Publications

Stephen Reilly

In Oversea-Chinese Banking Corp LTD v ING Bank NV (2019) [2019] EWHC 676 (Comm) the Claimant ran a novel argument on its breach of warranty claim where it did not plead diminution in value of the shares as the measure of loss in relation to a £14.5m breach of Warranty claim that the Target’s accounts failed to give a true and fair view of its state of affairs. The claim was connected to an alleged undisclosed contingent liability in the Target’s accounts relating to a third party exposure. The High Court judgment does not say why the usual diminution measure of loss argument was not run but presumably it was because the Claimant could not credibly show any loss on valuation evidence on what appeared to be a large banking deal (see para 35 of the High Court Judgment).

Instead, the Claimant ran an argument that (i) diminution was only the prima facie measure of loss (where there had been a breach of Warranty as to quality of the company sold), other measures of loss could be applied in specific circumstances and (ii) by reason of the non-disclosure of the third party contingent liability and the related breach of Warranty that the Target’s accounts did not give a true and fair view of its state of affairs, the Claimant had lost the chance (relying on Allied Maples V Simmons – a solicitors loss of chance case) to have negotiated a specific warranty or indemnity in the SPA in respect of the specific contingent liability to the third party.

The Court confirmed the correct measure of loss was diminution and that references in previously decided cases and in contract books Chitty//McGregor on such damages being “the prima facie measure of loss” and (therefore potentially inapplicable in certain circumstances) was a reference to the issue of the date when the diminution measure of loss applied and when losses are calculated (ie prima facie being the date of the breach of warranty) which prima facie date can be displaced depending on the facts.

The Court went onto hold that in any event (i) the Claimant had not demonstrated a breach of the Warranty that that the Target’s accounts gave a true and fair view of its state of affairs and (ii) per Allied Maples, even if there had been a breach and applying the Claimant’s measure of loss, the Claimant could not have negotiated a specific Warranty/Indemnity as alleged.