Atten Bidco Limited v Anna Assassa & Ors

This is a claim for damages for breach of warranties given in a Share Purchase Agreement dated 2 November 2022 (the “SPA”). By that agreement the Claimant purchased the shares of the Defendants in Tisski Limited (“Tisski”). Tisski was founded in 2011 by the 1^st Defendant (“Ms Assassa”) who was its Chief Executive. To use her words, she “ran the company from day one”. It is described in the pleadings as “an information technology consultancy company, focused on digital transformation in the public sector”.

Tisski’s business grew and achieved some notable success, and by 2022, Ms Assassa was looking to sell it. By that time the Ordinary A shares in Tisski were held as follows:

Ms Assassa’s background was in contract management (or customer relationship management). In 2020 she appointed a senior leadership team (the “SLT”). The members of the team at the date of the SPA were:

The Claimant is part of the Node4 group of companies. Node4 was founded in 2003 by Andy Gilbert (“Mr Gilbert”). Over the years it grew considerably, both organically and by acquiring a number of other businesses. By 2022 it had a substantial business, and was a much bigger operation than Tisski, employing over 1,000 people and offering a wide range of IT services. Node4’s ultimate owner is Providence Equity Partners LLC (“Providence”) but Mr Gilbert has continued to be centrally involved in the management and direction of Node4, and at the material time was its Chief Executive.

Acquisitions were and are a key part of Node4’s growth strategy. Node4’s Business Development Director at the time of the SPA was Mark Cox. He is an accountant with long experience of mergers and acquisitions, and had joined the business in February 2022. He was one of the “core team” working on acquisitions, together with Mr Gilbert, and two of Providence’s partners, a Mr Vervisch, and Daniel Zwicky.

Node4 acquired seven other businesses between 2013 and 2021. In July 2021 it acquired The Nav People, and in July 2022 a business called Risual. Both The Nav People and Risual were IT consulting business (as was Tisski). The Nav People was about twice the size of Tisski, whereas Risual was slightly smaller but had public sector capabilities which Node4 was particularly interested in because it helped to fill some of the “gaps” in its capabilities. Tisski also did work with the public sector, and that was one of the factors which made it an attractive acquisition for Node4. I return to that important issue later in this judgment.

At trial I heard evidence for the Claimant from Mr Gilbert, Mark Cox, and from Mark Skelton, who is currently the Chief Technology Officer at Node4. The Defendants called Ms Assassa, Mr Baxter and Ms Allen. I also had expert evidence on valuation from Mr Pearson for the Claimant, and Mr Eastwood for the Defendants. Both sides prepared written openings, and provided closing submissions in writing and orally. There were a substantial number of documents and the parties arranged for these to be presented electronically at trial on a system operated by Opus2. Each side has also prepared a core bundle of documents (essentially the documents they referred to in the course of the trial) which have been collated on Opus2’s system. That has been of considerable assistance in the process of revisiting the key events during the preparation of this judgment.

The witnesses spoke to events which occurred some years ago now. Inevitably, they will have thought about those events in the intervening years. For Ms Assassa, Mr Baxter and Ms Allan there is the added stress of knowing that they are responding to allegations that they have failed to act as they should have. For Mr Cox and Mr Gilbert, they are trying to put themselves back into the mindset they had in 2022, and at points, to recall what was and what was not said to them in meetings where they took little or no note. They may also feel the need (consciously or unconsciously) to justify the purchase of a company which (in the event) was not perhaps as good a buy as they thought it was.

Tisski’s business was a largely remote operation, so much of the communication with and between the relevant people is preserved. The run up to the SPA is similarly well documented. The round figure estimate of the number of documents in the case was 15,000.

The approach to witness evidence in a well-documented commercial case was considered by Leggat J (as he then was) in Gestmin v Credit Suisse (UK) Ltd and anor [2013] EWHC 3560 (Comm) at [15]-[22]. I do not set out that well known passage here, save for the conclusion:

To that I would add that the fact that a witness’s evidence is inconsistent with a reliable document from the time does not necessarily mean that they are being dishonest about it. They may be entirely sure in their own mind that something was said, when in fact it was not, or vice versa. That can be the consequence of thinking through events, and recollecting what was in their mind, rather than what they said. Or as they review the dispute over time, and consider allegations raised in correspondence and by the pleadings, they may conclude that they must have said or done something, when they may not have done. And the effect may not be as black and white as that. Those matters may cause a witness to emphasise certain aspects of their evidence and downplay others. None of that is dishonest; it is the function of human nature and of the way our memories work.

The considerations which underlie the approach in Gestmin find expression in paragraph 1.3 of Practice Direction 57AC:

That is not to say that I ignore the evidence the witnesses gave from the witness box. That process enabled me to hear how they dealt with the more abstract issues, to have their explanation for why they said what they said in a particular document, and to gauge whether they were generally reliable and honest. The process of cross examination using the contemporaneous documents, and in particular the less formal exchanges between the people involved, sent when their guard was down, help the court get at the motivation and state of mind of those concerned; see Males LJ in Simetra Global Assets Ltd v Ikon Finance Ltd [2019] EWCA Civ 1413 at [48].

At a very high level, the breach of warranty claim falls into three parts. The first relates to a contract which Tisski had entered into with the National Audit Office (“the NAO”) on 1 March 2022 (“the NAO contract”). The Claimant’s case is that the Defendants were in breach of warranty because the NAO contract could not “ … readily be fulfilled or performed by the Company on time or without undue or unusual expenditure of money or effort”. The second relates to the loss of a contract which Tisski had entered into with Aquila Air Traffic Management Services Limited (“Aquila”) on 15 March 2022 (“the Aquila contract”) and which Aquila terminated shortly before the SPA. The failure to disclose that fact is said to be a breach of warranty. The third relates to the alleged overstatement of the “Locked Box Accounts” as defined in the SPA, arising from the failure to write off some £90,000 of Work in Progress relating to work done by Tisski for the Ministry of Defence (the “MOD”) in relation to “Operation Declutter”. The Defendants dispute liability on all three parts of the claim.

The issues in relation to the third part of the claim are relatively narrow and discrete. Most of the trial was taken up with the evidence and argument on the first and second parts of the claim (and of that mostly the first part). The starting point for a consideration of the claim is the SPA.

The SPA is a sophisticated and detailed document, drafted and negotiated by solicitors who specialise in these sorts of transactions: Pinsent Masons for the Claimant, and Browne Jacobson for the Defendants. It is dated 2 November 2022. It was executed on 4 November 2022 and completed on 22 December 2022. In simple terms it involves the sale and purchase of the shareholding of Tisski for £45M. Whilst the Claimant had some substantial experience of acquisitions, the Defendants had no personal experience of such a process. They engaged PwC to handle the sale and provide advice during the sale and due diligence process. For its part, the Claimant engaged EY to assist with the due diligence. For some reason, the sale was referred to as “Project Magnetic”.

Given the detailed consideration of the terms of the SPA in the written and oral submissions made by the parties, I am able to keep the reference to the detail of terms of the SPA to a minimum. I begin with the terms relevant to the first and second parts of the claim. Firstly, some of the definitions as set out in clause 1:

“Accounts” are defined as “the audited financial statements of the Company (prepared under section 394 of the CA 2006) for the accounting period ended on the Accounts Date”; which is 31 August 2021;

“Company” is Tisski;

“Completion” was defined as “completion of the sale and purchase of the Sale Shares in accordance with this Agreement” and “Completion Date” as “the date which is 12 Business Days following receipt by the Buyer of the Completion Schedule in accordance with clause 6.1”;

“Data Room” is “the online data room hosted by Browne Jacobson LLP entitled “Project Magnetic” containing the documents relating to the Company as listed in the data room index attached to the Disclosure Letter”;

“Disclosed” is defined as “fairly disclosed with sufficient detail to enable a reasonable buyer to identify the nature and scope of the matter disclosed in or under the Disclosure Letter or the Data Room (and Disclosure will be construed accordingly”).

The construction and effect of this term is of considerable importance;

“Disclosure Letter” is defined as “the letter, in agreed form, from the Sellers to the Buyer with the same date as this Agreement and described as the Disclosure Letter”;

“Locked Box Accounts” is defined as “the agreed form unaudited balance sheet of Company as at the Locked Box Date”; which was 30 June 2022;

“Material Contract” is defined at paragraph 13.1 of Schedule 4 by reference to the top ten customers of Tisski by annual value of sales in the last financial year, including (but not limited to) a list of 10, which includes the NAO but not Aquila.

“Senior Leadership Team Member” is defined as “each of Kevin Ingrey, Darren Bassett, Carly Allan and Dan Coupland”.

Secondly, the warranties. Clause 8.2 provides that:

The first of the warranties relevant to the claim is paragraph 7 of Schedule 4, which refers to “Changes since the Accounts Date”. The Claimant’s case in relation to the second part of the claim (Aquila) relies in part on an allegation of a breach of paragraph 7.1.1. I set out paragraph 7.1 in full for the purposes of construction:

The next general warranty of relevance is paragraph 13.2 of Schedule 4. The Claimant’s case on the first part of the claim (the NAO claim) turns on the general warranty at paragraph 13.2.4 of Schedule 4, and its case on the second part of the claim (Aquila) relies on general warranty 13.7.1. Again I set out some of the surrounding terms for the purposes of the issues of construction which arise.

Paragraph 13.1 includes a definition of “Material Contract”, which has a relevance to the construction of the warranty given at paragraph 13.7.1.

Clause 1.20 of the SPA supplements the warranties at 13.2.4 and 13.7.1:

Thirdly, the entire agreement clause at 19.1:

Finally in relation to the warranty claims, the Defendants have a defence to a Warranty Claim provided for by paragraph 8.1 of Schedule 5:

The general warranties relevant to the third part of the claim (the MOD claim) are in paragraph 8 of Schedule 4:

Given the scheme of the SPA, the parties agree that in relation to the NAO claim, there are three broad issues:

The first issue involves an issue as to the construction of the warranty at paragraph 13.2.4, and findings of fact. The second issue is one of fact, but Mr Casey KC helpfully accepted during the course of opening submissions, that given the extent of the communication between the Defendants on the one hand (Ms Assassa and Mr Baxter in particular) and the members of the SLT on the other, that this was not a case where there were issues as to whether the knowledge of the SLT was to be imputed to the Defendants.

The first and second issues can be taken together, because the reality of the position is that if the NAO contract was (at the date of the SPA) a contract which “… cannot readily be fulfilled or performed by the Company on time or without undue or unusual expenditure of money or effort”, then Ms Assassa and Mr Baxter (and thus the Defendants) would have been aware of that fact. Whilst the Claimant submits that Ms Assassa sought to distance herself from the day to day issues at Tisski, it is one of the more attractive features of her evidence that she never sought to blame anyone else. That approach was consistent with her management style at Tisski, where she trusted her SLT to perform, and backed them up when they needed it.

The third issue follows on from the first two, and whilst there is obviously a lot of overlap in terms of evidence, it is convenient to deal with it in a separate section. It assists simply to set out the general scope of the argument. Firstly there is an issue as to the meaning and effect of the term “Disclosed”. The parties agree that the Disclosure Letter makes no reference to facts which may be material to the paragraph 13.2.4 claim, and that there is only one document of relevance in the Data Room (what was referred to as the RAG report). The Claimant’s case (in simple terms) is that in determining whether facts were “Disclosed” for the purposes of that warranty claim, all the court can consider (and all the Defendants can rely upon) is what appears from that one document. In other words, that all that was “Disclosed” for the purposes of paragraph 8.1 of Schedule 5 was that one document.

The Defendants’ case is that the court is entitled to have regard to the oral disclosure given at “Due Diligence” meetings on 18 and 24 October 2022. The Defendants do not deny the intended purpose and effect of the entire agreement clause, but seek to rely on that oral disclosure:

The approach of the Courts to the construction of written contracts was not in issue between the parties. Mr Spalton KC and Mr Cook referred to the summary of the applicable principle in Lord Neuberger’s judgment in Arnold v Britton [2015] UKSC 36 at [14]-[23]. There are a number of other helpful summaries of the principles in the cases. Given the measure of agreement on the approach, it is unnecessary to set out a lengthy review, but one recent example is ABC Electrification Ltd v Network Rail Infrastructure Ltd [2020] EWCA Civ 1645, where Carr LJ (as she then was) gave the leading judgment. At [18] there is a distillation of the principles, and at [19] this summary of them:

One point which arises in this case is the so called “redundancy” argument. I refer to Carr LJ’s judgment in ABC because she deals with the approach to such an argument in her judgment at [20]:

In a commercial contract such as this one, the parties have chosen the words of their agreement with the benefit of skilled advice. They have control over that language. The clearer the natural meaning of the words used, the more difficult it is to depart from that meaning. In addition, in this case, I can consider the other relevant provisions of the SPA, the overall purpose of the clause and the contract, the facts and circumstances known or assumed by the parties at the time that the document was executed, and “commercial common sense”. But the agreement is apparently well drafted, and what the parties meant is most obviously to be gleaned from the language.

It was not argued before me that this was a case in which I should look beyond the four corners of the SPA. But even were I to do so, I would find an agreement the purpose of which was to regulate the rights of the parties to this commercial bargain. The warranties form part of a scheme, which provides the buyer with some comfort as to the state of the business they are buying, and the seller with a defence to a warranty claim if they meet the contractual disclosure requirements. I come to the construction of that latter element later in this judgment, but at this stage I focus on the terms of paragraph 13.2.4 of Schedule 4.

The relevant words are these:

The starting point for the Defendants’ approach to the claim pursuant to paragraph 13.2.4, was that, at the time of the SPA, the NAO contract was projected to return a profit of 21% or 30%. That was 21% on the basis of revenue less cost, and 30% if tax credits for Research and Development (“R&D”) conducted during the project were added back in. Mr Casey KC submitted that the fact that the contract was expected to be profitable was fatal to the claim advanced, because a contract making such a profit was not a contract that could not be fulfilled without undue or unusual expenditure of money or effort. It was profitable, and profitable at a level which was consistent with other projects; see paragraph 15(1) of his skeleton argument.

