In Towergate Financial (Group) Ltd & Ors (“Buyer”) v Hopkinson & Ors (“Sellers”) [2020] EWHC 984, the High Court considered the construction of a contractual limitation period for notifying indemnity claims. The Court found that the Buyer was unable to claim under an indemnity as it had not complied with necessary notice requirements.

Background

Under an August 2008 share purchase agreement (“SPA“), the Buyer purchased a company which provided financial advice to retail customers (“Company“). An indemnity was given by the Sellers in relation to any professional negligence claims against the Company arising from mis-selling which took place before completion of the SPA (“Mis-selling Indemnity“).

The SPA contained a contractual limitation on the Sellers’ liability which stated that they would not be liable under the Mis-selling Indemnity unless written notice had been given “…as soon as possible and in any event prior to…on or before the seventh anniversary of the date of [the SPA]” (“Notice Limitation“).

In 2014, the Financial Conduct Authority (“FCA“) commissioned a review of historic alleged mis-selling of schemes for the transfer of benefits out of defined benefit pension schemes and marketing of unregulated collective investment schemes. The FCA review resulted in significant compensation payments to clients of the Company.

Dispute

In July 2015, the Buyer gave notice to the Sellers of possible claims under the Mis-selling Indemnity. The Sellers asserted that the Buyer’s claim was time-barred as it had not given notice of its claim “as soon as possible” in accordance with the Notice Limitation.

The Buyer brought proceedings seeking a declaration that it was entitled to be indemnified by the Sellers under the Mis-Selling Indemnity.

The Buyer argued the words “prior to” and “on or before” conflicted making a “nonsense” of the meaning of the Notice Limitation. Further, it was unclear from what point “as soon as possible” should be counted. The Notice Limitation therefore did not comply with the requirement that a condition precedent must be clear and unambiguous to be enforceable. The Buyer maintained that on a proper construction, notice was only required to be given prior to the seventh anniversary of the SPA and the words “as soon as possible” should be disregarded.

Judgment

The Court rejected the Buyer’s construction and determined the preliminary issues in favour of the Sellers. In addition to the requirement that notice must be given prior to the seventh anniversary of the SPA, it also must be given “as soon as possible”. On its face, the Notice Limitation while “not perfect” plainly imported a dual condition precedent. The wording was “clear…grammatical, [and] workable“.

Time started to run once there was an identifiable matter or thing which might give rise to a claim under the Mis-selling Indemnity. Therefore, the Court found that the Buyer’s notice was clearly late, as the claims notified had been identified a year earlier. There was no justification for this delay.

Comment

This case serves as a reminder for parties to ensure that close attention is paid to notice requirements for warranty and indemnity claims. Otherwise, they may be unable to enjoy the financial protection they had sought to negotiate, simply due to a technicality.