In TP ICAP Ltd v NEX Group Ltd [2022] EWHC 2700 (Comm), the High Court declined to strike out breach of warranty claims under a share purchase agreement on the grounds that the buyer’s notice of the claims failed to meet the requirements of the SPA.
The High Court has declined to strike out a buyer’s claim for breach of warranties in a share purchase agreement (SPA) on the grounds that its notice of the claim failed to comply with a contractual limitation of liability that required the buyer to give the seller, before a specified date, written notice “…stating in reasonable detail the nature of the [claim]…”.
The warranties alleged to have been breached were qualified by the seller’s awareness, which the SPA defined as the actual knowledge of eight named individuals. The warranties were given at both the date of the SPA and completion. When repeated at completion, one of the warranties (that there were no existing or pending non-routine investigations by a government authority concerning the target’s officers or employees) (Warranty 9.2) was deemed to have the following words added “… that, in each case, has or would have a material adverse impact on the operation of the [target business (taken as a whole)].”
The seller contended that the awareness qualifier meant that for a notification of claim to meet the requirement of stating in reasonable detail the nature of the claim, it must identify those of the named individual(s) in the SPA alleged to have had the relevant knowledge. As the buyer’s notification failed to state that any of these individuals had any knowledge, the seller argued it was ineffective for the purposes of the SPA. The seller also contended that the notification was invalid for failing to state that the investigations alleged to have resulted in a breach of Warranty 9.2 had or would have a material adverse impact on the target’s operations.
The court rejected the seller’s arguments. The SPA did not state that the names of the individuals said to have knowledge must be identified in a notification of claim. It was arguably obvious, when giving a notification of what it was said the seller was aware, that it meant awareness as defined in the SPA. The court could also see nothing in the SPA that required an explanation of how an investigation had impacted the target business to be included in the buyer’s notice of claim, the absence of which would render the notification ineffective. Adding the statement for which the seller contended would do no more than set out the applicable text of Warranty 9.2, which would not have advanced any of the commercial purposes for giving notice.
Source: Practical Law.