Tactus Holdings Limited v Philip Mark Jordan & Ors
[2024] EWHC 399 (Comm)
Millbrook Healthcare Bidco Ltd v Paul Croll & Ors
13 February 2023
[2023] EWHC 290 (Comm)
High Court
A company bought another company but the sellers hid some problems with contracts. The buyer found out and sued, winning £1.7 million because the hidden problems made the company worth less than they paid.
Key Facts
- •Millbrook Healthcare Bidco Ltd (Bidco) purchased the entire issued share capital of MHCDC Ltd (MHCDC) on 22 July 2019.
- •The purchase price was £28,032,500 plus £375,000 stamp duty.
- •Bidco claimed breach of warranty by the Sellers (Croll family) under the SPA.
- •The claim concerned two contracts: the East Sussex Contract and the Somerset Contract.
- •Bidco alleged that variations to these contracts were not disclosed and breached warranties regarding the true and fair view of MHCDC's financial position.
- •The Sellers denied the breaches and counterclaimed for Bidco's breach of warranty.
Legal Principles
Measure of damages for breach of warranty in a share sale agreement is the difference between the Warranty True value and Warranty False value.
Lion Nathan Ltd v C-C Bottlers Ltd [1996] 1 WLR 1438, Ageas (UK) Ltd v Kwik-Fit (GB) Ltd [2014] EWHC 2178 (QB)
Quantum of damages should be assessed based on a hypothetical, reasonable willing buyer and seller.
The Hut Group Ltd v Nobahar-Cookson [2014] EWHC 3842 (QB)
It is important not to be unduly affected by hindsight.
MDW Holdings Ltd v Norvill [2022] EWCA Civ 883
The price actually paid can represent the Warranty True value, particularly when calculated using orthodox methods like applying a multiple to EBITDA.
Lion Nathan, Ageas, The Hut Group, Ivy Technology Ltd v Martin [2022] EWHC 1218 (Comm)
Outcomes
The Sellers were in breach of warranty in relation to the East Sussex and Somerset Contracts.
The East Sussex Variation Agreement and the agreement to waive invoice 16150 were not disclosed, leading to misstatements in the accounts and management accounts. The undisclosed Variation Agreement significantly limited MHL's ability to recover debts under the East Sussex Contract.
Bidco's claim succeeds in the amount of £1,709,000.
The breach related to the East Sussex Contract impacted the perceived maintainable EBITDA, leading to a higher purchase price. This loss was adjusted to account for other factors and successful mitigation efforts.
The Sellers' counterclaim is rejected.
Bidco and MHL's actions after the SPA were reasonable given the circumstances and the undisclosed information.
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