MDW Holdings Ltd v Norvill  EWCA (Civ) 883
Damages – breach of warranty – deceit – share sale – measure of damages – contingency – hindsight – Bwllfa principle – overriding compensatory principle
The case concerned the purchase of shares in a waste management company, GDE, which (unknown to the buyers) had been operating in breach of environmental law and lying repeatedly to its regulators. The buyer, MDW, brought a claim for damages for deceit and for breach of warranty. MDW was successful in both causes of action in the High Court ( EWHC 1135 (Ch)). The damages calculation included an element attributable to the “fragility of the goodwill” of the business caused by the lies to the regulators.
The sellers (James Norvill, and his parents Jane and Stephen Norvill) appealed to the Court of Appeal, arguing that the trial judge wrongly excluded hindsight when quantifying damages: they relied on the fact that, by the time of trial, it was known that the risk of major regulatory intervention had not occurred. MDW argued in response that the judge was right not to have taken this type of hindsight into account because, as at the date of the Share Purchase Agreement, the agreed date at which damages were to be assessed, there was actual impairment to the goodwill of the business.
This was the first time that the question of hindsight, in the context of damages for breach of warranties contained in a Share Purchase Agreement, has been considered by the Court of Appeal. The Court found unanimously in favour of MDW. Newey LJ drew together the threads of existing authorities and gave guidance on the use of hindsight:
MDW was also successful in its cross-appeal, concerning the correct measure of damages for deceit. The judgment sets a precedent as to how damages should be quantified where the parties would, had the truth been known, have come to a different bargain (rather than walking away from the deal). The question of whether such a deal might have been reached was remitted to the trial judge.
An application for permission to appeal has been filed by the sellers with the UK Supreme Court.
Andrew Ayres KC, leading Laurie Scher of Maitland Chambers, was instructed by Jason Williams and Gemma Thomas of Morgan LaRoche on behalf of MDW.