ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Simon Gleeson (sitting as a Deputy High Court Judge)
Strand, London, WC2A 2LL |
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B e f o r e :
LADY JUSTICE ASPLIN
and
LORD JUSTICE BAKER
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(1) DECISION INC HOLDINGS PROPRIETARY LIMITED (2) DECISION INC SHARECO (RF) PROPRIETARY LIMITED |
Claimants/ Respondents |
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- and - |
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(1) STEPHEN GARBETT (2) ANIS EL-MARIESH |
Defendants/ Appellants |
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Mark Warwick KC (instructed by Child & Child Law Ltd) for the Respondents
Hearing dates: 18 and 19 October 2023
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Crown Copyright ©
Lord Justice Newey:
Basic facts
"In general a business will come to an EPM specialist when they want a new system designed and built for them. This means that the revenues of that specialist arise in 'large lumps' at any given time, such a business will have a relatively small number of relatively large projects ongoing, and there is relatively little 'flow' work. In summary, the continual winning of a few large mandates is essential to the business."
"[T]he nature of the EPM consultancy business is such that its operational gearing is very high. The design and implementation of EPM systems is difficult and complex work, and in order to be successful a firm needs a strong bench of full-time employed specialist consultants. The vast majority of such a firm's costs are therefore fixed. This means that when the firm is fully employed the profits may be very high, but a relatively small downturn in turnover may have a significant negative impact on profits."
i) On 25 January 2018, Mr El-Mariesh sent Mr Bell a sales pipeline for that month and a sales breakdown. The pipeline showed a grand total of £13,360,000 of possible work, with the BBC and Kerry Group as two of the biggest new potential projects. No information was given as to the likelihood of a mandate being won;
ii) On 29 March 2018, Mr Bell was sent a further pipeline with a total of £15,210,000. This document used a red/amber/green colour-coding system to indicate the chances of an item producing paid work;
iii) On 31 May 2018, Mr Bell was sent drafts of another pipeline ("the May Pipeline") and a detailed profit forecast ("the May Forecast"). The May Pipeline used the same colour-coding system as its predecessor and gave a total of £15,128,000. The May Forecast anticipated EBITDA (or "Earnings Before Interest, Tax, Depreciation and Amortisation") for the full year of £1,628,393 and assumed that the BBC, Kerry, Transport for London ("TfL") and Nidec ("the Four Contracts"), which were significant elements in the May Pipeline, would begin generating revenue in the current year, in September, June, June and June respectively;
iv) On 11 July 2018, Mr Bell was provided with the Company's draft June 2018 management accounts;
v) On 24 July 2018, Mr Garbett sent Mr Bell an "updated pipeline plan" ("the July Pipeline") with an overall total of £21,554,000. The July Pipeline depicted TfL and Nidec in green and the BBC and Kerry in amber. The total value given for the BBC, which was described as "ongoing", was £3 million;
vi) On 5 October 2018, Mr Bell was sent the Company's June and July management accounts; and
vii) On 8 October 2018, the day on which the SPA was concluded, Mr Bell was supplied with a document headed "August 2018 relevant invoices/revenue".
"Despite the positive signs there remains a high degree of scepticism with the first half performance to June, and whilst June was really positive, it is only one month and the previous five have been very poor by comparison."
"Revenues continued to be low, with the Company making a loss of £16,197 EBITDA in October and a profit of £1,078 EBITDA in November. However, these figures paled into insignificance in the face of the December figures, which showed an EBITDA loss of £97,387. The position did not noticeably improve in 2019, when the January EBITDA loss was £95,708."
i) the defendants served a defence and counterclaim in which they denied liability and also counterclaimed for the issue of shares in Holdings to the value of £787,000 pursuant to the terms of the SPA mentioned in the next paragraph; and
ii) the claimants served a reply and defence to counterclaim in which, among other things, they explained that they intended to set off £787,000 against what they were awarded for breach of warranty.
The SPA
"19 CHANGES SINCE THE ACCOUNTS DATE
Since the Accounts Date:
19.1.2 there has been no material adverse change in the turnover, financial position or prospects of the Company
.
