The recent decision of the High Court in TP ICAP Limited v Nex Group Limited [2022] EWHC 2700 (Comm) considers what may seem like a trifle in the context of litigation worth more than £1 billion: notifying the other side of the claim in accordance with the terms of the contract.
The transaction
Tullett Prebon plc, a financial services company, entered into an agreement to buy ICAP Global Broking Holdings Limited [“ICAP Ltd”], a provider of voice broking services (i.e. market matchmaking services, the purpose of which is to bring together market participants who wish to buy or sell financial instruments). Whilst the seller was ICAP plc, by way of novation, Nex Group Limited [“Nex”] assumed ICAP plc’s obligations and liabilities. Shortly before completion, Tullett Prebon plc changed its name to TP ICAP plc. The deal completed on 30 December 2016. Subsequently, in 2021, the plc became a private limited company, [“TP ICAP”].
The Seller Warranties
The Share Purchase Agreement [“SPA”] contained warranties upon which TP ICAP relied when buying ICAP Ltd [a “Seller Warranty”]. Should TP ICAP wish to bring a claim on the basis that a Seller Warranty was, or was alleged to be, untrue or inaccurate, it had to provide notification of that claim by 30 December 2018, the second anniversary of completion. The written notice would need to state in reasonable detail the nature of that claim and, if practicable, the amount claimed.
Amongst the warranties contained in the SPA, ICAP Ltd had stated that, so far as it was aware, no director was, or had been in the 18 months prior to completion, subject to any non-routine investigation, review, or enquiry by a governmental authority nor was any investigation pending or threatened.
The claim notifications
On 20 and 29 December 2018 – barely within the deadline contained in the SPA – TP ICAP, having purchased a business for more than £1 billion, sent letters to Nex – the party responsible by way of the novation – notifying it of two breach of Seller Warranty claims. The first involved an investigation by the US Commodities Futures Trading Commission in respect of swaps trading relating to bond issuances, the second an investigation by a German prosecutor into cum-ex trading. TP ICAP inferred that ICAP Ltd must have been aware of both investigations prior to completion of the deal.
In its application, Nex sought to argue that TP ICAP’s Seller Warranty claims should be struck out on the basis that notification of those claims had not been given in accordance with the requirements of the SPA. Nex argued that TP ICAP’s notification letters had not met the degree of specificity that would have enabled it to investigate the claims. The letters did not refer to the directors under investigation or the amount of the potential financial liability arising. Without this detail, Nex submitted the notifications were ineffective.
The judgment
The judge did not agree. In judgment handed down on 25 October 2022, Mr Justice Robin Knowles CBE said the nature of the Seller Warranty claims had been sufficiently stated in accordance with the SPA, which required only reasonable detail of the claim, and of quantum if it were practicable to do so. He did not take the view that the claims were unarguable; they may not be good claims, or of sufficient worth, but these were matters for trial. As such, the judge was not willing to strike out the Seller Warranty claims at this juncture.
Far from trifle
For TP ICAP’s billion-pound claim to fail for want of correct notification would be galling to say the least, a reminder that giant disputes can turn on minor details. Care needs to be taken to ensure that the contractual framework governing a relationship is complied with. For TP ICAP and Nex, the proceedings continue, towards what appears to be a blockbuster trial in late 2024.
For enquiries, please contact Nick Leigh, Legal Director, Dispute Resolution (nick.leigh@rosenblatt.co.uk).
