection of the December Health Business Review (“HBR”) meeting changed over the course of proceedings, particularly regarding the attendees. And finally, his recollection of when Mr Lyons had been told about the Olesen Offer, while forceful at the outset, was exposed as being imprecise and wholly inconsistent with the documents. While some of his testimony was plausible enough, I regret to say that I cannot unreservedly accept him as a witness of truth and I am unable to place any reliance on his evidence save where it is supported by contemporaneous documentation or accords with my view of the inherent probabilities.

Nicholas Shackley: Mr Shackley was an immensely cautious witness who took great time and care over his answers. Even so, it became apparent as his cross-examination progressed that his witness statement was incorrect in many respects and he too was often forced to change or retract what was there stated. For example, like Mr Stapel, Mr Shackley had to accept in cross-examination that the Health Management Team’s role in relation to approval of the Disclosures was less passive than he had described in his witness statement, and that each of them had a specific and personal responsibility to review the draft disclosures for their accuracy against the warranties which was understood at the time.

More troubling was his insistence that he had “a very clear recollection of participating in the HBR and presenting the Olesen material” on 13 December 2021 when the documentary evidence points overwhelmingly towards him not being in attendance. Thus, contemporaneous emails show that he was directed not to join the call and when forwarding some slides after the meeting, he himself noted that “The HBR was curtailed so I did not participate”. He had in fact declined the meeting and there is no record of his attendance at any stage. In his third witness statement, he said that he must have been asked to join from Mr Wesztergom’s office and that he recalled “standing at his standing desk to speak to the Olesen Offer Slide, rather than joining the meeting from my own desk”. However, he could provide no convincing explanation for why he would have attended from Mr Wesztergom’s office despite his superior, Mr Stapel, directing him not to attend and, if he did attend, it is not obvious why he messaged Mr LaFerle during the meeting to say that he had been “booted out” and that the meeting was now taking place only with Mr Stapel and Mr Wesztergom. On any view, he accepted that he would have joined after Ms Vawda and Mr Lyons had already left.

His evidence on this and many other points was substantially undermined by the documentary record, to the point of being at times unbelievable, and I treated it with the utmost caution. He admitted that some of his evidence was incorrect and could be interpreted as misleading.

In fairness to both Mr Stapel and Mr Shackley, I recognise the difficult position in which they both found themselves as retained employees of the Health Business following the sale, particularly when allegations of fraud were made against the JM Executives and Mr Stapel himself. Nonetheless, it is striking that the Claimant made submissions in closing undermining their evidence, which were subsequently criticised by the Defendants as an impermissible attempt to impugn the honesty of its own witnesses. I agree that even if it was not asserted in so many words that they had given dishonest evidence, it was certainly insinuated.

As to this, there is undoubtedly a general principle that a party may not invite the court to treat the evidence of its own witness as dishonest and untrue. However, the ambit of this rule is less certain and it does not in any event appear to be absolute. Like the Court of Appeal in The Filiatra Legacy, [1991] 2 Lloyd’s Rep. 337 at 361, I tend to think that the question of what evidence can and cannot be accepted is one for the trial judge. In the event, I have not found it necessary to determine whether their evidence on this point was honest, dishonest or simply inaccurate, self-serving reconstruction.

Antonios Chatzivasileiadis: Mr Chatzivasileiadis was a helpful, albeit very nervous witness. His involvement in the case was confined to his attendance as a note taker for Linklaters during the due diligence calls on 2 and 9 November. The sale transaction was only one part of Mr Chatzivasileiadis’ work as a then-trainee at Linklaters and he had only moved to the corporate desk in September 2021. He frankly accepted that he was not aware of the details of all of the issues being discussed and had only a high-level understanding of the transaction. Each meeting was fast-moving with long agendas and it is unsurprising that, four years on, he had no independent recollection of what was said and that his memories were entirely based on his notes and any recollections triggered by these notes. Consequently, while I do not doubt Mr Chatzivasileiadis’ integrity as a witness, it was difficult to place any great weight on anything he said that was not captured in the contemporaneous documents.

Robert MacLeod: Mr MacLeod was Chief Executive Officer of JM from 2014 until 1 March 2022. I found him to be a straightforward and co-operative witness who gave clear, concise and fair evidence and was careful to distinguish between recollection and reconstruction. I accept him as a witness of truth, although it is fair to say that his actual recollection was somewhat hazy. This is understandable, since I accept his evidence that his primary focus at the relevant time was on JM Group’s strategic exit from its Battery Materials business. This was a much more important matter for the Group, both strategically and reputationally, as compared to the sale of the Health Business which was a very minor and non-core part of the overall business. He would not, therefore, have been involved in the day-to-day running of the transaction or of the disclosure process. I did not agree with the Claimant’s view that this was an attempt to distance himself from the terms of the SPA and Disclosure Letter. The current intense focus of the forensic spotlight on BHCL and Alvogen should not be allowed to obscure the past reality of running a multi-billion-pound conglomerate.

However, Mr MacLeod did make a series of very significant concessions, including that in his view it was obvious that the Olesen Offer needed to be disclosed. He also accepted that the Disclosure Letter did not adequately disclose the Olesen Offer. The significance of these concessions is discussed further below: see paragraph ‎179 below.

Stephen Oxley: Mr Oxley was a measured witness. He had become Chief Financial Officer only on 1 April 2021 and gave evidence that, as a relatively new senior executive, his attention, like that of Mr MacLeod, was principally focused on the exit from the Battery Materials business. I reject the Claimant’s argument that Mr Oxley was lying when he said he could not recall some of the details of the events in question. He was persistently accused of being evasive but since many of his answers which attracted this criticism were in response to hypothetical questions about what he would have thought or done if he had known “x”, I found his evidence that he could not answer them even hypothetically without also knowing “y” and “z” to be entirely understandable and fair. On the contrary, I assessed him as a convincing and coherent witness who maintained both his composure and his testimony under very persistent and sometimes unnecessarily hostile questioning. Moreover, many of the matters on which the Claimant relied as demonstrating that his evidence was unreliable were peripheral to the main issues in the case and do not cast any doubt on my conclusion that he was a witness of truth.

David Martin: Mr Martin struck me as a fair and frank witness who again was subjected to some fairly hostile questioning. I was satisfied that I could accept his evidence without reservation. The parties agree that neither Mr Martin nor anyone else at HSF was told about the Olesen Offer at any stage during the Project Hermes sale.

James Lyons: Mr Lyons could not recall much, if anything, about the disclosure process or the various calls, meetings and discussions in which he participated. Nor could he clearly remember whether or not he in fact attended some of the calls or meetings which featured in his calendar or, if so, for how long. It is fair to note that, as with many of the Johnson Matthey employees, they had busy diaries with frequently overlapping appointments, so I do not find this surprising. He was a hesitant witness but I did not get the impression that this was due to any evasiveness on his part. Rather he was being careful to ensure that he fully understood the questions being put to him.

On the critical point as to when he first learned of the Olesen Offer, his evidence was that when Mr Fulco raised the question on 22 May 2022 of a bona fide offer which the Health Business was obliged to match, he could clearly recall his reaction which was that this was the first he had heard of it. This had a ring of truth about it and while he fairly accepted on the basis of Ms Vawda’s notes that they must have been told by the Health Management Team on 3 December 2022 that there was a structural issue with Buprenorphine and that Scotland was no longer economic due to the decline in Buprenorphine revenues, I am satisfied that he was telling the truth when he said that he was not aware of any offer from a specific supplier to a specific customer and that he did not “join the dots” between this information and either the renegotiated deal with Alvogen which was signed in February 2022, or the Olesen Offer to which Mr Fulco was referring in May 2022. At most he accepted that the offer might have been discussed during a call with Mr Wesztergom in February 2022 but he did not recall discussing it specifically and the evidence does not satisfy me that the Olesen Offer as such was discussed. I reject the assertion that he was deliberately seeking to mislead the court in his evidence.

