Drax v Scottish Power

JurisdictionEngland & Wales
JudgeLord Justice Males,Lord Justice Birss,Sir Geoffrey Vos, Mr
Judgment Date08 May 2024
Neutral Citation[2024] EWCA Civ 477
CourtCourt of Appeal (Civil Division)
Docket NumberCase No: CA-2023-000655 & CA-2023-000669
Drax Smart Generation Holdco Limited
Scottish Power Retail Holdings Limited
and between
Drax Smart Generation Holdco Limited
Scottish Power Retail Holdings Limited

[2024] EWCA Civ 477



Lord Justice Males


Lord Justice Birss

Case No: CA-2023-000655 & CA-2023-000669





Mr Simon Birt KC (sitting as a Deputy Judge of the High Court)

[2023] EWHC 412 (Comm)

Royal Courts of Justice

Strand, London, WC2A 2LL

David Quest KC and Philip Hinks (instructed by Clyde & Co LLP) for Drax

Sa'ad Hossain KC and Joyce Arnold (instructed by Womble Bond Dickinson (UK) LLP) for Scottish Power

Hearing date: 16 th April 2024

Approved Judgment

This judgment was handed down remotely at 10.30am on Wednesday 8 May 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Lord Justice Males

These appeals are concerned with the sufficiency of a notice of claim given pursuant to a Share Purchase Agreement. The agreement provided that unless the buyer notified the seller of the claim by a specified deadline, the seller would not be liable. The buyer's notice was required to state ‘in reasonable detail the nature of the claim and the amount claimed (detailing the Buyer's calculation of the Loss thereby alleged to have been suffered)’. Although the notice which the buyer gave extended over nine pages and gave a great deal of information about the claim, the seller contends that it did not satisfy this requirement.


The buyer puts its claim in a variety of ways, relying on different provisions of the Share Purchase Agreement. These include a claim for breach of warranty and a claim pursuant to a contractual indemnity. Sitting as a Deputy Judge of the High Court, Mr Simon Birt KC concluded, so far as the breach of warranty claim was concerned, that the notice was insufficient. He therefore dismissed that claim. But he held that the notice was sufficient so far as the indemnity claim was concerned, and therefore allowed that claim to proceed to trial. Each party now appeals.



The claim arises under an agreement for the sale and purchase of shares dated 16 th October 2018 (‘the Agreement’). Scottish Power Retail Holdings Ltd (‘Scottish Power’) sold the shares in a company then known as Scottish Power Generation Limited and now renamed VPI Power Limited (‘the Company’) to Drax Smart Generation Holdco Ltd (‘Drax’) for a total price of £702 million. The Agreement was a long and complex document running to some 225 pages.


One of the assets of the Company was a site in Kent known as Damhead Creek II, which is a potential location for a new gas power station. If such a power station were to be built, it would need to be connected to the national electricity grid. The obvious connection point would be at the site of the (now demolished) Kingsnorth Power Station, near Rochester, which is adjacent to Damhead Creek II. This would necessitate the laying of cables over the Kingsnorth land, which was owned by a third party, E.ON UK Plc (‘E.ON’), to connect the Damhead Creek II site to the grid.


Damhead Creek II was previously owned by another Scottish Power company, referred to as ‘SPDCL’. SPDCL had the benefit of an Option Agreement with E.ON dated 12 th March 2014 (‘the Damhead Creek II Option Agreement’), giving it the right to obtain an easement over the land to enable the necessary cables to be laid. The option was valid until 12 th March 2019 and was assignable by SPDCL, but only on condition that the assignee ‘shall enter into a direct deed of covenant in favour of the Grantor to perform the obligations on the part of the Grantee hereunder’. The expression ‘Grantor’ was defined to include successors in title of E.ON.


By an agreement dated 1 st March 2016 SPDCL agreed to transfer its business, including the Damhead Creek II site and its rights under the Damhead Creek II Option Agreement, to the Company. Seeking to comply with the requirements of the option agreement, the Company entered into a deed of covenant in favour of E.ON. However, by this time E.ON was no longer the relevant Grantor for the purposes of the option agreement, as it had transferred the Kingsnorth site to another company, Uniper UK Limited (“Uniper”) on or around 30 th September 2015. Accordingly, the deed of covenant was given in favour of the wrong party. No deed of covenant was given by the Company in favour of Uniper within the option period.


