[2025] EWHC 1889 (Comm)

Issues 1, 2, 10 and 13: The Deemed Withdrawal Issue, the Notification Issue, the Notification Claim Cap Issue and the Reclaim Issue

Allowing for the fact that LCG advances other defences to the defendants’ counterclaim based upon the “deemed withdrawal” of the indemnity claim, these issues (or the greater part of them) might have been suitable for determination as a preliminary issue, before a full trial. They are based upon contractual limitation periods which preclude either the claim as a whole or the pursuit of certain allegations within it and involve arguments about contractual interpretation by reference to uncontentious facts. The nature of these defences is such that, in this judgment following the full trial, logically they fall to be addressed first.

The SPA contains a time limit for the notification of warranty claims and indemnity claims.

Paragraph 1.1 of Schedule 5 to the SPA provides that:

“The Vendors shall not be liable for a Warranty Claim, claim for breach of any of the Title Warranties or Indemnity Claim unless the Vendors’ Representative receives from the Purchaser a written notice of:

1.1.1

any Warranty Claim for breach of any of the Tax Warranties or claim for breach of any of the Title Warranties on or before the seventh anniversary of the Completion Date;

1.1.2

any Indemnity Claim for a breach of the Funding Indemnity on or before the third anniversary of the Completion Date; and

1.1.3

any other Warranty Claim … on or before the date falling 18 months after the Completion Date.”

The Completion Date was the date of the SPA: 29 October 2021.

Paragraph 1.2 of Schedule 5 to the SPA provides as follows:

“The written notice of any Warranty Claim … shall give details (in such detail as is reasonably available to the Purchaser at the time) of the nature of the claim, the facts and circumstances giving rise to it and the Purchaser’s bona fide estimate of any alleged loss. In the situation where a liability is contingent or the outcome not capable of being quantified but which may give rise to a Warranty Claim … (‘Contingent Warranty Claim’), the written notice shall contain these details so far as are known to the Purchaser.”

The SPA also imposed a time limit for commencement of proceedings on a warranty claim.

As originally agreed, paragraph 1.4 of Schedule 5 of the SPA provided that:

“Any Warranty Claim … or an Indemnity Claim notified under paragraph 1.1 shall be deemed to be withdrawn … unless legal proceedings in respect thereof have been commenced within six months of the giving of written notice of such Warranty Claim … or an Indemnity Claim, and for this purpose legal proceedings shall not be deemed to have commenced unless both issued and served …”

However, the parties subsequently agreed (twice) to a variation of this provision. Firstly, by a Variation Agreement dated 7 October 2022 they extended the relevant period from 6 months to 8 months. Later, by a second Variation Agreement dated 8 December 2022 they agreed, while retaining the 8 month deadline, that the whole of paragraph 1.4 should be subject to a new paragraph 1.4.1. This provided as follows:

“Any Warranty Claim (other than a claim for breach of any of the Tax Warranties), claim for breach of any of the Title Warranties or an Indemnity Claim notified under paragraph 1.1 prior to 1 December 2022 shall be deemed to be withdrawn (if it has not been previously satisfied, settled or withdrawn) unless legal proceedings in respect thereof have been commenced by 14 February 2023, and for this purpose legal proceedings shall not be deemed to have commenced unless both issued and served …”

Therefore, for any claim (other than for breach of the Tax Warranties) which had been notified before 1 December 2022, proceedings had to be issued and served “by” 14 February 2023. For any such claim which had not been notified by that date, LCG had until 18 months after the Completion Date (ie. by 30 April 2023) to notify (under the original paragraph 1.1.3) and then another 8 months thereafter to issue and serve proceedings.

The defendants argue that LCG’s Warranty Claims in these proceedings are not supported by a valid notice under paragraph 1.2 of Schedule 5 and that the proceedings in respect of those claims were not served by 14 February 2023 so that they (and also the Indemnity Claim) are “deemed to be withdrawn” in accordance with the paragraph 1.4.1).

The Deemed Withdrawal Issue depends upon clause 13.1 of the SPA. That clause (together with other 9 sub-paragraphs in clause 13) is headed ‘NOTICES’ and provides as follows:

“13.1

Any notice or other communication to be given under this Agreement (“Notice”) shall be:

13.1.1

in writing and in English;

13.1.2

signed by or on behalf of the party giving it;

13.1.3

delivered by hand or sent by prepaid first class post, Royal Mail signed for delivery or special delivery, to the relevant address in this Clause 13 or by air mail if posted to an address outside the UK; and

13.1.4

marked for the attention of the relevant party set out in this Clause 13 (or as otherwise notified from time to time under this Agreement).

13.2

No Notice may be given by fax.

13.3

Any Notice given by hand delivery or post shall be deemed to have been duly given, unless proved otherwise:

13.3.1

if hand delivered (including by way of delivery by commercial courier or sheriff officer), when delivered;

13.3.2

if sent by prepaid first class post, signed for delivery or special delivery in the same country as the country of address at 09:00 on the second Business Day after the date of posting;

13.3.3

if given by air mail posted to an address outside the UK, on the fifth Business Day after posting, provided that in each case where delivery by hand or post occurs after 17:30 on a Business Day or on a day which is not a Business Day, service shall be deemed to occur at 09:00 on the next following Business Day. References to time in this paragraph are to local time at the location of the addressee.

………….”

Subject to any later notification of a change to it (see clause 13.6), for present purposes “the relevant address” under clause 13.1.3, as given in clause 13.4, is:

“Richard Huw Lewis, Vendors' Representative

Address: Trederwen

Watery Lane

Monmouth

Monmouthshire

Wales

NP25 5AT

For the attention of: Richard Huw Lewis”

The defendants argue that clause 13.1 extends to the communication of legal proceedings by the service of them under paragraph 1.4.1.

The defendants’ contentions fall to be tested by looking at the sequence of events after the 2022 Audit before addressing the legal principles.

The 2022 Audit took place in February 2022.

LCG’s then solicitors (Burness Paull, who drafted the SPA) gave written notice of the claims in their letter dated 8 April 2022 (“Notice 1”). Notice 1:

Burness Paull then provided an updated notice (which the defendants accept is to be read together with the first notice) by their letter dated 14 June 2022 (“Notice 2”), which:

Notice 1 therefore identified Warranties B3.6, B5.2.1, B5.2.2 (including the Key Warranty), B7.2.7, B7.4.2, B7.4.3 and B8.2; and LCG said it had insufficient information to provide an estimate of the quantum of its claim. Notice 2 identified the same warranties as Notice 1 and stated that LCG’s estimate for the loss resulting from their breach was £6,862,240 (the same amount identified as claimed in the claim form issued 8 months later), which was based on an alleged overstatement of the Company’s EBITDA by the amount of the Over-Claimed Sum multiplied by 5.5. In other words, the estimate was premised upon using the same EBITDA multiplier as in the SPA and only the EBITDA was adjusted downwards.

Eight months after Notice 2, on 14 February 2023, and as confirmed by the evidence of the respective process servers, the claim form (issued that same day) was hand-delivered in the following ways:

The defendants take two points in relation to Notice 1 and Notice 2 (read together). Firstly, they say that LCG’s failure to give written notice of alleged breaches in relation to Warranties B1.4, B2.1.2, B2.1.3, B2.2.2 and B2.5.2 means that LCG is precluded from advancing such claims. They say identification by number of the warranties relied upon was required “as a bare minimum”. Secondly, the defendants argue that LCG’s failure to give written notice of the quantum claim as later advanced in the particulars of claim (namely a claim in the sum of £10,180,040, based on a reduced multiplier of 3 rather than 5.5) means LCG is precluded from advancing such a claim. They say that, as loss falls to be assessed as at ‘Completion’, there is no reason why LCG (which is a substantial organisation with internal and external accountants) could not have advanced in Notice 2 the estimate of loss later pleaded in the particulars of claim.

In other words, the defendants argue, but for the deemed withdrawal issue mentioned next, LCG’s warranty claim (to which of course they have other lines of defence), is limited to a claim for £6,862,240 based upon those warranties identified in the two notices. Nine authorities are relied upon in connection with this defence based upon a failure of proper notification in accordance with paragraph 1.2 of Schedule 5 to the SPA. I address the material ones within that number in my reasoning and decision below on Issues 2 and 10: the Notification Issue and the Notification Claim Cap Issue.

LCG counters by saying the two notices were fully compliant with paragraph 1.2 for the purposes of supporting the claim as now advanced. They gave details of “the nature of the claim” (a claim for breach of warranty and under the Indemnity arising out of the over-funding), “the facts and circumstances giving rise to the claim” (namely one arising out of the over-funding) and Notice 2 contained LCG’s bona fide estimate of its loss (and the defendants had not challenged it as not being a bona fide estimate).

LCG’s fallback position is that its claim form constituted a fresh notice under clause 1.2, identifying all the warranties relied upon, and also that (by reason of their solicitors’ letter dated 16 June 2022) the defendants were estopped from denying the adequacy of the notices. By that letter Capital Law said that, if the notices were intended to be compliant with the CPR pre-action protocol, then they (i.e. the defendants) were “entitled to understand the specific warranties which [LCG] asserts they have breached” but, if not, “then the issue falls away.” As LCG says, it could have served a further notice (if the claim form is not to be treated as such) within the then current 18-month period under paragraph 1.1.3 of Schedule 5, and therefore the defendants are said to be estopped (by convention and/or representation) from disputing the efficacy of Notices 1 and 2.

The defendants say LCG’s fall-back contention that the claim form and particulars of claim can be treated as a fresh (and being before April 2023 under paragraph 1.1.3) timely notice under paragraph 1.4 of Schedule 5 is back to front when legal proceedings have to have been commenced within 8 months of the giving of such notice. The claim must therefore be commenced after the giving of notice not before. No fresh claim has been brought within 8 months of the suggested “notice” given by the proceedings. As to LCG’s estoppel argument, they say that the assertion in correspondence that LCG should identify the warranties relied upon cannot be taken to be a representation that they were not relying on their rights under the SPA. They say the requisite elements of an estoppel are wholly absent and that is before one considers the difficulty created by clause 11.4 of the SPA which requires any variation or waiver of its provisions to be in writing, (and for any such variation to be expressed as such).

