MDW Holdings Ltd v Norvill & Ors

A contractual disclosure clause protects a seller only where the relevant matter is fairly disclosed with sufficient detail to identify its nature and scope. A notice clause must be construed according to its wording and commercial purpose; a low threshold may be appropriate where quantification is inherently difficult. An entire agreement clause does not exclude claims for pre-contractual misrepresentation unless it clearly excludes representations, reliance or liability for misrepresentation. Damages for breach of warranty are assessed by comparing the value warranted with the actual value. The claimant must prove loss on the balance of probabilities, but once loss is established the court must do its best to quantify it on the evidence.

MDW Holdings Limited purchased all the shares in G.D. Environmental Services Limited from James, Jane and Stephen Norvill under a share purchase agreement dated 14 October 2015. MDW alleged that GDE had persistently breached environmental consents, misled regulators, and unlawfully disposed of waste, causing MDW to overpay for the shares.

The claims were for breach of warranty, misrepresentation and, against James, deceit. The defendants relied on contractual disclosure, knowledge, notification, limitation and entire agreement provisions. The central issues were whether the warranties had been breached, whether the contractual defences applied, whether actionable misrepresentations had been made, and what loss had been caused.

1. Liability. The defendants were liable for breach of warranty concerning persistent breaches of the 2012 Consent, false information supplied to DCWW, unlawful disposal of hard solids, occasional unlawful disposal of cess waste, non-disclosure of regulatory non-compliance, the threat of prosecution and the likelihood of revocation of the consent. The practically significant breaches concerned leachate processing and misleading the regulators.
2. The warranty in paragraph 9.1 of Schedule 5 was not breached because the regulatory enquiries were not sufficiently formal. Paragraph 9.2 was breached: the letters of 11 May and 2 June 2015 amounted to a threat of Proceedings, and there were circumstances that might well give rise to Proceedings. “Likely” did not mean more probable than not.
3. The disclosure clause did not protect the defendants. Disclosure of a letter referring to an Improvement Plan did not disclose the history or continuation of non-compliance, false data supplied to DCWW, or warnings of prosecution. Fair disclosure required positive and sufficiently specific disclosure.
4. The knowledge provision did not assist the defendants. MDW knew of some historic breaches and an alleged Improvement Plan, but not the persistent breaches, threat of prosecution, likelihood of revocation or deliberate falsification of data.
5. The leachate claim was notified in time. Clause 7.5 imposed a low threshold and MDW had stated figures for the claim as far as reasonably practicable. In any event, clause 7.7 applied because the claim arose from dishonesty, fraud, wilful misconduct or wilful concealment. The clause was not merely suspensory.
6. The SPA did not exclude misrepresentation claims. Clause 15 was an entire agreement clause concerned with contractual obligations, while clause 25.3 concerned remedies for breach of warranty. Neither clearly excluded liability for pre-contractual misrepresentation.
7. The actionable misrepresentations were the written responses concerning breaches of the 2012 Consent and DCWW sampling results. They were fraudulent on James’s part. Jane and Stephen were liable under section 2(1) of the Misrepresentation Act 1967 and, alternatively, for the fraud of their agent.
8. Damages were assessed by comparing Warranty True and Warranty False values. The Warranty True value was £3,341,276. The Warranty False value was £2,958,676, reflecting additional lawful disposal costs and a reduced valuation multiple for reputational and regulatory risk. Judgment was entered jointly and severally for £382,600, with interest, costs and other consequential matters adjourned.