LIBOR transition to risk-free rates and aviation finance
On July 27, 2017, the FCA announced that they would no longer compel or persuade banks to make submissions to LIBOR as from the end of 2021.
In Al-Hasawi v Nottingham Forest Football Club Ltd  EWHC 2884 (Ch) the High Court has reversed a Master’s decision which held that an entire agreement clause excluded liability for misrepresentation claims. The High Court held that the entire agreement clause was not effective in excluding misrepresentation claims and the parties had not separately agreed any such exclusion.
The Claimant/Buyer purchased Nottingham Forest football club from the Defendant/Seller under a Share Purchase Agreement (SPA). The Buyer alleged that during the due diligence process the Seller had represented that the financial liabilities of the club were lower than the actual liabilities. The Buyer relied on a spreadsheet uploaded to a dataroom purporting to set out the liabilities. The Buyer issued proceedings against the Seller, seeking amongst other remedies, damages for statutory misrepresentation (pursuant to s. 2(1) Misrepresentation Act 1967).
The key issue was whether the entire agreement clause in the SPA excluded claims for misrepresentation. It provided:
“This agreement (together with the documents referred to in it) constitutes the entire agreement between the parties and supersedes and extinguishes all previous discussions, correspondence, negotiations, drafts, agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter”.
The Buyer argued that the drafting of the entire agreement clause was not broad enough to exclude misrepresentation claims. It contended that it was only intended to preclude reliance on representations which otherwise could be alleged to be terms of the contract. The Buyer also argued that a “cumulative remedies” clause had the effect of preserving claims for misrepresentation. The clause provided: “[e]xcept as expressly provided in [the SPA], the rights and remedies provided under the agreement are ‘in addition to and not exclusive of any rights or remedies provided by law’”.
The Seller argued that the entire agreement clause should be construed against the contractual indemnity claims scheme in the SPA. It contended that, in this context, it was clear that the entire agreement clause was intended to exclude liability for misrepresentation. In particular, the Seller relied on a clause conferring a right on the Buyer to claim indemnity from the Seller relating to losses suffered “arising out of or in connection with” the amount of the club’s financial liabilities. It also relied on the fact that the SPA contained a detailed procedure for making contractual indemnity claims e.g. including time limits and notification requirements.
The Master’s approach was based on the Court of Appeal’s decision in Axa Sun Life Systems v Campbell Martin. The Master identified two “themes” arising from this decision
The Master concluded that misrepresentation claims were “expressly excluded” by the entire agreement clause. The Master appeared to rely principally on two points
The High Court reversed the Master’s decision, holding that misrepresentation claims were not excluded. In short, the court concluded that
This decision is a reminder that exclusions 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).
Each case will turn on the words used in the contract, although this decision suggests that, in general, the courts will 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.