Drax Smart Generation Holdco Limited v Scottish Power Retail Holdings Limited
[2024] EWCA Civ 477
Darryl Adie & Anor v Ingenuity Digital Limited
18 November 2024
[2024] EWHC 2902 (Ch)
High Court
Two companies argued about money owed after a business sale. One company (buyer) adjusted the final payment amount, saying the seller had wrongly written off debt. The seller argued this was unfair. The judge ruled it was not automatically unfair, and suggested each company should use the agreement's own rules to work it out. If that didn't settle the matter, then it would go to further court hearings.
Key Facts
- •Part 8 claim for declarations on the interpretation of a Share Purchase Agreement (SPA) dated 31 January 2022.
- •Claimants were sellers, defendant was buyer of the entire issued share capital of two companies.
- •Dispute concerns calculation of deferred consideration, specifically an adjustment to EBITDA related to a significant customer's (O4B) complaint.
- •Before the SPA signing, O4B complained about Ampersand's performance, potentially leading to contract termination and claims.
- •Amendments were made to the SPA's indemnity clause (8.1(c)) to address the O4B issue.
- •O4B claim escalated into a dispute, resulting in Ampersand writing off invoices and losing future business.
- •Defendant adjusted EBITDA in the deferred consideration statement to deduct the written-off invoices, impacting deferred consideration payable to claimants.
- •Defendant also intimated a separate indemnity claim for a similar amount and other losses.
- •Claimants argued that the defendant's adjustment to EBITDA is improper as its sole remedy is under the indemnity clause, and a double claim would result.
Legal Principles
Principles of contractual interpretation: the court considers the contract as a whole, the factual matrix, and the parties' intentions.
Sara & Hossein v Blacks Outdoor Retail [2023] UKSC 2; Lamesa Investment Ltd v Cynergy Bank [2020] EWCA Civ 821; Federal Republic of Nigeria v JP Morgan Chase Bank NA [2019] EWHC 347 (Comm)
Admissibility of evidence regarding the genesis and objective aim of a contract: evidence of factual background, including pre-contract negotiations, is admissible to show the genesis and objective aim of the contract as a whole, or a specific provision if sufficiently important.
Merthyr (South Wales) Ltd v Merthyr Tydfil County Borough Council [2019] EWCA Civ 526
Outcomes
Claimants' declarations were refused.
The court found that the SPA did not explicitly prohibit adjusting EBITDA and making a separate indemnity claim, and that such an outcome was not inherently unfair or contrary to commercial common sense. The court held that any dispute over the EBITDA adjustment should be referred to expert determination as per the SPA, and any indemnity claim could be dealt with in subsequent litigation.
Defendant's declarations were granted.
The court found the defendant was entitled to adjust EBITDA according to Schedule 7 and that the question of whether the adjustment should have been applied is for expert determination. Subsequent indemnity claims are a matter for further litigation.