"23. GOVERNING LAW AND JURISDICTION
23.1This Agreement shall be governed and construed in accordance with the English law without regard to the conflict of law provisions thereof.
23.2 In the event of any dispute between the Parties arising out of or in connection with this Agreement, or matters related thereto, they shall use all reasonable efforts to resolve the matters on an amicable basis. If the matter cannot be resolved amicably, any Party (the Aggrieved Party) may serve a notice on the other Parties setting out the nature of the dispute (the Dispute Notice).
23.3 In the event that any dispute, controversy or claim arising from this Agreement or matter related thereto is not resolved pursuant to Clause 23.2 above within a period of 60 days, the same shall be finally settled under the Rules in force at such time by one arbitrator to be appointed by agreement between the Parties. In the event that the Parties fail to agree on an arbitrator, appointment shall be made in accordance with the said Rules. The arbitrator must be an English qualified solicitor or barrister experienced in resolving corporate disputes. All arbitration proceedings are to take place in London, United Kingdom. All arbitration proceedings are to take place in the English language. The arbitral award shall be final and binding upon the parties hereto without appeal to any court or other party."
"31. GOVERNING LAW AND JURISDICTION
31.1This Agreement shall be governed and construe in accordance with the English taw, without respect to the conflict of law provisions thereof.
31.2 In the event of any dispute between the Parties arising out of or in connection with this Agreement, or matters related thereto, such Parties shall use all reasonable efforts to resolve the matters on an amicable basis. If the matter cannot be resolved amicably, any Party (the Aggrieved Party) may serve a notice on the other Parties setting out the nature of the dispute (the Dispute Notice).
31.3 All disputes arising out of or in connection with this Agreement shall be finally settled under the Rules by one or more arbitrators appointed in accordance with the said Rules.
31.4 In the event that any dispute, controversy or claim arising from this Agreement or matter related thereto is not resolved pursuant to Clause 31.2 above within a period of 60 days, the same shall be finally settled under the Rules in force at such time by one arbitrator to be appointed by agreement between the Parties. In the event that the Parties fail to agree on an arbitrator, appointment shall be made in accordance with the said Rules. The arbitrator must be an English qualified solicitor or barrister experienced in resolving corporate disputes. All arbitration proceedings are to take place in London, United Kingdom. All arbitration proceedings are to take place in the English language. The arbitral award shall be final and binding upon the Parties hereto without appeal to any court or other Party."
22.1 Mr Rami Bazzi [B/1,2,6]: he attended the final hearing and was cross-examined (Transcript, 31 January 2011, pp.9-75).
22.2 Mr David Haigh [B/11]: he attended the final hearing but was not required to be cross-examined.
23.1 Dr Najafi [B/5,10]: he attended the final hearing and was cross-examined (Transcript, 31 January 2011, pp.76-166).
23.2 Mr Cummiskey [B/8]: the Claimant required his attendance but he did not attend the final hearing. The Claimant applied for exclusion of his statement. At the final hearing the Tribunal decided to admit his statement [Transcript, 1 February 2011, p.80]. The reasons for doing so are as follows: (i) Mr Cummiskey is based in the United States; (ii) He apparently has limited means. Dr Schmits submitted that Mr Cummiskey had insufficient means to arrange attendance or to arrange and pay for a video-link. While there is no evidence to that effect the Tribunal accepts that this is a relevant factor to consider; (iii) Mr Cummiskey’s statement does not go much if at all beyond confirming the contents of Dr Najafi’s statement; and (iv) the weight to be attached to the statement remained a matter for submission. In my view there is a valid reason for Mr Cummiskey’s non-attendance for the purposes of Article 4.7 of the TBA Rules (which the parties agreed applied in this context). Even if that were not so, the matters identified at (i) - (iv) above constitute extraordinary circumstances to justify a refusal to disregard the statement completely.
23.3 Mr Shahin Tabrizi [B/4]: he attended the final hearing and was cross-examined (Transcript, 1 February 2011, pp.10-57).
23.4 Mr Nick Davey [B/7]: he was not required to attend and no objection was made to the statement being admitted.
23.5 Mr Michael Midgen [B/9J: the Claimant required his attendance at the final hearing but he did not do so. The Claimant applied to exclude his statement. I decided to disregard this statement (Transcript, 1 February 2011, p.80). The reasons for doing so are that there was no valid reason for his non-attendance, for the purposes of Article 4.7 of the IBA Rules. Further there were no exceptional circumstances justifying the Tribunal nonetheless having regard to Mr Midgen’s statement. Mr Midgen was in the United Kingdom and could apparently have attended the hearing if he had so wished.
23.6 Mr Hong Eu [B/I2]: this witness was not required to attend the final hearing and there was no objection to the statement being admitted.
23.7 Ms Faniya Mustafina [B/l3]: she was not required to attend the final hearing and there was no objection to her statement being admitted.
24.1 Claimant: Mr Doug Hall’s Report dated 13 September 2010 [C/2,3]; Supplemental Report dated 22nd October 2010 [C/4] which took account of further disclosure by then provided by the Respondents.
24.2 Respondents: Review Report of IEC United Auditing dated 31st October 2010 [C/5]. Mr Ajith Kumar CH presented this evidence at the final hearing. Mr Ajith did not comment on Mr Hall’s Supplemental Report.
"1.8 Financial Summary
• Five-Year Projected Sales: $581 million
• Five-Year Projected Net Profits: $131 million
• Initial Investment required: $3 million
[Axera] intends on raising $3 million to fund its initial activities in product definition, design, and marketing. This investment will carry the company through the first 18 months after which the company is expected to be profitable. Subsequent investment will only be sought for more rapid expansion and only when terms are very attractive due to initial success of the operations"
1 Manufacturers - Telian US$250,000
2 FTA approval costs US$ 150,000
3 Davey Communications US$100,000"
"31 July 2006
To: Injazat Technology Fund
This letter is to confirm that the documents supplied to you related to the business plans of Axera Wireless Technology are the same as those used by Broadlink Research FZLLC. It is understood that all business plans are forward looking information and no guarantees are made to the accuracy and actual implementation of the Plan.