20 FINANCIAL AND OTHER RECORDS
20.1 All financial and other records of the Company ('Records'):
20.1.1 have been properly prepared and maintained;
20.1.2 constitute an accurate record of all matters required by law to appear in them, and in the case of the accounting records, comply with the requirements of section 386 and section 388 of the CA 2006;
20.1.3 do not contain any material inaccuracies or discrepancies; and
20.1.4 are in the possession of the Company
."
"The Sellers shall not be liable for a Claim unless notice in writing summarising the nature of the Claim (in so far as it is known to the Buyer) and, as far as is reasonably practicable, the amount claimed, has been given by or on behalf of the Buyer to the Sellers:
11.4.1 in the case of a Claim for breach of the Tax Warranties, on or before the seventh anniversary of First Completion; or
11.4.2 in any other case, on or before the expiry of the period of 24 months commencing on the First Completion Date."
"The Sellers shall not be liable for a Claim unless:
11.3.1 the Sellers' liability in respect of such Claim (together with any connected Claims) exceeds £10,000; and
11.3.2 the amount of the Sellers' liability in respect of such Claim, either individually or when aggregated with the Sellers' liability for all other Claims , exceeds £100,000 ."
i) Clause 10.6 provided that, except for "the matters Disclosed", "no information of which [Holdings] has knowledge , or which could have been discovered , shall prejudice or prevent any Claim or reduce the amount recoverable under any Claim";
ii) By clause 10.7, Holdings warranted that it had "no actual knowledge of any fact, matter or circumstances constituting a breach of Warranty save as Disclosed"; and
iii) Clause 11.5 provided that the defendants should not be liable for a "Claim" to the extent that the "Claim" "arises from facts, events or circumstances that have been Disclosed including Disclosed in the Disclosure Letter".
The claim
The Notice
"5. There have been breaches of Warranty 19, specifically Warranty 19.1.2.
6. Based on the actual financial performance of the Company in FP May 2018 as reported in the FY2018 Forecast P&L, on an annualised basis, full year revenue for FY2018 of £4,337,0711 is £916,997 (or 17.5%) lower than FY2017 of £5,254,068, £836,151 (or 16.2%) lower than FY2016 of £5,173,224 and £81,076 (or 1.8%) lower than FY2015 of £4,418,148. The reduction in revenue in FY2018 alone represents a material adverse change in the turnover of the Company and therefore a breach of Warranty 19.
7. While 'prospects' is not defined in the Agreement, and while 'prospects' is not a recognised accounting term, prospects refers to the future financial performance (or forecasts) of a company. Since the Accounts Date there had been a material adverse change in both the turnover and the prospects of the Company, which was not properly reflected in the FY2018 Forecast P&L, the May 2018 Sales Pipeline or the July 2018 Sales Pipeline.
8. The prospects of the Company were represented in the May 2018 Sales Pipeline (on which the FY2018 Forecast P&L was based) and the July 2018 Sales Pipeline. However, these documents included revenue from projects which it was not certain that the Company would in fact win. Had the correct position been represented in the FY2018 Forecast P&L, then Consulting Services Revenue forecast for FY2018 would have been £3,553,464. This represents a decrease of £1,204,100 from the actual Consulting Services Revenue recorded in FY2017 of £4,757,564, a decrease of 25.3%. This represents a material adverse change in the turnover and the prospects of the Company."
"Based on the information provided, the Consulting Services Revenue forecast for FY2018 of £5,189,157 was overstated by £1,635,6942 and should have been £3,553,464, an overstatement of 46.0%. This represents a material inaccuracy in breach of Warranty 20. Furthermore a forecast of £3,553,464 represents a decrease of £1,204,100 from the actual Consulting Services Revenue recorded in FY2017 of £4,757,564, a decrease of 25.3%. This represents a 'material adverse change in the [ ] prospects of the Company' in breach of Warranty 19."
"£427,300 (BBC) +£358,288 (Nidec) + £669,456 (Kerry) + £390,075 (TfL) - £209,425 (Remaining Projects) = £1,635,694. The adjustment of £1,635,694 removes the revenue for BBC, Nidec and Kerry from the FY2018 Forecast P&L in its entirety. The adjustment to TfL removes £390,075 of the total forecast revenue of £512,100. The remaining £122,025 comprises revenue earned in August of £1,500 plus 50% of project revenues for months one to three of the project in October to December to reflect the uncertainty over the anticipated revenue for FY2018. The adjustment to remaining projects of £209,425 represents an uplift of 63% to other project revenues of £330,575 in October to December to reflect the potential for additional revenue which could have been generated from existing clients in FY2018."
"So far as is reasonably practicable the Buyer's calculation of the amount claimed pursuant to Clause 10.3.1 is £8,848,500. Without prejudice to the Buyer's contention that there is no obligation for this notice to provide any particulars of the said sum, the following calculation is provided:
(a) the Enterprise Value of the Company based on the warranted information of £9,645,000; minus
(b) the Adjusted Enterprise Value of the Company of £796,500."
Pleadings
"The amount claimed pursuant to Clause 10.3.1 is £8,848,500. This figure is calculated as follows:
(a) the Enterprise Value of the Company, based on the warranted information of £9,645,000; minus
(b) the Adjusted Enterprise Value of the Company of £796,500."
"the word 'prospects' is a reference to the Defendants' then present day assessment of the opportunities that were listed. Some of these prospects (in green) had already been secured and were 'ongoing'. Others (in yellow) were potential (often with a description of the likelihood of that potential being appended)."
Trial submissions
"Issue 3 As at the First Completion Date (viz. 12 October 2018), since the Accounts Date (viz. 31 December 2017) had there been a material adverse change in the turnover and/or prospects of the Company on the basis that the turnover and/or prospects of the Four Projects [i.e. the Four Contracts] was not properly reflected in the FY2018 forecast P&L, the May 2018 Sales Pipeline or the July 2018 Sales Pipeline, as alleged?
18. This calls for a comparison between the Company at 2 points in time, viz the Accounts Date and the First Completion Date.
19. As regards the Accounts Date, the prospects of the Company can be shown in a number of ways, including:
(i) The Info Memo at F1/62 et seq.
(ii) The documents at F1/252-254
(iii) The EBITDA as at Jan 2018, see G/19, viz £114,449.
20. As regards the First Completion Date, the prospects will be for the Court to assess. However the overwhelming evidence is that the true position as at 12 October 2018 was materially adverse to the Accounts Date. The Forecast and pipeline documents did not reveal the true position, rather they concealed it. The true position emerged from the August and September management accounts .
21. Evidence as to the true position can be found as follows:
(i) From the Dearman report [i.e. the report prepared by the expert instructed by the claimants]. The actual position for FY2017 was £4,757,564 . For FY2018 the position was £3,572,273 .
(ii) From Mr Thompson [i.e. the expert instructed by the defendants] His EBITDA for FY2017 was £997,019 and for FY2018 was £175,897 ."
"So we make the basic point that this issue calls for a comparison between the company at two points in time. So you then need to look at those points in time and so the first is the accounts date. Obviously, we don't have a document per se that tells us that on 31 December, so you have to look at material in the vicinity of that.
So we've got at (i) the information memorandum. That of course was a little earlier in time, but that gives you some clue as to what the prospects were. There are documents at F1,252 . That's 21 January and there was a sales forecast and some pipeline figures there. So we've got those documents.
Then we've got the EBITDA at January with a figure for that of about 114,000.
So we've got this is the position at about the prospects of the accounts date. Then we've got to look ahead and say what were the prospects at the first completion date ."
The Judgment
i) Breach of Warranty 20, on the basis that the Company's "records" were defective;
ii) Breach of Warranty 19, on the basis that there had been a "material adverse change in the turnover" of the Company; and
iii) Breach of Warranty 19, on the basis that there had been a "material adverse change in the prospects" of the Company.