In the course of his oral opening submissions, Mr Casey KC submitted that a contract which was still making a profit, was a contract that can be fulfilled with due and usual expenditure of money or effort; or to put it the other way, without undue expenditure of money or effort. I questioned whether the issue was as simple as that. Paragraph 13.2.5 made express provision for a loss making contract, so if 13.2.4 was simply about the contract still making a profit, what was the purpose of 13.2.5?

Mr Spalton KC and Mr Cook developed the issue in their written closing submissions at paragraphs 113 to 136. The submissions relevant to the issue of construction are as follows:

At 119 of their closing submissions Mr Spalton KC and Mr Cook put the matter in this way:

In closing, Mr Casey KC made two principal submissions in relation to the construction of this Warranty. His primary submission was to the effect that the warranty was concerned with profit and loss. It was there to catch a contract which may take time to become loss making, or where it may take time before you realise that the expenditure exceeds the consideration. In other words, the essential difference between 13.2.4 and 13.2.5 is temporal.

Secondly he submitted that if the paragraph was not to be considered in that way, that the language was vague. Unlike 13.2.5 there was no binary question. The Warranty would require an assessment of broad concepts. “Undue” would involve assessing the relationship between effort and reward. “Unusual” would require a consideration of what you would usually spend (in terms of time and money) to obtain that consideration (or to perform that contract). Those matters serve to emphasise that what the warranty is concerned about is not divorced from (or completely removed from) profit. For example it may be quite usual to do some free of charge (“FOC”) days to complete a contract.

I conclude as follows:

The notion that Warranty 13.2.4 is there to catch a contract in the period before it becomes loss making is not one which I find easy to follow. The Warranty is given on the basis of the position as at the date of the SPA, and is premised on the Seller’s awareness of the facts as they then are. How do they know which contract will become loss making? How does the Warranty work in those circumstances? Moreover, such a construction is at odds with the language of the Warranty.

Nor is this a Warranty which relates to a contract which includes some onerous, burdensome or unreasonable provision. Warranty 13.2.4 refers, not to a term of the contract, but to the contract itself, and qualifies the contract it applies to by reference to whether that contract can readily be performed on time, and the expenditure or effort required to readily perform it. On a number of occasions Mr Casey KC made the point that at no stage had the Claimant taken anyone to a term of the NAO contract and put to them that this was the problem. That is not what this Warranty is about. The issue goes to a consideration of the contract more widely.

The Claimant makes two further points which arise from the Defendants’ approach to the construction of this warranty. The first is that it explains the approach taken to the issue of Disclosure. I return to that later in this judgment. The second was in response to a matter I raised in opening, and that was whether the Warranty was “looking forward”. The Claimant’s case is that the Court should look at the entirely of the performance of the contract, rather than just what is to come. I raised the point, because the language used suggested it to me. Posing the question – is this a contract which cannot readily be performed or fulfilled on time or without undue or unusual expenditure or effort – is looking to whether something will happen. In that sense, it is looking forward. Mr Spalton KC and Mr Cook make the point that in doing so, what has happened to date must be relevant. I agree with that.

I return to such other issues as arise on the construction of the SPA when dealing with the Aquila contract and the MOD contract. With that I turn to the NAO contract and Tisski’s performance of it.

The NAO contract was an important contract for Tisski to win. Mr Coupland described it as a “key win”. Whilst the Defendants questioned whether it was really appropriate to describe some other contracts as key wins (Aquila included) there could be no doubt that the NAO contract was a key win. Ms Assassa accepted that it was an important contract; see t/s day page 61 line 13, and it was described as one of two “notable customer wins” in the “At a Glance” section of the Vendor’s Due Diligence (“VDD”) prepared by Tisski and PwC for the purposes of the sale of the company. To put that in context, the other “notable customer win” was HS2. In particular, the revenue the NAO contract generated was significant and secure, it ran for a number of years, and it was a major contract with a public sector body. That last factor was particularly significant, both to Tisski and to potential purchasers.

It would have been apparent to those at Tisski who were involved in the NAO contract, that if it was seen as a success by the NAO and others in public life, that success would be an important factor when bidding for more public sector work. It also presented a risk, because if the contract did not go well, that might deter other public sector bodies from using Tisski. The issue was made the more acute by the fact that the NAO regarded this contract as important, and that the NAO itself was subject to the scrutiny of the Public Accounts Committee. Those matters became apparent to Tisski not long after the contract was signed.

The Claimant’s case is that some of the staff at Tisski who were working on the NAO contract had misgivings about certain aspects of it even before the contract had been signed, and that those problems were not isolated to one part of the contract, but were cumulative and related. The Defendants’ case, put simply, is that there was a significant problem with one aspect of the contract, the Risk Assessment Planning Tool (the “RAPT”), but that by the time of the SPA, that problem was under control, and in any event was sufficiently disclosed.

In the course of the trial, the Claimant made extensive reference to email, Teams and WhatsApp messages between various members of Tisski’s staff about the problems they were experiencing. The Defendants do not dispute that there were problems, or that its staff sometimes described those problems in dramatic language, but ask the court to see that language in context. These were highly skilled people with a track record of sorting out problems. Those problems might, at times, look insuperable, and there would be open expressions of dismay and worse. But that did not mean that the position was anything to be particularly worried about, as the Defendants would say was demonstrated by the bringing of those problems under control.

Mr Casey KC also makes a number of points about the documentary record now available to the court. Firstly, that the Claimant has lost documents it had control of. The major loss relates to the email accounts of Richard Baxter and Ben Austen, which were deleted whilst in the control of the Claimant. That loss includes all the documents on their Microsoft 365 and One Drive accounts. That loss is mitigated in part by the fact that some of Mr Baxter’s emails form part of the chains of emails which are available from the email accounts of others. It is also apparent that Mr Baxter and Carly Allan were in regular contact on WhatsApp, and those messages are available. In addition, Ms Allan’s Teams messages have been misplaced, again by the Claimant. Mr Casey KC submits that if there is any doubt as to what these missing documents might show, then that doubt should be resolved in the Defendants favour.

As to that, it will be apparent that there is a substantial body of documentation for the parties and the Court to review, and both Mr Baxter and Ms Allan gave oral evidence. With one exception, the absence of Mr Baxter’s emails does not appear to have caused the Defendants any difficulty. The one issue of importance where it might have some significance is the contact Mr Baxter had with PwC’s tax department about the potential for the recovery of R&D tax credits in relation to some of the work done on the NAO contract. I return to that below.

Mr Casey KC’s second point is that the Claimant has not called Hannah Birch. Ms Birch was an employee of Node4, and took on the management of the NAO contract after Tisski was sold (so from about January 2023). Ms Birch was identified by the Claimant as a witness it intended to call earlier in the proceedings but has since left the Claimant’s employment. That is said to have been for reasons unconnected with this matter. Mr Casey KC submits that this is significant in circumstances where the Claimant relies on the performance of the NAO contract after the SPA in support of its case that there were issues with the contract which had not been disclosed. The Defendants’ case is that the alternative explanation for the problems with the NAO contract after the SPA is tied up with its management during that period, which was principally by Ms Birch. He submits that I should infer from the fact that she is not called that she would not have supported the Claimant’s factual case.

The inference to be drawn from the failure to call a witness will vary from case to case. People leave businesses for a variety of reasons, on good terms and bad. Even if they leave on good terms, they may decide not to assist their former employers by giving evidence. The fact that Ms Birch was apparently willing to give evidence earlier in proceedings (if it points to anything) might suggest that the NAO contract was not the issue. The evidence I have is that she left Node4 for reasons unconnected with the delivery of the NAO contract. I am not persuaded that I should draw the negative inference that Mr Casey KC argues for. Nor is it necessary to do so. There is a substantial body of evidence about what happened on the NAO contract in the early months following the SPA. There are the contemporaneous documents, and the witness evidence of Carly Allan and Andy Gilbert, both of whom were involved at the time.

The point is better considered from the perspective of the Claimant’s case. It has the documents and Mr Gilbert’s evidence, but it does not have the witness who was in charge of the management of the NAO contract after the SPA. To make good that gap, the Claimant was obliged to call Mr Skelton to give evidence. Mr Skelton joined Node4 in November 2023 as its Digital Practice Director. In that role he worked closely with Hannah Birch in relation to the NAO contract, and when Hannah Birch left in August 2024, he took over responsibility for the management of that contract from her. His direct knowledge of the issues which matter in this trial is minimal, and there is a limit to the weight I can give to his hearsay evidence about what Ms Birch did, or told him about, not least because it was open to the Claimant to call Ms Birch. All that said, in cases like this, it is the documents which are the starting point, and which generally provide the more reliable indication of what happened.

The Claimant’s case in relation to the NAO contract really begins with an email sent by Dan Barzotti, Tisski’s Pre Sales Lead, to Dan Coupland and Kim Piek-Van Vuuren on 29 September 2021. Dan Coupland was Tisski’s Sales Director, and Kim Piek-Van Vuuren was also on the Sales Team. It says this:

The Claimant emphasises the use of the term “hatchet job”. This may be an example of loose or over dramatic language, and is not to be taken out of context. But it is hard to read this email as anything other than a sign that the sales team were cutting the number of hours budgeted for the work on this contract as much as they could to keep the cost down. The last sentence of the email underlines the point that cost is the key to winning the contract. The Claimant’s case is that the consequent lack of sufficient resources to do the work required to complete the NAO contract was one of the main reasons for the problems which occurred.

On 14 January 2022 Katie Pearson (who was then the Project Manager for the NAO project) messaged Kim Piek-Van Vuuren. In that message Ms Pearson says that the “NAO budget is proving very challenging”. Ms Assassa’s evidence in cross-examination was that the reference to budget was about the milestones on the contract; see t/s day 4 page line 11. Taken on its own, it is hard to tell. Katie Pearson then set up a Teams meeting on 21 January 2022 inviting Darren Bassett (Tisski’s Corporate Servies Director) and Dan Coupland. The subject of the meeting was NAO finance costs, and her covering email included this: “We need to look int o some costs and be creative”.

The word “creative” is used on a number of occasions in relation to the NAO contract. Ms Assassa was cross-examined about her use of the word (and I return to that), but I did not read the documents or understand the witnesses to be using the word to describe anything dishonest or deliberately underhand. Usually what they were doing when they said they would have to be creative, was trying to work their way around a problem. The Defendants would say that it was no more than “thinking outside the box”. However it might be characterised, what these references indicate is that there was a problem which was not readily soluble. The danger in those circumstances is that in striving to find a way around the problem, people may become convinced that something will work, when it won’t, or downplay risks which in other circumstances they would not be willing to accept.

On 2 February 2022 there is a chat involving a number of Tisski employees. Saima Khan asks Katie Pearson how she is feeling. The reply is:

On 10 February 2022, Ms Allan messaged Mr Bassett and Mr Coupland. She says that “there is a challenge on the NAO contract discussions that kim has asked me to get involved”. This is the first time Ms Allan appears to have become directly involved. Again, of itself, this message, and the involvement of Ms Allan, is not of any great significance. The fact that there were risks in relation to the delivery of the work that was to be contracted for is probably not unusual, and the involvement of a member of the senior management to try and sort it out is no more than good practice. Spotting these risks early on can be seen as a function of a team working well. Indeed one of Tisski’s strengths was its staff, and their ability to resolve problems.

On 15 February 2022, Ms Pearson emailed Mr Bassett (copying Mr Coupland) with the subject: “NAO Meeting: briefing note”. In it she asked whether the NAO should be made:

Ms Assassa provides some explanation of the scheme of the contractual arrangements with the NAO in her witness statement at paragraph 20 and following. Tisski tendered to be the NAO’s provider of choice for its Microsoft Dynamics offering. It won the tender and entered into an Overarching Contract, which meant that the NAO was allowed to allocate work to Tisski without going through another tendering process. The NAO could issue a “Change Request” to add further specific requirements, but otherwise the requirements and the price were fixed. In her first witness statement at paragraph 35 Ms Assassa says that the NAO contract was one of a few number of fixed price contracts Tisski had entered into. In her evidence she said that such a fixed price contract was “not that normal” for Tisski; Tisski would normally provide an initial quote and then firm up the price after the discovery stage “once we understood a customer’s requirements”.

The NAO Contract was signed on 1 March 2022. It was to complete the delivery of a new Financial Audit Solution to manage the NAO’s portfolio of audits. The contract had two elements. The first was referred to as the “NAO Consultancy Project” and was to build an audit management system (“AMS”) over a period of about two and a half years for a fixed price of £2,996,855. The second element was a service contract over a period of 11 years for a fixed price of £3,267,808.

The first element was divided into three “releases”. Ms Allan describes them in this way at paragraph 15 of her first witness statement:

The NAO wanted to take an “agile” approach to the project. This is not unusual in IT projects. Generally it means that there are some “must have” requirements, but that they are “high-level”, and the detail is prioritised and elaborated as the project proceeds. Ms Allan’s evidence in her witness statement was to the effect that the level of contract detail in Release 1 was unusual for an “agile”. She anticipated that there would be a need for discussions with the client about Tisski’s interpretation of the requirements for Release 1 and that those discussions would be challenging. I observe that there is an obvious tension between an agile contract, where requirements are flexible and constantly reprioritised, and a contract where the requirements have been tied down. Ms Allan anticipated that those discussions would be challenging but manageable. She saw scope for a more pragmatic approach in Releases 2 and 3, and the possibility of clawing back extra “free days” which had been put into the design phase. Ms Allan’s evidence is that she also noted that release 1 had little contingency in the timeline, and that could have an impact of profit if unforeseen issues arose. She says that contingencies were built into releases 2 and 3 to maintain the estimated profitability.

The profit on the NAO Consultancy Project was originally estimated to be 50%, which was the price divided by the number of days budgeted to complete the work. The initial number was 3,352. That gave an average sales day rate of £885. Tisski worked on the basis of a cost day rate of £450: hence the 50% profit estimate. It is important to note Ms Assassa’s evidence that Tisski’s primary focus was not on the profitability of individual projects, but on the profit generated by a certain area of work. It monitored profits on individual projects internally by means of a “RAG” report (RAG is Red, Amber, Green). This was generated automatically from timesheets and other data fed into the system by the relevant Project Manager. The SLT and the Board had a weekly RAG meeting which Ms Assassa would attend. Generally she was interested in whether the customer was happy rather than the detail. By the summer of 2022, Ms Assassa had become more and more involved in the work leading up to the sale of Tisski, and her recollection is that the last RAG meeting she attended would have been in about June 2022.