Sarah Vawda: Ms Vawda was cross-examined hard for more than two days, which she withstood with great stamina and composure. It was evident that she was a person of decided and independent views which she was not afraid to express, and that these were sometimes at odds with those of her colleagues, although this did not appear to have been an issue in relation to the sale of the Health Business. She was an articulate and confident witness who gave her answers clearly and concisely and without evasion. Although she could not remember particular emails or meetings, her recollection where it existed was generally confirmed by other material. She readily agreed with most of the propositions put to her, for example relating to the materiality of the Olesen Offer, but was adamant that she was never told about it. I accept her as a witness of truth and reject the wide-ranging allegations that were put to her of duplicitous and dishonest conduct. As she aptly commented at one point, “The assumption that every time I reply to something I had something else in mind … is, with respect, quite preposterous.” Having heard Ms Vawda give evidence, I can only agree.

Ross Oehler: Mr Oehler was one of the few witnesses in the case who was not accused by the Claimant of dishonesty. I found him to be an articulate and collected witness. He was precise in his answers and while he did not pretend to have a current recollection of very much, he said what he recalled and stuck to it. I had no cause to doubt his honesty.

During the course of the trial, the Claimant cross-examined Ms Vawda and Mr Oxley on the basis that some of their conduct in relation to the transaction had been dishonest. In due course, it made extensive closing submissions in reliance on this cross-examination to suggest that the evidence of these witnesses could not be accepted and that they were fundamentally dishonest.

In particular, as part of a broader attack based on what the Claimant framed as her propensity to withhold important materials, it was put to Ms Vawda that she had acted dishonestly in signing off on the release of the Hermes Q1 Update materials which contained text suggesting that the Health Management Team had a “high degree of confidence” in the original FY22 forecast. In fact, Mr Stapel had been asked expressly to review the draft update and had explicitly confirmed that the text was “ok”. He did not suggest that he had been under any pressure to do so. It was nonetheless put to Ms Vawda that she could not honestly have believed this since Mr Stapel had previously said that the original forecast was untenable. However, as she said, unless and until any revised forecast had been formally approved, these were the figures provided by the Health Management Team and the figures on which they had signed off. She could only ask them what they believed and what they were willing to provide and it was not for her to override or change the figures she received back from them. In any event, since the Claimant was given the actual trading figures, it could assess the likelihood of meeting the forecast for itself.

For his part, Mr Oxley was accused of having misled the market and JM’s auditors in relation to certain matters relating to the Health Business’ trading figures.

The Defendants, unsurprisingly, submitted that none of these allegations had been pleaded and that no disclosure had been given about them. They pointed to authority that facts intended to advance a case of dishonesty should as a matter of fairness be pleaded: see Three Rivers District Council v Bank of England (No 3), [2003] 2 AC 1 at [186]:

There is considerable force in this criticism and to the extent that such cross-examination was intended to form the basis for an inference of dishonesty, it was in my view impermissible and unfair. When challenged, however, Mr Salzedo eschewed any such intention and insisted that the questioning went solely to matters of credit. As he accepted, he was therefore bound by the answers he received and could not go behind them, although the Claimant’s closing submissions at times came perilously close to straying beyond simply matters of credit into general dishonesty in relation to the transaction.

In the event, I was not persuaded that there was in fact any recognisable pattern in Ms Vawda’s behaviour beyond strategic business conduct. In particular, I do not accept that she can be criticised for wanting to control the release of information to the Claimant so that the communication of the admitted deterioration in the Health Business could be managed in the most advantageous way possible. That was, after all, her job. As far as Mr Oxley is concerned, I accept his denial that he attempted to mislead the market or the auditors and his answers are in any event final.

Accordingly, while it would perhaps have been better if these allegations had not been made in the way they were, they did not ultimately affect my decision.

I should nonetheless remark that, on re-reading the transcript, there were a number of features which troubled me. These principally consisted of the Defendants’ witnesses being questioned on the basis that they had accepted a proposition when they had not in fact done so – or at least not fully or unambiguously. Sometimes the witnesses picked this up for themselves. More often they did not. Some of these passages were then relied on in the Claimant’s closing submissions even though they were not necessarily a fair reflection of the witness’ evidence taken as whole. Questioning of this nature should on the whole be avoided. It is unattractive and unfair to the witness who cannot always be expected to be exercising the laser-like precision of a lawyer in their choice of words, still less to be aware of where any particular question is leading or which particular aspects of their answer might subsequently be regarded as critical.

One example will suffice. Ms Vawda consistently denied knowing about the Olesen Offer. In the Claimant’s closing submissions, however, it was said that she had agreed she knew there had been an offer from a competing supplier to supply at a price substantially lower than hitherto, and that this was a significant fact which needed to be disclosed. However, on any fair reading of her evidence, all that she agreed she knew was what was reflected in her notes of the meeting of 3 December and her email to Mr MacLeod of 6 December, namely that Scotland would not be economic as Buprenorphine had significantly declined, due to “a new entrant producing at a much reduced cost” and that this was a structural problem. With respect, there is nothing in either of these documents about any specific competing offer to any customer of the Health Business and Ms Vawda’s acceptance of what was said to be a significant fact has to be read in light of her note and email, rather than an offer she steadfastly maintained she did not know about.

A raft of other similar complaints were made by the Defendants following exchange of written closings to the effect that the Claimant’s closing submissions misstated the effect of the evidence which had been given. It is unnecessary for me to rehearse these here. Suffice it to say that I have re-read the transcripts for myself in full and satisfied myself as to the effect of the evidence given and the extent to which it supports one side’s case or other.

For completeness, I should say that I did not find attempts to get one witness to opine on the honesty or dishonesty of another witness helpful, particularly when the questions were put on the basis that the other witness had particular knowledge which may or may not have been the case. Ultimately, the assessment of the witnesses and the question of honesty are matters for the court. Other people’s views on a hypothetical basis are of little value.

Both Mr Oehler and Mr Wesztergom remained with the Health Business after the sale, although they have now moved on. They were intimately involved in the events leading up to the sale as part of the Health Management Team and it might have been expected that the Claimant would call them both to give evidence in support of its case. When it became apparent that it was not intending to do so, the Defendants themselves took steps to depose Mr Oehler and, as appears above, he in fact came and gave evidence on their behalf.

There has been no explanation from the Claimant as to why Mr Wesztergom was not called, notwithstanding its confirmation that he was under a contractual obligation to give evidence for it if called upon to do so. The Defendants accordingly invited me to infer from his absence that his evidence would not have supported the Claimant’s case any more than Mr Oehler’s did.

In such cases, the court takes a common-sense approach as explained by Lord Leggatt in Royal Mail Group Ltd v Efobi, [2021] UKSC 33; [2021] 1 WLR 3863 at [41]:

In this case, there was no evidence that Mr Wesztergom was unavailable to give evidence. On the contrary, he was under a positive contractual obligation to make himself available. He was a party to nearly all of the key meetings, discussions and correspondence and although he was not the only witness who could speak to these matters, his evidence would have been highly relevant given that the question of what was said or known, by whom and when, was hotly disputed.

In these circumstances, I conclude that this is a case where it is appropriate to infer that his evidence would not have supported the Claimant’s allegations that at least some of the JM Executives had the relevant knowledge, and I do so infer. The fact that the Defendants might have been able to call Mr Wesztergom for themselves as they did with Mr Oehler is neither here nor there. It is the Claimant who brings this claim and who bears the burden of proof.

