In the recent case of Ardmair Bay Holdings v Craig, the Court of Session considered the issues of failure to disclose, misrepresentation and breaches of warranty.


Ardmair Bay Holdings sued James Craig for breach of various warranties within a Share Purchase Agreement, arguing that he misrepresented or willfully concealed key information.

In terms of the SPA, Ardmair purchased the share capital of Craig Group Limited. As both the chairman and largest shareholder of the company, Mr Craig was central to both the negotiation of the sale and the disclosure of information to Ardmair as purchaser.

A substantial part of the value of Craig Group was tied up in two key contracts for the provision of specialist vessels. Those vessel agreements contained an option to extend the contractual period.

Craig Group believed its customer would exercise the option and extend the contract period. They did not. Instead, the day prior to the completion of the share sale to Ardmair, Craig Group was invited by its customer to tender re. the vessel agreements. It was therefore clear, prior to completion, that the vessel agreements would not be extended. 

Mr Craig failed to advise Admair of the change in circumstances.

Separately, the Current Contracts Summary (CCS) should contain complete and accurate details of all arrangements at the date of the SPA. On this occasion it did not; the Invitation to Tender was omitted.

Pointing to Mr Craig’s failure to disclose crucial information, Ardmair argued two points:

  1. warranties within the SPA had been breached; 
  2. Mr Craig had misrepresented the contracts in place. 

Ardmair relied on a breach of several warranties within the SPA.

Warranty 11.3 stated that that there were no current negotiations of material importance to the company at the time of the SPA. The Court agreed that Ardmair were not informed about the ITT prior to signing the SPA, and confirmed the ITT did qualify as an “outstanding or ongoing negotiation”.

Warranty 26.6 stated that the CCS provided on completion would include complete and accurate details of the charter arrangements currently in place. Ardmair argued that the possibility that the option may not be extended should have been disclosed under the CCS.

The evidence demonstrated there was a clear use of options within the industry. A key point to note is that the Company’s physical assets would only be profitable for the company when they were chartered. Therefore, an ITT is of significance in any potential sale of the company. The Court found the ITT should have been disclosed and as a result, the CCS contained incomplete and inaccurate details.

Further, the SPA provided that Mr Craig was obliged to notify Ardmair of any issues that he became aware of, before the date of completion if it could become a material event. Again, the ITT was such an event. Although Mr Craig argued that he was unaware of the features of the ITT prior to the case, the Court believed that Mr Craig was aware of the main features prior to the completion of the sale.

The Court accepted that Ardmair were focused on the contracts, the day rates and additional information related to the future profitability of the business and rejected Mr Scott’s evidence that Ardmair were aware of the ITT prior to completion as the initial mention of the ITT was misleading, downplaying the terms and possible effects of the ITT.


The fundamental issue was the change in facts between the potential misrepresentation being made and the conclusion of the contract. Ardmair argued that Mr Craig had misrepresented the position anent the vessel agreements to them, albeit the misrepresentation was negligent rather than fraudulent. In particular, they attacked Mr Craig’s representation in earlier correspondence as to maintaining the contracts at their current rate, arguing it was untrue.

Mr Craig argued the statement was an opinion and not a misrepresentation as it was honestly made. He argued there was no general duty for him to make any form of disclosure and there was no duty of care imposed on him. If the Court found there was, then Ardmair would have to demonstrate they relied on this statement when entering into the contract.

The Court held the statement in question was merely Mr Craig’s opinion, not a statement of fact. Although the ITT gives dubiety to Mr Craig’s certainty over whether the option would be exercised, there is no clear evidence Mr Craig misrepresented the situation in earlier correspondence to Ardmair.

An interesting point to note is the Court’s discussion around misrepresentation and statements of opinion. If the Court had found the statement was a misrepresentation of fact and not of opinion, they would have held the misrepresentations effect to have continued to the date of signing and Ardmair’s reliance on said misrepresentation. Although, the Court did explain that a duty to correct a representation made prior to signing an agreement could arise, depending on the agreement.


It is evident the Court will take into account the factual matrix surrounding the case to establish if any warranties have been breached. It is clear that contractual clauses and warranties must be adhered to, before and after the date of signing. Failure to do so and failing to be transparent in negotiations will result in serious consequences.

If you require any assistance in relation to any of the issues raised above, please get in touch with a member of our Commercial Dispute Resolution team.