Hilary Term [2017] UKSC 24 On appeal from: [2015] EWCA Civ 839

JUDGMENT
Wood (Respondent) v Capita Insurance Services
Limited (Appellant)
before
Lord Neuberger, President
Lord Mance
Lord Clarke
Lord Sumption
Lord Hodge
JUDGMENT GIVEN ON
29 March 2017
Heard on 7 February 2017
Appellant Respondent
Edward Cumming Andrew Twigger QC
(Instructed by Enyo Law
LLP
)
(Instructed by Birketts
LLP
)
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LORD HODGE: (with whom Lord Neuberger, Lord Mance, Lord Clarke and
Lord Sumption agree)
1. This appeal raises a question of contractual interpretation. It concerns an
indemnity clause in an agreement dated 13 April 2010 (“the SPA”) for the sale and
purchase of the entire issued share capital of a company, Sureterm Direct Limited
(“the Company”), which carries on business as a specialist insurance broker,
primarily offering motor insurance for classic cars.
2. The sellers of the Company were the respondent, Mr Andrew Wood (“Mr
Wood”), who owned 94% of its share capital, and Mr Christopher Kightley and Mr
Howard Collinge, who owned 1% and 5% of its share capital respectively. Each was
a director of the Company and Mr Wood was its managing director. The purchaser
was Capita Insurance Services Ltd (“Capita”). Mr Wood remained as managing
director of the Company until the end of 2010. He brought proceedings against
Capita arising out of the termination of his employment and Capita brought a
counterclaim against him under the indemnity provision in the SPA, which is the
subject matter of this appeal. Mr Kightley and Mr Collinge were, but are no longer,
parties to the proceedings.
3. It is not necessary to set out in any detail the circumstances in which Capita
came to make its claim under the indemnity. It suffices to summarise Capita’s claim
as follows.
4. In about August 2008 the Company began to sell motor insurance through
online aggregator sites such as Confused.com. The sales were not completed online:
potential customers obtained a quotation from the Company on the aggregator site
and the Company then contacted the potential customer directly with a view to
confirming their risk details before selling them the appropriate insurance policy.
5. Shortly after Capita’s purchase of the Company’s share capital, employees
of the Company raised concerns about the Company’s sales processes, which had
resulted in some customers paying substantially more than they had been quoted
online. The employees alleged that the Company had presented customers with
higher quotations without informing them why the quotations had increased. The
Company had thus increased its own arrangement fees when neither the
underwriting premium nor the risk profile had changed significantly. The Company
responded to the allegations by carrying out a review of its sales between January
2009 and January 2011. This review revealed that in many cases the Company’s
telephone operators had misled customers into believing that an underwriter had
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required a higher premium or that their risk profile was worse than it was or had
pressurised the customer to make sure that a sale was made.
6. Capita and the Company were obliged to inform the Financial Services
Authority (“FSA”) of the findings and did so on 16 December 2011. The FSA
informed them that the customers had been treated unfairly and had suffered
detriment and that there would have to be redress. After the FSA had conducted a
risk assessment visit to the Company in November 2012, Capita and the Company
agreed with the FSA to conduct a remediation scheme to pay compensation to
customers who were identified as potentially affected by the Company’s mis-selling.
Capita alleges that it, the Company and Capita’s other subsidiaries have suffered
loss as a result of the mis-selling or suspected mis-selling of insurance products in
the period before the completion of the sale under the SPA. Capita’s claim is for
£2,432.883.10, comprising an estimate of the compensation at £1.35m, interest of
about £400,000 and the costs of the remediation scheme.
7. It is appropriate to record that some of Capita’s allegations are disputed,
including the extent of the mis-selling and any detriment to customers. Other than,
perhaps, the facts narrated in para 4 above (which do not appear to be disputed), they
are not facts by reference to which the SPA is to be construed. But the circumstances
in which Capita and the Company were required to set up the remediation scheme
are of some importance because Mr Wood contends that they fall outside the scope
of the indemnity clause which is the subject matter of this action. In particular, the
requirement to compensate was not the result of a claim by one or more of the
Company’s customers or a complaint by those customers to the FSA or another
public authority. It resulted, as I have said, from information about the internal
review which Capita and the Company gave the FSA and the requirement by the
FSA that compensation should be paid to the customers.