In cases of fraud, the standard of proof remains the balance of probabilities. However, the courts have consistently recognised that in practice more convincing evidence will often be required to establish fraud than other types of allegation. This is on the basis that fraud is usually less likely than negligence and that the more serious the allegation, all other things being equal, the less likely it is to have occurred: Kazakhstan Kagazy Plc v. Zhunus, [2017] EWHC 3374 (Comm) at [155]-[156].

Despite (or maybe because of) this, there is an enhanced need to test the witness evidence carefully against the documentary evidence where it exists: Armagas Ltd v Mundogas SA (The Ocean Frost), [1985] 1 Lloyd’s Rep 1 at 57.

Further, although motive is not a necessary ingredient of fraud, the presence or absence of motive may be an important factor in assessing whether a person’s conduct has been dishonest. If authority is required for what might be thought to be a self-evident proposition, see Mortgage Agency Services Number One Ltd v Cripps Harries LLP, [2016] EWHC 2483 (Ch) at [88]:

On the other hand, it is also necessary to bear in mind that fraud is not generally signposted explicitly and that it can very often only be established by inference based on the cumulative effect of individual pieces of circumstantial evidence. As Bryan J said in Lakatamia Shipping Co. Ltd v Su, [2021] EWHC 1907 (Comm) at [64]-[65] after citing comments of Rix LJ in JSC BTA Bank v Ablyazov, [2012] EWCA Civ. 1141:

I bear all these considerations very much in mind when evaluating the evidence.

The Claimant’s case was initially advanced on the basis that fraudulent misrepresentations were made, by Mr Oehler amongst others, during the due diligence calls and in the Disclosure Letter and/or equivalent passages in a draft Disclosure Letter. Those allegations were subsequently withdrawn, and the claim now rests solely on breach of warranty “in respect of the fraud or wilful misconduct” of one or more of the JM Executives when they signed off on the SPA.

It was not controversial that parties are free to agree whether and to what extent the warranties given in a sale contract may be qualified. Commonly this is done by means of a disclosure letter. A useful summary of the principles relating to contractual disclosure clauses was given by O’Farrell J in Triumph Controls - UK Ltd v Primus International Holding Company, [2019] EWHC 565 (TCC) at 335 as follows:

In this case, the relevant provisions of the SPA concerning warranties and disclosures are as follows:

For ease of reference, I set out again here the Business Warranties in issue in this case:

These clearly have to be considered alongside the accompanying disclosures. In this regard, JM provided a Disclosure Letter (running to some 303 pages) which contained the following general provisions and specific disclosures in relation to these particular warranties:

INTRODUCTION

This letter, together with all information contained or referred to in it or deemed to be disclosed by it (including in any Appendix to it) constitutes the Disclosure Letter referred to in the Agreement.

The Business Warranties and the Tax Warranties contained in the Agreement are qualified by the disclosures contained in this letter provided that, in each case, the disclosures are Disclosed, and the Sellers will not be in breach of any such Business Warranties or Tax Warranties in respect of the matters Disclosed under this letter. The disclosure of any matter hereby shall not imply any representation, warranty, undertaking, assurance, covenant, indemnity, guarantee or other commitment of any nature whatsoever not expressly given in the Agreement and none of the Business Warranties nor the Tax Warranties shall be extended in scope by any of the disclosures.

For the sake of convenience, each matter disclosed is listed against the paragraph number of the Business Warranties or Tax Warranties to which the disclosure is considered most likely to relate, but any disclosure, whether made generally or specifically, directly, or by reference to any document or other source, will apply to all of the Business Warranties and the Tax Warranties to which it is or may be relevant and any disclosure will not be limited in any way to the specific Business Warranty or Tax Warranty to which it refers or against which it is listed.

Where brief particulars of a matter are set out or referred to in this letter or a document is referred to but not attached or a reference is made to a particular part only of such document, full particulars of the matter and full contents of the document are deemed to be disclosed as if set out in full in this letter.

Since the applicable Accounts Date, increased competition in the market for the Businesses' buprenorphine products has adversely impacted, and continues to adversely impact, the Businesses' market share in that market and the prices that the Businesses are able to charge their customers for these products. Pricing discussions in relation to this issue are ongoing with Alvogen. The projected financial impact of this issue cannot be quantified as at the date of this letter but the impact of this issue on the financial performance of the Businesses during the relevant periods is reflected in the Q1 Accounts and the September 2021 Accounts.

Since the applicable Accounts Date, increased competition in the market for the Businesses' buprenorphine products has adversely impacted, and continues to adversely impact, the Businesses' market share in that market and the prices that the Businesses are able to charge their customers for these products. Pricing discussions in relation to this issue are ongoing with Alvogen. The projected financial impact of this issue cannot be quantified as at the date of this letter but the impact of this issue on the financial performance of the Businesses during the relevant periods is reflected in the Q1 Accounts and the September 2021 Accounts.

The upshot of these provisions is that in order for the Claimant to make good its claim, it must show that:

Ordinary and Usual Course Warranty

It was the Claimant’s case that the price negotiations undertaken after notification of the Olesen Offer meant that the Health Business was not being carried on “in the ordinary and usual course consistent with past practice and so as to maintain it as a going concern, without any … material alteration to its nature, scope or manner”.

Valiantly as Mr Salzedo attempted to sustain this submission, I am unable to accept it. The warranty in terms looks at a particular period in the past, namely from the Accounts Date to the date of the SPA. It is not concerned with what the future might bring. As at the date of the SPA nothing had occurred which was out of the ordinary course. To the contrary, negotiations about pricing are entirely to be expected in the course of a long-term supply relationship. For a business like the Health Business, where price erosion is a feature of the commercial landscape, such negotiations were very much in the ordinary and usual course, and, moreover, consistent with past practice given that Alvogen had triggered the price match clause at least once before.

Nor can it sensibly be said that the price negotiations resulted in a change to the nature, scope or manner of the business. Note that it is the nature, scope and manner of the business which is the focus of this part of the warranty, not the nature, scope or manner of particular contracts. In my judgment, as a matter of construction, the clause is therefore directed at the actual manufacturing or other activities being carried out by the business. Thus a change from manufacturing pharmaceutical products to chartering out yachts would undoubtedly be a change in the nature of the business, while a change from selling own-manufactured products to supplying as a distributor or through a franchise operation would be a change in the manner of the business. Altering the geographical reach of the business would amount to a change in its scope.

I can see that an alteration to the contractual arrangements under which the business was operated might, in some circumstances, indicate a change to the manner in which the business was carried out. However, this could only be the case where any negotiations leading to the alteration had concluded and the change had actually occurred in the relevant period. In this case that had not happened. More importantly, this warranty is inapt to cover price negotiations which are contemplated by existing contractual arrangements and where such negotiations have taken place on a previous occasion.

In short, I am entirely satisfied that there was no breach of the Ordinary and Usual Course Warranty.

Key Contracts Warranty

To set the scene, it is common ground that:

In the context of this case, breach of the Key Contracts Warranty requires the Claimant to show: first, that there were renegotiations as to a material term of a key contract and, secondly, that upon conclusion, those renegotiations would have an adverse or detrimental effect on the Health Business. I take each in turn.

The Defendants argued that mere notification of a bona fide third party offer under the Alvogen Supply Agreement does not necessarily give rise to a renegotiation of anything. It simply triggers the price match clause which does not positively require any renegotiation, whether as to price or any other term. Moreover, as a matter of fact, there were no renegotiations with Alvogen until 20 December 2021, after the SPA had been signed.

Whilst admiring the elegance and apparent plausibility with which this argument was advanced, I regard it as pure sophistry. First and foremost, it is contradicted by the Defendants’ express disclosure to the Claimant that the Health Business was in negotiations with Alvogen about the price of BHCL. The distinction which the Defendants tried to draw between (i) negotiations following Alvogen’s first invocation of the price match clause in 2020 which (it was said) were still continuing and had not yet reached a conclusion and (ii) anticipated separate negotiations following the Olesen Offer which were still in future strikes me as unreal.

