The Value To Price Relationship In M&A Warranty Claims (a recent case)


The recently published High Court judgment in Triumph Controls v Primus ([2019] EWHC 565 (TCC); [2019] EWHC 2216 (TCC)) concerned the sale of businesses (an M&A Dispute) and claims for breaches of warranties.

The case involved highly technical accounting and valuation issues. Given these circumstances, how might the matter have been served by a technical (arbitral) tribunal? In addition, what of the role of court-appointed Assessor?


The Judgment

In summary, the Court determined inter alia that:

  • the Seller (Primus) was in breach of a warranty providing that the “forward looking projections” for the purchased companies had been “carefully prepared”
  • the consequential reduction in the valuation of the companies based on the Purchaser’s (Triumph) appraisal methodology (Net Present Value (NPV) / Discounted Cash Flow (DCF)) would have resulted in a lower sale price
  • the damages, effectively a downwards price adjustment, amounted to the said valuation reduction ($ for $) of around US$ 5.7m (sale price US$ 76.5m) before the deductible provided for in the Share Purchase Agreement (SPA).

Inter alia, the Defendant’s position was that neither the reduction in value assessed by its expert accountant nor that assessed by the Claimant’s expert accountant (both based on the Purchaser’s appraisal methodology, which the Court had determined to be the only applicable valuation methodology for these purposes) would have had any impact on the purchase price that the Purchaser would have been willing to pay. This is because both values derived by the experts exceeded the agreed price paid. Therefore, the Purchaser had not suffered any loss as a result of the breach and was not entitled to any damages. The Claimant also ran, and failed in, an argument that the valuation adjustment related to lost goodwill, for which liability had been expressly excluded in the SPA.



The judgment provides an insight into how an English court approaches the resolution of disputes of this type and particularly the technical (accounting and share valuation) content.

Clearly, the Court in question needed to work with the material before it and produce its determination in the complexity of the circumstances. However, on my limited reading of the judgment, I make a number of observations.

In view of the technical aspects of the quantum assessment, it is unsurprising that accounting experts were involved and, subject to the Court determining matters, the extent of reliance placed on their contribution.

However, leaving aside the polarised positions of the parties, it is notable that the experts did not appear to agree (at least initially) on the applicable valuation method for the assessment of quantum. The Court determined that the DCF method used by the expert for the Purchaser was the appropriate one – seemingly ignoring the referenced “market approach”. However, it seems the Seller’s expert later moved to this position (although I stand to be corrected in this regard).

In any event, the determined method involved an extensive range of input variables, numerous points of difference between the experts about these, and other anomalies and potential adjustments.

The use of an agreed methodology by the experts contrasts with the situation at the time of the business transaction. At that time the valuation methodology was not agreed by the parties, was not agreed by them as defining the sale price and produced a significant range of possible estimated results. On the face of it, it appears that the range mid-point was selected and relied on by the Court for quantification purposes.

Notwithstanding the apparent extensive estimation and a catalogue of uncertainties, the Court concluded that there was a direct relationship between the valuation differential reflecting the revised forecasts and the sale price: the price paid would have been reduced to reflect the reduced valuation on a $ for $ basis.



I have not seen the disclosures, witness statements, expert reports, submissions, attended the trial nor seen any trial transcripts. Except as follows, I therefore make no comment on the judgment. 

From my perspectives as an accounting expert and technical (accounting and share valuation) arbitrator, on the face of it, I question the judgment in relation to the quantification of the damages, particularly in relation to, inter alia:

  1. The deemed direct relationship between the subject valuation methodology and the sale price; and
  2. The reasonableness of the determined price adjustment in the circumstances.

Furthermore, I am inclined to ask how the matter might have developed had the case been before a technical (forensic accounting and share valuation) arbitration tribunal with the power (as set out in section 34(g) of the Arbitration Act 1996) to inquisitorially ascertain the facts (subject to the right of the parties to agree otherwise).  

In addition, I am also curious about the potential for a court-appointed expert Assessor (under Part 35.15 Civil Procedure Rules) to play a positive role in such circumstances. Such individuals can assist the court in dealing with matters where they have relevant skill and experience. Although this is an option for any court, I have not heard of its use in practice. It would be interesting to see what impact such an expert might have if appointed in some such future case.

The judgment can be found at, .


Daniel Djanogly FCA FCIArb CArb MAE QDR

The author is M&A Arbitrator and Forensic Accounting Partner at CVR Global. He is a skilled and experienced arbitrator, expert determiner and forensic accountant expert witness. He specialises in M&A, shareholder, partnership and other complex business disputes.

CVR Global LLP’s Forensics Services team is engaged in the resolution of an extensive range of business disputes including Warranty and Indemnity (W&I) Claims and M&A Disputes.  

T: +44 (0)203 794 8750

M: +44 (0)7808 870092