Executive Summary
The High Court ruled in favor of Learning Curve (NE) Group Ltd (“LCG”) against defendants Richard Huw Lewis and Melanie Probert for breach of warranty under a Share Purchase Agreement (SPA) dated 29 October 2021. The defendants are liable for damages of £5,211,625, approximately half of LCG’s original claim. The dispute centers on the valuation and funding of APCymru Limited (“APC”), a company providing military preparatory education, heavily reliant on ESFA funding. The judgment clarifies complex contractual interpretation issues, particularly regarding indemnity provisions and liability caps tied to consideration received by the defendants.
Sanctions Highlights
— No sanctions implications identified in the case.
Emerging Risks
- Reliance on government funding (ESFA) poses valuation risks in acquisitions, especially where funding clawbacks or adjustments arise post-transaction.
- Contractual caps on liability and indemnity claims can limit recovery, complicating remedies in warranty breaches.
- Complex funding and accounting metrics (EBITDA vs. maintainable EBITDA) create interpretative challenges in SPA disputes.
- Close personal relationships between parties (founder and partner) may complicate corporate governance and liability attribution.
Geopolitical Impact
- The case involves UK entities and funding agencies, notably the Education and Skills Funding Agency (ESFA), a UK government body.
- APC’s business supports UK military recruitment training, linking the case to broader UK defense and youth education policy.
- No direct involvement of Iran, but the UK’s regulatory and funding environment for military preparatory education is central.
- The judgment underscores the importance of UK government funding mechanisms in private sector education providers.
Economic Intelligence
- The SPA valued APC at £16.8 million, based on a 9+3 EBITDA calculation of £2.571 million and a multiplier of 5.5.
- ESFA funding accounted for approximately 50% of APC’s income and about 38% of profits from English academies, highlighting dependency on public funds.
- The damages awarded (£5.2 million) reflect significant financial exposure for breaches of warranty in high-value educational acquisitions.
- The case illustrates financial risks in acquisitions where post-sale funding clawbacks or adjustments affect enterprise value.
Strategic Recommendations
- Parties engaging in acquisitions involving government-funded entities should conduct rigorous due diligence on funding stability and clawback risks.
- SPA drafting should clearly define liability caps and indemnity provisions to avoid protracted disputes over interpretation.
- Buyers should seek warranties specifically addressing government funding compliance and potential clawbacks.
- Sellers should maintain transparent records and disclosures regarding funding arrangements to mitigate post-sale liability.
- Legal teams should prepare for complex expert evidence on accounting and funding metrics in warranty disputes.
- Monitor UK government funding policies affecting education providers, especially those linked to defense or youth training sectors.
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**Source Notes:** Learning Curve (NE) Group Lt v Lewis & Anor [2025] EWHC 1889 (Comm)
https://empyreanprotocol.com/litigation/view/www.bailii.org/ew/cases/EWHC/Comm/2025/1889.txt