Moreover, it founders on the rock of Mr Oehler’s evidence. He was clear that he had referred to ongoing negotiations with Alvogen in the due diligence calls but explained that the previous attempt to invoke the price match clause by Alvogen in 2020 had effectively petered out before being brought to a grinding halt by notification of the Olesen Offer. Accordingly, any ongoing negotiations could only have related to the Olesen Offer.

Secondly, Alvogen had asked the Health Business to match the Olesen Offer and although the Health Business did not put forward any counteroffer until after verification, Alvogen had fired the opening shot and negotiations were thus inevitable. Even if the 2020 negotiations were still limping on, the request to match was – at the very least – essential context to those continuing negotiations.

Thirdly, the Health Business and Alvogen were admittedly in negotiation about the conditions for verification of the Olesen Offer which was an essential pre-requisite for any discussions about price. Moreover, in the light of the communications which took place between them in late October regarding a possible linkage between BHCL and Lisdex, and Mr Patel’s email to Mr Oehler suggesting that they “proposed start and pricing structure dates and just kick it off”, I struggle to see how the parties were not engaged in a renegotiation process.

Mr Rainey invited me to test the matter by asking what would have happened if the Health Business had done nothing at all in response to Alvogen’s request to match the Olesen Offer. He submitted that Alvogen might well have walked away and gone to another supplier, in which case there would have been no negotiations or renegotiations at all. In my judgment, this submission loses touch with reality since it is fanciful to suppose that the Health Business would have simply put up the shutters in the face of a threat from its major customer for its flagship product to take its business elsewhere.

For these reasons, I am therefore satisfied that the invocation by Alvogen of the price match clause on 18 October 2021 in respect of the Olesen Offer marked the initiation of renegotiations within the meaning of the Key Contracts Warranty. Applying the usual canons of construction, I have no doubt that an ordinary person armed with all the background knowledge reasonably available to the parties at the date of the SPA would also understand the word “renegotiation” to cover this situation.

Alvogen was admittedly the Health Business’s most significant customer for Buprenorphine and there were no readily available alternative markets.

The benchmark set by the warranty is that the renegotiations would have an adverse or detrimental effect on the business, not that they might do so. In principle, a reduction in the price charged to Alvogen would not necessarily have such an effect since there might be mitigations which could be introduced, such as costs savings or greater efficiencies. That said, I accept that a drop of nearly 50% from the price currently being charged to US$8/g would have an adverse or detrimental effect unless offset by mitigating action. The evidence showed that at US$8/g the Health Business would barely cover the production costs of BHCL and that it would threaten the entire viability of the Annan site unless other production could be switched there to offset the loss of profit.

There was some debate after service of closing submissions as to whether the Claimant was attempting to advance a case that the Key Contracts Warranty was false on the basis of negotiations with Alvogen following a competing offer at a substantially lower - but unspecific - price. Ultimately, it was unclear to me whether Mr Salzedo was in fact putting his case in this way but, to the extent that he was, I agree with the Defendants that the Claimant had hitherto advanced its case squarely on the basis of the Olesen Offer and that this iteration of the argument was unpleaded and should not be permitted at this late stage.

Any adverse or detrimental effect therefore falls to be assessed by reference to the Olesen Offer. This requires consideration of whether it was sufficiently clear by 16 December 2021 that:

I bear in mind that the Health Business and the Claimant were effectively antagonists. Commerce is notoriously red in tooth and claw and any self-respecting buyer would naturally want to secure the best possible deal and leap on any opportunity to drive the price down. The Claimant had already reduced its offer several times on the basis of the Health Business’ continuing poor trading results in 2021 and there was nothing dishonest or unfair to my mind in the Defendants taking the view that they were not prepared to give it any further excuse to do so unless and until the position was clear. Clarification, however, required a two-stage investigation and consideration.

The first, essential, step was to confirm the Olesen Offer as genuine and bona fide. The price match clause was only triggered by a bona fide offer and until an offer had been verified as bona fide, it could not be said that the clause had actually been triggered. Mr Oehler’s verification visit to Alvogen took place on 10 December 2021, but it was not until 13 December 2021 that it was formally confirmed within the Health Business that the offer was indeed bona fide. In my view, there was no obligation on the Defendants to disclose the existence of the Olesen Offer before then. Until then, the Olesen Offer consisted only of the untested assertion of one customer. Indeed, the initial response of the Health Management Team to the offer was one of scepticism and incredulity and it was only gradually that they began to appreciate that it might in fact be genuine. Accordingly, there was nothing to disclose until after verification had taken place and there can therefore be no criticism of the Defendants’ failure to mention it in any of the due diligence calls.

The second stage was to try to assess the impact of the Olesen Offer. By 22 November 2021, the Health Business had tried unsuccessfully to negotiate a price higher than US$8/g by offering a profit share on Lisdex. However, quantification of the ultimate impact would depend on the availability of cost-cutting measures. It was not in dispute that the Health Business could not cover its costs at Annan unless it retained the Alvogen business and it could just cover those costs at a price of US$8/g. The Claimant accordingly submitted that the only realistic cost-cutting measure that could have been taken would have been to close Annan, although even that required consideration of the further possibilities that BHCL could be manufactured elsewhere, or that other production could be shifted to Annan.

All this was, of course, part of the Plan B assessment which was presented to senior management on 13 December 2021. In the event, Plan B modelled two scenarios which had been devised by the Health Management Team. The first modelled the retention of Annan with the addition of other products, while the second modelled closure. They were obviously not the only two possibilities but they clearly reflected the Health Management Team’s immediate reaction to the Olesen Offer. For the purposes of the present discussion, the important point is that both scenarios assumed a substantial drop in income from Buprenorphine.

Furthermore, by 16 December 2021, the precise tiering of the Olesen Offer had been disclosed to Mr LaFerle on 15 December 2021 and to Mr Stapel and Mr Shackley on 16 December 2021. As made clear by Slide 29 in the slides prepared for the HBR on 13 December 2021, the Health Management Team knew that the Health Business would have to match the Olesen Offer (or at least come close) if it wanted to retain Alvogen’s business. This they intended to do, since there was no realistic alternative in the absence of other readily available customers, as had been recognised by Mr MacLeod in his email to Mr Stapel of 3 December 2021.

In these circumstances, it cannot realistically be denied that, as at 16 December 2021, the conclusion of negotiations with Alvogen would have an adverse and detrimental effect on the Health Business, irrespective of whether or not it could be finally quantified. I am therefore satisfied that there was a prima facie breach of the Key Contracts Warranty unless it was adequately qualified by disclosure.

Disclosed/treated as Disclosed: in principle

The test laid down by the definition of Disclosure in the SPA is whether a matter has been fairly disclosed with sufficient detail to allow a reasonable buyer to make an informed assessment of the nature and scope of the matter concerned.

In this context, there was a debate before me concerning the relationship between clause 9.1 and paragraph B7 of the Disclosure Letter set out in paragraph ‎70 above. As a matter of textual construction, I tend to agree with Mr Rainey that the first step is to start with the Disclosure Letter and identify what matters are deemed to have been set out in full, before applying clause 9.1. However, it also seems to me that the court must avoid the danger of over-analysis. The critical question must always be whether the disclosure is fair and, as the authorities show, it may not be sufficiently fair simply to refer to a source of information: see Kitcatt v MMS UK Holdings Ltd, [2017] EWHC 675 (Comm); [2017] EWHC 786 (Comm) at [25].