At the time of the negotiation and signing of the NAO contract, the RAPT was still under development in house at the NAO with a consultancy developer called Britecloud. The NAO wanted Tisski to integrate the RAPT into the AMS that Tisski were developing. At paragraph 8(1) of the Amended Defence, the Defendants admit that Tisski underestimated the degree of effort required to provide the RAPT. Ms Allan accepts that at the time the contract was signed, Tisski did not have the full details of the RAPT and estimated the work needed to integrate it on the basis that it was a Canvas app, which was what the NAO had told them. It soon became apparent that there was far more to the integration of the RAPT than Tisski had assumed.

However, even before that, there was a concern about the timescale. On 10 March 2022 Ms Pearson emailed Mr Bassett, copying in Ms Assassa, about a meeting with the NAO the following day. She noted that:

The meeting on 11 March 2022 was also significant because it underscored the importance of the contract to the NAO, and raised the issue of public scrutiny. Mr Bassett reported on the meeting the same day, saying that it was “all very positive and collaborative”. His email goes on to make these points:

Mr Spalton KC cross-examined Ms Assassa about her understanding of the significance of the NAO contract following this meeting. Whilst it is a relatively lengthy passage of evidence to include in this judgment, I do so because it brings out the points to be made on both sides of the case.

Mr Spalton KC then went on to the concerns about the timescale, and the issue of whether or not the contract was unusual. There are other aspects of the evidence which bear on the second matter in particular, but the exchange is a useful summary of the Defendants’ position.

A few questions later:

On 28 March 2022 Mr Ingrey expressed his concerns about the timetable in a message to Ms Pearson in the following way:

It soon became apparent that there was a big problem with the RAPT tool. The problem is first noted in an internal “Project Highlight Report” dated 11 April 2022:

On 13 April 2022, Ms Pearson messaged Carly Allan and Saima Khan. She says this:

Then on 28 April 2022, Ms Pearson and Ms Allan exchanged the following messages: Katie Pearson:

Ms Allan then set up a Teams meeting, inviting (amongst others) Darren Bassett and Kevin Ingrey. The subject was “URGENT – NAO Contract Concerns”. The same day, Susan Ronaldson of the NAO emailed Ms Piek-Van Vuuren and Ms Pearson noting:

Later that evening, Ms Pearson exchanged messages with Mr Ingrey:

The fact that the team working on NAO team were “freaking out” had worked its way up to Mr Baxter, because he messaged Carly Allan on 6 May 2022 asking her if it was “justified”. Ms Allan responded with a message she had received from one of the team:

In the Project Highlight Report dated 24 May 2022, the Tisski RAG rating and Overall RAG rating turned to Amber for the first time because of missed milestones. By mid-June 2022 Tisski’s staff were acknowledging that they would not be able to deliver RAPT functionality by the September deadline. On 14 June 2022, Ms Pearson and Ms Allan exchanged the following messages:

In the Project Highlight Report dated 22 June 2022, the Tisski RAG rating turned to Red on the basis that Tisski had missed milestones, and that there was a risk that the September delivery date would also be missed. By 24 June 2022 Katie Pearson was off with stress, and Ms Allan noted that another staff member on the NAO team had resigned, and that others likely to resign as a result of working with the NAO. Her view was that:

Whilst Ms Assassa was not involved in the management of the project, she was aware that things were not going well. On 5 July 2022, in response to a question from Ms Assassa about the NAO, Mr Bassett told her:

By July 2022, Ms Assassa and Mr Baxter were heavily involved in preparations for the sale of Tisski. The Claimant had engaged PwC to provide advice and to market the company the previous year. Two factors (amongst others) would have been apparent to Ms Assassa and Mr Baxter by this time. The first was the importance of government work to a potential purchaser, and the fact that the NAO was a “key win” in that area. The second was that the financial model which Mr Baxter was preparing, and which would underpin the marketing of the business, was heavily reliant upon the historical and forecast growth of the business. The performance of the NAO contract was significant to this second factor as well, because of the potential impact on the figures for the Financial Year 2023 forecast (“FY23”).

Throughout this litigation, the Defendants have accepted that the issue with the RAPT was a serious one. That is plain from the documents, and there is no need for me to set out all the material the Claimant relies upon to establish that fact. However some of that material is relevant to the question of the importance of the NAO contract to the sale of Tisski, and the extent to which the Defendants were aware of how bad things were. An important part of that equation is the mitigation of the RAPT issue which Carly Allan effected in September 2022, and the existence of problems with the NAO contract other than RAPT.

Ms Assassa, Mr Baxter and the SLT understood that the performance of the NAO contract was significant for the FY23 forecast, and thus for the sale. On 18 July 2022 Ms Allan messaged Ms Khan stating:

The fact that staff were openly expressing their concerns was also something Ms Assassa was aware of. On 21 July 2022 she messaged Ms Allan saying:

By the end of July 2022, the estimate of the FOC days needed to rebuild the RAPT had gone up from 35 to 138. On 30 July 2022, Ms Allan messaged Mr Baxter saying that she was:

Ms Allan was not the only one troubled by the NAO contract. On 1 August 2022 Ms Piek Van-Vuuren messaged Ms Pearson stating:

Mr Baxter was also aware of the issue. On 2 August 2022 he messaged Ms Allan stating:

The other feature of the situation was the attitude of the NAO. There had been misgivings about their abilities and approach early on. The meeting on 11 March 2022 had gone well, as had the quarterly review on 5 July 2022. But the NAO were concerned about the lack of progress. On 15 August 2022, Ms Piek-Van Vuuren emailed Ms Khan and Ms Allan (copying Mr Bassett and Mr Coupland) noting:

On 16 August 2022 Ms Allan messaged Ms Piek-Van Vuuren saying this:

On 17 August 2022, Ms Piek-Van Vuuren emailed Mr Coupland and Ms Allan. This followed another escalation call with the NAO. This email noted various “significant points”, including that “NAO feel we aren’t honest with timelines and dates” and “RAPT – NAO said this was more complex and Tisski was adamant we could do this in 6 weeks. This resulted in a “we told you so””. It further noted that the NAO “are concerned about what their messaging will be that they take to parliament.” The email indicated that the:

The situation led to Ms Allan taking some legal advice about the NAO contract. The principal purpose of that advice was to see if there was any scope for renegotiating the requirements for Release 1. She was looking to see if there was any way that Tisski could challenge the contract and oblige the NAO to issue some Change Requests. She was aware that the FOC time was likely to be far in excess of the 138 days for RAPT she had been so concerned about not so long before. The figure by that time was forecast to be 1800, which she described as “astronomical”. The result of her further consideration of the terms of the NAO contract during August and September 2022 left her satisfied that there was no such challenge to be made.

In an email to Ms Assassa at around this time, Ms Allan said this:

The same day, Ms Assassa messaged Mr Bassett. Again, the message indicates her understanding of the importance of the NAO contract to the sale. This time she is concerned about the impact on the profit figures for September 2022:

Mr Baxter understood the position. Ms Allan messaged him saying:

Tisski’s internal forecast of 1800 FOC days reflects the position it presented to the NAO at a meeting with the NAO on 25 August 2022. Ms Allan’s briefing note for that meeting includes this:

The NAO were not apparently hostile at the meeting on 25 August 2022. They wanted the project to succeed too, but in an email sent by Kate Mathers of the NAO to Ms Allan and Mr Bassett the same day, the NAO made plain that there were consequences if things went wrong:

On 2 September 2022 Ms Allan messaged Ms Assassa saying:

Ms Allan had concluded that there was no contractual way out of the problem Tisski found itself in with the integration of the RAPT. The NAO had provided the relevant information and Tisski were contractually obliged to integrate the RAPT into the AMS. It was Tisski’s error. She decided that, rather than integrate the RAPT the NAO had developed into the AMS, with all the problems that presented, Tisski would rebuild the RAPT almost from scratch. Release 2 involved the development of the RAPT, so this new approach meant that some of that work could be brought forward into Release 1. Moreover, because work that would have been conducted in Release 2 was now being conducted in Release 1, Ms Allan was able to suggest to the NAO that some of the payment milestones should be brought forward. The NAO were amenable to the idea. On 6 September 2022, Ms Ronaldson of the NAO emailed Ms Allan indicating that they were keen to work with Tisski to make the plan work.

The upshot was that Release 1 was to be split into two. Release 1 (which was the AMS) was to go live in mid-November, and Release 1.1 (which was the new RAPT) was to be tested in December 2022 with a go live date in January 2023. That split allowed Tisski to be paid for the Release 1 work. The forecast at this stage showed that a further 1475 days were required from 31 August 2022 to complete Releases 1 and 1.1. At paragraph 138 of his opening written submissions Mr Casey KC observed that this appeared to reduce the level of contingency for Releases 2 and 3 from 981 days to 626 days.

There was some debate at trial as to whether that altered the September revenue figures. The Defendants’ position was that it did not. Revenue was calculated on a work done basis. But at the time it seems that the understanding was that the NAO overrun did affect the September figures. On 5 September 2022, Ms Assassa emailed Mr Bassett asking: “Do we think we can hit the September number?” Mr Bassett responded saying that the NAO was critical. A few days later Mr Bassett and Ms Assassa exchanged the following messages:

Once again the Claimant points to the use of the word “creative”, and the reticence about putting too much on Teams. As I have indicated, I did not regard Ms Assassa as someone who would engage in anything dishonest. That view gains some support from the email she sent to the SLTMs and Mr Baxter on 11 September 2022, the day before an important meeting with the NAO:

By this point Ms Assassa had realised that this was a problem that could hold up the sale. Mr Spalton KC put this to her in cross-examination:

On 12 September 2022 she emailed Mr Bassett (copying Mr Baxter) with the subject “PWC”. She was saying that if they were going to miss the September number, or any other number, she would like to tell PwC as soon as possible. Mr Bassett replied saying that it was “not good news”, and they “could be looking at breaking even between now and December”. Ms Assassa replied saying:

In a similar vein, I note that at paragraph 35 of her first witness statement, she says this:

Whilst the focus in this trial has been on the NAO contract and the issues it threw up, my view of this evidence is that it downplays those problems, and the differences between the NAO contract and other big contracts. The emails and messages I was taken to left me with no real doubt that this was a big and important contract, where Tisski had made a big and expensive mistake. All big contracts will present problems, but to describe it as “not massively more problematic than other contracts” and as ”not worrying me significantly” is not accurate.

Meanwhile, Ms Allan was involved in getting an agreement with the NAO as to how to proceed with her new plan. On 6 September 2022, Ms Ronaldson of the NAO emailed Ms Allan noting that Tisski had proposed a revised plan, and saying that they were committed to it succeeding. However she added this:

On 13 September 2022 Ms Allan emailed the NAO with her proposals for timelines. Her approach was to take responsibility for the underestimation of the work to be done on the RAPT, making the point that Tisski were suffering a loss on the Release 1 work to date, and to look to the future. What she proposed was that the parties

Her positive tone with the NAO contrasts with the mood of the discussions about the NAO contract within Tisski at the time. In messages exchanged on 14 September 2022, Ms Allan told Mr Ingrey that she had spent 4 weeks crawling through the detail about the overrun on the RAPT, but they “hadn’t a leg to stand on”. Mr Ingrey noted that they had a customer who “constantly throws the contract at us”. The same day Mr Ingrey exchanged messages with Ms Assassa, concluding that “… basically, we’ve massively screwed ourselves”.

That said, by the end of September 2022 things were looking a bit brighter. On 27 September 2022 the NAO confirmed that they had approval to include the Dataverse work in Release 1.1 because it was part of the RAPT work, and a meeting was set for 30 September 2022 between Ms Assassa and Ms Allan for Tisski, and the NAO team, including Gareth Davies, the NAO’s Comptroller and Auditor General. Ms Assassa described the meeting as having gone “about as well as could have been expected which is amazing” in an email to Mr Baxter the same day, and Ms Allan sent a message to Abbie Holland (the new project Manager) to say that “The meeting went really well – they really rate you and have a lot of confidence in your ability”. Gareth Davies also sent positive messages following the meeting, thanking Ms Assassa for her “support, guidance and understanding”, and remarking that it was “good to discuss how our teams are working together”.

Carly Allan thought the project was “generally turning a corner I think”. In one way, it was. She had found a way to deal with the RAPT, and to move forward with the contract. It meant accepting a much reduced profit margin, and she was fortunate that the NAO were as cooperative as they were (Ms Assassa described them in her evidence as “nice people”) but it was a real achievement. From the perspective of the sale of the business, there was a way forward with the NAO, and at least a partial answer to the problem (perceived or otherwise) with the September figures. Ms Assassa had some cause for optimism, but having heard all the evidence in the case (and reminding myself that I have the benefit of hindsight) it would be seriously overstating the position to say that everything was under control (or “set fair”, as Mr Casey KC puts it in his skeleton argument).

The Defendants’ case proceeds on the basis that the RAPT problem was an isolated, if serious, issue. There is some significant material from the time to the effect that that was not the position. Moreover, whilst Ms Allan had done well to find a way of dealing with the RAPT issue, it is simplistic to see it as an isolated problem. The future performance of a contract is bound to be affected by what has gone before, as Ms Allan accepted in the course of her cross-examination. Given what had gone before, it would have been unrealistic for anyone to assume that the NAO contract would now all run smoothly. The NAO Monthly Performance Update for August 2022 identified four “open” Red risks on the project:

The identification of these other risks did not come out of the blue. Abbie Holland had recently taken over as the project manager on the NAO contract. In an email she sent to Mr Cavanagh on 20 September 2022 she set out the issues on the NAO Contract as she saw them. It is a useful snapshot:

The extent of this risk was highlighted in a message from Ms Pandya, who was working on the project for Tisski, in an email she sent to Mr Cavanagh and Saima Khan on 4 October 2022:

Tisski took a number of steps to deal with the testing issue. Firstly it pressed the NAO to agree that the requirements for the RAPT as set out in the NAO contract represented the totality of the functionality to be delivered. Secondly, in order to help the NAO with the testing process, Tisski shared its own test scripts with the NAO so that the NAO could confirm that Tisski were testing for the functionality the NAO were expecting. Thirdly, the NAO agreed to develop its own test scripts for Release 1.1 and provide them to Tisski for the end of November 2022. On 13 October 2022 Abbie Holland told Carly Allan that the NAO test scripts would definitely be done by the end of November 2022. But in the event there were delays.

