Completion Accounts in Focus in Inspired Education Online Ltd v Crombie

In Inspired Education Online Ltd v Crombie, the High Court was asked to resolve a dispute arising from the sale of My Online Schooling Ltd (MOS) to Inspired Education Online Ltd (“Inspired”). The seller (also the sole director and CEO of the target) was accused of breaching warranties and fraudulently misrepresenting facts during the sale. However, a key issue that emerged – and one with broader implications for M&A practitioners – was the completion accounts process and a counterclaim by the seller regarding how it was handled.

The Share Purchase Agreement (SPA) included a typical form completion accounts mechanism, which allowed the final purchase price to be adjusted post-completion based on the actual financial position of MOS. The SPA required the seller to “notify the Buyer in writing” if he disagreed with the draft completion accounts. If no such notification was received, the accounts would be “deemed agreed.”

Mr. Crombie did dispute the accounts—but he sent his objections via email to the individual who had sent him the draft accounts, rather than to the formal contact specified in the SPA’s notice clause.

Inspired argued that this informal email did not meet the contractual requirements and that the seller had therefore failed to dispute the accounts in time. As a result, they claimed the draft accounts were binding.

The High Court disagreed with Inspired. It held that:

• The SPA’s requirement to “notify in writing” did not equate to serving a formal “notice” under the notice clause.
• The use of the term “notify” suggested a less formal communication was acceptable.
• The seller’s email, although not sent in strict compliance with the notice clause, was sufficient to constitute a valid notification under the completion accounts schedule.

This interpretation led the court to uphold the seller’s counterclaim and reject Inspired’s assertion that the accounts were deemed agreed.

It’s important for the parties to know and understand how notices under the completion accounts schedule need to be served in order to avoid accepting the completion accounts by default.

Although in this case the contract was interpreted to allow for an informal email as the court interpreted the contract language to allows for flexibility, this often isn’t the case. Many completion accounts schedules are much more prescriptive around how notices should be served and this is in order to ensure clarity as to how an objection to draft completion accounts must be communicated.

Parties often communicate informally during post-completion processes and this case shows that such informal exchanges can carry legal weight—if the contract permits. Buyers and sellers should therefore be aware that a counterparty raising objections to a set of completion accounts in this way could be sufficient to be formal objections, even if they don’t follow the strict procedure set down in the SPA.

Ensure that notice clause in the SPA is aligned with other parts of the agreement, especially those involving time-sensitive or consequential steps like completion accounts or notices of third party claims that might give rise to a claim under the warranties.