Investor Warranties Do Not Ordinarily Prove Implied Waiver/Personal Bar at Debate: Proof Required Where Waiver Is Alleged Between Co‑Warrantors

1) Introduction

In Reclaiming Motion by the Founder against Phlo Technologies Limited and others ([2026] CSIH 20, First Division, Inner House), the Scottish Court of Session considered whether a commercial action could properly be dismissed at debate on the basis that the pursuer had impliedly waived (or was personally barred from enforcing) certain service/consultancy arrangements, by reason of warranties given in a share subscription agreement to external investors.

The pursuer (the company’s founder and a shareholder/director) sought declarator that the purported summary termination of a 2020 service agreement for gross misconduct was null and void, together with related interdicts (including concerning share-related steps and termination of other agreements). The defenders/respondents (the company and four directors) maintained that warranties in a March 2024 funding round subscription agreement meant the founder had waived (or was personally barred from asserting) the later agreements said to govern his role.

The central appellate issue was procedural but decisive: was it competent to uphold waiver/personal bar and dismiss the action without evidence?

2) Summary of the Judgment

The Inner House allowed the reclaiming motion, recalled the commercial judge’s interlocutors, and allowed a proof before answer. It held that this was not one of the “rare” cases where implied waiver (and related personal bar) can be determined on the pleadings alone.

Key reasons included:

  • Implied waiver is fact-sensitive and normally requires examination of conduct in its full factual context after evidence.
  • The particular nature of investor warranties (including caps and time limits) meant it could not be assumed that granting them was an unequivocal abandonment “for all time” of contractual rights as between the founder and the company/directors.
  • The founder’s averments (notably concerning a pension disclosure aligned with the alleged 2020 agreement) were capable of undermining an inference of unequivocal abandonment.
  • The fairness/reliance dimension of implied waiver—especially in the “novel” setting of waiver between co-warrantors—was not suitable for final disposal at debate.

3) Analysis

3.1 Precedents Cited

Armia v Daejan 1979 SC (HL) 56

This House of Lords authority anchors the modern Scottish approach that implied waiver is assessed objectively. The Inner House, via Mactaggart & Mickel Homes Limited v Hunter [2010] CSOH 130 (discussed below), treated Armia as emphasising that waiver is “difficult to describe but easy to recognise,” and commonly engages considerations of fairness, often through some form of reliance.

Mactaggart & Mickel Homes Limited v Hunter [2010] CSOH 130

The Inner House relied heavily on Lord Hodge’s synthesis at para [82], which the court reproduced and applied: implied waiver arises from actions/inaction in context, viewed objectively, where a person (knowing of a right) is deemed to have voluntarily abandoned it. Crucially, Lord Hodge stated the court usually looks for reliance by the party asserting waiver, because waiver prevents unfairness arising from inconsistent conduct.

The Inner House treated this as setting the framework: waiver is commonly evidentially and contextually intensive, and therefore ill-suited to disposal without proof except in truly clear cases.

Jamieson v Jamieson 1952 SC (HL) 44

This is the controlling test for dismissal on the pleadings: only where, even if the pursuer proves all averments, the case must fail. The Inner House applied Jamieson to conclude the defenders had not cleared that high bar: the founder’s averments could, if proved, support the conclusion that there was no unequivocal abandonment.

Presslie v Cochrane McGregor Group Ltd 1996 SC 289

Cited alongside Armia and Mactaggart as part of the line of authority recognising that reliance is commonly relevant to implied waiver, because waiver is concerned with preventing unfairness.

Lousada & Co v Lesser (Properties) 1990 SC 178

Relied on by the founder in argument for the proposition that the defenders needed pleadings to support reliance/conduct of affairs on the basis of the supposed waiver. The Inner House did not finally determine the precise reliance/belief requirements on the merits, but treated reliance/fairness as one of the matters that required fuller factual exploration.

James Howden v Taylor Woodrow 1998 SC 853

The dispute here was about what, if anything, the case established on the need for belief-based reliance. Lord Kirkwood stated that a party could not have conducted its affairs in reliance on a waiver unless it believed the right had in fact been waived. The Inner House did not endorse or reject this as a general rule; it observed that reliance is not invariably required in every setting, and that what fairness demands may vary with context—particularly in the “novel” co-warrantor scenario.

Gatty v Maclaine 1921 SC (HL) 1

Mentioned in relation to personal bar, reflecting a principled, fairness-focused understanding of preventing inconsistent conduct. The Inner House ultimately treated personal bar, like waiver, as fact-sensitive and not apt for determination at debate on this record.

Reid and Blackie, Personal Bar (First Edition and Second Edition references)

The court used this text for two propositions: (i) waiver is regarded as a matter of fact assessed objectively; and (ii) the requirements of fairness (and thus the role of reliance) can vary by context. The Inner House deployed these points to justify why evidence was needed and why the co-warrantor context mattered.

