Ex-owner of Nottingham Forest FC’s parting gift

Authors: Andrew Judkins, Josh Kay

Nottingham Forest FC has successfully overturned a decision in relation to an entire agreement clause in the Share Purchase Agreement (SPA) dating back to the sale of the club in 2017 by Fawaz Al Hasawi.

Al-Hasawi purchased the club in July 2012 at a time when Nottingham Forest were mourning the loss of previous owner, Nigel Doughty. Mr Al-Hasawi subsequently sold the club in 2017.

The sale of the club by Mr Al-Hasawi in 2017 is now the source of the dispute which includes allegations that a company related to Mr Al-Hasawi represented the club’s financial liabilities as lower than their actual liabilities, a fact relied upon when finalising the purchase. The club and a company related to its new owner issued proceedings against Mr Al-Hasawi and the related company seeking, amongst other remedies, damages for statutory misrepresentation.

The key issue was whether the entire agreement clause in the SPA excluded claims for misrepresentation. The club argued that the drafting of the entire agreement clause was not broad enough to exclude misrepresentation claims. Rather, the entire agreement was only intended to preclude reliance on representations which otherwise could be alleged to be terms of the contract. The club’s position was that the entire agreement clause should be construed against the contractual indemnity claims scheme in the SPA and that it was clear that the entire agreement clause was intended to exclude liability for misrepresentation.

A Master found in favour of Al-Hasawi and concluded that misrepresentation claims were “expressly excluded” by the entire agreement clause. The Master appeared to rely principally on two points:

1. Contractual provisions excluding liability for misrepresentation do not have a fixed form requirement. In this case, the existence of the contractual indemnities demonstrated that the parties “core contractual intention” was to preclude claims relating to the subject matter of the SPA other than via the contractual indemnity scheme; and
2. The language in the SPA was “deliberately wide” so as to evidence an intention by the parties to exclude claims other than under the SPA.This decision is a reminder that exclusion of liability for common law claims in a contract must be clearly and expressly stated. In relation to misrepresentation specifically, this may be through the established formulations (i.e. a non-reliance clause or express exclusion language).
3. Although each case will turn on the words used in the contract, this decision suggests that the courts will generally not treat an entire agreement clause and/or contractual indemnity provisions as themselves establishing intention to exclude common law claims in the absence of express exclusion language.
4. A High Court judge has since reversed what would have been a controversial decision and held that misrepresentation claims were not excluded from the entire agreement clause. The existence of the contractual indemnities did not amount to an agreement to exclude misrepresentation claims. The court expressed caution about “improving the bargain the parties had actually made by inserting provisions that would make commercial sense but were not actually contained in the written agreement they had made.” The Judge held that the wording of the entire agreement clause in the SPA did not amount to clear wording establishing an intention to exclude other claims.