Contractual interpretation
8. In his written case counsel for Capita argued that the Court of Appeal had
fallen into error because it had been influenced by a submission by Mr Wood’s
counsel that the decision of this court in Arnold v Britton [2015] AC 1619 had
“rowed back” from the guidance on contractual interpretation which this court gave
in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900. This, he submitted, had
caused the Court of Appeal to place too much emphasis on the words of the SPA
and to give insufficient weight to the factual matrix. He did not have the opportunity
to develop this argument as the court stated that it did not accept the proposition that
Arnold had altered the guidance given in Rainy Sky. The court invited him to present
his case without having to refer to the well-known authorities on contractual
interpretation, with which it was and is familiar.
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9. It is not appropriate in this case to reformulate the guidance given in Rainy
Sky and Arnold; the legal profession has sufficient judicial statements of this nature.
But it may assist if I explain briefly why I do not accept the proposition that Arnold
involved a recalibration of the approach summarised in Rainy Sky.
10. The court’s task is to ascertain the objective meaning of the language which
the parties have chosen to express their agreement. It has long been accepted that
this is not a literalist exercise focused solely on a parsing of the wording of the
particular clause but that the court must consider the contract as a whole and,
depending on the nature, formality and quality of drafting of the contract, give more
or less weight to elements of the wider context in reaching its view as to that
objective meaning. In Prenn v Simmonds [1971] 1 WLR 1381 (1383H-1385D) and
in Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 (997), Lord
Wilberforce affirmed the potential relevance to the task of interpreting the parties’
contract of the factual background known to the parties at or before the date of the
contract, excluding evidence of the prior negotiations. When in his celebrated
judgment in Investors Compensation Scheme Ltd v West Bromwich Building Society
[1998] 1 WLR 896 Lord Hoffmann (pp 912-913) reformulated the principles of
contractual interpretation, some saw his second principle, which allowed
consideration of the whole relevant factual background available to the parties at the
time of the contract, as signalling a break with the past. But Lord Bingham in an
extra-judicial writing, A new thing under the sun? The interpretation of contracts
and the ICS decision Edin LR Vol 12, 374-390, persuasively demonstrated that the
idea of the court putting itself in the shoes of the contracting parties had a long
pedigree.
11. Lord Clarke elegantly summarised the approach to construction in Rainy Sky
at para 21f. In Arnold all of the judgments confirmed the approach in Rainy Sky
(Lord Neuberger paras 13-14; Lord Hodge para 76; and Lord Carnwath para 108).
Interpretation is, as Lord Clarke stated in Rainy Sky (para 21), a unitary exercise;
where there are rival meanings, the court can give weight to the implications of rival
constructions by reaching a view as to which construction is more consistent with
business common sense. But, in striking a balance between the indications given by
the language and the implications of the competing constructions the court must
consider the quality of drafting of the clause (Rainy Sky para 26, citing Mance LJ in
Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2) [2001] 2 All ER (Comm)
299 paras 13 and 16); and it must also be alive to the possibility that one side may
have agreed to something which with hindsight did not serve his interest: Arnold
(paras 20 and 77). Similarly, the court must not lose sight of the possibility that a
provision may be a negotiated compromise or that the negotiators were not able to
agree more precise terms.
12. This unitary exercise involves an iterative process by which each suggested
interpretation is checked against the provisions of the contract and its commercial
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consequences are investigated: Arnold para 77 citing In re Sigma Finance Corpn
[2010] 1 All ER 571, para 10 per Lord Mance. To my mind once one has read the
language in dispute and the relevant parts of the contract that provide its context, it
does not matter whether the more detailed analysis commences with the factual
background and the implications of rival constructions or a close examination of the
relevant language in the contract, so long as the court balances the indications given
by each.
13. Textualism and contextualism are not conflicting paradigms in a battle for
exclusive occupation of the field of contractual interpretation. Rather, the lawyer
and the judge, when interpreting any contract, can use them as tools to ascertain the
objective meaning of the language which the parties have chosen to express their
agreement. The extent to which each tool will assist the court in its task will vary
according to the circumstances of the particular agreement or agreements. Some
agreements may be successfully interpreted principally by textual analysis, for
example because of their sophistication and complexity and because they have been
negotiated and prepared with the assistance of skilled professionals. The correct
interpretation of other contracts may be achieved by a greater emphasis on the
factual matrix, for example because of their informality, brevity or the absence of
skilled professional assistance. But negotiators of complex formal contracts may
often not achieve a logical and coherent text because of, for example, the conflicting
aims of the parties, failures of communication, differing drafting practices, or
deadlines which require the parties to compromise in order to reach agreement.
