Neutral Citation Number: [2009] EWHC 1954 (Ch)
Case No: 10689/2009
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 20/08/2009

Before :

MR JUSTICE PETER SMITH
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Between :

	(1) Daniel Francis Butters
(2) Neville Barry Kahn
(3) Nicholas James Dargan
(Joint Administrators of WW Realisation 8 Ltd (formerly named Woolworths Media Plc) and Woolworths Group Plc)	Applicants	
	- and -		
	(1) BBC Worldwide Ltd
(2) 2 Entertain Ltd
(3) BBC Video Ltd	

Respondents	
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Mr Sheldon QC ,Mr Isaacs  and Mr Haywood (instructed by Denton Wilde Sapte LLP) for the Applicants
Mr Howard QC, Mr Jowell & Mr Arnold (instructed by Olswang LLP) for BBC             Worldwide Ltd
Mr Anderson QC & Mr Cullen for BBC Video Ltd (instructed by Wiggin LLP)

Hearing dates: 12th, 15th, 16th,30th June and 30th July 2009
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Judgment

Peter Smith J : 
INTRODUCTION
1.	The hearing of the Amended Ordinary Application arises out of the insolvency of the Woolworths Group of companies.  The Application was issued by Messrs Kahn, Butters & Dargan of Deloitte LLP the Joint Administrators (“the Administrators”) of WW Realisation 8 Limited (“Media”) and Woolworths Group PLC (“Group”).  The dispute which gives rise to the Application concerns the appropriate basis for the valuation of Media’s Shareholding in 2 Entertain Limited (“2e”).  It is a company owned by Media (as to 40%) and BBC Worldwide Limited (“BBCW”) (as to 60%).
CORPORATE STRUCTURES
2.	 Media is a subsidiary of Woolworths Entertainment Group Ltd and it is in turn a subsidiary ultimately of the holding company Group.  Media owns 40% of the shares in 2e.  One 2e’s subsidiaries is BBC Video Ltd (“Video”) Media was previously called Woolworths Media PLC and prior to that VCI PLC.  Media went into administration on 11th February 2009.  Media was a public limited company but was re-registered as a private limited company on 13th March 2009.  Group went into administration on 27th January 2009. 
3.	The issue concerns two documents.  First there is the Joint Venture Agreement (“the JVA”) dated 9th July 2004 between BBCW (1) Group (2) Media (3) and 2e (4).  It sets out the terms upon which BBCW and Media hold their shares in 2e.  
4.	Completion of the JVA was conditional on the grant by BBCW to Video of a licence of intellectual property rights and continuing access to future BBC rights in accordance with the Master Licence Agreement (“the MLA”).  The MLA was in an agreed form at the date of the JVA although it was not dated until 27th September 2004.
THE DISPUTE AND PROCEDURAL MATTERS
5.	The dispute concerns the basis upon which BBCW is entitled to acquire Media’s shares in 2e as a result of the insolvency of Media and/or Group.  As will be seen further in this judgment there are detailed provisions which confer rights on BBCW to acquire Media’s shares in 2e upon the happening of an Insolvency Event as defined in the JVA.  The JVA contains provisions for exercise of the right and determination of the price to be paid in the event that the parties are unable to agree the price.  As will be seen those are linked to the MLA.  The most significant linkage is that the MLA according to clause 16.2.5 terminates immediately after any company in the Woolworths Group suffers an Insolvency Event and BBCW serves notice (“The Notice”) in accordance with clause 26.7.1 of the JVA to acquire Media shares.  The main issue between the parties arising out of the Amended Ordinary Application is the validity of that provision.
6.	Initially Media by way of an Ordinary Application dated 15th April 2009 sought directions pursuant to paragraph 63 of Schedule B1 Insolvency Act 1986 that the Independent Investment Bank (“the IIB”) engaged pursuant to clause 27.1 of the JVA to determine the Fair Value of the shares in 2e should take into account a number of factors (6 in total).  At that time BBCW was the only Respondent.  By an amendment in May 2009 Media sought to include a preliminary objection namely that (in the events that have happened) clause 26.7.3 of the JVA and clause 16.2.5 of the MLA are both void and that the IIB is obliged to determine the Fair Value of the shares in 2e taking into account that those clauses are void or alternatively to treat them as void.  
7.	The original directions sought are then relegated in the sense that they only arise if those clauses are not declared to be void.
8.	At the same time 2e and Video were joined as Respondents to the Ordinary Application but initially they had taken no part in the proceedings although they were present throughout the proceedings by solicitors acting in effect on a watching brief.  Video was joined so that it could make representations as to the effect as contended by the Applicants of the MLA.  It had initially chosen not to do so.  This has caused a significant difficulty as will appear further in this judgment.
9.	During the hearing a clear issue arose as to the status of the MLA in the event that the Applicants were successful in contending the offending clauses were void. The difficulty was as appears below. After the Notice relied on by BBCW as in effect terminating the MLA was served it offered Video a new temporary licence on basically the same terms as the MLA save that it was terminable on 30 days notice. Clearly this is far less valuable than the apparently perpetual licence granted by the MLA. Video accepted the new licence without any qualification or reservation whatsoever.
10.	The argument raised by BBCW as a fall back was that there was in any event a new relationship and the MLA even if not terminated by the Notice because the relevant provisions were void was nevertheless impliedly terminated by the unqualified acceptance of the new licence. This was fully argued as between Media and BBCW. However the relevant licensee Video did not make any argument as to the impact of the disputes on its licence (whichever one it held). Apparently it did not occur to either Media or Video although it did occur to BBCW.
11.	After the initial hearing of the Amended Ordinary Application when judgment was reserved Video became alive to the possibility that the judgment might rule on the status of its licence. This was to my mind a self evident proposition; it was only joined after Media amended its Ordinary Application to raise the validity of the clauses for the first time. I cannot see why else it would have been joined as a party.
12.	Video finally became alive to this possibility. Its solicitors wrote to me seeking to make representations and even lead evidence on this issue. I directed it to issue an application for permission to adduce evidence and make submissions on this point which it did on 25th June 2009.
13.	I heard the application on 30th June. Media unsurprisingly supported it as it was in its interest to have the MLA in existence to maximise the value of its shares. There was no real opposition and I granted it permission to make its submissions and lead evidence. The other parties were also granted permission to lead evidence in reply. In the event after a flurry of correspondence on the point no evidence was challenged which gave me a little difficulty as appears below.
14.	By the time of the hearing of the application by Video I had already written my judgment which I handed out to the parties. I indicated that the clauses were void but could be saved as set out below. That made the status of the MLA unnecessary as I was minded to decide it had been validly terminated. Nevertheless in case that determination was challenged elsewhere I would have held that the MLA in any event had been impliedly terminated by reason of the unreserved entry into the new licence.
15.	I provided the draft to help the parties in their further submissions. In so doing I made it clear that I was not prepared to allow further submissions beyond the status of the licence point. The parties accepted that restriction. It was not intended to be a rerun of the main issue as to the validity of the clauses.
16.	The day before the hearing I was provided by BBCW with a copy of the decision of the Chancellor on the same principle in Perpetual Trustee Co Ltd v BNY Corporate Trustee Services and others [2009] EWHC 1912 handed down on 28th July 2009. The Chancellor has given permission to appeal his decision. Given the importance of the principle and to ensure judicial consistency I granted BBCW permission to reargue the provisional decision on the voidness point on the refixed hearing on 30th July. No one objected to that either. 
17.	Accordingly I heard full argument on both issues on 30th July 2009. This judgment is a result of the original hearing and the later hearing.. This judgment therefore replaces the draft although I have included some amendments to the original as I saw fit in the light of submissions from BBCW and Media. In so doing I have naturally taken on board and accept the criticisms of the BBCW submissions by Media. Some of them clearly go beyond the limited right to correct typing and obvious errors as opposed to seeking to rerun the hearing. Accordingly I have not incorporated the majority of BBCW’s proposed amendments.
18.	At the end of the hearing on 30th July I reserved judgment. Due to the urgency of the issue (although an appeal is inevitable I would have thought given the Chancellor’s decision to grant permission in the case before him) I indicated I would issue the judgment to the parties as soon as possible in the Vacation. This judgment is the result. I intend the parties to be able to publicise it as soon as it is received. However as it suffers from being typed up by me as opposed to my clerk it will not meet her high standards so I will hand it down formally on Thursday 20th August at 10.00am. Any typographical corrections should be provided to my clerk by 4.00pm Friday 14th August 2009.
INSOLVENCY/INSOLVENCY EVENT
19.	A company becomes insolvent if it fails to satisfy one of the two tests set out in section 123 IA 1986, namely that it is unable to pay its debts after service of statutory demand or alternatively it is proved to the satisfaction of the Court that the value of the company’s assets is less than the amount of its liabilities taking into account its contingent and prospective liabilities (“balance sheet insolvency”).  Following the onset of insolvency a company is then wound up either voluntarily or compulsorily.  For the company to be wound up voluntarily generally it requires a special resolution by the company.  If that happens the voluntary winding up is to commence on the date of that resolution.  In the case of a compulsory winding up by order of the Court the winding up relates back to the date of the presentation of the petition unless a voluntary resolution has been passed in which case the winding up relates back to the passing of that resolution (section 129 IA 1986).  In the case of an administration the company must be insolvent before it can go into administration and the administration takes effect either when the order of the Court is made or (more usually) when the conditions of the Notice of appointment are satisfied.
20.	Different companies in the Woolworths Group went into administration on different days. Woolworths PLC and Entertainment UK Ltd (“EUK”) went into administration on 27th November 2008.  Group went into administration on 27th January 2009 and Media on 11th February 2009.  
21.	This is to be contrasted with an Insolvency Event as defined in the JVA.  Thus whilst Group went into administration on 27th January 2009.  BBCW contends that it suffered an Insolvency Event on 2nd December 2008 following the presentation of a winding up petition against it. 
INSOLVENCY EVENT
22.	An Insolvency Event is defined in clause 1.5 of the JVA as:- 
“1.5.1 that person fails generally to pay its debts when they become due, or is deemed unable to pay its debts within the meaning of section 123(1)(b), (e) or section 123(2) of the Insolvency Act 1986; or
1.5.2 any meeting is convened for the purpose of considering a resolution, or any application or petition is presented or any other step taken, for the purpose of making an administration order against, or for the appointment of an administrator in respect of, or for the winding –up or dissolution of that person (otherwise than in the course of a reorganisation or restructuring previously approved in writing by the holders of a majority of the B Shares and the holders of a majority of the V Shares), and such action or step is not withdrawn within fifteen (15) Business Days; or
1.5.3 any encumbrancer takes possession of, or any administrative or other receiver or trustee or similar officer is appointed over all or a substantial part of the undertaking or assets of that person or any steps are taken to do the same; or
1.5.4 any steps are taken by that person with a view to proposing or negotiating any kind of composition, compromise or arrangement involving that person and any of its creditors; or
1.5.5 that person suffers, or there occurs in relation to that person, any event which is reasonably analogous to any of the events mentioned in sub-clauses 1.5.1 to 1.5.4 in any part of the world.”
23.	It will be seen that the definition of an Insolvency Event goes beyond the formal occasions when a company becomes insolvent. 
24.	BBCW’s contentions are that the Insolvency Event occurred when Group had the petition presented against it which then entitled BBCW to serve a Notice to acquire Media’s shares in 2e and having given that Notice the MLA automatically terminated.  The consequence of that is that when the IIB comes to determine the Fair Value the MLA will have terminated.  The relevant date for ascertaining the Fair Value is the date that the Notice was given namely on 2nd February 2009.  
25.	The parties have yet even to agree an IIB although the discussions in that regard are somewhat advanced.  It is self evident that the Fair Value of the shares in 2e to be determined in accordance with the provisions in the JVA will produce a value substantially less if the MLA has terminated as appears below.  