CEO and President
"THE BUSINESS PLAN APPROVED BY INJAZAT FOR THIS TRANSACTION IS ATTACHED"
61.1The points are points of law that do not involve a new factual case and which the Claimant can fairly be permitted to pursue. The Respondents did not identify any factual evidence that they would wish to serve in response to the points. I note that at paragraph 7 of the Respondents’ Opening Submissions dated 30 January 2011 it was submitted that the Respondents have already put forward evidence why clauses 9.4 and 9.5 of the SSA were irrelevant at the time of entering into the SSA. This suggests that any evidence the Respondents wished to adduce on those clauses was already served.
61.2 Insofar as the points were new, and not specifically made in the Claimant's written pleadings, they were clearly identified in the Claimant’s written opening submissions which were served before the final hearing. In my view the Respondents had sufficient opportunity to consider and respond to the points.
61.3 The claim under section 2(1) of the Misrepresentation Act 1967 was not relied upon as going wider than the claim made under clause 9.9 of the SSA.
63.1 The Respondents did not misrepresent to the Claimant the financial position of Broadlink (Opening Submissions, paragraph 1).
63.2 The Respondents did not make any contractual binding representation that the Claimant’s investment "is sufficient for any duration of 18 months starting whenever - neither before nor on or after Effective Date" (Opening Submissions, paragraph 2).
63.3 The Respondents did not misrepresent that the Company was free of liabilities (Opening Submissions, paragraphs 3 and 4-5).
63.4 In any event the Claimant has failed to fulfil its burden of proof and to particularise its claim in relation to undisclosed liabilities (Opening Submissions, paragraph 6).
63.5 The Claimant is estopped from claiming that the Respondents misrepresented the financial position of the Company in breach of clause 7.1, 7.2 and 7.3.1 (of Schedule 3 to the SSA) (Opening Submissions, paragraph 7).
63.6 The Respondents did not act in breach of any of clauses 7.1, 7.2 or 7.14 of the SHA (Opening Submissions, paragraph 8).
63.7 In relation to the agreements with Telian and Vodafone, these were executed before the Claimant’s investment in the Company and therefore they did not require board approval, and further the agreements were provided to the Claimant before its investment (Opening Submissions, paragraph 9).
63.8 In relation to allegedly unauthorised payments, the Claimant has failed to provide any evidence which would prove that any non-routine payments were actually made without the Claimant’s knowledge or the relevant approval by the Company’s Board (Opening Submissions, paragraph 10).
63.9 Generally, the Claimant fails to distinguish between the two individual Respondents and the capacity in which they were acting (Opening Submissions, paragraphs 11-12).
63.10 The Claimant is not entitled to recover damages because the Claimant is estopped (on the basis of promissory estoppel and/or estoppel by convention) from claiming an indemnity or any damages by reason of its actual knowledge of facts and its participation in the management of the Company (Opening Submissions, paragraph 15).
63.11 The Claimant is estopped from obtaining any relief against the Respondents "where the Claimant was lacking any diligence and violated its own supervision obligations in several ways" (Opening Submissions, paragraph 16).
63.12 Further the damages claimed are "unrelated to actions by the Respondents" and were not caused "by Broadlink’s fate" (Opening Submissions, paragraph 18).
63.13 The Schedule of loss includes management time at "a totally unreasonable level" for time spent since 2007 (Opening Submissions, paragraph 18). Any damages for breach of warranty must be limited to the cost of the transaction.
63.14 The alleged damages sustained by the Claimant were caused by its own negligence (Opening Submissions, paragraph 19) and by the Claimant’s failure to provide sufficient and timely funding (Opening Submissions, paragraph 20).
"21. In summary, it is clear from all the contracts and evidences submitted to this tribunal that the Claimant’s investment released under SSA and SHA could not under any circumstances be sufficient to make the company running. Apart from the fact that Claimant released only $750,000 direct working capital under SSA and SHA (second tranche was issued directly to Disney) and assuming there were no running expenses such a[s] salaries prior [to] 22 September 2006, already in the light of the agreements submitted to Claimant as part of the SSA (see table in Schedule 5 of the SSA) and the contractually required back order of 100,000 units (see clause 3(1)(b)(vi) of the SSA) it should have been self-evident to the Claimant that without immediate cash injection, Company could not bridge the financing and cash flow problem.
22. Having all the material facts available prior to its investment, Claimant decided to take the risk and invest on a start-up company. However, where the Claimant intentionally disregarded the needs of the Company and refused to grant any additionally working capital during this critical time, it is absurd to claim that the Company failed because of Respondents’ alleged breaches of contract. To emphasize Respondents did not represent the Company was free of liabilities and everything paid by the Company from the Claimant’s investment was also approved by the Claimant."
1. Was the Claimant induced to enter into the SSA and/or SHA, and/or to make the Initial Payment and/or the Second Payment under clauses 3.1(a) and (b) of the SSA, by any written or oral misrepresentation made by either Respondent?
2. If so, was such written or oral misrepresentation causative of the Claimant’s alleged loss?
3. If so, to what remedy is the Claimant entitled:
(a) at common law; and/or
(b) under section 2(1) of the Misrepresentation Act 1967?
Misrepresentation and/or breach of warranties in the SSA
4. Were any of the representations made (or warranties given) by cither Respondent to the Claimant in clause 9 of, and Schedule 3 to, the SSA false when the SSA was concluded and/or when the Claimant made the Initial Payment and/or the Second Payment? In particular, were the representations made by either Respondent in the following paragraphs of Schedule 3 false at any of those times: (a) paragraph 3; (b) paragraph 5; (c) paragraph 7.1; (d) paragraph 7.2; (e) paragraph 7.3.1; (f) paragraph 7.4; (g) paragraph 7.6; (h) paragraph 8.2.2; (i) paragraph 11(d); (j) paragraph 12.1; (k) paragraph 12.2; (1) paragraph 14.1; (m) paragraph 14.2.
5. If any of the representations made in the above paragraphs of Schedule 3 was false, was the Claimant induced to enter into the SSA and/or to make the Initial Payment and/or the Second Payment thereunder by such misrepresentation(s) and/or breach(es) of warranty? Further, is either Respondent precluded by the provisions of the SSA, in particular clauses 9.4 and/or 9.5, from asserting that the Claimant was not so induced?
6. Was such misrepresentation and/or breach of warranty causative of the Claimant’s alleged loss?
7. If the Claimant was induced to enter into the SSA and/or to make the Initial Payment and/or the Second Payment thereunder by misrepresentation(s) and/or breach(es) of warranty by either Respondent, to what remedy is the Claimant entitled:
(a) at common law;
(b) under clause 9.9 of the SSA; and/or
(c) under section 2(1) of the Misrepresentation Act 1967?
