“Apparent” Means Plainly Visible: The New Threshold for General Disclosure in Share-Purchase Agreements

Introduction

In Ruby Properties (Scotland) Ltd (formerly ARB Aviation Ltd) v James Alistair Watt & Kathleen May Watt ([2025] CSOH 61) Lord Braid was asked to rule on alleged warranty breaches in a Share Purchase Agreement (SPA) relating to the sale of Tayside Aviation Ltd (TAL). The judgment is important for three inter-locking reasons:

1. It clarifies the evidential consequences of failing to lodge “best-evidence” documents—in particular, statutory accounts—in a commercial action.
2. It crystallises how Scottish courts will interpret the word “apparent” in a general-disclosure clause that sweeps up documents filed at Companies House.
3. It illustrates how FRS 102’s revenue-recognition rules interface with breach-of-warranty claims while signalling the evidential hurdles that must be cleared to prove a mis-statement of deferred income.

Summary of the Judgment

Ruby Properties alleged that the 2020 accounts of TAL incorrectly recognised tuition fees paid in advance and therefore breached several warranties (15, 18.1(a)–(b), 18.1(e), 20.1) in the SPA. After a five-day proof restricted to liability, Lord Braid held:

• No breach of warranties 15, 18.1(a) or (b) (true and accurate accounts / FRS 102 compliance) because the pursuer failed to adduce reliable, admissible evidence establishing mis-recognition of income.
• Breach of warranty 18.1(e) (consistency of accounting policies) but only in relation to the 2017 accounts: the 2020 accounts applied a revenue policy different from that applied in 2017, and that difference had not been “fairly and accurately disclosed”.
• The “general disclosure” of everything apparent from a Companies-House search did not save the vendors: a change of policy buried in amended 2018 accounts was not sufficiently obvious to satisfy the contractual standard of “apparent”.
• The case therefore proceeds to a further proof on quantum, but damages will be capped at loss flowing from the narrow 18.1(e) breach.

Analysis

3.1 Precedents Cited and their Role

Best-Evidence Rule

• Scottish & Universal Newspapers Ltd v Gherson’s Trs 1987 SC 27 and Peacock Group plc v Railston 2007 SLT 269 reaffirmed that primary documents crucial to a case must be produced; secondary evidence is admissible only if loss or destruction occurred without the party’s fault.
• Lord Braid applied those cases to exclude all oral or secondary evidence about the 2020 accounts because the pursuer simply had not lodged the accounts, even though they existed.

Disclosure & “Apparent”

• Infiniteland Ltd v Artisan Contracting Ltd [2005] EWCA Civ 758 supplied the objective test: would reasonably competent reporting accountants, in a due-diligence review, become aware of the matter from the document?
• Lord Braid imported that test and concluded that a change in policy was not “apparent” merely because an inquisitive accountant might infer it from large variances in amended figures. “Apparent” means plainly visible, not discoverable through forensic back-calculation.

“True and Fair View” & Accounting Practice

• Macquarie Internationale Investments Ltd v Glencore UK Ltd [2010] EWCA Civ 697 (Jackson LJ) – departure from GAAP is normally persuasive evidence that accounts are not true and fair.
• HMRC v William Grant & Sons Distillers Ltd [2007] 1 WLR 1448 – courts lean on expert opinion and accounting standards when determining GAAP compliance.

3.2 Court’s Legal Reasoning

1. Pleading & Notice – In a commercial action, parties may flesh out pleadings by reference to expert reports, but basic fair-notice principles still apply. The pursuer’s pleadings were “confusing” and did not squarely allege the 12-month straight-line recognition method that its expert eventually attacked.
2. Admissibility Chain – Without the 2020 accounts the best-evidence rule barred oral surrogates. The pursuer’s key tool—Mr Whitby’s spreadsheet—was treated as “no more than a subjective exercise” and not reliable evidence of revenue recognition.
3. Weight of Expert Evidence – Mr McCarlie’s opinions were discounted because they rested entirely on the unverified spreadsheet and a premise (revenue must track flying hours) that was never proved.
4. Consistency Warranty (18.1(e)) – The only clear admitted fact was a policy change in 2019. Because 2017 accounts were never restated, they retained the old policy. Using the new policy in 2020 necessarily breached the warranty unless properly disclosed.
5. General Disclosure Clause – The disclosure letter stated that all matters “apparent” from a Companies-House search were disclosed. Lord Braid held that burying amended comparatives in 2018 accounts did not make the policy change “apparent”. The vendors needed a specific flag in the Disclosure Letter.

3.3 Impact of the Judgment

The decision will radiate beyond aviation-school finances:

• Drafting of General Disclosure Clauses – Vendors can no longer assume that anything lodged at Companies House is safely disclosed. They must ask themselves: “Would the fact leap off the page at a busy diligence reviewer?” If not, include an explicit schedule.
• Due-Diligence Practice – Purchasers should not rely on the safety-net of Companies-House disclosure. They must interrogate amended accounts and pursue written confirmations of any policy shifts.
• Litigation Strategy – Commercial litigants must lodge the primary financial statements they attack. Failure to do so will likely be fatal after this judgment.
• Expert Evidence – Experts who uncritically adopt a client’s internal spreadsheets risk their opinions being given negligible weight.

Complex Concepts Simplified

Share Purchase Agreement (SPA)

A contract for the sale of shares. It typically contains warranties—promises about the company’s state of affairs—as well as disclosure mechanisms that allow the seller to carve out exceptions.

Deferred Income / Unearned Revenue

Money received before the related service is performed. Under FRS 102 it is recorded as a liability (deferred income) until the service is delivered, then released to revenue.

FRS 102

The principal accounting standard for UK small and medium-sized entities. Section 23 governs revenue recognition, permitting several methods (percentage-of-completion, straight-line) so long as they faithfully reflect service delivery.

Best-Evidence Rule (Scots civil evidence)

If a case turns on the content of a document or tangible object, the original must be produced unless it is lost or destroyed without the litigant’s fault. Oral summaries or recollections are secondary and normally inadmissible as proof of content.

General Disclosure / “Apparent”

A catch-all clause often provides that any matter “apparent” from public filings or search results is deemed disclosed. After this case, “apparent” means plainly and immediately visible, not discoverable only after expert analysis.

Conclusion

Ruby Properties v Watt reshapes three areas of Scottish commercial law. First, it sharpens the evidential knife of the best-evidence rule: if financial statements are pivotal, produce them or fail. Second, it elevates the threshold for “apparent” disclosure, forcing sellers to provide explicit narrative if they rely on accounting-policy changes. Third, it reminds practitioners that expert opinion must have a solid factual substratum; homemade spreadsheets and assumptions about GAAP will not suffice.

As transactions grow more data-heavy and diligence periods compress, the case will likely be cited whenever a seller contends that a purchaser “should have known” by reading public filings. Under Lord Braid’s formulation, that contention will only succeed when the relevant fact leaps off the page without forensic gymnastics.