BMIC Ltd v Chinnakannan Sivasankaran Siva Ltd

Where parties negotiate detailed agreements which they intend to be definitive and formally executed, there is a strong presumption that pre-contract assurances are not intended to alter the written bargain. A collateral contract or promissory or equitable estoppel nevertheless requires an objectively intended legal commitment. An employee or negotiator cannot bind a company to a significant derogation from an executed agreement where the counterparty knows that board approval is required. An assurance concerning an intended funding mechanism does not create a legal obligation to fund through a particular lender or structure unless that commitment is objectively established.

BMIC claimed approximately US$184.8 million, together with continuing daily sums, under a settlement agreement concerning the parties’ former joint venture and related share transactions. The defendants accepted that the written agreement required payment but alleged that assurances given during negotiations created a collateral agreement, collateral terms, or promissory or equitable estoppel.

The alleged assurances concerned, first, the supposed interdependence of two share purchase agreements and, secondly, an alleged commitment by Batelco to arrange short-term funding. The share transactions did not complete by the contractual long-stop date. The central issues were the meaning and legal effect of the oral statements, their relationship with the definitive written agreements, and the authority of the negotiators who made them.

1. Claim succeeded. The defendants were liable under the Settlement Agreement for the sums claimed.
2. The alleged package assurance did not alter the written agreements. The discussion concerned the defendants’ concern that the Batelco side might fail to perform its obligations under the TTSL share purchase agreement. It provided comfort that those obligations would be performed, but did not make BMIC’s or Batelco’s obligations under the other agreements conditional upon that performance. The defendants did not satisfy the relevant condition in any event: they did not seek to complete the TTSL transaction under its terms before the long-stop date, and the later proposed structure was not legally binding.
3. An assurance intended to have legal effect is required for a collateral contract or for promissory or equitable estoppel. Applying Baird Textile Holdings Ltd v Marks & Spencer Plc [2001] EWCA Civ 274, the statements were objectively no more than commercial comfort. The parties intended their detailed, lawyer-drafted and formally executed documents to define their rights and obligations. The strong presumption arising from that context was reinforced by the negotiations’ repeated references to definitive agreements.
4. Mr Kaliaropoulos had no actual authority to bind BMIC or Batelco to a significant oral derogation from the written agreements, or to commit them to funding from a particular source. Ostensible authority was unavailable because the defendants knew that board approval was required. An agent cannot bind a principal to an unauthorised act by asserting authority to do something which the other party knows the agent has no general authority to do. The court applied The Ocean Frost [1986] AC 717 and Kelly v Fraser [2013] 1 AC 450 at [12]-[15].
5. The funding discussions described how Batelco then intended to perform its existing contractual obligations. They did not amount to a binding promise to obtain funds from Barclays, or to fund a later and materially different transaction structure which arose from unforeseen regulatory and financing difficulties in 2012. The funding assurance defence therefore also failed.