8. Is the Claimant entitled to relief under clause 7 of the SSA?
Misrepresentation and/or breach of warranties in the SHA
9. Was the representation made (or warranty given) by either Respondent in clause 6.1 of the SHA, that "the Business is an active self-financing business", false as at the date of the SHA?
10. If so, was the Claimant induced to enter into the SHA and/or the SSA by such misrepresentation and/or breach of warranty?
11. If so, was such misrepresentation and/or breach of warranty causative of the Claimant’s alleged loss?
12. If so, to what remedy is the Claimant entitled:
(a) at common law; and/or
(b) under section 2(1) of the Misrepresentation Act 1967?
Other breaches of the SHA
13. Did either Respondent breach clause 7.2 of the SHA by causing or permitting the undertaking by Broadlink of reserved matters without the express prior written approval of the Board of Directors including at least one Director appointed by the Claimant? In particular, did either Respondent so cause or permit the undertaking of any of the reserved matters set out in: (a) clause 7.2(f); (b) clause 7.2(j); (c) clause 7.2(k); or (d) clause 7.2(q)?
14. If so, were any such breach(es) causative of the Claimant’s alleged loss?
15. If so, to what remedy is the Claimant entitled?
Waiver and Estoppel
16. Has the Claimant waived its right to claim for misrepresentation and/or breach of warranty under the SSA and/or SHA?
17. Is the Claimant estopped from claiming misrepresentation and/or breach of warranty under the SSA and/or SHA?
18. Is any party entitled to an award of legal and/or other expenses, and if so for how much?
The information in respect of the Company and the Existing Companies set out in Schedule 2, as well as the Business as described in the Business Plan and the accounts upon which Injazat’s Investment was based are true, accurate, complete and not misleading."
83.1 The statement in paragraph 1.8 of the Business Plan [Dl/4/182] that US$3,000,000 in initial funding "will carry the company through the first 18 months after which the company is expected to be profitable". ITF says the Respondents had no reasonable grounds for believing this statement when the SSA was signed or at any time thereafter, given in particular that (i) neither Respondent knew how many liabilities the company had, (ii) the company in fact had significant liabilities, and (iii) both Respondents believed that US$3 million was not enough to make the company viable, relying on paragraph 9 of Mr Cummiskey’s witness statement and Dr Najafi’s oral evidence at Transcript, 31 January 2011, p.82.
83.2 The statement in paragraph 1.8 of the Business Plan [Dl/p. 182] that Broadlink expected to make sales of US$581,000,000 in its first five years of operations. ITF says the Respondents had no reasonable grounds for believing this statement when the SSA was signed or at any time thereafter, given that (a) the Business Plan contained little detail of how this figure was calculated, and (b) as at the date of the SSA Broadlink still did not have any sales plan at all, let alone a coherent plan for achieving sales of US$581,000,000 within five years.
83.3 The statement in paragraph 1.8 of the Business Plan that the five-year projected net profits were going to be or expected to be US$131 million. ITF says that figure was essentially "guesswork" and no information was given in the Business Plan about how these figures had been compiled (Transcript, Day 3, p.74).
84.1The information contained in the Business Plan cannot be reasonably considered as false, inaccurate, incomplete and/or misleading within the meaning of paragraph 3 and was prepared with reasonable skill and care.
84.2 The Respondents did not warrant in their personal capacity or on behalf of Broadlink the accuracy or implementation of the Business Plan.
84.3 The declaration in Dr Najafi’s letter of 31 July 2006, which was subsequently attached to the SHA in Schedule 2, clearly provides that "all information in the business plan are forward looking information and are in no way guaranteed".
84.4 The Business Plan of Axera was executed in 2005 and "it only provided sound arguments for the probable viability of the business, which was "expected to be profitable" after 18 months of operation" (Defence, paragraph 103.4).
84.5 The financial projections were prepared with due care on a reasonable basis and at the material time, Respondents had reasonable grounds to believe that the business will be profitable.
84.6 Where the Claimant decided to take a risk by investing in a start-up company with knowledge that the Business Plan of Axera was executed in 2005 and where Broadlink did not have any trading records, the claim in breach of warranty under paragraph 3 of Schedule 3 to the SSA is meritless.
88.1 The statements in the Business Plan relied on by ITF can reasonably be regarded as at least incomplete and/or misleading in circumstances where both Respondents accept that the company required more than an initial investment of US$3 million in order to survive. This was not what the Business Plan said at paragraph 1.8.
88.2 The Respondents did individually provide the warranties in Schedule 3. Further they did, impliedly even if not expressly, represent to ITF that they had reasonable grounds for making the representations in paragraph 3 of Schedule 3.
88.3 Dr Najafi’s letter does not alter my finding above. The letter is naturally read as making the point, which is accepted by ITF, that the Respondents were not warranting or guaranteeing that the forecasts and other forward looking information in the Business Plan would be achieved. However Dr Najafi’s letter was not purporting to tell ITF that the Respondents did not believe and/or did not have reasonable grounds for making statements contained in the Business Plan. As the typing added to the bottom of Dr Najafi’s letter dated 31 July 2006 makes clear, the Business Plan was a document that ITF had sought specific comfort about from Dr Najafi, and had specifically approved for this transaction. Further it was sufficiently important, as must have been well-understood by Dr Najafi and Mr Cummiskey, to be attached to both the SSA and the SHA.
88.4 While the Business Plan was in the name of Axera, it was stated by Dr Najafi in his covering letter to be applicable to the company. That obviously followed from the company taking the place of Axera in the proposal. Further, while the Business Plan plainly was prepared in or as at mid-2005, it was attached to the SSA and the SHA and it is not disputed by the Respondents that warranties they gave, including at paragraph 3 of Schedule 3, related to the Business Plan as at the date of the SSA and the subsequent payments by ITF under the SSA.
88.5 For the reasons given above I do not agree that the Respondents had reasonable grounds for making the statements relied on by ITF or that ITF’s decision to invest on the terms that it did alter my conclusion on this issue.
"5. NO BANKRUPTCY
Neither the Company nor any of the Existing Companies is, and the transactions contemplated by this Agreement will not cause the Company or any of the Existing Companies to become, bankrupt, insolvent or otherwise in danger of not being able to pay its debts as they fall due."
