Neutral Citation Number: [2007] EWCA Civ 811
Case No: A3/2006/2603
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM  Queens Bench Division, Commercial Court
Mr Justice Toulson
[2006] EWHC 2887 (Comm)
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 31/07/2007
Before :

LORD JUSTICE WALLER
Vice-President of the Court of Appeal, Civil Division

LORD JUSTICE GAGE
and
LORD JUSTICE LAWRENCE COLLINS
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Between :

	IFE Fund SA	Appellant	
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	Goldman Sachs International	Respondent	
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(Transcript of the Handed Down Judgment of
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
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Jonathan Nash QC and Rajesh Pillai (instructed by Messrs Fox Williams LLP) for the Appellant
Mark Howard QC and David Quest (instructed by Messrs Herbert Smith LLP) for the Respondent

Hearing dates : 16th – 18th July 2007
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Judgement
Lord Justice Waller : 

Introduction
1.	This is an appeal from a judgment of Toulson J (as he then was) by which he dismissed a claim for damages by the appellants (IFE), based on an alleged failure by the respondents (GSI) as arrangers and underwriters of a syndicated loan to disclose to them information, obtained after the Syndication Information Memorandum (SIM) had been sent out, but before IFE completed their purchase of bonds from GSI.
The Facts
2.	There is on the appeal no challenge to the judge’s findings of fact and the full history can be found in his judgment.   For the purposes of the appeal the basic facts can be described fairly shortly. GSI were the underwriters of credit facilities made available to Autodis SA (Autodis). They were also the arranger for syndication of an intermediate tier of credit provided to Autodis for its purchase of shares in a UK listed company, Finelist plc (Finelist). GSI produced a SIM subject to certain standard wording which was distributed on or about 30 March 2000 to possible participants including IFE. The expectation was that all participants and GSI would finally commit themselves during April 2000, but in fact GSI committed themselves as underwriters on 27 April 2000 and there was some delay before other participants committed themselves.
3.	IFE invested Euros 20 million purchasing bonds and warrants issued by Autodis from GSI on 30 May 2000 in reliance on the information in the SIM and on two reports from Arthur Andersen relating to Finelist dated 21 December 1999 and 11 February 2000 which, although they were sent separately, later it is common ground can be treated as if incorporated in the SIM. 
4.	Between the sending out of the SIM and 30 May GSI received other information from Arthur Andersen by what are described as reports dated 19 and 26 May 2000. Those reports, on the findings of the judge, disclosed information which showed “that the statements about Finelist’s financial performance in the SIM and Arthur Andersen’s pre-acquisition reports were or might have been incorrect in [a] material way” [ see paragraph 77 of the judgment].
5.	In September 2000 following discovery of accounting frauds committed by the management of Finelist a receiver was appointed over Finelist. The appointment occurring so soon after May 2000, IFE were concerned as to whether they had received all relevant information, and during their inquiries discovered in January 2001 that Arthur Andersen had produced a report to GSI on 19 May 2000which was “much more negative in tone” than the reports referred to in the SIM which had not been disclosed to IFE.
6.	In order to restructure the capital and debt of the Autodis Group in July 2001 the various classes of shareholders and creditors of Autodis including IFE and GSI entered into a Bondholders’ Agreement pursuant to which IFE agreed to invest a further £4.5 million in equity and new bonds issued by Autodis. By clause 16.4 of that agreement the parties agreed not to bring proceedings of any kind. All the parties other than IFE signed the agreement at a meeting at the Paris Office of Ashurst Morris Crisp on 29 June 2001. Mr Mitjavile for IFE did not sign at that meeting, exception having been taken to a limit in the Power of Attorney dated 29 June 2001, which IFE had granted to him. The Power of Attorney had been granted “under the limitations stated in the attached letter dated 28 June 2001, addressed to Mr Jean-Luc Sauvage, the appointed bondholders’ representative, ..”; the letter stated that IFE’s agreement “in no case comprises any waiver of our rights of action ….”.
7.	A fresh unlimited power of attorney was obtained dated 3 July 2001 replacing that of 29 June 2001. But before signing the agreement Mr Mitjavile on behalf of IFE sought to preserve IFE’s position by a letter faxed to Mr Jean-Luc Sauvage on 3 July 2001. Before any response was obtained to that letter Mr Mitjavile on behalf of IFE signed the agreement on 4 July 2001. By letter dated 9 July 2001 Mr Sauvage rejected the attempt to reserve the position. IFE went ahead with its investment and the agreement was ultimately approved by the French Court.
The action
8.	IFE brought this action against GSI in September 2005. The essence of the claim was to assert  that GSI had failed to reveal the further information on Finelist obtained from Arthur Andersen prior to 30th May 2000. The primary way in which that case was made was to assert that GSI had impliedly made certain representations. Paragraphs 9 and 10 of the Re-amended Particulars of Claim asserted:-
“9.  Further, by referring to Finelist’s financial performance and to the Memorandum Reports in the Memorandum, and by arranging with Arthur Andersen that copies of the Memorandum Reports should be sent to IFE, GSI impliedly represented to IFE and/or represented by its conduct to IFE that:
(1)	GSI was not aware of any facts which showed that the statements about Finelist’s financial performance made in the Memorandum were or might be incorrect in any material way; and/or
(2)	GSI was not aware of any facts which showed that the facts stated in the Memorandum Reports were or might be incorrect in any material way, and/or which showed that the opinions expressed in the Memorandum Reports were not or might not be reasonable; and/or
(3)	So far as GSI was aware, Arthur Andersen considered that the facts stated in the Memorandum Reports were correct and that its opinions stated therein were reasonable.