BACKGROUND
26.	Having set out the preliminary issues to be considered I should say something about the background which led to the JVA, the MLA and the events which led to the demise of the Woolworths Group.  
27.	The JVA set out the terms upon which BBCW and Group (ultimately) hold their respective shares in 2e.  By the MLA BBCW licensed certain rights to Video a subsidiary of 2e.  Those rights included worldwide rights to manufacture, distribute, market and sell videos and DVDs of certain titles.  
28.	In late 2008 discussions took place between Group and BBCW.  BBCW made an indicative offer of £120,000,000 for the shares.  However that was on the premise that EUK which was the important customer of 2e continued to provide strong cashflows by purchases from 2e.  Unfortunately on 27th November 2008 EUK went into administration.  A revised offer was sent offering up to £40,000,000 for the shares of which £15,000,000 was to be contingent on recoveries from EUK it was also conditional on the basis that there would be no material, adverse change or insolvency/administration event affecting Media or Group.  A winding up petition was presented against Group on 2nd December 2008 which precipitated the application for administration order which was made on 27th January 2009.   A further revised offer was made at a meeting on that date to acquire the shares for £27,000,000.  It was intimated in the absence of a deal by 30th January 2009 BBCW would serve a Notice requiring Media to sell the shares for a “Fair Value” pursuant to clause 26.7 of the JVA. 
29.	The Administrators (of Group not Media) did not accept the offer by that deadline.  As a result by a letter dated 30th January 2009 BBCW sent Media Notice that it required Media to sell the shares at Fair Value.  It was sent by email and the parties have agreed that the Relevant Date was Monday 2nd February 2009.
30.	Under the terms of the MLA (clause 16.2.5) the MLA was automatically terminated.  It is cross-referred to in the JVA (clause 26.7.3).  That has the effect as I have said of substantially diminishing the Fair Value of the shares in 2e.  If any evidence was required of that it is demonstrated by the succession of reduced offers BBCW made.  
31.	I should point out that the reference to those offers is merely for background material; they do not have any effect or relevance to the matters which I am asked to decide in my opinion.
SUBSEQUENT EVENTS AND NEW LICENCE EVIDENCE AT ADJOURNED HEARING
32.	On 30th January 2009 (i.e. the same day they served the Notice) BBCW sent a separate letter to Video informing it that the MLA was terminated and offering a new licence.  The terms are in my view significantly different.  The term is terminable by either party by giving 1 month’s written notice entitling Video to the benefit of 6 months sell off procedure as set out in clause 17.3 of the MLA.  The letter also said:-
“We will take the continued exploitation by 2e after today’s date of rights previously granted as your acceptance of these offers of new licences and new service level agreements unless we hear from you to the contrary”
33.	The letter also stated that 2e and all subsidiaries had been sent copies of the letter.  In addition it was copied to Media.  No reply was received until 5th February 2009 when 2e replied stating:-
“The directors of [Video] and [2e] have given the terms of the BBCW Offer very careful, but urgent, consideration.  
We have today negotiated with BBCW a variation to the terms of the BBCW Offer as per the attached letter.
In line with the very serious consequence of the termination of the MLA for the [2e Group] the directors of [Video] and [2e] have concluded that it is appropriate to accept the BBCW Offer”
34.	That licence subsists today.  Indeed the original Ordinary Application included suggestions that the IIB is entitled in determining the Fair Value to take into account the prospect of a new licence being granted to Video and the fact that one was actually offered by the above mentioned letter and agreed. 
35.	The contention that the MLA had not terminated because the termination provision was void was first raised by the Applicants when they proposed to amend their Ordinary Application in May 2009.  That is why they joined Video.  The Applicants did not address however the consequences of the parties freely entering in to the new licence following the termination of the MLA.  I should say that the Administrators although not appointed Administrators of Media until 11th February 2009 were fully aware of the background because of the Notices served on other companies of which they were administrators.  
36.	This seems to me to create a fundamental difficulty.  The new licence arrangement and the MLA cannot exist simultaneously.  The former replaced the latter.  It replaced the latter because Video having been served with the termination Notice on 30th January 2009 ultimately by 5th February 2009 not only accepted that termination but also agreed a new licence.  That new licence has now existed for nearly 5 months.  
37.	Even if the MLA was not terminated because clause 16.2.5 was void it seems to me that any arguments about that are overtaken by the fact that the parties had entered into a new agreement which now governs the relationship between them.  
38.	Initially I had no evidence from either Media or (more appropriately) Video on this.  Mr Sheldon QC who with Mr Isaacs and Mr Haywood appears for the Applicants submitted at the initial hearing that was immaterial.  I was beingasked to determine whether or not the MLA was terminated.   If the MLA was not terminated because clause 16.2.5 is void he submitted that the consequence of that should be considered at a later day.  
39.	This was a piecemeal approach to litigation which the Courts do not approve of and strive to avoid.  That was precisely why Video was joined so that any arguments it wished to put forward could be fully addressed.  Mr Sheldon QC submitted that if I determined that clause 16.2.5 was void then the later agreement would be attacked either on the grounds that the parties entered into it under a mistaken belief that the earlier agreement was not void or that Video entered into it on that basis.
40.	Absent such a challenge (and there was none at the initial hearing for the reasons set out above) in my view the later licence (whatever the status of the earlier licence) now would govern the parties’ relationships.
41.	My provisional view as set out in the draft judgment was that if clause 16.2.5 was void and the MLA subsisted there must have been an implied surrender of the MLA in exchange for the new licence.  This would operate as a matter of law irrespective of the intention of the parties: see generally by analogy Hill & Redman “Landlord and Tenant” paragraph A [8025].  Conversely if the clause was not void then it operated to terminate the MLA and Video hold under the terms of the new licence.  
42.	Media (and very shortly afterwards its Administrators) acknowledged that the MLA had terminated and gratefully accepted the offer of the new licence.  In the absence of any explanation I could only initially conclude that even if the Administrators’ contention were correct Video had impliedly agreed a surrender of the MLA in exchange for the new licence.  The Administrators have affirmed that.  Alternatively it would be estopped from denying that that is the consequence of the exchange of correspondence. 
43.	It is that provisional view that Video seeks to challenge. Media unsurprisingly supports it.
44.	Video’s evidence on the point is provided by the 1st and 2nd witness statements of Mr Dillon dated 25th June and 16th July respectively. BBCW responded with the witness statements of Mr Morgan dated 10th July 2009 and Mr Parsons’ two witness statements dated 15th June and 10th July. Media produced a 5th witness statement from Mr Kahn dated 15th July.
45.	Mr Dillon deposes (and this is not challenged) that the first time he heard of a challenge to the clauses was when Denton Wilde Sapte (“DWS”) wrote to Wiggin on 27th May 2009 indicating for the first time a challenge to the Notice and termination of the MLA on the grounds that the relevant clauses were void on public policy grounds. Although the evidence of Mr Kahn did not consider the consequences of a declaration that the clauses were void Mr Dillon somewhat surprisingly in my view formed the view that the joinder of Video was merely a formality and that it was appropriate for Wiggin to write on its behalf stating that it did not wish to become involved in the dispute between Media and BBCW and would only attend the hearing by a solicitor to monitor the hearing. As the hearing went on he eventually realised that the status of the current licence might be determined by the judgment in the present proceedings to which Video was a party but had chosen not to participate.
46.	His evidence then addressed the mistake of Video in entering into the new licence with no reservation. It is inconclusive and I would have preferred it (and the other evidence) to have been tested by cross examination. It simply states there was a mistake as to the consequences because everybody acted as if the clauses were valid and the MLA had terminated.
47.	BBCW responded to this evidence with the statement of Mr Morgan. In his second dated 10th July he referred to meetings between BBCW and Media in December. Although the evidence is a little coy it is clear in my view that Mr Baird  (a partner in Freshfields representing inter alia Media) raised the possible challenge to the clauses on public policy. He is described as being “a well respected partner at Freshfields dealing with insolvency related matters”. Mr Morgan also states that Mr Baird reiterated those views at meetings in January. Once again whilst Media was present Video was not. Nevertheless Mr Morgan states that he believes Video and the Administrators would have been aware of the argument. I cannot see what else he can be talking about. However the difficulty is that Mr Baird has not produced any evidence. Further Mr Kahn in paragraph 9 of his 5th witness statement suggests Mr Baird disputes the accuracy of Mr Morgan’s recall of what he said Mr Morgan sets out what he believes he heard.  So I have disputed hearsay evidence on this important point. 
48.	Finally Mr Dillon acknowledges that Video was told there was an argument that the provisions were “unfair” in some unspecified way. Further he said he received advice that there were no grounds for challenging the termination. Video waived privilege as regards the Advice and I accept it was never advised that there were any grounds for challenging the clauses in the advice it has disclosed.
49.	Mr Kahn for the Administrators is equally coy about what he believed. He does not really explain his thought processes save stating his general “duty to do the best I can for the creditors of Media”. Whilst he states (paragraph 14) that he had not concluded that there was a viable attack that misses the point. He does not say that he had considered a possible attack on those grounds. He is of course an experienced insolvency practitioner. He suggested BBCW were clearly not surprised by the argument and they had considered the principle and had concluded it did not apply. Mr Morgan and Mr Parsons on behalf of BBCW clearly accept they were aware of a possible challenge on these grounds. They would not of course anticipate it but would see what response was made to the notice. It is possible that the decision to rely on the Insolvency Event caused by Group rather than Media was deliberately chosen to weaken any challenge ( see below).
50.	Mr Morgan (on behalf of BBCW) submits it is clear it was known as a possibility but discounted. Thus he contends Video entered into the new licence with no reservation because it believed there were no grounds (including the grounds now raised) for challenging the validity of the clauses.
51.	Faced with this unsatisfactory evidence I conclude that all parties were aware of a possible argument but certainly Media and Video had discounted it before Mr Sheldon QC presumably advised that it was a good argument. This led to the amendment. I believe and so find that Video discounted it before it took advice from Mr Anderson QC (see the vague reference to it in paragraph 9.1 of the Instructions to Counsel dated 29th January 2009.  Given the way it was put (criticism is not intended) it is hardly surprising that Mr Anderson QC did not venture into an investigation of an insolvency law point.
52.	I conclude on the evidence before me that BBCW were very much alive to the point but it was not for it to run. I find that Media and Video were aware of the point but had no confidence in it when the new licence was negotiated. There was therefore no reservation. If they wanted to argue the point they could have raised it but that would have risked the new licence being offered without which it could not trade. They could of course have gone to Court and sought interim relief pending determination of the status of the MLA. I cannot see any difficulties in that regard. Media and Video apparently accepted the MLA had terminated and thus entered into the new licence agreement. I accept it is inconceivable they would have acted in that way if they believed they had an argument to the contrary. However it must be appreciated that it is my view not a point that was missed; it is an assessment of the strength of a case. Until April it was clearly believed to be weak.
53.	Having made that assessment they then decided to enter into the new licence. The Administrators and Media did not demur; in fact they agreed with the decision.
54.	The question to be answered is whether having made a decision to lie in the bed they should be required to remain in it. The MLA cannot stand alongside the new licence as the latter supplants it and has governed the relationship consensually and contractually since February.
55.	They clearly were aware of the possibility of an argument. I reject the suggestion that they were unaware of the argument. It seems to me they made a commercial decision to take the new licence. If there was a mistake it was in assessing the strength of the issue. On the law and facts as I find it that was the correct decision as I have determined the MLA had terminated. The question will only arise if I join the group of people who believed that but turn out to be wrong.
