Selling a business is one of the most significant transactions most owners will ever go through. Buyers invest huge sums based on the information they are given, but what happens if crucial facts are kept back – not technically lied about, but quietly omitted?
A recent Commercial Court case, Veranova Bidco LP v Johnson Matthey PLC & Ors [2025] EWHC 707 (Comm), tackles that question head-on. The outcome isn’t just a reminder of the legal consequences of silence – it’s a shot across the bow for sellers who think they can hide behind the technical wording of a contract.
The High Court has refused an application by a seller in a share purchase transaction (D) for summary judgment or strike out in respect of the buyer’s (C) deceit claim based on alleged false representations made by D in a draft disclosure letter (Disclosure Letter) circulated before completing the transaction.
What was the case about
Veranova (C) bought a pharmaceutical business from Johnson Matthey (D) under a Share Purchase Agreement (SPA) signed on 16 December 2021, with completion on 31 May 2022. Shortly before signing, a major customer of the business – Alvogen – triggered a price review mechanism under its supply contract, presenting a competitor’s much lower offer for a key product, BHCL.
Crucially, this price challenge was not disclosed in a way that Veranova felt was full or fair. Instead, the sellers simply referred to “pricing discussions” and said the financial impact couldn’t be quantified. Veranova said that was misleading and sued for both breach of warranty and deceit.
The Claims
Veranova alleged:
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Breach of Warranty: The warranties were false or recklessly given.
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Deceit (Fraudulent Misrepresentation): The draft Disclosure Letter created an implied misrepresentation by omission or misleading half-truths.
The deceit claim focused solely on the statements in the 15 December 2021 draft Disclosure Letter and whether those could amount to actionable representations.
The Application
Johnson Matthey applied for summary judgment or strike out of the deceit claim, arguing that the draft Disclosure Letter could not, as a matter of law, give rise to any representations. They relied on leading cases like Idemitsu v Sumitomo and Sycamore v Breslin, which hold that warranties (and sometimes even disclosures) are contractual promises, not representations of fact.
What did the judge say?
The Court wasn’t having it.
Sean O’Sullivan KC ruled that disclosures in a draft disclosure letter might well be capable of being relied on as factual statements, particularly in the context of fraud. He stressed that:
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There’s no hard legal rule stopping draft disclosure letters from giving rise to claims for misrepresentation.
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Whether a statement is a representation depends on why it was made, how it was used, and the context of the negotiation.
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Even if the seller said “this isn’t a representation”, that won’t wash in cases of fraud.
So, the claim for fraudulent misrepresentation will now proceed to a full trial.
Incidentally, the claim was that the representations allegedly giving rise to the deceit claim were found in a draft version of the Disclosure Letter, not the final, signed version.
Key Lessons for Business Owners
Whether you’re selling your business or thinking of buying one, here are the practical takeaways:
1. Disclose properly, not just technically
Merely including a vague statement in a disclosure letter like “pricing discussions are ongoing” isn’t enough. If there’s a material risk that affects business value, spell it out. Courts can look past carefully chosen wording to assess what was really going on.
2. Fraud cannot be excluded by contract
Even if your SPA says “nothing here is a representation” or “you can’t rely on anything we said”, those clauses may not protect you if you’ve been dishonest or misleading. Fraud cuts through contract.
3. Don’t rely blindly on boilerplates
Just because a disclosure letter is “standard” doesn’t mean it’s safe. If your letter downplays bad news, or omits key facts that a buyer would want to know, you may open the door to a costly misrepresentation claim.
4. For buyers – read between the lines
If a disclosure letter glosses over risks or says things “can’t be quantified”, ask why. Dig deeper. Ask for clarification. Make your own assessment of whether you are being told the full picture.
5. Context matters – not just black letter law
This case is a reminder that courts will look at the real-world context. Just because something isn’t labelled a “representation” doesn’t mean it won’t be treated like one.
If you’re planning to buy or sell a business and want to make sure you’re properly protected, feel free to get in touch. I’m Steven Mather, Solicitor – and I help business owners close deals with confidence.
