Al-Hasawi v Nottingham Forest Football Club Ltd & Ors

A bespoke liability definition in a share purchase agreement need not have the same meaning as an accounting standard. Accounting standards may provide a starting point, but the contractual wording and commercial context remain determinative. An indemnity for liabilities is confined by express temporal or other contractual qualifications. Claims based on contingent, unquantified or unpaid liabilities may be excluded by the agreed terms. A contractual indemnity for undisclosed contracts requires proof of actual loss caused by the non-disclosure; it does not create strict liability. A settlement entered into on legal advice may support an inference that it was reasonable, but that inference can be displaced by evidential uncertainties.

The claimant sought repayment of completion loans arising from the sale of Nottingham Forest Football Club under a share purchase agreement and a related deed of variation and facility. The defendants counterclaimed for leakage, indemnity losses, schedule claims, costs and expenses, and alleged misrepresentation concerning the Club’s liabilities. The claimant disputed both the substantive claims and the defendants’ entitlement to set-off against the loans.

The principal issues were the construction of the contractual definition of liabilities, the effect of contractual exclusions for contingent or unpaid claims, whether undisclosed contracts caused recoverable loss, whether a settlement established liability, the validity of an acceleration notice, and whether a trial balance was a false representation.

1. Claims under the SPA. The disputed leakage payments were not received by the Seller or a person connected with it. They therefore did not fall within the contractual definition of Leakage. The defendants’ argument that the claimant benefited indirectly from the payments was irrelevant to the proper construction of that definition (paras [25]–[29]).
2. The contractual definition of “Liabilities” was a bespoke sub-species of liabilities. The words limiting liabilities to those relating to the period ending on the Liability Statement Date had substantive effect. FRS 102 could be a starting point, but it was not determinative. Macquarie Internationale Investments Ltd v Glencore UK Ltd [2010] EWCA Civ 697 concerned materiality in accounting warranties and did not require a defined contractual term to bear the same meaning as an accounting standard (paras [34]–[42]).
3. The claims for Villarreal, Assombalonga, Osborn and Vellios were excluded by paragraph 9 of Schedule 6 because the relevant liabilities were not yet capable of being quantified, were contingent, or were not due and payable. The aggregate liabilities therefore did not exceed the contractual threshold and no indemnified Losses were recoverable (paras [46]–[59]).
4. The Player exception in Schedule 7 was confined to contracts with or concerning players in the contractual sense identified by the provision. Intermediary, transfer, loan and sub-loan agreements were not within that exception and were capable of being Material Contracts. However, an indemnity for undisclosed contracts required proof of loss caused by the omission from the Data Room. The defendants failed to establish that loss. The Schedule Claims therefore failed (paras [60]–[79], [87]–[93]).
5. Where a settlement is entered into on legal advice, that fact may establish a prima facie inference that the settlement was reasonable. The inference was displaced in relation to Dr Ahmadi because the agreement, date, entitlement and underlying liability remained uncertain. The claim consequently failed (paras [80]–[90]).
6. The defendants’ alleged agreement or representation that repayment of the August Loan could be postponed was not established. The Acceleration Notice was valid. The misrepresentation claim also failed: the Trial Balance was not shown to be false, and reliance was confined to setting the contractual liability threshold rather than renegotiating loan repayments or interest (paras [95]–[121]).
7. The claims under the SPA failed. No disputed sums were available for set-off against the completion loans. The claimant’s claim for repayment proceeded subject to the calculation of interest and costs under the contractual provisions. The parties were directed to prepare draft minutes of order (para [122]).

First-instance decision. No prior appellate decision is stated in the judgment.