There may often therefore be provisions in a detailed professionally drawn contract
which lack clarity and the lawyer or judge in interpreting such provisions may be
particularly helped by considering the factual matrix and the purpose of similar
provisions in contracts of the same type. The iterative process, of which Lord Mance
spoke in Sigma Finance Corpn (above), assists the lawyer or judge to ascertain the
objective meaning of disputed provisions.
14. On the approach to contractual interpretation, Rainy Sky and Arnold were
saying the same thing.
15. The recent history of the common law of contractual interpretation is one of
continuity rather than change. One of the attractions of English law as a legal system
of choice in commercial matters is its stability and continuity, particularly in
contractual interpretation.
The Sale and Purchase Agreement
16. The SPA is a detailed and professionally drafted contract. It provided for the
sale and purchase of the Company’s share capital (clause 3) for the consideration of
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£7,681,661 payable on completion (clause 4), and it also provided for deferred
consideration (Schedule 8). Clause 1 contained the following definitions which are
relevant to the construction of the disputed indemnity:
“Authority means any local, national, multinational,
governmental or non-governmental authority, statutory
undertaking, agency or public or regulatory body (whether
present or future) which has jurisdiction over the Business or
any decision, consent or licence which is required to carry out
the Business and Authorities shall be construed accordingly.
Company means Sureterm Direct Ltd …
Completion Date means the date of this Agreement.
Employees has the meaning given to it at paragraph 6 of
Schedule 4 [which refers to a list of all of the employees
employed by the Company].
FSA means the Financial Services Authority and any body
which supersedes it.
Regulatory Authority means any body by which any part of
the Business is or was regulated pursuant to any Applicable
Financial Services Laws (including, but not limited to, the
FSA, the Personal Investments Authority Ltd, the General
Insurance Standards Council, the Insurance Brokers
Registration Council and including the Financial Services
Ombudsman and any voluntary regulatory body with whose
rules the Company has agreed to comply).
Relevant Person means an Employee or a former employee of
the Company and any dependant of an Employee or a former
employee of the Company.
Shares means all of the issued shares in the capital of the
Company.
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Warranties means the Tax Warranties and the warranties set
out in Schedule 4.”
17. Clause 7 dealt with warranties and indemnities. Each of the sellers severally
warranted to the buyer on a proportionate basis in terms of the Warranties (clause
7.1); the Warranties were qualified by matters which had been fairly disclosed in the
disclosure letter (clause 7.2); and where a Warranty was qualified by an expression
such as “so far as the Sellers are aware” that referred to the actual knowledge of the
sellers, who confirmed that they had made due and careful enquiry of the Company’s
compliance manager, IT Director and HR Director (clause 7.3).
18. The indemnity clause whose interpretation is in dispute is clause 7.11. It
provided:
“The Sellers undertake to pay to the Buyer an amount equal to
the amount which would be required to indemnify the Buyer
and each member of the Buyer’s Group against all actions,
proceedings, losses, claims, damages, costs, charges, expenses
and liabilities suffered or incurred, and all fines, compensation
or remedial action or payments imposed on or required to be
made by the Company following and arising out of claims or
complaints registered with the FSA, the Financial Services
Ombudsman or any other Authority against the Company, the
Sellers or any Relevant Person and which relate to the period
prior to the Completion Date pertaining to any mis-selling or
suspected mis-selling of any insurance or insurance related
product or service.”
19. This clause must be seen in its contractual context. Schedule 4 contained 30
pages of detailed warranties. In Part 12 of that Schedule, which concerned litigation,
disputes and investigations, the sellers warranted that they were not aware of
circumstances which were likely to give rise to any investigation or enquiry by any
Authority (para 12.4) and that no breach of contract, tort, statutory duty or law had
been committed for which the Company was or might be liable (para 12.5). Part 14
which was concerned with compliance and regulatory matters included the
following para:
“14.1
(a) The Company conducts, and has conducted the Business
in accordance with the requirements of all Competition laws
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and Applicable Financial Services Laws applicable to the
business and has not been and is not being investigated for any
alleged non-compliance or infringement of such Competition
Laws and Applicable Financial Services Laws. …
(c) The Company has no reason to believe that any action
will be taken against it in relation to any of its current or past
activities based on any alleged non-compliance or infringement
of any Competition Laws and Applicable Financial Services
Laws.”
