Warranties, indemnities and double recovery: A learning curve on the fine print in an SPA

Introduction

Share Purchase Agreement disputes often hinge on the fine print of warranties and indemnities. The High Court’s decision in Learning Curve (NE) Group Ltd v Lewis¹ is a textbook example, highlighting the importance of precise drafting and the Court’s reluctance to imply terms where the SPA is clear. Most notably, the case clarifies that a buyer’s right to claim under a specific indemnity does not prevent a warranty claim. While double recovery under both the warranty and indemnity will be prevented by law, the buyer can choose between them as it sees fit.

Background

Learning Curve (NE) Group Ltd bought a company called APCymru Limited from Mr Lewis and Ms Probert for GBP16.8 million, with further earn-out possible. Soon after, an audit revealed the APCymru had overclaimed GBP1.25 million in Education and Skills Funding Agency funding, resulting in a negotiated clawback from the agency of GBP783,000. Learning Curve argued this breach of funding regulations meant that APCymru was worth far less than it had paid, and brought claims for breach of warranty and under the SPA’s funding indemnity. In the Claim Form, Learning Curve expressly reserved the right to elect between its remedies for breach of warranty and claims under the indemnity.

The Defendants argued that they had paid Learning Curve the amount of the clawback under the terms of the funding indemnity. They also argued that they had not been properly notified of Learning Curve's 's warranty and indemnity claims within the time limits and validity requirements under the SPA (including raising issues as to the meaning of "notice or other communication" and "served"), and so were deemed withdrawn. They also counterclaimed for the return of the sum of the clawback, arguing that if Learning Curve's claims were time-barred or deemed withdrawn, then there had been unjust enrichment.

Key issues and judgment

• The Court found Mr Lewis and Ms Probert liable for breach of warranty: APCymru had not complied with Education and Skills Funding Agency rules, and other warranties (accounts accuracy, management accounts) were also breached.
• Crucially, the buyer’s ability to claim under a specific indemnity did not preclude a warranty claim. The buyer could choose between an indemnity claim for the clawback sum or a warranty claim for the greater loss in value, but not both as there can be no double recovery.
• Notices of claim were held to be sufficient and timely; the SPA did not require every warranty to be specified in the initial notice, nor did it prevent later adjustment of the claimed loss.
• Damages were assessed using the parties’ original valuation method: maintainable EBITDA, adjusted for the clawback and a lower multiplier reflecting increased risk – the Court carried out detailed analysis in this regard, considering expert evidence.
• Mr Lewis and Ms Probert 's counterclaim for return of the indemnity payment failed – payment under a binding contract cannot be reclaimed for unjust enrichment.
• Other technical defences (on notification, limitation of liability, composite warranties, and quantum of loss) were rejected.

Conclusion

This case is a clear reminder: the right to claim under a specific indemnity does not bar a buyer from bringing a warranty claim, provided double recovery is avoided. The buyer may elect the route that best compensates their loss. The judgment also reinforces the value of careful SPA drafting and the Court’s preference for upholding clear contractual terms over implied ones. For practitioners, the message is simple – draft with precision, and understand the interplay between indemnities and warranties.

¹Learning Curve (NE) Group Ltd v Lewis [2025] EWHC 1889 (Comm)