The Supreme Court has dismissed an appeal arising from a 1981 takeover in which the purchaser claimed it had not been properly told about substantial deficits in pension funds connected with three acquired companies.
UPM Kymmene Corporation, formerly Rauma Repola OY, bought the entire issued share capital of Brooks Thomas Limited, Brooks Haughton Limited and Brooks Hanley Limited from BWG Limited’s predecessor under an agreement dated December 21, 1981. The agreed share price was £675,474, with arrangements also made for liabilities and loans totalling more than £2.275 million.
The sale agreement contained warranties concerning the companies’ pension schemes. Several years later, UPM complained that the pension funds had been underfunded at completion and argued that the vendors should meet an estimated £2.2 million shortfall.
BWG accepted that further sums were required to fund pension benefits relating to service before completion. Its case was that the underfunding had already been disclosed through letters from Irish Pensions Trust Limited attached to the formal disclosure letter.
The most important of those documents, dated August 27, 1981, recorded funding results of 33% for Brooks Thomas, 53% for Brooks Haughton and 54% for Brooks Hanley. Expert witnesses disagreed over whether those figures adequately communicated the scale of the deficits.
The Supreme Court agreed with the High Court that they did. Mr Justice Francis D Murphy held that, read objectively and in context, the figures clearly conveyed that the pension funds were substantially deficient relative to accrued liabilities.
The court acknowledged that part of the actuarial explanation preceding the figures was incomplete or confusing and that clearer language could have been used. However, it found that the actual percentage results, viewed with the rest of the letter and the companies’ known financial circumstances, left no real doubt about the state of the funds.
The vendors had therefore adequately disclosed the underfunding and qualified the pension warranty. The appeal was dismissed.