94.1 On the Respondents’ own case, they "repeatedly informed [ITF] that Broadlink was unlikely to survive without the remaining investment of 1 million USD, which [ITF] had agreed to provide under the SSA" (Defence, paragraph 104.2 [A/8/l12]).
94.2 Further, it is the Respondents’ case that ITF "was informed that the first tranche did not and could not cover [Broadlink's] debts as they fell due" (Defence, paragraph 104.3 [A/8/112]).
94.3 Broadlink was unable to make payments due to Telian, the Korean manufacturer of the D100 phone, since before the SSA was signed (sec e-mails at [D2.1/170, 173, 181, 191]).
94.4 Broadlink began October 2006 with a negative cash balance and spent US$720,000 during that month alone: see the e-mail from Mr Tabrizi, the chief financial officer, to Dr Najafi at [D2.1/195].
94.5 On 21 November 2006 Dr Najafi wrote to Mr Bazzi to say that "we have about $53,000 in the bank and we will not be able to take care of our bills at the end of November" [D2.1/195].
95.1At the date of entering into the SSA, the Claimant had actual knowledge that Broadlink was not able to pay its debts as they fell due and that the first tranche would not be sufficient to balance the financial situation and the cash flow of Broadlink. Based on the all the liabilities disclosed to the Claimant, it was obvious that the remaining funding was critical for the future operations.
95.2 The Respondents repeatedly informed the Claimant that Broadlink was unlikely to survive without the remaining investment of US$1 million, which the Claimant agreed to provide under the SSA.
95.3 The Claimant was informed that the first tranche did not and could not cover the debts as they fell due. However, with full knowledge of all the circumstances the Claimant decided not to advance the remaining capital which would have eased the financial situation of Broadlink.
"7. ACCOUNTS AND MANAGEMENT ACCOUNTS OF THE COMPANY AND THE EXISTING COMPANIES
7.1 The Accounts and Management Accounts of the Company and each of the Existing Companies (true copies of which have been supplied to Injazat) have been prepared in accordance with and comply with all relevant International Accounting Standards and show a true and fair view of the state of affairs and the financial position of the Company and each of the Existing Companies and of the profit and losses of the Company and each of the Existing Companies.
7.2 Without prejudice to the generality of the foregoing, in the Accounts and the Management Accounts of the Company and each of the Existing Companies full provision or reserve has been made for all bad and doubtful debts, all actual liabilities and obligations and all capital and burdensome commitments. In relation to contingent un-quantified or disputed liabilities full provision or reserve has been made or a note thereto has been included stating the maximum amount which has been and/or could be claimed and containing the directors’ best estimate (on the basis of appropriate advice) of the likelihood of such liabilities materializing. In relation to contingent liabilities, each of such known liabilities has been described in a note thereto."
7.3 Off balance sheet activities
7.3.1 All assets in which the Company and/or any of the Existing Companies has an interest are either accounted for in its or their accounting records or are disclosed in the Accounts; and all liabilities (actual or contingent) for which the Company and/or Existing Companies may have a responsibility present or future are accounted for in its or their accounting records or disclosed in the Accounts."
""Accounts": means the audited balance sheet and profit and loss account and cash flow statement for the financial period or as of the date, as applicable, specified in the Accounts, including the reports, notes and documents annexed thereto."
""Management Accounts": means the balance sheet, profit and loss account and cash flow statement for the Company and each of the Existing Companies for the period beginning from the end of the financial period specified in their respective last available Accounts and ending on December 31st."
105.1 "Claimant accepted prior to its investment that Broadlink did not have the accounts or management accounts which could have provided full provision for all of the actual liabilities and obligations or for all capital and burdensome commitments of Broadlink."
105.2 "During the subsequent negotiations of the SSA, acknowledging the time pressure of the entire project Claimant accepted prior to its investment that it was feasible to solve the complete accounting, acceptance and reporting system on post-investment. Only in September 2006, after Broadlink and Claimant agreed to hire a CFO, Broadlink started to prepare its accounting records with all liabilities as of 30 September 2006...".
105.3 "Before the accounting records were established, Claimant and Respondents only discussed about Broadlink’s liabilities like payments to Telian, Davey Communication and other related parties. All the liabilities assumed prior to the execution of the SSA and SHA, including those owed to Dr Najafi’s company Axera, were partially accepted or became Broadlink’s liabilities only after approved by the Claimant during the Board Meeting held on 28 and 29 January 2007..."
105.4 "Consequently in the context of the claims made under paragraphs 7.1, 7.2, 7.3.1... of Schedule 3 to the SSA, Claimant is prevented from claiming for breach of warranty, because the Claimant accepted the relevant facts and circumstances underlying these warranty claims."
"7.4 Position since June 2006
Since June 2006
(a) there as been no material adverse change in the... financial position... or prospects of the Company or any of the Existing Companies...;
(c)... the Company... has [not] made or agreed to make any payment (including without limitation any donation for charitable or political purposes or any ex gratia payment) other than routine payments in the ordinary and usual course of trading arising from real and valid payables related to the Business;
(d) there has been no material change in the level of borrowing, [or] in the working capital... of the Company...;
(g) neither the Company nor any of the Existing Companies is aware of any matter which might suggest that any material... liabilities (actual or contingent) have been omitted from or mis-stated in the Accounts."
113.1 "The claim in material changes in the financial positions of Broadlink or the Existing Companies is inaccurate as Claimant had actual knowledge of Broadlink’s financial position. In relation to the Existing Companies, Claimant has not provided any arguments or supporting evidences."
113.2 "The claim that Broadlink had made or agreed to make non-routine payments is vague, as Claimant has failed to prove that Broadlink would have made or agreed to make any non-routine payments without Claimant’s knowledge or the relevant approval from the Board."
113.3 "In relation to the material changes in the level of borrowing and the level of working capital of Broadlink... at the material time Claimant was aware that the level of debts exceeded the level of working capital received. However, this was not a material change which would lead to a breach of warranty under paragraph 7.3.1(d) [sic] of Schedule 3."
113.4 "Notwithstanding that Broadlink did not have established accounts prior to the Claimant’s investment, in relation to the accused breach of warranty under paragraph 7.3.1(g) [sic], Claimant has failed to prove that Broadlink or the Existing Companies would have omitted material liabilities or misstated such liabilities in the accounts."
