Commercial Court strikes out contingent warranty claims

England and Wales

The Commercial Court has struck out substantive elements of a claim for breach of warranties said to have arisen from investigations concerning alleged “cum-ex” and swaps trading.

Calver J held that notifications to the defendant of contingent warranty claims were not compliant with the parties’ agreed notice provisions and so were ineffective.


In TP ICAP Ltd v Nex Group Ltd [2021] EWHC 1375 (Comm), the claimant entered into a share purchase agreement (SPA) with ICAP plc to acquire its voice broking business.

Some three years later, the claimant purported to notify the defendant of warranty breaches in connection with ongoing investigations and enquiries by the Financial Conduct Authority (FCA), the US Commodities and Future Trading Commission (CFTC) and various German authorities concerning the target’s alleged involvement in certain cum-ex and swaps trading activity.

By the notification provision clause in the SPA, the purchaser was required to provide written notice “stating in reasonable detail the nature of the Seller Warranty Claim and, if practicable, the amount claimed”, within the specified timeframe.

The defendant applied to strike out and/or for summary judgment on aspects of the claims on the basis, amongst other issues, that the claimant’s notifications were invalid. 

Warranty regarding compliance with laws and regulations

One of the primary claims concerned purported breaches of a warranty that the target had not “contravened any applicable law or regulation…which has in the preceding 18 months resulted or may result in any fine, penalty or other liability or sanction that, in each case, has or would have a material adverse impact on the operation of the Voice Group Business (taken as a whole)”.

The defendant argued that the notifications were invalid in respect of any breaches of this warranty because they had not stated that the target had in fact contravened any applicable law or regulation, nor identified any fine or penalty which would have a material adverse impact on the business. Instead, the notices stated that the claimant “may” incur loss in the event of adverse findings arising out of those investigations and that those matters “may give rise” to a claim – rather than stating that such a claim existed.

The claimant maintained that the notice provision did not require it to make a positive assertion in its notifications that the target had breached applicable law/regulation. A reasonable recipient would understand that the notices had intended to notify the defendant that if the ongoing investigations concluded in future that there had been a contravention of a law or regulation, then the defendant would be in breach of the warranty.

The claimant also argued that in the absence of regulatory or court findings, it should not be required to assert that there had been a breach of the law and/or regulations by the companies it had acquired, as that could be taken by regulators as an admission of wrongdoing and lead to penalties and/or civil claims, the costs of which could well be spread between the parties. It argued that it would be commercially illogical to suppose that the parties intended to set as a pre-condition to the notification of a potential warranty claim the effective admission of a liability by the claimant. Such an admission, in the context of a potential warranty claim, would be in neither party’s best interests.

Calver J held that since the SPA required notifications to provide “in reasonable detail the nature of the Seller Warranty Claim, and, if practicable, the amount claimed…”, and a “Seller Warranty Claim” was defined as “a claim by the Purchaser the basis of which is that a Seller Warranty is, or is alleged to be, untrue or inaccurate”, in order to determine the nature of what was required to be notified to the Defendant, reference had to be made to the actual warranty in dispute.

In this case, the warranty focused on a past contravention of a law or regulation which either had or might result in a fine or penalty. On that basis, the underlying claim would need to consist of an allegation that a contravention of a law or regulation had in fact occurred. Therefore, it was not sufficient to simply notify within the relevant time limit that an unspecified contravention might be identified at some stage in the future. That would rob the time limits in the SPA’s notification clause of their purpose. Similarly, the commercial purpose of a notification (to ensure that the seller knows in sufficiently formal terms that a claim for breach of warranty is in fact being made, such that financial provision can be made for it) would also be defeated.

In order to provide “reasonable detail” of the nature of the claim, the claimant must include a description of the broad nature of the contravention of the law or regulation which was alleged (identifying the relevant law/regulation), and making clear that as a result, the claimant was making a warranty claim.

Calver J further held that the notifications must “make clear that…a claim is being lodged and pursued now, rather than indicating a possibility that a claim may be made at some point in the future”.

Further, the wording of the warranty made a material adverse impact on the operation of the business a necessary and important element of any claim. The alleged impact therefore had to be specified in the notification in order to enable the seller to gauge to what extent the claim had substance. 

Calver J acknowledged that, for its own commercial reasons, the purchaser might not wish to allege (i.e. effectively admit) contravention(s) of a law or regulation by the target in its notices, but stated that it must then accept that it would not have given valid notice under the SPA.  This unfortunate choice between a rock and a hard place was a function of how the warranties and notice provisions were drafted.

The notifications in respect of this warranty were therefore held to be invalid.

Warranty regarding investigations

The claimant had also purported to notify the defendant of breaches of the following warranty:

"No Voice Group Company, nor, so far as the Seller is aware, any director, officer or employee of any Voice Group Company nor (in relation to the Voice Group Business) any member of the Seller's Group or any director, officer or employee of any member of the Seller's Group, is or has in the preceding 18 months, been subject to any non-routine investigation, review or enquiry..."

The claimant stated in its notification that the Frankfurt prosecutor had made enquiries in respect of various employees of the Target companies “and thus the [companies] themselves”. The defendant submitted that this did not constitute valid notification of a claim regarding an investigation into one of the target companies (as opposed to the employees) – the words quoted above were said to be an “illegitimate device” to get around the fact that investigating an employee was not the same thing as investigating the company. That distinction was an important one, since the warranty in the case of an individual under investigation was qualified by awareness on the part of the seller.

The claimant submitted that, since the prosecutor was intending to impose a fine on one of the Target companies if it were to find that its director was in contravention of criminal law, the investigation therefore extended to that Target company, as did the notification.

Calver J again ruled in favour of the defendant, since: (i) the claimant’s notification had defined the Frankfurt investigation as concerning the director, and (ii) it was at this stage the director that was the true subject of the investigation. Calver J pointed out that: “if it were the case that any investigation into an employee of a Voice Group Company was also necessarily an investigation into a Voice Group Company itself, then the additional element of knowledge… ("so far as the Seller is aware") would never come into play.”

This notification was, therefore, also invalid as regards any investigation into the target companies.


The judgment is a helpful reminder that the courts often look unfavourably on notifications of contingent claims, since the effect of such notifications can be to nullify the commercial purpose of notification provisions for breach of warranty claims, and in particular the time limits agreed between the parties. Buyers should be aware that such notifications may well be challenged. If the parties want contingent claims to be capable of notification, they should say as much in their transaction documents.

Similarly, both purchasers preparing warranty claim notices and sellers in receipt of them should consider carefully whether or not all the elements required by the notice provision are clearly set out. While a failure to do so will not always be fatal – e.g. where the seller is aware of the relevant background from other sources, as in the recent case of Dodika Ltd & others v United Luck Group Holdings Ltd [2021] EWCA (Civ) 638 – it will be worth taking advice in order to make certain of the position.