Getting What You Bargained For

The importance of due diligence for purchasers cannot be overstated, including for companies purchasing debts. A recent Court of Appeal decision in Bibby Factors Northwest Ltd v HFD Ltd and another provides a salutary reminder that due diligence needs to be undertaken before, not after, purchase and that the legal concept of buyer beware is still very much alive.

The factual background

Bibby Factors Northwest Ltd (Bibby), as the name suggests, is a factoring company. In March 2000, it entered into a factoring agreement under which it purchased existing and future debts owing to a company (the Assignor) by its customers (the Customers), including HFD Ltd.

In July 2013, the Assignor went into administration. In October 2013, Bibby commenced proceedings against the Customers for over £280,000 allegedly due for supplies received from the Assignor. The Customers defended the claim and counterclaimed, alleging they were entitled to a 10% rebate for each supply made