Hilary
Term
[2017] UKSC 24
On appeal from: [2015] EWCA Civ 839
JUDGMENT
Wood (Respondent) v Capita Insurance Services
Limited (Appellant)
before
Lord Neuberger, President
Lord Mance
Lord Clarke
Lord Sumption
Lord Hodge
JUDGMENT GIVEN ON
29 March 2017
Heard on 7 February 2017
|
Appellant
Edward Cumming
(Instructed by
Enyo Law LLP)
|
|
Respondent
Andrew Twigger QC
(Instructed by
Birketts LLP)
|
LORD HODGE: (with whom Lord
Neuberger, Lord Mance, Lord Clarke and Lord Sumption agree)
1.
This appeal raises a question of contractual interpretation. It concerns
an indemnity clause in an agreement dated 13 April 2010 (“the SPA”) for the
sale and purchase of the entire issued share capital of a company, Sureterm
Direct Limited (“the Company”), which carries on business as a specialist
insurance broker, primarily offering motor insurance for classic cars.
2.
The sellers of the Company were the respondent, Mr Andrew Wood (“Mr
Wood”), who owned 94% of its share capital, and Mr Christopher Kightley and Mr
Howard Collinge, who owned 1% and 5% of its share capital respectively. Each
was a director of the Company and Mr Wood was its managing director. The
purchaser was Capita Insurance Services Ltd (“Capita”). Mr Wood remained as
managing director of the Company until the end of 2010. He brought proceedings
against Capita arising out of the termination of his employment and Capita
brought a counterclaim against him under the indemnity provision in the SPA,
which is the subject matter of this appeal. Mr Kightley and Mr Collinge were,
but are no longer, parties to the proceedings.
3.
It is not necessary to set out in any detail the circumstances in which
Capita came to make its claim under the indemnity. It suffices to summarise
Capita’s claim as follows.
4.
In about August 2008 the Company began to sell motor insurance through
online aggregator sites such as Confused.com. The sales were not completed
online: potential customers obtained a quotation from the Company on the
aggregator site and the Company then contacted the potential customer directly
with a view to confirming their risk details before selling them the
appropriate insurance policy.
5.
Shortly after Capita’s purchase of the Company’s share capital,
employees of the Company raised concerns about the Company’s sales processes,
which had resulted in some customers paying substantially more than they had
been quoted online. The employees alleged that the Company had presented
customers with higher quotations without informing them why the quotations had
increased. The Company had thus increased its own arrangement fees when neither
the underwriting premium nor the risk profile had changed significantly. The
Company responded to the allegations by carrying out a review of its sales
between January 2009 and January 2011. This review revealed that in many cases
the Company’s telephone operators had misled customers into believing that an
underwriter had required a higher premium or that their risk profile was worse
than it was or had pressurised the customer to make sure that a sale was made.
6.
Capita and the Company were obliged to inform the Financial Services
Authority (“FSA”) of the findings and did so on 16 December 2011. The FSA
informed them that the customers had been treated unfairly and had suffered
detriment and that there would have to be redress. After the FSA had conducted
a risk assessment visit to the Company in November 2012, Capita and the Company
agreed with the FSA to conduct a remediation scheme to pay compensation to
customers who were identified as potentially affected by the Company’s
mis-selling. Capita alleges that it, the Company and Capita’s other
subsidiaries have suffered loss as a result of the mis-selling or suspected
mis-selling of insurance products in the period before the completion of the
sale under the SPA. Capita’s claim is for £2,432.883.10, comprising an estimate
of the compensation at £1.35m, interest of about £400,000 and the costs of the
remediation scheme.
7.
It is appropriate to record that some of Capita’s allegations are
disputed, including the extent of the mis-selling and any detriment to
customers. Other than, perhaps, the facts narrated in para 4 above (which do
not appear to be disputed), they are not facts by reference to which the SPA is
to be construed. But the circumstances in which Capita and the Company were
required to set up the remediation scheme are of some importance because Mr
Wood contends that they fall outside the scope of the indemnity clause which is
the subject matter of this action. In particular, the requirement to compensate
was not the result of a claim by one or more of the Company’s customers or a
complaint by those customers to the FSA or another public authority. It
resulted, as I have said, from information about the internal review which
Capita and the Company gave the FSA and the requirement by the FSA that
compensation should be paid to the customers.
Contractual interpretation
8.
