Infiniteland Ltd & Anor v Artisan Contracting Ltd & Anor [2005] EWCA Civ 758
Citation:Infiniteland Ltd & Anor v Artisan Contracting Ltd & Anor [2005] EWCA Civ 758
Rule of thumb: If you buy shares off of a company and agree a ‘fair disclosure’ clause, only for it to turn out later there were some ‘skeletons hiding in the closet’, you were not aware of, is there anything you can do? Possibly, yes, if the reasonable accountant would have provided this information then the transaction can be set aside.
Judgment:
This case affirmed the principle of ‘fair disclosure clause’ in share transfer agreements as revolving around the ‘reasonable reporting accountant’. The Court confirmed that this requires there to be sufficient reference to all of the company’s basic financial position so that a reasonable reporting account could obtain an effective overview of the company’s finances. Failure to comply with this test could result in a reduction of the price paid or a reduction of the contract reduced altogether with the shares to be returned and full money to be paid back, ‘... all matters contained or referred to in the documents contained in the disclosure bundle.... any investigation made by it... into the affairs of the... company, except to the extent that such investigation gives the purchaser actual knowledge of the relevant facts or circumstances. ... matters fairly disclosed (with sufficient details to identify the nature and scope of the matter disclosed) in the disclosure letter. ... such matters as might fairly be expected to come to the knowledge of the reporting accountants from an examination (in the ordinary course of carrying out the due diligence exercise for which they were engaged) of the documents and written information supplied to them... mere reference to a source of information... will not satisfy the requirements of a clause providing for fair disclosure with sufficient details to identify the nature and scope of the matter disclosed... the disclosure requirement was satisfied in relation to such matters as might fairly be expected to come to the knowledge of the reporting accountants from an examination (in the ordinary course of carrying out a due diligence exercise for which they were engaged) of the documents and written information supplied to them’, Lord Chadwick
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.