113.5 "In general terms, the warranty claims represented in paragraph 46.7 of the Statement of Claim are vague and embarrassing and the Respondents cannot respond further unless the Claimant particularises the transactions relied on."
The budget projections for the Business for the period to 2010 disclosed to Injazat are still valid as of the date hereof and were prepared with due care using reasonable and prudent assumptions made after due and careful consideration having regard to all facts known or which on reasonable enquiry ought to be known to the Company and the Existing Companies at the relevant time..."
120.1 "Claimant had actual knowledge that the budget projections disclosed to the Claimant as of 22 September 2006 were based on Axera’s Business Plan executed on 2005.... at the material time these were prepared with due care on a reasonable basis."
120.2 "... as of the 22 September 2006 Claimant was also aware that these budget projections were no longer valid due to the accumulated expenses which occurred after 2005."
120.3 "Notwithstanding... the above, the Claimant has not provided any arguments or supporting evidences that any of the budget projections made by Broadlink after the execution of the SSA and SHA would have not [been] prepared with due care or using reasonable or prudent assumptions made after due or careful consideration having regard to all facts known or which on reasonable enquiry ought to be know[n] to... Broadlink."
120.4 "The warranty claims by the Claimant... are vague and embarrassing and the Respondents cannot respond further unless the Claimant particularises the budget projections relied on."
"8.2 Security and Guarantees
8.2.2 Neither the Company nor any of the Existing Companies has given any guarantee, indemnity, comfort or other support (whether legally binding or not) in relation to obligations of another person (not being the Company or an Existing Company)."
126.1 The Claimant has not proved that Axera "had to pay the development fees for Sprite phones". Rather Axera was funding development "as a somehow available third party in the absence of secured funding for Broadlink by the claimant".
126.2 Axera had no contractual obligation towards Telian or Davey Communications or other third parties, employees were hired by companies other than Axera, and it was these contractual obligations that were passed to Broadlink when the existing companies’ businesses and obligations were transferred.
126.3 AH payments which were advanced by Axera were accepted or became Broadlink’s liabilities only after being approved by ITF and the board of the Company during the board meeting in January 2007.
No petition has been presented, meeting convened, resolution passed, procedure commenced or other step threatened or taken or order made for or leading to:
(d) neither the Company nor any of the Existing Companies is insolvent or unable to pay its debts or has stopped paying its debts as they fall due."
12.1 Information given to Injazat
All Information given to Injazat or any of its advisers in connection with the Business was when given and remains true, complete and accurate in all respects and there is no fact or matter that is or may reasonably be expected to be relevant to the Company or any of the Existing Companies or to an investment therein, which has not been disclosed to Injazat in writing, disclosure of which might render any of the information referred to above untrue, misleading or inaccurate or might affect the willingness of Injazat to purchase Shares in the Company on the terms set out herein set out."
""Information": means all information, know-how and techniques (whether or not confidential and in whatever form held) and includes without limitation:
(c) operational, management, employee, administrative and financial information (Including business plans and forecast);
owned or used by the Group Companies in connection with the Business."
"12.2 The Records
The Records are up to date and fully, properly, accurately and consistently made-up, kept and completed, contain a true, complete and accurate record of all acts and transactions of the Business and comprise all of the information and documentation necessary for the Company and the Existing Companies to carry on the Business on and from Completion in the manner carried on by the Company and/or the Existing Companies, or contemplated to be so carried on, and without interruption."
144.1 The Claimant is prevented from suing for breach of warranty under paragraph 12.1 because the Respondents did not warrant in their personal capacity or on behalf of Broadlink the accuracy or implementation of the Business Plan.
144.2 Schedule 2 to the SHA clearly provides that "all information in the business plan are forward looking information and are in no way guaranteed". The sales forecasts and the sales plan represented "only provided sound arguments for the probably viability of the business".
144.3 It cannot be held that the information was not "complete" within the meaning of paragraph 12.1 where the Claimant had actual knowledge that Broadlink did not have yet the accounts or management accounts which could have provided full provisions for all of the actual liabilities and obligations of Broadlink.
144.4 The Claimant was informed and updated about the contracts in place.
147.1 The Respondents did make the representations in Schedule 3 in their personal capacity and these representations included, at least implicitly, that there were reasonable grounds for the matters explicitly stated in the Business Plan.
147.2 The reference to the Claimant's knowledge is dealt with below.
147.3 The fact that the Claimant was provided with a copy of at least some contracts, including that with Telian of November 2005 (see SSA, Schedule 5, Item 6 [DI/2/48]), does not in itself demonstrate that the representations in paragraphs 12.1 and 12.2 were true. For the reasons given above, Information in the form of the Business Plan contained statements which the Respondents had no reasonable grounds to make.
14.1 Contracts generally
In relation to the agreements, arrangements and understandings to which the Company and/or any of the Existing Companies (in relation to the Business) are a party or by which they are bound:
(a) the same are reduced to writing, [i]n the name of or validly legally assigned to the Company or Existing Companies, are not ultra-vires, un-authorised, invalid or unenforceable and have been appropriately registered;
(b) a true, complete and accurate copy or (in respect of those not reduced to writing) a memorandum of all material terms thereof has been supplied to Injazat prior to the execution of this Agreement and no amendment to those terms will be made or permitted by the Company;..."
151.1 The Claimant fails to prove or identify which agreements, arrangements or understandings were not disclosed to the Claimant.
151.2 The Claimant was informed of every detail of the business.
151.3 They had regular meetings (including board meetings) and conversations and the Respondents made the Claimant aware of all the relevant details as appropriate,
151.4 The Claimant was very much kept up to date and involved in the ongoing matters - in particular as the Vodafone deal required the cooperation of all parties.