56.	Video raises two arguments that the entry into the new licence of itself does not terminate the MLA by implication.
57.	First it submits it was a condition precedent to the new licence that the MLA has terminated. I was referred to the  decision of Steyn J (as he then was ) in Associated Japanese Bank v Credit du Nord SA[1989] 1 WLR 255,268 and 262-263:
“p 262 F-G
The construction point
The first question to be considered is whether the guarantee was expressly made subject to a condition precedent that the four machines existed. The factual matrix, which is relevant to this question of construction, is that both parties - the creditors and the guarantors - were induced to commit themselves by information supplied by the lease brokers employed by Mr. Bennett. That information included the statement, which was made expressly or by necessary implication, that the four machines existed. And it matters not that the plaintiffs thought that Mr. Bennett owned the machines, while the defendants thought that the plaintiffs owned the machines. The fact is that both parties were informed, and believed, that the machines existed.
“p 263 E-264 A
If my conclusion about the construction of the guarantee is wrong, it remains to be considered whether there was an implied condition precedent that the lease related to four existing machines. In the present contract such a condition may only be held to be implied if one of two applicable tests is satisfied. The first is that such an implication is necessary to give business efficacy to the relevant contract, i.e. the guarantee. In other words, the criterion is whether the implication is necessary to render the contract (the guarantee) workable. That is usually described as the Moorcock test, being a reference to The Moorcock (1889) 14 P.D. 64. It may well be that this stringent test is not satisfied because the guarantee is workable in the sense that all that is required is that the guarantors who assumed accessory obligations must pay what is due under the lease. But there is another type of implication, which seems more appropriate in the present context. It is possible to imply a term if the court is satisfied that reasonable men, faced with the suggested term which was ex hypothesi not expressed in the contract, would without hesitation say: yes, of course, that is "so obvious that it goes without saying:" see Shirlaw v. Southern Foundries (1926) Ltd.  [1939] 2 K.B. 206, 227, per MacKinnon L.J. Although broader in scope than the Moorcock test, it is nevertheless a stringent test, and it will only be permissible to hold that an implication has been established on this basis in comparatively rare cases, notably when one is dealing with a commercial instrument such as a guarantee for reward. Nevertheless, against the contextual background of the fact that both parties were informed that the machines existed, and the express terms of the guarantee, I have come to the firm conclusion that the guarantee contained an implied condition precedent that the lease related to existing machines. Again, if this conclusion is right, the plaintiffs' claim against the defendants as guarantors or as sole or principal debtors under clause 11 fails.”
And 268B
It might be useful if I now summarised what appears to me to be a satisfactory way of approaching this subject. Logically, before one can turn to the rules as to mistake, whether at common law or in equity, one must first determine whether the contract itself, by express or implied condition precedent or otherwise, provides who bears the risk of the relevant mistake. It is at this hurdle that many pleas of mistake will either fail or prove to have been unnecessary. Only if the contract is silent on the point, is there scope for invoking mistake. That brings me to the relationship between common law mistake and mistake in equity. Where common law mistake has been pleaded, the court must first consider this plea. If the contract is held to be void, no question of mistake in equity arises. But, if the contract is held to be valid, a plea of mistake in equity may still have to be considered: see  Grist v. Bailey  [1967] Ch. 532 and the analysis in Anson's Law of Contract, 26th ed. (1984), p. 290.”

58.	This decision was approved by the Court of Appeal in Graves v Graves [2007] EWCA CIV 660 at [27].
59.	It is suggested by Video that he letters give the impression of such an express condition precedent or at least an implied one see the letter of offer. This is not the correct analysis in my view. It is not a simple case that the MLA had terminated and the parties acted on that belief. It is the case that the parties having considered a possible argument that the termination had been ineffective nevertheless decided to enter into the new licence. The purpose was to put aside all possible arguments and create a new agreement whatever was the actual status of the MLA. There is in my view no room for a condition precedent therefore. I do believe the officious bystander would say of course if the question was put to him “was it an implied condition precedent of the new licence that the MLA had terminated?” 
60.	However that is the wrong question. The correct question is whether there would be an implied term or condition precedent as to the validity of the MLA in the light of the possible arguments that if it turned out that the MLA was not void the new licence would be of no effect? The answer would be “no” because it was a possibility that the parties were aware of but did not raise when they entered into the new licence. It was intended to replace the MLA in the light of the parties’ knowledge and beliefs at that time including the possibility of a challenge to the provisions
61.	Further Video submits the question “is whether the common intention of the parties was to “abrogate”, “rescind”, ”supersede” or “extinguish” the old contracts by a “substitution” of a completely new or self subsisting agreement” per Lord Sumner in British & Benningtons Ltd v NW Cachar Tea Co Ltd [1923]AC48,67.
62.	Video submits the answer to that is aresounding”no”. In fact I think it is a resounding “yes”. Given the possible arguments which were known but discarded the parties entered into the new licence. Whatever words are used from Lord Sumner’s judgment the parties intended to create a new relationship between them. That necessarily involves giving up the MLA
63.	There is no doubt that the parties did so intend this to happen. However it was because they believed there was no effective challenge to the clauses.
64.	This is in line with the opinion of Lord Devlin in United Dominions Corporation v Shoucair [1969] 1 AC 340 at p347E-G.
65.	The second argument is mistake. However it is difficult to see what the mistake was. It cannot be said that Video missed a point it was completely unaware of. The best that can be said is that it underestimated the strength of the case for challenging the provisions.
66.	The authoritative decision in this area is The Great Peace[2003]QB 679
“74 In considering whether performance of the contract is impossible, it is necessary to identify what it is that the parties agreed would be performed. This involves looking not only at the express terms, but at any implications that may arise out of the surrounding circumstances. In some cases it will be possible to identify details of the "contractual adventure" which go beyond the terms that are expressly spelt out, in others it will not.
75 Just as the doctrine of frustration only applies if the contract contains no provision that covers the situation, the same should be true of common mistake. If, on true construction of the contract, a party warrants that the subject matter of the contract exists, or that it will be possible to perform the contract, there will be no scope to hold the contract void on the ground of common mistake.
76 If one applies the passage from the judgment of Lord Alverstone CJ in  Blakeley v Muller & Co  19 TLR 186, which we quoted above to a case of common mistake, it suggests that the following elements must be present if common mistake is to avoid a contract: (i) there must be a common assumption as to the existence of a state of affairs; (ii) there must be no warranty by either party that that state of affairs exists; (iii) the non-existence of the state of affairs must not be attributable to the fault of either party; (iv) the non-existence of the state of affairs must render performance of the contract impossible; (v) the state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible. 
82 Thus, while we do not consider that the doctrine of common mistake can be satisfactorily explained by an implied term, an allegation that a contract is void for common mistake will often raise important issues of construction. Where it is possible to perform the letter of the contract, but it is alleged that there was a common mistake in relation to a fundamental assumption which renders performance of the essence of the obligation impossible, it will be necessary, by construing the contract in the light of all the material circumstances, to decide whether this is indeed the case.”
67.	It seems to me that the mistake does not satisfy requirement (iv). The new licence is clearly performable. Video’s objections that this is impossible because the rights have already been granted by the MLA and cannot be regranted miss the point. That cannot happen because Video gave up its rights on this analysis under the MLA in exchange for the new rights under the new licence. It did this in the knowledge that there was an argument that the notice could be challenged but which it discounted on the basis of its knowledge at the  time
68.	As is said in the Great Peace at paragraph 84:  “Once the court determines that unforeseen circumstances have, indeed, resulted in the contract being impossible of performance, it is next necessary to determine whether, on true construction of the contract, one or other party has undertaken responsibility for the subsistence of the assumed state of affairs. This is another way of asking whether one or other party has undertaken the risk that it may not prove possible to perform the contract, and the answer to this question may well be the same as the answer to the question of whether the impossibility of performance is attributable to the fault of one or other of the parties." (emphasis added). 
69.	This echoes similar observations in Bell v Lever Brothers [1932] AC 161 at p224 and Chitty “Contracts” (30th Edn) paragraph 5-016.
70.	In my view Video and Media took the risk that by entering into the new licence they were giving up an argument that the MLA still subsisted. The undoubted view was that it was a slight risk. I would have agreed with them as this judgment shows.
71.	Accordingly there are no grounds for setting aside the new licence for mistake
72.	Therefore by May 2009 it is  much too late to argue that the MLA is not void when it has been validly terminated as a result of the implied surrender and grant.
73.	Accordingly the answer to the first question is very simple namely that the MLA was terminated by the implied surrender and the grant of the new licence agreed between the parties in early February 2009.  That actually reflects the factual scenario which appertains and which (absent a setting aside of the later agreements) will continue to appertain when the IIB determines the Fair Value.  
74.	There is therefore nothing more to be said.    However it is clearly sensible for me to address the arguments relied upon by the Applicants in case my view of the events in February 2009 subsequently turns out to be correct.  That will involve a consideration of terms of the JVA and the MLA and legal submissions arising out of those terms.
TERMS OF THE JVA
75.	  The key provision is clause 26.7 which provides as follows:-
“26.7 Insolvency of the holders of the V Shares
If a holder of V Shares or any parent undertaking of the holder of V Shares or (if the holder of V Shares is a member of Woolworths Group) Woolworths suffers an Insolvency Event the following provisions shall apply:
26.7.1 The holders of all (but not some only) of the B Shares may be by written notice delivered to the holder(s) of all of the V Shares require the holder(s) of the V Shares to sell all (but not some only) of the V Shares to them at Fair Value.  If any notice is so given, the holder(s) of the V Shares shall be bound to sell, and the holder(s) of the B Shares shall be bound to buy, all of the V Shares.  No notice under this clause 26.7 may be given after sixty (60) Business Days following the day on which a holder of V Shares notifies a holder of B Shares that it, any parent undertaking of it and/or Woolworths has suffered an Insolvency Event.
26.7.2 In determining Fair Value for the purpose of this clause 26.7, the Investment Bank shall be directed to take into account the continuation (on the same or on different terms) or the termination in accordance with their terms as a consequence of the Insolvency Event in question of the agreements referred to in this clause 26.7 and the consequences of any such continuation or termination.
26.7.3 The provisions of clause 16.2.5 of the Master Licence shall apply. 
26.7.4 The BBCW SLAs shall (unless otherwise agreed) be deemed (for the purpose of determining Fair Value) to terminate in accordance with their terms.
26.7.5 The WWG SLAs shall (unless otherwise agreed) be deemed (for the purpose of determining Fair Value) to terminate in accordance with their terms.
26.7.6 The provisions of clause 25.1.1 of this Agreement shall cease to apply.
26.7.7 Subject to completion of the sale of the V Shares, neither Woolworths or VCI nor any of their Associates shall have any liability to any Group Company, to any Shareholder or to any other party to this Agreement in respect of the continuation (on the same or different terms) or the termination in accordance with the terms of any of the agreements or arrangements referred to in this clause 26.7 (and if any such person has already asserted any such claim against Woolworths, VCI or any of their Associates, it shall not be entitled to pursue such claim) but without prejudice to any accrued rights of any person at the time when the V Shares are sold under this clause.”
76.	The V Shares are those held by Media.
77.	Clause 26.7.1 gives the holders of the B Shares (i.e. BBCW) an option by written notice to require Media’s shares to be sold to it at “Fair Value”.  As the preamble shows, that option is triggered on the occurrence of an Insolvency Event not merely of Media but also if any parent undertaking or any Woolworth company suffers an Insolvency Event.  
78.	BBCW as I have said rely upon an Insolvency Event of Group on 2 December 2008.  That event (a presentation of a petition) would not make Group insolvent for the purpose of the Insolvency Act 1986 at that time as it would depend on the success of the petition.  
79.	Clause 26.7.3 provides that the provisions of clause 16.2.5 of the MLA apply.  That clause says:-
“16.2.5 if a holder of V Shares or any parent undertaking of a holder of V Shares or (if the holder of V Shares is a member of the Woolworths Group, as defined in the Joint Venture Agreement) Woolworths, suffers an Insolvency Event and the holders of B Shares serve notice in accordance with the provisions of clause 26.7.1 of the Joint Venture Agreement (and become unconditionally bound to buy V Shares) this Agreement shall immediately terminate; and…”
80.	It should be observed that there is no general entitlement on the part of BBCW to terminate the MLA in the event of insolvency of Media or any other company in the Woolworths Group.  The MLA only terminates (and then automatically) if BBCW has served a Notice to acquire the  V Shares under the JVA and then when the Notice under the JVA is in respect of an Insolvency Event.  