In his written case counsel for Capita argued that the Court of Appeal
had fallen into error because it had been influenced by a submission by Mr
Wood’s counsel that the decision of this court in Arnold v Britton
[2015] AC 1619 had “rowed back” from the guidance on contractual interpretation
which this court gave in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900. This,
he submitted, had caused the Court of Appeal to place too much emphasis on the
words of the SPA and to give insufficient weight to the factual matrix. He did
not have the opportunity to develop this argument as the court stated that it
did not accept the proposition that Arnold had altered the guidance
given in Rainy Sky. The court invited him to present his case without
having to refer to the well-known authorities on contractual interpretation,
with which it was and is familiar.
9.
It is not appropriate in this case to reformulate the guidance given in Rainy
Sky and Arnold; the legal profession has sufficient judicial
statements of this nature. But it may assist if I explain briefly why I do not
accept the proposition that Arnold involved a recalibration of the
approach summarised in Rainy Sky.
10.
The court’s task is to ascertain the objective meaning of the language
which the parties have chosen to express their agreement. It has long been
accepted that this is not a literalist exercise focused solely on a parsing of
the wording of the particular clause but that the court must consider the
contract as a whole and, depending on the nature, formality and quality of
drafting of the contract, give more or less weight to elements of the wider
context in reaching its view as to that objective meaning. In Prenn v
Simmonds [1971] 1 WLR 1381 (1383H-1385D) and in Reardon Smith Line Ltd v
Yngvar Hansen-Tangen [1976] 1 WLR 989 (997), Lord Wilberforce affirmed the
potential relevance to the task of interpreting the parties’ contract of the
factual background known to the parties at or before the date of the contract,
excluding evidence of the prior negotiations. When in his celebrated judgment
in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 Lord Hoffmann (pp 912-913) reformulated the principles of contractual
interpretation, some saw his second principle, which allowed consideration of
the whole relevant factual background available to the parties at the time of
the contract, as signalling a break with the past. But Lord Bingham in an
extra-judicial writing, A new thing under the sun? The interpretation of
contracts and the ICS decision Edin LR Vol 12, 374-390, persuasively
demonstrated that the idea of the court putting itself in the shoes of the
contracting parties had a long pedigree.
11.
Lord Clarke elegantly summarised the approach to construction in Rainy
Sky at para 21f. In Arnold all of the judgments confirmed the
approach in Rainy Sky (Lord Neuberger paras 13-14; Lord Hodge para 76;
and Lord Carnwath para 108). Interpretation is, as Lord Clarke stated in Rainy
Sky (para 21), a unitary exercise; where there are rival meanings, the
court can give weight to the implications of rival constructions by reaching a
view as to which construction is more consistent with business common sense. But,
in striking a balance between the indications given by the language and the
implications of the competing constructions the court must consider the quality
of drafting of the clause (Rainy Sky para 26, citing Mance LJ in Gan
Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2) [2001] 2 All ER (Comm) 299 paras 13 and 16); and it must also be alive to the possibility that one
side may have agreed to something which with hindsight did not serve his
interest: Arnold (paras 20 and 77). Similarly, the court must not lose
sight of the possibility that a provision may be a negotiated compromise or
that the negotiators were not able to agree more precise terms.
12.
This unitary exercise involves an iterative process by which each
suggested interpretation is checked against the provisions of the contract and
its commercial consequences are investigated: Arnold para 77 citing In
re Sigma Finance Corpn [2010] 1 All ER 571, para 10 per Lord Mance. To my
mind once one has read the language in dispute and the relevant parts of the
contract that provide its context, it does not matter whether the more detailed
analysis commences with the factual background and the implications of rival
constructions or a close examination of the relevant language in the contract,
so long as the court balances the indications given by each.
13.
Textualism and contextualism are not conflicting paradigms in a battle
for exclusive occupation of the field of contractual interpretation. Rather,
the lawyer and the judge, when interpreting any contract, can use them as tools
to ascertain the objective meaning of the language which the parties have chosen
to express their agreement. The extent to which each tool will assist the court
in its task will vary according to the circumstances of the particular
agreement or agreements. Some agreements may be successfully interpreted
principally by textual analysis, for example because of their sophistication
and complexity and because they have been negotiated and prepared with the
assistance of skilled professionals. The correct interpretation of other
contracts may be achieved by a greater emphasis on the factual matrix, for
example because of their informality, brevity or the absence of skilled
professional assistance. But negotiators of complex formal contracts may often
not achieve a logical and coherent text because of, for example, the
conflicting aims of the parties, failures of communication, differing drafting
practices, or deadlines which require the parties to compromise in order to
reach agreement. There may often therefore be provisions in a detailed
professionally drawn contract which lack clarity and the lawyer or judge in
interpreting such provisions may be particularly helped by considering the
factual matrix and the purpose of similar provisions in contracts of the same
type. The iterative process, of which Lord Mance spoke in Sigma Finance Corpn
(above), assists the lawyer or judge to ascertain the objective meaning of
disputed provisions.
14.
On the approach to contractual interpretation, Rainy Sky and Arnold
were saying the same thing.
15.
The recent history of the common law of contractual interpretation is
one of continuity rather than change. One of the attractions of English law as
a legal system of choice in commercial matters is its stability and continuity,
particularly in contractual interpretation.
The Sale and Purchase Agreement
16.
The SPA is a detailed and professionally drafted contract. It provided
for the sale and purchase of the Company’s share capital (clause 3) for the
consideration of £7,681,661 payable on completion (clause 4), and it also
provided for deferred consideration (Schedule 8). Clause 1 contained the
following definitions which are relevant to the construction of the disputed
indemnity:
“Authority means any local,
national, multinational, governmental or non-governmental authority, statutory
undertaking, agency or public or regulatory body (whether present or future)
which has jurisdiction over the Business or any decision, consent or licence
which is required to carry out the Business and Authorities shall be construed
accordingly.
Company means Sureterm
Direct Ltd …
Completion Date means the
date of this Agreement.
Employees has the meaning
given to it at paragraph 6 of Schedule 4 [which refers to a list of all of the
employees employed by the Company].
FSA means the Financial
Services Authority and any body which supersedes it.
Regulatory Authority means
any body by which any part of the Business is or was regulated pursuant to any
Applicable Financial Services Laws (including, but not limited to, the FSA, the
Personal Investments Authority Ltd, the General Insurance Standards Council,
the Insurance Brokers Registration Council and including the Financial Services
Ombudsman and any voluntary regulatory body with whose rules the Company has
agreed to comply).
Relevant Person means an
Employee or a former employee of the Company and any dependant of an Employee
or a former employee of the Company.
Shares means all of the
issued shares in the capital of the Company.
Warranties means the Tax
Warranties and the warranties set out in Schedule 4.”
17.
Clause 7 dealt with warranties and indemnities. Each of the sellers
severally warranted to the buyer on a proportionate basis in terms of the
Warranties (clause 7.1); the Warranties were qualified by matters which had
been fairly disclosed in the disclosure letter (clause 7.2); and where a
Warranty was qualified by an expression such as “so far as the Sellers are
aware” that referred to the actual knowledge of the sellers, who confirmed that
they had made due and careful enquiry of the Company’s compliance manager, IT
Director and HR Director (clause 7.3).
18.
The indemnity clause whose interpretation is in dispute is clause 7.11. It
provided:
“The Sellers undertake to pay to
the Buyer an amount equal to the amount which would be required to indemnify
the Buyer and each member of the Buyer’s Group against all actions,
proceedings, losses, claims, damages, costs, charges, expenses and liabilities
suffered or incurred, and all fines, compensation or remedial action or
payments imposed on or required to be made by the Company following and arising
out of claims or complaints registered with the FSA, the Financial Services
Ombudsman or any other Authority against the Company, the Sellers or any
Relevant Person and which relate to the period prior to the Completion Date
pertaining to any mis-selling or suspected mis-selling of any insurance or
insurance related product or service.”
19.
This clause must be seen in its contractual context. Schedule 4
contained 30 pages of detailed warranties. In Part 12 of that Schedule, which
concerned litigation, disputes and investigations, the sellers warranted that
they were not aware of circumstances which were likely to give rise to any
investigation or enquiry by any Authority (para 12.4) and that no breach of
contract, tort, statutory duty or law had been committed for which the Company
was or might be liable (para 12.5). Part 14 which was concerned with compliance
and regulatory matters included the following para:
“14.1
(a) The Company conducts,
and has conducted the Business in accordance with the requirements of all
Competition laws and Applicable Financial Services Laws applicable to the
business and has not been and is not being investigated for any alleged
non-compliance or infringement of such Competition Laws and Applicable
Financial Services Laws. …
(c) The Company has no
reason to believe that any action will be taken against it in relation to any
of its current or past activities based on any alleged non-compliance or
infringement of any Competition Laws and Applicable Financial Services Laws.”