20. Part 14 also contained detailed warranties that the Company had complied
with its regulatory obligations and that correspondence between the Company and
all Regulatory Authorities had been disclosed, that the Company, its officers and
employees had not been subject to any regulatory sanction and that no such sanction
was likely or pending; and that the Company had not been subject to a regulatory
investigation and, so far as the Sellers were aware, there were no circumstances
which could give rise to a visit by any Regulatory Authority.
21. Clause 8 of the SPA provided for limitations on the sellers’ liability in
Schedule 5, which in para 1 provided that the aggregate maximum liability of all
claims under the SPA (with one exception) would not exceed the purchase price and
that the liability of each seller would not exceed his proportionate liability (ie 94%,
5% and 1%). That limitation applied to claims under clause 7.11 as well as under
the warranties. But paragraph 3 of Schedule 5 imposed time limits on the warranties
by providing:
“3.1 Save in respect of a Warranty Claim or a claim under
the Tax Covenant notified in writing to the Sellers prior to such
a date, the Sellers will cease to be liable:
(a) for any claim under the tax warranties or under
the Tax Covenant on the seventh anniversary of
Completion; and
(b) for any other Warranty Claim on the second
anniversary of Completion.”
Thus in contrast to the indemnity under clause 7.11, the warranties relating to,
among other things, regulatory compliance, had a lifespan of only two years.
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22. In a judgment dated 14 October 2014 ([2014] EWHC 3240 (Comm))
Popplewell J decided the preliminary issue of the interpretation of the indemnity
clause and held, in effect, that it required Mr Wood to indemnify Capita even if there
had been no claim or complaint by a customer. The Court of Appeal (Patten LJ,
Gloster LJ and Christopher Clarke LJ) in a judgment written by Christopher Clarke
LJ ([2015] EWCA Civ 839) disagreed. In its order dated 30 July 2015 the Court of
Appeal declared that Mr Wood’s liability under the indemnity in clause 7.11 of the
SPA:
“cannot arise unless the matter in respect of which indemnity
is sought follows and arises out of either (i) a claim made
against the Company, a Seller or a Relevant Person or (ii) a
complaint registered with the FSA, the Financial Services
Ombudsman or any other Authority against the Company, a
Seller or a Relevant Person and, in either case, the claim or
complaint (a) relates to the period prior to the Completion Date
and (b) pertains to any mis-selling or suspected mis-selling of
any insurance or insurance related product.”
23. Capita appeals against that order, arguing that the contractual indemnity is
not confined to loss arising out of a claim or complaint.
24. In this case both Popplewell J and the Court of Appeal have considered and
weighed both the language of the disputed clause 7.11 and the commercial
considerations. They have both started by examining the language but have reached
opposing conclusions. This disagreement is not caused by any failure to apply the
correct principles but is, in my view, the result of an opaque provision which, as
counsel for each party acknowledged, could have been drafted more clearly.
25. I have concluded that the Court of Appeal has come to the correct view as to
the meaning of this difficult clause. I set out below my reasons, which are essentially
the same as those which Christopher Clarke LJ presented.
Discussion
26. Clause 7.11 has not been drafted with precision and its meaning is avoidably
opaque. My preliminary view of the meaning of the clause on a first reading was
consistent with the view which the Court of Appeal favoured, namely that the
indemnity covered loss and damage which (a) followed and arose out of claims or
complaints against the Company, the Sellers or any Relevant Person, (b) related to
the period before completion and (c) pertained to the mis-selling or suspected mis-
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selling of insurance products or services. But it is necessary to place the clause in
the context of the contract as a whole, to examine the clause in more detail and to
consider whether the wider relevant factual matrix gives guidance as to its meaning
in order to consider the implications of the rival interpretations.
27. The contractual context is significant in this case. The indemnity in clause
7.11 is an addition to the detailed warranties in Schedule 4. The mis-selling which
clause 7.11 addresses is also covered by the warranty in paragraph 14.1 of Schedule
4 (para 18 and para 19 above). But liability for the Schedule 4 warranties is timelimited by Schedule 5. In particular paragraph 3.1(b) of that Schedule (para 20
above) required the Company to claim within two years of the completion of the
sale and purchase. The scope of the clause 7.11 indemnity, breach of which gives
rise to a liability which is unlimited in time, falls to be assessed in the context of
those time-limited warranties.
