A recent Court of Appeal decision has overturned a first instance finding that sellers of a company were liable for breach of a warranty that there had been “no material adverse change” in the company’s prospects since the accounts date specified in the agreement: Decision Inc Holdings Proprietary Ltd v Garbett  EWCA Civ 1284.
The decision illustrates that the courts will look carefully at the wording of such a warranty to determine what comparison is required in assessing whether there has been a material adverse change. In this case the clause required the court to compare the prospects of the company as at the accounts date (some nine months before the agreement was signed) with its prospects at the date of the agreement. That did not equate to comparing (as the judge had done) the expectations a reasonable buyer would have had on the date of the agreement and the actual position as at that date.
In any event, the Court of Appeal held that the sellers were not liable because the buyer had not given sufficient notice of the amount claimed in respect of each breach of warranty alleged. On a proper interpretation of the notice clause in the agreement, it was not sufficient to give an overall figure. Continue reading
In this 20th episode of our series of commercial litigation update podcasts, we look at the High Court’s decision dismissing ClientEarth’s attempt to bring a derivative action against Shell’s directors, the Supreme Court’s rather dramatic recent decision on litigation funding agreements, a brief update on a development relating to representative actions, some interesting recent contract law cases, and a Supreme Court judgment which clarifies the extent of a bank’s duties in paying out from customer accounts.
This episode is hosted by Maura McIntosh, a professional support consultant in our litigation team, who is joined by Sarah McNally, an insurance disputes partner, and Ceri Morgan, a professional support consultant in our banking litigation team.
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In a recent judgment, the High Court has dismissed a claim under a Warranty & Indemnity (W&I) insurance policy on the basis that the policyholder had not established a breach of warranty covered by the policy: Finsbury Foods Plc v Axis Corporate Capital Ltd & Ors  EWHC 1559 (Comm).
The decision acts as a reminder that a claim under a W&I policy will only succeed where the insured can establish a breach of the warranties covered by the policy – and (relatedly) that contractual warranties should be carefully drafted to ensure they are clear and unambiguous.
For more information see this post on our Insurance Notes blog.