TP ICAP LTD V NEX GROUP LTD [2022] EWHC 2700 (COMM)

HEADLINE SUMMARY

This decision is a stark reminder of the dangers of not meeting contractual notification requirements when bringing a claim based in contract, irrespective of its amount. It concerns a strike out/summary judgment application brought by the defendant, Nex Group Ltd (Nex), to dismiss breach of warranty claims under a share purchase agreement (SPA) brought by the claimant, TP ICAP Ltd (TP ICAP), prior to trial. Whilst this application was unsuccessful, the claim continues.

FACTUAL BACKGROUND

• In 2015, the claimant, Tullett Prebon plc (later renamed and privatised as TP ICAP), entered into a SPA to purchase ICAP Global Broking Holdings Limited (Target) – whose business was in voice broking – from ICAP plc. By way of novation, ICAP plc's rights and obligations under the SPA passed to the defendant, Nex.
• The sale completed on 30 December 2016 and consideration exceeded £1 billion. The SPA contained numerous warranties as to the condition of the Target which were restated on completion.
• In broad terms, the warranties included, so far as the Seller was aware, that:
  • the Target and its directors were or had not been subject to any non-routine regulatory investigations in the preceding 18 months that has or would have "a material adverse impact" on the Target's business, and
  • there were no circumstances which would reasonably be expected to give rise to any litigation concerning the Target with a value over £500,000,

(collectively, the Warranties).

In the SPA, the Seller's awareness was defined by reference to the actual knowledge of eight named individuals.

• The Buyer later became aware of two substantial, regulatory investigations being conducted into the Target and a director (Investigations) and brought a claim for breach of the Warranties. Notice was provided by way of two letters to Nex in 2018 (Notification Letters).
• Within the SPA there was a common notification of claims clause. This stated that the Seller (now Nex) would not be liable for any breach of warranty claims under the SPA unless the Buyer (now TP ICAP), among other things, notified the Seller in writing "stating in reasonable detail the nature of the Seller Warranty Claim and, if practicable, the amount claimed" (Notice Requirements).
• Nex contests whether the Notice Requirements were actually met in practice and therefore whether the notice was defective and TP ICAP is now barred from bringing a claim for breach of the Warranties under the SPA.

THE DECISION

• Nex contested that the Notification Letters did not meet the degree of specificity required by the Notice Requirements – in particular that they did not state:
  • who were the individual(s) with knowledge of the Investigations, which had not been disclosed to TP ICAP in breach of the Warranties; and
  • that the Investigations would or have materially and adversely impacted the Target's business.
• For purposes of strikeout/summary judgment, this argument was dismissed. The matter before the court was one of contractual interpretation. It was held that these were arguable matters for trial as, on plain reading, the terms of the SPA did not require the Notification Letters to specify the:
  • relevant individuals with the requisite knowledge of the Investigations; and
  • resulting "material adverse impact" to the Target.
• Additionally, in both instances, such a requirement would not further the commercial purpose of the notification of claims provision in the SPA. Rather, it would simply require the Notification Letters to restate the Warranties. 

COMMENTARY

This matter is not "closed". The proceedings continue with trial due in late 2024 where these arguments will be repeated. However, the decision (and the potential outcome of strikeout/summary judgment) is stark warning of the significance of complying with contractual notification requirements.

When drafting notification of claims clauses, parties to a contract can agree (and later hold themselves to) far more onerous requirements than those in the pre-action protocols of the Civil Procedure Rules, with much graver consequences for non-compliance. A meritorious claim, irrespective of its worth, can fail on the wording of a pre-action notice alone or even the notice being misaddressed or sent by unapproved means.

Whether drafting the contract itself or any later notice of a claim, what should be required/included is ultimately a question of balance. Contractual notice requirements should be sufficiently clear and precise that the recipient will be aware of the claim(s) it faces, but also not overly onerous. Similarly, any notice must meet these requirements (or risk the underlying claim be barred) but a claimant should also consider whether its notice could be too prescriptive as to what is claimed, so as to prevent the claim from being expanded in scope or quantum at a later date if new details emerge.

The devil remains in the detail.

Key Contact

Thomas Ash