"I am strongly of the view that Mr Garbett was guilty of a degree of self-persuasion when he put the pipeline documents together. However he was extensively cross-examined on this point, and I can find nothing in his evidence which suggests that what was written was not an accurate record of what he believed the position to be. The same applies as regards the May Forecast no matter how implausible the beliefs of the Defendants may have been at the time when this document was put together, I can find no evidence that it did not, at that time, accurately record their beliefs as to the likely course of the financial year."
"The question is therefore simply as to whether the turnover figures for the months of August and September were so far away from the long-run average for the Company that a hypothetical reasonable seller would have concluded that there had been a fundamental change in the nature of the revenue flows into the Company. Although there was a significant drop in these figures particularly considered on a month-by-month basis I am by no means certain that it is large enough for such a seller to have concluded that there was such a fundamental change. It should also be emphasised that the turnover warranty, unlike the prospects warranty, is necessarily purely backward-looking. The question is simply one as to whether developments up to the Effective Date [i.e. 12 October 2018] constitute a material change. I have some difficulty with this determination, but I think that on balance the Claimants have failed to make their case that these events, taken as a whole, show a change in turnover which was so significant as to be material."
"100. In essence, there are three stages to the process. The first is to determine what might be called a 'baseline' figure that is, what was the expected or forecast level of the relevant factor at the time of the contract. The second is to determine the 'actual' figure what was the actual position as at the date of the contract. The third is to consider the difference between the baseline and the actual figure, and determine whether that difference is so great as to be material.
101. The establishment of a baseline figure is not as easy as it seems. For a well-established business with predictable revenues, the baseline may simply be the historic level of that factor thus, if turnover has been 100/month for the last five years, the baseline will be 100/month. However, for a business with highly variable turnover, such an exercise may make no sense. In this sort of case it is necessary to examine the process by which the agreement was reached, and to try and establish what a reasonable expectation would have been. Here again, the test is objective and not subjective a wildly over-optimistic purchaser does not acquire a cause of action in this regard as a consequence of his over-optimism. The baseline is the level which reasonable buyers and sellers, had they been asked to do so, would have agreed to be the most likely estimate of the factor concerned over the period concerned.
102. The ease of establishment of the actual figure depends heavily on the factor forecast. For turnover, for example, the actual level of turnover as at the Effective Date [i.e. 12 October 2018] can be established by simple inspection of the books of the Company at that date. However, for a warranty as to the future in this case, of prospects some analysis may be necessary in order to determine what the actual prospects of the Company were as at the Effective Date ."
"133. These months had been put down in the May forecast as producing EBITDA of £231,796 and £228,077 respectively. The Defendants knew that the actual figures were a loss of £40,746 in August and a profit for September of £2,382. This means that they knew that they were nearly half a million pounds adrift of the forecast which they had given Decision in May. This difference, although enormous, would not of itself have taken them out of the range of contemplated outcomes under the SPA. However, the only way that a reasonable person in their position could have concluded that there had not been a material change in the prospects of the Company would have been if they were very highly confident that the remaining months of the year would produce at the very least the £432,463 predicted for it in the May forecast.
134. I think this is relevant to the issue of the approach of the hypothetical reasonable seller. A hypothetical reasonable seller in this position would, I think have concluded that there had been a material adverse change in the prospects of the Company unless he had a very high degree of confidence that profits over the next few months would be sufficient to rebalance the ship. That question would depend almost entirely on the prospect of substantial revenue under the Four Contracts being received in that period. The question is therefore simply this how confident of this were the Defendants at the time, and would that confidence have been shared by a hypothetical reasonable seller?"
i) In relation to the BBC, that he "absolutely [did] not think that a hypothetical reasonable seller would have had a high degree of confidence that this contract would produce any significant turnover in the medium-term future": paragraph 137 of the Judgment;
ii) In relation to TfL, that "a hypothetical reasonable seller could well have concluded that it was certain that £28,500 would be received under this contract, and highly likely that £122,025 would have been received by the year end" but that this was "not anywhere close to the £512,100 which had been projected for the contract over 2018 as a whole": paragraph 142;
iii) In relation to Nidec, that he "[could not] accept that a hypothetical reasonable seller could have concluded that any forecast revenue should be attributed to this contract at all for the year 2018": paragraph 145; and
iv) In relation to Kerry Group, that he did "not believe that a hypothetical reasonable seller would have concluded that there was any reasonable prospect of any revenue being received under this contract in the course of calendar 2018": paragraph 149.