10. The representations referred to in paragraph 9 above were continuing representations which IFE was entitled to and did in fact regard as remaining true until completion of the transaction on 30 May 2000.”

9.	In the original pleading IFE asserted that the representations became false and that GSI had no reasonable grounds for believing that they were or remained true by reference to the Arthur Andersen Report of 19 May 2000. Only after commencement of the action did IFE become aware of the further report of 26 May 2000and the pleading was amended to allege falsity by reference to that report as well.
10.	Shortly before trial IFE made a further amendment to the pleading alleging a duty of care and by paragraph 10A alleged : 
“10A. Further or alternatively, by reason of the facts and matters pleaded in paragraphs 2 to 8 above, GSI owed a duty of care to IFE to take reasonable care that if before completion of the transaction GSI became aware of any facts and matters which showed that (1) the statements about Finelist’s financial performance made in the Memorandum were or might be incorrect in any material way; and/or (2) the facts stated in the Memorandum Reports were or might be incorrect in any material way, and/or which showed that the opinions expressed in the Memorandum Reports were not or might not be reasonable; and/or (3) that Arthur Andersen no longer considered that the facts stated in the memorandum Reports were correct and that its opinions stated therein were reasonable, GSI would inform IFE that this was the case and/or would inform IFE of the relevant facts and matters.”
11.	By its defence GSI relied on clause 16.4 of the Bondholders’ Agreement by which GSI asserted it was clear as a matter of French law that IFE were precluded from bringing the proceedings. That clause provides as follows:- 
“16.4 Waiver and recourse and action
(a)  The Parties, both on their own behalf and for and on behalf of their Affiliates, for which they shall be answerable, undertake (i) to co-operate and provide every assistance with the preparation and conduct of Proceedings, (ii) not to conduct proceedings relating to the Proceedings and, more generally, to any facts and circumstances which may be the subject of the Proceedings other than in the context of and in accordance with the provisions of the Participating Capital Loan and (iii) not to bring any proceedings of any kind whatsoever against (x) Autodis or its subsidiaries, (y) any of the members of the supervising board or managing board of Autodis or Autodistribution, or (z) any of the Parties, or their Affiliates, with regard to the Finelist Group plc, its acquisition and all events, actions or omissions linked to this acquisition which have preceded or followed this (including with regard to the corporate offices within the Finelist Group plc)
(b) Any Party having brought legal proceedings in breach of Section 16.4 (a) shall lose, and the transferee receiving all or part of its Securities shall lose, all rights or benefits resulting for said Party from the present Agreement, including all rights to payments of Remuneration or to transfers of Shares pursuant to the present Article XVI, while remaining bound by all the obligations resulting for said Party from the present Agreement, just as the transferee receiving all or said part of its Securities shall remain bound by all the obligations resulting for said transferee from the present Agreement.”
12.	IFE’s response was to take a point on construction under French law on which the judge ruled against IFE and which is not pursued on the appeal. They in addition took two points by reference to French law; first they asserted the effect of the letter of reservation was either to produce an agreement in accordance with the terms of the reservation or no agreement at all, and second asserted that IFE’s allegations against GSI constituted “dol par reticence” and that under French law a party could not rely on a clause waiving the right to bring proceedings against him where the claim arises from “dol par reticence”. This was not ultimately quite the way in which the “dol par reticence” point was argued at the trial as will appear.
13.	By its defence GSI also relied on the terms of the “Important Notice” under cover of which the SIM was provided to IFE and all possible participants. That notice contained standard terms under which arrangers and underwriters in the world of syndicated finance provide SIMs. Indeed as explored in some detail in cross-examination, they are the standard terms adopted by IFE when it acts as arranger or underwriter. The important terms are the following, numbered for convenience:- 
“(i) The information contained in this Memorandum has been obtained from the Sponsors, Autodistribution, Finelist, professional consultants and/or public sources.  The Sponsors have approved the information obtained from them and its inclusion in this Memorandum, and have authorised the distribution of this Memorandum.  None of this Memorandum, the information contained in it or any other information supplied in connection with the Facilities shall form the basis of any contract.  Any future prospective co-underwriter or participant in the Facilities will be required to acknowledge in the Facilities contract that it has not relied on, or been induced to enter such agreement by, any representation or warranty, save as expressly set out in such agreement.
(ii) The Arranger has not independently verified the information set out in this Memorandum.  Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility is accepted by Goldman Sachs International, nor any of their holding companies, subsidiaries, associated undertakings or controlling persons, nor any of their respective directors, officers, partners, employees, agents, representatives or advisors as to or in relation to the accuracy or completeness or otherwise of this Memorandum or as to the reasonableness of any assumption contained therein or any other information made available in connection with the Facilities (whether in writing or orally) to any interested party (or its advisers).  These disclaimers by the Arranger shall, for the avoidance of doubt, apply (without limitation) to the Valuation and Exit Strategy in Section IX of the Memorandum.  Neither the Arranger nor any of its respective directors, officers, employees, agents, partners or professional advisers shall be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement contained in this Memorandum or any such other information.
 (iii) The information contained in this Memorandum should not be assumed to have been updated at any time subsequent to the date shown on the cover hereof and the distribution of this Memorandum does not constitute a representation by any person that such information will be updated at any time after the date of this memorandum.  The Arranger expressly does not undertake to review the financial condition, status or affairs of Autodistribution, Finelist or any of their affiliates or any obligor in respect of the facilities, at any time or to advise any potential or actual participant in the Facilities of any information coming to the attention of the Arranger.
