Buyer awarded £5.2m for breach of warranty in company sale dispute

The High Court has awarded more than £5.2 million in damages to the buyer of a training company after finding that the seller breached key warranties in a share purchase agreement.

The case arose from the 2020 sale of a further-education provider to Learning Curve (NE) Group Ltd, a national training organisation. The warranties in the sale agreement confirmed that the company’s funding arrangements complied with government requirements and that no circumstances existed which might lead to a loss of income.

Mr Justice Bright found those assurances were false. The business had misapplied funding rules under the Education and Skills Funding Agency (ESFA) by classifying some full-time students as part-time in order to avoid English and maths obligations. When the ESFA later reviewed the accounts, it clawed back large sums that had already been paid.

The judge ruled that this clawback meant the company’s value at the date of sale had been overstated, since a major part of its income stream was unsustainable. That amounted to a breach of warranty, entitling Learning Curve to recover the difference between the price paid and the company’s true worth.

Damages were assessed at £5,211,625. The court confirmed that compensation for breach of warranty is measured at the date of the transaction, not in hindsight, and that contractual notice requirements had been met.

Mr Justice Bright also addressed how service of proceedings should be interpreted under share purchase agreements, preferring earlier reasoning by Flaux J in T&L Sugars that focuses on commercial sense rather than technicalities.

The decision highlights how contractual warranties can expose sellers to substantial liability if regulatory issues later emerge.

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