Towergate Financial (Group) Ltd & Ors v Clark & Ors

Notice provisions in share purchase agreements must be construed according to their own wording. Where terms are elaborately defined, the court should presume that the parties used them consistently with those definitions unless the context requires otherwise. A notice under an indemnity provision may be validly given in respect of a prospective liability, even though no loss has yet been incurred and no third-party claim has formally been made. The notice must nevertheless identify a matter or thing which may give rise to an indemnity claim; an open-ended notice concerning unknown future liabilities is insufficient. Whether notice was given “as soon as possible” may raise a fact-sensitive issue unsuitable for summary judgment.

The claimants sought a declaration that they were entitled to indemnification under clause 5.9 of a share purchase agreement for liabilities arising from professional negligence claims connected with two FCA Skilled Person Reviews. The defendants applied for summary judgment, arguing that a notice sent shortly before the contractual seven-year deadline was premature and insufficiently specific.

The central issues were whether clause 6.7 permitted notice of a prospective indemnity claim before loss or a formal third-party claim had arisen, and whether the notice complied with the requirement to be given “as soon as possible”.

1. Applications dismissed. The claimants’ claim had a real prospect of success, so summary judgment was refused.
2. Each notification clause turns on its own wording. The court endorsed the approach stated in Forrest & Ors v Glasser & Anor [2006] 2 Lloyds Rep 392, adopting the proposition distilled from RWE Nukem Ltd v AEA Technology Plc [2005] EWHC 78.
3. Professionally drafted agreements containing elaborate definitions should ordinarily be construed on the basis that defined terms are used consistently with their definitions. The court should depart from that meaning only where the context requires it. The use of a capital “Claim” in clause 6.7 therefore referred to the defined category of warranty and tax claims, whereas the lower-case reference in clause 6.7.3 referred to a claim under the indemnity. The drafting anomaly in clause 6.7.1 did not justify rewriting the other references.
4. A right to indemnity under clause 5.9 could not arise until a relevant professional-negligence claim had resulted in an ascertained liability or loss. However, actual loss was not required before notice could be given. Nor did the agreement require a formal claim by a third party before notice of a prospective indemnity claim could be served.
5. Clause 6.7 required notice once there was an identifiable matter or thing which might give rise to liability under the indemnity. It did not permit an entirely open-ended notice concerning unspecified future liabilities arising from unknown matters and unknown third parties. On the evidence, the notice could not be held premature on a summary judgment application.
6. The alternative argument based on the words “as soon as possible” could not be determined summarily. The construction issue had not been fully argued, and whether notice was given as soon as possible raised a factual question on which the necessary evidence was unavailable. AIG Europe (Ireland) Limited v Faraday Capital Limited [2007] Lloyds IR 267 was referred to but the point was left open.
7. The claimants were awarded £55,000 in costs, payable within 21 days. Permission to appeal was refused, although the time for filing a notice of appeal was extended as requested.

First-instance decision. The judgment records no earlier appellate decision.