Warranty claims to proceed, following High Court ruling on service of suit

25/10/13

Green J has ruled that proceedings brought against Kwik-Fit (GB) Limited by Ageas (UK) Limited were served validly and on time.

The judgment arises from warranty claims brought by Ageas under a share purchase agreement whereby it acquired Kwik-Fit’s insurance business in 2010 for approximately £215m. Ageas alleges that the business’s pre-acquisition accounts overstated its profits and assets, significantly inflating the apparent value of the business and the price paid.

Kwik-Fit initially denied that the target company’s accounts had been overstated, but later conceded that they had. It also alleged that Ageas’s warranty claims had been served out of time, contrary to a 6 month contractual time bar.

Under the share purchase agreement, warranty claims were to be notified to Kwik-Fit within one year of completion. Thereafter, the claim was “deemed to be withdrawn and no longer enforceable unless legal proceedings in respect thereof are ... commenced by validly issuing and serving legal process within six months of the making of such claim.” Ageas, having notified its claim on Thursday 28 July 2011, issued a claim form and transmitted it to Kwik-Fit by fax, DX and email two days before the expiry of the six-month period, on Thursday 26 January 2012. Kwik-Fit accepted that it had received the claim form by fax on that date, but contended that such service was nevertheless late, as the effect of CPR r.6.14 was to deem service to have been effected on Monday 30 January 2012.

On the trial of the service point as a preliminary issue, Green J held that the contractual service provisions were to be read according to their ordinary and natural meaning, unaffected by glosses imported from the Civil Procedure Rules. So read, service had been effected on time under the share purchase agreement. Even if the CPR was to be applied, Green J held that the relevant provision was CPR r.7.5, whereby service is deemed to be complete upon the taking of the steps there set out, not r.6.14. The former rule created a rule for service to be applied by claimants. The purpose of the latter is to enable defendants to calculate the time available to them to respond to claims. Applying this interpretation of the relevant provision, service was again held to have been on time.

Finally, service was also validly effected under another provision of the agreement which dealt with the delivery of notices under the agreement generally.

Ageas’s warranty claims against Kwik-Fit continue.

The judgment is here.