"I am prepared to use this figure as an accurate estimate of what a reasonable hypothetical seller in the position of the Defendants would have known to be the true expected prospects of the Company for the year 2018. More simply, what that figure indicates is that the Company, in aggregate, would be lossmaking in the second half of the year."
"The May Forecast suggested that EBITDA for the year might be £1.5m, but it does not seem to me that the Claimants ever regarded this as certain, or even probable. I think the best guide to the expectations of the parties can be derived from the agreed pricing structure for the transaction."
The Judge concluded in paragraph 155:
"the baseline estimate from which the assessment of material adverse change must start is the expectation that the Company would generate around £1m EBITDA in the year 2018, and possibly a little more in 2019. That is the expectation which a reasonable buyer would have had, and the baseline against which the question of whether there was a material adverse change must be assessed."
"157. If, on the Effective Date [i.e. 12 October 2018], the baseline figure for expected prospects for 2018 was £1m, whilst the actual expected profit was £0.3m, I think it is clear that this constitutes a material adverse change in the prospects of the Company as at that date. If the Company was now lossmaking, this would lead to cash-flow shortfalls and the need for recapitalisation as indeed eventually proved to be the case.
158. I am therefore satisfied that at the Effective Date, the Defendants were in breach of their warranty that there had been no material adverse change in the prospects of the Company as at that date."
"193. My starting point here is to consider the specific facts of the case. In particular, I cannot see how it would have been possible for the Claimants to proceed as Mr Lowe suggests and allocate different values to the different breaches. Mr Thompson attempted in his expert's report to calculate the loss relating to one particular breach the breach of the turnover warranty in order to demonstrate that this was theoretically possible. However, I agree with Mr Dearman that this exercise is in reality not possible, since, as Mr Dearman points out, the assumptions required to establish one breach necessarily imply other breaches which would fall to be valued in turn. In reality, the breaches here are so intertwined that it is impossible to say with any degree of plausibility that this breach caused £x of damage, whereas that breach caused £y. The reason that the Claimants gave only a single figure for the cumulative impact of the breaches was because that was the best they could do, and that must mean that their estimate was 'reasonable' which is all that is required by clause 11.4.2.
194. I do not think that the facts of this case come anywhere near the principles established in Senate [i.e. Senate Electrical Wholesalers Ltd v Alcatel Submarine Networks Ltd [1999] 2 Lloyd's Rep 423]. There is no question that the Claimants' notice was such, or was pleaded in such a way, as to leave any doubt as to the allegations of breach being made or the calculation mechanism to be applied in arriving at the quantum of damages if the claim was successful. There is no question of the Defendants having been disadvantaged in any way by reason of the form of the notice or the way in which the case was pleaded."
The issues
i) Was the Judge's interpretation of, and approach to, the Prospects Warranty wrong?
ii) Should the Judge's order be set aside on the basis that the breach of the Prospects Warranty which he held to have taken place did not reflect a claim pleaded or argued by the claimants?
iii) Did the Notice give adequate notice of a claim for the breach of the Prospects Warranty which the Judge found proved?
iv) Did the Judge fail to take proper account of revenues from work on the TfL project in August and September 2018?
v) In the event of the appeal succeeding, should the case be remitted for a re-trial?
Issue (i): Interpretation of, and approach to, the Prospects Warranty
"the Agreement provided that the Claimant can make no claim under any warranty in respect of any matter where the relevant facts had been disclosed to him. Since a very great deal of information was disclosed to the Claimants between the accounts date and the Effective Date [i.e. 12 October 2018], I decided that it was appropriate to use the expectations of the parties after that information had been disclosed that is, on the Effective Date as the baseline for determining the common expectation of the parties as regards prospects. I do not see that this does anything more than to give effect to the terms of the Agreement as a whole."