The defendants also argue that the hand-delivery of the claim form on 14 February 2023 (see paragraph 140 above) was not sufficient to meet the requirements of paragraph 1.4.1 of Schedule 5 as service (by 14 February 2023) – the language is “both issued and served” - means delivery which brings the contents of the document to the actual attention of the intended recipient.

On behalf of the defendants, five authorities were referred to by Mr Sims KC and Mr Jagasia which bear upon what they said were the alternatives of (1) service involving actual receipt/knowledge of the proceedings in accordance with the SPA and (2) service in accordance with the CPR where, they said, the only relevant provision governing the timing of such service is CPR 6.14 and its “deemed service” provisions.

They relied upon the provisions of clause 13 of the SPA in relation to the giving of notices to say service of legal proceedings is covered by that clause. The evidence shows that Mr Lewis and Ms Probert were on holiday in Cornwall until 15 February 2023 and that they did not receive actual notice of the proceedings until 15 February 2023. Accordingly, they say, service was not effected before that day (they rely upon the “unless proved otherwise” language of clause 13.3 to displace the conclusion that hand delivery to the Monmouth address on Tuesday 14 February 2023 constituted “notice” of the proceedings).

The first argument, therefore, is that “served” in paragraph 1.4.1 means brought to the actual attention of the intended recipient. The past tense of the word is emphasised in that it supports the concept of a completed act. Mr Sims KC and Mr Jagasia relied upon the decision of Green J in Ageas (UK) Ltd v Kwik-Fit (GB) Ltd [2013] EWHC 3261 (QB). The defendants did not have notice of the legal proceedings until 15 February 2023, which is too late. Service on the two firms of solicitors on 14 February was insufficient as neither was authorised to accept it. I should note here that clause 13.9 provided for copies of any “notices” to be given to Capital Law Limited but the clause said “Failure to communicate such copies shall not invalidate such Notice”.

Indeed, the defendants’ argument in relation to service “under the SPA” went even further in saying that hand delivery of the claim form on 14 February would have been too late even if Mr Lewis had been there to receive it (c.f. clause 13.3.1).

Counsel submitted that service “by” 14 February 2023 meant no later than 13 February 2023. They referred to clause 1.2.7 of the SPA which provides:

“if a period of time is specified and dates from a given day or the day of an act or event, it shall be calculated exclusive of that day (unless otherwise agreed in this Agreement)”

Mr Sims KC and Mr Jagasia said that, although that provision did not refer to “by” a given day (as opposed to “from” one) it was a strong indicator that paragraph 1.4.1 of Schedule 5 should be read as excluding the day of 14 February 2023. If that is correct then it is a knock-out point which dispenses with the more convoluted argument involved in the others.

The defendants’ alternative argument is that “served” under paragraph 1.4.1 means deemed service in accordance with CPR 6.14, so that they were not served until the second business day after the completion of the relevant step under CPR 7.5(1) (i.e. 16 February 2023). I return to it below having outlined LCG’s rival argument that only CPR 7.5 is relevant to this issue.

Their defence, that under either argument the claim was accordingly served too late, is the basis on which they say that LCG’s warranty and indemnity claims are deemed to be withdrawn and the counterclaim is made for the return of the sum paid under the Funding Indemnity.

On this aspect of the case the defendants say they cannot be estopped from reclaiming the £783,324 (with interest). They point to an exchange of solicitors’ correspondence (a letter of 27 October 2022 on behalf of LCG and the defendants’ reply of 29 November 2022) which shows the £783,325 paid by the defendants under the Funding Indemnity was accepted by LCG as a payment on account without any aspect of the claim being settled.

So far as the timing of service of the proceedings is concerned, LCG responded by saying the word “served” in paragraph 1.4.1 of Schedule 5 means (on its true construction) serving the proceedings in accordance with the requirements for service set out in the CPR – i.e. CPR 7.5 – and this is what was effected (and effective for the purposes of paragraph 1.4.1) on 14 February 2023. In support of this Mr Booth KC and Mr Adamyk relied upon one Court of Appeal decision in April 2019 (permission to the Supreme Court having been refused by that court) as to the meaning of service under the CPR. The authority is Kennedy v National Trust for Scotland [2019] EWCA Civ 648; [2020] QB 663. They say Kennedy was widely reported in 2020 and the SPA should be treated as having been drafted with knowledge of it.

The defendants’ argument upon the CPR is significantly more intricate. In large part, this is a reflection of their reliance upon the decision of Andrew Baker J in Brightside Group Ltd v RSM UK Audit LLP [2017] EWHC 6 (Comm); [2017] 1 WLR 1943.

The defendants’ second argument is that if “served” means service under the CPR, then this means it should be read as deemed service under CPR 6.14 rather than under CPR 7.5. Under CPR 6.14 deemed service took place on 16 February 2023, again too late. On this argument the defendants are less enthusiastic about what Green J said, obiter, in Ageas and, in preference to that decision, the decision of Flaux J (as he then was) in T&L Sugars Ltd v Tate & Lyle Industries Ltd [2014] EWHC 1066 (Comm) and the decision of Master McCloud in Paxton Jones v Chichester Harbour Conservancy [2017] EWHC 2270 (QB), they invite the court to prefer the analysis of Andrew Baker J in Brightside which, their counsel submitted, remains unaffected by the decision in Kennedy.

It is sensible to start with the defendant’s potential knock-out argument that, even if “served” does not mean received, or deemed to be served, the steps referred to in paragraph 140 above were all too late because they took place on (rather than before) 14 February 2023.

Just as this might have been raised for determination as a preliminary issue potentially dispositive of LCG’s claim (if not the defendants’ counterclaim) so too it might produce the same result after a reasonably lengthy trial. That said, as I observed at the hearing, even acceptance of the argument or the defendants’ alternative ones on this Issue would not now obviate the need to address all the others in case an appeal court disagreed with my conclusion.

As I indicated in the course of submissions, when noting that the defence had not flagged this particular point as opposed to the contention that the proceedings were not served until after 14 February 2023, this argument requires the court to conclude that paragraph 1.4.1 of Schedule 5 should be read as if it says “no later than 23:59:59 on 13 February 2023.” Mr Sims KC accepted that must be so and the defendants’ written closing submissions said “by 14 February 2023” does indeed mean no later than midnight on 13 February 2023.

To my mind, that reveals the fundamental flaw in the argument which requires a phrase referring only to something being done by a given day being interpreted as if it instead descends into specifics about hours and minutes in that (or another) day. Without such specificity being read into the contractual language the result would be inevitable temporal regression in that, without more being said, “by” 13 February (i.e. the whole of that day) would, on the defendants’ interpretation, mean service actually had to be effected on the 12^th, and so on. If it would be wrong to conclude that about the day of the 13^th, because until midnight is allowed in the absence of any minute and/or hour in that day being specified, then the same must follow for the 14^th.

The argument also runs up against the language of clause 1.2.7 of the SPA (see paragraph 151 above). That tells the contracting parties when they can start their stopwatch, albeit it is counting in days not seconds, but not when to stop it. It is not a provision (like CPR 2.8(2) in relation to “clear days”) which excludes both days either side of the period in question.

In my judgment, therefore, the true meaning of “by 14 February 2023” is not “before” that day but, instead, no later than it. This conclusion is reinforced by the following propositions (supported by authority) in Lewison, The Interpretation of Contracts (8th ed), at paragraphs 15.20 and 15.31, upon which LCG’s counsel relied:

“7.

Fractions of a Day

In general, fractions of a day are ignored in construing contracts, although the particular context may indicate that regard is to be had to fractions of a day, particularly where questions of priority may depend upon a precise time at which an event occurs.”

“9.

Action within a Certain Period

Where a person is required to perform an act within a certain period the day of the date or event from which the period runs will not be included in the period; and the act may be performed at any time up to the last moment of the last day of the period.”

I therefore turn to what had to be done by LCG no later than 14 February 2023.

“Served”

The defendants’ written opening submissions steered clear of Kennedy. In their comprehensive closing submissions on this point, Mr Sims KC and Mr Jagasia said LCG had misinterpreted the decision and its application to this case. So far as concerns the earlier first instance decisions in support of their first and second arguments upon the date of service, respectively addressed below, they said none of the online sources (Westlaw etc) suggest Kennedy casts doubt on Ageas - i.e. the aspect of the decision the defendants favour rather than the other which they challenge – or Brightside. That may be so but, if they do not, perhaps those sources should do so in the light of what was said about Ageas (in connection with the defendants’ first argument below) in T&L Sugars, when the decision of Flaux J was endorsed by the Court of Appeal in Kennedy albeit on the point on which it and Ageas speak with one voice, and when an obvious question arises, which I must address, as to whether anything said in Brightside remains compelling or even persuasive, for present purposes, in the light of the Court of Appeal’s approval of T&L Sugars.

So far as the defendants’ reliance upon Ageas is concerned, to support their argument that service of the proceedings required them to have been brought to their actual attention no later 14 February 2023, in accordance with clause 13.1 of the SPA, it is important to recognise that the facts in Ageas were the converse of those in the present case.

In Ageas, the defendant did have actual notice of the proceedings before the relevant deadline date. Its argument was that that was not good enough, so that the breach of warranty claim was deemed to have been withdrawn, because “serving legal process” (the language of the SPA in that case, set out at [21]) was a concept to be judged by reference to the deemed date of service provisions under CPR 6.14. Under those provisions the deemed date of service was too late. So, whereas the defendants here say they did not by the relevant date have any actual notice of the proceedings, through LCG sending them and them receiving them, in Ageas the defendant argued that actual notice (by the claimant sending them and it receiving them) was not “service” of the proceedings, by the relevant date, at all.

Green J rejected that submission. Although the agreement did not specify any particular mechanism by which legal proceedings (as opposed to notices) were to be served on the defendant, the judge concluded that the defendant’s actual receipt of the proceedings before the relevant date did constitute “serving legal process.” His alternative, and therefore obiter, conclusion (see below) was that, if the relevant clause in relation to service of proceedings either imported or was to be construed by reference to the service requirements of the CPR, then CPR 7.5 prevailed over CPR 6.14.

