In Ageas (UK) Limited v (1) Kwik-Fit (GB) Ltd (2) AIG Europe Ltd  where Shoosmiths acted for the claimant, the High Court examined principles relevant to the permissibility of using hindsight to value a company for the purposes of a warranty claim.
The case concerned a breach of warranty claim in relation to a share purchase agreement. Ageas entered into the agreement to purchase the full share capital of Kwik-Fit Insurance Services Limited for £215m. Ageas valued the company on the basis of the accounts provided by Kwik-Fit.
Kwik-Fit gave warranties that the audited accounts were prepared in accordance with GAAP, and gave a true and fair view of the assets, liabilities and financial position of the company and its subsidiaries, and that they did not materially misstate the assets or liabilities. At the same time as entering into the agreement, Ageas entered into a warranty and indemnity policy with AIG to protect it against losses resulting from breaches of warranty in excess of a £5m cap.
Ageas claimed the total loss for breach of warranty amounted to £17.6m; this figure was calculated on the basis of information available as at the date of completion in 2010. AIG contested this figure on the basis that this figure would over-compensate Ageas because it failed to take account of subsequent events post acquisition. AIG claimed that using hindsight meant the damages claim should be limited to £8.7m.
The Court reaffirmed Lion Nathan Ltd v C-C Bottlers Ltd  stating that the measure of loss for breach of warranty in a share sale agreement is the difference between the value of the shares as warranted and the true value of the shares.
It was accepted by both parties that the value of shares as warranted was equal to the price paid.
Further the prima facie rule, from which departure must be justified, is that damages are to be assessed at the date of the breach, and only events which have occurred at that date can be taken into account.
In assessing the true value of the shares however; it was appropriate for the court to examine the Bwllfa  approach as applied in The Golden Victory , which supported the proposition that when assessing damages for breach of contract, in an appropriate case, when assessing a valuation as at a specific date (here the date of completion) the valuation can be arrived at with the benefit of hindsight.
Popplewell J accepted the proposition but sounded a 'note of caution'. The Judge identified two qualifications to the adoption of such an approach; firstly it can only be justified where it is necessary to give effect to the overriding compensatory principle, and secondly; it was important to bear in mind any contractual allocation of risk made by the parties.
In applying these considerations to the facts of the case Popplewell J found that AIG had failed to displace the prima facie rule.
AIG had failed to establish that an award of £17.6m would provide Ageas with a 'windfall' and thus offend the overriding compensatory principle such that it was necessary to depart from the usual rule. In relation to the allocation of risk the Court found that the SPA was for a fixed price, the risk of future performance was firmly allocated to Ageas as the agreement did not contain a clause allowing for a post sale adjustment of the price. Any contingencies post acquisition was for Ageas' risk and this was accepted by the parties at the time the SPA was agreed. When assessing loss therefore by reference to the allocation of risk in the SPA it was not necessary or appropriate to take into account hindsight when arriving at a valuation of the business as at the date of acquisition.
This decision reaffirms the overriding compensatory principle which dictates that in breach of warranty claims damages are generally assessed as at the date of breach; the principle also encompasses the proposition that to give effect to the principle hindsight can be taken into account, but only if justified and necessary.
Justification involves examining if application of the general principle would cause an injustice, in this case a 'windfall' for the party who has suffered the breach. In assessing whether this is the case it was important to return to the underlying contract, the SPA, to consider where the risk lies. If the full risk post acquisition lies with the purchaser then it is part of the bargain struck as at the date of purchase such that any loss suffered should normally be assessed without the benefit of hindsight.