Notus Group Limited v British Engineering Services Holdco Limited

In assessing breach of bribery warranties on a share sale, the court must determine whether conduct constituted an inducement for improper performance. It is unnecessary to prove that the inducement produced an actual benefit for the company. A warranty using the words “does or could contravene” legislation is not uncertain: “could” expresses possibility.

Damages for breach of warranties of fact are ordinarily assessed at the transaction date by comparing the value warranted with the value of the shares as they actually were. The court must assess what a hypothetical open-market purchaser would have paid with knowledge of the breach. Subsequent events and mitigation are generally irrelevant. A broad-axe assessment remains available where appropriate, but a substantial claim for precisely quantifiable investigation costs fails without adequate evidence.

Notus sold the entire share capital of Notus Heavy Lift Solutions Limited to British Engineering Services Holdco Limited under a share purchase agreement. The purchase price included additional consideration, which became payable when an EBITDA target was achieved.

BES admitted liability for the additional consideration but counterclaimed for breach of commercial warranties concerning bribery. It alleged that Notus’s shareholders had made payments and provided benefits to individuals connected with EDF’s Hinckley Point project, including commission payments, a car, a quad bike and further payments disguised as consultancy or investment transactions.

The central issues were whether the conduct contravened the Bribery Act 2010, whether the warranties were breached, how damages should be assessed, and whether BES could recover its investigation costs.

1. Liability. The court found that the quad bike and payments made to Mr Daniels and his companies were inducements for the improper performance of his duties at EDF. An offer made to Mr Milledge on 3 October 2017 was also an inducement, although the court rejected the other principal allegations concerning him. Actual benefit to NHLS was unnecessary: the relevant statutory offence was complete upon the offer, promise or giving of an advantage with the requisite intention.
2. The relevant conduct contravened the Bribery Act 2010 and therefore fell within “Bribery Legislation” under the SPA. Clause 14.1 was not void for uncertainty. In context, “could contravene” expressed possibility and had a plain meaning. The court found breaches of clauses 14.1 and 14.2 of Schedule 3, together with wilful non-disclosure.
3. Valuation damages. The appropriate measure was the difference, at the date of the SPA, between the value of the shares on the basis that the warranties were true and their value on the basis that they were false. The latter value was the price which a hypothetical open-market purchaser, without a special interest, would have paid with knowledge of the established wrongdoing.
4. The court applied the ordinary date-of-breach approach stated in MDW Holdings Limited v Norvill [2022] EWCA Civ 833. It rejected reliance on subsequent retention of the Rullion/EDF work. The parties’ allocation of risk through the unqualified warranties had to be respected. The purchaser’s assessment could take account of the seriousness of the wrongdoing, regulatory and reputational risks, NHLS’s reputation, workforce, customer base, revenue flexibility, and prospects of replacement work.
5. The court rejected both the assumption that all Rullion earnings would disappear and the proposed redeployment scenario as complete valuation bases. It adopted Scenario 1 as the foundation, but used the broad-axe approach to retain 75% of the Rullion EBITDA in the “Warranties False” calculation. Further submissions were invited on remaining arithmetic issues.
6. BES’s separate claim for investigation costs was dismissed. Although such costs were capable in principle of constituting consequential loss, the loss was precisely quantifiable and required evidence identifying the work undertaken, its relevance, reasonableness and amount. Invoices without narratives and a witness statement merely confirming payment were insufficient.

Judgment was entered for Notus on the main claim, subject to the counterclaim; judgment was entered for BES on the Counterclaim and Part 20 Claim, subject to calculation on the stated basis.