Headline Summary 

In the case of Towergate Financial (Group) Limited v Hopkinson & others, the High Court considered the correct interpretation of a notification clause in a share purchase agreement in relation to claims under the indemnity provisions.  

The impact of failing to comply with the terms of such clauses can be serious. Having no valid notice equates to the loss of a right to claim under the indemnity.  Notice provisions need to be considered against the backdrop of their purpose: to give certainty to and protect the position of the individual or entity giving the indemnity.

Factual Background

The Towergate case acts as a salutary tale. It arose out of the sale in 2008 by the trustees of certain trusts, of a business which gave financial advice to retail customers.  Subsequently, the business has faced claims for inter alia professional negligence in respect of advice given prior to the sale.  While Towergate held relevant insurance policies, it also purported to notify the indemnifiers under the terms of the SPA in order to maintain a right to call on an indemnity given on the sale of the business.

The claim had already been hard fought. In advance of the preliminary issue hearing, a summary judgment application had been heard, rejected and then appealed up to the Court of Appeal.     

The key issue of construction in this application was the notification clause in respect of the relevant indemnity. It stated:

"6.7 nor shall the Warrantors have any liability in respect of any matter or thing unless notice in writing of the relevant matter or thing is given to all the Warrantors as soon as possible and in any event prior to;

[6.7.1 and 6.7.2 not reproduced]

6.7.3 in relation to a claim under the indemnity in clause 5.9 on or before the seventh anniversary of the date of this Agreement"

The Claimants had served a notice just before the seventh anniversary of the SPA in 2015.  The Defendants (contrary to the position taken in the summary judgment application) said that this was too late.

Key Legal Points

The Defendants' contention was that the true construction of the clause was that it was a dual condition precedent: you had to consider whether the notice had been given as soon as possible, rather than just looking at whether it was before the 7 year period had expired.  

The Court noted that, reflecting current case law, a contractual limitation for bringing claims is a form of exclusion clause and so similar principles apply in terms of construction to those used to construe exclusion clauses.  Such clauses will be narrowly construed and any exclusion of liability (given its effect) must be clearly expressed.

However, notwithstanding the amendments made to the construction of  the clause arising from the Court of Appeal's judgment (which related to a different issue), the Judge had no real difficulty in finding that the meaning of the clause in real terms was perfectly clear.  That meaning was a dual condition.  You first looked at whether the notice has been given "as soon as possible".  If it had not, the condition would not be met and the notice failed.

A second aspect of the assessment was the trigger point: when a "relevant matter or thing" was known.   Comparing the Claimants' submission to "forensic prestidigitation" (performing of tricks), the Judge stated that it was clear to him that the time for notification started to run when there was an identifiable matter or thing in relation to which a claim under the indemnity might arise.

Once those conclusions were reached by the Court, the Claimants faced an uphill battle given that they had been engaging with their insurers in relation to making claims under the insurance in respect of the same matter since 2013.  The Court took the view that the Claimants had sufficiently known about the potential claims at that stage and was not willing to find that they were entitled to wait over 2 years before notifying.


Given the background to the litigation, there is every chance that an appeal may follow.  However, the judgment reemphasises that when considering claims all avenues and potential sources for recovery must be viewed in parallel, even if from a time and cost management perspective it may be fatally attractive to deal with each avenue separately.  Also, there is always a concern about being too premature: a premature notice may ultimately give notice of claims that do not materialise.  

However, the impact of notifying early, but then updating a defendant as matters progress, is likely to be far less damaging than notifying too late.  The Courts are far more likely to be persuaded that a party which has taken advice and then notified early, with less detail, has acted as soon as possible, than a party that has held back.  

Depending on their wording, the better approach to dual condition clauses may be to focus on the earlier of any triggers, with any later date being considered only as a back- stop from which any claims at all will be barred 

Key contact

Rachel Cook

Rachel Cook

Managing Associate, Dispute Resolution
United Kingdom

View profile