14.	The fact that IFE used such terms lead to Mr Mitjavile making a number of concessions in cross-examination. Towards the end of that cross-examination, at the suggestion of the judge, Mr Howard QC put a number of short points. The questions and answers are set out in the judge’s judgment as follows:-
“Q. I am going to make a number of short points to see whether we agree or disagree.  The first thing is: you did not understand that Goldman Sachs had made any representations to you on which you could rely; correct?
A. I agree.
Q. Secondly, you understood that Goldman Sachs were saying to you: I will have no legal responsibility to you in relation to your acquisition of these bonds?
A. I agree.
Q. Thirdly, Goldman Sachs were making it clear that if you suffered any loss as a result of relying on the syndication information memorandum or any other information that you were provided with they would not have any responsibility to you for that?
A. I agree.
Q. . . . You had no objection to proceeding on that basis; correct?
A. I agree
Q. And the reason you had no objection was that this type of syndication information memorandum and there being no legal responsibility on the part of Goldman Sachs was something that you regarded as perfectly standard and acceptable?
A. I agree.”
15.	It was in the light of such answers that Mr Howard for GSI elected at the trial to call no evidence. Indeed he elected not to cross-examine any of IFE’s other witnesses and thus the evidence at the trial was simply the documentation, the witness statements on behalf of IFE, and Mr Mitjavile’s oral evidence.
The judge’s judgment
16.	Toulson J dismissed IFE’s claim. He held first that there were no implied representations as asserted by IFE. He did so in these terms:-
“59. The Arthur Andersen pre-acquisition reports had made it clear that it had limited information about Finelist.  It could therefore be difficult to judge whether some particular piece of information “might” make the statements about Finelist’s financial performance incorrect, and, if so, “in a material way” (whether by reference to the materiality test applied by PWC as Finelist’s auditors, materiality in the view of Arthur Andersen or materiality in the view of a potential investor).  An implied representation of the scope contended for by IFE would potentially require Goldman Sachs to carry out an evaluation in order to decide what information it was required to disclose, inconsistent with the express language of the SIM (“The Arranger expressly does not undertake to review the financial condition, status or affairs of …Finelist… at any time or to advise any potential or actual participant in the Facilities of any information coming to the attention of the Arranger”).
60. Mr Mitjavile’s evidence did not support IFE’s case that a reasonable person would have understood that Goldman Sachs was making any such implied representation, and I do not accept that there was any such implied representation.  That is not to say that Goldman Sachs made no representations at all.  I do not doubt that there was an implied representation that in supplying the SIM it was acting in good faith, that is, not knowingly putting forward information likely to mislead; or that this was a continuing representation, so that if, after the issue of the SIM but before a recipient acted on it, Goldman Sachs became aware that the information which it had supplied in good faith was misleading, it would be under a duty to disclose this (at all events unless it honestly believed that the error was a matter of no importance). There is, however, a difference between actual knowledge that the information previously supplied was misleading and acquisition of information which merely gave rise to a possibility that the information previously supplied was misleading. In the latter case, Goldman Sachs would not be under a duty to the prospective participant to investigate the matter further, or to advise the participant, in view of the terms of the SIM.”
17.	He held that there was no duty of care as alleged, and did so in these terms:- 
“63. The mezzanine syndication involved a number of interlocking contractual relationships giving rise to rights and obligations defined in documents drafted by specialist lawyers.  In such circumstances the court should be very slow to superimpose any obligations in negligence going beyond those carefully defined in the contractual documentation.
64. Goldman Sachs was not acting as an adviser to IFE or purporting to carry out any professional service for IFE, as the terms of the SIM made plain.  It was acting for the sponsors and not on behalf of the recipients of the SIM.  In general a party involved in negotiations towards a commercial venture owes no positive duty of disclosure towards another prospective party.  A duty of disclosure may be undertaken, but no such duty was undertaken in this case either expressly or impliedly.  The expression “assumption of responsibility” has on occasions been used in cases where it would be more accurate to speak of the court imposing a responsibility, but I can see no ground on which it would be fair to impose on Goldman Sachs the duty of care contended for by IFE.”
18.	He then dealt with an argument of IFE based on section 3 of the Misrepresentation Act 1967 and/or section 2 of the Unfair Contract Terms Act 1977 relating to exclusion clauses and the requirement of reasonableness if they are to exclude liability for misrepresentation or negligence. He held that apart from the sentence stating that GSI would not be liable “for any loss or damage suffered by any person as a result of relying on any statement in the SIM” the other terms of the “Important Notice” were not exclusion clauses but went to the scope of the representations being made or (so far as the claim for negligence was concerned) to the issue whether there was a duty of care. As regards the excepted sentence, he held that it was “arguably different” but was not in any event relevant to the issue of what representations were made.
19.	In case he was wrong as to whether representations had been made the judge dealt with the significance of the reports obtained in May 2000. As already indicated the judge would have found that, if continuing representations were made that GSI was not aware of facts which showed that Arthur Andersen’s pre-acquisition “were or might be incorrect in any material way”, there was a misrepresentation. He also found that if the reports had been shown to IFE they would not have gone ahead with the purchase of bonds: see para 77.