152.1 Vodafone: the MOU between Vodafone and Davey Communications dated 4 July 2006 has been referred to above. It was not included in the list of Contracts and Documents at Schedule 5 to the SSA [D1/2/48]. There is no dispute that the MOU was concluded with Davey Communications to suit Vodafone’s requirement to contract with a European company: see e.g. Dr Najafi’s email at [D2.1/100]. The Company was a party to this MOU, albeit a non-binding document for the most part, yet it does not appear to have been provided to ITF before the date of the SSA and SHA. Further, and even if the MOU was provided to ITF, the evidence does not include a document recording the agreement, or at least understanding, that there must have been between the Company and Davey Communications regarding the supply of the Sprite phone to Vodafone. No document recording this arrangement was provided to ITF, either before or after 22 September 2006. The Respondents have not clearly identified both (1) the written arrangements between the Company and Davey Communications to which they say the Company was a party and/or bound, and (2) when and how those written arrangements were provided to the Claimant. In relation to the supply of phones by the Company to Vodafone via Davey Communications I therefore find that the representations in sub-paragraphs 14.1 were false as at 22 September 2006 and the dates of ITF’s subsequent payments under the SSA.
152.2 Davey Communications: for the same reasons as set out above regarding Vodafone, I also find that the representations were false in relation to Davey Communications.
152.3 Axera: for the reasons given above on Issue 8.2.2, in my view there was at least an understanding between the Company and Axera regarding the reimbursement of costs relating to the Sprite phone. I therefore also find that the representation in paragraph 14.1 was false in respect of that arrangement, as it was neither reduced to writing nor disclosed to ITF before or after 22 September 2006.
"14.2 Contingent Liabilities
Save as disclosed to Injazat in writing attached hereto, neither the Company nor any of the Existing Companies, in relation to the Business, has any liability (actual or contingent) and there are no events or circumstances which would give rise to any such liability on its or their part."
156.1 The fact that some liabilities may have been approved after the SSA and SHA were signed does not alter the fact that they had not been disclosed before then and in any event more than USS 1 million was not approved.
156.2 The reference to liabilities in the Term Sheet does not assist the Respondents for the various reasons set out at paragraph 48 and 49 of the Opening Submissions.
|Cash on Hand Accounts Receivable Inventory Prepaid Expense CURRENT ASSETS||Beginning Balance 3,000,000 0 500,000 50,000 3,550,000|
|Plant & Equipment||200,000|
|Accounts Payable Line-of-Credit Current Portion - Term Loans CURRENT LIABILITIES||0 0 94,745 94,745|
|Note Payable LONG-TERM LIABILITIES||605,255 605,255|
|Paid-in-Capital / Stock Retained Earnings Year-To-Date Earnings EQUITY||3,100,000 0 0 3,100,000|
|LIABILITIES & EQUITY||3,800,000|
"REPRESENTATIONS AND WARRANTIES
9.4 Injazat’s reliance
Each of the Parties acknowledges and accepts that Injazat is entering into this Agreement in reliance upon the Warranties.
9.5 Injazat’s Knowledge
Neither the Company nor the [Respondents] shall be entitled to claim that they have no liability for any of the Warranties that is or was untrue, inaccurate or misleading because Injazat knew or could have discovered on or before Completion or any Subsequent Payment that the Warranty in question was untrue, inaccurate or misleading."
168.1 The issue in Springwell was very similar to the issue in the present case, save that the relevant contractual clause provided that one party (Springwell) was to be deemed not to have relied on any representations made by the other party (JP Morgan), whereas the clauses in this case provide that one party (ITF) was to be deemed to have relied on the representations of the other party (the Respondents).
168.2 Aikens LJ approached the issue as a matter of principle:
143. I will try and analyse the matter from principle. If A and B enter into a contract then, unless there is some principle of law or statute to the contrary, they are entitled to agree what they like. Unless Lowe v Loinbank is authority to the contrary, there is no legal principle that states that parties cannot agree to assume that a certain state of affairs is the case at the time the contract is concluded or has been so in the past, even if that is not the case, so that the contract is made upon the basis that the present or past facts are as stated and agreed by the parties. It is, after all, common in marine insurance contracts for an assured to "warrant" that a certain state of affairs has existed in the past and is still existing at the time the insurance contract is concluded or will continue, e.g. that the nationality of a ship was and is British; or that a ship was and is "in Class" with her Classification Society. The shipowner may know that those things are not the case; the insurer may have his suspicions that they are not the case. The parties agree that for the purposes of the insurance contract, the facts as "warranted" by the assured are as he has stated them to be. A "conclusive evidence" clause in a sale contract, viz. that a report on e.g. the amount or condition of a commodity sold under a contract between A and B shall be "conclusive evidence" of the matters stated in the report is to the same effect. The parties are agreeing that the statements in the report shall be the case for the purposes of the contract of sale and the parties cannot go behind that agreement.
144. So, in principle and always depending on the precise construction of the contractual wording, I would say that A and B can agree that A has made no pre-contract representations to B about the quality or nature of a financial instrument that A is selling to B. Should it make any difference that both A and B know at and before making the contract, that A did, in fact, make representations, so that the statement that A had not is contrary to what each side knows is the case? Apart from the remarks of Diplock J in Lowe v Lombank, Mr Brindle [counsel for Springwell] did not show us any case that might support the proposition that parties cannot agree that X is the case even if both know that is not so. I am unaware of any legal principle to that effect. The only possible exception might be if the particular agreement between A and B on the certain state of affairs concerned contradicts some other specific or more general rule of English public policy. Like Moore-Bick LJ in Peekay Inlermark Ltd v Australia and New Zealand Banking Group Ltd  2 Lloyd’s Rep 511 I see commercial utility in such clauses being enforceable, so that parties know precisely the basis on which they are entering into their contractual relationship.
168.3 Aikens LJ went on to consider Lowe v Lomhank  1 WLR 196, on which Springwell had relied as authority for the proposition that the parties to a contract cannot bind themselves to an agreed statement of facts that both know to be untrue, and held that it was not authority for any such proposition: at . Aikens LJ went on to consider a number of other cases that are consistent with the statements of principle set out above: at -, and concluded that those statements of principle represented the law.
168.4 Aikens LJ also dealt with a further submission made by Springwell, to the effect that a party seeking to rely on a contractual estoppel such as clauses 9.4 and 9.5 of the SSA (here ITF) must establish that it would be "unconscionable" for the other party (here the Respondents) to resile from the contractual estoppel. Aikens LJ had little hesitation in rejecting that submission: at .
168.5 It follows from the decision of the Court of Appeal in Springwell that the Respondents are precluded from asserting that ITF did not rely on any of the representations set out in Schedule 3 to the SSA. This means that if any of those representations was false, ITF is entitled to succeed on its claim that the SSA and the payments made under it were induced by the Respondents’ misrepresentations.
