The case concerned the acquisition of all the share capital of Gissings Group Limited (“GGL”) by Sycamore Bidco Limited (“Sycamore”), an ad hoc vehicle specifically created for the acquisition, whose majority shareholder was a private equity firm. According to Article 219 TCO, “the seller is liable for the absence of the qualifications communicated for purchase and is also responsible for material, legal or economic defects incompatible with qualifications or the quantity of qualifications and the reduction or transfer of the benefit that the buyer expected to obtain for his use.” When the buyer issues equity securities to the seller, another guarantee is given. In Sycamore Bidco Ltd/Breslin [2012], the High Court recently considered whether explicit guarantees in a share purchase agreement could also form the basis of an action for misrepresentation. The “Insurance and Guarantees” section of the sales contract is one of the most frequently negotiated sections of an agreement between a buyer and a seller. It includes factual assertions and promises about what is being sold. The seller will make several insurances and guarantees on the objective and assets. Although shares are the fundamental theme of share purchase contracts1, the purpose of the purchaser through share purchase agreements is generally the acquisition of companies from the company to which the subject shares belong. In this context, in addition to unit qualifications, qualifications, which would significantly affect the business activity, are essential for the buyer. The High Court concluded that no statement had actually been made and that there could be no misrepresentation.
In the Tribunal`s view, the relevant statements in the GSO have always been characterized as “guarantees” and not insurance, but furthermore, the proposition that representation could be included in a contract did not work – a misrepresentation should include the presentation before the contract date and not in the contract. However, the right to breach the guarantee was maintained because the accounts had actually been raised, so that there was no real and fair view of the state of the situation and they were deviated from GAAP. The damage caused by the breach of the warranty was therefore assessed, on the basis of damage, as a differential difference between the price paid at the close and its actual value.