28. All of the parties to the SPA were commercially sophisticated and had
experience of the insurance broking industry. Capita was not involved in the
management of the Company before the share purchase. The Sellers were the
directors and the only shareholders of the Company. They were the people who
knew or ought to have known how the Company had operated its business; Capita
would in all probability not have that knowledge. The parties to the SPA would have
known this. That lack of knowledge explains why Capita required the disclosures in
the disclosure letter and the detailed warranties in Schedule 4; but it does not assist
the court to determine the scope of the indemnity clause. The court is not aware of
the negotiations which led to the SPA; they are not relevant to the task of interpreting
that agreement: Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101. Business
common sense suggests that Capita had an interest in obtaining as broad an
indemnity against the adverse consequences of mis-selling as it could obtain. But
the sellers had given warranties of compliance with regulatory requirements, which
covered such mis-selling, subject to the agreed limits of quantum and time. The
sellers were exposed to a potential liability under those warranties for the two years
after the Completion Date, during which Capita could learn of the Company’s sales
practices. One may readily infer that they had an interest in minimising their further
exposure to liability after that time had elapsed. Business common sense is useful to
ascertain the purpose of a provision and how it might operate in practice. But in the
tug o’ war of commercial negotiation, business common sense can rarely assist the
court in ascertaining on which side of the line the centre line marking on the tug o’
war rope lay, when the negotiations ended. I therefore turn to examining the clause
in more detail before returning to the commercial context.
29. In order to illustrate the competing contentions of the parties Popplewell J
helpfully divided clause 7.11 into its constituent parts. I set that presentation out
below with the addition in (B) of the sub-headings (i) and (ii) to assist my exegesis.
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30. Clause 7.11 thus divided provides:
“The Sellers undertake to pay to the Buyer an amount equal to
the amount which would be required to indemnify the Buyer
and each member of the Buyer’s Group against
(1) all actions, proceedings, losses, claims, damages, costs,
charges, expenses and liabilities suffered or incurred, and
(2) all fines, compensation or remedial action or payments
imposed on or required to be made by the Company
(A) following and arising out of claims or complaints
registered with the FSA, the Financial Services
Ombudsman or any other authority against the
Company, the Sellers or any Relevant Person
(B) (i) and which relate to the period prior to the
Completion Date (ii) pertaining to any mis-selling or
suspected mis-selling of any insurance or insurance
related product or service.”
31. Counsel for Capita submitted that the clause should be read by treating (2)
and (A) as a composite phrase so that the Sellers were bound to indemnify against
both (1) and (2+A), each of which was subject to the two conditions in (B). This
meant that it was only the fines etc in (2) which had to follow on or arise out of
claims or complaints made to the FSA or other Authority against the Company etc
as provided in (A). Thus, it was submitted, the indemnity covered all liabilities in
(1) provided only that (i) they related to the period prior to the completion date and
(ii) pertained to any mis-selling or suspected mis-selling of insurance products etc.
32. Counsel for Mr Wood submitted that the clause was properly construed by
treating both (1) and (2) as being subject to three conditions, namely (A), B(i) and
(B)(ii). He submitted that (A) should be read as if there was a comma after “claims”,
so that it provided as a condition for the triggering of the indemnity under (1) or (2)
that there must be either claims by customers, or complaints made to the regulatory
authorities, in each case against the Company, the Sellers or any Relevant Person.
Thus, on his approach, either a claim by a customer against the Company, the Sellers
or an employee or former employee of the Company, or a complaint to a regulatory
authority against the Company, the Sellers or an employee or former employee of
the Company would trigger the indemnity if the two conditions in (B) were met.
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33. Both counsel accepted that, because of the breadth of the terms used in (1),
the types of loss and damage in (1) covered all of the types of loss and damage in
(2). Thus it was suggested that (2) must have been included only for the avoidance
of doubt. This means that on Mr Wood’s approach (2) was otiose while on Capita’s
approach the composite (2+A) was otiose. I find the latter proposition remarkable
and unlikely for two reasons.
34. First, and to my mind most significantly, (A) would serve no purpose by
restricting the source of loss and damage if (A) governed only (2) and therefore (1)
was unrestricted. (A) would not restrict the scope of the indemnity in any way. On
Mr Wood’s construction the words in (A) have a purpose as they limit the scope of
both (1) and the otiose (2).