In contrast to the language of paragraph 1.4.1 of Schedule 5 to the SPA (“shall not be deemed to have commenced unless both issued and served”) Green J was concerned with the language of a clause which referred to “legal proceedings ……. commenced by validly issuing and serving legal process”. In rejecting the argument based on CPR 6.14, through the exercise of contractual interpretation of that clause, the judge (at [52]-[54] and [58]-[61]) explained his reasons for concluding that the parties had not “carefully and deliberately chosen a very precise legal term of art which, according to consistent case law, should be accorded its technical meaning” or linked “service to the CPR, or any particular rule therein.” Although he recognised the word “serving” could bear “a number of different and conflicting meanings covering points in time before, on, and after receipt” his view was that normally the concept of “service” meant bringing the document to the actual attention of the recipient and that was what the clause before him was designed to achieve.

When that reasoning was directed to the defendant’s competing argument relying upon the deemed service provisions under CPR 6.14, the question arises as to the impact of Ageas upon my interpretation of paragraph 1.4.1. That it was so directed is revealed by the judge’s observation, at [62], about his conclusion upon CPR 7.5 bearing upon the process of interpretation; particularly when his conclusion on that (CPR) point is not consistent with his view as to what “service” (more generally) normally entails.

The SPA is obviously a different contract than the one in Ageas and it falls to be interpreted in its own right. Nevertheless, it can, I think, fairly be said by the defendants that a plainly different concept of service than the one adopted by Green J does not leap out at the reader comparing the phrases “and served” (this case) and “and serving” (Ageas).

In contrast to the language of paragraph 1.1 of Schedule 5 to the SPA in relation to the giving of notice (“receives”) the equivalent clause in Ageas in relation to notices (set out at [22]) focussed upon acts of dispatch. The language was that of “may be given by delivery or by being sent”, “delivered” and “given”. It was by reference to that language that Green J concluded that the clause could apply to service of the proceedings and that the service of the claim, within time, was also validly effected under that clause.

However, the SPA does not contain the other provisions upon which he relied (at [61]) as part of the unitary exercise of interpreting the agreement before him to conclude that service meant delivery. Indeed, in the context of the provisions of clause 13 addressing the “delivery” of notices, clause 13.5 of the SPA provides: “In proving service, it shall be sufficient to prove that personal delivery was made, or that such Notice was properly addressed, stamped and delivered into the custody of the postal authority as a signed for delivery or registered post.” When read alongside clause 13.3.3 quoted in paragraph 132 above (the part of clause 13 which addresses the deemed timing of the “giving” of notice out of office hours) this appears to me to be ambiguous on the point as to whether or not the SPA treats “service” as synonymous with delivery (in the sense, as I think Green J clearly meant, of actual receipt).

During counsel’s opening submissions, without then having analysed the decision in Ageas (or T&L Sugars), I expressed the instinctive view that the phrase “and served” in relation to legal proceedings, in an SPA governed by English law, including English procedural law, and the jurisdiction of this court (see clause 14), clearly indicated that service was governed by the Civil Procedure Rules. The question as to which of those rules was applicable was, of course, a separate matter. Unsurprisingly, the parties had not attempted their own contractual departure from the CPR (which obviously could not work once any timely proceedings are “up and running” as the parties are not the Rules Committee) and neither had they said anything more about when the proceedings should be regarded as up and running in terms of their issue and “service”. As I observed, commercial contracts in this jurisdiction, especially ones which expressly contemplate litigation between the parties, are not made by them in a CPR-free zone.

That this is instead a matter to be regulated only by the CPR, and that a reasonable person having the knowledge of the prospect of a warranty claim would read paragraph 1.4.1 of Schedule 5 accordingly, seems to me to be obvious from the fact that clause 13 of the SPA makes no provision, at all, for a step that might constitute valid service on Ms Probert, so that if she was not served with the claim form in accordance with CPR 7.5 within 4 months of its issue it would lose its validity against her. I say that on the basis that it is difficult to read the language of clause 13 as a pre-issue, blanket authority from Ms Probert that Mr Lewis (as ‘Vendors’ Representative’) is authorised to accept service of any legal proceedings on her behalf, during the (cumulative) period under Schedule 5. The defendants’ submissions (which rather glossed over this point) did not suggest it amounted to such authority. As for the “service” of proceedings on Mr Lewis himself, clause 13 makes no provision for service by email or other electronic transmission and expressly proscribes service by fax. The last one is rarely used these days but these are methods expressly authorised by CPR 7.5 (assuming the requirements of paragraph 4 of Practice Direction 6A are observed) and they each carry their own deemed date of service under CPR 6.14. Again, as with Ms Probert’s procedural rights as a defendant under the CPR, it is not easy to grasp how the SPA can be read as cutting down LCG’s rights as a process-serving claimant under the CPR (or indeed the “right” of the defendant to be served by email if that is considered to be a convenient method of service).

Accordingly, and in contrast to the reasoning in Ageas at [62], my starting point would be to question why as a matter of the plain meaning of the words “as served”, both as a matter of textual and contextual analysis of the SPA and commercial common sense, the parties should be taken to have intended that the concept of service means anything other than in accordance with the CPR: see the principles in Arnold v Britton addressed below. To say instead that the parties intended that service should be “in accordance with the SPA” either produces circularity, and begs that question, or makes little (certainly not complete) sense when the SPA says nothing expressly about the service of legal proceedings, as opposed to contractual notices.

Even without the benefit of further authority, I would not have been persuaded to follow the reasoning in Ageas in concluding that, as a matter of contractual interpretation, issue and service under paragraph 1.4.1 can somehow be considered in isolation from the CPR. As it is, there is the decision of Flaux J in T&L Sugars, which supports my conclusion on this particular aspect of the Deemed Withdrawal Issue. In my judgment, that decision confirms the correct analysis to adopt and it undermines the defendants’ primary argument that this is purely a contractual concept to be defined solely by reference to what appears in the language of the SPA (i.e. reading paragraph 1.4.1, in the light of clause 13, as a stand-alone provision which is independent of the CPR).

In T&L Sugars the argument of the defendant, in support of the deemed withdrawal of the warranty claim, was in fact to the opposite effect. As in the SPA, the relevant phrase in that case was “both issued and served”. The defendant in that case (who, like the defendant in Ageas, had through its solicitors actually been served before the deadline) positively argued that service of the proceedings was a CPR matter to be considered quite separately from the contractual provisions governing the service of notices: see paragraphs [7(2)] and [12] of the judgment. In that sense, the observations of Flaux J on this “contract versus CPR point” (as I summarise it) were strictly obiter. There is also the point made by the judge that the task of the court is to construe the contract before it “not some other contract considered by another judge in another case.”

Nevertheless, Flaux J did not find the reasoning in Ageas compelling and did not follow it. I respectfully agree with his observations, at [15]-[16], that (especially when the words “and served” follow the reference to “issued” which plainly means issued in accordance with the CPR) this cannot mean anything other than service in accordance with the CPR.

I turn to the defendants’ alternative argument that T&L Sugars (and on this point Ageas) and Paxton Jones were wrong to conclude that it is CPR 7.5 which defines what constitutes “service” and that I should instead adopt the reasoning of Andrew Baker J in Brightside who said that question is instead to be answered by reference to CPR 6.14.

So far as the defendants’ distinguishing of Ageas (and T&L Sugars and Paxton Jones) is concerned, they correctly note that Kennedy was a decision concerned with the concept of service for the purposes of the temporal validity of the claim form. It addressed what had to be done by the claimant, in terms of service, within the relevant period for which the claim form remained valid for service (6 months rather than 4 months from issue in that case as the defendant was in Scotland and so outside the jurisdiction) if the claim form was to remain valid thereafter. The Court of Appeal noted earlier decisions of that court (Godwin v Swindon Borough Council [2001] EWCA Civ 1478; [2002] 1 WLR 997 and Anderton v Clwyd County Council (No. 2) [2002] EWCA Civ 933; [2002] 1 WLR 3174) which were decided under the CPR in force before 2008. The rules at that earlier time required the deemed date of service to fall within the relevant period. The court in Kennedy observed that the change in 2008 reversed the effect of those decisions by requiring the claim form to be “served” within that period. A further change in 2011 to introduce the words “within the United Kingdom” (and the Court of Appeal held that included a defendant domiciled in Scotland) meant that the deemed date of service provisions in CPR 6.14 were only relevant, on this question over the temporal validity of the claim form, to service where the defendant was EEA domiciled outside the UK.

Likewise, Brightside concerned an equivalent point where a claim form issued but not yet served had to be served (if the claim was not discontinued) within the time specified in a notice served by the defendant in accordance with CPR 7.7.

Mr Sims KC and Mr Jagasia said LCG’s argument overlooked the difference between the question as to what has to be done within the specified period for which the claim form remains valid for service, on the one hand, and, as they put it, “the timing of service that has otherwise been effected” on the other. In essence, the question for me is whether that is a distinction without a difference. The defendants say not.

In saying that, the defendants rely upon what Andrew Baker J said in Brightside, at [20]: “CPR 6.14 fixes the date on which service of a claim form occurs, for all, not only for some, CPR purposes.” At [24(ii)], the judge said CPR 7.5(1) “defines what must be done within four months by a claimant who serves within the jurisdiction for the resulting service of his claim form to be valid. It does not provide or imply that service of a claim form served within the jurisdiction occurs upon completion of that step.”. Addressing the fact that the claimants had hand delivered the claim form to the defendants on the last day specified by their CPR 7.7 notice, and in support of his conclusion that the deemed date of service under CPR 6.14 meant it was nevertheless served too late, he said, at [26], it is “incorrect and unhelpful, in an analysis of the meaning and effect of these provisions of the CPR, to speak about when service ‘actually occurs’ as distinct from when the CPR say it occurs.”

At the start of this section of my judgment I noted the defendants’ position that Kennedy does not undermine their reliance upon Brightside. By way of summary of counsel’s very detailed exposition of the procedural law, as they analyse it, they ask me to look beyond the headnote of the law report of Kennedy (“Dicta of Andrew Baker in Brightside Group Limited (formerly Brightside Group Ltd (formerly Brightside Group plc) v RSM Audit LLP [2017] 1 WLR 1943, para. 18 not applied”) which makes it clear that the Court of Appeal disapproved of Brightside on the question which was before it. The defendants’ counsel say that is the position only to the extent that Brightside addressed (at paragraph [18]) what was required, by an act of service, to preserve that validity of a claim form at the very end of its 4 month life (assuming service within the jurisdiction), in other words, the completeness of the act required under CPR 7.5, or CPR 7.7, to preserve the temporal validity of the claim form. Counsel submitted that Brightside remained good law, and that I should adopt the reasoning of Andrew Baker J in preference to that in Ageas, T&L Sugars and Paxton Jones, on the issue I have to decide: the CPR 7.5 versus CPR 6.14 point and what constitutes the act of service of a claim form for the purposes of paragraph 1.4.1 of Schedule 5.

