English High Court Provides Useful Guidance On The Requirement To Notify A Claim As Soon As Possible In Rejecting An Indemnity Claim Under An SPA

• Published date: 17 July 2020
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Professional Negligence
• Law Firm: Mayer Brown
• Author: Mr Robert Hobson and Chris Roberts

Introduction

The English Courts have in recent years held that parties must comply with the strict wording of procedural matters in contracts, such as notice provisions¹ and indeed any other conditions precedent such as the need to attempt alternative dispute resolution prior to commencing litigation².

In the recent case of Towergate Financial Limited v Hopkinson³, the High Court followed the same pattern in rejecting a claimant's indemnity claim under an SPA because the claimant had failed to give notice of its claim "as soon as possible".

In doing so, the Court provided helpful guidance on how to construe the requirement to notify a party "as soon as possible" and, in particular, when that requirement is triggered. It also serves as a further reminder of the importance of parties ensuring that they adhere to notice provisions, particularly where they are drafted as a condition precedent.

Factual background

On 5 August 2008, Towergate Financial (East) Limited (the "Claimant") entered into a share purchase agreement with Mr Mitchel Hopkinson and Mr Mark Howard, both in their personal capacity and in their capacity as trustees of certain trusts (the "Defendants"), to acquire M2 Holdings Limited, a company that provides financial advice to retail customers (the "SPA"). Pursuant to the SPA, the Defendants provided certain indemnities to the Claimant including with regard to professional negligence claims for mis-selling financial products.

To pursue an indemnity claim under the SPA, the Claimant was required to give notice under Clause 6.7.3. This clause provided that the Defendants shall have no liability "in respect of any matter or thing" unless:

"' notice in writing of the relevant matter or thing' is given ' as soon as possible and in any event prior to ' on or before the seventh anniversary of the date of the Agreement."

The Claimant had become aware of certain professional negligence claims in early 2013 and subsequently notified the Defendants on 29 July 2015, shortly before the seventh anniversary of the SPA on 5 August 2015.

After the Claimant and its group companies issued a claim seeking a declaration that they were entitled to be indemnified against certain liabilities for professional negligence, the Defendants argued that the claim should be rejected because it had not been notified to them "as soon as possible". Given that this dispute concerned a narrow issue which was susceptible of disposing of the dispute entirely, a preliminary issue hearing was ordered with the consent of both parties. The points for Mrs Justice Cockerill to consider were as follows:

1. On the proper construction of Clause 6.7.3, was there a condition precedent as to the time by which such notice must be given?
2. If there was a condition precedent as to the time by which such notice must be given, what is that time?
3. What triggered the requirement to notify?
4. In light of the above, had the Claimant complied...