UK Supreme Court · [2017] UKSC 24

Wood v Capita Insurance Services Limited

Capita bought an insurance broker and later uncovered alleged pre-sale mis-selling.

UK Supreme Court29 Mar 2017

Plain-English explainers, not legal advice. Use the linked official source for section-level detail, and get advice for your situation.

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Quick read

Warranties and indemnities are not interchangeable safety nets.
Capita bought an insurance broker and later uncovered alleged pre-sale mis-selling.

Use this to check

Draft indemnity triggers around every route by which the loss may arise
Track warranty notification deadlines from completion
Read a disputed clause in the context of the whole agreement

Decision snapshot

What happened
- Capita bought all shares in Sureterm Direct, a classic-car insurance broker, for £7,681,661 plus deferred consideration.
- Employees later raised concerns that telephone operators had increased customer charges and misled customers.
- The business reported the findings to the Financial Services Authority and agreed a remediation scheme.
- Capita claimed about £2.43 million under a sale-agreement indemnity, but no customer claim or complaint had triggered the regulator's action.
What the court had to decide
- Did the indemnity cover all losses connected with pre-completion mis-selling, or only losses following claims or complaints of the kind identified in the clause?
What the court decided
- The Supreme Court unanimously dismissed Capita's appeal.
- The indemnity was triggered only by the specified claims or complaints.
- The wider regulatory warranties may have covered the problem, but they carried a two-year claim limit and Capita appeared not to have notified a warranty claim in time.

Practical impact

Practical read

Warranties and indemnities are not interchangeable safety nets.
A buyer needs each risk mapped to the trigger, notice process, time limit, liability cap and remedy that will apply if that risk becomes real.

Useful next steps

Draft indemnity triggers around every route by which the loss may arise
Track warranty notification deadlines from completion
Read a disputed clause in the context of the whole agreement
Do not assume a court will broaden an indemnity because the loss is commercially serious
Create a post-completion claims process before problems emerge

The problem emerged after the acquisition

Sureterm Direct sold specialist motor insurance, including through online comparison sites. Soon after Capita acquired the company, employees reported that some telephone sales staff had moved customers to higher prices without properly explaining why.

An internal review examined sales between January 2009 and January 2011. Capita and the company reported the issue to the regulator and agreed to compensate affected customers. Capita's claimed loss included estimated compensation, interest and the cost of running the remediation scheme.

The sale agreement split protection between clauses

The agreement contained detailed warranties about regulatory compliance. Most non-tax warranty claims had to be notified within two years after completion.

It also contained an indemnity for losses following and arising from claims or complaints registered with the regulator or another authority and connected with pre-completion mis-selling. That protection was not subject to the same time limit, but its trigger was narrower.

Protection	Commercial feature
Regulatory warranties	Broader subject matter, two-year notification limit
Mis-selling indemnity	No equivalent time limit, narrower claim-or-complaint trigger
Overall liability limits	Applied across agreed categories of claim

Why Capita's broader reading failed

Capita argued that the claim-or-complaint wording limited only part of the indemnity. On that reading, other categories of loss would be covered whenever they related to pre-completion mis-selling.

The Supreme Court held that the Court of Appeal's narrower reading was correct. The words, structure and relationship with the time-limited warranties all mattered. It was commercially possible for sophisticated parties to agree broad warranties for a limited period and a longer-lasting indemnity for only specified events.

How to protect the deal after completion

Risk allocation does not finish at signature. The buyer needs a live diary of claim deadlines, notice addresses, evidence requirements and liability thresholds. Operational teams need a route to escalate complaints, audits and regulator contact to the deal team quickly.

During drafting, test each important risk against different fact patterns. Ask what happens if a customer complains, an employee reports the issue, a regulator begins an investigation or the buyer discovers it through its own audit. The contract should state which route is covered.

Key points

Map each known risk to a warranty, indemnity or price adjustment
List every trigger and exclusion in plain language
Calendar notification and limitation dates at completion
Specify the required form, recipient and content of a claim notice
Connect customer, finance and compliance reports to the claims owner
Preserve evidence of when the issue was first discovered

Common questions

Did the Court decide whether all alleged mis-selling occurred?

No. The appeal concerned the meaning of the indemnity. Some factual allegations remained disputed, and the Court did not determine the full underlying mis-selling claim.

Why did the distinction between warranties and indemnities matter?

The warranties were broad but time-limited. The indemnity had no equivalent time limit but a narrower trigger. The contract allocated different risk to each protection.

Can context override the words?

Context helps identify objective meaning, particularly where drafting is unclear. It does not give a court permission to create the protection one party wishes it had negotiated.

How Sprintlaw can help

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