i) It would appear from paragraphs 100 and 101 of the Judgment that the Judge's starting point was that, when considering "how a breach of a warranty of this kind should be established", "the expected or forecast level of the relevant factor at the time of the contract" should be compared with "the actual position as at the date of the contract". That premise was flawed. The Prospects Warranty called instead for the actual position in October 2018 to be compared with the actual position at 31 December 2017;
ii) While the defendants might not have been vulnerable to a claim in respect of matters "Disclosed", "Disclosed" was a defined term. A matter was "Disclosed" only if "fairly disclosed in the Disclosure Letter";
iii) The correct approach had to be to assess the Company's "prospects" at 31 December 2017 and to compare them with the "prospects" in October 2018. Supposing them to have worsened, it could be relevant to consider whether matters bearing on that had been "Disclosed". The fact that the defendants might have been able to escape liability in respect of matters "Disclosed" could not, however, remove the need to evaluate the Company's "prospects" at 31 December 2017, nor make it appropriate to work from the "expectations of the parties".
Issue (ii): Pleadings and submissions
"In my view the judge was not entitled to find for the claimant on the basis of the third man theory. It is fundamental to our adversarial system of justice that the parties should clearly identify the issues that arise in the litigation, so that each has the opportunity of responding to the points made by the other. The function of the judge is to adjudicate on those issues alone. The parties may have their own reasons for limiting the issues or presenting them in a certain way. The judge can invite, and even encourage, the parties to recast or modify the issues. But if they refuse to do so, the judge must respect that decision. One consequence of this may be that the judge is compelled to reject a claim on the basis on which it is advanced, although he or she is of the opinion that it would have succeeded if it had been advanced on a different basis. Such an outcome may be unattractive, but any other approach leads to uncertainty and potentially real unfairness."
"I would add here that I endorse the view expressed by the judge to the parties at the trial and repeated in his judgment at [11] that the statements of case ought, at the very least, to identify the issues to be determined. In that way, the parties know the issues to which they should direct their evidence and their challenges to the evidence of the other party or parties and the issues to which they should direct their submissions on the law and the evidence. Equally importantly, it enables the judge to keep the trial within manageable bounds, so that public resources as well as the parties' own resources are not wasted, and so that the judge knows the issues on which the proceedings, and the judgment, must concentrate. If, as he said, there was 'a prevailing view that parties should not be held to their pleaded cases', it is wrong. That is not to say that technical points may be used to prevent the just disposal of a case or that a trial judge may not permit a departure from a pleaded case where it is just to do so (although in such a case it is good practice to amend the pleading, even at trial), but the statements of case play a critical role in civil litigation which should not be diminished."
"36. The present case is not one of a party seeking to depart from his pleaded case, but one where the parties addressed in their evidence and submissions the cases that had been pleaded, but the judge decided the case on a basis that had neither been pleaded nor canvassed before him. In our system of civil litigation that is impermissible, and a misunderstanding of the judge's function which is to try the issues the parties have raised before him. The relevant principles were stated by this court in Al-Medenni v Mars UK Ltd [2005] EWCA Civ 1041 .
38. In the present case, the possibility that the Croydon properties were held on trust for Mr V Sharma does not appear to have been even canvassed by the judge during the hearing, but, as far as we know, first emerged fully-formed in the judgment. That, for the reasons given by Dyson LJ in Al-Medenni, was not a course that was open to him. Judges may sometimes think - and may even sometimes be right - that their own theory better fits the facts than that of either party, but if it is wholly outside the scope of the pleaded issues, that is nothing to the point, and to decide a case on a basis that has not been explored in evidence or addressed in submissions is likely to leave at least one, if not both, parties with a profound and justified sense of unfairness."
"To these statements of principle I wish only to add the following. These problems are all concerned with the interests of justice and, in particular, with circumstances which cause prejudice to the losing party. The common sort of prejudice which is to be avoided is that a new point has arisen in such a way that the losing party was not given a proper chance to call evidence or ask questions which could have addressed it. That is why the function performed by pleadings, lists of issues and so on, which is to give notice of and define the issues, is an important one; but is also why a judge can always permit a departure from a formally defined case where it is just to do so. It is also why the judge's function is to try the issues the parties have raised before them, rather than to reach a conclusion on the basis of a theory which never formed part of either party's case. By placing the emphasis on prejudice, the point I am making is that the modern approach to the definition of the issues requires judges to adopt a pragmatic approach in line with the overriding objective and not seek to be governed by unnecessary formality, provided always that it is just not to do so."
