Project Angel Bidco Ltd (In Administration) v Axis Managing Agency Ltd & Ors

Factual and Procedural Background

On 19 November 2019, Company A exchanged a Share and Purchase Agreement ("SPA") with various sellers for the acquisition of the entire issued share capital of Company B, a provider of civil engineering and general construction services primarily to local authorities. Company A subsequently took out a Buyer Side Warranty & Indemnity Insurance Policy ("the Policy") in connection with this acquisition. The Policy was underwritten and issued on 3 December 2019. Company A is now in administration and Company B has been placed in liquidation, events which allegedly give rise to a claim under the Policy.

The SPA included warranties relating to litigation, investigations, breaches of law, and anti-bribery and corruption compliance. The Policy was negotiated post-exchange of the SPA but before completion, with the sellers' approval of the Policy terms being a condition precedent to completion. The Policy included a Cover Spreadsheet listing insured obligations, including warranties related to bribery and corruption, while also containing exclusions, notably for any loss arising out of an "ABC Liability" (anti-bribery and anti-corruption liability).

In November 2022, Company A issued proceedings against the underwriters claiming the full limit of the Policy and alleging breaches of various warranties, including those related to bribery and corruption. The claim involved an interpretation dispute over whether losses arising from breaches of these warranties were excluded under the ABC Liability exclusion.

Legal Issues Presented

1. Whether there is an inconsistency between the insuring clauses covering certain warranties (including bribery and corruption warranties) and the exclusion of liability for losses arising from any ABC Liability under the Policy.
2. Whether the alleged inconsistency constitutes an obvious drafting mistake that the court can and should correct by interpretation.
3. If a mistake exists, what is the appropriate corrective interpretation or cure for the Policy’s wording.
4. How to interpret the Policy as a whole, including the relationship between the Cover Spreadsheet, the exclusions, and definitions, in light of the contractual and commercial context.

Arguments of the Parties

Appellant's Arguments

• There is a plain contradiction between the scope of cover provided by the insuring clauses (including warranties marked as "Covered") and the exclusion of losses arising from any ABC Liability.
• The definition of ABC Liability contains a drafting error, specifically the use of "or" instead of "for," which leads to an illogical exclusion that negates coverage for breaches of bribery and corruption warranties.
• The court should apply a corrective interpretation to fix this obvious mistake, thereby aligning the Policy’s coverage with its commercial purpose and the parties’ intentions.
• The Policy’s Cover Spreadsheet and the wording of the insuring clauses indicate that the bribery and corruption warranties were intended to be covered, and the exclusion should not entirely negate that coverage.
• The proposed correction is a minimal textual change that resolves the contradiction and reflects the parties’ commercial understanding.

Respondent's Arguments

• There is no contradiction or inconsistency in the Policy as a whole; the insuring clauses and exclusions can be read together without absurdity.
• The ABC Liability exclusion was a heavily negotiated bespoke clause intended to limit the underwriters’ liability, especially given the waiver of recourse against the sellers except in cases of fraud.
• The Policy expressly provides that exclusions take precedence over certain cover provisions, as reflected in the Cover Spreadsheet’s rubric stating that losses may be excluded pursuant to Clause 5.
• The alleged drafting error is not obvious, and even if there were an error, the court should not rewrite the contract or apply a corrective interpretation without a clear and unequivocal indication of mistake and remedy.
• The Policy’s language, although imperfect, is coherent and consistent with the commercial interests of the parties, particularly the underwriters.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Chartbrook Ltd v Persimmon Homes [2009] AC 1101	Principles of contractual interpretation and correction of obvious drafting mistakes.	Used to establish the high threshold for correcting a contract and the need for clarity on both mistake and correction.
Cattles plc v Welcome Financial Services Ltd [2010] EWCA Civ 599	Use of labels in defined terms to elucidate ambiguities.	Supported the interpretation that labels are chosen to distill meaning and assist in construction.
Impact Funding Solutions Ltd v Barrington Support Services Ltd [2016] UKSC 57	Exclusions in insurance policies must be read in context and consistent with the contract’s purpose.	Guided the court to interpret exclusions in a manner consistent with the insurance contract as a whole.
MonSolar IQ Ltd v Woden Park Ltd [2021] EWCA Civ 961	Correction of obvious errors requires clarity on mistake and intended provision.	Reinforced the high hurdle for corrective interpretation and the iterative nature of interpretation.
East v Pantiles (Plant Hire) Ltd [1982] 2 EGLR 111	Obvious mistake principle – a reader would inevitably recognize the error.	Used to elaborate on the standard for identifying obvious mistakes in contracts.
Britvic plc v Britvic Pensions Ltd [2021] EWCA Civ 867	Need for clarity in both the mistake and the corrective remedy.	Illustrated that multiple possible corrections bar relief for mistake.
JIS (1974) Ltd v MCP Investments Nominees I Ltd [2003] EWCA Civ 721	Distinction between impracticability and obvious nonsense in contract interpretation.	Rejected corrective interpretation where clause was not obviously nonsensical.
Arnold v Britton [2015] UKSC 36	High standard for corrective interpretation; must be clear what correction is needed.	Emphasized that the court must be satisfied as to both mistake and correction.
Pagnan SpA v Tradax Ocean Transportation SA [1987] 3 All ER 565	Definition of inconsistency between contract terms.	Clarified that inconsistency requires contradiction such that both clauses cannot be given effect.
Septo Trading Inc v Tintrade Ltd [2021] EWCA Civ 718	Distinction between qualifying and negating contractual terms.	Helped assess whether clauses can be read together fairly and sensibly.
FCA v Arch Insurance (UK) Ltd [2021] UKSC 1	Contextual interpretation of seemingly inconsistent clauses and contractual complexity.	Supported the approach that some inconsistency may be contemplated and resolved by contractual structure.
Scottish Power Plc v Britoil (Exploration) Ltd (1997) 141 SJLB 246	Order of precedence in conflicting contractual clauses.	Referenced in relation to resolving conflicts by clause precedence.
NHS Commissioning Board v Vasant [2019] EWCA Civ 1245	Order of precedence and effect of "subject to" clauses.	Used to illustrate how later clauses may take precedence.
Scottish Widows Fund and Life Assurance Society v BGC International [2012] EWCA Civ 607	Effect of "without prejudice" clauses on precedence.	Showed that "without prejudice" preserves earlier clauses.
Generali Italia SpA v Pelagic Fisheries Corpn [2020] EWHC 1228	Approach to interpreting contractual provisions as a "jigsaw."	Warned against false equivalence between bespoke and boilerplate terms.
AIG Europe SA v John Wood Group plc [2022] EWCA Civ 781	Contractual status and location of clauses indicating precedence.	Supported that clause location may indicate higher contractual status.
Wood v Capita Insurance Services Ltd [2017] UKSC 24	Recognition of negotiated compromises and hindsight disadvantage.	Reinforced caution in assuming drafting mistakes where clauses reflect compromises.
Arbuthnot v Fagan [1996] LRLR 135	Limited weight to redundancy arguments in detailed documents.	Supported the view that redundancy arguments often fail in complex contracts.
Doe d Spencer v Goodwin (1815) 4 M & S 265	Difficulty in identifying clear correction for obvious mistakes.	Illustrated the challenge when the exact nature of the drafting error is unclear.

Court's Reasoning and Analysis

The court began by examining whether there was an apparent inconsistency between the warranties listed as "Covered" in the Cover Spreadsheet, particularly the bribery and corruption warranties, and the broad exclusion of losses arising from any ABC Liability. The court acknowledged that on the face of it, there was a conflict: the Policy appears to provide coverage for certain warranties while simultaneously excluding losses arising from breaches of those same warranties under the ABC Liability exclusion.

The court then considered whether the Policy itself provided a mechanism to resolve this conflict. It found that the Cover Spreadsheet’s rubric indicated exclusions could override coverage but did not provide a clear resolution where coverage was effectively negated entirely. The Policy’s structure and definitions did not conclusively subordinate one clause over the other to resolve the contradiction.

Next, the court analyzed whether the inconsistency amounted to an obvious drafting mistake. The court reviewed the wording of the ABC Liability definition and its unusual phrasing, noting that the use of "or" instead of "for" created awkward and arguably redundant language. However, the court emphasized that the ABC Liability exclusion was a heavily negotiated bespoke clause with a rational commercial purpose from the underwriters’ perspective, namely to exclude loss arising from alleged non-compliance with anti-bribery laws, which could materially affect share value even without proven liability.

The court applied established principles of contractual interpretation, including the high threshold for corrective interpretation: there must be a clear mistake and a clear correction. It found that although the wording was imperfect and arguably "odd," the Policy as a whole was coherent and consistent with the parties’ commercial interests. The court also noted that the Policy’s structure and the parties’ negotiations suggested that the exclusion was deliberate and not an obvious mistake.

Finally, the court considered the proposed correction by the appellant (changing "or" to "for" in the ABC Liability definition) as a potential cure. While this correction would resolve the linguistic awkwardness and the apparent inconsistency, the court found that the existence of an alternative possible correction (such as excluding the warranties from coverage altogether) and the lack of clarity about which clause was mistaken meant that no clear corrective interpretation was warranted.

In sum, the court concluded that the appellant had not overcome the high threshold for corrective interpretation, and the Policy should be interpreted as drafted, with the ABC Liability exclusion applying as written.

Holding and Implications

The court dismissed the appeal.

The direct effect of this decision is that the insurance policy’s exclusion for losses arising from any ABC Liability applies as written, and therefore the appellant’s claim under the Policy for breaches of the relevant warranties, including those related to bribery and corruption, fails unless the losses fall outside that exclusion. The decision affirms the importance of the high standard for corrective interpretation of contracts and confirms that courts will not lightly rewrite negotiated bespoke insurance clauses even where the language is imperfect or awkward.

No new legal precedent was established beyond the application of established principles of contractual interpretation and corrective interpretation to the facts of this case.