3.2 Legal Reasoning

(a) Why waiver/personal bar could not properly be decided at debate

The court reaffirmed that implied waiver is “by its nature fact sensitive” and normally requires evidence to locate the alleged inconsistent conduct within its full context. Only in “rare cases” can waiver be determined on pleadings alone, and then only where the defender satisfies Jamieson v Jamieson.

(b) The distinctive character of investor warranties

The defenders’ case treated the founder’s (and company’s) warranties to investors—stating there were no undisclosed interested-party contracts and that employment/consultancy terms matched disclosed templates—as “entirely inconsistent” with continued reliance on the 2020 service/consultancy/NED agreements.

The Inner House held that approach was not determinative at debate because the warranties were part of a standard risk-allocation mechanism in investment transactions and were contractually limited (notably by an 18-month claim notice period and capped liability). In that setting, the warranty does not necessarily look like a permanent surrender of the underlying right; it can look like an agreement as to who bears the financial risk if the undisclosed matter comes to light within a defined window.

That contractual architecture made it difficult to conclude—without evidence—that the founder’s act of giving warranties to third-party investors was an unequivocal abandonment “for all time” of rights as against the company/directors, particularly given that waiver was being asserted in a “novel” way between co-warrantors.

(c) Co-warrantor waiver is “novel” and fairness may work differently

The warranties were granted jointly and severally by two warrantors (the founder and the company) to investors. The defenders’ waiver theory required the court to treat that as extinguishing rights as between the two warrantors. The Inner House highlighted the conceptual difficulty: it was not obvious that a risk allocation to an investor should, without more, operate as a permanent abandonment of rights between the warrantors themselves.

The court therefore declined to settle (at debate) what fairness requires in this co-warrantor context—especially whether it requires reliance, and if so whether it requires belief-based reliance.

(d) The pension disclosure averment as a material factual feature

The founder offered to prove that the disclosure letter stated the company made a 10% pension contribution to him, and that a 10% pension contribution obligation appeared in the 2020 service agreement but not in the 2018 service agreement. Because disclosures could apply to multiple warranties (“made against all the Warranties to which they reasonably relate”), this averment was potentially supportive of the case that rights under the 2020 agreement were not being treated as non-existent/undisclosed in the way alleged. The Inner House held this was a relevant factual matter that could affect the waiver inference, meaning the Jamieson threshold for dismissal was not met.

(e) Personal bar followed the same procedural fate

Although the commercial judge considered waiver sufficient and treated personal bar as also made out, the Inner House held that personal bar likewise should not be determined before evidence on this record. It emphasised the fact-sensitive nature of personal bar and the dependence of categorisation (waiver vs personal bar) on the full factual circumstances.

3.3 Impact

  • Procedural discipline in commercial actions: The decision strengthens the message that implied waiver/personal bar will rarely justify dismissal at debate, particularly where the alleged inconsistent act is embedded in a complex commercial instrument (subscription/warranty/disclosure structures).
  • Investor warranties ≠ automatic extinction of internal rights: The court signalled caution against treating warranties—especially limited warranties—as necessarily producing “waiver for all time” of underlying rights, and especially not as between joint warrantors.
  • Co-warrantor waiver is not settled law: The court explicitly characterised the co-warrantor context as “novel,” leaving future cases to develop the substantive criteria after proof.
  • Disclosure mechanics matter: Seemingly peripheral disclosures (here, a pension contribution) can be legally significant because disclosure letters often operate across warranties by reasonable relation, affecting whether conduct is truly unequivocal.

4) Complex Concepts Simplified

  • Debate: A hearing on legal issues based on the parties’ written pleadings, without witness evidence. The pursuer’s averments are generally taken as true for the purpose of testing legal relevancy.
  • Proof before answer: The court hears evidence first, while keeping legal pleas open to be decided after the facts are established.
  • Implied waiver (Scots law): Not an express agreement; rather, the law treats a right as abandoned because the right-holder’s conduct, viewed objectively in context, is inconsistent with later enforcing it. It is often linked to preventing unfairness from inconsistent conduct, commonly (though not invariably) involving reliance.
  • Personal bar: A doctrine preventing a party from asserting a position inconsistent with their earlier representation/conduct where it would be unfair to allow the change, typically because another relied on it.
  • Warranties & disclosure letters in investments: Warranties allocate risk to investors; disclosures carve out exceptions. Caps and time limits often mean the instrument is designed to manage financial exposure, not necessarily to rewrite or extinguish underlying contracts.
  • Declarator and interdict: Declarator is a court declaration of parties’ rights/status; interdict is an order preventing certain acts (akin to an injunction).

5) Conclusion

The Inner House in [2026] CSIH 20 reaffirmed that implied waiver and personal bar are ordinarily unsuitable for final disposal at debate, and it set a clear caution against equating limited investor warranties with a necessarily unequivocal, permanent abandonment of internal contractual rights—especially where waiver is alleged in the “novel” form of operating between co-warrantors. The case proceeds to proof before answer, where the factual context—including disclosure mechanics—will determine whether waiver or personal bar is ultimately made out.