In Kennedy, having referred to Brightside, at [18], the Court of Appeal (Sharp and Asplin LJJ and Sir Rupert Jackson) said this:

“124.

A different analysis of the effect of the rules is to be found in para 31 of T&L Sugars Ltd [2014] EWHC 1066 (Comm) at [31]. There Flaux J said (emphasis added):

"In my judgment these two rules, CPR 7.5 and 6.14, taken together draw a clear distinction between the date when service is actually effected, which is when the relevant step under rule 7.5 has been completed and the date two business days later when service is deemed to take place under CPR r 6.14. If one asks oneself why that distinction is there, it is not as Mr Nicholls QC suggests because service does not actually occur until the deemed day, but because, whereas CPR r 7.5 is looking at when actual service takes place, so that a Claimant who takes the requisite step, depending upon which method of service he employs, can be sure that he has served within the four months of validity of the claim form (thereby avoiding, if relevant, any limitation issues). CPR 6.14 is looking at when service will be deemed to have taken place for the purpose of other steps in the proceedings thereafter, beginning with the filing of an acknowledgement of service. In my judgment, that construction of the rules is supported not only by the reasoning of Green J. in the Ageas UK Ltd [2013] EWHC 3261 (QB) case at [63]-[80], with which on this point I entirely agree, but by the wording of the rules themselves and by the various commentaries on the CPR, not only Blackstone's Civil Practice on which Mr Mill relied but, on a proper analysis, the notes to the White Book."

125.

Paxton Jones [2017 EWHC 2270 (QB) was a case, which concerned service within the jurisdiction under rule 7.5(1). The "relevant step" was the posting of the documents on 17 January 2017. The documents arrived on 18 January 2017. As the final date for service was 17 January 2017, a question arose as to whether the claim form was properly served within its period of validity. The defendant argued that by reason of rule 6.14, the latest day for the relevant step was 13 January 2017 (two business days prior to 17 January 2017).

126.

In summary, the Master rejected the defendant's argument for three reasons: (1) in so far as Andrew Baker J in Brightside [2017] 1 WLR 1943 was purporting to lay down a general rule that an otherwise valid claim form could be invalid due to the operation of rule 6.14 that conclusion was obiter and incorrect; (2) the 2008 Rules had reversed the effect of Godwin by removing the snare of the deemed date of service provisions and it would be contrary to the purpose of those Rules to re-introduce a "dead" period at the end of the validity of the claim form; and (3) the only function of rule 6.14 was to ensure that it is clear to the parties what date is to be used for the purpose of calculating dates for subsequent steps in the litigation. See in particular paras [29], [37] and [38].”

On the issue before it, the Court of Appeal concluded, at [137], that the judge below was correct to follow the reasoning of Flaux J in T&L Sugars Ltd and Master McCloud in Paxton Jones. The contradictory dicta of Andrew Baker J in Brightside was not endorsed.

Mr Sims KC and Mr Jagasia are strictly correct to say that the Court of Appeal in Kennedy was deciding only what was required to preserve the validity of the claim form beyond the initial period for service allowed by CPR 7.5. However, the key question is whether that leaves any room for their argument which invokes CPR 6.14 on the application of paragraph 1.4.1 of Schedule 5. The question obviously arises when, in Brightside at [25]-[26] and [30], Andrew Baker J expressed the view that the reasoning of Flaux J in T&L Sugars (including at paragraph [31]) was incorrect but the Court of Appeal has since endorsed it.

As already noted, in Brightside, at [20], the judge said CPR 6.14 fixes the date on which service of a claim form occurs, for all, not only for some purposes. In the light of Kennedy, that unqualified statement cannot stand. If it is therefore wrong to suggest that CPR 6.14 fixes the date of service for all purposes of the CPR, the question then is why should it fix the date for service under paragraph 1.4.1 of Schedule 5?

I cannot see any good reason why it should and, despite the encouragement and ingenuity in the defendants’ written submissions, I cannot easily identify a principled basis for doing so that would not involve me wrongly ignoring Kennedy and the Court of Appeal’s endorsement of T&L Sugars and Paxton Jones.

In any event, and assuming I have been insufficiently receptive to the point about CPR 6.14 which the defendants say survives Kennedy for the purposes of this judgment, I would nevertheless prefer the reasoning of Flaux J in T&L Sugars to that of Andrew Baker J in Brightside.

Of the two decisions Brightside is obviously the more recent and contains a critique of the earlier decision. Like that in T&L Sugars, the judgment of Andrew Baker J was a reserved judgment. As appears from paragraphs [9] and [21], the judgment addressed the issue of procedural law in circumstances where the judge at the hearing had already dismissed the defendant’s application for dismissal of the claim under CPR 7.7(3) (stating his conclusions for exercising his discretion against that course without having called upon counsel for the defendant to address him) and by reference, therefore, only to the defendant’s detailed skeleton argument on what I have summarised as the CPR 7.5 (in that case CPR 7.7) versus CPR 6.14 point.

The first point to make about Brightside is that, as the Court of Appeal noted in Kennedy, at [122], the case concerns CPR 7.7. This is illustrated clearly by what the judge said about that rule at [15], [17], [19] and [22]. In the first of those paragraphs, he noted that the absence of a rule change in 2008 for CPR 7.7 (unlike the change for CPR 7.5 later noted in Kennedy) meant that the Court of Appeal’s decision in Godwin was binding on him. Had he not been bound by Godwin (by parity of reasoning) the judge could have seen, even on the old language of CPR 7.5, “room to argue that …. compliance should be tested by when the claimant had done what he was required to do to effect service rather than by the deemed date of service resulting under CPR 6.14” (my emphasis through underlining). It is now clear from Kennedy that the change to the language of CPR 7.5 in 2008 means Godwin is no longer of any effect in the interpretation of that provision. Andrew Baker J anticipated what the Court of Appeal would later say about that at [16].

The second point in relation to Brightside (which I believe the emphasised words in the quote above begin to reveal) is that Andrew Baker J expresses himself in places using language which encourages the thought that the initial part of initial reasoning might not be materially at odds with that of Green J in Ageas and Flaux J in T&L Sugars. So much so that, with respect to the judge, reading the decision leaves me a little puzzled as to why he reached the firm conclusion that the reasoning of Green J and Flaux J, in relation to CPR 7.5, was incorrect. In particular, Andrew Baker J also said (again my emphasis):

“[17] It is to be noted that: there have always been two different questions: (i) what must the claimant do to effect service; and (ii) when do the CPR say that service, in consequence, takes place; the distinction between the two was not introduced by the amendment to CPR 7.5; moreover, that amendment did not touch question (ii); rather, it re-defined the temporal validity of a claim form for service within the jurisdiction so that it referred to question (i) rather than question (ii). ……….”

“[18] … As the CPR now stand: for a claim for a claim form served within the jurisdiction, CPR r 7.5(i) requires that the step there required, for the method of service used by the claimant, as a result of which service will be effected to business days later (see CPR r 6.14) must be taken within four months of the claim form being issued ….”

“[19] … For claim forms served within the jurisdiction, CPR 7.7 still has reference to when service occurs, but CPR 7.5 does not ….”

“[25] … As with Green J’s obiter conclusion, to my mind this decision of Flaux J’s is to be explained on the basis that upon the proper construction of the contract before him, and bearing in mind the two different questions addressed by the CPR (see para 17 above), the contractual time bar operated by reference to the date when the claimant did that which was required of it by the CPR, so as to effect service, and not by the date when service occurred, according to the CPR. …”

The third and I think most important point I would make about the decision, which feeds into my puzzlement and the reasons why I would also follow the reasoning of Flaux J on the Deemed Withdrawal Issue, is that (in light of the distinction recognised in Brightside at [17]) I am unpersuaded by Andrew Baker J’s conclusion that CPR 6.14 provides the answer, for all purposes when applying the CPR, as to when service takes place. The judge, at [26], says it was “incorrect and unhelpful to speak about when service “actually occurs” as distinct from when the CPR say it occurs”. My own reading of paragraph [31] in T&L Sugars (quoted within the extract from Kennedy in paragraph 187 above) is that Flaux J was simply describing what service actually is (and describing how it is effected) and was therefore addressing the first of the questions identified in Brightside, at [17] in order to distinguish the second.

In Paxton Jones, Master McCloud said she found the judgment in Brightside “challenging in some respects”. The master identified tension between what was said in Brightside in paragraphs [20] and [24iii)]. Her analysis, at [29] of Paxton Jones, was that the true analysis of Brightside is that CPR 7.5 was recognised to be a special case and does not alter the role of “deemed date of service” for purposes outside that rule. If she was wrong about that then she disagreed with Brightside, saying Andrew Bakers J’s observations were incorrect if applied to CPR 7.5 (with which she was concerned) and favouring the reasoning of Flaux J in T&L Sugars. Her approach to CPR 7.5 was also endorsed by the Court of Appeal in Kennedy.

For the purposes of addressing the defendants’ argument, I adopt Master McCloud’s first analysis which leaves open their argument that Brightside can stand in the light of what was said in Kennedy about that special case (only). They rely upon the width of the obiter conclusion in Brightside, at [20], for all other purposes including the impact of CPR 6.14 upon what is meant by service under the SPA.

However, even on that adopted analysis, I remain unpersuaded that the otherwise wide-ranging observation in Brightside, at [20], provides the answer to that question. Like Master McCloud, I prefer the reasoning in T&L Sugars for the purposes of determining the question under paragraph 1.4.1 of the SPA which I have to decide.

On my reading of CPR 6.14, which Andrew Baker J said fixes the date of service for all purposes outside CPR 7.5, the language of the rule itself supports the essential distinction drawn by Flaux J in T&L Sugars:

“A claim form served within the United Kingdom in accordance with this Part is deemed to be served on the second business day after completion of the relevant step under rule 7.5(1).” (my emphasis)

The emphasised words must relate to an act of service under CPR 7.5 which results in the claim form being “served”.