The Defendants’ case is that the issue about the testing on the RAPT was identified on 5 December 2022. That mischaracterises the position. The risk was expressly identified some 2 months or so before as “massive”. The problem may not have become as acute as it was by 5 December 2022, but it was there and recognised in September/October 2022. The Claimant makes the point in its closing submissions that despite the fact that the risk was foreseen, there was no adjustment to the forecast made in August 2022. It submits that Carly Allan’s evidence that all relevant contingencies were accounted for cannot be correct.

On 25 October 2022, Ms Piek-Van Vuuren messaged Ms Allan:

Then on 27 October 2022, Ms Allan was involved in an exchange of messages with the SLT and Ms Assassa. She confirmed that the AMS (Release 1) was due to go live in November, but added this:

Carly Allan discussed the risk that Release 2 could not be delivered to time or quality by the deadline of September 2023 with Ms Piek-Van Vuuren in messages on 26 September 2022. They agree that this was a red risk. Ms Allan says this:

The risk on Release 2 was worrying Abbie Holland. On 21 October 2022 she sent a message to Carly Allan:

I note that the risk summary in the Project Highlight Report of 25 October 2022 said this:

There are three further aspects of the history of the NAO contract over the months leading up to the SPA to deal with before I turn to the issues of disclosure. The first is the extent to which matters were deteriorating over that period. This involves a slightly odd situation on the pleadings. Paragraph 27 of the Particulars of Claim pleads as follows:

The Claimant’s pleaded position was based on a presentation Carly Allan gave to the Board of Node4 about the NAO contract in January 2023. The Claimant relied on the document Ms Allan produced for that meeting when pleading paragraph 27 of the Particulars of Claim. Not only that, but in the Amended Defence at paragraphs 22(4) and (5), the consequent “adverse variance” in the expected profitability of the NAO contract is admitted and averred. The Defendants’ position now is that this is an error, as the documents confirm. The question for me is what effect these matters have on the determination of the facts. Whilst there have been no amendments to the parties’ pleadings (a criticism which cuts both ways) given that the factual position is now effectively agreed, it would be unjust to hold the parties to what is pleaded and proceed on a factual basis which I know is not correct.

The Defendants’ case is (to the effect that) the fact that the number of additional days budgeted did not increase from the August forecast, supports the case that as at the date of the SPA the NAO contract was under control. The Claimant’s case is that Ms Allan’s view of the position in January 2023 reflects the fact that the position between August and October was worsening. I have already referred to the documentary evidence from the time about the risks which remained on this contract, and the mounting concerns of the staff involved in it. The views of Ms Allan in January 2023 are consistent with that. There would be no reason for Ms Allan to misrepresent that general trend to the Board meeting in January 2023. The Claimant relies not only on the Briefing document, but on the accompanying email Ms Allan sent to the SLTs, which included reference to her “adding in resources and re-estimating between August and November-ish”. Whilst it goes against Ms Allan’s oral evidence, the Claimant’s case on this aspect is the more likely. It is possible Ms Allan may not have provided accurate numbers to the Board in January 2023, but it is unlikely that the general tenor of her account of a worsening situation would have been inaccurate. It was recent history, and she had lived through it.

The second matter relates to the level of contingency provided for the future releases of the NAO contract when Ms Allan re-worked Release 1, bringing forward the RAPT work in Release 2. Ms Allan’s evidence was that she built in a lot of contingency. In her evidence, particularly orally, she made a number of references to building in a generous contingency for Release 2.

The revised budget prepared in August 2022 included a contingency for Releases 2 and 3. The Defendants refer to an email sent to Ms Allan by Jon Broadley on 2 September 2022 with his estimate of the design effort for Releases 2 and 3, and the spreadsheet which accompanied it. However, the analysis of the revised budget for the NAO contract of 23 August 2022 at paragraph 138 of the Defendants’ skeleton argument adopted in opening, suggests that this involved a reduction in the contingency for Releases 2 and 3, rather than an increase. There is no hard evidence that the budget was changed after that to add in any more contingency. Indeed the impression I have is that the drive would have been to keep the overall number of additional days within bounds given the effect on the sale (perceived or actual).

The Claimant also points to the terms of a message sent by Ms Allan to Ms Holland on 14 November 2022 (after the SPA).

The Claimant suggests that Ms Allan may have confused the contingency she built into the timelines with the idea of a contingency for additional days. The email she sent to the SLT with her Board Briefing in January 2023 included this:

The third issue relates to the accounting effect that changing the milestones on the NAO contract. There seems to have been some confusion about this at the time. In her evidence Ms Assassa made it plain that she was not an accountant and that this was really a matter for Mr Baxter. But my understanding of the documents from the time was that she was very concerned about the effect that the overrun on the NAO contract would have on the September figures. I refer above to the exchanges during which she is told that Tisski may be breaking even in the period from September to December 2022, and her enquiry as to whether the figures could be nuanced.

The Defendants’ position at trial was that the changes in milestone had no effect on the accounts in terms of revenue. What it did was bring forward the date for which Tisski could be paid for work it had done. In other words, it was good for cashflow. Tisski’s accounts were prepared on an accruals basis, and revenue accrued in line with work actually done, rather than work paid for. As Mr Casey KC puts it in in his closing submissions, when bills are raised and cash is paid, it does not affect the timing of the recognition of revenue. Debtors reduce and cash increases. The problem presented by the overrun was more about profitability on the contract overall. There was a fixed price, so that profit was adversely affected by an increase in the number of days Tisski had to pay its staff and consultants to do the work it had contracted to do. Putting the cost of the overrun into a particular period would adversely affect the profit, but not the revenue.

Ms Assassa was cross-examined on the basis that the changes to the milestones had been undertaken in order to mask the adverse variance on the NAO contract – to pull the wool over the purchaser’s eyes, as it was put. There was a proper basis for putting the case that way. There are emails from Ms Assassa encouraging her team to be “creative”, counselling against putting too much on Teams and asking them to “nuance” the figures. But as I have already indicated, I reject the suggestion that Ms Assassa was doing anything dishonest. The point is more that, in Ms Assassa’s mind, the overrun on the NAO had the potential to derail the sale of the business, and she was looking to put things forward in the best possible light. That is not to say that matters were properly disclosed for the purposes of the SPA, but I reject the suggestion that there was anything deliberately dishonest about it.

Standing back, the reality was that this was a contract which could not readily be performed on time and could not readily be performed without an undue or unusual expenditure of money and effort. There were a number of matters which went to that characterisation of the NAO contract. Profitability was one, and the extent of the overrun was another, but on their own they fail to paint the true picture. That required a wider review of the problems that had been experienced and the foreseeable risks, and the way these matters combined. There are bound to be issues on a big contract, but the issues on this contract were of a different order. In particular:

The contractual definition requires the application of some broad and necessarily imprecise tests, but the factual evidence satisfies me that, this was a contract that fell within the ambit of paragraph 13.2.4. Sitting alongside the hard evidence of those problems and risks, are the multiple examples of the descriptions of this contract from various members of Tisski’s staff. They describe it in terms which go well beyond the nature of the words of Warranty 13.2.4. Those culminate in Ms Assassa’s description of the NAO contract in October 2022 as a “buggar of a contract”. The determination of this issue involves the application of the contractual test, but that is not a bad approximation of the sort of contract this Warranty was concerned with. There is no issue but that the Defendants were aware of these matters. Consequently, the Claimant succeeds on the first and second issues on the NAO claim.

This section of the judgment deals with the third issue on the NAO claim, namely were the facts in relation to the warranty claim under paragraph 13.2.4 “Disclosed” for the purposes of paragraph 8.1 of Schedule 5. That breaks down into:

The starting point is the pleadings. Paragraphs 15 and 15A of the Amended Defence plead the matters the Defendants say were raised at the meetings on 18 and 24 October 2022:

The Claimant responds to those matters at paragraph 5 to 7A of the Amended Reply:

The Amended Defence then goes on to deal with the RAG report I refer to above:

Tisski used this RAG colour coding to identify whether a project (or certain aspects of it) were Red, Amber or Green. In general terms, Green is an indication that all is going to plan, through Amber, to Red, which indicates that things are not going to plan. What was provided by Tisski in response to this request (through PwC) was, in fact, not a RAG report as such, but a “cut” of some of the information in relation to 32 contracts, including the NAO contract, which were taken from the relevant RAG reports. The information in relation to the NAO contract was revised and annotated by Ms Allan, and provided in black and white rather than in colour. Ms Allan prepared it on 26 October 2022, and sent it to PwC to upload into the Data Room. For some reason it was not actually uploaded into the Data Room until 1 November 2022, the day before the SPA was due to be signed.

The Amended Reply at paragraph 8 makes the point about the document as provided being in black and white, and pleads the following case:

It is against that background, that the Defendants plead the two lines of argument they ran at trial. Firstly, that the RAG Report disclosed on 1 November 2022 which showed a reduction in the expected profitability in the NAO Consultancy Project from 50% to 30%. fell to be read in the context of the information supplied to the Claimant at the meeting on 18 October 2022 and at the meeting on 24 October 2024. The case is put this way at paragraph 21(3) of the Amended Defence:

Secondly the estoppel argument, which is pleaded at paragraph 21(6) of the Amended Defence:

The Claimant’s response is at paragraph 10 of the Amended Reply:

The first issue to determine is the meaning of “Disclosed” for the purposes of the SPA. The Claimant’s primary case is that as a matter of contract, the Defendants cannot rely upon any of the information they may have provided to the Claimant at the October meetings to set up a defence to the claim for breach of Warranty. They are limited to what is set out in the cut from the RAG report which was uploaded to the Data Room on 1 November 2022. Mr Casey KC submits that what was said at the October meetings is relevant to a consideration of what was fairly disclosed within the meaning of the term “Disclosed”. He does not seek to argue against the contractual provisions, but to bring in the October meetings as part of the context in which the disclosure made by the provision of the cut from the RAG report is to be read.

I refer back to the principles of construction set out above, and to the analysis of the nature of this contract. I do not repeat what is set out there, but it follows from that analysis that the language of the terms relevant to “Disclosed” is to be given significant weight. What the parties intended is most obviously to be gleaned from the language.

There are two other matters of particular relevance to the construction of the words used in the terms relevant to this issue. The first is the purpose of entire agreement clauses. Generally they are designed to ensure that the contractual relationship between the parties will only be as set out in the written document, or as expressly provided by the written document. That is the plain purpose behind these terms of the SPA, contained as they are within a well drafted agreement, and incorporating the sort of mechanism for disclosure which is common to find in agreements of this kind. It promotes certainty, something much valued in the commercial world. That can be seen as the general position. It is to be remembered that such a regime, and the certainty it promotes, works both ways. In this case it is being used by the Claimant to argue that there is no defence to a Warranty claim. But in different circumstances, it would have the potential to prevent a claim for misrepresentation being brought by Node4 against the Defendants in relation to some extra contractual promise or representation.

The second matter of relevance to the process of construction is that the terms which provide for what is “Disclosed” for the purposes of the SPA are to be seen as a defined exception to that general position, and as part of a scheme drafted to effect that exception. The definitions of “Disclosed”, “Disclosure Letter” and “Data Room”, and the terms of paragraph 8.1 of Schedule 5, combine to regulate how, and consequently what, is “Disclosed” for the purposes of a defence to a Warranty claim. I also note that there is a parallel “defence” built in to the Warranties given by paragraph 8 of Schedule 4, where the Warranty is given “… save as Disclosed”. The process of construction must take account of this scheme and the way it works.

To begin with the language. The language of the entire agreement clause is clear, and its terms are intentionally wide. It includes all previous discussions, assurances, representations and understandings. It is not simply about excluding the process of negotiating the terms of the agreement, but catches the process the parties were involved in at the October meetings.

The language of the definition of “Disclosed” is particularly important. It is defined to mean:

Whilst the point is put very attractively, there is a difficulty with that approach which stems from both the purpose and the language of the definition. What this definition is considering is the matter disclosed in the Disclosure Letter or the Data Room. The issue is whether the matter in the Disclosure Letter or the Data Room has been fairly disclosed with sufficient detail to enable a reasonable buyer to identify its nature and scope. This definition is not directed to some specific piece of information that the buyer may have obtained outside of that process, or to some specific fact which the buyer may have been told in the course of (for example) a meeting. It is directed at the material the Seller has referred to in the Disclosure Letter or the Data Room. In other words – was what is in the Disclosure letter or the Data Room fairly disclosed with sufficient detail to enable a reasonable buyer to identify the nature and scope of the matter disclosed.

The language and structure of this definition reflect the wider purpose of the disclosure scheme provided for by the SPA. One reason for that certainty is that it avoids expensive disputes about what was said or not said at unrecorded meetings. The parties know where they are. To allow the Seller to then rely on specific information provided outside that process as “context” for the information provided by that process, would be to drive a coach and horses through the mechanism the parties had agreed on. Mr Casey KC accepted his argument was “at the margins” of the entire agreement clause. My view is that it goes considerably further than that.

It may be argued that such a rigid process works an unfairness. So in this case, if Mr Cox is told something about the NAO contract in the October meetings which materially adds to his understanding of the significance of the RAG report, then Mr Casey KC submits that it would be unfair for him to then turn around and say that the Defendants were in breach of Warranty because he did not understand the real significance of what was in the RAG report without taking account of his actual understanding. At one level, that is unfair. But if that information was necessary for the matter disclosed in the Data Room to be “fairly disclosed” for the purposes of the Warranty defence, then it was open to the Defendants to put that material into the Data Room, with such detail as they chose. They are not limited to answering the specific questions they are asked. Indeed, the notion of disclosure more broadly involves the provision of information in circumstances where the recipient may not know enough to ask the relevant question. The point comes back to the fact that the parties have agreed a clear and workable means by which material will be “Disclosed”, and that governs their relationship in this matter.

