Learning Curve (NE) Group Limited v Richard Huw Lewis & Anor

A contractual notice clause must be construed by its own wording and commercial purpose. A notice need not identify every warranty by number where it adequately identifies the nature of the claim and the facts and circumstances giving rise to it. A bona fide estimate of loss is not ordinarily a contractual cap on damages.

Where a share purchase agreement separately provides an indemnity and warranties, an anti-double-recovery clause may permit claims under both, subject to recovery only once. Damages for breach of warranty are assessed by comparing the value of the shares as warranted with their value if the warranties had been true at completion. Later events generally cannot be used retrospectively to reduce the award, although they may illuminate facts existing at the valuation date or relevant mitigation.

The claimant purchased the entire issued share capital of APCymru Limited from the defendants under a share purchase agreement. The company’s business was substantially funded by the Education and Skills Funding Agency. Following completion, an audit identified over-claimed funding arising from breaches of the applicable funding rules. The claimant sought damages for breach of warranty and also relied on a contractual funding indemnity.

The defendants argued that the claims had been withdrawn for late service, that the notices were inadequate, that the indemnity excluded warranty claims, and that the claimant had suffered no recoverable loss. The court determined thirteen contractual and evidential issues, including notification, disclosure, knowledge, breach, mitigation and valuation.

1. Disposition. The defendants were liable for breach of warranty. The claimant was entitled to elect judgment for £783,325 under the funding indemnity or £5,211,625 in damages for breach of warranty. The claimant elected damages.
2. “By 14 February 2023” meant no later than that date. Service of the claim form was governed by the Civil Procedure Rules. The relevant step under CPR 7.5, rather than deemed service under CPR 6.14, was sufficient. The claims were therefore not deemed withdrawn.
3. The notices complied with the contractual requirement to give details of the nature of the claim and the facts and circumstances giving rise to it. Identification of every warranty by number was not required. The stated figure of £6,862,240 was a bona fide estimate, not a ceiling on the damages later claimed.
4. The indemnity did not exclude warranty claims. The anti-double-recovery provision expressly contemplated claims under both warranties and an indemnity, while preventing recovery more than once for the same matter. No term excluding the warranty claim was necessary or obvious.
5. The purchaser had neither been given sufficient disclosure nor acquired actual knowledge of the matters giving rise to the claims. The word “and” in the purchaser-knowledge provision did not require correction to “or”. The principal compliance warranty contained two separate limbs; the first was an absolute warranty and had been breached. Several accounts and contractual warranties were also breached.
6. The claimant had complied with its contractual duty to mitigate. The court adopted the warranty-true/warranty-false measure of damages. The warranty-false EBITDA was £1,787,675, reflecting deduction of the clawback, and the appropriate multiplier was 5.0. The court rejected hindsight-based reliance on unrelated post-completion matters, including the ARG/Capita issue.
7. The resulting warranty-false value was £11,601,383, producing damages of £5,211,625. The damages exceeded the indemnity claim and were subject to the contractual cap applicable to the second defendant.