CPR 7.5 clearly identifies the “step required” for the various methods of service of a claim form set out in the table. In the case of mail and DX, they are “posting, leaving with, delivering to or collection by the relevant service provider.” In the case of delivery, they are “delivering to or leaving the document at the relevant place.” In the case of fax, it is “completing the transmission of the fax” and in the case of email it is “sending the email”. Those are all acts of dispatch by the claimant and none of them is described in terms which encompass or extend to the actual or deemed receipt of the claim form by the defendant. Only where the method used is personal service under rule 6.5 (described in terms of “leaving it with”) will the step of serving the claim form and its receipt be simultaneous. However, even in that situation, the actual receipt of the claim form defers to the deeming provision under CPR 6.14 so that service is deemed to take place on the second business day afterwards. In my judgment, therefore, these acts of dispatch or delivery were correctly described in T&L Sugars in terms of when service was “actually effected” (i.e. the first of the two questions identified in Brightside, at [17]).

In my judgment, the defendants’ counsel in their detailed submissions have therefore overlooked the basic point that, on proper analysis, there is consonance rather than conflict between the two rules (despite me labelling the point as “the CPR 7.5 versus CPR 6.14” point).

Whatever the method of service used, the different concept (and date) of deemed receipt/service is irrelevant to the ongoing validity of the claim. This is so even if actual receipt occurs before the deemed date of receipt. The decision in Kennedy put that beyond any doubt for the purposes of CPR 7.5. In my judgment it is difficult to identify any rational basis for distinguishing the concept of service which operates to extend the validity of a claim form beyond 4 months under CPR 7.5 from one which extends its validity beyond the date of 14 February 2023 under paragraph 1.4.1 of Schedule 5 to the SPA. To the extent the decision in Brightside can be said to survive Kennedy on matters outside CPR 7.7, I do not regard it as persuasive in deciding the outcome of the issue under paragraph 1.4.1.

I note that in Brightside, at [22], Andrew Baker J expressly noted that Ageas and T&L Sugars were “each concerned with the proper interpretation of a contractual time bar provision in a share purchase agreement” and that “[i]n both cases, it was held that legal proceedings had been served, within the meaning of the contractual term in question … although for CPR purpose the date of service set by CPR 6.14 was after the contractual deadline had expired.” See also paragraph [25] quoted above. I believe the defendants’ argument also loses sight of that point.

So far as the deeming provision of CPR 6.14 is concerned, as Andrew Baker J observed in Brightside, at [18], there is no “deemed date” rule where the service is overseas. In my judgment, that is another clear indication that the act of service – i.e. what constitutes service – cannot be defined by reference to its calendar-based consequences for the next procedural steps in the litigation. For such cases, the consequential timing point addressed by Flaux J in T&L Sugars, at [31], is of course addressed by section 6 of CPR PD6B. The logic of the defendants’ argument is, I think, that if they had, under clause 13.6 of the SPA, notified LCG of a relevant address abroad then the deadline date of 14 February 2023 would be brought forward to an earlier date according to the relevant number of days for the country in question as specified in the Practice Direction. Their reasoning therefore produces uncertainty over the deadline (through the introduction of a corresponding “dead period” of the kind described by Master McCloud in Paxton Jones at [37]) which seems at odds with the parties’ choice of a certain date in paragraph 1.4.1 of Schedule 5.

Although it has been necessary to address the defendants’ argument distinguishing Kennedy and promoting Brightside at length, the clear answer to it is given by Flaux J in T&L Sugars at [31]. His reasoning in that paragraph was approved by the Court of Appeal and, to the extent I am justified in saying anything more about what constitutes service in the light of Kennedy, I also respectfully adopt it for the reasons explained. The decision in Kennedy confirms the claim form was served in time under paragraph 1.4.1 of Schedule 5.

I reject the defence that LCG’s warranty and indemnity claim is deemed to have been withdrawn on the basis that it was not served by 14 February 2023.

That conclusion on Issue 1 does not obviate the need to address the defences that certain of the warranty claims in the claim form cannot be pursued and also that LCG cannot pursue the warranty claim in the sum of £10,180,040 identified in the particulars of claim because Notice 2 identified the sum of £6,862,240 (which, as noted, was based on a multiplier of 5.5 applied to an overstated EBITDA due to the Over-Claimed Sum). The claim form also identified the lower sum.

LCG’s position (in part) is that the significance of the Notification Issue is heavily qualified by its ability to rely upon the Key Warranty in respect of which no point about lack of notification can be taken by the defendants.

Subject to that point by LCG, the issues here are whether some of the warranty claims set out the particulars of claim fall foul of the prior notification requirements in the SPA and whether the amount of LCG’s claim is capped as the defendants contend.

The focus of the first – Issue 2 - is upon whether the claim under Warranties B1.4, B2.1.2, B2.1.3, B2.2.2 and B2.5.2 cannot be pursued because Notices 1 and 2 did not embrace those warranty claims by including (quoting from paragraph 1.2 of Schedule 5) in respect of them:

“….. details (in such detail as is reasonably available to the Purchaser at the time) of the nature of the claim, the facts and circumstances giving rise to it. ….”

The focus of the second – Issue 10 – relates to the continuing words in paragraph 1.2:

“…. and the Purchaser’s bona fide estimate of any alleged loss ..”

The defendants relied upon numerous authorities in relation to these two issues. LCG’s position is that many of them are unhelpful, as they concern notification provisions expressed in materially different wording to that set out above, or support LCG’s case.

I agree with Mr Booth KC that little assistance is derived from extracting isolated dicta from earlier cases which were directed to different contractual wording applied to the facts of the case. In RWE Nukem Ltd v AEA Technology plc [2005] EWHC 78 (Comm), at [10]-[11], which was at the forefront of the defendants’ submissions, Gloster J began the series of propositions to be applied in that case with the obvious point that “[e]very notification clause turns on its individual wording”. In Drax Smart Generation Holdco Ltd v Scottish Power Retail Holdings Ltd [2024] EWCA Civ 477; [2024] 2 All ER (Comm) 1062, at [50], Males LJ made the same point:

“Whether a notice is sufficient to satisfy the requirements of any given clause must depend primarily on the language of the clause. Commercial parties are free to impose whatever requirements they wish. However, where they use broad and general terms such as 'the nature of the claim' and 'in reasonable detail', those requirements should be interpreted in the light of the commercial purposes of such clauses, including those identified in Dodika. It is important that Notice of Claim clauses should not become a technical minefield to be navigated, divorced from the underlying merits of a buyer's claim. While a seller's interest will always be to knock the claim out if it can on the technical ground that the notice is insufficient, courts should not interpret such clauses as imposing requirements which serve no real commercial purpose unless compelled to do so by the language of the clause.”

Males LJ, at [49], identified the initial purpose of such a clause as follows:

“Taking a step back, the initial purpose of such clauses is to provide a contractual limitation period. If no notice is given by the specified deadline, the parties can close their books on the transaction. That promotes finality and certainty in commercial dealings. It is only if some kind of notice is given that the purposes identified in Dodika come into play. In that event, it will be obvious that the buyer is seeking to make a claim, so that the achievement of finality and certainty must be postponed.”

The reference in the quoted passages to Dodika was to the judgment of Popplewell LJ in Dodika Ltd v United Luck Group Holdings Ltd [2021] EWCA Civ 638 where, at [46], he addressed the wider purpose of a notification clause, where a claim has been notified, as follows:

“The purpose of a notice clause such as that in schedule 4 para 2(b) of the SPA is to enable the recipient to make such inquiries as it is able, and would wish, to make into the factual circumstances giving rise to the claim, with a view to gathering or preserving evidence; to assess so far as possible the merits of the claim; to participate in the tax investigation to the extent desirable or possible with a view to influencing the outcome; and to take into account the nature and scope of the claim in its future business dealings, whether by way of formal reserving or a more general assessment of the potential liability. As Mr Choo-Choy accepted, the additional detail available, if included in the 24 June letter, would not have advanced any of these purposes. I balk at a conclusion that the level of detail provided in a notice of this sort fell short of what was required as reasonable, that is to say was unreasonably deficient, when the additional level of detail said to have been required would not have furthered any of the commercial purposes for giving such a notice. What is reasonable takes its colour from the commercial purpose of the clause, and what businessmen in the position of the parties would treat as reasonable. Businessmen would not expect or require further detail which served no commercial purpose. That would be the antithesis of what was reasonable.”

If a significant element of LCG’s claim has become lost to LCG, through a failure to give timely notification of it, then the grounds for reaching that conclusion should be clear when Notices 1 and 2 are tested against that commercial purpose and the uncomplicated language used in paragraph 1.2 of Schedule 5.

That language is to be construed by the court using “all its tools of linguistic, contextual, purposive and common-sense analysis to discern what the clause really means.” That phrase is part of a quotation from the judgment of Briggs LJ in Nobahar-Cookson v The Hut Group Ltd [2016] EWCA Civ 128, at [18]-[19] with which Males LJ in Drax, at [51], agreed. This is the conventional approach to the objective interpretation of a commercial contract by reference to how a reasonable person with knowledge of the context would understand it.

In Nobahar-Cookson, Briggs LJ said (and this was also endorsed in Drax) that such exclusion clauses were not narrowly construed by reference to the contra proferentem rule but because they cut down or detract from an important obligation in the contract and “parties are not lightly to be taken to have intended to cut down the remedies which the law provides for breach of important contractual obligations.”

The same objective approach to interpretation applies in discerning the meaning of Notice 1 and Notice 2 unilaterally served by LCG. In Laminates Acquisition v BTR Australia Ltd [2003] EWHC 2540 (Comm); [2004] 1 All ER (Comm) 737, concerning an issue of notification of a claim under a share purchase agreement, Cooke J referred, at [29], to the decision of the House of Lords in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 at p. 767G (per Lord Steyn) and p. 775E (per Lord Hoffmann) before observing “[t]he question is how this notice would be understood by a reasonable recipient with knowledge of the context in which it was sent.” Cooke J found the citation of other authority addressing a similar issue of limited help because “each clause has to be construed for itself and in the light of the commercial context in which it is found and the commercial purpose it is intended to serve.”

More recent Supreme Court authority upon the interpretation of contracts such as Arnold v Britton [2015] UKSC 36, [2015] AC 1619, at [15-[20] confirms this approach.