35. Secondly, if one airbrushes out (2+A) as otiose, the clause does not specify
against whom the actions, proceedings and claims in (1) are directed. The clause
would read:
“The Sellers undertake to pay to the Buyer an amount equal to
the amount which would be required to indemnify the Buyer
and each member of the Buyer’s Group against
all actions, proceedings, losses, claims, damages, costs,
charges, expenses and liabilities suffered or incurred, and
which relate to the period prior to the Completion Date
pertaining to any mis-selling or suspected mis-selling of any
insurance or insurance related product or service.”
The identity of the persons against whom the relevant claims etc could be made so
as to trigger the sellers’ indemnity would, on Capita’s approach, be left to
implication. There must be a limit on who such persons could be as it would be
absurd for Capita to have a claim against the Sellers for indemnity resulting from
any mis-selling on its part before the Completion Date. But, even assuming that the
target was mis-selling by or on behalf of the Company, it is far from obvious that
the delimited class of persons would be “the Company, the Sellers or any Relevant
Person”.
36. Capita made three further points against Mr Wood’s interpretation. First,
there is an element of tautology as the “claims” in (1) are said in (A) to follow and
arise out of “claims”. But as Christopher Clarke LJ observed, tautology in
commercial contracts is not unknown and the verbal exuberance (or torrential
drafting) of (1) makes tautology difficult to avoid.
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37. Secondly, Capita pointed out that there is a comma after “incurred” at the end
of (1) and no comma after “Company” at the end of (2). This could support the
separation of (1) from (2) and the conjunction of (2) and (A). Similarly, Mr Wood’s
interpretation would involve inserting in (A) a comma after “claims” and also after
“any other Authority” so as to limit both the claims and the regulatory complaints
to those against “the Company, the Sellers or any Relevant Person”. Again in
agreement with Christopher Clarke LJ I do not think that the use of commas in this
clause is a strong pointer in favour of Capita’s interpretation, both because there are
no set rules for the use of commas and in any event the draftsman’s use of commas
in this clause is erratic.
38. Thirdly, the draftsman used an adjectival participle at the start of (A)
(“following and arising out of”) and “changed tone” by using a relative pronoun
(“and which”) at the start of (B). But the use of the adjectival participle does not tie
(A) exclusively into (2) because in (B) the adjectival participle (“pertaining to”)
unquestionably applies to both (1) and (2). These detailed points of style and syntax
are of little assistance in construing an admittedly opaque clause.
39. I return to the commercial context and the practical consequences of the rival
interpretations. On Mr Wood’s interpretation it requires a customer or customers to
make a claim, or complaint to the regulatory authorities, against the Company, the
sellers or a Relevant Person in order to trigger the indemnity. Thus if a whistleblower alerted the regulatory authorities of suspected or actual mis-selling, or if (as
in fact occurred) management, complying with their regulatory obligations, reported
such mis-selling to the FSA, which ordered the payment of compensation, the
indemnity would not be triggered. Yet in each case, the mis-selling before the date
of completion causes the Company loss.
40. The general purpose of clause 7.11, to indemnify Capita and its group against
losses occasioned by mis-selling is clear. Had clause 7.11 stood on its own, the
requirement of a claim or complaint by a customer and the exclusion of loss caused
by regulatory action which was otherwise prompted might have appeared
anomalous. But clause 7.11 is in addition to the wide-ranging warranties in Part 14
of Schedule 4 (paras 18 and 19 above) which probably covered the circumstances
which eventuated. Capita had two years after completing the purchase to examine
the sales practices of the Company’s employees and so uncover any regulatory
breaches in order to make a claim under the Schedule 4 indemnities. Prima facie that
was not an unreasonable time scale. Indeed, Capita was able to send its findings to
the FSA within 20 months of the Completion Date. It is not contrary to business
common sense for the parties to agree wide-ranging warranties, which are subject to
a time limit, and in addition to agree a further indemnity, which is not subject to any
such limit but is triggered only in limited circumstances.
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41. From Capita’s standpoint the SPA may have become a poor bargain, as it
appears that it did not notify the sellers of a warranty claim within two years of
Completion. But it is not the function of the court to improve their bargain.
42. In this case, the circumstances which trigger that indemnity are to be found
principally in a careful examination of the language which the parties have used.
Conclusion
43. I would therefore dismiss the appeal.