The parties were also in dispute as to the relevance of extraneous statements, in this case what was said during the due diligence calls or in prior correspondence. The Claimant relied on BIP Chemical Holdings Ltd v Blundell, [2021] EWHC 2590 (CH.) in support of its submission that such statements could be relied upon in assessing the fairness of any disclosure. The Defendants argued forcefully that they were irrelevant and should be left out of account on the basis that to do otherwise would not only be contrary to authority but was also at odds with the express non-reliance provisions contained in the SPA. Mr Rainey submitted that the purpose of the warranty and disclosure scheme was to confine the ambit of disclosure to defined sources. Accordingly, just as the Defendants could not assert that a matter was disclosed by other means, equally the Claimant could not rely on extraneous material to read down or qualify what had been disclosed.

In support of this submission, Mr Rainey relied on Atten Bidco Ltd v Assassa, [2025] EWHC 2347 (Comm) which contained contractual provisions very similar to those in the present case. Thus “Disclosed” was defined as “fairly disclosed with sufficient detail to enable a reasonable buyer to identify the nature and scope of the matter disclosed in or under the Disclosure Letter or the Data Room (and Disclosure will be construed accordingly”). The contract also contained warranties that:

HHJ Worster held that the definition of “Disclosure” focused on what had been disclosed in the Disclosure Letter/Data Room, not on what had not been disclosed. Thus, the relevant enquiry was whether there was sufficient detail within the four corners of what was in the Disclosure Letter/Data Room to enable a reasonable buyer to identify its nature and scope. The defendants in that case accordingly could not rely on previous discussions to amplify what was in the Disclosure Letter/Data Room. In obiter comments, he further opined that the defendants could not even rely on the discussions as context for what was disclosed in the Disclosure Letter/Data Room, although in fact it made no difference since nothing had been said which changed the position and the disclosure was still insufficient and unfair. In the course of his judgment, he made the telling point that if something which had been discussed previously was material to a proper understanding of what had been disclosed, there was nothing to stop the seller adding it expressly to the Disclosure Letter/Data Room.

I respectfully agree with HHJ Worster that it is not open to a party to rely on extraneous material to go beyond the terms of any contractual agreement (in this case the Disclosure Letter) in order to identify the material that has been Disclosed. By the same token, it is not open to either party to rely on what has been said or discussed previously in order to assess whether that material amounts to “fair” disclosure of the relevant facts and circumstances.

It might, of course, be said that if the touchstone is fairness, the court would be donning self-imposed blinkers if it simply ignored what the Claimant had previously been told about the expectation that negotiations with Alvogen would conclude at around US$12-US$13/g. The argument is that this would be the very antithesis of fairness. I could see considerable force in this submission if the definition of Disclosure had referred to “the buyer” (as in BIP v Blundell), i.e., specifically to Veranova. However, it does not. It refers instead to “a reasonable buyer”, thereby clearly imposing an objective test. That, it seems to me, indicates an intention to exclude reliance by either party on anything outside the ambit of the Disclosure Letter in order to construe or qualify what is there said. Such an approach is entirely consistent with and supported by the non-reliance provisions on which the Defendants relied. Given the different definition in BIP v Blundell and the sheer extent of the non-disclosure in that case, I do not regard it as compelling authority to the contrary.

I see no injustice in this. If the Disclosure as so constrained is not fair for the reasonable buyer, then there is no need for the actual buyer to have resort to any extraneous material. On the other hand, if it is fair for the reasonable buyer, it is difficult to see why or on what basis the actual buyer should be entitled to complain given the contractual scheme to which it agreed. Conversely, if the seller is concerned that something said previously is necessary in order properly to interpret the Disclosure, then it should disclose it explicitly. It may not be under any formal obligation to provide additional material, but if failure to do so makes the actual disclosure unfair, then I do not see why the seller should be permitted to shelter behind the lack of any positive obligation in this regard.

In fact, the point is not live in this case since, for the reasons given below, I have concluded that there was not in any event fair disclosure of what I have held needed to be disclosed.

Disclosed/treated as Disclosed: fair disclosure in fact

In order to forestall a claim for breach of warranty for the purposes of clause 9.1 of the SPA it is the facts and circumstances giving rise to the claim which must be disclosed. In the context of the Key Contracts Warranty, the relevant “claim” is the assertion that the Health Business was “currently renegotiating [a] material term of [the Alvogen Supply Agreement] which, upon conclusion, would have an adverse or detrimental effect on the business”. The facts and circumstances giving rise to that claim plainly extend beyond the renegotiations themselves and include the context giving rise to those negotiations.

As already stated, it is accepted by the Defendants that there was no specific reference during the due diligence calls to the Olesen Offer specifically or to a price of US$8/g. This was a deliberate decision by the Health Management Team as they did not yet know whether the offer was genuine and bona fide. There was, however, a dispute between the parties as to whether the Claimant was positively told that the last attempt to trigger the price match clause had been made over a year previously or whether reference was made during any of the calls to a second, more recent, trigger by Alvogen.

The contemporaneous notes are somewhat ambiguous as to precisely what was said in this regard:

Having listened to the evidence, I am satisfied on a balance of probabilities that Mr Oehler did not say expressly that the price match clause was “last triggered” over a year ago. He denied having said any such thing in his witness statement and it would have been untrue if he had. Rather, he said only that the price match clause had been triggered over a year ago, that there had been no resolution and that negotiations were ongoing. The gist of Mr Oehler’s evidence has already been set out in paragraph ‎81 above. He said that he would not have been talking about two-year old negotiations which were dead and that the only reason to mention the first trigger at all was to set the scene for the second trigger. He did not recall saying anything about pricing.

On the other hand, while Mr Oehler may subjectively have had in mind that what he said about negotiations referred to separate negotiations in relation to a second offer, I am equally satisfied that he did not refer expressly to a second trigger. There is no reason why he would have done, and every reason why he would not prior to the Olesen Offer being verified. Until then, the price match clause had not technically been triggered and what he said was therefore not inaccurate. However, it is entirely understandable that the Claimant and the other attendees on the call understood that there had only been one invocation of the price match clause to date.

Mr Rainey nonetheless argues that express disclosure of ongoing pricing negotiations following a trigger of the price match clause (whenever it may have occurred) was sufficient to cover the developing situation with Alvogen and the further invocation of the price match clause.

I disagree. I accept the point made by Mr Martin that knowledge of the Olesen Offer specifically would not have been the only way in which the Claimant could have made an informed decision about the transaction. However, it is one thing to refer to negotiations in the context of increased market competition and downward pressure on pricing in general and quite another to refer to negotiations around a price which represented a sudden 50% reduction with a direct impact on revenues and material consequences for the operation of the manufacturing sites. To say that the Defendants could not quantify the precise financial impact of the Olesen Offer until negotiations with Alvogen had concluded misses the point. If the Health Business matched the Olesen Offer, there would be an adverse and detrimental impact which was qualitatively different from both general price erosion due to increased competition and the impact of a reduction to US$12-US$13 about which the Claimant was aware.

Thus, even if the disclosure was arguably sufficient to allow the Claimant to make an informed assessment of “the nature of the matter concerned” within the meaning of the definition of “Disclosure”, it was not in my judgment sufficient for it to make an informed assessment of the “scope of the matter concerned”.

I do not ignore the fact that where information is received which requires clarification before its impact can be properly understood, the Defendants would have had a legitimate commercial concern about divulging information which might prove not to be correct, particularly where the information in question is an unverified assertion by a single customer. That would permit a prospective purchaser to have a free shot at reducing the price on grounds which might turn out to be wholly unfounded. Moreover, to keep changing position looks chaotic and unprofessional. As Mr MacLeod said in his oral evidence: they would not keep giving updates. They would disclose once, and it was for CorpDev to decide when.

