Key takeaway

Veranova Bidco LP v Johnson Matthey Plc [2026] EWHC 1021 (Comm) addresses a question that M&A lawyers have been watching closely: can you stitch together the knowledge of multiple executives to build a case of corporate fraud? The High Court says no, and every buyer, seller, and M&A lawyer should take note.

What was Veranova v Johnson Matthey about?

A business was sold, warranties were given in the SPA, and shortly after completion the buyer discovered that a major customer had been offered a better price from a competitor, triggering a contractual right to switch supplier. Four days after signing, the seller matched that competing offer. The buyer argued this breached a warranty that the target group was not renegotiating any material term of a key contract.

The SPA contained what lawyers call a “Warranty Limitation”: a clause preventing the buyer from bringing any warranty claim unless it could prove the breach arose from fraud or wilful misconduct by the sellers. The buyer could not simply win on breach alone. It had to prove dishonesty.

It is also worth noting that the buyer originally pleaded a claim in the tort of deceit against the seller executives personally, but abandoned that claim a month before trial. What remained was the question of whether the breach of warranty itself was fraudulent.

The buyer sought to establish fraud by combining the states of mind of four senior seller executives (the Seller Executives), arguing that together they knew enough to constitute fraud, even if no single individual did. That argument was rejected.

What is the legal test for fraudulent breach of warranty?

The court confirmed that the test in the context of the Warranty Limitation was substantially the same as for a claim in deceit. The buyer had to show that the seller knew the warranty was false, gave it without belief in its truth, or was reckless as to whether it was true or false.

The buyer’s primary case was a shortcut: once the warranty was shown to be false, it argued that awareness by any one of the Seller Executives of the facts making it false was sufficient to establish fraud. The court rejected this firmly. Awareness of relevant facts is not enough. What is required is conscious dishonesty on the part of at least one identifiable individual.

Read our article on deceit claims in share sale disputes for related analysis of fraudulent misrepresentation, warranties, reliance and M&A litigation.

Corporate fraud and knowledge attribution: why can’t innocent states of mind be combined?

English law does not recognise “composite fraud.” You cannot aggregate the knowledge of facts held by one executive with the knowledge of the warranty terms held by another, attribute that combined picture to the company as a whole and declare it fraudulent. As the court stated plainly: you cannot add an innocent state of mind to an innocent state of mind to obtain a dishonest state of mind.

To establish that a company has committed fraud in the context of a warranty breach, you need to find what the court described as “at least one bad apple.” That means at least one individual who:

• knew the relevant facts that made the warranty false;

• knew (or was reckless as to) the nature and terms of the warranty itself; and

• knew (or was reckless as to) whether those facts falsified the warranty.

All three elements must be present in the same person. On the facts of Veranova, none of the four executives came close to satisfying that test.

Why does Veranova matter for M&A fraud claims?

Fraudulent breaches of warranty are typically excluded from the scope of warranty and indemnity (W&I) insurance policies. Had the court accepted the buyer’s aggregation argument, it would have widened considerably the scope of fraud claims and, by extension, the exposure sitting outside W&I cover.

The decision will therefore be welcomed by many corporates and their insurers.

For sellers and their officers, every executive involved in a transaction needs to genuinely engage with the warranties being given and satisfy themselves they are either true or properly disclosed against.

Document that process.

A contemporaneous record of honest belief is your best protection, because fraud requires conscious dishonesty, not merely a careless or poorly coordinated deal process.

What should buyers do about knowledge attribution in SPAs?

The court drew an explicit contrast with Synthos Spolka Akcyjna v Ineos Industries Holdings Ltd [2026] EWHC 83 (Comm), where aggregation of knowledge was permitted, but only because the SPA there contained an express clause deeming the knowledge of named individuals to be the company’s knowledge. The parties had anticipated the attribution problem and resolved it contractually.

Buyers should do the same. Specify who counts as a “relevant” officer for knowledge attribution purposes and build that into the SPA before you sign.

These questions are far cheaper to resolve at the negotiating table than in litigation.

What happens next?

The judge granted permission to appeal, acknowledging this is an area where there is no clear authority. The Court of Appeal may revisit whether “recklessness” (one of the routes to establishing fraud) could be assessed with some objectivity, potentially allowing one officer’s state of mind to form part of the factual context in which another’s recklessness is judged. The Veranova judgment acknowledged this possibility while stopping short of endorsing full aggregation, noting that the former state of mind would simply form part of the factual matrix rather than be aggregated directly.

Whether that distinction holds at appellate level remains to be seen.

What should buyers and sellers do now?

Sellers and seller-side officers should document their genuine engagement with the warranties they give. A contemporaneous record of honest belief and a proper disclosure process is your best protection against a fraud allegation.

Buyers should include express attribution provisions in the SPA, specifying whose knowledge counts and how it is attributed to the seller entity. Do not rely on the general law to fill that gap in your favour; as Veranova confirms, it likely will not.

Prospective claimants should identify their bad apple before issuing proceedings, build the case around contemporaneous documents rather than witness recollection, and approach fraud allegations with clear-eyed realism about the evidential threshold.

Barnes Law’s Civil Fraud and Asset Recovery team advises clients on civil fraud disputes, deceit, fraudulent misrepresentation, warranty claims, M&A litigation and disputes arising from misleading commercial conduct. For more information, please contact our civil fraud lawyers to discuss how we can support you.

Written by Barnes Law Managing Partner Yulia Barnes.