20.	The judge set out the differing arguments on inducement at paragraphs 78 to 81 of his judgment. Mr Howard had argued that once it was clear (as Mr Mitjavile’s evidence showed) that IFE had not relied on any representation, inducement could not be established. Whereas Mr Nash QC’s argument was that with a case that was in reality about non-disclosure it was an over simplification of Mr Mitjavile’s mental state to look at what he said about representation, having regard to what he said he would have done if the reports had been disclosed to him.
21.	The judge decided not to lengthen his judgment by exploring those arguments in the light of his ruling that there was no representation.
22.	He dealt in paragraphs 82 to 84 very shortly with points relating to the contract between IFE and GSI. The only point of relevance to this appeal (or more accurately a respondent’s notice by GSI) was his decision that the paragraphs of the important notice were not incorporated into the purchase contract in the light of one of those terms stating that “none of the memorandum was to form the basis of any contract”: see para 84.
23.	The judge then dealt with the effect of clause 16.4 of the Bondholders Agreement. It is only the points on French law which are of relevance to the appeal. As to the reservation letter of 3 July 2001, he set out the agreed position as to French law; he stated that there were only three possibilities (i) no contract at all (ii) contract in which clause 16.4 was to be interpreted as per 3 July letter or (iii) a contract in relation to which the parties did not agree on the interpretation of clause 16.4. He held that it was the third of those three options which had been achieved, and thus that the clause prevented the bringing of proceedings subject to the dol par reticence aspect.
24.	As to dol par reticence, he held that the IFE claim of non-disclosure “would have been likely in French law to constitute dol par reticence”. He then recited the joint opinion of the French law experts and referred (as Mr Nash would say inaccurately) to what had been agreed as the effect of French law during the hearing. The judge held that Mr Mitjavile knew that the 19 May report had not been disclosed and that there had been “non-disclosure”.  The judge held that, although Mr Mitjavile did not know of the full details, he knew what the judge concluded was all he needed to know as a matter of French law and summarised as “all that was essential for clause 16.4 to constitute a valid waiver.”
Issues on appeal
25.	 	a. Was the judge right in his conclusion that none of the alleged representations was made?
b. If there was a representation was the judge right that there was no continuing representation up to 30 May 2000?

c. If there was a continuing representation, did it induce IFE to contract on 30 May 2000?

d. Was there a free standing duty of care owed by GSI to IFE?

e. If any of the terms of the important notice were exclusion clauses – were they contractual and if so were they reasonable?

f.   Is the judge right in his conclusions on French law as to the effect of Clause 16.4 of the Bondholders’ Agreement i.e. (i) as to the effect of the 3 July 2000 letter, and (ii) in relation to waiver of dol par reticence?

Misrepresentation
26.	IFE have at all times made clear that they are not alleging dishonesty against GSI.  Mr Howard for GSI has on the other hand from GSI’s side made clear that he does not argue that the standard terms would allow GSI to act dishonestly. It was no doubt this concession which lead the judge to say what he did about an implied representation as to good faith [see para 16 above].  
27.	As debate before us illustrated it is not that easy to define “dishonesty” or what might or might not be “in good faith” in a vacuum. Until one has identified what, if any, representations were being made or what duty of disclosure was owed one cannot really say what would or would not be honest or in bad faith. Furthermore if the decision were to be that there was a duty to disclose by virtue of what GSI had set out in the SIM, but GSI were honestly not aware of that duty, then their conduct might not as I would see it be dishonest. [See Lord Wright M.R. in With v O’Flanagan [1936] 1 Ch.575 at 584.] 
28.	I can start by clearing one or two issues out of the way. First it seems to me that the argument that there was some free standing duty of care owed by GSI to IFE in this case is in the light of the terms of the Important Notice hopeless. Nothing could be clearer than that GSI were not assuming any responsibility to the participants: Hedley Byrne v Heller & Partners [1964] A.C. 465. The foundation for liability for negligent misstatements demonstrates that where the terms on which someone is prepared to give advice or make a statement negatives any assumption of responsibility, no duty of care will be owed. Although there might be cases where the law would impose a duty by virtue of a particular state of facts despite an attempt not “to assume responsibility” the relationship between GSI either as arranger or as vendor would not be one of them. I entirely agree with the judge on this aspect. Second since IFE and GSI were parties to the contract under which GSI sold bonds to IFE if there was a misrepresentation it would be one to which the Misrepresentation Act 1967 would apply. If that Act does not, for any reason, provide a remedy, there could as I see it be no room for IFE being able to succeed on some other case of negligent misstatement. Third if by virtue of establishing all the ingredients of a misrepresentation IFE would otherwise succeed in their case under that Act, I am very doubtful whether GSI would succeed simply on the issue of inducement by reference to Mr Mitjavile’s evidence. It is true he said he did not rely on any representation and that may be relevant to whether there was misrepresentation, but if there was a misrepresentation what one would then have to ask is what would have occurred if the misrepresentation had not been corrected. On that issue the judge accepted Mr Mitjavile’s evidence that disclosure of the reports would have led to non-completion.
29.	The fundamental questions in this case are in my view whether in the light of the terms of the Important Notice IFE have established that GSI made any representation of fact when handing over the SIM; whether they continued to make a representation as at 30 May and if so what that representation was; and then if a representation has been established whether IFE have established that that representation made was untrue. It goes without saying that it does not benefit IFE to establish a representation unless they can establish either that it was untrue or became untrue, and that GSI could not succeed in showing they had reasonable grounds for its belief.
30.	If IFE have a case on representation it can best be tested by following section 2(1) of the Misrepresentation Act 1967 and then subjecting to analysis what IFE have to establish, and what GSI have to establish. That section provides as follows:-
“Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.”