All that said, I am satisfied that the position had become sufficiently clear by 16 December 2021 that fair disclosure in accordance with the contractual provisions required Disclosure of the following facts and circumstances:

As to (a), it is irrelevant that the Health Management Team did not know the exact tiering of the Olesen Offer until after signature of the SPA. The offer had been presented as an offer at a price point of around US$8/g, and Mr Oehler had confirmed that it was bona fide. That was therefore the benchmark price against which negotiations would take place. As to (b), the subjective intention of the Health Management Team to match the Olesen Offer was relevant only to the Health Management Team’s forward-looking assessment of the impact on the Health Business and, as such, it did not need to be disclosed in itself. By contrast, the relevant circumstance for disclosure was the objective fact that retention of Alvogen’s business depended on matching the offer or at least coming close.

Nothing in the Disclosure Letter or Data Room amounted to fair disclosure of either of these matters. Nor do I accept that full particulars of the discussions with Alvogen were deemed to have been disclosed in the Disclosure Letter by virtue of paragraph B7. First, such a submission is inconsistent with the Defendants’ case that negotiations with Alvogen about the Olesen Offer did not commence until 20 December 2021. Secondly, no reasonably buyer in the position of the Claimant would have understood that these discussions related to a potential immediate drop in price of around 50%. Thirdly, a general and unspecific reference to price negotiations cannot be regarded as brief particulars of Alvogen’s operation of the price match clause on the basis of a specific offer at a specific price. Finally, there is considerable force in Mr Salzedo’s submission that the deeming provisions of paragraph B7 cannot apply to particulars of which the buyer had no reason to suspect even existed and to which it had no access. Indeed, it would be extraordinary if paragraph B7 amounted to a contractual agreement that full particulars were nevertheless treated as being incorporated into the Disclosure Letter in this situation and very clear wording would be required to achieve this result. In my judgment the appropriate test should be whether the brief particulars provided enable a purchaser to say “I want to see more about X” where X is the matter which needs to be disclosed. If the purchaser is not even alerted to the possibility that there might even be an “X”, then the deeming provisions cannot apply.

I do not criticise the Defendants’ failure to provide any quantification of the financial impact of the Olesen Offer. I accept that the precise consequences could not be calculated and, in any event, if fair disclosure was given as I have outlined above it was for the Claimant itself to assess the impact that the offer might have on revenues and what, if any, knock-on effects there might be on the viability of Annan or any other site. Obviously something would need to be done, but exactly what would be a matter for the Claimant if the sale proceeded or for the JM Group if it did not.

Subject to the all-important question of fraud/wilful misconduct, the Claimant has therefore established that there was a breach of the Key Contracts Warranty. If I am wrong about the exclusion of extraneous material and it is permissible to take account of the fact that the Claimant was told during the due diligence calls that the Health Business anticipated negotiations with Alvogen to conclude at around US$12-US$13/g then the position is a fortiori.

This was the major battleground between the parties. There was no dispute that the Defendants had given the warranties in question by virtue of the JM Executives having signed and approved the SPA. I have now found that the Key Contracts Warranty was false and was not adequately qualified by disclosure. The question is therefore whether this arose from the fraud or wilful misconduct of one or more of the JM Executives.

Test for fraud

There was no real dispute that the test for fraud or wilful misconduct in the context of a claim for breach of warranty in an SPA was substantially the same as the claim for deceit and therefore required that the defendant knew that the warranties breached were false; or gave the warranties without belief in their truth; or was reckless as to whether they were true or false: see Arani v Cordic Group Ltd, [2023] EWHC 95 (Comm) where this was common ground.

However, knowledge that a warranty is false requires some unpacking, particularly in a corporate context. Guidance on the point is provided in Raffeisen Zentralbank Österreich AG v The Royal Bank of Scotland, [2010] EWHC 1392 (Comm) at [338]-[340] where it was held by Christopher Clarke J (as he then was) that in the context of a fraudulent misrepresentation, it is necessary to prove that the defendant:

It is in this sense that the reference in some of the cases to “wickedness and dishonesty” is to be understood: see Armstrong v Strain, [1951] 1 TLR 856 at 871 per Devlin J. To that extent, the concession in Arani may have gone too far in so far as it suggests that there is an additional requirement to show that the defendant was dishonest by the standards of ordinary reasonable people with the same knowledge. Nonetheless, I agree with Mr Salzedo that if conscious knowledge in the Raffeisen sense is established then it would, almost inevitably, be dishonest by the standards of ordinary reasonable people.

The Claimant advanced a number of alternative cases as to how the test fell to be applied in the corporate context of this case. I deal with each in turn.

The Claimant’s primary case was that, once it is established that the warranties were false, the only further question is whether the Defendants knew the facts that made them false and this will be the case if any of the JM Executives knew such facts.

I have no hesitation in rejecting this submission. The analysis in paragraph ‎‎121 above necessarily means that the defendant must not only know the facts, but must also know or be reckless as to (i) the terms of the warranties and (ii) their falsity. If not, then there cannot be said to be conscious dishonesty.

The Claimant has only pleaded a case of fraud, not wilful misconduct. However, the reference to wilful misconduct in clause 9.27 is instructive since “wilful misconduct” refers to conduct by a person who knows that he is committing and intends to commit a breach of duty or is reckless as to the same: see National Semiconductors (UK) Ltd v UPS Ltd, [1996] 2 Lloyd’s Rep. 212 at 214 per Longmore J (as he then was) and De Beers UK Ltd v Atos Origin IT Services UK Ltd, [2010] EWHC 3276 (TCC) at [206] per Edwards-Stuart J. This necessarily implies that the conduct and the culpable state of mind must co-exist in the same person, since a person cannot intend to commit a breach of duty or be reckless as to the breach unless he is the person carrying out the relevant acts and omissions (or, I would add, is aware that another person is carrying out the acts and omissions and adopts or endorses them).

Accordingly, I fail to see how deliberate conduct by one employee can be coupled with the state of mind of someone who is not themselves doing anything. Such a situation cannot in my judgment sensibly be regarded as wilful misconduct, even if the conduct and the state of mind can be separately and independently attributed to a corporate employer as a matter of corporate attribution. That being the case, it seems to me that this gives colour and meaning to the concept of “fraud” in the SPA.

On the basis that conscious dishonesty is therefore required, the next question is how this is to be established in a corporate context. It was common ground that the state of mind of each of the JM Executives was attributable to the Defendants on ordinary principles of corporate attribution. However, the contentious issue was the extent to which it is permissible in a corporate context to aggregate knowledge of facts and knowledge of falsity in the corporate entity where such knowledge is held by different individuals.

Mr Rainey relied on Armstrong v Strain (supra) in support of the proposition that it is not possible to add an innocent state of mind to an innocent state of mind to obtain a dishonest state of mind. Thus, he submits, dishonesty is not established where one person knows the relevant facts but does not know that those facts render the warranty untrue and another person knows the terms of the warranty but not the facts that render it false.

This is a principle of long standing which has been applied repeatedly. It is sufficient in this context to refer to two cases. The first is Greenridge Luton One Ltd v Kempton Investments Ltd, [2016] EWHC 91 (Ch) at [77]-[78] where Newey J (as he then was) said the following with reference to Armstrong v Strain:

The second is Stanford International Bank Ltd v HSBC Bank plc, [2021] EWCA Civ. 535 at [47] per Sir Geoffrey Vos MR giving the unanimous judgment of the Court of Appeal:

The Defendants submitted that the Claimant’s primary case was completely at odds with this principle since it ignored the need to find at least one person with a dishonest state of mind. In response, Mr Salzedo relied heavily on the decision of Moore-Bick J (as he then was) in MAN Nutzfahrzeuge AG v Freightliner Ltd, [2005] EWHC 2347 (Comm). In that case, the judge identified three distinct sets of rules: (i) those relating to the imposition of vicarious liability; (ii) those governing the attribution of an agent’s knowledge to a principal; and (iii) those governing the attribution of knowledge to a company. It is common ground that vicarious liability is not in issue in this case as it is not alleged that any of the JM Executives gave the warranties in a personal capacity. Nor is this a case of agency. We are therefore only concerned with the rules of corporate attribution and, as Moore-Bick J pointed out, this is not so much a question of attribution as one of identifying the natural person whose knowledge is to be treated as that of the company.

