A Finnish company yesterday lost its High Court action for damages arising from an alleged £2.4 million (€3.05 million) shortfall in pension schemes which the company took over as part of its acquisition of three Irish timber merchants.

UPM Kymmene Corporation of Helsinki acquired the timber merchants in 1981 and had claimed a shortfall in five separate pension schemes which it took over as part of the purchase deal with BWG Limited, formerly known as the Brooks Watson Group.

UPM argued the alleged shortfall of £2.4 million at the time of the purchase would have been worth £17 million at 1998 investment value had it been properly invested in the period since.

The company, formerly Rauma-Repola OY, through its Irish subsidiary Rauma Repola (Ireland), acquired Brooks Haughton of Cork, Brooks Hanley of Sligo and Brooks Thomas of Dublin from BWG in December 1981.

It alleged breach of warranty in relation to the funding of the pension schemes contained in a share purchase agreement with BWG dated December 21st, 1998 and sought damages.

During the action which began in the High Court in April 1998, the Finnish company said that at the time of the deal, the defendant warranted that the pensions of the three companies it purchased were fully funded and adequate to provide all future benefits relating to service before completion of the contract.

UPM is the biggest producer of sawed timber in Europe.

During the 1998 hearings, it argued that it was entitled to be indemnified in respect of all payments it made in eliminating the pension fund shortfall.

BWG in its defence said it neither warranted nor represented that the pension funds concerned were fully funded at the time or were adequate to provide all future benefits relating to service before the sale contract.

Yesterday, Ms Justice Laffoy, in a 39-page reserved judgment, said UPM had not established a breach of warranty on the part of the vendor at the time of the sale.

During the sale in 1981, the purchaser had approached the deal with eagerness tempered by caution.

But it had not retained any consultant actuary or pension adviser in this jurisdiction regarding the pensions schemes at issue.

At a meeting between representatives of the vendor and purchaser in September 1981, the Finnish company was not given any oral assurances that the pension schemes were fully funded as to past service liabilities.

In fact, the actuarial advice which BWG had from Irish Life and Irish Pensions Trust indicated the pension schemes were grossly under-funded as to past service liabilities, the judge said.

She believed two senior Finnish executives who attended the September discussions were mistaken in their recollection of what had transpired at the meeting.

The purchaser had not established the breach of warranty alleged and she dismissed the action.