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GESSEL is proud to announce a successful outcome of the long-lasting, multi-faceted court dispute associated with Przedsiębiorstwo Mięsne PMB S.A.

The complex dispute between Mispol S.A. and Podlaskie Towarzystwo Finansowo Inwestycyjne Sp. z o.o. concerned a sectoral take-over by Mispol S.A. (formerly a publicly listed company) of another entity in the meat production and processing industry.

The share purchase agreement executed in 2010 included representations and warranties by the seller concerning the financial status of the company whose shares were being acquired. The general picture, as painted in these representations and warranties, was that the company, while posting a loss at a manageable level, remains an attractive investment proposition. Once the transaction was completed and the new Management Board embarked on performance of its duties, however, it transpired that, in fact, the company is facing bankruptcy, with a loss at the level of PLN 35 million.

The ensuing court dispute between the seller and the purchaser was a contentious and complex one, with numerous claims and counterclaims. At a certain point, GESSEL secured for its client dismissal of a PLN 13 million claim brought in the context of the broader proceedings.

At first instance, GESSEL’s client had to grapple with surprising testimony by some witnesses as well as with an unfavourable assessment by an expert witness called to make a deposition; in the end, however, the Circuit Court in Białystok ruled in favour of our client. This favourable outcome has now been upheld after our client’s adversary appealed the original ruling. The key point – one whose potential ramifications depart considerably beyond the present case – is that the Court held that shares may be tainted be defects associated with the business enterprise of the company issuing those shares, and that representations and warranties made in a share purchase agreement on a “best knowledge” basis and the performance of due diligence do not necessarily translate into absolute, unqualified exclusion of the seller’s liability for such defects. In other words, in the context of a share purchase agreement, “knows” may in fact mean “ought to have known”.