116 Cardamon Ltd v Macalister & Anor [2019] EWHC 1200 (Comm) (15 May 2019)

It is rare that a claim for breach of warranty in a share purchase agreement results in an award of damages for the entire purchase price and the buyer retaining the purchased shares. But this is what happened in this case.


The Claimant entered into a SPA through which it bought a 100% shareholding in an insurance company called Motorplus, for a purchase price of £2,386,247.50. Because the sale was concluded quickly, the Claimant did not perform any due diligence and instead relied on contractual warranties. The key warranties upon which it relied related to the truth, fairness, accuracy and proper preparation of Motorplus's accounts. The SPA contained a cap on the sellers' liability for breach of warranty to the amount of the purchase price, with a de minimis irrecoverable provision of the first £500,000 of any warranty claim. The Claimant claimed that the Defendant breached these warranties as it transpired that Motorplus was effectively insolvent at the time of the sale and the accounts did not represent a true, fair or accurate picture of its financial condition.

There were three main elements to the claim for breach:

  1. That a receivable listed in the accounts had no real value and should have been written off;
  2. That a change in payment method of Motorplus's brokers had artificially inflated the value of certain items in its accounts; and
  3. That there had been a significant underprovision for claims against Motorplus. The underprovision was so significant that the Claimant claimed the entire amount of the purchase price.

In relation to each of these elements Cockerill J held:

  • In relation to the first head of claim, the Court found that sufficient disclosure had been made about the status of the receivable in an email from the company's financial controller prior to the sale.
  • As to the change in payment method, the Court ruled that this head of claim had not been sufficiently articulated in the Claimant's Notice of Claim and was therefore subject to a contractual limitation defence.
  • As to the principal head of claim, however, the Court found for the Claimant that there had been an underprovision.


Where quantification of damages for a breach of warranty can be simple (it is usually the difference between the value of the shares taking the breach into account, and the "as-warranted" value), in this case it proved complex. Not only had there been an underprovision in the accounts relied upon by the Claimant, but it also transpired that accounts of previous years had underprovided for claims. The Court therefore rejected the Claimants' contention that the "as-warranted" value of the shares was the purchase price.

Ultimately, the Court was not convinced by the expert evidence adduced by either party and it conducted its own valuation. Cockerill J concluded, in line with the parties’ experts, that the as-warranted value of the shares exceeded the purchase price by at least £500,000, meaning that there was no need to reduce the Claimant's claim by the de minimis cap. Therefore, the Claimant was entitled to recover the entire purchase price and, for what they were worth, retain the shares in Motorplus.

Stephenson Harwood comment

This case raises two important issues.

Firstly, parties need to be aware of how contractual limitations operate. A seller may assume that a cap on liability together with a de minimis provision will reduce its overall liability to the cap, less the de minimis provision. This is not necessarily so where the purchase price is found not to reflect the true value of the shares being sold.

Secondly, the importance of careful drafting of a Notice of Claim cannot be overstated. In this case, the Claimant failed to fully articulate all possible heads of claim in its Notice of Claim, meaning that certain claims which were later articulated by the Claimant in its Particulars of Claim were contractually barred as they were in breach of contractual terms governing the provision of notice of claims under the SPA.