31.	What IFE must first establish is a misrepresentation. In the context of this case that means first establishing that GSI by issuing the SIM was expressly or by implication representing to IFE something as a fact; second establishing that as at 30 May, they continued to represent that something as a fact; and third establishing that as at 30 May that fact was no longer accurate. So far GSI’s state of mind will not have been in issue. Only once all those matters have been established does GSI’s state of mind come into play, and at that stage it is for GSI to establish that it had reasonable grounds for its belief.
32.	Mr Nash for IFE relies on certain authorities from which he says he gains support for his argument that by implication GSI were representing that they did not know facts rendering what was being provided in the SIM inaccurate. He relies on Smith v Land & House Property Corporation (1884) 28 Ch D 7,  Hummingbird Motors Ltd v Hobbs [1986] RTR 276, and Sumitomo Bank v BBL [1997] 1 Lloyds Rep 487. Those authorities in my view simply support the proposition that someone may make a statement which is not a representation of fact but which by implication carries with it a representation of fact i.e. in the case where the original representation is one of opinion that the representor is not aware of facts which make the statement of opinion untrue. They do not in my view help to identify in the circumstances of this case what (if any) representation GSI are making when putting forward the SIM.
33.	Mr Howard suggests that IFE simply cannot identify any representation giving rise to an implied representation that GSI is not aware of facts which make the representation untrue. Indeed of course he relies on Mr Mitjavile’s answers in cross examination as destroying any case on representation at all. He speculates as to the kind of opinion that might have been said to have been expressed by GSI from which it might be implied that there were no facts of which GSI was aware which rendered that opinion false. His examples were a representation that GSI believed all the information was accurate or that GSI represented to the best of their knowledge and belief, the information was accurate. He chooses those examples so that he can make the powerful point that they are actually contrary to the express terms of the Important Notice, and thus not representations which IFE could begin to establish.
34.	It seems to me that IFE’s suggested representations asserted in para 9(1) and 9(2) involving representing facts or opinions which “were or might be untrue” or opinions which “were or might be unreasonable”, are simply impossible to spell out of the supply of the SIM since GSI make it clear by the “Important Notice” that they have no obligation to check. As the judge said, an implied representation of the scope contended for in those sub paragraphs would potentially require GSI to do an evaluation contrary to the express terms of the SIM. For all the reasons given by the judge I would reject the implication of any representations as asserted in paragraphs 9(1) and (2).
35.	The most powerful way in which IFE can put their case seems to me to be to argue that by producing a mass of information and data, and in particular by setting out sections described in these terms “The following sections reflect the conclusions of Arthur Andersen’s report, which is shown in appendix C”, GSI impliedly represented that the reports and conclusions reflected Arthur Andersen’s view of Finelist as at the date of the SIM as far as GSI was aware. Some support for this representation can be gained from what is the most highly material term when it comes to consider whether there was a continuing representation or what representation was being made as at 30 May. That term numbered (iii) above starts by saying the information should not be assumed to have been updated at any time subsequent to the date on the cover i.e. March 2000. Those words could be said to suggest by implication that up until that date it was being updated in so far as GSI had further information.
36.	But if IFE could only establish the above representation as at the date of the SIM, and no representation to like effect as at 30 May, IFE would not be able to establish a breach, or that GSI did not reasonably believe that what they were passing on was Arthur Andersen’s views as at the date of the SIM.
37.	To succeed they must establish a representation by GSI as arranger or sellers of the bonds that as far as they were aware the reports reflected Arthur Andersen’s view of Finelist after the date of the SIM and right up to  30 May.
38.	In the light of paragraph (iii) of the Important Notice, it seems to me impossible for IFE to establish such a representation. That paragraph suggests that an updating may take place up to the date on the cover of the SIM, but makes clear that GSI  expressly does not undertake to advise IFE “of any information coming to the attention of the arranger” after that date.
39.	I should also say that I am far from clear that the findings of the judge would actually establish a breach of any such representation as at 30 May 2000. In considering breach the judge has concentrated on the possibility of a representation being established of the kind referred to in paragraph 9(1) and (2). His finding in paragraph 77 is that the undisclosed reports showed that the pre-acquisition reports “were or might have” been incorrect. That is not the same as a finding that GSI knew by virtue of the May reports that the earlier reports no longer reflected accurately the views expressed by Arthur Andersen. 
40.	During argument I registered some doubt as to whether the representation I am suggesting might have been arguable had in fact been pleaded. Mr Nash submits that paragraph 9(3) covers the point and I would be inclined to accept that.
41.	As I say this representation reflects IFE’s most powerful case, and if there was a breach, a case where GSI would be in great difficulties in saying that they had reasonable grounds for its belief, but I am not persuaded that even this more limited representation was being made. 
Bondholders’ Agreement
42.	I will deal first with the effect of Mr Mitjavile’s letter of “reservation” dated 3 July 2001. The sequence of events I have already spelt out. Mr Nash’s argument is that if one reads the joint memorandum of the experts on French law, they only suggested two options, a contract with a term as per the reservation letter or no contract. He submits thus that the judge’s third option of there being a contract with a difference of opinion between the parties as to the proper interpretation was not an alternative in French law.
