Problems With Enforcement Of Indemnity

Rust Consulting Limited v PB Limited [2010] EWHC 3243 (TCC)

Rust (which was in liquidation) sought to claim under an indemnity given by PB when it purchased Rust's business. The indemnity was against "proceedings claims and demands" in respect of Liabilities (as defined) to be discharged by PB after the purchase. A customer made a claim that Rust had failed to use reasonable care and skill in providing services. Rust liquidators agreed to judgment for the full amount of claim and then called on the indemnity. PB refused to pay, arguing that the liability to indemnify did not cover a consent judgment and that Rust must prove its liability to the customer.

The Judge refused to give effect to the indemnity in respect of the amount of the judgment. He came to the following conclusions: