This case report was last updated 0 months ago and may not represent current law.
Update, October 2026: I wrote this article in March 2023 about the High Court’s decision. The Court of Appeal reversed that decision in May 2024, in Drax Smart Generation Holdco Ltd v Scottish Power Retail Holdings Ltd [2024] EWCA Civ 477, and held that the buyer’s notice was valid. I’ve kept the account of the High Court decision below, added what the Court of Appeal decided and rewritten the lessons at the end, as the ones I drew in 2023 (including that the buyer’s solicitors should have put more in their letter) turned out to be wrong.
What the case was about
Scottish Power sold a company to Drax in 2018 under a share purchase agreement for £702 million. One of the company’s assets was a site in Kent where a gas power station might be built, and to connect it to the national grid the company needed the benefit of an option to lay cables over a neighbour’s land. Scottish Power warranted that the option would be transferred to the company and gave an indemnity as well, but because of a mistake in the paperwork before the sale the company never got it.
As in most sale agreements, the seller wasn’t liable for a claim unless the buyer had given notice of it by a deadline, and the notice had to state “in reasonable detail the nature of the claim and the amount claimed (detailing the Buyer’s calculation of the Loss thereby alleged to have been suffered)”. Drax’s solicitors sent a nine-page letter on the last possible day. It set out what had gone wrong in detail and estimated the loss as the cost of getting a new right over the land, at something over £8.1 million if it could be agreed with the landowner and about £6.7 million if it had to be acquired compulsorily.
When the claim was issued, Drax changed the way it put its loss. The letter had described costs which the company would incur, whereas the claim as amended was for the difference between what the company’s shares were worth with the option and what they were worth without it (which is the usual measure of loss for a breach of warranty on a share sale). Scottish Power said that this was a different claim from the one notified, that it was now out of time and that it should be dismissed without a trial.
What the High Court decided in 2023
In Drax Smart Generation Holdco Ltd v Scottish Power Retail Holdings Ltd [2023] EWHC 412 (Comm) the High Court agreed with Scottish Power on the warranty claim. The judge held that if the claim was based on the fall in value of the shares, that was part of the nature of the claim and part of the calculation of the loss, and so it had to be in the notice. It wasn’t, and he gave summary judgment for the seller on that claim.
He let the indemnity claim continue. The indemnity required a written demand for a sum of money, and the judge held that the time limit in the notice clause didn’t apply to that demand, and that the notice had given reasonable detail of the loss even though a final figure couldn’t yet be given.
What the Court of Appeal decided in 2024
Both sides appealed, and the Court of Appeal found for Drax on both points, so the warranty claim and the indemnity claim were both allowed to go to trial.
On the warranty claim, Males LJ said the nature of the claim was straightforward, in that the company should have had the benefit of the option and didn’t, and Scottish Power knew that perfectly well as the two sides had been writing to each other about it for over a year. He could see nothing in the wording of the clause or in its commercial purpose which required Drax to spell out that damages would be based on the difference in value of the shares, and said that to impose such a requirement “serves no commercial purpose and merely introduces a trap to defeat what may be a valid claim”.
On the amount, the clause asked for the buyer’s calculation of its loss and the letter gave one. It was a genuine estimate put forward in good faith (which Scottish Power didn’t dispute), and there was nothing in the clause “to set in stone” the calculation in the notice, so Drax wasn’t prevented from putting its loss on a better legal footing later.
The court also said something more general about these clauses, which is that they work as a contractual time limit and are in effect exclusion clauses, so they “should not become a technical minefield to be navigated, divorced from the underlying merits of a buyer’s claim”. A court shouldn’t read them as imposing requirements which serve no real commercial purpose unless the wording compels it to.
I should say that the Court of Appeal was only deciding whether the claims could go to trial. It didn’t decide whether Scottish Power was liable or what, if anything, Drax had lost.
Lessons for buyers and sellers
The first is that the wording of the clause still decides the outcome. The Court of Appeal was clear that commercial parties are free to impose whatever requirements they wish, so if you’re selling and you want a claim notice to identify the warranty relied on, or to explain the basis on which the loss is calculated, the clause needs to say so in clear words. General phrases such as “the nature of the claim” and “reasonable detail” will be read in a practical way.
If you’re buying, I wouldn’t take too much comfort from the result. Drax’s notice went on the last possible day and it took a trip to the Court of Appeal, nearly three years after the notice was sent, to establish that it was good enough. A notice should still set out what has gone wrong, which parts of the agreement you rely on and a genuine estimate of the loss with the workings, and it should go well before the deadline.
There is also a limit to how far Drax helps a buyer. It allows the calculation of loss to change after the notice has gone, but it doesn’t allow new complaints to be added, and in a 2026 case a buyer’s funder was refused permission to add breaches which its notice hadn’t mentioned. I’ve written about that in how much detail does a warranty claim notice need?
I act for buyers and sellers on share purchase agreements, including negotiating the warranties and the limits on them, although warranty disputes themselves go to my Nexa colleagues who litigate them day to day. Get in touch if you need some help.
Written by Steven Mather, a business solicitor acting on company sales and purchases. This is general information about the law, not legal advice on your situation. Law correct as at .