20.
Part 14 also contained detailed warranties that the Company had complied
with its regulatory obligations and that correspondence between the Company and
all Regulatory Authorities had been disclosed, that the Company, its officers
and employees had not been subject to any regulatory sanction and that no such
sanction was likely or pending; and that the Company had not been subject to a
regulatory investigation and, so far as the Sellers were aware, there were no
circumstances which could give rise to a visit by any Regulatory Authority.
21.
Clause 8 of the SPA provided for limitations on the sellers’ liability
in Schedule 5, which in para 1 provided that the aggregate maximum liability of
all claims under the SPA (with one exception) would not exceed the purchase
price and that the liability of each seller would not exceed his proportionate liability
(ie 94%, 5% and 1%). That limitation applied to claims under clause 7.11 as
well as under the warranties. But paragraph 3 of Schedule 5 imposed time limits
on the warranties by providing:
“3.1 Save in respect of a
Warranty Claim or a claim under the Tax Covenant notified in writing to the
Sellers prior to such a date, the Sellers will cease to be liable:
(a) for any claim under the
tax warranties or under the Tax Covenant on the seventh anniversary of
Completion; and
(b) for any other Warranty
Claim on the second anniversary of Completion.”
Thus in contrast to the indemnity under clause 7.11, the
warranties relating to, among other things, regulatory compliance, had a
lifespan of only two years.
22.
In a judgment dated 14 October 2014 ([2014] EWHC 3240 (Comm)) Popplewell
J decided the preliminary issue of the interpretation of the indemnity clause
and held, in effect, that it required Mr Wood to indemnify Capita even if there
had been no claim or complaint by a customer. The Court of Appeal (Patten LJ,
Gloster LJ and Christopher Clarke LJ) in a judgment written by Christopher
Clarke LJ ([2015] EWCA Civ 839) disagreed. In its order dated 30 July 2015 the
Court of Appeal declared that Mr Wood’s liability under the indemnity in clause
7.11 of the SPA:
“cannot arise unless the matter in
respect of which indemnity is sought follows and arises out of either (i) a
claim made against the Company, a Seller or a Relevant Person or (ii) a
complaint registered with the FSA, the Financial Services Ombudsman or any
other Authority against the Company, a Seller or a Relevant Person and, in
either case, the claim or complaint (a) relates to the period prior to the
Completion Date and (b) pertains to any mis-selling or suspected mis-selling of
any insurance or insurance related product.”
23.
Capita appeals against that order, arguing that the contractual
indemnity is not confined to loss arising out of a claim or complaint.
24.
In this case both Popplewell J and the Court of Appeal have considered
and weighed both the language of the disputed clause 7.11 and the commercial
considerations. They have both started by examining the language but have
reached opposing conclusions. This disagreement is not caused by any
failure to apply the correct principles but is, in my view, the result of an
opaque provision which, as counsel for each party acknowledged, could have been
drafted more clearly.
25.
I have concluded that the Court of Appeal has come to the correct view
as to the meaning of this difficult clause. I set out below my reasons, which
are essentially the same as those which Christopher Clarke LJ presented.
Discussion
26.
Clause 7.11 has not been drafted with precision and its meaning is
avoidably opaque. My preliminary view of the meaning of the clause on a first
reading was consistent with the view which the Court of Appeal favoured, namely
that the indemnity covered loss and damage which (a) followed and arose out of
claims or complaints against the Company, the Sellers or any Relevant Person,
(b) related to the period before completion and (c) pertained to the
mis-selling or suspected mis-selling of insurance products or services. But it
is necessary to place the clause in the context of the contract as a whole, to
examine the clause in more detail and to consider whether the wider relevant
factual matrix gives guidance as to its meaning in order to consider the
implications of the rival interpretations.
27.
The contractual context is significant in this case. The indemnity in
clause 7.11 is an addition to the detailed warranties in Schedule 4. The
mis-selling which clause 7.11 addresses is also covered by the warranty in paragraph
14.1 of Schedule 4 (para 18 and para 19 above). But liability for the Schedule
4 warranties is time- limited by Schedule 5. In particular paragraph 3.1(b) of
that Schedule (para 20 above) required the Company to claim within two years of
the completion of the sale and purchase. The scope of the clause 7.11
indemnity, breach of which gives rise to a liability which is unlimited in
time, falls to be assessed in the context of those time-limited warranties.
28.
All of the parties to the SPA were commercially sophisticated and had
experience of the insurance broking industry. Capita was not involved in the
management of the Company before the share purchase. The Sellers were the
directors and the only shareholders of the Company. They were the people who
knew or ought to have known how the Company had operated its business; Capita
would in all probability not have that knowledge. The parties to the SPA would
have known this. That lack of knowledge explains why Capita required the
disclosures in the disclosure letter and the detailed warranties in Schedule 4;
but it does not assist the court to determine the scope of the indemnity
clause. The court is not aware of the negotiations which led to the SPA; they
are not relevant to the task of interpreting that agreement: Chartbrook Ltd
v Persimmon Homes Ltd [2009] AC 1101. Business common sense suggests that
Capita had an interest in obtaining as broad an indemnity against the adverse
consequences of mis-selling as it could obtain. But the sellers had given
warranties of compliance with regulatory requirements, which covered such
mis-selling, subject to the agreed limits of quantum and time. The sellers were
exposed to a potential liability under those warranties for the two years after
the Completion Date, during which Capita could learn of the Company’s sales
practices. One may readily infer that they had an interest in minimising their
further exposure to liability after that time had elapsed. Business common
sense is useful to ascertain the purpose of a provision and how it might
operate in practice. But in the tug o’ war of commercial negotiation, business
common sense can rarely assist the court in ascertaining on which side of the
line the centre line marking on the tug o’ war rope lay, when the negotiations
ended. I therefore turn to examining the clause in more detail before returning
to the commercial context.
29.
In order to illustrate the competing contentions of the parties
Popplewell J helpfully divided clause 7.11 into its constituent parts. I set
that presentation out below with the addition in (B) of the sub-headings (i)
and (ii) to assist my exegesis.
30.
Clause 7.11 thus divided provides:
“The Sellers undertake to pay to
the Buyer an amount equal to the amount which would be required to indemnify
the Buyer and each member of the Buyer’s Group against
(1) all actions,
proceedings, losses, claims, damages, costs, charges, expenses and liabilities
suffered or incurred, and
(2) all fines, compensation
or remedial action or payments imposed on or required to be made by the Company
(A) following and arising
out of claims or complaints registered with the FSA, the Financial Services
Ombudsman or any other authority against the Company, the Sellers or any
Relevant Person
(B) (i) and which relate to
the period prior to the Completion Date (ii) pertaining to any mis-selling or
suspected mis-selling of any insurance or insurance related product or
service.”
31.
Counsel for Capita submitted that the clause should be read by treating
(2) and (A) as a composite phrase so that the Sellers were bound to indemnify
against both (1) and (2+A), each of which was subject to the two conditions in
(B). This meant that it was only the fines etc in (2) which had to follow on or
arise out of claims or complaints made to the FSA or other Authority against
the Company etc as provided in (A). Thus, it was submitted, the indemnity
covered all liabilities in (1) provided only that (i) they related to the
period prior to the completion date and (ii) pertained to any mis-selling or
suspected mis-selling of insurance products etc.
32.
Counsel for Mr Wood submitted that the clause was properly construed by
treating both (1) and (2) as being subject to three conditions, namely (A),
B(i) and (B)(ii). He submitted that (A) should be read as if there was a comma
after “claims”, so that it provided as a condition for the triggering of the
indemnity under (1) or (2) that there must be either claims by customers, or
complaints made to the regulatory authorities, in each case against the
Company, the Sellers or any Relevant Person. Thus, on his approach, either a
claim by a customer against the Company, the Sellers or an employee or former
employee of the Company, or a complaint to a regulatory authority against the
Company, the Sellers or an employee or former employee of the Company would
trigger the indemnity if the two conditions in (B) were met.
33.
Both counsel accepted that, because of the breadth of the terms used in
(1), the types of loss and damage in (1) covered all of the types of loss and
damage in (2). Thus it was suggested that (2) must have been included only for
the avoidance of doubt. This means that on Mr Wood’s approach (2) was otiose
while on Capita’s approach the composite (2+A) was otiose. I find the latter
proposition remarkable and unlikely for two reasons.
34.
First, and to my mind most significantly, (A) would serve no purpose by
restricting the source of loss and damage if (A) governed only (2) and
therefore (1) was unrestricted. (A) would not restrict the scope of the
indemnity in any way. On Mr Wood’s construction the words in (A) have a purpose
as they limit the scope of both (1) and the otiose (2).
35.
Secondly, if one airbrushes out (2+A) as otiose, the clause does not
specify against whom the actions, proceedings and claims in (1) are directed. The
clause would read:
“The Sellers undertake to pay to
the Buyer an amount equal to the amount which would be required to indemnify
the Buyer and each member of the Buyer’s Group against
all actions, proceedings, losses,
claims, damages, costs, charges, expenses and liabilities suffered or incurred,
and which relate to the period prior to the Completion Date pertaining to any
mis-selling or suspected mis-selling of any insurance or insurance related
product or service.”
The identity of the persons against whom the relevant
claims etc could be made so as to trigger the sellers’ indemnity would, on
Capita’s approach, be left to implication. There must be a limit on who such
persons could be as it would be absurd for Capita to have a claim against the
Sellers for indemnity resulting from any mis-selling on its part before the
Completion Date. But, even assuming that the target was mis-selling by or on
behalf of the Company, it is far from obvious that the delimited class of
persons would be “the Company, the Sellers or any Relevant Person”.
36.
Capita made three further points against Mr Wood’s interpretation. First,
there is an element of tautology as the “claims” in (1) are said in (A) to follow
and arise out of “claims”. But as Christopher Clarke LJ observed, tautology in
commercial contracts is not unknown and the verbal exuberance (or torrential
drafting) of (1) makes tautology difficult to avoid.
37.
Secondly, Capita pointed out that there is a comma after “incurred” at
the end of (1) and no comma after “Company” at the end of (2). This could
support the separation of (1) from (2) and the conjunction of (2) and (A). Similarly,
Mr Wood’s interpretation would involve inserting in (A) a comma after “claims”
and also after “any other Authority” so as to limit both the claims and the
regulatory complaints to those against “the Company, the Sellers or any
Relevant Person”. Again in agreement with Christopher Clarke LJ I do not think
that the use of commas in this clause is a strong pointer in favour of Capita’s
interpretation, both because there are no set rules for the use of commas and
in any event the draftsman’s use of commas in this clause is erratic.
38.
Thirdly, the draftsman used an adjectival participle at the start of (A)
(“following and arising out of”) and “changed tone” by using a relative pronoun
(“and which”) at the start of (B). But the use of the adjectival participle
does not tie (A) exclusively into (2) because in (B) the adjectival participle
(“pertaining to”) unquestionably applies to both (1) and (2). These detailed
points of style and syntax are of little assistance in construing an admittedly
opaque clause.
39.
I return to the commercial context and the practical consequences of the
rival interpretations. On Mr Wood’s interpretation it requires a customer or
customers to make a claim, or complaint to the regulatory authorities, against
the Company, the sellers or a Relevant Person in order to trigger the indemnity.
Thus if a whistle-blower alerted the regulatory authorities of suspected or
actual mis-selling, or if (as in fact occurred) management, complying with
their regulatory obligations, reported such mis-selling to the FSA, which
ordered the payment of compensation, the indemnity would not be triggered. Yet
in each case, the mis-selling before the date of completion causes the Company
loss.
40.
The general purpose of clause 7.11, to indemnify Capita and its group
against losses occasioned by mis-selling is clear. Had clause 7.11 stood on its
own, the requirement of a claim or complaint by a customer and the exclusion of
loss caused by regulatory action which was otherwise prompted might have appeared
anomalous. But clause 7.11 is in addition to the wide-ranging warranties in Part
14 of Schedule 4 (paras 18 and 19 above) which probably covered the
circumstances which eventuated. Capita had two years after completing the
purchase to examine the sales practices of the Company’s employees and so
uncover any regulatory breaches in order to make a claim under the Schedule 4
indemnities. Prima facie that was not an unreasonable time scale. Indeed,
Capita was able to send its findings to the FSA within 20 months of the
Completion Date. It is not contrary to business common sense for the parties to
agree wide-ranging warranties, which are subject to a time limit, and in
addition to agree a further indemnity, which is not subject to any such limit
but is triggered only in limited circumstances.
41.
From Capita’s standpoint the SPA may have become a poor bargain, as it
appears that it did not notify the sellers of a warranty claim within two years
of Completion. But it is not the function of the court to improve their
bargain.
42.
In this case, the circumstances which trigger that indemnity are to be
found principally in a careful examination of the language which the parties
have used.
Conclusion
43.
I would therefore dismiss the appeal.
