Corporate Law Update
Warranty claim notice did not comply with content requirements
The High Court has held that a buyer’s notice of claim for breach of warranty was invalid because it did not comply with the content requirements set out in the share sale agreement.
Drax Smart Generation Holdco Ltd v Scottish Power Retail Holdings Ltd  EWHC 412 (Comm) concerned an acquisition of shares in a company that was intended to develop a power station.
The buyer claimed for breach of a warranty that certain pre-sale reorganisation steps had been fully and correctly implemented.
The sale agreement required the buyer to give the seller notice of any warranty claim, stating “in reasonable detail the nature of the claim and the amount claimed (including the Buyer’s calculation of the Loss thereby alleged to have been suffered)”.
The buyer gave notice of its warranty claim, alleging that the target company had suffered loss for which the buyer was in turn liable. It launched legal proceedings on this basis.
Subsequently, the buyer amended its particulars of claim to state that the loss it had suffered was a diminution in the value of its shares in the company.
The court found that this was a different description of loss from that which the buyer had set out in its notice of warranty claim. As a result, the notice of warranty claim was invalid, as it had not complied with the requirement to include reasonable detail of the loss claimed, and the buyer was unable bring a claim for breach of warranty.
You can read more about the case in our separate in-depth piece.