43.	I would reject this argument. The joint memorandum provided a general exposition of French law without reference to how it might operate in relation to a factual scenario where (a) one party to a multipartite agreement proposes to sign under a limited power of attorney containing a reservation to an important provision; (b) the power of attorney is rejected on behalf of all the other parties because the reservation is unacceptable; (c) the reservation is repeated at the same time that the agreement is signed under an unlimited power of attorney; (d) the rejection of the reservation is repeated; and (e) the agreement is then acted upon. If it were a matter of English law, I would reason as follows. First to appreciate that a signature had been refused because of a limit placed on the power of attorney, and to obtain an unlimited power of attorney and use that to sign would, prima facie, produce a contract on the terms as signed. An attempt to impose a variation on those who had already signed by sending a letter could not vary the contract unless there was an acceptance of that variation. There was not only no acceptance of any variation but the reservation was rejected. 
44.	In any event for a variation to be effective it would need a document signed by all parties (see clause 22.7(a) of the Bondholders’ Agreement particularly the last sentence). Furthermore after rejection of the reservation, IFE went ahead and performed the contract. As a matter of English law there clearly was a contract, and as a matter of English law there was clearly no agreed variation, and that leaves the only alternative, a contract with its interpretation still open to argument.
45.	I find nothing in the joint opinion on French law which could possibly suggest that the above conclusion identical to that reached by the judge was not correct.
46.	As regards dol par reticence and waiver, the judge sets out the joint opinion of the experts in these terms. 
“102. Lastly, the victim of a dol in the formation of the contract has the option to affirm the contract, by issuing a waiver of his right to avoid it. However, such a waiver is effective only if it is issued by the claimant after he has become aware of the essential element of the agreement which was hidden from him as result of the actions or omission of the defendant: indeed, if the claimant issues a waiver before that time, his consent is still vitiated by the effect of the initial dol which is still operative; as a result, he cannot offer that consent in order to seek to mend an agreement already deficient for want of valid consent.”
47.	 During the trial it seems that there was debate as to precisely what the joint opinion on waiver meant, and the judge made clear what his understanding was in order to see whether the expense of calling the experts could be saved. He said this:-
“On the question of waiver, it seems to me that where the would-be claimant has a claim at the time of the alleged waiver there will only be a waiver if that party knew the essential facts relating to the claim.   Where the claim is based on non-disclosure it is therefore necessary that they knew the essential facts wrongly withheld.”
48.	The criticism Mr Nash makes of the judge’s judgment is that he submits the judge did not apply the test of knowing “the essential facts”. He submits that since Mr Mitjavile only knew of the existence of the 19 May report and not the details of its contents and did not know of the existence of the 26 May report, he cannot be held to have known the “essential facts”. 
49.	There seems to have been some misunderstanding of the joint opinion on French law. It is plainly considering dol “in the formation of the contract”, i.e. the contract for the acquisition of the bonds. It says, consistently with English law, that a party who has been induced to enter into an agreement by dol may affirm the contract or waive the effect of the dol with knowledge of the “essential element of the agreement which was hidden from him.” The opinion on waiver is a general exposition and in fact consistent with the English law of waiver.  But waiver so that what would otherwise be a ground for rescinding or terminating a contract can no longer be relied on is one thing. That can take place without any further contract and there will be no waiver without knowledge of the facts. But a contract of compromise or a contract not to sue as a matter of English law would need a different analysis. I am not sure that situation has been addressed by the French law experts at all.  Under English law such a contract could only be set aside if there was a misrepresentation or a mistake or something of that character affecting that contract. Bell v Lever Brothers [1932] AC 161 was a case where a settlement was reached with certain directors to pay them substantial sums on the basis that their contracts had some period to run, without knowing of serious breaches of contract they had committed. On discovery of the serious breaches, the argument was that the agreement had been reached on the basis of a mistake that the directors’ contracts were not terminable without notice.  There was debate as to whether the directors had a duty of disclosure of their misdemeanours to their employer. It was held they did not and it was held that there was no mistake entitling the company to set aside the contract to pay substantial sums. A slightly different result could be said to have been reached in  Magee v Pennine Insurance Company [1969] 2 QB 507  where a compromise of an insurance claim was set aside on the grounds of mistake by reference to discovery of a breach of warranty in the original contract of insurance. All it is necessary to say is that under English law the question in the present case relating to the Bondholders’ Agreement would be whether there was a basis for setting aside that Agreement.  If (as would seem to me to be the natural construction of Clause 16.4) IFE were agreeing that whatever claims they might have had, whether known to them or not, they would not bring any proceedings, I do not see a reliance on not knowing some feature of such a claim could be relied on so as to give a right to set aside that contract.  I am doubtful whether French law would be any different and I am unconvinced that what has been taken to be French law is in fact French law.
50.	Be that as it may, the pronouncement of the judge as reflecting what the parties were contending was French law must be followed. But that said, since the judge was simply stating what his understanding was, it would be wrong to treat what he said as some statutory provision, which seems to me to be the effect of Mr Nash’s argument.   The judge was in the best position to apply what he understood to be French law. His conclusion was in the following terms:- 
“104. By the date of the Bondholders’ Agreement, Mr Mitjavile knew that Arthur Andersen had produced a report dated 19 May 2000. He learned this at a meeting of the mezzanine steering committee on 22 January 2001, which was attended by Ms Margaret Cole of the law firm White and Case.  She referred to parts of it, which Mr Mitjavile described in his witness statement as “much more negative in tone than the December 1999 or February 2000 reports”.  Although Mr Mitjavile knew those matters, Mr Nash submitted that IFE did not have the essential knowledge required for waiver because it did not have full details of the 19 May report and it knew nothing of the 26 May report.