However, I do not understand anything in MAN v Freightliner to absolve the Claimant from the need to prove conscious dishonesty by at least one natural person whose state of mind is attributable to JM and the following passages from the judgment at [156]-[158] make this clear:

The entire judgment was thus premised on the need to find a dishonest state of mind in some particular individual. On the facts, there was no conscious dishonesty by anyone whose state of mind was attributable to the company. The question of aggregating the states of mind of different individuals to arrive at an overall dishonest corporate state of mind accordingly did not arise. Nonetheless, the terms of the judgment indicate quite clearly that there is no relevant distinction to be drawn between a corporate and a non-corporate context. It is still necessary to find a dishonest state of mind in an individual whose state of mind is either attributable to the defendant on agency principles, or is treated as being that of the defendant by virtue of corporate attribution. If it were otherwise, I agree with Mr Rainey that it would significantly erode the very real distinction between fraud, negligence and innocence.

I note the following comment in the judgment of Singleton LJ in Armstrong v Strain (supra) which was referred to in Greenridge (supra):

This does not seem to me to alter the position. Singleton LJ was not there saying that the court can find deceit when the maker of the statement does not know the true facts but another person does. Rather he was saying that the evidence in the case may in those circumstances still support a finding of recklessness or absence of belief on the part of the maker. Either way, it is the state of mind of the maker of the statement which is important.

The Claimant further relied on Marme Inversiones 2007 SL v Natwest Markets Plc, [2019] EWHC 366 (Comm) at [259]-[260] where Picken J commented obiter that:

Again, however, this passage in fact affirms the principle that it is not possible to aggregate as between two innocent agents to arrive at a finding of fraud but merely contemplates that a situation may arise where the person with the dishonest state of mind effectively adopts or authorises the statement made by another so as to arrive at a coincidence between the making of the statement and the culpable mindset. I regard that as an entirely orthodox approach and the matter is put beyond doubt by Picken J’s reference to the judgment of Males J (as he then was) in UBS AG v Kommunale Wasserweke Leipzig GmbH, [2014] EWHC 3615. In that case, Males J accepted that there would be no corporate fraudulent state of mind where one representative made a statement believing it to be true even though another representative “not responsible for the representation and not being aware of its being made knows facts making it untrue.” (Emphasis added.)

Finally, the Claimant relied on the very recent decision of HHJ Pelling in Synthos Spolka Akcyjna v Ineos Industries Holdings Ltd, [2026] EWHC 83 (Comm). That was a case of an SPA which contained very similar provisions to those in issue here excluding claims for breach of warranty save in the case of fraud. Critically, however, it also contained an express clause (clause 9.5) which contractually deemed the actual knowledge of certain individuals to be that of the company. The judge held as a matter of construction that this clause permitted the knowledge of those individuals to be aggregated and treated compendiously as the knowledge of the company.

The judge in fact held in favour of the claimant on the basis of a warranty which he held to constitute an unqualified contractual obligation breach of which did not depend on knowledge. However, he went on to consider, obiter, the position in relation to a different warranty which is the relevant provision for present purposes. This was (in essence) a warranty that the target company was not involved in any proceedings and that “so far as the Seller is aware” there were no circumstances likely to give rise to any such proceedings.

As to this, HHJ Pelling expressed the view that the only issue to be determined was whether the company did or did not have knowledge of the relevant circumstances and the likelihood that those circumstances would give rise to proceedings. He further held that by virtue of clause 9.5 the state of mind of different individuals could be aggregated as to both facts and likelihood as a matter of contractual agreement. Having therefore held as a matter of construction that it was not necessary to identify any single individual who had knowledge of the facts and likelihood, he dismissed an argument based on Armstrong v Strain (supra) on the grounds that it was irrelevant to the only question which he had to determine, which was the attribution of knowledge pursuant to clause 9.5. By the same token, however, his judgment has nothing to say about aggregation where (as here) there is no clause equivalent to clause 9.5.

In any event, a crucial distinction between the present case and Synthos is that the latter concerned a warranty that the seller did not possess certain knowledge. The judge held that if in fact it did have that knowledge, then it must necessarily have been fraudulent (or at the very least reckless) and there was no need to show any further dishonesty. In other words, there was no distinction to be drawn between falsity of the warranty and dishonesty because the one determined the other. Clause 9.5 therefore had the practical effect of permitting aggregation in relation to both knowledge of the facts and dishonesty.

I do not express any opinion on whether the judge was correct to elide so completely the conceptually distinct concepts of knowledge of facts and dishonesty, and I note that he did not refer to Armstrong v Strain in this context. I can see arguments both ways. However, the important point is that the warranty with which this case is concerned is not a warranty as to the Defendants’ knowledge (as was the case in Synthos), nor did the SPA contain a provision equivalent to clause 9.5. In my judgment, the decision of HHJ Pelling (which was in any event obiter) does not dissuade me from the view that the principles in Armstrong v Strain remain good law and that, in so far as it departs from these principles, the Claimant’s primary case is wrong in law.

I therefore reject the argument that it is unnecessary to prove that any of the JM Executives was actually aware of the content of the warranty breached or knew that it was false.

The first of the Claimant’s alternative cases was that it was sufficient to prove that at least one of the JM Executives knew or was reckless about the falsity of the warranty, although it was not necessary to prove that s/he was consciously aware of the exact text of the warranty or of the Disclosure Letter.

I am prepared to go a substantial way with the Claimant along this path. In my judgment, in order to succeed, the Claimant must show the following.

First, it must establish that one or more of the JM Executives knew the facts which made the warranty (as qualified by any disclosure) false. This is a binary question: a person knows something or they do not. It is difficult conceptually to see how you can be reckless as to knowledge other, perhaps, than in the sense of blind eye knowledge which is not alleged in this case.

Secondly, that JM Executive must have sufficient knowledge of the terms of the warranty in question. I agree with the Claimant that knowledge of the precise terms is not required in every case. Indeed, I do not understand this to be disputed by the Defendants. They agree that there is no bright line and that the question is context-specific. To my mind, the best formulation is that the individual must know the nature and terms of the warranty in sufficient detail to be able reasonably to appreciate that the knowledge which s/he has is relevant to the warranty. Alternatively, s/he must be reckless as to the terms of the warranty in the sense of not caring what warranties are given.

This follows from what was said in Raffeisen (supra) about the necessity for showing that the defendant knew or was at least completely reckless as to whether he was making the statement alleged to be false. For example, if the defendant simply did not care what warranties were being offered or whether they were true or false (what was referred to in Stanford (supra) at [45] as “institutional dishonesty”), then it would be open to the court to find recklessness as to both the existence of the warranty and its falsity. I believe that this is what Picken J had in mind when making the comments set out above in Marme (supra).

This is a high hurdle since it is inherently unlikely that the senior executives of a company would be reckless in this sense. On the contrary, it is much more likely that they would be concerned that the warranties given should be correct (and/or appropriately qualified) and would have put in place a proper process to ensure that this was the case. If so, then their fault, if fault there be, is more likely to be one of negligence than recklessness. However, absent complete recklessness of this nature, I consider that there must be sufficient knowledge of the terms of the warranty for the defendant reasonably to appreciate the significance of his or her own knowledge of the facts and circumstances to that warranty. I can see nothing in the contractual structure which, as a matter of construction, leads to any different conclusion.

Thirdly, the Claimant must show that the Executive in question knew or was reckless as to whether the warranty was falsified by that knowledge.