81.	I was shown various other clauses in the JVA by Mr Sheldon QC which set out other occasions when the parties might have the ability to acquire shares.  In none of those is there any coupling with the MLA.  Thus the Fair Value to be determined under those other provisions would be on the fact that the MLA still exists.  
82.	This is the key basis for the Applicants’ submission.  It is submitted that the effect of clause 26.7 and its linkage to the MLA and the automatic termination of the MLA is to enable BBCW to acquire the shares at a depressed value.  The value is depressed because the MLA has terminated.  The effect could be substantial.  Although Mr Kahn in his first witness statement (paragraphs 19 and 22) is circumspect as regards the actual advice given to him by Close Brothers he appears to be suggesting that the difference between what BBCW offers for the Fair Value (on the basis that the MLA had terminated) and the level he would seek is something in the order of £73,000,000.  That is in the context of the Group liabilities which exceeded £385,000,000.  Media was jointly and severally liable as a guarantor and provided security in respect of those liabilities.  (See Mr East’s witness statement dated 3rd February 2009 in support of the Application for Administration (paragraph 29)).
83.	Mr Kahn’s fourth witness statement dated 3rd June 2009 has updated those figures (paragraph 9).  There has been a considerable reduction by reason of realisations from other companies in the group and he expected that Media’s secured liabilities would be reduced to between £78,000,000 and £88,000,000.  Accordingly there is a possibility (it is impossible to be more precise than that) that if the shares are valued at the top end of Close Brothers opinion Media will be able to make a substantial contribution to the group indebtedness.  That will benefit Media and ultimately all the other companies in the group.  Without that contribution the other companies in the group by virtue of their joint and several liability would suffer a disproportionate exposure to satisfying the debts.  It is not inconceivable that there might be a surplus available for the unsecured creditors in Media.    
84.	The next question to consider is how did clause 16.2.5 come to appear in such a limited form? There is nothing exceptional about an agreement that provides for termination upon the insolvency of one of the parties.  There is no general insolvency power of termination in the MLA on insolvency.  The answer appears in the witness statement of Mr Parsons dated 8th May 2009 on behalf of BBCW.  In paragraph 20 he sets out the fact that the terms of the MLA were on the basis that BBCW would not earn a profit from Video and thus 2e’s exploitation of any BBCW content.  2e has therefore he deposes acquired the benefit of the Video/DVD rights for the life of the Joint Venture where BBCW received no material royalty or financial benefit other than through its equity interest in 2e. 
85.	In paragraph 63 he deposes that it was standard practice for BBCW to seek to control or protect key BBC commercial rights in the event that Joint Ventures which exploit them go into insolvency.  As a result BBCW generally requires both (a) termination of the arrangements and (b) the right to purchase the insolvent partner’s shares at a price to be calculated on an agreed contractual basis.  Similar rights he acknowledges were given the other way in the (admittedly unlikely) event of BBCW becoming insolvent.  It is suggested that the commercial reason for this is that if the contributions made to the Joint Venture were included in the valuation the solvent party would be obliged to pay value for rights which had already reverted to it.
86.	He amplified this in paragraph 7 of his second witness statement dated 1st June 2009.  After setting out the normal position that the parties would generally agree a termination of a licence upon an Insolvency Event of one of the parties to it he also deposed that BBCW was concerned to ensure that those termination provisions extended not just to Media but to the wider Woolworths Group which reflected the reality of the relationship between the parties.  He said that the expectation was that in addition to the BBC related content provided under the MLA, plus the content provided by Media, 2e would also acquire from a number of other providers.  In other words he deposed it was not intended that 2e’s business would only be made up of that business provided to it upfront by BBCW and Group.  
87.	He then deposes (and somewhat surprisingly this is not challenged) that Media insisted that the parties should agree upon an Insolvency Event BBCW would be compelled to acquire Media’s stake in the Joint Venture.  Media was concerned that without such a provision it might find itself unable to attract any buyer for its shares in the Joint Venture.  It is thus he deposed that the form of 16.2.5 was agreed.
88.	There are two things in my view to note.  First there is nothing in the JVA or the MLA which compels BBCW to acquire Media’s shares in the event of insolvency contrary to paragraph 7(c).  Second the desire to trigger an obligation to buy Media’s shares does not seem to me necessarily to require the linkage to an automatic termination of the MLA.  
89.	Nevertheless it is clear in view of the undisputed evidence that the ultimate wording of 16.2.5 was agreed between the parties at arms length after negotiations.  Thus Media was content in the event of an Insolvency Event to provide for an automatic termination of the MLA and the consequent valuation by the IIB upon the facts that occurred namely that the MLA had already been determined.  There is no suggestion of oppression or mistake or misunderstanding on Media’s part as regards these clear and obvious provisions.
90.	As regards the suggestion of Mr Parsons that this is a benefit for Media that is in my view somewhat doubtful.  An obligation to acquire the shares at a Fair Value (absent termination of the MLA) would be valuable.  However the valuation only arises if BBCW serves its Notice to acquire and in that event the MLA automatically terminates and (as admitted) hugely depresses the value of the 2e shareholding.  That in my view is a dubious benefit.  Media would actually be better off if there was no such termination provision.  In that eventuality there would be no mechanism whereby its shares could be acquired on an insolvency but that would then lead to negotiations and those negotiations would take place against the background of the MLA continuing because there would be no automatic termination.
ASCERTAINMENT OF FAIR VALUE
91.	The ascertainment of Fair Value is set out in clause 27.2.  The IIB is required to determine the fair market value of a share as at the Relevant Date (i.e. 2nd February 2009).  It does so by working out the fair market value of 2e divided by the aggregate number of total issued shares.  It is required to ignore any premium for majority control or discount for minority holding and to assume a willing buyer and a willing seller having regard to value as achieved on recently completed transactions in similar types of companies and to what would be achievable on a listing of 2e for a sale of the shares to a trade buyer or a private equity house.  Finally it is required to ignore any restrictions on sale contained in the JVA or the Articles of Association.
92.	The Fair Value is to be determined as agreed or determined by the IIB as above.  It is then final and binding on the parties for all purposes. 
93.	There are issues over the appointment of the IIB at the moment.  There is one potential target but the terms of its appointment are not resolved.  Given the sensitive nature of that appointment I will say nothing further about it for present purposes.
94.	There are two factual matters which featured in the arguments.  First on the Relevant Date BBCW had already served Notice (self evidently) and the MLA had terminated automatically.  Second whilst there was an Insolvency Event for the purposes of enabling BBCW to exercise its rights that was an event which arose on the presentation of the petition in December 2008 against Group.  At the Relevant Date Media was not insolvent nor had an Insolvency Event occurred in respect of it.  Mr Howard QC who with Mr Arnold and Mr Jowell appears for BBCW submitted that is an important point because the exercise of the option took place before Media became insolvent.  Thus the deprivation principle cannot apply to the insolvency of Media so as to disallow the agreement for the compulsory acquisition of its shares in 2e.  This is an ingenious argument but in my view is incorrect for the reasons that I will set out further when I come to examine the application of the deprivation principle.
THE DEPRIVATION PRINCIPLE
95.	Mr Sheldon QC in the written openings on behalf of Media (paragraph 17) sets out what he contends is a summary of the deprivation principle as follows:-
“[T]he ower of property may, on alienation, qualify the interest of his alienee, by a condition to take effect on bankruptcy; but cannot, by contract or otherwise, qualify his own interest by a like condition, determining or controlling it in the event of his own bankruptcy, to the disappointment or delay of his creditors.
[A] person cannot make it a part of his contract that, in the event of bankruptcy, he is then to get some additional advantage which prevents the property being distributed under the bankruptcy laws.
[A] simple stipulation that, upon a man’s becoming bankrupt, that which was his property up to the date of the bankruptcy should go over to someone else and be taken away from his creditors, is void as being a violation of the policy of the bankruptcy laws.”
96.	It should be appreciated that no-one suggests there was a deliberate attempt to insert a clause to secure that more money should come in the event of an insolvency.  The simple question is whether or not the clauses combined together have that effect albeit it was not so intended by the parties.
97.	Although Mr Sheldon QC referred me to a number of authorities it seems to me they are all reviewed comprehensively by Neuberger J (as he then was) in Money Markets International Stockbrokers v London Stock Exchange Limited [2002] 1 WLR 1150.
98.	Neuberger J dealt with a case cited to me Borland’s Trustee v Steel Bros & Co Ltd [1901]1 Ch 279 at paragraph 65 as follows:-
“65 In  Borland's Trustee v Steel Bros & Co Ltd  [1901] 1 Ch 279, 290 Farwell J turned to "the question whether or not these provisions constitute a fraud on the bankruptcy law". He cited and adopted "the principle as stated by James LJ in  Ex p Jay; In re Harrison  
  14 Ch D 19, 25" which I have quoted, and continued [1901] 1 Ch 279, 290-291: 
"There is no idea of preferring any one person to another, except so far as is pointed out by article 47, under which by contract the original shareholders, at the time of the passing of the special resolution for the new articles, retained for themselves the right to refuse the compulsory sale of their shares until they should die, or voluntarily transfer the same, or should become bankrupt.
66 Farwell J rejected the contention that the references to becoming bankrupt in article 47 "constitute a fraud on the bankruptcy law, and are void", and he said, at p 291:
"If I once arrive at the conclusion that these provisions were inserted bona fide—and that is not contested—and if I also come to the conclusion that they constitute a fair agreement for the purpose of the business of the company, and are binding equally upon all persons who come in, so that there is no suggestion of fraudulent preference of one over another, there is nothing obnoxious to the bankruptcy law in a clause which provides that if a man becomes bankrupt he shall sell his shares.
67 Later on the same page, Farwell J said:
If I came to the conclusion that there was any provision in these articles compelling persons to sell their shares in the event of bankruptcy at something less than the price that they would otherwise obtain, such a provision would be repugnant to the bankruptcy law; but it is not so. They all stand on the same footing, and the proper value is to be ascertainable for all alike.
68 He then went on to consider in a little more detail the basis upon which Mr Borland's shares were to be paid for under article 53. He then said:
These shares can have no value ascertainable by any ordinary rules, because having held … that the restrictive clauses are good, it is impossible to find a market value. There is no quotation. It is impossible, therefore, for anyone to arrive at any actual figure, as to which it may be said it is clear that that is the value, or something within a few pounds of the value.
69 Towards the end of his judgment, Farwell J referred to  Whitmore v Mason  
  2 J & H 204, and said [1901] 1 Ch 279, 292-293: 
In that case Page Wood V-C had before him a partnership deed which contained an article under which, in case of bankruptcy, the partners were to forfeit the whole value of a certain lease. That was held to be bad, and if there had been anything of the sort here I should, of course, have held it bad too. But there was also a provision, which was held to be good, that there was to be a valuation of the share of the bankrupt partner …
I think I am following that case when I hold that there is no fraud on the bankruptcy law here”.
99.	Mr Sheldon QC relied strongly on the Borland’s case.  It is not difficult to see why in the context of the present facts.  As he rightly drew to my attention in any other situation where shares are to be acquired the Fair Value is determined on the basis of the facts that appertain namely that the MLA continues.  Where there is an acquisition in the case of an Insolvency Event the valuation is still on the basis of the facts as they are namely that the MLA has been terminated.  However the termination is not as a result of a general provision as regards termination on an Insolvency Event it is peculiarly limited to the circumstances where BBCW had given Notice to acquire the shares.  Thus for example if an Insolvency Event occurred  and BBCW did not exercise its option the MLA would subsist and any acquisition of the shares would have to be at the Fair Value if any negotiations ensued.  There would of course be no mechanism for acquisition at that time.  It follows from this analysis Mr Sheldon submits that the termination of the MLA is linked solely to the acquisition of the shares.  Thus the effect of the Notice is to create an environment whereby the MLA is automatically terminated.  The automatic termination therefore is solely for the purposes of ascertaining the Fair Value upon exercise of the option.  It plainly (Mr Sheldon QC submits) therefore provides a situation whereby upon insolvency the shares are obtained at a lower value than otherwise the BBCW would have to pay for them under any other circumstances.
100.	After reviewing a number of further authorities Neuberger J summarised the principles he derived from them as follows:-
“The principles as derived from the authorities
Introduction
87 MMI relies on the principle that "there cannot be a valid contract that a man's property shall remain his until his bankruptcy, and on the happening of that eventual go over to someone else, and be taken away from his creditors", which as already mentioned I call "the principle". As a number of the cases to which I have referred show, there is no doubt that the principle exists, and has been applied to defeat provisions which have that purported effect. However, it is equally clear from the authorities that there are occasions where a provision which, at least on its face, appears to offend the principle has been upheld. I do not find it easy to discern any consistent approach in the authorities as to the application of the principle. In this, I do not appear to be alone. The difference of outcome in  Ex p Jay; In re Harrison  14 Ch D 19 and  Ex p Newitt; In re Garrud  (1881) 16 Ch D 522 has been described as "rather surprising" by Dr Fidelis Oditah in "Assets and the Treatment of Claims in Insolvency" (1992) 108 LQR 459, 476. "The result in British Eagle v Air France  has not been the subject of universal approbation" according to Gerard McCormack inProprietary Claims and Insolvency (1997), p 18. According to Professor Roy Goode in Principles of Corporate Insolvency Law , p 148:
"the distinction between a determinable interest and an interest forfeitable on a condition subsequent has rightly been characterised … as 'little short of disgraceful to our jurisprudence' when applied to 'a rule professedly founded on considerations of public policy', a view endorsed in  In re Sharp's Settlement Trusts  [1973] Ch 331, 340 …"
88 It is not, however, my function to criticise the law. I have to decide whether the principle applies to invalidate the purported exercise by the directors of LSE of their rights under article 8 of the LSE articles in relation to the disputed share, bearing in mind the facts of this case, the guidance given by the authorities as to the circumstances in which the principle applies, and, to the extent that it is relevant, the European Human Rights Convention. Having considered the authorities, it seems to me convenient to proceed to deal with the various ways to which the application of the principle has been analysed in the present case. This course has its dangers, because it may be that one has to look at the position "in the round", given that the principle is essentially one of public policy, and it, therefore, could be said to be inappropriate to compartmentalise features. However, to justify the applicability or non-applicability of a particular principle by reference to "public policy" without considering the specific ground or grounds upon which it is said that public policy requires a particular result is even more dangerous. Public policy has been famously described as "an unruly horse", and, therefore, at least to my mind, when considering an argument based on public policy, the court should analyse each of the arguments advanced to explain it. In the present, because it is accepted on behalf of LSE that the principle exists, and that it is based on public policy, it seems to me that this reasoning indicates that I should consider each of the arguments as to the proper approach to the principle in turn.
Established categories
89 Although I have already mentioned them, it is right to start with two established categories where the principle does not apply. It does appear well established that an interest granted on the basis that is inherently limited on insolvency is recognised by the court. In other words, a determinable interest, that is an interest with a limitation until insolvency, is valid: see the discussions in Snell's Equity, Underwood & Hayton and Professor Goode's book and the passage quoted above from Fry LJ in Ex p Barter  26 Ch D 510, 519-520. It must, I think, follow that an interest granted on the basis that it is inherently limited on some other event is effective, even if that event occurs on or after an insolvency.
90 Secondly, a lease can be validly forfeited—i e determined by the lessor in the event of the lessee or tenant becoming insolvent. As I have mentioned, that has never been challenged and appears to have been impliedly sanctioned by the legislature in section 146(9) of the Law of Property Act 1925. For some reason, a lease liable to forfeiture on grounds other than insolvency will be determinable on any of those grounds notwithstanding that the lessee is insolvent.
An inherent proviso
91 Mr Mann argues on behalf of LSE that, where, as the original part of the arrangement pursuant to which a right or property (an "asset") is granted, there is a provision under which the grantor can in some way confiscate the asset ("a deprivation provision"), on an insolvency or otherwise, it is enforceable even if the grantee is insolvent. Another way of putting the same point, possibly in a more limited way, is that, where it is an inherent feature of an asset from the inception of its grant that it can be taken away from the grantee (whether in the event of his insolvency or otherwise), the law will recognise and give effect to such a provision. A property or right subject to removal in the event of insolvency has been described by Oditah as a "flawed" asset: see 108 LQR 459, 474.
92 This has the merit of being a simple and readily comprehensible proposition, and one which is easy to apply. However, it does not seem to me to be correct. First, it would represent such an easy way of avoiding the application of the principle, that it would be left with little value. In other words, it seems to me that, if I accepted Mr Mann's simple proposition, the effect would be to emasculate the principle, which, at least according to Professor Goode, is one which should be more widely, rather than more narrowly, applied. In his book he not only described, at p 150, "The distinction between recapture of [an interest] transferred outright and termination of a limited interest" as "redolent of [a] highly artificial distinction". He went on to describe as "sound" section 541(c)(i) of the United States Bankruptcy Code which, he said, "roundly declares ipso facto termination clauses ineffective, however they are formulated". Professor Goode also suggested that this "is a sound rule and one which English courts could sensibly follow". I appreciate that there is a real argument to support the contrary view, namely that the principle should be abrogated on the basis that it is not for the courts but for the legislation to override contractual terms. This argument could be said to have particular force in light of the sophisticated and detailed legislative apparatus enshrined in the Insolvency Act 1986 and Insolvency Rules 1986. However, that is not an approach open to me in view of the authorities to which I have referred.
93 Secondly, it would be inconsistent with the apparently well established principle referred to bySnell , Underwood & Hayton and Professor Goode. That principle, to quote from Professor Goode, p 147, is that "The transfer of … an asset … upon the condition that the asset is to revest [on] liquidation [of the transferee] is void". It is true that this rule can in some cases (especially relating to real property) be explained by reference to the provision being repugnant or offending the rule against perpetuities. However, such arguments do not apply to personal property: see, for instance, per Farwell J in Borland's Trustee v Steel Bros & Co Ltd  [1901] 1 Ch 279, 288-290.
94 Thirdly, it appears to me that an analysis of the authorities undermines the notion that the initial inclusion, and subsequent operation, of a deprivation provision in the event of insolvency is ipso facto effective in an insolvent situation. In  Whitmore v Mason  2 J & H 204 there was a single contract pursuant to which Mr Mason had paid his share of capital into a partnership, had acquired his interest in the partnership assets, including the mining lease, and had agreed that, in the event of his bankruptcy, his interest in that lease would effectively be forfeited for no consideration to his partners. The deprivation provision was, thus, an inherent part of the bargain pursuant to which he obtained his interest in the lease; the beneficial interest which was accorded to him by the partner who acquired the lease contained, what amounted to, a provision for forfeiture in favour of the surviving partners in the event of the bankrupt's insolvency. In my judgment, if LSE's first argument is correct, Page Wood V-C ought to have concluded that the effective confiscation of the bankrupt's equitable interest was effective, and yet he did not.
95 I consider that the decision in Borland's  case [1901] 1 Ch 279 is also difficult to reconcile with LSE's first argument. It was an inherent term of the contract between the members of the company inter se and with the company (by virtue of articles of association) that, from the moment the shares in question were issued to Mr Borland, they were subject to the directors of the company being entitled to require him to transfer them away. As Farwell J made clear in passages in his judgment, at pp 291-293, in so far as the articles entitled the directors to require the shares to be transferred away on the shareholder's insolvency, they would have offended against the principle, were it not for the fact that they provided for compensation. Apart from being, at least in some respects, pretty similar to the present case, there is force in the contention that Farwell J should have decided otherwise if LSE's first argument is correct.
96 However, Mr Borland originally had shares in the company which were not, it would appear from the report, subject to such a potential direction from the directors. Accordingly, Mr Mann contends that  Borland's  case was a case where the bankrupt had had shares which were not "flawed", but subsequently voluntarily agreed to their becoming flawed.
Properly understood, he therefore contends that the decision in Borland's  case was really based on the well established proposition that, having acquired assets which were not subject to being confiscated in the event of bankruptcy, a provision which rendered the assets subject to such deprivation agreed to after they had been acquired would not be enforceable. I accept that principle is correct: see the passages I have quoted fromSnell and from Underwood & Hayton and the decision in  Ex p Mackay  LR 8 Ch App 643 may well be explicable on this basis. Although the argument has some force, it does not seem to me that it can be fairly said to have been the basis from which Farwell J reached his conclusion. It is true that, in at least two places in his judgment, he did make reference to the fact that the potentially offending provision was to be found only in the new articles, but it does not seem to me that that fact formed part, let alone an essential part, of his reasoning.
97 In what amounts to something of a refinement or narrowing of the proposition, Mr Mann suggests that the principle applies not only in those cases where a bankrupt agrees the deprivation provision subsequent to his acquisition of the property or right, but also where he acquires the property or right subject to a deprivation provision for consideration which was not subject to a deprivation provision. Thus, in  Borland's  case [1901] 1 Ch 279 the bankrupt acquired the shares which were subject to the deprivation provision in exchange for shares which were not subject to such a provision; in  Whitmore v Mason  2 J & H 204 the acquisition of the interest in the lease subject to the deprivation provision was for a sum of money which, ex hypothesi, was itself not subject to any deprivation provision. That argument could be said to tie in the decisions in  Whitmore v Mason  and  Borland's  case with cases such as  Ex p Mackay  LR 8 Ch App 643. However, as I have mentioned, it does not seem to be the basis upon which Farwell J decided  Borland's  case; nor do I think that it was the basis upon which Page Wood V-C decided  Whitmore v Mason  .
98 Furthermore, if this alternative way of putting LSE's first point was correct, it would mean that a deprivation provision was unenforceable even in a case where it was an inherent part of the asset or a term pursuant to which the asset was originally acquired, unless the asset was obtained gratuitously or in return for another asset which was itself subject to a deprivation provision. That is not a test propounded in any textbook, article or case on the topic, save, possibly,  Whitmore v Mason  . In any event, if that was indeed the proper formulation of the principle, it would mean that a proviso for re-entry in the event of insolvency was unenforceable in the case of a lease granted for a premium. While I know of no authority where that point has been specifically considered, it would appear to be inconsistent with what has always been understood to be the law: see for instance Official Custodian for Charities v Parway Estates Developments Ltd  [1985] Ch 151 (where the consideration for the grant of a lease was not a capital sum, but substantial building works). Quite apart from this, in  Bombay Official Assignee v Shroff  48 TLR 443 it is clear that Mr Madhavji paid for his membership of the Bombay Broker's Hall, and for his membership card; yet, as I have mentioned, the Privy Council held cancellation of his membership and the forfeiture of his card subsequent to his bankruptcy was effective.
99 It also appears to me that, whether expressed in the broader or narrower way, LSE's contention is difficult to reconcile with the majority view of the House of Lords in  British Eagle International Airlines Ltd v Cie Nationale Air France  [1975] 1 WLR 758. At the time that the plaintiff agreed to render the relevant services to the defendant, both of them were bound by the IATA clearing house arrangements and, accordingly, at the very moment they entered into their agreement, it was an inherent part of their contractually enforceable arrangement that, in due course, when the clearing house accounts came to be drawn up, there would be no debts as between the plaintiff and the defendant, merely debits or credits as between each of them and IATA. Mr Mann argues that the difference between the majority view expressed by Lord Cross and the minority view expressed by Lord Morris was attributable to the difference between their respective juridical analyses of the interrelationship between the agreement between the plaintiff and the defendant for the provision of specific services, and the overarching arrangement between various airlines, including the plaintiff and the defendant, and IATA. I am not persuaded that that is correct. The point is perhaps most graphically illustrated in the passage I have quoted from the judgment of Lord Morris, at p 768, where he expressly reached his conclusion on "either view".