The point is illustrated by the terms of the Disclosure Letter itself, which identifies the specific warranties against which Disclosure is being given, and says this:

It follows from the above that I agree with the Claimant’s position on the construction of what is “Disclosed”. It is only what is in the Disclosure Letter or the Data Room. It was accepted that the reasonable buyer would be someone with a degree of general financial and business knowledge and experience, but it was unnecessary to explore the point in any detail, because on the facts of this case that general knowledge would not have had a material effect on the outcome. It was only the specific matters which were said to have been disclosed at the October meetings which might have had such an effect.

The next issue is whether the relevant matters were “fairly disclosed”. In the course of their submissions, Mr Spalton KC and Mr Casey KC referred me to a number of authorities which went to the issue of “fair disclosure”. Whilst they emphasise different aspects, I did not detect any real disagreement of principle.

Mr Spalton KC submitted that it was not sufficient for the disclosing party to provide the means of knowledge for certain information, and leave the other party to search for it. He referred to the judgment of Gibson J in In Levison v Farin [1978] 2 All ER 1149 where the seller of a company warranted that “save as disclosed” its overall financial position would not have changed adversely in any material way between the balance sheet date and the date of completion. At 1157h Gibson J said this:

In Daniel Reeds Ltd v EM ESS Chemists Ltd [1995] CLC 1405 at 1412 Beldam LJ (with whom the other members of the Court agreed) held that where matters were said to be specifically disclosed against warranties:

Mr Casey KC submitted that these cases differed significantly on their facts from this case. The information provided by the RAG report was precise and focussed, and this was not a case where the Buyer had been left to search for the relevant information within a complex document. It might have been better if the material had been included in the Disclosure Letter by reference to the relevant Warranty, but uploading to the Data Room was sufficient.

What amounts to fair disclosure in any particular case depends on the facts of that case. Mr Spalton KC and Mr Cook begin their submissions by pointing out that the RAG report was provided in answer to a request for information from EY via PwC, which related to the profitability of the NAO contract. It was not information which was provided by reference to the relevant Warranty, and the response made no reference to Warranty 13.2.4. They submit that it would be absurd to see this information as being disclosed by reference to that Warranty. The absence of reference to the relevant warranty is a point, but if the material which was put into the Data Room provided sufficient detail of the matters which gave rise to the Warranty claim, such that there was “fair disclosure” I would not regard a specific reference to the relevant Warranty as being necessary. In this instance, the information related to the NAO contract, and was brief and relatively simple to understand. It did not require a search through a long complex document.

There is more force in the point that the information was only uploaded shortly before the SPA was agreed. It is unclear why this was. Carly Allan sent it to PwC in good time, so it appears that the late disclosure of the material was a result of PwC not uploading it to the Data Room. There is nothing to suggest that it was deliberate, but the consequence was that there was limited time to consider it. On its face, the information is simple, but it appears to have come too late for EY’s due diligence report on 1 November 2022, which makes no reference to the cut from the RAG report or a profit margin of 30% on the NAO contract.

The more significant issue is whether this information went far enough. Did it provide sufficient detail to identify the nature and scope of the matter disclosed? Mr Casey KC’s submission is that it did. In the context of Warranty 13.2.4, the reasonable buyer would be interested in the profitability of the contract, and the extent to which there had been an overrun on the budgeted days. He submits that the RAG report provided the necessary details of those matters in a simple format.

There are a number of points to make as to that. The first is that there were issues which went beyond those statistics that were relevant to the state of the NAO contract. As I have found, the reality was that this was a contract which could not readily be performed on time and could not readily be performed without an undue or unusual expenditure of money and effort. There were a number of matters which went to that characterisation of the NAO contract. Profitability was one, and the extent of the overrun was another. But the bare figures were not even an accurate headline for what was a story which required a lot more detail to be properly understood.

The second is to note what was not provided. EY had requested an “updated point in time RAG analysis”. The document provided was not a copy of the RAG analysis, but cut the figures for some 32 contracts from the latest reports. The document is a list of figures, and does not reproduce the rest of the material provided by a RAG report, including information about risks and the colour coded analysis.

The document which went into the Data Room was in black and white. Mr Spalton KC made much of the removal of the colour coding with Ms Allan, suggesting that it was done to remove something which would have drawn attention to the contract, and given rise to concern on the part of Node4. As I have already observed, the detail of the RAG report was omitted, but I am not sure how the addition of colour would have worked on this list of numbers.

The other feature of significance is that the figures for the NAO contract were adjusted to give a profitability figure of 30% rather than the 21% shown in the original RAG report. That involved adding what must be a significant sum for tax credits to the profit of the contract. The Defendants’ case is that PwC had told them that these tax credits were (at least in principle) recoverable in relation to the R&D done on the NAO contract. I accept Ms Allan’s evidence that she had been given the figures by Mr Baxter. That is where she would have got them. I also accept that Mr Baxter would have had some such conversation with PwC about these (potential) tax credits. The gap in the evidence is that there is nothing in writing from PwC setting out the calculation or the basis for it, or confirming that these tax credits would be recoverable. The Defendants say that this is a document lost by the Claimant. The Claimant’s response is that the loss of Mr Baxter’s records has been known for some time, yet the Defendants have failed to obtain a copy from PwC, despite obtaining a number of documents from PwC in recent times to fill in the history. The riposte to that was that the additional documents were obtained from PwC’s M and A department, whereas the tax credit issue was dealt with by its tax department. Why that prevents the Defendants from obtaining a copy I am not sure.

There is no document to support the calculation, but it is highly unlikely that Mr Baxter would have made this up. Indeed, there is evidence from the time that some calculation had been made of the likely figure, for Mr Baxter includes this in his speaking note for the meeting he had with Mr Cox and others on 24 October 2022:

It was apparent from the exchanges between Ms Allan and Ms Assassa, and Ms Allan and Mr Baxter at the time of Ms Allan’s preparation of this cut from the RAG report, that Ms Allan was worried about the 30% figure. Both Ms Assassa and Mr Baxter were against her including the note about the R&D tax credits, but she did. It is to Ms Allan’s credit that she did, but those exchanges reveal the mindset at the time. This was not so much an exercise in disclosure, as the provision of the minimal amount of information possible in relation to what they all knew was a problematic contract. That was a mindset well summarised by Ms Assassa’s message to Browne Jacobson a few days later on 30 October 2022:

Standing back from the detail, the answer to the question of whether or not there had been fair disclosure for the purpose of the SPA is plain. The cut from the RAG report uploaded to the Data Room fell well short of the detail sufficient to enable a reasonable buyer to identify the nature and scope of the matter disclosed.

Given the conclusions I have reached on the construction of “Disclosed” and the question of fair disclosure, and the views I set out below in relation to the estoppel argument, the determination of the issues of fact which arise from the evidence about what was said at these meetings, is not determinative. But given the prominence of that evidence at trial, I should set out my findings.

There were meetings on 18, 19 and 24 October 2022. No issues arise in relation to the meeting on 19 October 2022, but there was a substantial amount of oral evidence about what was said at the other two meetings. Whilst there were significant differences between the parties in the evidence given about what was said at these meetings, I do not regard any of the witnesses who gave that evidence as being dishonest. I have already referred to the scope for witnesses to misremember matters in a case such as this, and to the importance of the documents from the time.

Firstly the meeting of 18 October 2022. This was attended by a number of Node4’s key staff, including Mr Cox and Mr Gilbert. In addition Node4 had its Chief Commercial Officer, its Chief Financial Officer and advisers from EY and Providence. For Tisski there was Ms Assassa, Mr Baxter, the Senior Leadership Team, including Ms Allan, and representatives from PwC. Node4 prepared a detailed agenda, which identified the issues they wanted to consider. The agenda is dated 15 October 2022 and was distributed before the meeting, and included the following at Item 4:

The NAO was number 3 on the list of the current top ten customers, and so was bound to be discussed. No doubt, Ms Allan and Mr Baxter had prepared to answer some difficult questions about it. The Defendants’ pleaded case is that during the course of this meeting, Ms Allan told the meeting that the expected profit margin on the NAO was 30%, conditional upon the recovery of tax credits against R&D expenditure. Ms Assassa’s evidence was to the effect that there was such a discussion, although it is fair to say that she accepted that her recollection of what Ms Allan said was not that good. Her role was likely to have been more strategic. In particular, she was keen to observe Mr Gilbert and his reaction to matters.

In her witness statement signed on 23 January 2025, Ms Allan sets out her recollection of the meeting. The evidence about the 18 October 2022 meeting at paragraph 83 is that she thinks she started with HS2, which was Tisski’s biggest earner at the time. She recalled questioning whether this was the right time to go into the numbers. The reason she gives was as follows:

At paragraph 84 of her witness statement, Ms Allan says that after HS2, they moved onto talking about the NAO contract.

It may well be that Ms Allan gained the impression that Mr Gilbert was not that interested in the fine detail of the finances of every project, but the problem with her evidence about the question about the NAO contract being rated Amber was that, as at 18 October 2022, Node4 had not been told what the RAG status of the NAO project was. Consequently, there would have been no basis for Mr Cox (or Mr Gilbert) to ask why the NAO RAG status was Amber. Moreover, as Mr Spalton KC pointed out in the course of cross-examination, the NAO’s RAG status at the time was Red.

At paragraph 85 of her witness statement, she says this:

On the face of it, given that there was a follow up meeting arranged for 24 October 2022, it seems likely that Ms Allan is right to have concluded that there was no discussion about the NAO profit margin at this meeting. That was the case Mr Casey KC put to the Claimant’s witnesses. There is further support for that conclusion in the following:

The more significant element of the evidence Ms Allan gives at paragraph 85 of her witness statement (and orally) is that she discussed the issue of the RAPT, and the shifting of milestones. There are differences of recollection, but the Claimant’s case is that there was a discussion about the shifting of milestones. There is support for that in the item on the agenda for the 24 October 2022 about the potential risk to the NAO contract. From the inquiry however, it seems that Node4 were unsure what this risk related to. Ms Allan’s evidence is that she told the meeting on 18 October 2022 that the discussions with the NAO about moving the milestones were under control.

The difference between the evidence Ms Allan gives and the evidence that Mr Gilbert and Mr Cox give about this aspect of the matter, is that Mr Cox and Mr Gilbert gained the impression that the NAO contract generally was under control. Mr Cox says this about the way the shift in milestones was presented (paragraph 49 of his witness statement):

In his witness statement at paragraph 41, Mr Gilbert says this:

Whilst Mr Gilbert may not have been that interested in the fine detail, he was interested in the overall position, and the NAO contract was a big public sector client which would have been of interest to him. He would have been looking at the bigger picture, and the potential for growing the work with the NAO and other Government agencies. He was also interested in the people who would be working for him. The likelihood is that he would have been interested to know whether there were any significant problems with the contract, and he would have wanted some reassurance that all was well. If he had gained some other impression, then it is unlikely that he would have said – let’s move on. If the point is considered from the Defendants’ perspective, the probability is that Carly Allan would have given the impression that the NAO contract was under control.

These issues took some time to cover with the witnesses at trial, and Counsel refer to numerous passages from the transcripts of that evidence in the course of their written closing submissions. I have reminded myself of that evidence in the course of preparing this judgment. It is unnecessary to set out all the issues which were covered in the oral evidence of the witnesses who dealt with the meeting. There is more than sufficient in the above summary of the major points to satisfy me that the upshot of this meeting was that the impression was given that the NAO contract was under control, and that there was no mention of the profit margin. Still less was there any explanation of the very serious problems RAPT had caused, the tightness of the contract, or the risks that had been identified as to the future running of the Consultancy Project.

The meeting on 24 October 2022 was a virtual meeting at which the main players were Ms Allan, Mr Baxter, Mr Coupland and Mr Cox. Mr Cox and Mr Zwicky had prepared a document called “Tisski FDD follow up” dated 20 October 2022 which set out details of what they wanted to discuss. The headings were (1) Pipeline, (2) Utilisation and day-rate, and (3) Other. The NAO was not highlighted for discussion in relation to (1), nor was there any express reference to it in (2) or (3). The increase in FOC days was referred to under (2), and under (3) they sought some “… colour on the revenue decline in August vs. budgeted increase”.

Mr Baxter prepared a speaking note for the meeting. I have already made reference to the 49% profit margin being maintained by using R&D tax credits. The paper also makes reference to the NAO contract in the context of the fall in day rates in August and September 2022. In the note, this is explained on the basis of a “prudent” approach in the light of the shift in milestones, identifying the correct figure as being £800, which was much closer to the day rate used in the original budget for the project of £855. The note PwC circulated the next day makes reference to being told that Tisski had taken this “prudent” approach. That seems to have been the explanation put forward. It is also consistent with Mr Cox’s note of the meeting.

In their written closing submissions Mr Spalton KC and Mr Cook make the point that the Defence as originally pleaded made no reference to this meeting. The amendment pleads that Ms Allan explained that the forecast profit on the NAO Consultancy Project was 30% including the recovery of tax credits against R&D expenditure; and 21% without such recoveries. Once it was confirmed that the NAO Consultancy Project was not expected to be loss-making, the conversation moved on to other projects. In terms of the information disclosed to the Claimant, all that adds to the RAG report is that the profit was 21% without the R&D tax credits.

However, at paragraph 88 of her witness statement, Ms Allan says this:

The transcript of the evidence Carly Allan gave at the start of Day 6 (pages 1-12) is an example of the problems of trying to remember these sorts of matters accurately. Ms Allan is not sure that she was sharing the RAG report on her screen, but it is unlikely that she would have been. If she had, then it would not have shown a profit of 30%. That figure does not appear in any of the RAG reports or other Tisski documents. It would have shown 21% or 20%. Nor is it likely that she would have been explaining a differential profit margin dependent on R&D tax credits. Firstly, it was not something she really understood. Secondly, had she provided this information to the meeting on 24 October 2022, it seems unlikely that a few days later she would have been agonising over the note to that effect which she added to the cut from the RAG report which was uploaded to the Data Room. Mr Baxter includes some detail about R&D tax credits in his speaking note for the meeting, and may well have said that they were to be rolled into the budget. But whether he deployed that information in the context of profit figures must be doubtful given his note that it would be used “if prompted” and the reference to a figure of c49%.