In relation to the defendants’ challenge to LCG’s reliance upon each of the five warranties identified above (for the purposes of Issue 2), success for them must in essence rest upon a finding that the details given in Notices 1 and 2 about the “nature of the claim”, later issued, and the “facts and circumstances giving rise to it”, cannot support such reliance. That finding would be required in order to draw the conclusion that the defendants were not notified of the relevant warranty claim in time.

In relation to the challenged element of quantum in LCG’s pleaded claim (Issue 10), this must involve also the estimate of loss of £6,862,240 in Notice 2 being impugned but with the consequence that no greater loss than that can now be pursued in this the claim. In other words, the defendants seek to knock out the claim for a value which has not been estimated (at all, in good faith or otherwise). More specifically, it involves the conclusion that I should not entertain any contention by LCG which is based on the use of an EBITDA multiplier below 5.5 (the damages figures of £10,180,040 and £6,862,240 being the result of applying multipliers of 3.3 and 5.5, respectively, to the EBITDA in the computation of the damages claim).

As noted, on Issue 2 - the Notification Issue - the defendants relied upon a number of decided cases concerning the efficacy of a claim notification under the chosen language of the particular share purchase agreement before the court.

Paragraph 1.2 is expressed in plain language with no obvious element of ambiguity or uncertainty. It is therefore important that the court should not become distracted by what was said in other cases, about different contractual language, into thinking it needs to delve deep into its interpretative toolbox when that may not be necessary in order to discern the clause’s natural and ordinary meaning. I am not concerned with any technical minefields (per Males LJ in Drax) that may have been encountered in those other cases. That said, I need to address some of the authorities highlighted by the defendants in order to test the soundness of any initial impressions about the efficacy of Notices 1 and 2 when read against the language of the clause. Mr Booth KC’s competing submission was that the defendants’ reliance upon these cases leads to their true effect for present purposes being bent out of all recognition.

In Senate Electrical Wholesalers Ltd v Alcatel Submarine Networks Ltd [1999] 2 Lloyd’s Rep 423 (a case upon which the defendants also rely in support of their position on Issue 8), at [91], Stuart-Smith LJ emphasised the need for certainty in the terms of the notification so that “the vendor is left in no reasonable doubt not only that a claim may be brought but of the particulars of the ground upon which the claim is to be based.” That statement is not materially different from what was later said in Dodika, with the obvious and essential rider that it is the language of the contract in question that will determine the level of information the vendor is entitled to receive. In Senate Electrical, the relevant clause required “such particulars of the grounds on which such claim is based as are then known to the Purchaser ….” No particulars were given in the relevant letter which instead referred to some particulars given orally at two meetings between the parties. May J held the notice provision was satisfied. The Court of Appeal, noting that the minutes of one of those meetings recorded the parties’ agreement that the matter of profits being misrepresented was “a grey area”, disagreed.

In Laminates, as already noted above, Cooke J also found decisions about the effect of different contractual language to be of limited assistance. He was concerned with a clause which required “written notice of such claim specifying (in reasonable detail, to the extent that such information is available at the time of the claim) the matter which gives rise to the claim, the nature of the claim and the amount claimed in respect thereof (detailing the Purchaser’s calculation of the loss thereby alleged to have been suffered …..) ….”. The judge said that that clause was analogous to the clause in Senate Electrical (in that it required some information, if not “particulars” as such, relating to the claim) and, at [31], he set out what the requirements were in relation to a notice served under that clause. In fact, the purchaser’s notification letters were sent under a different clause. Although it was accepted that a letter might serve the purpose of both clauses, the court concluded, at [37], that “nowhere was the form of substance of the claim spelt out.”

In Teoco UK Ltd v Aircom Jersey 4 Ltd [2018] EWCA Civ 23; [2018] BCC 339 the Court of Appeal was concerned with a notification clause which required the purchaser to set out “reasonable details of the claim (including the grounds on which it is based and the purchaser’s good faith estimate of the amount of the claim (detailing the purchaser’s calculation of loss, liability or damage alleged to have been suffered or incurred))” The Court of Appeal agreed with the judge that the failure of the two letters in question to identify the particular warranties and other contractual provisions on which the claims were based meant that the clause had not been complied with.

It is important to note, however, that Newey LJ, at [19], agreed with the judge below that the provision within the agreement enabling the seller to avoid liability by remedying any matter capable of being remedied, within 60 days of the notice, “suggests that the information to be provided in compliance with para. 4 must at least identify the particular Warranty breached so that the consequences which flow from it can be put right.” The SPA (at paragraph 7 of Schedule 5: ‘Remediable Breaches’) also contains a significantly shorter five- day period for the defendants to put things right without any loss to LCG. In language similar but not identical to paragraph 1.2 the basis of this opportunity is that defendants should know “the fact, matter, event or circumstances giving rise to such claim.” The SPA does not provide for the relevant warranty or warranties to be identified by number.

That last point in Teoco about the need for a notification letter to identify all warranties relied upon was one previously addressed by Gloster J in RWE Nukem. The defendants place heavy reliance upon what she said in that case, at [10]-[11], about the need for the notice to be informative and her expectation that “a compliant notice would identify the particular warranty that was alleged to have been breached” and “would explain why it has been breached”. Those observations were expressly made by reference to what had to be notified in the case before her by reference to the nature of the claim made. Having regard to the judge’s recognition (already noted above) that the answer in any particular case obviously turns on the actual language of the contract under consideration, it is important to note, therefore, that Gloster J was applying the terms of a clause which required “written particulars of such claim (giving details of the specific matter as are available to the purchaser in respect of which such claim is made)”.

In Teoco, at [23]-[24] and [28], Newey LJ referred to Gloster J’s expectation that a compliant notice would identify the particular warranty alleged to have been breached. Alongside the importance of certainty recognised in Senate Electrical, it was, he said, consistent with the conclusion he had reached applying the language of the clause before him. So far as the basis of the warranty claim is concerned (as opposed to the level of detail required to support the good faith estimate of its value) the contractual language in Teoco is closer to the language of paragraph 1.2 which I have to apply; though the SPA here does not contain any equivalent provision to support the point made in Teoco at [19]. It is obvious that the contractual language under consideration in RWE Nukem required a greater degree of precision and specificity than that justified by paragraph 1.2. It required particulars of the claim including details of the specific matter in respect of which the claim was made, as opposed to details about the nature of the claim and the facts and circumstances giving rise to it.

In the light of that more exacting language, it is unsurprising that it created an expectation on the part of the judge that the details of the specific matter in respect of which the claim was made would extend to identifying the relevant warranty whose breach was alleged. However, even applying that language, it is important to note, as Newey LJ did in Teoco at [24]:

“On the facts, Gloster J concluded that some claims had not been properly notified. As regards certain other claims, however, she considered them to have been adequately notified even though the material letter had not referred to all the relevant warranties. She said (in paragraph 30):

“The absence of a reference to paragraphs 15.1 and 16.1 of Schedule 6 to the Agreement is not in my view fatal. The nature of the claim is, in my judgment, adequately summarised in paragraph 17 of the September Letter, although, it is fair to say, not in an entirely satisfactory fashion.””

That finding must indicate that, on its true construction, the clause in RWE Nukem did not, in the judge’s view, strictly require each warranty to be identified by number, which is presumably why she expressed matters in terms of an expectation rather than a mandatory requirement.

Having reviewed the authorities relied upon by the defendants, I have concluded that there is no basis for concluding that the claim under the five warranties in question is invalidated because they were not identified in Notices 1 and 2. In my judgment, the defendants are wrong to contend that paragraph 1.2 of Schedule 5 required each and every warranty to be identified in the notices if that particular warranty was to support (reading on to paragraph 1.4.1) later “legal proceedings in respect thereof”.

On its natural and ordinary meaning the clause does not say that. This is despite the fact that it begins by introducing its subject matter (for present purposes) as a “notice of any Warranty Claim”. A ‘Warranty Claim’ is defined as “any claim for breach of the General Warranties”. The ‘General Warranties’ are defined as “any of the Warranties other than the Title Warranties”. There was an obvious opportunity for the draftsmen to include provision that the notice should specify “the warranty or warranties relied upon” (or similar words to that effect) but the language adopted instead required LCG to give details of the nature of the claim and the facts and circumstances giving rise to it.

It is the giving of notice of those (warranty non-specific) facts and circumstances which supports the legal proceedings in respect thereof, if commenced by 14 February 2023 under paragraph 1.4.1.

Therefore, contrary to the expectation of Gloster J in RWE Nukem (where an element of disappointment in that regard did not invalidate some of the later claims) and of Newey LJ in Teoco, I see nothing in the language of paragraph 1.2, when read in its context, which required any warranty to be identified by number in the notice of claim. References to a general need for certainty in the mind of the recipient (which were plainly justified on facts such as those in Senate Electrical) cannot override the need to construe and apply the terms of the SPA. Otherwise, the court would be putting to one side the conventional tools of interpretation, described by Briggs LJ in Nobahar-Cookson, and the exercise becomes one of extrapolation not interpretation. Notably, such extrapolation would produce the opposite effect of what might be described as the interpretational restraint, encouraged by the Court of Appeal in Nobahar-Cookson, Dodika and Drax, to be applied when considering whether or not a remedy has been lost through non-notification.

In paragraph 137 above I have summarised what was said in Notice 1 including (in its paragraphs 11 to 16) about the nature of LCG’s claim and the facts and matters giving rise to it. Of course, Notice 1 (in its paragraphs 9 and 10) did set out the numbered warranties, to which the defendants can take no exception on the present issue, and it reserved the right to identify any further applicable ones.

However, putting to one side what was touched upon in relation to the quantum of LCG’s claim (as that is a matter for Issue 10 to be addressed in the light of Notice 2) I cannot identify any sound reason why the following paragraphs in Notice 1 did not satisfy the requirements of paragraph 1.2 so far as the nature of the claim and the facts and matters giving rise to it) are concerned:

“13.

Our client has reason to believe that the Company has breached the Funding Rules (insofar as they apply to the ESFA) which are applicable to the Company by over-claiming funding from the ESFA in the region of £1.2m in the academic year 2020/2021. It is understood that the over-claiming of funding relates to planned learning hours and Maths / English condition of funding delivery.