The upshot, according to Drax, was that the rights under the Damhead Creek II Option Agreement were not transferred to the Company, with the result that the Company was not entitled to exercise those rights. Unfortunately this mistake was not recognised in time.


Scottish Power subsequently decided to sell the Company and the Agreement with Drax was concluded on 18 th October 2018. It included terms by which Scottish Power warranted that the benefit of the Damhead Creek II Option Agreement would be assigned to the Company prior to Completion and agreed to indemnify Drax for all losses suffered as a result of (among other things) any failure to transfer the benefit of the option agreement to the Company.


The Completion Date under the Agreement was 31 st December 2018.


On 8 th March 2019, shortly prior to the expiry of the option period, the Company gave notice to Uniper that it was exercising the option to acquire an easement contained in the Damhead Creek II Option Agreement. However, on 11 th April 2019, Uniper's solicitors responded that, because no deed of covenant had been given in favour of Uniper, the purported exercise of the option was of no effect and, with the expiry of the option period, the option had fallen away.


By a letter dated 22 nd May 2019, Drax gave notice to Scottish Power of ‘a matter which may give rise to a claim under the [Agreement]’, summarising the events set out above. There was further correspondence over the course of the next year which it is unnecessary to summarise, save to say that during 2020 the parties entered into two deeds of variation relating to the time limit for notifying claims under the Agreement. The first deed of variation, dated 30 th June 2020, defined a new type of claim, a ‘Damhead Creek II Option Agreement Claim’, and provided that the time limit for Drax to give notice in respect of any such claim was 24 months from the Completion Date. The second deed of variation, dated 29 th December 2020, extended this time limit until 30 months from the Completion Date (i.e. until 30 th June 2021).


In December 2020, Drax sold the Company to VPI Generation Limited (“VPI”), pursuant to a sale and purchase agreement dated 15 th December 2020. So far as we have been made aware, it does not appear that the price which Drax was able to achieve for the sale of the Company was affected by its inability to transfer to VPI the benefit of an easement over the Kingsnorth site.


By a letter dated 30 th June 2021, Drax gave what it described as ‘formal notice of a Damhead Creek II Option Agreement Claim’, and also ‘to the extent necessary … formal notice of a Reorganisation Claim’ under the Agreement (‘the Notice of Claim’). It is the sufficiency of this notice which is in issue on these appeals. Before examining the terms of the notice, however, it is necessary to set out some of the terms of the Agreement.

Relevant terms of the Agreement


In accordance with common drafting practice, defined terms in the Agreement were given an initial capital letter. For the most part, however, once the background set out above is understood, the defined terms to which it is necessary to refer for the purpose of this judgment are self-explanatory and their precise terms do not matter for the purpose of these appeals. Accordingly I need only set out one of those definitions in full. Any reader who wishes to see their full text can find them in the judgment of the court below.


Clause 8.1 of the Agreement provided that:

‘The Seller warrants to the Buyer that the Warranties are true and accurate at the date of this Agreement. …’


The Warranties themselves were set out in Schedule 3. Some of them were concerned with what was called the ‘Reorganisation’, a defined term which for present purposes can be taken to include (among other things) the transfer of the benefit of the Damhead Creek II Option Agreement to the Company. These Warranties provided that:

‘9.1. The Reorganisation has been carried out in accordance with the Reorganisation Agreements and, except as Disclosed, all transfers and other actions envisaged by the Reorganisation Documents have occurred.

9.3. All material licences, registrations, consents, permits, concessions, certifications, approvals and other authorisations (public and private) that are necessary for the completion of the Reorganisation have been obtained.’


Clause 11 of the Agreement also referred to the Reorganisation. It contains the indemnity under which one of Drax's claims is brought:

‘Subject to Completion taking place and subject to Clauses 11.2 and 11.3, the Seller covenants to pay to the Buyer, each Group Company and each other Buyer's Group Undertaking within five (5) Business Days of a demand by written notice from the Buyer to the Seller an amount which is equal, on an after-Tax basis, to any and all Losses suffered by any Group Company or any member of the Buyer's Group, whether arising before, on or after Completion:

11.1.3 in relation to, or arising out of, any steps or actions taken to implement the Reorganisation (or any part thereof) (including, for the avoidance of doubt, any...

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