Synthos Spolka Akcyjna v Ineos Industries Holdings Limited

Contractual notification obligations are construed according to the language chosen by the parties. In a sophisticated share sale agreement, a notification duty covering events or developments arising between signing and completion may be engaged by repeated conduct forming part of a pre-existing course of conduct. The relevant question is whether the post-signing event could have more than a de minimis adverse effect on the business, judged against the warranted position at signing. An express knowledge qualification should not be implied where the agreement carefully uses knowledge wording elsewhere. Contractual warranty time limits apply only to claims falling within the defined warranty claims. Where a knowledge-qualified warranty was given with actual or contractually attributed knowledge that it was false, the claim may fall within a fraud exception to the time bar.

The claimant acquired the defendant’s expanded polystyrene business under a share sale agreement. After completion, the European Commission found that the business had participated in a buyers’ cartel concerning monthly styrene contract-price settlements. The claimant alleged breaches of warranties and of contractual notification duties, including an obligation to notify events or developments that could materially affect the business before completion.

The warranty claims were notified outside the contractual time limit. The central issues were whether the time limits applied to the notification claims, whether post-signing cartel settlements triggered the notification duty, whether knowledge was required, whether the claimant would have terminated the transaction if notified, and whether the fraud exception preserved the warranty claims.

1. Notification claims. The Schedule 6 time limits applied only to claims under the defined Warranties. They did not apply to claims for breach of clause 8.1 or other notification obligations. The agreement used clear and carefully defined language, which could not be displaced by an appeal to commercial common sense.

2. Construction of clause 8.1. The clause concerned events or developments occurring after the offer letter or agreement and before completion. A post-signing event did not cease to be an event or development merely because it continued a pre-existing course of conduct. The relevant adverse effect was to be assessed against the position at the offer-letter date, assuming the business was as warranted. Any adverse effect exceeding a de minimis level was sufficient.

3. The June to August 2016 settlements could have materially affected the business through possible competition fines, legal and management costs, follow-on claims and reputational consequences. The defendant was required to notify them. Clause 8.1 contained no express knowledge requirement. Promptness was measured from the occurrence of the event, and no term implying prior knowledge was necessary or obvious.

4. Causation. Proper notification would probably have revealed the wider cartel and the breach of the competition warranty. Given the substantial and uncertain fines, potential follow-on claims, uncertainty over profitability and price, and the limited period for termination, the claimant would have terminated under clause 9.4 before completion. The claim for damages therefore succeeded.

5. Warranty claims. The paragraph 11 warranties required awareness of both the relevant circumstances and their likelihood of giving rise to proceedings, investigation or inquiry. Clause 9.5 required reasonable enquiries of the named individuals and relevant persons within the Business, with their knowledge aggregated. The paragraph 11 warranties were breached. Clause 9.6(b) applied because the warranties were given fraudulently in the relevant sense, and the warranty claims were consequently not subject to the Schedule 6 time bar.

6. The claimant succeeded on the clause 8.1 claim and the paragraph 11 warranty claims. It was unnecessary to decide the remaining notification claims or the paragraph 17 warranty claim.

First-instance trial in the High Court (Commercial Court). The judgment records no prior appellate decision.