14.

The Company’s over-claiming of funding from the ESFA directly over-inflated the value of the Company at the time it was acquired by our client. The Initial Consideration for the purchase of the Company paid by our client to the Vendors in accordance with paragraph 3 of the SPA was based on a multiple of EBITDA. As such, had the Company not over-claimed funding from the ESFA the Initial Consideration figure in the SPA, paid by our client for the purchase of the Company, would have been lower by the amount of over-claimed funding multiplied by the applicable EBITDA figure.”

It may be that the defendants’ enthusiasm for Issue 2 has been encouraged by the enumeration within Notice 1 of some but not all of the warranties subsequently relied upon in these proceedings. It is not at all surprising that the notices did identify particular warranties and one would expect a carefully drafted notice to do so even if that was strictly not required.

Nevertheless, in my judgment it is misplaced enthusiasm. So much is clear from the fact that any breach of each of the warranties challenged by the defendants under Issue 2 can only be the consequence of the breach of the Funding Regulations identified in Notice 1 (and is therefore dependent upon establishing a breach of the Key Warranty whether or not it forms part of a single, composite Warranty B5.2.2) and leads to no different or greater measure of loss. (Strictly speaking, this last point, about the disputed warranties having no further impact on the value of LCG’s claim, itself provides the answer to Issue 2 as formulated and set out in paragraph 93 above). In other words, for paragraph 1.2 purposes, they neither change the nature (or value) of the claim nor do they rest upon different facts and circumstances from those previously notified.

The present case is therefore quite unlike the situation which arose (in respect of one of the heads of claim) in 116 Cardamon Ltd v MacAlister [2019] EWHC 1200 (Comm) upon which the defendants rely. In that case, Cockerill J, as she then was, considered a notification provision which required the purchaser to summarise “the nature of the Claim (in so far as it is known to the Buyer) and, as far as reasonably practicable, the amount claimed”. She found that the warranty in relation to broker remuneration was barred by limitation under the share purchase agreement. That was because the only claim advanced at trial (under amended particulars of claim) in respect of that warranty was based upon the change in remuneration being an unusual and/or non-recurring item affecting the Accounts and Management Accounts. Yet the purchaser had only notified (and originally pleaded) the breach of warranty as resting upon it being an undisclosed change in accounting policy contrary to FRS 18. The new claim did not relate to the claim that had been notified.

Had I reached a different conclusion upon the interpretation of paragraph 1.2 and LCG’s compliance with it by Notices 1 and 2, I would not have been persuaded by LCG’s fall-back arguments.

I see no basis for reading Capital Law’s letter of 16 June 2022 as a representation that the defendants would not take a point that a claim under five warranties that had yet to be identified (and were not identified until service of the particulars of claim) was not barred on limitation grounds. The letter was only directed to whether or not Notice 2, incorporating Notice 1, was intended to comply with the pre-action protocol; in which case the defendants were entitled to be informed at that stage about all warranties upon which LCG intended to rely. It said nothing either way about later identification of a specific warranty being compliant with the requirements of paragraph 1.2.

As for LCG’s alternative argument that the claim form (identifying all the warranties) can be treated as a notice under paragraph 1.4, this strikes me as an entirely circular and therefore baseless (or “bootstraps”) argument. The structure of Part 1 of Schedule 5, and the need for any proceedings under paragraph 1.4 to supported by a prior notice (see the phrase “in respect thereof”), clearly indicates that the claim form cannot both serve as the proceedings and the notice which is required to precede them. The argument also undermines the purpose of the notice provision as identified in Dodika (though obviously not the initial purpose identified in Drax as the defendants already knew from Notices 1 and 2 that proceedings in respect of some of the warranties were coming their way).

Turning to Issue 10 - the Notification Claim Cap Issue - the defendants urge me to rely upon the decision of HHJ Waksman QC, as he then was, in Highwater Estates Ltd v Graybill [2009] EWHC 1192 (QB) to support the conclusion that LCG’s claim in these proceedings is capped at the £6.8m figure.

In Highwater, the vendor under the share purchase agreement was not liable on a warranty claim under it unless, by a certain date, the purchaser gave “written notice of the Claim stating in reasonable detail the matter giving rise to the Claim and the nature and amount of the Claim.” The judge compared the claim before him with the one which had previously been notified. The claim as notified was based upon the loss of profit attributable to a shortfall in wedding bookings from the number warranted in the agreement (the company owned and operated a wedding venue) whereas the claim as pleaded also extended to an allegation of negligent or fraudulent misrepresentation which the claimant said had induced it to buy the company. The damages, as pleaded, were based upon a diminution in the value of the company at the time of purchase.

The judge found that the notice had not set out the “nature” of the claim as brought. He also found that the notice had not set out the “amount of the Claim”. In the part of the judgment headed with those words, he said:

“45.

I also take the view that the discrepancy between the amount claimed in the Particulars of Claim (£2.06m) and that claimed in the Claim Letter (£387,000) is a further ground for non-compliance. The sums are vastly different and the vendor might obviously take a different view when he knows that he is facing a claim of those proportions in relation to one particular matter. It is no answer to say that the Court will decide damages in the round. The Court might dismiss the claim altogether, but the vendor’s need is to see what he is facing from the purchaser.

46.

Mr Berragan says that the two amounts have the same starting point. I agree, but that is no answer when they end up at very different destinations. Moreover the type of damages claim is different. In the letter it is based on what profit Majorstage would have made if there were 150 bookings. In the Particulars of Claim it is the familiar “overpayment” claim based on an assertion that because of the matter complained of the true value of the company, as acquired by Highwater, is very much less than the price paid. That involves detailed explanations of how the price paid was arrived at and what the true value was, explanations in fact given in the letter of 22 April 2008 albeit that at that stage it was said that the claim was worth “at least” £800,000 and maybe up to £2m.

47.

Where a clause expressly requires the amount of the claim to be given and in truth the amount of the claim pursued in the Particulars of Claim is simply missing from the Claim Letter to a very substantial extent, which cannot be described as a mere difference in detail, the clause has not been complied with.”

In my judgment, those observations which were directed to a differently worded notification clause, do not assist the defendants. The same can be said about the contractual requirement in Laminates to specify the “amount claimed” which Cooke J said, at [31], “specifically requires a calculation on the part of Laminates of the loss which is allegedly suffered”. Teoco did concern a clause which, like paragraph 1.2, required reasonable details of an “estimate” of the amount of the claim but, significantly, the clause in Teoco also required “detailing the purchaser’s calculation of the loss ….”.

Returning to the judgment in Highwater, I am prepared to accept that a differential of 2.2 in LCG’s multiplier does produce a “vastly different” sum. However, the defendants knew that the lower sum was an estimate as at June 2022 (and, therefore, not necessarily the amount of the claim that would be made) and the higher sum sought in the pleading served nine months later does not reflect a different type of damages claim. Using the language in Highwater, it is instead reflective of a difference in detail (as to what is the appropriate multiplier to adopt on the “warranty false value”) as the nature of the rival expert evidence adduced at trial only serves to highlight.

I believe the defendants’ case on Issue 10 is missing both the substance and the requisite element of logical deduction required to knock out LCG’s claim to the c. £3.3m additional damages that were not flagged by Notice 2 (when, in fact, as noted in the next paragraph, the more relevant figure may be c. £2m).

The lack of substance is revealed by the defendants not challenging the estimate £6,862,240 on the ground it was not a bona fide one. They contend that LCG could have done better in June 2022 (obviously worse from the defendants’ perspective) in its estimation of loss but that does not equate to, nor has it resulted in, a challenge which says that LCG did not have genuine belief in the claim to the £6,862,240. (In fact, Notice 2 added the claim under the Funding Indemnity, when the terms of paragraph 4 of Schedule 5 against double-recovery prevented that, so that it concluded the section on quantum by saying “our client currently expects that the quantum of its Claim will total c. £8,124,000”.) However, allowing for the requirement that LCG was to provide such detail in support of it as was reasonably available to it at the time, the terms of paragraph 1.2 do not introduce any standard of competence in giving the estimate (compare the inclusion of an additional £1,247,680 contrary to the provision against double-claims) as opposed to a standard of commercial probity. The clause does not purport to regulate the reasonableness or accuracy of the estimate (save perhaps by reference to what plainly lies outside the more generous boundaries set by the concept of good faith).

The lack of logic in the challenge is highlighted by the incongruity between an exercise which required an estimate of loss to be given in good faith and the formulation of an issue (Issue 10) that is expressed in terms of it resulting in a cap on the damages that can later be claimed in respect of it.

The facts of Drax, summarised below, illustrate that there may of course be cases where the omission from a notification letter of a particular head or type of loss may preclude a later claim to recover it (though that was not the end result in that case). However, a clause which refers to an “estimate” of loss under an otherwise adequately notified claim (so far as the “nature” of it is concerned) is not a happy starting point for an argument that the notice served under it creates a ceiling, or cap, upon the value of any later pleaded claim. The defendant’s suggestion that it does prompts the obvious question as to why the estimate should not just as well be regarded as creating a floor (or threshold, or base figure) for the purposes of any proceedings in respect of that notified claim. An estimate is just that: it does not bind the parties to the estimated figure in any later proceedings so that the court may only award damages in that figure (or, as the defendants accept and urge, a lesser figure).

In this case, Notice 1 said:

“[o]ur client currently has insufficient information to provide a precise estimate of the quantum of its claim. It shall provide this information in due course once it becomes available.”

Notice 2 said:

“The Vendors are in breach of some or all of the General Warranties listed at paragraph 9 of the 8 April Notice. Damages for breach of warranty aim to put the claimant in the position he would have been in had the warranties been true. As such, our client’s claim for breach of warranty will encompass the amount by which the Initial Consideration paid by our client to the Vendors for the purchase of the Company was over-inflated as a result of the Company’s over-claiming of funding. The quantum of our client’s claim for breach of warranty will therefore be £1,247,680 x 5.5 (being the applicable EBITDA multiplier), totalling £6,862,240.”

