Liberty Partnership Limited (Formerly Known as Tancreds Limited) v Geoffrey Douglas Tancred, Gillian Mary Tancred  EWHC 2707 (Comm)
Does a deed have to be sealed to obtain a 12 year, rather than a 6 year limitation period? Or is execution as a deed in accordance with the Law of Property (Miscellaneous Provisions) Act 1989 enough?
Limitation Act 1980, s 8 prescribes a limitation period of 12 years for "an action upon a specialty". Since the 1989 Act came into force, it has been unclear whether a deed still had to be sealed to count as a "specialty". Ruling on a preliminary issue, the High Court has now held that execution as a deed without sealing is sufficient to provide the longer limitation period.
On 14 November 2007, Liberty Partnership acquired all of Mr and Mrs Tancred's business shares through a Share Purchase Agreement (SPA). The company provided independent financial advice to local people. Before the sale, the company found itself in trouble with the regulators. In fact, the Financial Services Authority (FSA) raised concerns about whether the Company had proper authorisation to perform the tasks it was carrying out under the Financial Services and markets Act 2000. On 27 September 2006, the Company entered into a Settlement Agreement with the FSA, which was followed by the negotiations with the Claimant leading to the SPA.
The SPA referred to a formal Disclosure Letter, dated 14 November 2007. The Letter provided “details of complaints from clients which have been brought to the attention of the Company” (as well as the FSA Settlement Agreement and the FSA Final Notice) and “details of complaints from clients of the Company since 2002”. However, a number of complaints that were received before the date of the letter and SPA were not disclosed, and some others were received by the Company after the SPA relating to business conducted before the SPA and due to the non-compliance of regulations. Some of the complaints were upheld by the Financial Ombudsman Service and compensation had to be paid while others were either successfully defended, not pursued further or withdrawn, and the rest had not been resolved before the Company went into liquidation. No new business was being placed by March 2009 and the Company went into Creditors Voluntary Liquidation on 5 April 2013. Consequently, Liberty Partnership brought an action to recover losses which were alleged to have been suffered due to breaches of the SPA.
On a trial of preliminary issues, the Court considered whether Liberty Partnership should be allowed to bring certain warranty claims that allegedly arose or were delayed by the sellers' wilful concealment. When the shares were sold, the sellers provided different warranties to the buyer as to the conditions of the company's business. The value of warranties from the buyer's perspective is to give him the right to bring a claim for breach of warranty in case any warranty given by the seller is proved to be false. If a breach is shown, the buyer would be entitled to compensation.
Both Mr and Mrs Tancred were required to “fairly and accurately disclose [warranties] with sufficient details to identify the nature and scope of the matter disclosed in or under the Disclosure Letter". Consequently, the buyer alleged that the sellers had failed to disclose against warranties to the standard that was required.
This case focuses on the importance of a seller to effectively disclose against warranties that it is giving to the buyer. The standard of disclosure that is necessary for the seller to meet is usually defined within the acquisition agreement. In cases where the sellers fail to meet the standard, then they are at risk of a claim for a breach of warranty.
Additionally, it might be advantageous for the sellers not to have the acquisition agreement executed as a deed because, as this case has shown, the seller is more at risk to have certain claims brought against for a period that is twice as long for a deed than it is for a contract. The case confirms that execution as a deed is sufficient to qualify as a "specialty", meaning that the applicable limitation period was 12 rather than 6 years.