171.1 The Respondents disputed the Claimant’s analysis of the decision in Springwell, but accepted that, as a matter of principle, "parties could agreed that a certain state of affairs should form the basis of their transaction, whether it was the case or not, and that agreement would give rise to an estoppel" (paragraph 10 and quote from a Lawtel summary).
171.2 The earlier decision of the Court of Appeal in Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd  EWCA Civ 386 was a more appropriate case to consider, upon which the Respondents relied.
171.3 The Claimant signed the ITF with "full knowledge that the reality of the contracts... was different". As examples the Respondents refer to Dr Najafi’s covering letter of 31 July 2006 and the fact that the businesses of the Existing Companies were to be transferred to the Company under the SSA.
171.4 In conclusion the Respondents say that clauses 9.4 and 9.5 are not binding.
174.1 Peekay is not authority for any different proposition to that identified in the subsequent decision in Springwell.
174.2 By clause 9.5 the Respondents agreed they could not avoid liability for breach of warranty on the grounds of ITF’s knowledge as to the subject matter of those warranties. In my view the Respondents have not identified a legal principle which disentitles ITF from relying on clauses 9.4 and 9.5 according to their terms.
180.1 In my view there are no grounds for finding that Injazat unreasonably withheld its approval of such financial and reporting system as may have been implemented at the Company as from 22 September 2006.
180.2 My finding that Schedule 3 contained false representations in Schedule 3 of the SSA means that the Claimant was entitled by the terms of clause 3.1 not to advance the third tranche.
"Subject to clause 10, each of the [Respondents] hereby jointly and severally agrees to indemnity Injazat in respect of all liabilities, losses, charges, costs, claims or demands incurred or made, directly or indirectly, by Injazat, as a consequence of or which would not have occurred or arisen directly or indirectly but for any Warranty being breached."
182.1 ITF’s investment of US$2,000,000;
182.2 wasted management time, quantified in the sum of US$ 127,701 (as set out in the Schedule of Loss [A/7/89]);
182.3 further costs and expenses incurred in relation to the transaction (specifically recoverable under clause 10.2); and
182.4 interest as set out in the Schedule of Loss.
"Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true."
189.1 The Claimant did not refer me to any specific authority justifying the recovery of such a charge as damages. The evidence of Mr Haigh does describe what he says he has been advised as to when such a claim may be made under English law (witness statement, paragraph 7 [B/11/107-108]) but this was not supported by any legal authority in the Claimant’s written submissions or at the final hearing.
189.2 The basis for this head of claim is complicated by the fact that ITF has no employees and pays a management fee to Injazat Capital Ltd ("ICL") (by which Mr Haigh is employed) whose employees carry out all of ITF’s work. I was not taken to the contractual terms between ITF and ICL according to which that fee is calculated. Mr Haigh says it is calculated "as a product of ITF’s net asset value" and is "open to renegotiation from time to time, with the approval of ITF’s board" (witness statement, paragraph 8).
189.3 It is not clear to me from Mr Haigh’s evidence, or ITF’s submissions, that the amount claimed would not have been payable by ITF to ICL in any event. It is therefore not clear to me on what basis I can properly find that the management fee paid to ICL, or any part of it, has resulted from time being spent by ICL employees on these proceedings.
"6. PROVISION OF FINANCE
6.1 Financing the Company
The Business is an active self-financing business. The Parties intend and expect that the Company will require a second round of financing (further injections of capital) from the Partners to support its activities."
Issue 10 : If so, was the Claimant induced to enter into the SHA and/or the SSA by such misrepresentation and/or breach of warranty?
Issue 11 : If so, was such misrepresentation and/or breach of warranty causative of the Claimant’s alleged loss?
Issue 12 : If so, to what remedy is the Claimant entitled:
(a) at common law; and/or
(b) under section 2(1) of the Misrepresentation Act 1967?
"7. BOARD OF DIRECTORS
7.2 Action by the Board of Directors
The Board of Directors shall act by majority vote. The Board of Directors may delegate any of its powers, to the extent permitted by applicable Law, the Memorandum and Articles and this Agreement to the Senior Management Team or other individuals or sub-committees. Notwithstanding the foregoing the Parties shall procure that the following matters shall not be undertaken without the express prior written approval of the Board of Directors including at least one Director appointed by Injazat:
(f) any material change in the nature or scope of the Business including expansion into new commercial areas or in a manner in which the same is conducted or which comprises or may comprise a significant change to the Company’s or any Group Company’s prices or commercial policies.
(j) (except for contracts which satisfy such authorization criteria as the Board of Directors may from time to time approve) the entry into by the Company or any Group Company of any contract, liability or commitment which:
(ii) could involve an obligation of a material magnitude or nature in relation to the business of the Company or the Group Companies, or the annual aggregate of related matters, is in respect of an amount in excess of US$100,000 (One hundred thousand United States Dollars);
(iii) directly or indirectly relates to the distribution of any of the Company’s or any Group Company’s products;
(k) any transaction by the Company or any Group Company with any of the Parties or any Person affiliated to or connected to any of the Parties;
(q) incurrence of the Company and/or any of the Group Companies of any material expenditure or commitment not in the Annual Budget or over the amount provided for such expenditure or commitment in the Annual Budget by ten percent (10%) or more;..."
206.1 The Vodafone Contract: ITF says that in breach of the SHA Dr Najafi both (0 created a financing gap between sums paid to Telian and sums received from Vodafone, and (ii) in breach of clause 7.2(j)(ii) and (iii) entered into a contract to supply phones to Vodafone for the Christmas 2006 period that the Company could never have complied with and which severely damaged the Company’s relationship with Vodafone and resulted in a substantial penalty payment.
206.2 Unauthorised payments: ITF says that in breach of clauses 7.2(k) and (q) of the SHA, between the date of ITF’s investment in the Company and July 2007 the Respondents authorised a number of payments to companies affiliated with the Respondents without first seeking the approval of the Board of Directors. At paragraph 63 of the Statement of Claim the Claimant said that details of those payments would be set out on completion of ITF’s accountant’s analysis. At paragraph 27 of the Reply the Claimant included a table to compare authorised and unauthorised payments for 2006 and 2007 [A/9/131].
212.1 The agreement with Telian was negotiated before the date of the SHA and therefore did not require Board approval under the SHA.
