Project Angel Bidco Ltd (In Administration) v Axis Managing Agency Ltd & Ors [2024] EWCA Civ 446

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The Court of Appeal has affirmed the Commercial Court's decision and its approach to the interpretation of a Warranty and Indemnity policy, rejecting the Insured's claim...
UK Corporate/Commercial Law
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The Court of Appeal has affirmed the Commercial Court's decision and its approach to the interpretation of a Warranty and Indemnity policy, rejecting the Insured's claim that there was an obvious mistake in the exclusion clause of the policy. This is an illuminating case for all parties in the W&I market.

1 Background

The Court of Appeal has dismissed the appeal of the Insured under a Buyer Side Warranty and Indemnity (W&I) Insurance Policy, finding, by majority, that the Commercial Court's decision, that certain warranties in a Share Purchase Agreement (SPA) had been excluded under the relevant W&I policy, was correct.

As set out in our briefing on the Commercial Court judgment in Project Angel Bidco Ltd (In Administration) v Axis Managing Agency & Ors1 (see our briefing here), the Insured had taken out the Buyer Side W&I policy in relation to its purchase of a civil engineering and general constructions services business in November 2019 for approximately £16 million.

A Buyer Side W&I policy is intended to protect a purchaser against the risk that a target business is not in the state warranted by the vendors. W&I policies are bespoke and are typically negotiated in parallel with the negotiation of the SPA. The policy in this case was notable (at least in this respect) in that the negotiations for the policy only commenced after exchange of the SPA (although before completion).

2 The Claim

The Insured alleged breaches of certain warranties concerning the target company's compliance with anti-bribery and anti-corruption legislation, and ultimately brought a claim against the underwriters of the W&I policy in respect of those breaches.

Each of the warranties alleged to have been breached2 was referred to in the "Cover Spreadsheet" appended to the policy as "Covered" for the purpose of the insuring clause of the policy3.

However, the W&I policy also contained a number of exclusion clauses, including in respect of liabilities arising from breaches of anti-bribery and anti-corruption law – defined in the policy as "ABC Liability". The plain reading of the exclusion clause for ABC Liability would have captured all of the alleged breaches, notwithstanding the inclusion of these warranties within the Cover Spreadsheet.

At the heart of this case was the question whether, as the Insured argued, there was an obvious error in the definition of "ABC Liability", as evidenced by the inconsistency between the plain reading of the exclusion of liability for loss arising from an ABC Liability on the one hand, and the scope of the insuring clause and Cover Spreadsheet on the other.

3 The Relevant Provisions in the W&I Policy

The relevant exclusion clause at 5.2 of the policy read:

"The Underwriters shall not be liable to pay any Loss to the extent that it arises out of...any ABC Liability".

The definition of "ABC Liability" read:

"any liability or actual or alleged non-compliance by any member of the Target Group or any agent, affiliate or other third party in respect of Anti-Bribery and Anti-Corruption Laws".

The definition of "ABC Liability" contended for by the Insured involved replacing the first "or" in the definition of ABC Liability to read "for", as follows:

"any liability for actual or alleged non-compliance by any member of the Target Group or any agent, affiliate or other third party in respect of Anti-Bribery and Anti-Corruption Laws" (emphasis added).

4 The Decision

It was common ground between the parties that unless the correction to the definition of ABC Liability contended for by the Insured was made, all of the alleged breaches of warranties fell within the scope of the exclusion for ABC Liability, bringing an end to its claim. The Court of Appeal therefore had to decide whether there was:

  1. an obvious error in the policy wording; and

  2. a clear means of curing that error, either provided within the contract itself or that the Court could impose.

The leading judgment of Lord Justice Lewison, on behalf of the majority4, set out the following principles, in reaching the same conclusion as the Commercial Court that there was not an obvious error in the W&I policy:

  • Complex contractual documents may "contemplate and provide for the possibility of inconsistency", per the Supreme Court inFCA v Arch Insurance (UK) Ltd5.

  • The interpretation of a contract is an iterative exercise that requires a contract to be considered as a whole, including in connection with the contractual context. Citing Justice Foxton in Generali Italia SpA v Pelagic Fisheries Corpn6 that a "jigsaw approach" to construction, which assume that parties intend all parts of a contract between them to be effective, risks providing a "false equivalence between bespoke and boilerplate contractual provisions".

  • A correction to the literal meaning of a provision of a contract can only be made if the court is satisfied both as to the mistake and the nature of the correction7, and while there is not a "limit to the amount of red ink ... which the court is allowed", there is a high hurdle before the court will accept that "people have made linguistic mistakes particularly in formal documents"8.

  • Critically for this case, it is not sufficient to demonstrate inconsistency between various policy terms.9

Applying these principles, Lewison LJ concluded that there was not an obvious error in the policy wording. First, if there had been a mistake, it must be a mistake that was common to both parties. However, Lewison LJ was satisfied that there was a coherent and rational explanation for why the ABC Liability definition took the form that it did from the perspective of the underwriters. The ABC Liability definition as drafted excluded liability for any "diminution in share value attributable to an allegation of non-compliance with anti-bribery laws even if the allegation was never proven nor even investigated". It was therefore clearly in the underwriters' interests for the definition to be drafted as it was.

Second, while Lewison LJ accepted that the policy appeared to give with the one hand and take away with the other, the exclusion did not serve to render all of the relevant warranties redundant - there were plainly breaches of certain of the warranties which were the subject of the claim10, which could in theory fall outside the scope of the exclusion and thereby could give rise to liability under the policy.

Finally, even if it was accepted there was an obvious mistake, it was not obvious whether that mistake was in the wording of the ABC Liability or was in the inclusion of warranty 13.5 in the "Covered" section of the Cover Spreadsheet.

By contrast, Lord Justice Phillips' short dissenting judgment found that the correction contended for by the Insured was an obvious cure to what may well have been a typographical mistake and was satisfied that "the intention of the parties is best and properly reflected by adopting the interpretation proposed by [the Insured]."

5 Conclusion

As with the decision of the Commercial Court below, this decision is an important reminder that merely because a warranty is indicated to be "covered" in an appendix to a W&I policy, consideration must be given to the contract as a whole, in particular the relevant exclusion clauses contained in the body of the policy. While W&I policies are almost always negotiated alongside the accompanying SPA, as part of time pressured and intensive negotiations, each party must pay careful attention to the consistency of the insuring clause as against the strict wording of any exclusion clause.

Read the full judgment here.


1. [2023] EWHC 2649.

2. Namely, warranties 11.1, 11.4, 11.5 and 13.5.

3. Save for warranty 11.1 which was stated to be "Partially covered".

4. Lord Justice Lewison gave the leading judgment, with which Lord Justice Arnold agreed and Lord Justice Phillips dissented.

5. [2021] UKSC 1.

6. [2020] EWHC 1228 (Comm).

7. Arnold v Britton [2015] UKSC 36.

8. Chartbrook Ltd v Persimmon Homes [2009] AC 1101.

9. Per Sir Geoffrey Vos MR in Britvic plc v Britvic Pensions Ltd [2021] EWCA Civ 867.

10. Warranty 13.5 was the only warranty where Counsel for the underwriters could not identify any potential breach that would fall outside of the ABC Liability exclusion.

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.

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