Mr Baxter and Ms Allan were communicating on WhatsApp during the course of this meeting. The exchanges in the bundle are heavily redacted (to exclude irrelevant personal conversation). The exchanges as set out in Mr Casey KC’s written closing submissions at paragraph 143 are fuller, and I use those:

The other written record of that was discussed at this meeting was the note made by Mr Cox. In relation to the day rates for August and September 2022 he noted that there was “… some unknown end of August”. I tend to agree with Mr Casey KC’s submission that this related to the problem with the RAPT (the next line of Mr Cox’s note refers to a “Wrap tool”) and a discussion about the movement of the milestones. Mr Cox accepts that the Claimant was told that there was a reduction in revenue in the months concerned, but that this was a reflection of the prudent approach which Tisski had taken, and that this was a temporary adjustment whilst the milestones were shifted. His note goes on to refer to FOC days and includes what appears to be a reference to the profit on Release 1:

The position is unclear. The agenda makes no reference to profit figures as such, save under item 1 in relation to pipeline where NAO was not highlighted to be discussed. Mr Baxter’s speaking note tends to suggest a disinclination to deal with profitability unless prompted, and the percentage is different to the one he and Ms Allan say was mentioned. Mr Cox’s note refers to a figure of 33% for Release 1, but the RAG report would have shown 21%. Mr Cox thinks no figure was mentioned, but if a figure had been mentioned it is likely that he would have been interested in it, and would have made a note. Meanwhile EY were making a formal request for that information.

On balance I find that the profit figures of 30% with R&D, and 21% without were not mentioned. Had they been, Mr Cox is likely to have written them down, and it would have been a simple matter for the same figure to have been included in the written information Ms Allan provided a few days later. Instead of which, Mr Cox made no note, and the drafting of the response to EY’s request appears to have troubled those involved, and in particular Ms Allan. There was a discussion of the problems identified on the agenda as to moving milestones, the level of FOC days, the drop in revenue, and (probably) the problem with the RAPT. But the figures were explained by reference to financial prudence, and I accept that the impression given was that this was not a matter of concern or other than a temporary issue.

In summary, whilst this aspect of the evidence took some time to deal with, I conclude that it takes the matter little further. The Defendants’ evidence does not satisfy me that there was a discussion of the profitability on the NAO contract, but even on their case, it did not go that much further beyond what went into the Data Room on 1 November 2022, save for the explanation about shifting the milestones, and the explanations as to the FOC days and day rate to which I have referred. The overall impression which the Claimant took away from these meetings was that the NAO contract was under control. That explains why Mr Gilbert was so surprised by the problems on the contract when he learned about them in early January 2023. That would have been the impression Tisski wanted to give at those meetings. Whether that is seen as putting your best foot forward, or a nuancing of the figures, that was the effect. It was an exercise in answering questions and providing the minimum information so as not to jeopardise the sale. It was not an exercise in disclosure informed by an understanding of the requirements of Warranty 13.2.4.

The point is not determinative, but even if the specific matters the Defendants say were put forward at the October meetings were to form part of the context for the RAG report uploaded to the Data Room on 1 November 2022, they would not have added significantly to the understanding of the reasonable buyer. The material matters would not have been fairly disclosed.

During the course of submissions, I was concerned to understand how this argument was put, and what principles applied. Mr Casey KC says this at paragraphs 234-236 of his written closing submissions:

I took it from that formulation, that the Defendants no longer pursued an estoppel based on the allegation that Mr Gilbert curtailed discussion of financial matters on 18 October 2022 having been told that the contract was not loss making, or that the request for the RAG report amounted to a confirmation that no more than this financial information was required. The first runs into the problem the Claimant identified, which was that there was to be a further discussion at a follow up meeting on 24 October 2022; and the second falls well short of amounting to a clear representation to the effect pleaded.

In his skeleton argument, Mr Casey KC referred to the summary of general principle in Chitty on Contracts 35^th ed at paragraph 7-005:

The authority in the footnote for the proposition in the last sentence of that quote, that this may be possible even in the face of an entire agreement clause, is Brikom Investments Ltd v Carr [1979] 1 QB 467, a decision of the Court of Appeal. The passage referred to is in the judgment of Lord Denning MR at 480C-D. Lord Denning MR was dealing with the argument that a claim against landlords based on a collateral contract or misrepresentation was defeated by an entire agreement clause. Having set out that clause he said this:

There was some doubt before me as to whether this was indeed a correct statement of the law. Whether or not it is, Mr Casey KC submits that the estoppel he proposes does not undermine the entire agreement clause. It goes to the question of what is fair disclosure. If Mr Cox is to be given information at the meeting on 24 October 2022 which feeds his understanding of a document which forms part of the Disclosure, and says that he does not require further information, it would be inequitable for him then to say – I didn’t understand what was being said in that document.

On my construction of “Disclosure” any further information provided would, in any event, fall outside the material the SPA contemplates. The specific information (as opposed to the general commercial knowledge which a reasonable buyer would be taken to have) which would have been provided at this meeting but for the discussion being curtailed, would not be taken into account as the context for the determination of what was “Disclosed”. In those circumstances, the estoppel adds nothing.

Further, whilst the point was not directly argued before me, in circumstances such as the present, where the entire agreement clause is such an integral part of the contractual arrangements the parties have agreed upon, and where there is no issue as to whether the clause is “fair and reasonable” for the purposes of the 1967 or 1977 Acts, it would require something exceptional for this sort of argument to be run. Where parties such as these have agreed on the relevant process, it is unlikely to be inequitable to hold them to that process.

The Claimant’s case is that in any event, the argument fails on the facts. That would be because:

I agree with the Claimant’s case that the representation relied upon lacked the necessary clarity. If the comment attributed to Mr Cox was made, it referred to profitability only. The issues on this claim go beyond that. The second point speaks for itself. As to the third point, it is unlikely that the Defendants would have offered any further information without being specifically asked for it. There is no evidence to suggest that they were intending to put anything into the Data Room about the NAO contract. Had they intended to make some disclosure about it, then there would have been an opportunity to do so when they completed the Disclosure letter. The plain intention was to say no more than they were asked. It was a contract they did not want to draw attention to. There is no proper basis for the estoppel claimed.

It follows that the Claimant establishes a breach of Warranty 13.2.4 in relation to the NAO contract.

The issues which arise in relation to this part of the claim can be broken down into (i) the construction of the relevant terms of the SPA; (ii) the relevant facts; and (iii) causation and quantum. The consideration of issue (iii) is closely related to the issues of causation and quantum in relation to the NAO claim, so I deal with those matters together.

I set out the relevant terms of the SPA at paragraphs 18-21 above, and refer once again to the principles of contractual construction I have already reviewed. The Claimant alleges that the Defendants are in breach of two warranties in relation to the Aqulia contract.

The first is paragraph 7.1 of Schedule 4, that “… since the Accounts Date … the Company has conducted its business in the ordinary course and as a going concern; …”. The accounts date is 30 June 2022. The Claimant alleges that as a result of the issues experienced in relation to the Aquila contract, and/or the fact that the contract was terminated on 28 October 2022, Tisski had not conducted its business in the ordinary course since the Accounts date. The meaning of the words … conducting its business in the ordinary course … is to be considered by reference to the ordinary and natural meaning of those words in the context of this agreement, and the words of this paragraph. The purpose of the term is also of relevance.

My reading of these words is that they are directed to the business of Tisski; in other words, the operation that it ran as an information technology consultancy company. What it does as an information technology consultancy company is what it does in the ordinary course of its business. These words are not to be read in isolation from the rest of the paragraph. They are followed by the phrase … and as a going concern … . That phrase is also directed at the business Tisski is conducting, and (in everyday language) requires that the business is still being actively traded as a business.

That construction of the paragraph is consistent with the apparent purpose of some of the other terms set out under paragraph 7.1. These are warranties to the effect that there have been no significant changes since the last accounts. The warranty that Tisski is still conducting its business in the ordinary course, sits alongside warranties that there has been no material adverse change in the turnover, financial or trading position of the Company; no shareholder resolution of the Company has been passed; no share or loan capital of the Company has been, or agreed to be, issued, allotted, redeemed, purchased or repaid by the Company; no dividends have been declared or paid, and creditors are being paid on time and no debtors have been released at less than the face value of the debt. The overall purpose is to warrant that the underlying state of the company is as it is shown in the last accounts.

The phrase “ordinary course of its business” also appears in the warranty at paragraph 13.2.1 of Schedule 4:

It also assists to consider how the rival constructions work in practice. The Claimant’s case is to the effect that a business is not being conducted in its ordinary course because a significant customer has been lost. The loss of a customer may have an adverse effect on the profitability, or in some circumstances, the financial viability of a company. But the business of that company can still be conducted in its ordinary course. Indeed, the loss of custom is a regular feature of most businesses, and cannot be said to be out of the ordinary course. To illustrate that, Mr Casey KC makes the point that the VDD included specific reference to “churn”.

The Claimant’s construction strains the ordinary meaning of the words of this paragraph, taken in context. Nor is there an obvious purpose in such a construction. The SPA contains a number of terms which deal with the sort of situation the Claimant is seeking to catch. In those circumstances, the Claimant’s case that the Defendants were in breach of this warranty fails.

The second Warranty the Claimant relies upon in relation to the loss of Aquila is paragraph 13.7.1 of Schedule 4, which provides that:

The claim on this Warranty turns on whether:

Aquila was a significant customer; and if it was

whether Tisski’s business

Mr Casey KC makes the point that the Aquila contract was not a Material Contract for the purposes of paragraph 13 of Schedule 4 of the SPA. That term is defined at paragraph 13.1 as follows:

There are a series of warranties which apply to Material Contracts at paragraphs 13.3-13.6. These relate to the disclosure of such a contract, that they are valid in full force and effect and binding, that Tisski are not in default, and that there has been no termination. These warranties immediately precede the warranty at 13.7 which the Claimant relies upon. Consequently, paragraph 13.7 is to be read with the provisions which relate to Material Contracts. But the fact that the Aquila contract was not a Material Contract is not to the point. Having provided for the top ten customers, the SPA goes on to provide for customers who are outside the top ten. These must be “significant” customers, and the warranty relates, not to the loss of a contract with such a customer, but to the loss of the customer itself, and requires in addition, for that loss to have a material effect on Tisski’s business. There is nothing inconsistent between that provision and the Material Contract provisions.

The term “significant customer” is not defined, but must extend beyond the top ten, otherwise the provision serves no purpose. Whether or not the customer is significant is to be judged by reference to Tisski’s business. That would primarily be a reference to the revenue and profit it generated, but the term is wide enough to include a customer in a developing but important area of work, or a customer who brings some cachet and/or enhances the reputation of Tisski. It is to be contrasted with a customer who is not significant (or insignificant).

Tisski signed a contract with Aquila on 15 March 2022. It was a fixed price contract for a new EIS solution worth something over £800,000 in revenue. There was no pre-existing relationship – this was the only contract Tisski had with Aquila. Work started in April 2022, but Aquila were soon voicing concerns. By August Tisski had realised that there were significant problems. The project manager emailed Carly Allan on 25 August 2022, noting that discovery had taken 265.5 days instead of the planned 66, and the design was forecast to go over budget. Towards the end of September 2022 Aquila’s Head of IT asked for a meeting with between his Chief Operating Officer and the leadership at Tisski to make sur that they were aware of the issues, and so that questions about “… delays etc …” could be dealt with.

On 5 October 2022, Ms Allan emailed staff at Tisski. She included this:

In an email on 12 October 2022, Ms Assassa asked Ms Allan whether Tisski should be worried about Aquila apparently avoiding communications with Tisski. Ms Allan’s response was: “I’m worried”. Inside Tisski there was a recognition of “… how badly people have screwed up …”; see Ms Allan to Mr Ingrey on 14 October 2022. By this stage there were 255 FOC days to cater for. There were discussions about how to allocate those, and a recognition that the revenue forecast would drop. A Change Request was made, but on 26 October 2022 there was a meeting between Aquila and Ms Allan, and the project was paused.

On 28 October 2022, Ms Assassa met with Aquila, following which Aquila sent a letter terminating the contract. It included this:

This meant that Tisski were never going to be able to bill for unpaid work. In the event an agreement was reached on 23 November 2022, that Aquila would not pay the September invoice either, in return for which Aquila would not seek credit against previous invoices. Ms Allan described that at the time as a “good outcome overall”. In addition to the loss of future revenue, £84,000 of WIP was written off.

At paragraph 239 of his written closing submissions, Mr Casey KC draws attention to the explanation given by Mr Bassett to Node4 in January 2023. This suggests that the problems were not so much Tisski’s fault (as the contemporaneous documents suggest) but a combination of fault on both sides. He said that there was a hope that Aquila might re-engage. Ms Assassa says something similar in her first witness statement at paragraph 103, and that she hoped that Aquila might re-engage. There is no reason given for that, and given the terms of the termination letter it is hard to see what objective evidence there was for such a hope. There was no pre-existing relationship, and no goodwill from past successes to fall back on. Tisski’s internal view was that it had “screwed up” and Aquila seem to have adopted much the same stance.

The loss of Aquila took place just before the SPA was agreed. That loss was not communicated to Node4. Indeed, the RAG report uploaded to the Data Room on 1 November 2022 still has the Aquila contract with a profit forecast at completion of 33%. Was that a breach of warranty 13.7.1?