212.2 The Claimant was fully aware of the conditions and content of the Telian contract and received a copy of it.
212.3 The Claimant is therefore estopped from claiming it did not approve the contract with Telian including its payment terms.
212.4 Further the Claimant "had full knowledge that due to the unanticipated payment requirements imposed by... Telian, at the start-up phase of Broadlink’s operations there was a funding gap between the payments received and expenses due" (Defence, paragraph 120).
213.1 The Vodafone contracts were signed by Davey Communications and Dr Najaf: cannot be personally sued.
213.2 The contract between Vodafone and Davey Communications was entered into before the date of the SHA and did not require Board approval.
213.3 As with the Telian contract, the Claimant "was fully aware and updated about Vodafone’s purchase conditions" and the purchase orders were the main reason for the Claimant’s investment (Defence, paragraph 123).
213.4 The Claimant had required the Company to have about 100,000 units in "back order" before its investment and received the purchase orders by Vodafone (Defence, paragraph 124).
213.5 Prior to accepting the order by Vodafone for Christmas 2006, Dr Najafi "secured commitment from Telian to ship the Christmas orders in four shipments through November and early December 2006 to meet Vodafone requirements" (Defence, paragraph 125). However the inability to meet the order was due to the nonpayment of US$1 million under the SSA (Defence, paragraph 128).
215.1 This was the result of a mutual, collective and inevitable decision involving the Claimant (Defence, paragraphs 134, 139).
215.2 The "confidential negotiation" with Vodafone was the only way to try to salvage the business relationships with the Company’s most important customer (Defence, paragraph 136).
215.3 Only a limited amount, US$50,000 of development fees were spent (Defence, paragraph 137). Thereafter it was the Claimant that proceeded to spend more on the D200 (Defence, paragraph 138).
228.1 Dr Najafi does not explain the detail of the agreement that was reached regarding the Christmas order by Vodafone which must have been accepted by Dr Najafi on behalf of the Company. This agreement appears to have been made after the date of the SHA, therefore the date of the non-binding MOU with Vodafone is not determinative of this issue, or whether ITF knew of that MOU before the date of the SHA.
228.2 Dr Najafi has not persuaded me that ITF knew the full details of the contract and/or purchase orders between the Company and Vodafone (directly or indirectly) relating to the Christmas 2006 order.
228.3 As indicated above in the context of claims made under the SSA, I reject the allegation by the Respondents that ITF was in breach of the SSA in not advancing the tranche of US$1 million under the SSA. Dr Najafi has not explained in any detail why he committed the Company to the Vodafone Christmas 2006 order before being sure that finance was available, or at least before he obtained prior written approval from the Company’s Board.
"17. Therefore both concepts of estoppel under English law are applicable in favour of the Respondents. Promissory estoppel can be used to argue that the Claimant’s express or implied representation to the Respondents that it would proceed with the investment in the full knowledge of Broadlink’s financial circumstances (and thus waive any breach of the SSA and/or SH) prevents it from now alleging breach of the SSA and/or SH. This is relevant to the actions of the parties after a prima facie breach of contract has arisen. Estoppel by convention allows the Respondents to argue that the Claimant is estopped from disputing that the parties agreed to proceed with the investment as per SSA and SH in full knowledge of Broadlink’s financial circumstances. This is relevant to the common understanding of the parties in carrying out their contractual obligations."
246.1 There is no basis in the evidence for any assertion that ITF is estopped from asserting its rights or that it has waived them.
246.2 The Respondents have not identified the representation(s) said to give rise to the estoppel. ITF’s case is that no such representation was made.
246.3 Under clause 6.5 of the SSA [DI/18] any waiver by ITF is of no effect unless communicated "by notice in writing".
246.4 The Respondents’ argument that ITF is estopped from asserting its rights is inconsistent with clauses 9.4 and 9.5 of the SSA. In fact, the Respondents are estopped from disputing that ITF relied on the representations and warranties in Schedule 3 to the SSA.
249.1 Denton Wilde Sapte fees: total US$128,026.
249.2 Dewey & Leboeuf fees: total US$765,091. This total figure included costs of the preliminary issue on jurisdiction of US$104,032 and a 20% success uplift of US$127,515.
249.3 Disbursements including (i) Dewey & Leboeuf disbursements, hearing costs and related costs and disbursements of US$109,585; (ii) Smith & Williamson fees of US$83,521, (iii) Counsel fees of US$40,393, and (iv)advance to cover the costs of arbitration of US$122,500.
250.1 Clyde & Co fees: US$25,016
250.2 Amereller Rechtsanwälte Legal Consultants: total US$589,114
250.3 No 5 Chambers: US$7,087
250.4 Emirates Chartered Accountants LLC: US$5,988
250.5 Disbursements: total US$31,782.
252.1 The Claimant has succeeded in most but not all of its claims under the SSA and the SHA against Dr Najafi, and against Mr Cummiskey in the most part in its claims under the SSA.
252.2 The Claimant has not however succeeded on all its claims. It has failed completely in its claims against Mr Cummiskey under the SHA. The Respondents have raised various legitimate complaints and it cannot reasonably be said that they should not have contested the claims against them at all.
252.3 The Claimant has clearly spared no expense in pursuing the Respondents as individuals. There appears to have been an imbalance as to the resources available to the Claimant to pursue the claims and those available to the Respondents to defend the claims.
252.4 The Respondents’ challenge to the jurisdiction of the Tribunal contributed significantly to the time and expense of the procedure.
252.5 In the event both the Respondents failed in their challenge to the jurisdiction.
252.6 The stage of the disclosure in the procedure required the Claimant to make an application to the Tribunal.
252.7 Both the Claimant and the Respondents sought their costs and did not dispute the principle that the reasonable costs should follow the event.
262.1 The Respondents are jointly ordered to pay to the Claimant the value of the Claimant’s investment, namely US$2 million.
262.2 The Respondents are ordered to pay to the Claimant interest on its investment in the total amount of US$792,803.45, calculated at 8% as set out in the Claimant’s Schedule of Loss dated 23 September 2010.
262.3 The Respondents are ordered to pay to the Claimant the sum of US$71,250 in respect of the costs of arbitration, which were fixed by the ICC Court at US$95,000.
262.4 The Respondents are ordered to pay to the Claimant the sum of US$562,500 in respect of the Claimant’s reasonable legal and other costs incurred for the arbitration.
262.5 All other requests and claims are rejected.
Already registered ?