IPSOS SA v Dentsu Aegis Network Ltd

Contractual notification clauses in share sale agreements turn on their wording and commercial context. A notice must be construed as a reasonable recipient with knowledge of that context would understand it. A warranty claim notice must make clear that a claim is being made, rather than merely indicating that a claim may arise. It must specify, in reasonable detail, the matter giving rise to the claim, its nature and, so far as reasonably practicable, the amount claimed. Those matters should be stated, rather than left to inference. A notice concerning a third-party claim under a separate contractual provision may have different requirements and consequences. Failure to give an effective warranty claim notice within the contractual period prevents the warranty claim from proceeding.

IPSOS SA purchased shares in companies in the Synovate Group from Dentsu Aegis Network Ltd under a share sale and purchase agreement. IPSOS alleged that Synovate Brazil had breached Brazilian employment and social-security laws by treating contract workers as independent contractors, contrary to Seller Warranty 17.24.

The agreement distinguished between notices of purchaser warranty claims and notices of third-party claims. IPSOS sent a 2012 letter expressly stating that it was not a warranty claim notice, followed by a September 2013 letter referring to the Brazilian claims, the warranty and possible indemnity claims. Aegis applied to strike out the claim or obtain summary judgment on the basis that no effective warranty claim notice had been given within two years of completion.

1. Claim dismissed in substance. The September 2013 letter was not an effective Claim Notice under paragraph 3.1 of Schedule 5 to the SPA. No Claim Notice was given before 12 October 2013, the second anniversary of completion, so the claim was contractually barred.
2. Notification provisions must be construed according to their wording. The relevant question is how the notice would have been understood by a reasonable recipient who knew the contractual and commercial context. The commercial purpose of a warranty claim notice includes giving the seller sufficiently formal and clear notice that a claim is being made, so that financial provision can be made.
3. A paragraph 3.1 notice had to make clear that a claim was actually being made. A general notification that a claim might be made in the future was insufficient. The notice also had to specify, in reasonable detail, the matter giving rise to the claim, the nature of the claim and, so far as reasonably practicable, the amount claimed. The word “specifying” strongly indicated that these matters could not simply be inferred.
4. Paragraph 5 dealt with third-party claims and was materially different from paragraph 3.1. Failure to comply with paragraph 5 did not prevent the underlying claim or extinguish the seller’s liability, although any increased liability caused by the failure could be taken into account.
5. The September letter remained focused on third-party claims, possible indemnity claims and future notification. It did not state that a warranty claim for damages was being made, identify adequately the underlying breach of Brazilian Labour law, or set out the form and substance of a claim under Warranty 17.24.

The court would hear the parties on the form of order.