The evidence relevant to the first two elements (significant customer and materially adverse effect) overlaps. In terms of being “significant”, Mr Coupland, who was in charge of sales, was obviously very pleased to have acquired Aquila as a customer. On 22 December 2021 he emailed his team saying that they had had a “fantastic 2021” and that:

There is a more scientific analysis in the material included within the VDD. It includes an analysis of the Top 10 new customers over the recent past. Aquila is named as one of the top ten new customers for FY 22 (10 plus 2) in the VDD. The list was as follows:

In terms of projected revenues for FY23 (an important factor in the valuation of this business) Aquila was the sixth largest customer for the purposes of the “Bridge”. This was a subset of the work in the “Pipeline” and went to illustrate what work Tisski would be doing (here) in FY23. The most helpful summary is in the table at paragraph 8.40 of Mr Eastwood’s report:

The status of the customers in the Bridge/Pipeline, and the work they brought, varied. Some work was secure and some was not. The revenue from the Aquila contract was either Booked or Contracted. These were the two most secure categories of work in the Pipeline. “Booked” revenues were those “... with a signed SOW and due to start in current period” and “Contracted” revenues were those where “… the client has committed to through signed scopes of work under a framework agreement. The work is won but it is possible for contract delays causing revenue timing to slip”. The other categories were “Existing competitive”, “Existing non-competitive” and “New”. Tisski’s revenue analysis for FY 23 annual revenue as at October 2022 had Aquila in the top 10 clients for “Booked” revenues (the likeliest category to be earned); and as the highest single client for “Contracted” revenues (the second likeliest category to be earned).

The Defendants’ case is that Aquila would be easily replaced by other work, and the team working on Aquila would be re-engaged on a similarly profitable project. It is submitted that Aquila was not, either in terms of its size, importance or the effect on the business, a significant customer. For the Claimant, Mr Spalton KC and Mr Cook submit that any definition of “significant customer” which took account of the FY23 revenues, and which did not include Aquila, would be artificially narrow; see their written closing at paragraph 180(d).

In support of their case, the Defendants referred to the customer below Aquila in Mr Eastwood’s table at paragraph 227 above. This was Homes England, which was projected to produce much the same in the way of revenue. The evidence was that at about this time, Tisski was hoping to win that contract. Mr Cox’s note of the meeting he had with Tisski to discuss the Pipeline in October 2022 was:

The other factor the Claimant relied upon was that Aquila was an F&O contract. This was a small but growing part of Tisski’s business, and one which the forecasts in the VDD indicated was an area of considerable projected growth. The parties agree that the continued growth of the business in new areas such as F&O, was important to Tisski’s business and thus to its value.

These issues were explored with the experts. In particular, Mr Spalton KC’s cross-examination of Mr Eastwood brought out the major points of difference; see t/s day pages 120-134. Mr Eastwood regarded the loss of Aquila as not an irrelevance, but not insuperable hurdle; see t/s day 7 page 130. His view was that it felt like churn.

The Claimant also draws attention to exchanges on WhatsApp between Mr Baxter and Ms Allan in September 2021 at or around the time the possibility of a sale was being explored. Given the essentially objective nature of the elements of the warranty and the timing, these have only a limited relevance. Ms Assassa is due to meet PwC, and Mr Baxter describes her as being stressed about it. Ms Allan asks what her big worries are. Mr Baxter says this:

Finally the Claimant draws attention to the exchange of messages between Carly Allan and Darren Bassett after the event on 16 January 2023. The topic is the NAO contract:

The evidence satisfies me that Aquila was a significant customer. It was a new customer rather than being the source of repeat business over a number of years, but that said, it was a big contract, in an area where Tisski were looking to grow, and provided a relatively certain and significant contribution to current revenue and projected revenue for FY23. It cannot sensibly be described as insignificant. I agree with the submission made by Mr Spalton KC and Mr Cook to which I refer at paragraph 229 above.

Similarly, the loss of Aquila had, and was likely to have, a materially adverse effect on Tisski’s business, both in terms of current revenue and projected growth. One marker of that materiality is that the forecast revenue in respect of the Aquila Contract was included in the forecast EBITDA for FY23. It might be seen as churn, and I agree with Mr Eastwood that that loss was not an insuperable hurdle. But it was a significant loss and it must have had a material effect. Tisski had a good track record of meeting its forecasts, but that is a different point.

The third element of the warranty the Claimant must establish is the Seller’s awareness. This is not an issue of belief, but awareness. If the Seller is aware of the facts which establish the other elements of the warranty, the test is satisfied. If they are not, then there is no breach of warranty. Here I take particular account of Ms Assassa’s hope that Aquila might re-engage, the fact that Aquila was a new customer, and Tisski’s historical ability of hitting its growth forecasts. Those matters cause me to pause, but standing back it is hard to conclude other than that the Defendants were aware of the significance of Aquila as a customer that it had been lost, and that that loss was likely to have a materially adverse effect on the business. I find that the Claimant establishes a breach of warranty on the Aquila contract.

The warranties relevant to this claim are in paragraph 8 of Schedule 4 of the SPA and are set out at paragraph 25 above. The claim relates to work undertaken by Tisski in relation to “Project Declutter” in May 2020, which was in Tisski’s accounts as at 30 June 2022 as Work in Progress. The sum involved was about £90,000.

The MOD was a big customer of Tisski’s, and there had been discussions between Tisski and the MOD about a statement of work which would have provided a contractual basis for charging for that work. But nothing was ever signed off. As a commercial decision it was understandable that Tisski went ahead and did the work in the hope that the MOD would sign off the statement of work, or (in the course of their continuing relationship) retrospectively agree to pay for it. But the documentary evidence from the time confirms that the Defendants knew that there was no real prospect that it would ever be paid for. As early as 10 June 2020, there was an email sent to Mr Bassett, copied to Mr Baxter and Mr Austen, from one of Tisski’s staff, saying:

The contract with the MOD ran for a number of years, but was due to come to an end in September 2022. At paragraph 132 of her first witness statement, Ms Assassa says that in April-June 2022 it looked like Project Declutter would move forward so we did not write off the £90,000 Work in Progress. There is no documentary support for that, and the material from the time tends to suggest the contrary. Firstly, in April of 2022 Ms Allan messaged Mr Baxter noting that “mod have pushed out”. Secondly, on 7 July 2022 Ms Allan messaged Ms Assassa saying:

Ms Assassa confirms that around September/October 2022, Tisski’s contract with the MOD had concluded and was not renewed, and at paragraph 133 of her witness statement, she accepts that by then it was unlikely that the work on Project Declutter would proceed, and that the £90K WIP would likely need writing off. On 20 October 2022 Ms Assassa suggested to Browne Jacobson that they should disclose the fact that the contract with the MOD had come to an end. As a result the Disclosure Letter includes a note in respect of Warranty 13.7.2 of Schedule 4 saying this:

The Claimant also refers to some messages about the WIP on 28 February 2023 which involved Ms Assassa and Mr Baxter. Darren Bassett sent a message to Ms Assassa saying that Hannah Birch would be asking about write offs. The MOD was mentioned. Ms Assassa asked to be reminded of what that was about. Later that day she had this exchange with Mr Baxter:

The Defendants’ position throughout has been that there was no obligation to disclose the fact that the sum of £90,000 was likely to be written off, that there was some prospect of recovery as at June 2022, and that the commercial decision to write off was not made until November 2022. That later point in particular is emphasised.

The work had been undertaken at Tisski’s own risk, and whilst there had been efforts to obtain the MOD’s approval for some time, that was never forthcoming. There may have been a hope that Project Declutter would move forward, but that was little more than a hope, and by 17 August 2022 that hope had gone. Moreover, even if the project revived, the MOD was under no obligation to make any payment in respect of this WIP. The exchange between Mr Baxter and Ms Assassa in February 2023 suggests that they both knew that the WIP was irrecoverable. Even if it was not to be written off in full as at 30 June 2022: (i) there was no proper basis for it all to remain in the accounts without some adjustment; and (ii) Tisski knew that it had lost the work in mid-August. That should have been recorded as a post balance sheet event.

Whilst I can understand Ms Assassa’s view that this issue was not material to the sale, I am satisfied that this WIP should have been written off in the 30 June 2022 accounts. Consequently, the Locked Box Working Capital was overstated as at the balance sheet date of 30 June 2022.

The quantum on the MOD claim was not a matter of dispute. The purchase price paid included an upwards adjustment for the amount of the Locked Box Working Capital. I have found that to be overstated, and consequently the Claimant’s loss is £90,000.

The issues of causation and quantum which arise on the NAO claim and the Aquila claim are to be dealt with together. Those issues were explored with the expert witnesses in cross-examination, and whilst significant differences remain, by the end of their evidence there was a good deal of common ground.

As I explain below, the approach the parties had taken to the valuation of Tisski’s shares for the purpose of the SPA involved some sophisticated financial analysis. This looked not simply at the value of the business as it was, but most importantly, at the projected growth of the business over the coming years, and the value that provided. Crucially, there was a calculation made of the EBITDA for FY23 of about £4.5M, to which a multiple was applied. That gave a value which plainly influenced the value which the Claimant placed on the shares. The experts had the material produced by Tisski for the purposes of that exercise, and the Claimant’s response to it. They were then able to consider the effect of the breaches of warranty on those numbers. However, just as the Claimant’s judgment of the value of Tisski’s shares for the SPA (on a Warranty True basis) was affected by matters which went wider than the numbers, so the experts too were able to consider those less tangible factors.

The Claimant’s pleaded case on loss involved setting out the measure of its loss, and that it would rely on expert evidence to quantify that loss. It went on to estimate what that loss would be based on the information then available. It was said that the EBITDA was overstated, in respect of the NAO contract by c £570,300, and in respect of the Aquila contract by c £359,400. Applying a multiple of 10, that gave claims for damages of £5,703,000 and £3,594,000 respectively. As will be apparent from my treatment of the matter below, the award of damages in this case is neither of that scale, nor arrived at by such a calculation.

Mr Casey KC drew attention to the fact that, despite obtaining its expert evidence, the Claimant had failed to replead its claim for loss to reflect that evidence. The key point is that its expert, Mr Pearson, did not support the approach taken in the pleadings. Rather than adjusting the EBITDA, Mr Pearson favoured an adjustment to the multiple.

Pleadings tell the other party what case it has to meet, they define the issues allowing for the orderly preparation of the case, and they provide a critical audit of the necessary elements of a party’s claim. Their centrality to civil procedure and a fair trial has been emphasised over and over again. That said, the lack of a formally repleaded case in this case on this issue is not, to my mind, of any great significance. The issue of quantum has been pleaded on the basis of the (correct) measure of loss, and an indication given that the loss will be quantified by expert evidence, as is commonplace in disputes such as this. That has led to both sides instructing experienced experts in the field, who have provided detailed and carefully considered reports, met, produced a joint memorandum, and (in Mr Eastwood’s case) a short report in response. The issues in relation to the quantification of loss have consequently been identified, the arguments for and against set out, some agreement reached, and the issue prepared for trial. The Claimant’s written opening at paragraphs 260-287, puts its “primary case” on loss on the basis of a reduction in the multiple. At paragraphs 287-289 it deals (briefly) with what is called its “alternative case” on the basis of reduction of maintainable EBITDA. It was plain from that what the Claimant’s case was. I did not detect any difficulty in dealing with that either before or during the trial. A formal repleading would have served little or no useful purpose.

It is common ground between the parties that the measure of damages for breach of warranty is the difference between the value of the business as warranted (the “Warranty True Value”) and the value of the business as it in fact was (the “Warranty False Value”). The parties agree that the Warranty True Value was the sale price; see the experts joint memorandum at para 2.10. They differ as to the Warranty False value.

The principles are helpfully summarised in the judgment of Bright J in Milbrook Healthcare Bidco Ltd v Croll [2023] EWHC 290 (Comm) at [139]-[142]:

Both Mr Spalton KC and Mr Cook, and Mr Casey KC refer to the passage in the judgment of Newey LJ in MDW Holdings Ltd v Norvill [2022] EWCA Civ 833 at [49] to which Bright J refers to in Milbrook at [140]:

The facts of MDW are of some relevance. In that case, the trial judge reduced the warranty false value of the shares by reference (inter alia) to a reputational risk to the business attendant upon the established breaches of warranty. The sellers argued that the reputational risks had not eventuated, so that it was not appropriate to make an adjustment to the valuation multiple. That submission was rejected by the trial judge because it relied on hindsight. The sellers appeal was dismissed. The fact that the reputational risk had not eventuated did not mean that the risk itself could not affect the value of the shares at the date of sale; see at [53].

Mr Casey KC relies upon the corollary. He submits that if such a reputational risk, or some other factor which depresses profitability, only emerges after a sale, then it should not have any bearing on the value of the shares at the date of the SPA. That must be right.

One of the main planks of the Defendants’ case is that Tisski was an attractive proposition for Node4, and that even if it had known the true position, it would still have proceeded with the SPA and at the same price. Or to put it in the terms of the legal test for quantum, the true value of the shares was the same as the value of the shares as warranted.

I begin with the way in which Tisski was marketed for sale. Mr Baxter prepared what was referred to as the Financial Model. This was a detailed review of Tisski’s business and finances, and included projections for the growth of the business from FY23 onwards. With the benefit of that information, PwC prepared a VDD Report. It is a detailed document containing a substantial amount of financial information and analysis produced by Tisski, a management view and a PwC view. No doubt the detail would have been studied by the Claimant and its advisor, EY.

The first page of the VDD Report is a single page, entitled “At a Glance” to which I refer below. The next section is the Executive report, at the top of the first page of which is a Business overview, opposite which is the PwC view. Whilst this is by way of being the headline, it gives a flavour of what is emphasised in the report.

Below that is a timeline, starting with Ms Assassa’s founding of the business in 2011; the acquisition of Microsoft Gold status in 2015 and Inner Circle Partner status in 2020; an emphasis on the public sector client base including the “key wins” in 2019 of MOD and HS2 and the repeat revenue which underpins Tisski’s trading results in recent periods. The timeline says this under “FY22 & beyond”:

The key customers for FY22 are listed as follows:

The issue of “Churn” is dealt with in this way:

The other impressive feature of Tisski’s trading history was its sustained growth. Tisski forecast that this growth would continue in the years to come. The figures are set out in the “Financial Snapshot” in the “At a Glance” section of the VDD, and much of the detailed financial analysis which follows in the body of the report goes to support that “snapshot”. Mr Pearson summarised the key figures from the profit and loss account (actual and forecast) for the years from 2019 to 2026 in a table at paragraph 3.21 of his report of 14 February 2025:

Mr Pearson provides a convenient summary of the growth represented by the figures from the Financial Model at paragraph 3.22 of that report:

That the figures in the Financial Model were convincing is demonstrated by the fact that EY only made a few adjustments when they reviewed them, and those adjustments tended to show the potential for greater savings (and thus profit). The judgment that these figures were reliable was, however, based on more than simply the maths, or an extrapolation of Tisski’s actual trading history.

