Commercial Court decision confirms corporate dishonesty cannot be assembled from the innocent states of mind of different executives

The Commercial Court has dismissed a multi-million-pound fraud claim relating to the sale of the Johnson Matthey Health Business, in which the buyer alleged that the sellers were in fraudulent breach of certain warranties contained within the SPA: Veranova Bidco LP v Johnson Matthey Plc [2026] EWHC 1021 (Comm). 

In many modern M&A transactions, the buyer takes out warranty and indemnity ("W&I") insurance and, in return, waives its right to bring warranty claims against the seller – except to the extent that those claims arise from the seller's fraud or wilful misconduct. The deal is straightforward in theory: the buyer's warranty risk is transferred to an insurer for most purposes, and the seller is exposed only for deliberate wrongdoing.

The present judgment demonstrates how formidable a hurdle the fraud exception can be. Despite finding that a warranty had been breached without being adequately qualified by disclosure, the court dismissed the claim in its entirety: the terms of the SPA precluded any claim in negligence or for simple breach of contract, and the buyer's fraud claim (pursued with what the court described as "relentless aggression") was found to be "implausible, improbable and wholly unsupported by the evidence".

The judgment contains important guidance on the test for fraud in the context of a breach of warranty claim: it is not possible to "aggregate" knowledge of facts and knowledge of falsity in a corporate entity where such knowledge is held by different individuals. The court held that a single, identifiable individual must have known the relevant facts, known enough about the warranty to appreciate that those facts were material to it, and known (or been reckless as to whether) the warranty was false. 

The decision is a stark illustration of the risk run by a buyer whose only route to a successful warranty claim is by invoking the fraud exception.

Herbert Smith Freehills Kramer LLP, alongside Simon Rainey KC, David Caplan KC and Ruihan Liu, acted for the successful defendants, Johnson Matthey Group.

For further details, see this post on our Civil Fraud and Asset Tracing Notes blog.

Note: This decision is subject to an appeal to the Court of Appeal which will be heard in April 2027.