"[S]tanding back it is fair to note that the judge's conclusion does amount to a particular intermediate combination of the various factual assertions making up both parties' cases, and the combination itself is one that neither party had expressly pleaded. However that is a commonplace in civil litigation. The circumstances in which that occurs will be infinitely variable and in many cases, like this one, it presents no problems of any sort. In the closings at trial, the case was argued out fully by counsel before the judge. In no sense could it be said that the appellants were ambushed or precluded from advancing submissions or evidence which they might otherwise have done. The appellants have not identified any step they might have taken, but were deprived of the opportunity to take, because of the way the case was decided. No evidence has been identified which the appellants might have called but did not, nor any questions which might have been asked in cross-examination, nor any authority which might have been cited. No prejudice to the appellants of any sort has been identified."
Issue (iii): The Notice
i) The Notice was defective because it failed to give the "amount claimed" for breach of the Prospects Warranty; and
ii) The breach of the Prospects Warranty outlined in the Notice did not correspond to the breach which the Judge held to have occurred.
"The Defendants' expert sought to argue that it would have been perfectly possible to do a separate damages calculation for each breach identified in the Claimant's notice, the Claimants' expert said that it was impossible. I am entirely with the Claimants' expert on this point. I cannot for the life of me see how individual claims could have been attached to figures ."
"in the absence of some other identifiable error, such as (without attempting an exhaustive account) a material error of law, or the making of a critical finding of fact which has no basis in the evidence, or a demonstrable misunderstanding of relevant evidence, or a demonstrable failure to consider relevant evidence, an appellate court will interfere with the findings of fact made by a trial judge only if it is satisfied that his decision cannot reasonably be explained or justified".
The circumstances in which an appellate Court will interfere with an evaluative assessment by a trial judge are similarly limited.
"The Experts agree in principle, that different findings by the Court in relation to each of the alleged breaches might result in different assessments of damages. The experts would be happy to assist the Court further if required, in order to assist in the assessment of damages on alternative bases."
Asked in cross-examination whether he accepted in principle that a breach of one warranty might result in a different claim value as compared with the breach of another warranty, Mr Dearman accepted that but said he had not originally been instructed to look at whether claims could be disaggregated. When, later in the cross-examination, Mr Dearman was asked whether "in principle it can be done and you can just assume the only breach alleged is this one and then you work out where that gets you", he replied, "In principle", but explained that he had not thought about how one might do it.
"Ambiguity in an exclusion clause may have to be resolved by a narrow construction because an exclusion clause cuts down or detracts from the ambit of some important obligation in a contract, or a remedy conferred by the general law such as (in the present case) an obligation to give effect to a contractual warranty by paying compensation for breach of it. The parties are not lightly to be taken to have intended to cut down the remedies which the law provides for breach of important contractual obligations without using clear words having that effect".
He also said, however, that the Court "must still use all its tools of linguistic, contextual, purposive and common-sense analysis to discern what the clause really means" (see paragraph 19), and Hallett LJ and Moylan J, who were the other members of the Court, "place[d] greater emphasis on the commerciality of the Respondent's interpretation" (see paragraphs 40 and 41).
"Certainty is only achieved when the vendor is left in no reasonable doubt not only that a claim may be brought but of the particulars of the ground upon which the claim is to be based. The clause contemplates that the notice will be couched in terms which are sufficiently clear and unambiguous as to leave no such doubt and to leave no room for argument about the particulars of the complaint. Notice in writing is required in order to constitute the record which dispels the need for further argument and creates the certainty. Thus there is merit in certainty and accordingly, in our judgment the point taken by the [vendor] is not a matter of mere technicality and is not without merit."
Issue (iv): TfL revenue
Issue (v): Remittal?
Conclusion
Lady Justice Asplin:
Lord Justice Baker: