Daniel Shapiro KC, Caroline McColgan and Hamish Fraser acted for the successful Insurers in the first warranty & indemnity insurance claim to be decided by the Commercial Court
Judgment was handed down today in Finsbury Foods Plc v Axis Corporate Capital Ltd & Ors [2023] EWHC 1559 (Comm). The Defendant Insurers succeeded on every issue. This was the first claim under a policy of warranty & indemnity (“W&I”) insurance to be determined at trial in the Commercial Court.
The Claimant (“Finsbury”) purchased W&I insurance in respect of its acquisition of a specialist gluten-free baker, Ultrapharm Ltd (“Ultrapharm”) for £20m. Finsbury complained that there had been price reductions and recipe changes to some of Ultrapharm’s products prior to the acquisition and that these had not been adequately disclosed by the sellers of the Company, in alleged breach of a “Trading Conditions”/Material Adverse Change warranty and/or a Price Reductions Warranty in the share purchase agreement (“SPA”) by which Finsbury acquired Ultrapharm. Finsbury claimed it had valued Ultrapharm on the usual EBITDA * multiplier basis and that the breach of Warranties meant that Ultrapharm was valued at only just over £16m, allegedly entitling Finsbury to damages for breach of warranty exceeding £3m and a corresponding indemnity from Insurers under the Policy.
Insurers defended the claim on the basis that Finsbury’s claim was contrived: (1) properly construed, there was no breach of either the Trading Conditions Warranty or the Price Reductions Warranty in the SPA; and, even if there had been a breach (2) there was no loss, because Finsbury would have paid the same for the Company in any event and/or (3) there was no entitlement to indemnity under the Policy, because Finsbury had known about the price reductions prior to the acquisition.
Insurers succeeded on all of these defences at trial. Mr Lionel Persey KC rejected Finsbury’s claim having found that he could not rely on the evidence of any of Finsbury’s witnesses. There was no breach of warranty, but even if there had been, it was excluded by the Knowledge Exclusion in the Policy, and in any event, had not caused Finsbury any loss. The claim was dismissed and Finsbury paid Insurers’ costs on the indemnity basis.
Daniel Shapiro KC, Caroline McColgan and Hamish Fraser were instructed by Kirsty Hick, Rebecca Bailey, Julian Bubb-Humfryes, and James Woodward at DAC Beachcroft LLP.
