Subject: Contracts; Company law; Damages
Keywords: Breach of warranty; Fraud; Measure of damages; Share purchases; Share transfers; Share valuation; Time limits; Valuation
Summary: This was a dispute arising out of a Share Purchase Agreement (“SPA”) under which The Hut Group (“THG”) purchased a company trading as MyProtein from the Defendants for a combination of cash and shares in THG. THG contended that the financial position of MyProtein was not as warranted in the SPA and claimed damages for the loss thereby caused. For its part the Second Defendant contended that the financial position of THG was not as warranted in the SPA, which THG admitted. However, there was cap in the SPA on liability for breach of warranty not resulting from THG’s fraud (“the cap”) and the Second Defendant alleged that its losses exceeded the cap. It therefore alleged that THG’s admitted breach resulted from the fraud of THG and also that it had been deceived into entering into the SPA.
In awarding THG substantial damages, Blair J found that MyProtein’s Management Accounts had not fairly presented its financial position in virtually all the respects alleged by THG and he rejected the Defendants’ case that timely and adequate notice had not been given of THG’s breach of warranty claim. As to the counterclaim, it was common ground that THG’s admitted breach of warranty resulted from the fraud of a former employee of THG and the Judge held that his fraud was to be attributed to THG for the purposes of the relevant provision in the SPA – accordingly, the Second Defendant was entitled to recover more than the cap. However, the Judge rejected the allegation that a current employee and former director of THG had known of and/or participated in the fraud and dismissed the allegation of deceit.
The judgment considers amongst other things the notice requirements for breach of warranty claims under the SPA; the attribution of the fraud of an individual to a company under the SPA; and the calculation of damages for breach of warranty, including the use of hindsight in such calculations under the principles set out in The Golden Victory.