Article
United Kingdom High Court judgment on warranty and indemnity claim
June 29, 2023 · Authored by Stuart Hogan
The High Court (Court) has ruled on a warranty and indemnity (W&I) insurance policy claim made by Finsbury Foods Group plc (Insured) against Axis Corporate Capital UK Ltd and Others (Insurers).
The Court determined that the Insured did not suffer any loss under the policy, despite claiming losses of £3.2 million from Insurers.
Baker Tilly’s forensic, litigation and valuation services team were instructed by DAC Beachcroft LLP (who acted for Insurers) on the quantification of losses claimed under the policy, with Principal Catherine Rawlin giving expert evidence on the matter.
Background
The transaction
In 2018, the Insured, a U.K.-based speciality baked goods manufacturer, acquired Ultrapharm Ltd, a specialty gluten-free bakery with manufacturing facilities in the U.K. and Eastern Europe, from Messrs Lewis, Lewis and Lewis.
The sales and purchase agreement (SPA) was signed, and the deal completed, on 31 August 2018, for an agreed purchase price of £20 million. On the same date, the Insured entered into the policy with Insurers, which covered specific warranties and indemnities made by the sellers under the SPA.
The claim
The Insured asserted that, in 2017, Ultrapharm agreed to price reductions and recipe changes for two product lines sold to one of its largest customers, M&S, with these changes allegedly first taking effect after the accounts date, 31 December 2017.
As a result, the Insured claimed under the policy for breach of the following summarised warranties:
- “Since [31 December 2017] … no Group Company has … agreed to offer ongoing price reductions … that would result in an aggregate reduction in turnover of more than £100,000 or would otherwise be reasonably expected to materially affect the relevant Group Company’s profitability” (“Price Reduction Warranty”).
- “Since [31 December 2017] …