100 Accordingly, convenient and simple though it may be, I do not consider that the suggestion that a deprivation provision on insolvency or otherwise is valid provided it is included as part of the initial bargain (or as an inherent part of the asset) is correct; nor do I consider that the more refined version of this analysis, involving a superadded requirement that the asset in question must have been acquired for no consideration or for consideration which was itself subject to a deprivation provision, can be supported. However, as is common ground, it seems that the converse proposition is correct: if a person has a specific asset which is not subject to a deprivation provision, then a deprivation provision to which he subsequently agrees to make it subject is unenforceable in the event of insolvency: see the passages quoted above from Snell and from Underwood & Hayton.”
101.	It is significant to note that Neuberger J acknowledges that there are two established categories of exemption from the deprivation principle.  If an interest is to continue only until insolvency (as opposed to subject to a condition subsequent upon insolvency), that is valid.  Equally there is no reason why a general provision (for example a lease) cannot have a provision for an interest to be terminated on insolvency.  As I have said above however that is not the import of the clause.  
102.	He also disposes of the arguments raised by Mr Mann QC (as he then was) that if the termination provision was part of the original arrangement then that is immune from the principle.  He rejected that submission.  That seems to me to be a complete answer to BBCW’s arguments as opened by Mr Howard QC namely that this was a right freely negotiated between the parties and the basis upon which BBCW would negotiate.
103.	In the next part of his judgment he rejects the argument that if the parties did not intend to prejudice the creditors on insolvency that is a defence to the claim as follows:-
“No intention to prejudice
101 Mr Mann contends that an important validating feature of any deprivation provision is that it was not entered into with the intention of disadvantaging creditors on a bankruptcy. It may be that, at one time, the fact that there was no intention to interfere with, or to override, the pari passu rules on bankruptcy would have been a reason for holding a deprivation provision valid. However, in light of the observations of Lord Cross in  British Eagle International Airlines Ltd v Cie Nationale Air France  [1975] 1 WLR 758, 780, I consider that that contention is no longer maintainable: he said that it was "irrelevant" that the parties to the arrangements in that case "had good business reasons for entering into them and did not direct their minds to the question how the arrangements might be affected [on] insolvency". To my mind, he was indicating that one must look at the effect of the deprivation provision, and whether, if it applies in the context of an insolvency, it is contrary to public policy in light of the bankruptcy laws.
102 Further, I would refer to the observations I have quoted of Farwell J in  Borland's Trustee v Steel Bros & Co Ltd  [1901] 1 Ch 279, 290-291 and of Lord Blanesburgh in  Bombay Official Assignee v Shroff  48 TLR 443, 446. In my judgment, they are difficult to marry up with the view that the absence of any intention to evade the insolvency rules is a factor—or at any rate a major factor—which assists the court in concluding that a deprivation provision should be effective on an insolvency. Certainly, the reasoning in those two cases is very hard to reconcile with the view that the absence of intention to evade would render a provision effective if it would otherwise have been held to have been unenforceable.
103 Once again, however, it seems to me that the converse of the proposition upon which LSE relies is correct. If a deprivation provision, which might otherwise be held to be valid, can be shown to have been entered into by the parties with the intention of depriving creditors of their rights on an insolvency, then that may be sufficient to justify holding invalid the provision when it would not otherwise have been held invalid. Support for that may be found in  Borland's  case [1901] 1 Ch 279, 290, where Farwell J referred to there being no question of the article in question "preferring any one person to another", and in the Bombay Official Assignee  case 48 TLR 443, 446, where Lord Blanesburgh referred to the fact that the rules of the association were "entirely innocent of any design to evade the law of insolvency". Further, it seems to me that the judgment of Farwell J in  Borland's  case indicates that, if it is clear that there was no intention to evade the bankruptcy law, then the court will tend to lean in favour of upholding a deprivation provision (which otherwise be invalid) on the ground that it entitles the person so deprived to a reasonable sum in respect of the asset concerned.”

104.	As can be seen the important decision in British Eagle International Airlines Ltd v Cie Nationale Air France [1975] 1 WLR 758 shows that one must look at the effects of the deprivation provision and whether it applies in the context of insolvency to establish whether it is contrary to public policy in the light of the bankruptcy laws.  Thus Mr Sheldon QC argues that one looks at the overall position.  Although the insolvency relied upon was the presentation the effect overall was to enable BBCW to seek to acquire the 2e shares held by Media at an advantageous price.  It is to my mind irrelevant that at the time of the Insolvency Event Media was not the subject matter of the event relied upon.  Factually I would be surprised if Media was not also insolvent at the same time.  As shown in Mr East’s witness statement (referred to above) it had a joint and several liability of over £350,000,000 at that time and it would have been unable to pay it as it became due.  It would plainly become due upon the presentation of the petition against Group.  It cannot be right that BBCW could rely upon the Group insolvency and argue that because Media is not the subject matter of the insolvency event the termination clause does not infringe the deprivation principle because Media was not at that time formally subject to the insolvency regime.  That would lead to the bizarre result that if Media was subject to an Insolvency Event at the same time as Group BBCW would evade the consequences of the deprivation principle if they had picked Group as the Insolvency Event but not if they had picked Media as the Insolvency Event.  As I have said in any event although the evidence is not entirely clear I am quite satisfied on the balance of probabilities that Media itself in the light of the material before me would also have committed an Insolvency Event at the same time.  
105.	The next part of Neuberger J’s judgment also destroys a further argument put forward by BBCW.  As I have set out above Mr Howard QC submitted that as the Insolvency Event relied upon was not that of Media and as at the time of the Relevant Date Media was not subject to formal insolvency proceedings the event did not operate on the insolvency of Media.  In my view this flies in the face of reality of the facts.  There is no evidence to suggest that Media would not have been insolvent from the time when Group went insolvent.  Mr Sheldon QC accepted that there needs to be ultimately an insolvency of Media for the principle to be applicable.  That is self-evident.  To suggest that because technically Media was not subject to insolvency proceedings on 2nd February 2009 ignores the reality of the position.  Neuberger J deals with a proposition such as this as follows:-
“The provision applies on an event other than insolvency
104 It is also argued on behalf of LSE that the fact that a deprivation provision falls to be operated on the happening of an event or events not being the insolvency of the transferee is at least a factor which is to be taken into account as a factor upholding the provision. That may be the ground for justifying the fact that the deprivation provision was effective in  Ex p Newitt; In re Garrud  16 Ch D 522, in contrast with the striking down of the provision in  Ex p Jay; In re Harrison  14 Ch D 19. As I see it, in  Ex p Newitt  the essential points were that the landowner's right to take possession of the builder's materials was not dependent on the builder being bankrupt, but being in default, and the materials were specifically to become the property of the landowner on the basis that they represented liquidated damages in respect of the builder's breach of contract.
105 In light of the reasoning of the majority of the House of Lords in  British Eagle International Airlines Ltd v Cie Nationale Air France  [1975] 1 WLR 758, there must be real doubt as to whether that reasoning can now be sustained. First, it appears clear from the speech of Lord Cross that it is the effect of a deprivation provision in the event of insolvency with which one is ultimately concerned, and not so much whether or not the deprivation provision is expressed to apply on insolvency or not: see p 780. Further, it is clear from the facts of the  British Eagle  case itself: the deprivation provision, or its equivalent, was in no way concerned with insolvency, and was intended to apply automatically to what would otherwise be sums due under contracts between IATA members. Secondly, the effect of the arrangement in  Ex p Newitt  was to render the landowner a secured creditor (at least to the value of the builder's materials on the premises) so far as his claim for damages was concerned. In part of his reasoning, Lord Cross, at p 780, considered that this represented an objectionable feature of the arrangement from the point of view of bankruptcy principles.
106 None the less, it appears to me that, particularly when one bears in mind that a forfeiture clause in a lease is binding on a trustee in bankruptcy or liquidator, even if the forfeiture is triggered by the bankruptcy or liquidation itself, there is something to be said for the logic of the view expressed in Ex p Newitt  16 Ch D 522, namely that the forfeiture proviso in respect of the builders materials was enforceable against the builder, and therefore his trustee in bankruptcy could not avoid it. However, I find it hard to see how the reasoning in  Ex p Newitt  can stand in light of the reasoning of the majority of the House of Lords in the  British Eagle  case [1975] 1 WLR 758. It is not as if the forfeiture arrangement in Ex p Newitt  was akin to a forfeiture provision in a lease, because, other than the right to forfeit, the landowner had no interest whatever in the materials: as between him and the builder, they were the builder's property and the builder encumbered them with a deprivation provision. On the other hand, at least with a forfeiture clause in a lease, it can be said that the landlord always retains the reversionary interest to the land the subject of the lease.
107 However, there are problems with applying the principle if  Ex p Newitt  is wrong. Would a purported forfeiture of the materials by the landowner after the builder had actually gone bankrupt have been ineffective if the principle had applied? Whether a purported forfeiture of the materials before the bankruptcy, and if so for how long before the bankruptcy, would have been valid, it is hard to say. After all, in the  British Eagle  case the clearing house arrangement would only have taken effect after the plaintiff had gone into liquidation, and there was no criticism of the effect of clearing house arrangements prior to the liquidation. It may be that, if the deprivation provision can be activated in an event other than bankruptcy or liquidation (irrespective of whether those events could also activate the provision) then, provided the right to implement the provision has arisen before the bankruptcy or liquidation, and provided that the deprivation has been completed by the date of the bankruptcy or liquidation, then it will not fall foul of the principle. Some support for this view is to be found in cases such as In re Detmold; Detmold v Detmold  (1889) 40 Ch D 585 and  In re Balfour's Settlement; Public Trustee v Official Receiver  [1938] Ch 928. However, in  Ex p Newitt; In re Garrud  itself, James LJ said 16 Ch D 522, 531: "To my mind it is immaterial at what particular moment the seizure was made." Similarly, Lord Blanesburgh in  Bombay Official Assignee v Shroff  48 TLR 443, 446 reached his conclusion whether or not the "expulsion [takes] place before the commencement of … insolvency".
108 There is attraction in the argument that a deprivation provision which engages on an event other than insolvency will be enforceable notwithstanding the insolvency of the owner of the asset concerned. There is also authority to support that view, namely  Ex p Newitt  16 Ch D 522, as I have mentioned. However, I think the argument is difficult to reconcile not only with the view of Lord Cross in the  British Eagle  case [1975] 1 WLR 758, but also with the way Lord Blanesburgh expressed himself in the  Bombay Official Assignee  case 48 TLR 443, 446. The deprivation provision in that case was exercisable on default not on bankruptcy; if that alone had been enough to validate the provision even on a member's bankruptcy, it is hard to see why there was any necessity to justify the decision by reference to "the nature and character of the association". It also may be that this argument on behalf of LSE is difficult to reconcile with  Borland's  case [1901] 1 Ch 279.
109 The alternative approach is to analyse cases such as the  Bombay Official Assignee  case as involving a deprivation provision which is exercisable on an event which is so similar to insolvency, namely default, that it falls within the basic principle as described in the earlier cases. Such an approach could be said to be consistent with the last of the passages I quoted from the judgment in  Whitmore v Mason  2 J & H 204, 215. If this alternative approach is correct then it would validate some deprivation provisions in the event of an insolvency (i e those triggered by events not akin to insolvency) but it would not assist LSE in the instant case”.
106.	In paragraph 105 he casts doubt on the earlier proposition based upon the reasoning of Lord Cross in British Eagle.  I agree with that analysis and in my view it is plain from the speech of Lord Cross that it is the effect of the provision that is important and not whether or not it is merely expressed to apply on insolvency.  
107.	It seems to me that one has to bear in mind that prima facie where a company is insolvent the principle of pari passu distribution as regards the unsecured creditors is paramount.  Thus in Roberts Petroleum v Kenny [1983] AC 182 the House of Lords refused to make a charging order nisi into a charging order absolute because the winding up order had ensued in the interim.  
108.	This is the approach alluded to by Neuberger J in paragraph 107 where he opines that if the deprivation provision can be activated event other than the bankruptcy or liquidation then provided the right to implement the provision has arisen before the bankruptcy or liquidation and provided the deprivation had been completed by the date of the bankruptcy or liquidation then it will not fall foul of the principle.  
109.	It must be appreciated however that in so expressing an opinion it is in the context of his belief in paragraph 105 that none of this is relevant because of the British Eagle case.  
110.	Even if paragraph 107 represents the law it is clear that Neuberger J considered that the deprivation provision if activated by an event other than the bankruptcy or liquidation would only be affected “provided the right to implement the provision has arisen before the bankruptcy or liquidation and provided that the deprivation has been completed by the date of the bankruptcy or liquidation….”
111.	Mr Howard QC submits that is the position in the instant case.  He submits that the insolvency of Group is not the insolvency of Media and therefore it is not an insolvency situation for the purpose of the deprivation principle.  Second he submits that the arrangements are completed in equity by the service of the Notice on 2nd February 2009 so that the enforcement is complete before Media’s insolvency by the administration order on 11th February 2009.  
112.	As I said above this has an unreal air in the light of the evidence of the solvency of the Woolworth companies in my view.  Further I do not accept the implementation is complete when the Notice is served.  It seems to me it is only complete when the procedure has been completed namely when there has been a valuation of 2e and thus the price payable for each share by the IIB and that transaction itself has been determined by a transfer of the shares in exchange for the purchase price.  It seems to me that it is open to the Administrators to argue that as the matter is not complete the deprivation principle applies and that it is open to them to resist the completion of the exercise.  Mr Howard QC suggested that it would be improper on the part of the Administrators so to act.  I do not accept that.  It seems to me that they owe a duty to the general creditors of Media and if there was an argument that the deprivation principle would operate to prevent BBCW acquiring the shares on the basis that the MLA had terminated it would be their duty to do that in order to maximise the returns for Media’s creditors.  
113.	What would then happen is that BBCW would have to go to Court to seek an order compelling them to comply.  Equally if they refused to participate in the machinery for determining a price the Court would on that analysis substitute its own machinery to procure the happening of the necessary event see Sudbrook v Eggleton [1983] 1 AC 444.  It is accepted that the Court can grant specific performance as against insolvent companies even though the result would be (for example) to transfer assets rather than leave the Claimant in question to prove in the liquidation for damages for failure on the part of the insolvent company to comply with its obligations to transfer assets.  However on such an application it seems to me that the Administrators would be entitled to invoke the deprivation principle.  If on the occasion of that application the proposed order sought would have the effect of infringing the deprivation principle if acceded to the Court could not properly order it.
114.	In my view clause 26.7.3 of the JVA and its linkage to clause 16.2.5 of the MLA inevitably means that upon insolvency of any of the companies in the Woolworths Group that provision enables BBCW to acquire the shares at less than the Fair Value price that would have appertained but for the Insolvency Event.  That in my view is a classic situation where the deprivation principle would apply.  It does not matter in my view that it was a negotiated provision nor does it matter that it was not intended to be the effect nor does it matter that the Insolvency Event relied upon is not connected (as BBCW would argue) with the insolvency of Media.
115.	It would have been otherwise in my view if the two agreements had not been linked.  Thus for example if clause 16.2.5 had removed from it the linkage to the Notice so it became a general insolvency clause this would not pose a difficulty to BBCW.  In that eventuality in my view the deprivation principle would have no application.  The reason for that is that the MLA would have a standard provision for termination on insolvency.  It has long been the case that such a provision is not subject to the deprivation principle see Neuberger J above.  Mr Sheldon QC initially accepted that was the case even if the Insolvency Event was a different company within the group.  He later resiled from that proposition and said it would only be a normal provision if the insolvency was the party to the MLA.  I do not accept that.  There are compelling reasons why the Insolvency Event would be triggered for any company within the group.  That too in my view is not an unusual provision it merely reflects refinement of the clause over the years to deal with the possibility of the contracting company being kept alive artificially while all the other companies in the group collapse around it to avoid the determination provision.  Thus if the clause read:-
“If a holder of [Media’s shares] or any parent undertaking of a holder of [Media’s shares] or if the holder of [Media’s shares] is a member of the Woolworths Group as defined in the Joint Venture Agreement Woolworths suffers an Insolvency Event ……this Agreement should immediately terminate…..”
116.	That of course is not the agreement that was negotiated between the parties.  I have no power to renegotiate the agreement.  Thus it is of no assistance to BBCW to argue that the clause reflects the ordinary provision that on insolvency BBCW will have the right to terminate the MLA (per BBCW’s supplemental note paragraph 7).  I fully accept the gestation of the clause and why BBCW would consider it unfair in effect to have to “buy back” its own rights.  However one is concerned as Neuberger J sets out above with the consequences of the operation of the clause in the facts of the case.  The consequence is inevitable namely that as a determination only takes effect on the insolvency and the giving of the Notice its sole purpose is to produce a termination of the MLA for the purposes of calculating the Fair Value in the light of the Notice given by the BBCW.  Nobody could expect that clause operating that way to achieve anything other than a reduced price in my view.  It is self evident that 2e does not have much of a business if the MLA is terminated.  
117.	As I said in argument (and this is relevant to a further part of my judgment) the reality is that the situation has come about by a drafting problem.  There would have been no reason why the agreed terms of the parties could not have been achieved by redrawing clause 16.2.5 of the MLA as set out above.  Thus the application of the deprivation principle has an unintended consequence.  I cannot believe that either BBCW or Media ever contemplated that there would be some principle that would prevent their freely negotiated agreement coming into effect.  
118.	I therefore nevertheless conclude that clause 16.2.5 and the linkage to the JVA by clause 26.7.3 is also void.  They both together infringe the deprivation principle.  
119.	Finally, the fact that the event which causes the problem (clause 16.2.5 of the MLA) is in a document to which Media is not a party is in my view irrelevant.  One looks at the facts, one looks at the events and if the consequence is that an asset is removed from the availability for the creditors at a lesser value than otherwise it would have been then the deprivation principle is infringed.  Support for this is to be found in the Hong Kong Court of Appeal decision provided by Mr Sheldon QC in Peregrine Investments Holdings Ltd (In liquidation) & Ors v Asian Infrastructure Fund Management Company Ltd LDC & Ors CACV 32/203 at paragraph 87.  
120.	Equally the fact that the parties were bona fide and the provision was fair agreement does not deflect the Courts from applying the deprivation principle as a matter of public policy if the agreement however well intentioned infringes it (see paragraphs 93 and following in the Peregrine judgment).
121.	Such were my views as expressed in the draft judgment. I now consider these issues in the light of the decision of the Chancellor in Perpetual Trustee.
122.	The decision of the Chancellor like that of Neuberger J in Moneymarkets is of persuasive authority. However given the fact that it covers the same issues and was fully argued I will clearly give it great consideration.
123.	BBCW relies on it principally because it was held that an event of insolvency triggered by the insolvency of a Company other than the Company against whom the default was relied upon was not caught by the principle. On the facts the Chancellor held that an event of default relied upon was the filing for Chapter 11 relief by Lehman Bros Holdings on 15th September 2008 (“LBH”) was not invalidated by the principle. Lehman Brothers Special Financing Inc (“Lehman BSF) did likewise on 3rd October 2008 and that too was an event of default.
124.	The note holders appeared to relief on the default of Lehman BSF
125.	In paragraph 28 of his judgment the Chancellor set out three questions to be determined:
1.	The breadth of the principle
2.	Whether it applied if there is no insolvency process in England in relation to Lehman BSF
3.	Whether it applies if the clause operates on an event other than the bankruptcy of Lehman BSF
            He considered those in turn.
126.	He reviewed all the authorities considered by Neuberger J. He concluded that the principle did not apply to strike down the relevant clauses. That made consideration of issues 2 and 3 unnecessary but he considered them nevertheless (paragraph 47). The third issue is most relevant although BBCW relies in addition on the Chancellor’s reasoning on issue 1. He found that the seeking of Chapter 11 protection by LBH was an event of default that Lehman BSF was the defaulting party and the event was an event other than the insolvency of Lehman BSF.
127.	On the first issue BBCW relies upon the observations of the Chancellor in paragraph45 that the court should be astute not to interpret commercial provisions so as to invalidate them particularly if it casts doubt on longstanding commercial agreements. I agree with those propositions as far as they go but it must be borne in mind that the operation of the principle is an anti avoidance principle designed to prevent parties agreeing in advance provisions which better  party’s position in the event of insolvency. Given that there is no difficulty in upholding provisions which operate irrespective of the insolvency. The second argument relied upon by BBCW was the fact that Media went into insolvency only on 11th February by which time the MLA had terminated and it had no property which was determined prematurely by its insolvency.
128.	This is ingenious but in my view is wrong when the overall facts are considered. For the reasons set out above in my view it is unrealistic to look at the event of default created by the insolvency of Group in isolation. As I have said there was a joint and several liability for £300m at least and the reality was that all companies became insolvent. I do not see why the same inability to meet the payments could have a different result depending on whether Group was selected as opposed to Media.
129.	This is where I with great diffidence depart from the views of the Chancellor in respect of issue 3. 
130.	The first thing to note is that there was apparently no disagreement that the insolvency of LBH was an event other than the insolvency of Lehman BSF. Further the arguments of Mr Sheldon QC to look at the realities were not made in the Perpetual case.
131.	The authorities relied on by the Chancellor (Jay and Newitt) upheld clauses where there was no reliance on insolvency to terminate the relevant interest. They struck them down if they were relied upon in the event of insolvency and no other breach see paragraphs 49-55 of the Chancellor’s judgment and in particular paragraph 51 with which I respectfully disagree. 
132.	I do not accept with respect to the Chancellor that these decisions have any relevance where on the facts in this case the “other event” is also an insolvency event. It is necessary to look at the overall position for the reasons set out above. This seems to me to be in accordance with the House of Lords in British Eagle.
133.	If that is not correct it seems to me that I should follow the reasoning of Neuberger J in Money Markets. I do not think the restricted basis for the decisions can stand in the light of British Eagle. In my view the Court is entitled to look at the overall position and if the result is to create a better position on insolvency by invoking a provision other than a default of the insolvent party the court applying British Eagle can look at the overall position and the result. This is well illustrated by the present case.
134.	Equally the fact that apparently a significant number of commercial contracts have been drafted ignoring the possible impact of British Eagle is not in my view a basis for disapplying it (see paragraph 44 of the Chancellor’s judgment). I accept this is a policy issue and the contrary is clearly arguable. The area clearly needs clarification.
135.	Accordingly I see no reason to change my initial view as expressed in the draft judgment.
136.	I now consider the original submissions in the light of this determination
137.	Mr Sheldon QC submits there are 3 options:-
1)	The first is that clause 16.2.5 is void so that the termination of the MLA is void and the MLA continues.  BBCW would be entitled to buy the shares pursuant to the Notice it gave but on the basis that the MLA has not terminated.
2)	The second option is that the deprivation principle applies such that clause 16.2.5 is rendered void and the MLA continues but the effect is to invalidate the entirety of the option procedure because otherwise it would require BBCW to acquire the shares on a different basis.  That would lock the parties in the JVA despite the occurrence of the Insolvency Event and the insolvency of Media in particular.
3)	The third possibility is that clause 16.2.5 is not void so that the MLA is terminated but clause 26.7.3 is void but requires BBCW to acquire the shares as if the MLA had not terminated.
