Veranova Bidco LP v Johnson Matthey Plc & Ors

A contractual warranty does not, without more, constitute an actionable representation of fact. That principle does not establish that statements in a draft disclosure letter can never amount to representations. Whether disclosures provide factual information capable of inducing reliance depends on the wording, context and purpose of the communication. A disclosure letter may have a dual purpose: qualifying warranties and imparting information. Where fraud is alleged, contractual provisions excluding representations or reliance may not necessarily prevent a claim. Issues involving implied representations and the meaning of disclosure statements are ordinarily unsuitable for summary determination where their resolution requires factual investigation.

The claimant purchased the defendants’ Health Business under contractual documents including a share purchase agreement and disclosure letter. It alleged that the defendants failed to disclose a price review mechanism triggered by a competing offer concerning a significant customer and product.

The remaining deceit claim relied on alleged express and implied representations in a draft disclosure letter circulated before the agreement was signed. The defendants applied for summary judgment or strike out, contending that the draft disclosure letter could not give rise to actionable representations and that the pleaded representations could not arise from its wording.

The central issue was whether the claim was legally incapable of succeeding, or instead raised factual and contextual questions requiring trial.

1. Application refused. The claimant’s remaining fraudulent misrepresentation claim had real prospects of success and was required to proceed to trial.
2. A claimant bringing a misrepresentation claim must identify a representation on which it was entitled to rely. However, the fact that contractual documents contain warranties does not automatically determine whether other statements made during negotiations are representations.
3. The court accepted the principle in Idemitsu, supported by Sycamore Bidco and related authorities, that giving a contractual warranty, without more, is not an actionable representation. A warranty is a contractual promise rather than an imparting of information.
4. That principle could not be extended into a general rule that statements in a draft disclosure letter can never be representations. A disclosure letter qualifies warranties, but it may also provide factual information on which the recipient could rely. Whether it does so depends on the precise words, the surrounding circumstances and the purpose of the communication.
5. The draft disclosure statements relied upon could, in context, be factual information capable of amounting to misrepresentations. Whether they did so required a full analysis of their meaning and the negotiations, including the fact that they followed questions raised by the claimant. The issue was therefore unsuitable for strike out or summary judgment.
6. The existence of an implied representation is a question of fact. The court should be cautious before determining it summarily, particularly where the relevant discussions and context have not been fully investigated.
7. The allegations of fraud were legally significant. The court considered it at least arguable that contractual wording excluding representations or reliance might not prevent liability for fraudulent statements. It did not finally determine that issue.
8. The defendants’ additional submission that two alleged implied representations could not arise from the draft disclosure letter was a factual and evaluative issue amounting to a proposed mini-trial. It was rejected as a basis for summary disposal.

The claim, as amended, was to proceed to trial.