The language of the notices, referring to a “precise estimate” (a phrase repeated at paragraph 6 of Notice 2) of the value of what “will be” (paragraph 12(b)) LCG’s claim, indicated that LCG was perhaps holding itself to a more rigid process of (apparently fixed) quantification than that justified by the language of paragraph 1.2. However, Issue 10 has to be decided by reference to the language of the SPA, and a reading of the notices against that language, rather than as if Notice 2 was a standalone promise that LCG’s claim would never be valued higher than that. It is clear that paragraph 1.2 of Schedule 5 requires an estimate by reference to what was reasonably available to LCG “at the time”. The focus is upon the nature, facts and circumstances of the claim known at the time of notification. Unlike the position in Teoco, LCG was not required to support the estimate with a calculation.

The defendants’ argument on Issue 10 distorts the meaning of the clause and its commercial purpose (compare Dodika). It amounts to saying that LCG needed to know at the time it gave notice what its case at trial would be (thereby anticipating the expert valuation evidence and argument about that) and cannot now depart from a calculation which it gave in support of its then estimate even though the notice did not require a calculation.

In Drax, the defendant sought reverse summary judgment on the claim on the ground that “the nature of the claim and the amount claimed” had not been sufficiently notified in accordance with the terms of the share purchase agreement. The claimant (who had later sold on the company it had purchased from the defendant but before giving the defendant notice of a claim under the earlier agreement by which it had acquired the company) had notified a claim with two alternative calculations of loss put forward. Those reflected the fact that the company did not, at the time of the agreement between the parties, have a right to lay cables over a third party’s land. This was said to amount to a breach of warranty (and to trigger an indemnity) given by the defendant under the agreement. The notified losses were said to be the cost of obtaining an alternative easement from the landowner or, if agreement over that could not be reached, the cost of a potential compulsory acquisition.

In the later proceedings, the judge at first instance concluded that a claim pleaded in draft amended particulars of claim (which deleted all references to the company having suffered loss and alleged the loss was the claimant’s alone) had no prospect of success because that was based on a loss reflecting the diminution in the value of the company’s shares and had not been identified in the notice of claim. However, in allowing the appeal against that decision, Males LJ (with whom Sir Geoffrey Vos MR and Birss LJ agreed) said, at [58]:

“It is true that the draft Amended Particulars now put forward a different basis, ie difference in value, on which the damages calculation is based. However, so long as what is put forward in the Notice of Claim is a genuine estimate, it is as a matter of fact ‘the Buyer’s calculation of the Loss thereby alleged to have been suffered’, which is all that the clause requires. There is nothing in the clause to set in stone the calculation of the loss which is stated in the Notice of Claim. If further reflection indicates that the calculation is legally unsound, or capable of improvement, there is nothing in the clause and no good reason to insist that the buyer should be held to the way in which the calculation was formulated in the Notice of Claim. On the contrary, the notice has served its purpose by preventing the claim from becoming barred, and the parties will move forward promptly (if they cannot resolve the matter) to litigation, with a claim form required to be properly issued and validly served on Scottish Power within six months beginning on the date of the Notice of Claim (para 3 of Sch 4). At that stage the formulation of the claim and the possibility of amendment will not be determined by the Agreement but by the Civil Procedure Rules.”

That reasoning, addressing the language and commercial purpose of a notification clause which required the claimant to state “in reasonable detail … the amount claimed”, is in my judgment even more compelling when applied to the requirements of paragraph 1.2 of Schedule 5. What was required, and only required, was LCG’s “bona fide estimate of any alleged loss”. LCG gave its estimate (albeit using language in Notice 2 which perhaps conveyed to the defendants that there would be no upwards “amendment” of the quantum claim before or after the issue of proceedings).

In this case, the increase in LCG’s claim from the £6.86m figure in Notice 2 and the claim form to the £10.18m in the particulars of claim reflects the application of a different EBITDA multiplier in LCG’s calculation of loss (3.3x as opposed to 5.5x). In my judgment, there is no good reason, which can be said to be consistent with the proper interpretation of paragraph 1.2 and its commercial purpose, why LCG should be held to the lower figure as if it is set in stone.

My decision on Issue 2 is therefore that all of the claims for breach of warranty pleaded in LCG’s particulars of claim are supported by the notification given by Notices 1 and 2.

My decision on Issue 10 is that LCG is not confined to a claim capped at £6,862,240.

My decision on Issue 1 obviates the need for separate analysis of Issue 13. The conclusion that there was no deemed withdrawal of the claim under the Funding Indemnity, because of a failure to comply with paragraph 1.4.1 of Schedule 5, means that there is no basis for the defendants’ counterclaim seeking the return of the sum of £783,324 (with interest for the period since) which they paid to LCG on 14 October 2022.

The language of the counterclaim confirms as much. The claim to recover that sum was expressed succinctly as follows:

“61.

…… The sum paid by the Defendants to the Claimant was in discharge of the Indemnity Claim and it has deemed to have been withdrawn. Accordingly there has been a failure of basis and/or a total failure of consideration and the Defendants are hereby entitled to reclaim the same sum of money on the grounds of unjust enrichment.”

However, for completeness I should say that, even if the premise for the assertion of LCG’s unjust enrichment had been sound, there were obvious difficulties with this part of the defendants’ case. The true analysis is not that LCG has been unjustly enriched in respect of the Clawback but rather that it has been indemnified by the defendants in respect of it.

The sum of £783,324 was paid by the defendants to LCG before the period for issuing and serving proceedings under paragraph 1.4.1 had expired. The claim under the Funding Indemnity had been notified by Notice 1 and Notice 2. By a letter dated 14 October 2022, Capital Law on behalf of the defendants referred to the notices and their understanding that LCG was in the process of paying the Clawback to ESFA. The letter said:

“Our clients accept that the indemnity claim as set out in your correspondence has been properly made and therefore that the clawback sum and your reasonable and proper costs in bringing the claim fall to be paid.

Our clients will therefore make payment of £783,325 to your client today ….”

A further letter dated 21 October 2022 from Capital Law stated their belief that the indemnity claim was settled subject to receipt of LCG’s costs breakdown.

The argument by Mr Sims KC and Mr Jagasia that their client cannot be estopped from recovering that sum relied upon the letter dated 27 October 2022 written by Burness Paull on behalf of LCG. Like their later letter dated 22 November 2022 (which set out LCG’s position that, by reference to the provision in paragraph 4 of Schedule 5 against double-recovery, the unilateral transfer of the £783,325 to LCG should not operate as a “crude attempt to block our client from bringing its warranty claim”) Burness Paull were anxious to make plain their position that LCG was not prepared to reach any settlement of part of its claim - the indemnity claim - in isolation from the remainder (the warranty claim). They said LCG was prepared to accept the sum of £783,325 as a payment on account of the entire claim. The same point was made in the pre-action letter dated 25 November 2022 from Burness Paull which said that the sum should either be treated as a payment on account or returned to the defendants.

By their letter dated 29 November 2022, Acuity Law on behalf of the defendants said:

“It is difficult to see how you can criticise our clients for transferring the full amount of your client’s indemnity claim. That sum was transferred to your client in good faith and to avoid further unnecessary costs being incurred in respect of the indemnity claim.”

A further letter dated 9 February 2023 from Acuity Law contained the defendants’ substantive response to the pre-action letter which, in foreshadowing Issue 3 (the Indemnity v Warranties Construction Issue), said:

“…. A clawback from ESFA should not lead to a breach of warranty claim. It should result in a claim made under the Funding Indemnity, which our clients have agreed to satisfy in full.”

In the light of their decision to satisfy the claim under the Funding Indemnity, once it had been notified, and this subsequent correspondence, I cannot see how the defendants could have succeeded on the Repayment Issue (even with the following wind of a favourable decision on Issue 1 which has not come about).

As a matter of strict analysis of LCG’s defence to the counterclaim, its position was not that the defendants are estopped from making it. That said, bringing a counterclaim to recover a sum voluntarily paid prior to proceedings, and before any issue of deemed withdrawal of claims could have arisen, and the payment of which was then said and is still said to be the basis of a defence to LCG’s warranty claim, strikes me as a clear case of impermissible approbation and reprobation on the part of the defendants.

Instead, and no doubt because the counterclaim is advanced as a claim in restitution rather than in contract, LCG’s defence is simply that the claim in restitution cannot be successfully advanced when the relevant receipt of monies by LCG is one provided for by the SPA (i.e. the Funding Indemnity which the defendants have at all times “approbated” as a provision which justifies that receipt).

I agree that the basic flaw in paragraph 61 of the counterclaim is the assumption that a claim in respect of a contractual liability, which is deemed to be withdrawn, means that the liability never existed; not even at the time when it was voluntarily discharged before there was any question of a claim to enforce the liability being withdrawn. The existence of the SPA (and the defendants’ undertaking to pay under the Funding Indemnity) shows that the assertion that there has been a failure in the basis and/or consideration for the payment of £783,325 is entirely baseless. The SPA was and remains binding. There did not have to be “legal proceedings in respect thereof” (to quote from paragraph 1.4.1 of Schedule 5) and indeed the defendants voluntarily complied with their obligation in October 2022 in an attempt to avert such proceedings being brought within the contractual limitation period.

Mr Booth KC and Mr Adamyk relied upon the majority decision of the Supreme Court in Barton v Morris [2023] UKSC 3; [2023] AC 684, at [88]-[106], in highlighting the difficulty involved in pursuing a claim in restitution where the parties have entered into a contract which regulates the dealings between them that are said to give rise to it. In that case, the issue was whether the claimant had the right to an introduction fee where the buyer introduced by him to the defendant eventually paid a price less than the price identified in the contract as the trigger for the claimant’s fixed fee. The majority held there was no basis for a claim in quantum meruit on the basis that the defendant would otherwise have been unjustly enriched by the claimant brokering the deal.

In Barton v Morris the contract was silent upon the claimant’s remuneration in the circumstances as they had come about but a claim in restitution still did not lie as that would have been at odds with the contract between the parties. In the view of the minority in the Supreme Court (Lords Leggatt and Burrows) that silence did not preclude a claim for the value of the claimant’s services based upon a term of the contract implied in law, though only Lord Burrows would have upheld his claim based on unjust enrichment. Here the case for rejecting a claim in restitution is even stronger as the SPA (in the form of the Funding Indemnity) expressly provided for the defendants to pay and for LCG to receive the £783,325 and, on this aspect of it, both sides recognised and implemented their binding contractual obligations.

Even if the defendants had succeeded on the Deemed Withdrawal Issue, I would therefore have found against them on the Repayment Issue.