105. However, Mr Mitjavile knew that Arthur Andersen had provided an additional report, more negative than its previous reports, which had not been disclosed to it.  He had this very much in mind at the time of the Bondholders’ Agreement, because he wanted to amend clause 16.4 precisely so that IFE did not lose its right to pursue any party whose acts or omissions had contributed to its decision to invest in Autodis. I do not consider that the non-disclosure of the May reports can fairly be regarded as operative on Mr Mitjavile’s mind in determining whether to enter into the Bondholders’ Agreement.  He knew that there had been non-disclosure; he did not know the extent of it; but he entered into the Bondholders’ Agreement knowing that he did not have full details of what Arthur Andersen had reported in May 2000.  I conclude that he knew all that was essential for clause 16.4 to constitute a valid waiver.”
51.	I would not differ from the judge on this aspect.
Conclusion
52.	I would dismiss the appeal.  In the circumstances it is unnecessary to deal with GSI’s cross-appeal in any detail.  It is right, however, to record that my inclination would have been to say (contrary to the views of the judge) that the terms of the “Important Notice” were contractual terms accepted by IFE when they accepted the SIM and relied on it.

Lord Justice Gage : 

53.	I agree that this appeal must be dismissed for the reasons given by Waller LJ, whose summary of the facts and circumstances of the appeal I gratefully adopt. I agree with his conclusions on the issues of negligence and the Bondholders’ Agreement and do not wish to add anything on those issues.
The misrepresentation issue
54.	The background facts that are not in dispute or are as found by the judge and which are material to my conclusions are as follows. In late October or early November 1999 Goldman Sachs began advising Autodis in connection with Autodis’ acquisition of Finelist. In December 1999 Autodis retained Arthur Andersen to carry out a review of Finelist’s financial affairs. The judge pointed out that at that stage Arthur Andersen would not have access to any unpublished documents of the company, but would have had discussions with its auditors, PWC, and limited interviews with senior members of Finelist’s management.
55.	On 21 December 1999 Arthur Andersen produced its first report on Finelist. It was necessarily guarded because Arthur Andersen had not had access to all the company’s internal accounting records and information. A further report dated 11 February 2000 was prepared by Arthur Andersen. These two reports were described as annexed to the SIM but were sent to IFE separately.
56.	The SIM contained the three paragraphs under the heading Important Notice which are set out in Waller LJ’s judgment and need no repetition.
57.	Following the acquisition by Autodis of Finelist and before IFE purchased bonds from Goldman Sachs on 30 May 2000 Arthur Andersen produced the two further reports dated 19 May 2000 and 26 May 2000. Each was described as a Phase I: Due Diligence Update. The judge said of these reports that in the Arthur Andersen report of 19 May 2000 Arthur Andersen stated that it had received significantly less access to information and materials than it needed to be able to meet a tight timetable requested by Goldman Sachs. The report of 26 May 2000, as the judge said, disclosed that work continued to progress slowly due to lack of timely access to management and difficulty in obtaining relevant information.
58.	The report of 19 May 2000 contains a passage under the sub-heading “Group Wide Planning Issues”. The bullet point under this heading stated “the engagement was established as risk level 4, on a scale of 1 to 5 where 5 is maximum”. In the court papers, against this part of the report there is a handwritten note which reads “not going to help syndication!” It would seem this note was made by someone in Goldman Sachs.
59.	The papers also contain an e-mail from Celine Mechain, an employee of Goldman Sachs, to “David and Guy” two Arthur Andersen employees, in which Celine Mechain states:
“Thanks for the update on the Finelist report dated 19 May. Although it does not sound too rosy, we are looking forward to your final conclusions and necessary adjustments to the numbers of 31/12/1999 and 30/06/1999 and possibly to the projections.”
60.	In the judgment under the heading “The Significance of Arthur Andersen’s reports dated 19 and 26 May 2000”, the judge recorded Mr Mitjavile’s evidence about these reports. Mr Mitjavile was extremely critical of Goldman Sachs’s failure to disclose these two reports. At paragraph 74 of the judgment the judge stated:
“As Mr Mitjavile put it in his witness statement, the clear implication from this statement (a statement in the 26 May report) was that provisions which central management knew ought to be made were nevertheless overridden if those provisions would prevent group targets being met, or in plain language that a part at least of Finelist’s financial results had been fabricated by central management.”
61.	It is not clear whether in this passage the judge was simply recording Mr Mitjaville’s evidence or expressing agreement with his opinion. For my part, I am prepared to accept it was the latter.
62.	I shall return to this part of the judgment below and an earlier passage in it, which throws some light on the judge’s findings in respect of these two reports later in this judgment.
The rival contentions 
63.	IFE contends that there were implied representations as set out in paragraph 9 of its Re-Amended Particulars of Claim. This also has been set out in full in Waller LJ’s judgement.
64.	Mr Nash described these compendiously as the No Inconsistent Knowledge Representations. He submits that these were continuing representations which subsisted up to the date when IFE acquired the bonds from Goldman Sachs. Accordingly, once Goldman Sachs had seen the reports of 19 May and 26 May it could no longer be said that the opinions of Arthur Andersen expressed in previous reports annexed to the SIM remained the same. By failing to supply these reports to IFE or at least alerting IFE to the words of caution in the reports Goldman Sachs were in breach of these representations.
65.	Mr Howard for Goldman Sachs accepts the fact there is an implied representation of good faith. But he submits that there is no further implied representation. He submits that this court should deal with this issue in two stages. First it should decide whether there was any representation beyond good faith. Secondly, whether such representation as there was continued up to the date of the acquisition by IFE of the bonds. Mr Howard relies heavily on the terms of the SIM which he submits very considerably limit the possibility of an implied representation beyond that of good faith.
