Legal Update for Accountants - Time to bring a warranty claim?

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20 October, 2015

Case Update: The Hut Group Limited -v- Oliver Nohabar-Cookson and another [2014] EWCH 3842 (Comm)

The High Court had to interpret the terms of notice provisions in a share purchase agreement (SPA) to establish whether the imposed time limit ran from when the Buyer became aware of the grounds which could amount to a claim, or whether it was at the point the Buyer knew there was a proper basis to form a claim.

The case brought by The Hut Group (the Claimant) was in relation to an apparent breach of warranties regarding the management accounts of the Target Company. The Claimant made three notices of the breach of the warranty but these were denied by the Defendant who argued that the notices of claim did not comply with the limitation of liability clause in the SPA which imposed a time limit on notifying claims to the other party.

The Court came to the conclusion that the time limit for giving notice of a claim only began to run once the relevant party had an awareness of the proper basis for bringing a claim.

In most cases it is the Accountant that becomes aware of the possibility of a warranty claim and this case highlights that parties should be clear as to what is required in order to comply with notice provisions when reporting breaches of warranties, particular thought should be given to information which must be provided and the time from when any limitation period runs.

For further information please contact Pauline Rigby, Head of Corporate and Restructuring at Forbes Solicitors on 0800 689 0831 or email Pauline Rigby

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