116 Cardamon Ltd v MacAlister & Anor

In a warranty claim arising from a share sale, damages are not denied merely because the precise loss is difficult to quantify. Where substantial loss is established, the court must assess it as best it can on the available evidence.

Contractual notification provisions require the notified claim to summarise its nature. A later pleading cannot introduce a materially wider claim after the contractual notification period has expired. An unusual or non-recurring item may breach an accounts warranty even if it does not make the accounts misleading.

Loss of bargain damages are assessed by comparing the value of the shares as warranted with their actual value. The agreed purchase price is evidence of value, but is not necessarily conclusive.

The claimant bought all shares in Motorplus Limited from the defendants under a share purchase agreement. The agreement contained warranties concerning the company’s accounts, liabilities, assets and management accounts.

The claimant alleged that the accounts understated FamilyPlus insurance claims liabilities, failed fully to write off a related-party debt, and failed to disclose a change in broker remuneration. It claimed damages up to the purchase price. The defendants relied on disclosure, contractual limitation provisions and valuation evidence.

The central issues were whether the warranties had been breached, whether particular claims were time-barred, and how any loss should be quantified.

The claim succeeded in the sum of £2,386,247.50.

1. Underprovision. The FamilyPlus claims provision in the accounts was inaccurate. The 2012 opening position was also underprovided, although the evidence showed that it was more accurate than the 2013 position. The court assessed the resulting loss as best it could, because substantial loss was established but a precise claim-by-claim reconstruction would have been disproportionate.
2. Damages where quantification is difficult. Following Karim v Wemyss [2016] EWCA Civ 27 and Simpson v The London and North Western Railway Co (1876) 1 QBD 274, difficulty in quantification did not justify awarding no damages. The court used the available accounting and expert evidence and made a reasoned estimate.
3. Limitation and notification. The broker-remuneration claim was time-barred. The letter of claim notified a claim concerning the management accounts and their alleged misleading effect. It did not notify a claim concerning the accounts or an unusual or non-recurring item. The later particulars therefore could not enlarge the notified claim after expiry of the contractual period.
4. Broker remuneration. If limitation had not defeated the claim, the change in remuneration would have been an unusual and non-recurring item affecting the accounts. Such an item did not need separately to make the accounts misleading. The change had not been fairly disclosed, since the relevant inference was not the only inference available from the accounts.
5. Quantum. Compensation was assessed by comparing the value of the company as warranted with its value as is, consistently with Karim v Wemyss [2016] EWCA Civ 27. The purchase price was relevant evidence but did not prevent an orthodox expert valuation. The company’s liabilities and the funding needed to maintain its financial position reduced its actual value.
6. In accordance with Tai Hing Cotton Mill Ltd v Kamsing Knitting Factory [1979] AC 91 and Crewe Services & Investment Corporation v Silk [1998] 2 EGLR 1, the court assessed the damages itself rather than ordering further proceedings. The contractual cap limited recovery to the purchase price, but the de minimis provision did not further reduce the award.