Jurisdiction(s):
United Kingdom

Capita (Banstead 2011) v RFIB Group: Court of Appeal rejects continuing breach, applies EE Caledonia concurrent-cause bar to share sale indemnity and apportions pre/post-transfer negligence

Published on: 04 January 2016

Published by a LexisNexis Dispute Resolution expert

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This decision explored how far a purchaser of a company can rely on an indemnity in a share sale agreement to recover from the seller for losses stemming from an employee’s negligent acts occurring both before and after the business transferred. The indemnity clause stated the seller would hold the buyer harmless for loss ‘directly or indirectly’ arising from services the company (or its agents) supplied before the transfer date, as specified in the agreement. Such wording is a common feature of share sale indemnities. On a straightforward reading, it implies that any loss linked to conduct after completion falls to the buyer, with no route to reimbursement from the seller. The core dispute was how liability should be apportioned for losses spanning pre- and post-transfer where pre-transfer negligence was left uncorrected following completion. This required analysis of two principal questions, including:

the issue of continuing breach—on this point, the Court of Appeal (by a majority) reached a view concerning the existence of a continuing duty and continuing...

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