With these qualifications, I accept the Claimant’s first alternative formulation as the appropriate test.

The second alternative put forward by the Claimants was that the JM Executives must have had actual knowledge of the text of the warranties and the facts which made them false and also known or been reckless as to whether the warranties were false.

If made out on the facts, I accept that this would be sufficient (as indeed did Mr Rainey, subject to the Claimant’s third alternative case below). Since, however, I have accepted the Claimant’s first alternative case, the second alternative no longer arises.

The third alternative case arose out of a debate between the parties as to whether it was necessary for the Claimant additionally to show that the Defendants intended it to be induced by the false warranty to enter into the SPA. The Claimant denied that there was any separate requirement as to reliance/inducement or intention, maintaining that it was irrelevant in the context of a claim for breach of warranty. For their part, the Defendants recognised that it might not add much if all other ingredients of deceit were established, but nonetheless submitted that, as a matter of principle, the concept of dishonesty or trickery required an intention to induce reliance.

I am not myself persuaded that there is any such additional requirement for much the same reasons as given by Picken J (obiter) in Marme (supra) at [254]. But it is unnecessary for me to decide the point since (i) as I find below, the claim fails in any event; and (ii) there is considerable force in the Claimant’s submission that the enquiry would be artificial since the warranties were included in the SPA and were obviously therefore intended to be relied upon such that I could fairly infer an intention to induce reliance if fraud were to be established.

Had it been necessary to do so, I would accordingly have found that the Claimant did rely on the warranty and that the Defendants intended it to do so.

Application to the facts

It is common ground that Mr Oxley signed the SPA and that the other JM Executives were present at the signing and so must be treated as having adopted the warranties on behalf of the Defendants.

On the basis of my conclusions so far, a successful claim further requires the Claimant to establish the following:

I start this investigation with the following prefatory comments.

JM was a multi-national, multi-billion pound conglomerate. The sale of the Health Business was a complex matter requiring the corporate reorganisation of three separate entities and careful structuring. It involved thousands of pages of due diligence materials and nearly 100 separate transaction documents. Unsurprisingly, the process could not be handled by a single individual, or even a single team, and involved multiple professional advisors to guide and oversee different parts of the process, in addition to the JM Group’s own CorpDev and legal departments. These included Citi (financial), HSF (legal), BCG (commercial VDD) and KPMG (financial VDD).

Mr MacLeod and Mr Oxley were extremely senior executives who were in charge of running the entire JM Group. It is unrealistic to suppose that either of them was involved in the day-to-day running of the Health Business, which was the smallest part of the JM portfolio and not strategically important to the Group. Its annual revenues were described by Mr Rainey as a “rounding error” in the context of overall Group revenues and, even allowing for forensic hyperbole, this was not altogether an inaccurate description. Day-to-day handling of the business was the province of the Health Management Team, who would have known most about what was going on. It is true that Mr MacLeod had regular catch-up meetings with Mr Stapel and that Mr Oxley had regular meetings with the CFOs for each business sector (i.e., Mr Wesztergom for the Health Business). However, such meetings were relatively high-level. Mr MacLeod’s role as CEO was only to offer strategic guidance and he would only have needed to know sufficient details for that purpose and no more. Likewise, the HBR meetings were necessarily at a fairly high level.

Neither Mr MacLeod nor Mr Oxley was involved in the details of the sale, let alone the handling of the negotiations or the procedure for the transaction. Both had many other projects on their plate at the time, not least of which was managing the Group’s volte face on the Battery Materials business which carried huge reputational risks. Mr Oxley’s evidence was that this was his primary focus at the time and I am satisfied that the sale of the Health Business would not have been at the top of either man’s list of priorities.

Ms Vawda and Mr Lyons were obviously in a different position as they were specifically charged with leading the sale process. However, they also (in particular Ms Vawda) had multiple other important projects in progress at the same time and the sale to the Claimant was not their sole focus any more than it was that of Mr MacLeod or Mr Oxley. In any event, while CorpDev may have been leading the project for the Group, the nature and complexity of the process necessarily meant that different teams were handling different aspects. The role of Ms Vawda and Mr Lyons was therefore primarily one of reviewing and co-ordinating the output from each team and providing strategic oversight. They would not have had the time and cannot have been expected to get into the granular detail of what each team was doing.

Accepting the proposition that the JM Executives did not know any more than the Health Management Team about the facts which needed to be disclosed, I regard it as wholly unrealistic to expect any of them to have done more than give reasonably diligent consideration, in the light of such knowledge as each of them had, to material which was put in front of them or which was raised for their attention from time to time. If they should reasonably have appreciated that that material was contrary to something they had previously been told, they can legitimately have been expected to query it. Otherwise, in my judgment they were entitled to rely on the proper operation of the process which had been put in place and could not reasonably have been expected to go behind it. It follows that if a particular query was raised and an answer received from the appropriate sources best-placed to provide that answer, they were entitled to rely on it unless they should reasonably have suspected that it was untrue.

The warranty and disclosure process was run by HSF with the involvement of JM’s internal lawyers. JM waived privilege for the purposes of this case over all relevant communications with its in-house counsel and HSF regarding that process, which included specific and targeted requests to the Health Management Team to provide information and to comment on the disclosures being made. There was no suggestion that the process itself was flawed or inadequate in any way and it is to be noted that no suggestion of fraud is advanced against any of the internal or external lawyers involved or (now) against any members of the Health Management Team. The JM Executives knew that this process was in place and could see from the correspondence to which each of them was variously copied that HSF were seeking information directly from the people best-placed to provide it.

It is also worth pointing out that the Defendants made no attempt to suppress the disclosure of negative information altogether. As will be clear from the Factual Synopsis, the Health Business sustained dismal trading results throughout the entirety of 2021 and the decline in Buprenorphine sales was disclosed at regular intervals along with negative information about other areas of the business. The Disclosure Letter alone extended to 22 pages of single-spaced type with a further 281-page schedule.

A further pertinent point is that none of the JM Executives had any motive to act fraudulently and the Claimant was unable to identify quite what any of them stood to gain from the sale proceeding rather than falling through. Mr MacLeod had already announced his retirement and I reject the suggestion put to both him and Mr Oxley that they were motivated by the impact on their respective bonuses if the sale did not proceed. This was explored in cross-examination but the evidence was that it would only have affected the discretionary element of any bonus payment and that the sale price had fallen so far below initial expectations already that it was unclear whether a failure to complete the transaction would have made any difference anyway. While it might have been embarrassing for the JM Group if the sale had fallen through, this was hardly a significant factor when set against the Battery Materials disposal which was far more reputationally damaging.

Moreover, none of the JM Executives was particularly enthusiastic about the sale. Mr MacLeod vacillated about selling but ultimately thought on balance that it would be better to proceed. Mr Oxley was uncomfortable with the price (which he described as “terrible”) but ultimately concluded in favour of sale because the Health Business was non-core and not a good strategic fit within the Group and he thought it might do better with different owners. Ms Vawda thought that the Health Business was worth much more than the Claimant was offering and that it would be better to retain it, albeit that it would need restructuring. She advised against sale, but it was not her decision. Mr Lyons’ view was also finely balanced, but he also eventually concluded that it was a deal that they could live with in the circumstances.

Given the insignificant proportion of the overall Group revenues represented by the Health Business, the suggestion that the JM Executives were desperate to avoid the continuing losses that would be incurred by retaining and restructuring it does not, to my mind, carry great weight as an incentive to fraud. The JM Executives may well all have wanted to bring an end to what had already become a protracted sale process, but not at the expense of their personal and corporate reputations.

If anything, the disincentives to fraud would have been far more powerful than the incentives, such as they were. Thus, if fraud there was, it would have been a peculiarly obtuse type of fraud where:

With these preliminary remarks, I turn to consider the position of each JM Executive.