Bikam OOD & Anor v Adria Cable SARL

A contractual warranty concerning subscriber numbers may count subscriptions rather than individual persons where the wording and background reasonably available to the parties support that construction. Separate subscriptions, including promotional, hotel and cable subscriptions, qualify where each involves a contract for access to the lowest package and is not more than 89 days in default.

A negotiated agreement fixing a post-completion adjustment may compromise claims concerning the adjustment and create a contractual estoppel as to the agreed factual position. A party cannot subsequently reopen the settled amount by alleging inadequate access to information where the agreement was intended to provide finality.

The Sellers claimed the unpaid second tranche of the purchase price under a sale and purchase agreement and sought to recover a reduction made under an agreed net debt adjustment. The Buyer alleged breaches of warranty, principally that the Company had fewer than 80,000 qualifying DTH subscribers at completion.

The central issues were whether promotional Second Television subscriptions, hotel-room subscriptions and cable subscriptions fell within the warranty; which competing data set established the subscriber number; and whether the Sellers could challenge the Net Debt Agreement by alleging misrepresentation or breach of contractual information obligations.

1. DTH subscriber warranty. The warranty was construed by applying the approach stated in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 and Chartbrook v Persimmon Homes [2009] 1 AC 1101. The relevant background included information reasonably available to the parties, including exchanged spreadsheets, due diligence material and the Company’s subscription practices.
2. “Subscribers” meant subscriptions rather than individual persons. Second Television subscriptions involved separate contracts, smartcards and independently operated access to content including the Economy Package. They therefore satisfied the contractual definition. Hotel-room subscriptions and cable subscriptions likewise qualified because each represented separately paid access to content including the lowest package. The Buyer’s contrary construction was inconsistent with the contractual language and background.
3. The Sellers’ data was more reliable on the balance of probabilities than the Buyer’s later reconstruction from DVD data. There were at least 80,000 qualifying subscriptions at completion, so the Buyer failed to establish breach of the DTH Subscriber Warranty. The other warranty allegations either failed or did not require determination.
4. Net debt adjustment. Clause 5.3 required access to the accounting information and documents actually used by PwC in its review. It did not require access to the whole accounting or billing systems, PwC’s working papers, its methodology or documents not considered in the review. There was no breach.
5. The Net Debt Agreement was a final commercial compromise of the net debt amount. Its language, context and purpose showed that claims concerning inadequate access under clause 5.3, and also any claim under clause 3.4.2, had been compromised. Further, the express agreement that the Net Debt Amount was BGN 45,625,990 created a contractual estoppel preventing the Sellers from denying that factual position. The causation and loss cases would also have failed.
6. The Sellers were entitled to the second tranche, as reduced by the Net Debt Agreement, namely €4,194,000. The Buyer’s counterclaims were dismissed.