66.	I shall state first my conclusions on this issue without reference to the authorities to which we have been referred.
67.	For my part, I accept, as Mr Howard submits, that the question of what representation, if any, was made by Goldman Sachs, must be considered by reference to the terms of the Important Notice in the SIM. The Notice expressly states that Goldman Sachs have not independently verified the information set out in it. It also states that it accepts no responsibility for the accuracy or completeness of the information contained in it. It must inevitably follow that no representation is made as to the accuracy or completeness of the Arthur Andersen reports of December 1999 and February 2000.
68.	In my view, the third cited paragraph of the Important Notice rules out any representation that the information will be reviewed at any stage before the recipient acquires bonds. This is clear from the final sentence of that paragraph.
69.	In my judgment, on the face of it, this relieves Goldman Sachs of any obligation to carry out any investigation of its own into the information provided in the SIM either at the stage SIM was issued or before an acquisition  was made by a recipient of it.
70.	Turning to the authorities, Mr Nash relied on four in support of his submissions: Smith v Land & House Property Corporation [1884] 28 Ch D 7; With v O’Flanagan [1936] Ch 575; Hummingbird Motors Ltd v Hobbs 1986 RTR 296; Sumitomo Bank v BBL [1997] 1 Lloyds Reps 487.
71.	In my judgment, neither Smith v Land & House Property Corporation nor Hummingbird Motors are of any real assistance. They were decided on the basis that there was a representation and beg the question in this case of what was the representation. The facts in Sumitomo Bank are quite different and again I draw no assistance from it. 
72.	With v O’Flanagan is of some significance. It supports the proposition that when a representation has been made and the representor subsequently learns that it is not true he has a duty to correct the representation. Romer LJ said (at 586):
“The only principal invoked by the appellants in this case is as follows. If A with a view to inducing B to enter into a contract makes a representation as to a material fact, then if at a later date and before the contract is actually entered into, owing to a change of circumstances, the representation then made would to the knowledge of A be untrue and B subsequently enters into the contract in ignorance of that change of circumstances and relying upon that representation, A cannot hold B to the bargain. There is ample authority for that statement and, indeed, I doubt myself whether any authority is necessary, it being, it seems to me, so obviously consistent with the plainest principles of equity.”
73.	In the same case Lord Wright MR described that situation as one that might be described as fraud. He added (at 584):
“… though nowadays, the Court is more reluctant to use the word “fraud” and would not generally use the word “fraud” in that connection because the failure to disclose, though wrong and a breach of duty, may be due to inadvertence or a failure to realise that the duty rests upon the party who had made the representation not to leave the other party under an error when the representation has become falsified by change of circumstances.”
74.	My final conclusions on this issue are as follows. The only implied representation made by Goldman Sachs arising out of the SIM was as the judge found one of good faith. There was, in my judgment, no implied representation that the information provided in the Arthur Andersen reports annexed to the SIM was accurate. There was an express statement that Goldman Sachs would not review or check the information contained in the SIM. In my view, it follows that it is only if Goldman Sachs actually knew that it had in its possession information which made the information in the SIM misleading that it could be liable for breach of the representation of good faith, provided the necessary intention was proved. In effect this would amount to an allegation of dishonesty. 
75.	The judge held that the implied representation of good faith was a continuing representation. However, in my judgment, that must be seen in the context of the sentence in the SIM which states that Goldman Sachs will not review the information contained in the SIM. It seems to me that this underlines the necessity for IFE to plead and show dishonest conduct by Goldman Sachs before it can succeed on the implied representation found by the judge.
76.	As to the information provided by the subsequent reports, the judge held that that information was not such as to make Goldman Sachs aware that the information in the Arthur Andersen reports annexed to the SIM was misleading. He distinguished between actual knowledge that the earlier reports were misleading and information which “… merely gave rise to a possibility that the information previously supplied was misleading”. In my judgment, in the circumstances this distinction was justified. The former would give rise to an allegation of bad faith. The latter did not.
77.	His conclusion in respect of the information contained in the subsequent reports is set out in paragraph 77 of his judgment. It seems to me to follow that he did not find facts which demonstrated that the earlier Arthur Andersen reports were to the knowledge of Goldman Sachs misleading. If this paragraph is read together with paragraph 59 of the judgment, it seems clear that the judge found that it would have required some investigation of both sets of reports before it could be concluded that the information in the first reports was misleading. In my judgment, this is a finding which the judge was entitled to make.
78.	In reaching this conclusion I am conscious that the handwritten note in the margin of the 19 May 2000 report and the e-mail of 21 May 2000, to which I have referred above, appear to indicate that Goldman Sachs had some doubts about the financial position of Finelist. I am also conscious of the fact that no evidence was called on behalf of Goldman Sachs. Nevertheless, in my judgment, the judge was entitled to reach the conclusion that it had not been demonstrated by IFE that Goldman Sachs had actual knowledge of information which caused the two reports annexed to the SIM to become misleading. In any event no allegation of bad faith has at any stage been made by IFE.
79.	In summary, in my view the only route by which IFE could establish a duty on Goldman Sachs to disclose the two reports of May 2000 to IFE is by way of a duty of care. As to that, for the reasons given by Waller LJ, with which I agree, that argument cannot succeed. 
Lord Justice Lawrence Collins :
80.	I agree with both judgments.