The recent decision of IPSOS S.A. v Dentsu Aegis Network Limited, provides a warning to those seeking to make a warranty claim, that they need to do so with care and follow the procedure set out in the relevant agreement closely, failing which their claim could fail on that ground alone.

IPSOS S.A. (Ipsos) and Dentsu Aegis Network Limited (previously Aegis Group plc) (Aegis) entered into a share purchase agreement (SPA) relating to the acquisition of shares in the Synovate Group by Ipsos from Aegis.  Ipsos (as buyer) issued court proceedings for damages for a breach by Aegis of a warranty contained in the SPA.  The warranty in question related to employees of Synovate Brazil Ltda, a company in the Synovate Group.

In its defence, Aegis relied upon the contractual limitation of liability provisions relating to warranty claims set out in the SPA. The limitation of liability provisions included a term that no claim for breach of warranty could be brought against Aegis and Aegis should have no liability for a breach of warranty unless, within 2 years of completion of the transaction, Ipsos had given Aegis written notice of the claim. The SPA provided that the written notice of claim must specify in reasonable detail:-

  1. the matter which gave rise to the claim;
  2. the nature of the claim; and
  3. so far as is reasonably practicable at the time of notification, the amount claimed.

Further, the SPA provided that if the matter has not previously been settled between the parties, court proceedings in respect of the claim had to be commenced by Ipsos within 6 month of service of the notice, otherwise the claim would be deemed to have been withdrawn.

One of the leading (Court of Appeal) authorities provides that every notification clause turns on its own wording. The Commercial Court in Ipsos set out however four propositions that it felt could be derived from past cases:-

  1. attention needs to be paid to the commercial purpose of a clause where there was a finite period in which to make a claim and that the seller (in this case, Aegis) would know in sufficient terms that a claim for breach of warranty had been made. The Court commented that Ipsos's notice was particularly uninformative.
  2. in construing a notice, the question is how it would be understood by a reasonable recipient with knowledge of the context in which it was being sent;
  3. the notice must specify that a claim is actually being made rather than indicate there is a possibility that a claim may be made; and
  4. where, as in this case, there is a requirement for certain matters to be specified in the notice, this suggests very strongly that it is not sufficient that matters a) to c) above may be inferred.

In terms of service of the notice of breach of warranty on Aegis, Ipsos relied on two letters from its Group Corporate Counsel to Aegis.  In short, the Court felt that the two letters did not comply with the contractual requirements under the SPA in respect of the service of notice of a claim for breach of warranty and therefore the warranty claim failed. By the time of the Court's decision the relevant time for making a new claim under the SPA had long passed.

Whilst if may be felt that the Court in Ipsos has taken a somewhat strict and technical approach it is not the first case to take this view. Thus those parties wishing to make warranty or other claims under an agreement, need to take care to comply with the requirements both of the particular agreement and the Court's statements.

The decision of the Commercial Court in IPSOS S.A. v Dentsu Aegis Network Limited [2015] EWHC 1171 (Comm) is available at http://www.bailii.org/ew/cases/EWHC/Comm/2015/1171.html. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.