Bad bargains and business common sense

Lois Horne and Jonathan Pratt consider a recent Supreme Court decision concerning the interpretation of an indemnity in a share purchase agreement.

In Wood v Capita Insurance Services Limited [2017] UKSC 24, the parties had entered into a share purchase agreement (the SPA) for the sale and purchase of Sureterm Direct Limited (the Company). The Company carried on business as a specialist insurance broker, primarily offering motor insurance for classic cars. After the deal had completed, employees of the Company raised concerns that certain products had been mis-sold to customers. An internal review was conducted and the FSA was informed. The buyer and the Company agreed with the FSA that they would set up a remediation scheme to pay compensation to consumers affected by the mis-selling. The buyer sought to recover the costs associated with the remediation scheme (approximately £2.4m) from the seller.