BL-2022-002117 - [2025] EWHC 2794 (Ch)

The Defence pleads at paragraph 82.3.3:

“On 10 September 2018, the ESFA wrote to the Company to inform it that the ESFA was suspending all contracts with the Company. This decision followed an investigation by the ESFA into the Company’s affairs, which had revealed substantial grounds for believing that the Company had (i) manipulated the ILR data it submitted to ESFA in a way which artificially inflated the Company’s QAR and led to the Company obtaining funding to which it was not entitled and/or accessing funding before it was entitled to the same (“the Data Manipulation”); and (ii) retained funding which it should have paid onwards to employers (“the Wrongful Retention”)”.

At paragraph 82.3.5 it pleads that the ESFA terminated the Company’s contracts because of the findings of Data Manipulation and Wrongful Retention.

Then at 83.2 the plea of its relevance to this case is as follows:

“83.2.

Even had the TLP Acquisition completed in late 2016 or early 2017, the purchaser would have been entitled to redress from the Claimants (a) upon discovery of the Data Manipulation and Wrongful Retention and/or upon the ESFA’s decision to terminate in contracts with the Company on the basis of the same.”

The Claimants objected to this in their Reply as wholly unparticularised and maintained those submissions at trial. I accept those submissions.

In relation to ‘data manipulation’ there is no pleading of: (a) any facts to show that the ‘data manipulation’ actually took place, as opposed to the SFA’s opinion that there were substantial grounds for believing that it had; (b) any of the underlying facts which the investigation or SFA relied on to reach its view; (c) any facts or particulars to found the allegations of manipulation or that the QAR was artificially inflated.

In relation to ‘wrongful retention’, there is no pleading of: (a) what sums were allegedly retained; (b) on what basis it is said they were wrongfully retained; or (c) what type of ‘wrongful’ conduct is alleged.

Nor is it pleaded: (a) what ‘redress’ Trilantic is alleged to have been entitled to; (b) what facts those claims would have been based on; (c) whether Trilantic would have brought that claim; (d) whether that claim would have succeeded, or would have had a chance of success (and, if so, what chance); (e) the amount (if any) which Trilantic would have been entitled to recover from that claim, or (f) the effect (if any) that would have had on the Claimants’ loss.

The Defendant explained for the first time what ‘redress’ she said Trilantic could have sought for data manipulation in her skeleton argument for trial, alleging for the first time that Trilantic could have claimed for breaches of two warranties given by the sellers, including the Claimants, in the Trilantic SPA: (a) warranty 12.2.8 that 3AAA ‘is not, and has not been, in material breach of’ any contract with the SFA [A/45/1253]; (b) warranty 23.1.1 that 3AAA has conducted its business ‘in accordance with the requirements of all laws, regulations and funding rules applicable to the Business and the Group’. In my judgment it is in the circumstances of this case simply too late to attempt to particularise a complex argument on loss in the skeleton argument. There has been no opportunity for the Claimants to consider and plead what defences they might have to such a claim, or whether they might have had a contribution or indemnity claim against other Sellers or third parties.

I should say that the Defendant submitted that it was not necessary for the court to decide if data manipulation had taken place and what is relevant is that the ESFA would have terminated the contracts. This is plainly wrong: the Defendant must establish that Trilantic would have claimed for alleged breaches of warranty caused by data manipulation and what its prospects of success against the Claimants (and other Sellers) were. To do that the Court has to consider what the evidence of alleged data manipulation was. It was open to the Sellers to dispute that there was a breach of the warranty in the SPA whether or not ESFA’s termination had been challenged by the Company or not.

Finally, I observe that it is not possible on the evidence before the Court to reach a conclusion on the allegations of Data Manipulation and Wrongful Retention, without making the mistake of relying on the opinion and hearsay evidence in reports prepared or contributed to by people at the SFA and BDO not all of whom were available for cross-examination, on underlying information and data which was not available to the Court or the parties and which had not been examined by court appointed experts.

In paragraph 84.3 there is a further plea as follows:

“84.3.

Alternatively, if the price agreed in the TLP Acquisition was higher than the true value of the Claimants’ shares, the Defendant will say that any valuation of the Company, the Group Company’s shares [3AAA Group] in the Company and/or the Claimants’ shares in the Group Company as at December 2016 which did not take into account the Data Manipulation and Wrongful Retention would have been flawed. Paragraph 83.2 above is repeated.”

In addition to the points made above as to the failure to particularise Data Manipulation and Wrongful retention, there is no plea as to whether and if so why the TLP Acquisition was for higher than the true value of the shares, or particulars of what Data Manipulation or Wrongful Retention prior to the TLP Acquisition was not, but should have been, taken into account and what impact that was said to have.

In closing submissions (paragraphs 335.1-3), the Defendant appeared to accept that this plea added nothing to the breach of warranty plea if the data manipulation had arisen before the TLP Acquisition, and was irrelevant if the data manipulation arose after. I disregard it.