The English High Court’s judgment in Learning Curve (NE) Group Ltd v. Richard Lewis and Melanie Probert[1] concerned the alleged breach of warranties and an indemnity in a sale purchase agreement (SPA). The defendants put up a vigorous and multifaceted defence, resulting in an extremely wide-ranging judgment. While much of the analysis is highly fact dependent, two of the issues traversed are worth highlighting – notification of claims under an SPA and service of proceedings.
Background
The defendants, Richard Lewis and Melanie Probert, sold the entire share capital of AP Cymru, trading as the Motivational Preparation College for Training (MPCT), to Learning Curve Group (LCG) under an SPA dated 29 October 2021.
MPCT provided education and training for young people, in particular through military training and preparation. It was heavily funded by the Education and Skills Funding Agency (ESFA), an executive agency which is sponsored by the Department for Education. After completion, the ESFA audited MPCT for academic year 2020 – 2021 and identified £1.25 million of overclaimed funding as a result of breaches of the applicable ESFA funding rules. ESFA eventually clawed back £783,325 from MPCT.
LCG sued the defendants for breach of a suite of warranties – alleging that the breach of the funding rules had a substantial adverse financial effect on MPCT’s business far in excess of the amount of the clawback.
The defendants ran multiple defences, including that many of the claims had not been notified in accordance with the terms of the SPA and were therefore excluded, and that the claims were not served on the defendants in time and were therefore deemed to have been withdrawn.
Notification
The SPA required that notice of any warranty claim “shall give details (in such detail as is reasonably available to the Purchaser at the time) of the nature of the claim, the facts and circumstances giving rise to it and the Purchaser’s bona fide estimate of any alleged loss”.
LCG gave notice of its warranties claims in two letters. The first letter set out the nature of the claim and the facts relied upon, and specified (by number) several warranties it claimed had been breached. The second letter set out its loss, which it estimated as £6.9 million. Subsequently, in its particulars of claim served in the proceedings, LCG alleged breaches of five additional warranties that had not been specified in its notice of claim and claimed a loss of £10.2 million.
The defendants submitted that, as the allegations regarding the breaches of the additional five warranties had not been set out in the notice of claim, they had not been properly notified in accordance with the terms of the SPA and were therefore excluded. They further submitted that, having stated the loss as being £6.9 million in the second letter of notice, LCG could not seek to recover more than that.
The judge acknowledged the line of recent authorities in which claims had been struck out for technical noncompliance with a notification clause in an SPA. However, he emphasized that little assistance is derived from extracting isolated dicta from earlier cases which were directed to different contractual wording applied to the facts of the case – every notification clause turns on its individual wording. The judge considered that the notification clause in the SPA was expressed in plain language with no obvious element of ambiguity or uncertainty. Accordingly, he reasoned, it was “important that the court should not become distracted by what was said in other cases, about different contractual language, into thinking it needs to delve deep into its interpretative toolbox when that may not be necessary in order to discern the clause’s natural and ordinary meaning”. Further, he was “not concerned with any technical minefields … that may have been encountered in those other cases”.
The judge concluded that there was no basis for concluding that the claim under the five warranties in question was invalidated because they were not identified in the notices. On its natural and ordinary meaning, the notification clause did not require such identification. Had that been the intention, the contract drafters could have required the notice to specify “the warranty or warranties relied upon” (or similar), rather than simply requiring LCG to give details of the “nature of the claim” and “the facts and circumstances giving rise to it”.
Regarding the defendants’ submission that the loss was capped at the £6.9 million, the judge held that it was clear that the notification clause simply required a bona fide estimate (which is what LCG had given) and not a fixed cap. That would require very different, specific wording.
Service of the proceedings
The SPA provided that, “Any Warranty Claim … or Indemnity Claim … shall be deemed to be withdrawn … unless legal proceedings in respect thereof have been commenced by 14 February 2023, and for this purpose legal proceedings shall not be deemed to have commenced unless both issued and served …”.
The defendants issued the claim form and had it hand-delivered to the defendants’ property on 14 February 2023. The defendants were away until the following day, and did not become aware of the claim form until their return.
The defendants argued that service in this context meant service in accordance with the notice provisions in the SPA, under the terms of which service had not taken place until 15 February 2023, when they returned to their property. In the alternative, the defendants argued that the date of service should be determined in accordance with Civil Procedure Rule (CPR) 6.14. CPR 6.14 provides that,“A claim form served within the United Kingdom in accordance with this Part is deemed to be served on the second business day after completion of the relevant step under rule 7.5(1)”. This would mean that the claim form was served on 16 February, and the deadline had been missed.
LCG countered that “served” in this context meant served in accordance with one of the methods set out in CPR 7.5(1), which includes delivering to or leaving at the relevant place. Once the specified step is complete, the document is served. Accordingly, the document was served when it was delivered to the defendants’ property.
The judge’s starting point was to question why, both as a matter of textual and contextual analysis of the SPA and commercial common sense, the parties should be taken to have intended that the concept of service meant anything other thanin accordance with the CPR. To say instead that the parties intended that service should be “in accordance with the SPA” made little sense when the SPA says nothing expressly about the service of legal proceedings, as opposed to contractual notices. Given “and served” followed “issued”, which plainly meant issued in accordance with the CPR, this could not mean anything other than service in accordance with the CPR.
As to the applicable CPR rule, the judge was of the view that the two rules taken together draw a clear distinction between the date when service is actually effected, which is when the relevant step under rule 7.5 has been completed, and the date two business days later when service is deemed to take place under CPR 6.14. CPR 7.5 is looking at when actual service takes place, so that a claimant who takes the requisite step can be sure that they have served within the four months of validity of the claim form (thereby avoiding, if relevant, any limitation issues). CPR 6.14, in contrast, is looking at when service will be deemed to have taken place for the purpose of other steps in the proceedings thereafter, beginning with the filing of an acknowledgement of service. Accordingly, service was effected when the claim form was hand-delivered on 14 February 2023 and was therefore in time.
Takeaways
The court’s findings on these two issues were sensible, in line with established authorities and should really have come as no (or very little) surprise – even to the defendants. But even if the outcome was something of all but a foregone conclusion, the disputes on these issues could have been avoided altogether with more explicit drafting, specifically:
- Clarifying the type and level of information to be included in a notice of claim.
- Specifying the degree to which the information in the notice of claim, including a statement of loss, limits later recovery.
- When using terms such as “service”, being explicit as to what they mean.
[1] [2025] EWHC 1889 (Comm).
Contributors
Alex Radcliffe