Triumph Controls - UK Ltd & Anor v Primus International Holding Company & Ors

Contractual notice provisions are construed by their wording and commercial purpose. A notice need not plead every detail, but must identify the nature and amount of the claim clearly enough for investigation and financial provision. A claim arising from an undisclosed warranty breach may fall within a general contractual notice regime.

Fair disclosure may be made through documents where the parties have agreed that method, but the matter must be directly ascertainable and sufficiently identified. A warranty that financial projections were carefully prepared imposes an objective standard of credible, evidence-based assumptions or expressly identified risks. Damages are measured by the difference between the agreed price and the price that would have been agreed on a properly prepared forecast.

The claimants acquired Primus companies under a share purchase agreement and claimed damages for alleged breaches concerning Nadcap accreditation, operational delivery and quality problems, financial projections, and failure to give a pre-completion breach notice. The defendants disputed liability, notice, disclosure, causation and quantum.

The first-instance court upheld notice for the warranty claims but rejected the Nadcap and operational warranty claims. It held that the financial projections had not been carefully prepared, and directed an expert exercise to calculate the resulting price difference. The central issues included the construction of the contractual notice and disclosure provisions, the meaning of material compliance, and the objective standard governing financial forecasts.

The claim succeeded in part. The court held that the claim under clause 6.6 was barred by the contractual notice requirement, the Nadcap and operational warranty claims failed, and the claim under warranty 19.5 succeeded.

1. Notice. Clause 20 permitted service on any two persons named in the clause. The warranty claims were therefore validly notified. Clause 9.7 required a formal and sufficiently clear summary of the nature and amount of each claim, but not pleading-level particulars. A clause 6.6 claim arose from the underlying warranty breaches and was within the contractual definition of a Claim. As no such claim was notified within 18 months, it could not be pursued.
2. Nadcap. Applying the contractual construction principles in Arnold v Britton [2015] UKSC 36 and the related authorities, Nadcap accreditation was a Permit because it gave permission to hold the facility out as meeting required aerospace standards and was commercially necessary. However, the 2012 audit was independent evidence of compliance. Material compliance did not require strict compliance, and the alleged manipulation of that audit was not proved. The 2013 failure was substantially attributable to failures under Triumph’s control. Warranty 6.2 required a notice received by Primus, not merely knowledge of non-compliance.
3. Operational warranties and disclosure. The customer arrangements were Material Contracts. The deemed-knowledge provision imposed an objective enquiry-based test. The delivery and quality problems created a real, rather than fanciful, risk of claims or proceedings. Nevertheless, the matters were fairly and clearly disclosed through the disclosure letter and agreed data-room documents. The disclosure requirement concerned the nature of the matters, not their full extent.
4. Financial projections. The phrase carefully prepared imposed an objective standard. The forecast had to be credible and reliable, based on current information, appropriate consultation, documented assumptions and proper review. The LRP omitted a three-month buffer for relevant transfers, time to reduce arrears, increased labour and scrap costs during accelerated production, and the resulting delay to transfers and profitability. Triumph would have proceeded at a lower price.
5. Quantum. Applying Lion Nathan Ltd v C-C Bottlers Ltd [1996] WLR 1438 (PC), damages were to reflect the difference between the agreed price and the price calculated using the properly adjusted LRP. A discounted cash-flow valuation was appropriate. The adjusted valuation was to be calculated and agreed by the experts, subject to the contractual cap of US$15 million.