The VDD (at page 31 of that document) indicated that Tisski’s management considered the growth was predicated on the following key “growth pillars”:

It was also apparent that Tisski had an enviable reputation in the market. That position is perhaps best illustrated by the fact that it was a member of the Microsoft Inner Circle for Business Applications. Exhibited to Mr Eastwood’s first report is a publicity document Tisski produced explaining what Inner Circle membership means. It makes the point that the Microsoft Partner Network is made up of more than 400,000 organisations worldwide, and that Inner Circle membership is only awarded to the top 1%. The evidence was that there were less than 20 Inner Circle members in the UK. Ms Assassa made much of Tisski’s membership in her witness evidence. It not only indicated that the company was very good at what it did, but it was the sort of accolade which gave customers confidence in Tisski’s abilities. The relevance of that for the Defendants’ case is well summarised by Mr Eastwood at paragraph 3.5 of his report of 14 March 2025, when he says that Inner Circle Membership was one of the two aspects of Tisski’s business which were of particular significance to potential purchasers; the other being it’s track record and relationships with government customers and several local authorities.

Mr Cox was less impressed with the membership of Microsoft’s Inner Circle. He was cross-examined about this aspect of the matter at some length; see t/s day 2 page 8 line 12 to page 14 line 18. The opening exchanges give an indication of his approach:

Mr Gilbert was more of a commercial man, and a very successful one at that. The issue of Inner Circle Membership was the first topic Mr Casey KC dealt with in his cross-examination; see t/s day 3 page 58 line 18 to page 63 line 86.

Mr Gilbert recognised the value of “accreditations” like this, and did not seek to downplay the benefits it brought. The central point he made was whilst Node4 did not have this Inner Circle Membership for Business Applications, it had the equivalent for Microsoft’s Azure technology. But he said that Inner Circle Membership was not a factor in Node4’s valuation of Tisski’s business. Whilst that may be so as a matter of the numbers, I find that (whether or not you thought of it as a shiny badge) Inner Circle Membership was a mark of Tisski’s abilities and reputation, and those were significant factors in Node4’s interest in buying Tisski.

The experts summarise the reasons for Node4’s interest in their joint report at paragraph 2.3:

Mr Gilbert’s evidence is that he became aware of the business in the period between May and November 2021, when he was notified by Tisski’s advisers PwC that they considered Tisski to be a potential acquisition target. He says that he was impressed by the fact that Tisski appeared to have a very strong reputation in the public sector, which was an area which Node4 had specifically planned to target. He was also impressed by its strong capabilities in Microsoft CXM (Customer Experience Management software) which was a capability which Node4 lacked at the time. His understanding was that the process was paused, but came back in 2022. He met the key people from Tisski, including Anna Assassa. He was particularly impressed by her relationship with Microsoft and Tisski’s public sector experience. Mr Gilbert’s evidence was that the only slight cause for concern was the speed with which Anna Assassa was pushing them to proceed. But he says this at paragraph 31 of his witness statement:

Whilst Node4 might have felt that the process was being pushed along, it too was pressing for a deal to be done quickly, and before the formal bid process PwC was proposing for 26 October 2022. On 5 October 2022 it made an indicative bid of £45M, based on Tisski’s EBITDA for FY23 of £4.5M, and a multiple of 10. Node4 proposed an accelerated timeline, and made it plain that it was in a position to exchange prior to 26 October 2022. Mr Cox explains that at the time it was not unusual to have to move quickly to secure an attractive asset; see paragraph 29 of his witness statement of 23 January 2025.

The two main players at Node4 were Mr Gilbert and Mr Cox, but they were in close contact with Providence, and in particular with Daniel Zwicky. Having received the VDD on 12 October 2022, Mr Cox sent a copy to Mr Zwicky. He emailed Mr Cox on 14 October 2022 with these comments:

It is also apparent that Mr Cox had obtained some material which he should not have had. It is unclear whether this had any effect on Node4’s view. More important for these purposes was that Mr Cox appears to have agreed with Mr Zwicky that the EBITDA for FY23 was £4M rather than £4.5M; see his email to Mr Gilbert of 17 October 2022. There were then the meetings in October which I have already dealt with, and on 26 October 2022 a further offer. The headline figure remained at £45M, but the EBITDA was reduced to £4.4M and the multiple increased to 10.23. The willingness to make an adjustment to the multiple in order to maintain the headline figure, is an illustration of how parties approach valuation in the real world. The EBITDA calculation may provide a figure to work with, but the assessment of the multiple and thus the final figure is not simply a matter of arithmetic. Mr Eastwood provided some helpful evidence about this during the course of his cross examination, and I return to that below.

Mr Casey KC makes the point that Node4’s private view of the EBITDA is significant in the context of this dispute because it shows that the value of the business can remain the same (in the eyes of this willing purchaser) despite the fact that the EBITDA was £500,000 lower. I agree. There is, however, a limit to that point. If a purchaser has already factored in a lower EBITDA, there may a lower tolerance toward some other unexpected bad news (financial or otherwise); for example the reduction in profitability and future risks on the NAO contract, and the loss of Aquila.

There were two other bids for Tisski. The first was an offer of £50M by BCN Group Limited, which was made up of £35M cash and £15M of deferred consideration via shareholdings. The offer was premised on a sustainable adjusted EBITDA for FY22 of £2.9M or higher (there is a list of other assumptions). The second was a bid by Trustmarque Limited for £27.6M, which was £23M cash and an earn out over two years of £4.6M. Neither bid is comparable to Node4’s bid, and whilst they provided the experts with some assistance as to the level of the appropriate valuation, they agree that the Warranty True value is the equivalent of the Node4 bid.

In addition to the bids for Tisski, there was some further evidence about the level of the multiples used in the acquisition of businesses in this sector at or around this time. There will be differences in relation to every such transaction which limits the scope for comparison, but the experts drew that evidence together in a Table produced jointly on 25 July 2025, and calculated the multiples on the basis of whether the EBITDA was Forward or Trailing. Risual and TNP were Node4 acquisitions in 2023 and 2021 respectively. The figures for Professor Damodaran and Aventis are referred to in the expert reports, and Mr Cox’s transactions come from paragraphs 40 and 41 of his first witness statement. They provide some context for the multiple used in this case.

The Warranty True valuation is to be assessed by reference to the hypothetical, reasonable willing buyer and a hypothetical, reasonable willing seller, rather than being bound by the subjective views of the parties. That said, Mr Gilbert and Ms Assassa were experienced, able and successful commercial people. Their assessment of the relevant commercial risks and opportunities provide an indication of how a hypothetical reasonable willing buyer and seller might be expected to have approached matters. I take Mr Gilbert, rather than Mr Cox, not because I discount Mr Cox’s views, but because Mr Gilbert’s approach took full account of the factors which went wider than the purely financial. He was interested in the quality of the business, and in particular its involvement in some good public sector work. He wanted to meet the management team, who (as he put it) would be his management team. He was impressed with them. Those factors, together with the past financial performance of Tisski, the projected growth, and its Inner Circle membership, would be all be factors which the hypothetical, reasonable willing buyer would take account of when deciding what to pay.

Hearing the experts give evidence and be cross examined about these matters was of considerable assistance. In broad terms, having considered valuation in terms of a reduction in the EBITDA, Mr Pearson expressed his preference for an approach which involved the reduction in the multiple. His views can be summarised by reference to paragraphs 7.56-57 of his report. The multiple needed to reflect the perceived risks and rewards associated with the anticipated maintainable profits of the company concerned; for example, if there are high growth prospects and low risks perceived in relation to a company, then a higher multiple will apply. He considered that as a result of the breach of warranties there were a number of factors that increased the risks associated with the anticipated maintainable profits that a buyer of Tisski would need to consider. As will be apparent from my approach to the matter below, whether that increase in risk is reflected in the reduction of the multiplier, or by a focus on the sum involved, I agree that that is an essential part of the process of assessing the Warranty False Value in this case.

To assist the court, Mr Pearson prepared a range of calculations showing the impact of reducing the multiplier applied to the FY23 EBITDA of £4.4M; see the table at paragraph 7.81 of his report. He took four calculations, which reduced the multiplier by 5%, 10%, 15% and 20%. He considered that to be a reasonable and proportionate range to reflect the issues.

He went on to say that, whilst the appropriate reduction in multiple would be for the Court to determine, if there were:

Mr Pearson faced some sustained cross-examination on this approach, including the criticism that it involved plucking a figure out of the air. He maintained his position, accepting that it was a matter for the court as to where on the scale the reduction was to be, and emphasising that regardless of the reduction, he still regarded Tisski as a good and valuable business. Mr Pearson gave his evidence in an entirely professional way. Indeed both these experts demonstrated a deep and sophisticated knowledge of the area, which they applied in accordance with their duties to the court.

In his report, Mr Eastwood took the view that if there was a breach of warranty, the loss was to be calculated on the basis a “one off adjustment” to the value, rather than a reduction in multiplier; what the experts referred to as a pound for pound basis. I return to some of the evidence Mr Eastwood gave in cross-examination below.

If the claim was limited to the Aquila contract, then there is a good argument for saying that the loss is to be measured on a pound for pound basis. The loss of that customer had a material effect on the business. The team was stood down, and it was not probable that the work would be replaced with something equivalent without there being a loss. There is also an argument for saying that the projected revenue figures stood to be adjusted, and consequently the FY23 EBITDA and thus the value of the business; see Mr Pearson’s first report at paragraph 7.73. But I find that the hypothetical reasonable buyer would be satisfied with the pound for pound approach. There were problems with the Aquila contract, but they were not of the scale or effect which required a re-appraisal of the wider reasons behind the purchase. The experts agreed the pound for pound loss on the Aquila contract in FY23 at £312,000; see Table 1-3 (28 July 2025).

The experts also agreed the figures for the impact of the NAO contract on Tisski’s profitability assuming a reduction from 43.8% in Table 1-1 (28 July 2025) as follows:

Despite Mr Eastwood’s evidence, I am not persuaded that such an approach is appropriate in relation to the NAO claim. The NAO was one contract, and the Defendants’ case is that the issue with the RAPT was an isolated problem. But the issues I identify at paragraph 134 above went well beyond the ordinary run of problems, and revealed issues which went not only to the financial information which underlay the valuation of the business, but to the view which the hypothetical reasonable purchaser would have formed about the quality of the business. Moreover, Node4 would not have been the only purchaser who would have been attracted to Tisski because of its public sector work. The NAO contract was the “key win” for a high profile client in that sector, which if it went well, paved the way for further expansion into that area of work, but if it went wrong had the potential to cause serious reputational damage in a market where reputation was very important. The hypothetical reasonable buyer would see more to this than the direct financial consequences.

It is important not to take undue account of subsequent events. The position in November 2022 is not the position in January 2023, but what had happened by early 2023 was that risks which were apparent in November 2022 had come to fruition. That was not simply a question of a much reduced profitability figure (by then 6.5% as opposed to 21 or 30%). Mr Gilbert’s views as to the effect of the problems with the NAO contract carry the mark of the reasonable commercial man. He regarded the issue as a serious one. His reaction when he was first told of the issues in January 2023 is telling. He immediately contacted Ms Assassa for an explanation. His view was that someone at Tisski must have known what was going on. The evidence from the time demonstrates that this is not some post event rationalisation, or the exaggeration of concerns for the purposes of litigation. He refers to the matters of concern in his witness statement at paragraphs 45, and 47-51. To summarise:

Whilst the extent of the reduction in profitability may not have been calculable in November 2022, at the very least it would have been apparent that profitability was likely to continue reducing. As to the other factors, there was plain evidence of each of them. By January 2023, there had been another 2 months or so of staff fatigue, and the mitigation Carly Allan had arranged for the RAPT testing had failed to materialise, but the underlying problems were much the same.

Given that Tisski’s obvious attractions were its projected growth, its public sector work, and the apparent quality of its business and its management, even allowing for the fact that it remained a good business with an impressive track record and enviable reputation, the impression that it made on the reasonable purchaser would have been tarnished by the fair disclosure of the issues on the NAO contract as at the date of the SPA. They go beyond the temporary or the ordinary, and take the shine off the view the reasonable purchaser would have formed as to the future prospects for this business. Standing back, those issues were such, that I am satisfied that the problems with the NAO contract lead to a reduction in the Warranty False Value which goes beyond a pound for pound reduction.

Mr Eastwood gave some evidence about the issue of value by reference to the way the parties would have gone about a re-valuation in these sorts of circumstances. In practical terms he thought that it would be one CEO picking up the phone to the other CEO, and doing a deal. I set out below an extended passage of Mr Eastwood’s evidence in cross-examination which was of assistance on the issue of how to approach the issue of value in these circumstances; (J is a question I asked):

The approach to valuation taken by Mr Eastwood here is not that different to the approach Mr Pearson takes. There is an adjustment to the price to reflect the change in risk. It is not governed by a hard financial calculation, although that would have its place. The focus would be on the value, and the less tangible aspects reflected. In other words, it would be a commercial decision. The EBITDA and the multiplier would be a cross check or post hoc rationalisation.

Mr Pearson’s table is helpful, but the reality is that the valuation would not have involved a percentage reduction, but the sort of round figure exercise Mr Eastwood referred to. The sum involved would be more than the pound for pound loss, but would have reflected the strengths of Tisski’s position as well as the risks which the NAO contract revealed. In absolute terms it would be significant, but I am not persuaded that it would have been anything like the sort of figure identified at the higher end of Mr Pearson’s range. The reduction would be at the lower end of Mr Pearson’s range. Given the factors discussed above, the figure would be in the region of the £43,000,000 Mr Eastwood offered in cross-examination. I find that to be the Warranty False Value.

The claim succeeds and there will be awards of damages as follows:

The parties have agreed that upon handing down this judgment, I should adjourn the consideration of consequential orders to a hearing in due course, and extend the time for the filing of an Appellant’s Notice pursuant to CPR Part 51.12(2)(a) to 21 days after that hearing. I make an order in the terms that they have agreed.