138.	There is a fundamental objection on the part of BBCW to the suggestion that they should be forced to acquire the shares on the basis that the MLA has not terminated.  It is said with some force that had that been the possibility that is something they would not have agreed to or negotiated at the start.  To foist it on BBCW now is to transform the option agreement into something radically different and to increase by a significant amount the financial obligations of BBCW.  By way of contrast Media never contemplated obtaining such a windfall price for the shares if an Insolvency Event occurred.  BBCW would also contend that option 3 was also unfair for the same reasons.  
139.	That would leave option 2.  That has the effect of removing any rights to acquire the shares.  It also means that the MLA is not terminated but continues.  The parties will be locked into an unsatisfactory JVA and would presumably have to negotiate a share acquisition.  On the one hand BBCW would argue that the shares in negotiation terms would have to be discounted to take into account the minority status (an option removed under the terms for setting out the Fair Value under the JVA).  Against that Media would argue that the shares would have to be valued on the basis that the MLA had not terminated.  That would enhance the value.
140.	BBCW submits that the way to proceed is to strike out as little as possible of the JVA and the MLA that requires to be struck out so that the remainder of the agreement no longer offends the deprivation principle.  Mr Howard QC submits this is easily done by striking out the linkage provisions in clause 16.2.5 as set out above.  Thus shorn of that linkage the MLA clause 16.2.5 operates to terminate the MLA automatically upon the Insolvency Event.  When reverting back to clause 26.7 of the JVA the reference to clause 16.2.5 could also either be deleted or left in as it has no significant consequences.  It merely states the factual scenario namely that upon the Insolvency Event the MLA has terminated and thus the valuation by the IIB must be on the factual situation as it is.  
141.	Mr Sheldon’s objection to this is that it allows the clause to overcome the deprivation principle “by the back door”: that might well be true.  However it is not an absolute principle.  Thus careful drafting can achieve a result without infringing the principle.  In the present case the altered drafting as altered set out above would mean that there would be no infringement of the deprivation principle but BBCW would still be entitled to acquire the shares on the basis that the MLA had terminated.  This also actually reflects what the parties wished to happen. However they were unintentionally unable to achieve because of the drafting of the JVA and the MLA.  It is on the facts no answer for Mr Sheldon QC to submit that it is circumventing the deprivation principle.  It is circumventable on some occasions.  It would not be circumventable on every occasion.  Thus for example if a provision had provided for the acquisition of the shares at £1 in the event of an Insolvency Event occurring no amount of ingenious drafting would have circumvented that obvious infringement.  In the circumstances of a commercial negotiation at arms length with two large organisations the Court should be slow to strike clauses down unnecessarily if they can be saved without infringing the deprivation principle.  It is plain (in the light of Mr Parsons’ evidence above) that it was inadvertent.  Had the matter been thought out fully I have no doubt BBCW would have inserted a general provision.  By way of contrast as I have said above the avoidance of the dispositions under the deprivation principle gives Media something which it was never in the contemplation of the parties that it would obtain.  The effect is unfair for the reasons set out in Mr Parsons’ witness statement namely that it requires BBCW to pay for its own assets.
142.	Accordingly I am of the opinion that Mr Howard QC’s submissions are the correct ones.  I should simply strike out the offending words in  clause 16.2.5.  That will still leave the option agreement to be implemented on the basis that the MLA was terminated but without the linkage to the acquisition of the shares.  It is not a large rewriting of the MLA because there will be no further operation of the MLA in any event; it is addressing a one off termination at the end of the parties’ relationship.  
143.	I would therefore declare that the provisions are void and in the consequence strike out the offending parts set out above but do no more.
AN ALTERNATIVE ARGUMENT
144.	If I am wrong in that it seems to me that there is another provision which is of significance.  Clause 39.2 of the JVA provides:-
“39.2 If any provision of this Agreement becomes or is held by a Court of competent jurisdiction to be invalid or unenforceable then the parties shall enter into good faith negotiations to substitute a valid or enforceable clause which achieves so far as possible the objectives to the original clause”
145.	There is no such provision in the MLA (see clause 23 which replicates the effect of clause 39.1.
146.	The purpose of this provision seems to me to be clear.  If a clause is struck down as being invalid or unenforceable the parties are required to enter into good faith negotiations to draft a new clause which would achieve the objectives as far as possible as the original clause.
147.	If one applies that to the present facts upon an Insolvency Event BBCW was to be entitled to acquire Media’s shares in 2e.  It was agreed between the parties that would be on the basis that the MLA terminated.  It is therefore perfectly possible for that to be achieved by redrafting along the lines that I have set out above.
148.	Mr Sheldon QC objected to that because it is the enforcement of an agreement to agree contrary to the principles of the House of Lords set out in Walford v Miles [1992] 2 AC 128.  I do not accept that has any relevance to a clause to be found in an existing agreement.  I prefer the observations of Longmore LJ in Petromec Inc & Ors v Petrolio Brasiliero SA Petrobras & Ors [2005] EWCA Civ 891.  I need not set out the factual background to the judgment.  It concerned the consequences of an explosion and fire involving tragic loss of life of the Petrobras 36 which capsized and sank in deep water off Brazil’s coast.  It constituted the world’s largest offshore production platform.  The relationships of the various people interested were set out under a number of agreements.  One of them was described in the judgment as “the Service Supervision Agreement”.  Clause 12.4 of that (see paragraph 86 of the judgment) provided as follows:-
“12.4 Brasoil agrees to negotiate in good faith with Petromec the extra costs referred to in clauses 12.1 and 12.2 above and the extra time referred to in clause 12.2 above…”
149.	As shown in paragraph 109 of the judgment Miss Prevezer QC made what was described as a sustained attack on the judgment of the Judge below submitting that the Courts ought to enforce an express contractual provision to negotiate in good faith despite the decision of the House of Lords in Walford.
150.	In paragraph 117 Longmore LJ refers (without referring to the decision) to the ability of the Court to provide machinery for ascertainment if the parties do not participate.  He dismissed the appeal on grounds which did not involve consideration of the submission applicable to clause 12.4.  Nevertheless he did express an opinion on it as follows:-
“Enforceability?
[115] This brings me to the question whether an express obligation to negotiate in good faith is enforceable or not. Anything I say on this topic is not essential to the disposition of the appeal but in deference to the arguments presented, I would like to say a few words.
[116] The traditional objections to enforcing an obligation to negotiate in good faith are (1) that the obligation is an agreement to agree and thus too uncertain to enforce, (2) that it is difficult, if not impossible, to say whether, if negotiations are brought to an end, the termination is brought about in good or in bad faith, and (3) that, since it can never be known whether good faith negotiations would have produced an agreement at all or what the terms of any agreement would have been if it would have been reached, it is impossible to assess any loss caused by breach of the obligation. I doubt, however, if any of these objectives would be good reasons for saying that the obligation to negotiate in good faith contained in cl 12.4 is unenforceable in this particular case.
[117] The first objection, that the obligation is an agreement to agree, carries little weight in the present case. It is contained in the Supervision Agreement which is itself legally enforceable. (No one suggested that, if the obligation to negotiate the cost of the upgrade is unenforceable, that affects the rest of the agreement.) The obligation only relates to the cost to Petromec of the Roncador upgrade over and above the South Marlim upgrade and the cost of any variation orders. The “cost to Petromec” is comparatively easy to ascertain (especially if no element for profit is to be included). If agreement is not reached, the court will itself have to ascertain what the reasonable cost of such upgrade should be. If there are any ascertainable losses which arise from a failure to negotiate in good faith, they will likewise to ascertainable with comparative ease”.

151.	That analysis is equally applicable to the present case.  I adopt and agree with the observations of Longmore LJ.  It would be quite wrong for the Courts to strike down clause 39.2 when it has been carefully drafted by large commercial organisations (no doubt equipped with the usual array of lawyers) as an attempt to address the possibility that a clause might unintentionally be invalid.  It seems to me to be perfectly apposite to the present case.  
152.	Now it is true that the relevant provision sought to be circumvented is  clause 16.2.5 of the MLA which is not in the JVA and is therefore technically not subject to clause 39.2.  However it is referred to in the JVA and in my view the parties would be able to negotiate in good faith a provision which would enable the MLA to be suitably adjusted.  
153.	This provision is not before me but for the reasons that I have set out it seems to me that there is in any event an obligation on both parties to attempt to address this invalidity.  Contrary to Mr Sheldon QC’s submission it is not enforcing the agreement by circumventing the deprivation principle.  It is a clause which addresses the possibility that a clause might become invalid.  This is sensible because it is impossible for any draftsman to cover every eventuality.  As the clause can be made effective without infringing the deprivation principle the parties ought to negotiate in good faith a clause which implements their joint agreement namely that upon an Insolvency Event the MLA was intended to terminate and BBCW was intended to acquire the shares on the basis that the MLA had terminated.
154.	If the parties do not attempt to negotiate in good faith then the matter can of course be brought before the Courts in the future.
ALTERNATIVE DECLARATIONS
155.	Although I have determined that part of the clauses are void nevertheless the procedure for valuation still continues.  I now therefore consider the alternative declarations sought.  These related to matters which Media considered the IIB ought to take into account but were not obliged to do so.  They are items 4 (i) – (vi) of the Amended Ordinary Application.  
156.	There was a misunderstanding between the parties.  It was no part of Media’s case that the IIB was obliged to consider these factors; it is clear from the wording of the Amended Ordinary Application and the submissions that these were factors which he was entitled to take into consideration.  Therefore the differences between them were relatively modest.  This was demonstrated by the fact that on the last day of the hearing it was agreed between the parties that items (i) – (iv) would be resolved by them leaving only issues (v) and (vi) as follows:-
“(v) the fact that the V Shares are to be sold by Media and purchased by BBCW; and
(vi) the fact that BBCW is contractually obliged to purchase the V Shares”.
157.	I was initially concerned about whether the Court should interfere in the exercise in the JVA.  These were matters in my view which were properly to be put before the valuer for him to consider.  However Mr Jowell reminded me of the decision of Norwich Union Life Insurance Society v P&O Property Holdings Ltd [1993] 1 EGR 164 and in particular the final part of the judgment of Sir Donald Nicholls VC as follows:-
“The function of the expert is to make the decision and that is not the function of the Court where the decision has been entrusted to the expert.  It is otherwise if both parties agree – as they often do- to get a ruling from the Court to determine the base upon which an expert is to proceed, and if it is practicable to assist the Court will do… ”
158.	Mr Sheldon QC submits that factors 5 and 6 ought to be considered by the IIB.  In my view this is incorrect.  As can be seen from the clause set out above the IIB is to determine the Fair Value of the share.  However it does it by reference to the Fair Market Value of the company and then divides that value by the relevant number of shares.  Majority and discount share holding issues are expressly excluded.  There is an assumption of willing buyer and willing seller.  It is normal (and I can see no reason to depart from this principle) that the fact that there will be a sale and that the sale will be in favour of BBCW are factors which ought to be left out of account.  That prevents arguments (on behalf of BBCW) that as it is the only buyer the price should be discounted and arguments (on behalf of Media) that BBCW will pay more to obtain the shareholding because of its majority shareholding.  In this context I refer to Amec Development Ltd v Jurys Hotel Management (UK) Ltd [2001] 1 EGLR 81 and Word Wide Fund for Nature v World Wrestling Federation Entertainments Inc [2006] EWHC 184 at paragraph 174.  The subsequent Court of Appeal decision did not interfere with that analysis.   The fact that the only buyer will be BBCW in my view ought to be disregarded.  A similar position appertains (for example) in rent review where a user clause in a lease might restrict it to use by the named lessee see: Law Land Co Ltd v Consumers Association [1980] 2 EGLR 109.  The exercise in this case is to value 2e as a whole and it seems to me that the personality of BBCW as a buyer is irrelevant to that issue.
159.	Accordingly I reject Media’s contention that factors (v) and (vi) are factors which the IIB can consider.
160.	I am grateful to all parties for the preparation of the case, the written submissions and the oral arguments which I found of great help.