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Update article – MDW Holdings Limited v James Norvill and others [2022] EWCA Civ 883

  • United Kingdom
  • Commercial litigation



On 4 June 2021, we published a summary of the High Court’s decision in MDW Holdings Limited v James Robert Norvill and others [2021] EWHC 1135 (Ch). That decision provided helpful analysis on the key defences that defendants/sellers often run when defending SPA claims made by claimants/buyers. Our previous article can be found here: Defending post M&A warranty claims: A recent analysis- Publications - Eversheds Sutherland (

On the issue of quantum, we noted that the court ordered the Seller to pay the Buyer £382,600, representing some 30% of the amount claimed.  That decision on quantum was the subject of appeal by both parties, and the Court of Appeal judgment is of significant interest on a couple of issues, specifically:

The use of hindsight: Damages are to be assessed at the date of breach.  On a share sale, that is usually the date of the SPA.  However, to what extent can events that took place post-SPA be taken into account when calculating the true value of the shares?

Speed read: The Court of Appeal makes clear that in a share sale it is only in exceptional cases that the resolution of contingencies that existed at the date of the SPA should be taken into consideration (i.e. that the use of hindsight will be appropriate) when calculating the true value of the shares of the target company.  Exceptional circumstances are likely to include where to ignore post-SPA events would give a party an unjustified windfall, or leave a party under-compensated.  Post-SPA market movements are unlikely to be taken into account.

Measure of damages: In addition to a claim for breach of contract, a disappointed buyer may also consider available causes of action in tort including, when the facts allow, claims for fraudulent misrepresentation and/or deceit.  The Court of Appeal decision neatly illustrates in practical terms the divergence between the measure of damages in contract and tort.

Speed read: A damages claim for breach of contract is for the difference in value of the acquired shares with/without the breach of warranty - the price is technically irrelevant to the assessment of contractual damages for breach of warranty (although it often provides a starting point for the value “as warranted”).  The objective is to put the buyer in the position it would have been in had the warranties been true.  However, in certain circumstances, a claim in tort may allow the buyer to claim the difference between the actual value and the price that the buyer paid.  The objective is to put the buyer in the position that it would have been in it the tort had not taken place.  If the value “as warranted” is less than the agreed price, then this may well enable the buyer to argue for a higher level of damages than the contractual measure.


The Buyer (MWD) purchased the entire share capital of G.D. Environmental Services Limited (GDE) from three Sellers (the Norvill family) for £3,584,224.

The Buyer alleged that, prior to the acquisition, GDE had systematically breached environmental law and unlawfully avoided the costs of regulatory compliance, thereby increasing its profits to levels that could not have been achieved if it had operated lawfully. 

The first instance court found the Sellers liable for breach of contract and deceit and ordered the Sellers to pay some £382,000, being the sum the Judge found to be the difference between the value of the shares of GDE “as warranted” and their actual value as at the date of the SPA.

The decision was appealed by both parties on two key issues.

The use of hindsight

The Sellers argued that the Judge had undervalued the “actual value” of GDE at the date of the SPA, because of an adjustment the Judge had made to account for particular risks to which GDE was exposed at the date of SPA (including for example risk of prosecution for the environmental law breaches and/or wider reputational harm).

The Sellers argued that the adjustment was unjustified, because by the time of the trial, those risks were known to the Judge not to have materialised.  They argued that the Judge should have had regard to post-SPA events as they had actually transpired.

The Court of Appeal rejected the argument.  The court found that the valuation of shares upon an acquisition was always the product of a number of contingencies; whether or not they eventuate would always have an impact on the true value of the shares post-SPA – but that was the buyer’s risk.  Accordingly, in this case, the court found that events subsequent to the purchase could not affect the value at the time of the transaction: “the fact that, as matters turned out, GDE did not experience reputational damage does not mean that the value of the company was not reduced in the way the Judge found as at the date of the SPA”.

The decision confirms that the circumstances in which a court can take into account the resolution of contingencies that existed at the date of breach are rare.  They are likely to involve situations where parties would either otherwise receive an unjustified “windfall” or be under-compensated taking into account the compensatory principle.

Measure of damages

At first instance, the Judge found the following:

  • price paid by the Buyer: £3.584m
  • true value of shares of GDE “as warranted”: £3.341m
  • actual value of shares of GDE: £2.958m

The Judge awarded damages of some £382k, being the difference between the value of the shares of GDE “as warranted” and its actual value.  That is the usual basis for calculating contractual damages.

However, the Buyer also established tortious liability, for fraudulent misrepresentation/ deceit.  Given the Judge’s conclusion that the value of GDE “as warranted” was less than the price paid by the Buyer, the Buyer appealed the Judge’s award of quantum, on the basis that, as regards the fraudulent misrepresentation claim, the tortious measure of damages should have been the difference between the price paid (not the “as warranted” value) and the actual value of the shares. This issue had apparently not been canvassed at trial because both parties had proceeded on the assumption that the value “as warranted” and the amount actually paid were the same.

The Court of Appeal concluded that where a buyer would not have entered into the relevant transaction at all but for the deceit, damages for tort should be fixed by the difference between purchase price and real value. However, if the buyer would still have proceeded, but for a lesser amount, the correct measure of damages would be to grant it a sum representing the difference between the actual price and what it would have paid ‘but for’ the representation.  This is a useful illustration in the context of a share sale of how tortious damages aim to put the claimant in the position it would have been in had the tort not happened.

On the facts of this case, the Court of Appeal found it impossible to know whether the Buyer would have proceeded with the purchase at all, but for the misrepresentation; that was a factual determination that would need to be remitted back to the Judge.