![Waiver, warranties and “fact-sensitive” appeals: Sarwar v Phlo Technologies Ltd [2026] CSIH 20](https://bto.co.uk/wp-content/uploads/2026/04/Waiver-warranties-and-fact-sensitive-appeals.jpg)
In allowing a reclaiming motion, recalling the Commercial Judge’s interlocutor dismissing the action at debate and instead ordering a proof before answer, the Court reaffirmed that implied waiver is “by its nature fact sensitive” and will only rarely be determined without evidence.
The pursuer, Mr Sarwar, was the Founder, majority shareholder and a director of an online pharmaceutical company, Phlo Technologies Limited. Following a March 2024 funding round, he was summarily dismissed in August 2024 for alleged gross misconduct. He raised proceedings seeking declarator that the purported termination of his 2020 service agreement was null and void, together with interdicts protecting his contractual and shareholder rights.
The defenders’ core position was that, by granting warranties in the 2024 subscription agreement to investors, Mr Sarwar had implicitly waived his rights under his service, consultancy and non‑executive director agreements, or alternatively was personally barred from relying on these agreements by reason of alleged non-disclosure during the funding round. The commercial judge upheld those arguments at debate and dismissed the action.
The central issue on appeal was whether that approach was legitimate or whether the court should have ordered a proof before answer (i.e. evidential hearing).
Delivering the opinion of the court, Lord Ericht emphasised that cases of implied waiver almost always turn on their factual context. He observed:
“Cases such as this one, in which a party asserts an implied waiver, are by their nature fact sensitive.” (para [21]). He endorsed Lord Hodge’s well-known description of implied waiver in Mactaggart & Mickel Homes Ltd v Hunter:
“In my view an implied waiver arises from a person’s actions or inactivity seen in their factual context, from which the law deems that he, in the knowledge that he has a right, has voluntarily abandoned that right.” Lord Ericht underlined the orthodox position that:
“Waiver is regarded as a matter of fact: the conduct in question is viewed objectively to ascertain whether it is consistent with a continuing intention to exercise the right.” (para [21])
Against that background, the Inner House made clear that determining waiver at debate and without the benefit of evidece will be exceptional.
Lord Ericht accepted that there are rare cases where waiver can be resolved on the pleadings alone, but stressed the stringent test:
“That can happen only if the defender succeeds in showing that even if the pursuer succeeds in proving all that he avers, still his case must fail.” (para [23], citing the well-known case of Jamieson v Jamieson)
This was not such a case: “Both because of the nature of the contractual provisions on which the respondents rely, and because of the averments made by the Founder, the question of whether the Founder has waived his rights can only be decided after proof.” (para [24])
A key strand of the Inner House’s reasoning lies in its analysis of commercial warranties. The Court rejected the assumption that giving warranties to investors necessarily amounts to an unequivocal abandonment of contractual rights as between company and founder.
Lord Ericht highlighted that the warranties:
As he explained:
“The purpose of the warranties is to allocate risk as between the investor on the one hand and the company/shareholder/director on the other.” (para [28]). The Court noted: “The warrantor has not unequivocally abandoned for all time the right under the undisclosed contract. The warrantor has merely allocated the risk in respect of the undisclosed contract coming to light.” (para [30]). That analysis made it impossible to conclude, without evidence, that the warranties operated as a permanent waiver of the Founder’s rights against the company.
The pursuer’s averment that his 10% pension entitlement under the 2020 service agreement had in fact been disclosed in the warranty process was also significant. Lord Ericht held that this was a relevant factual averment which, if proved, could undermine the assertion of waiver: “It cannot be said that even if the Founder proves that averment his case is bound to fail.” (para [33]). Again, context was everything.
On reliance, the Court resisted laying down rigid rules. While fairness “usually” requires reliance on a belief induced by the other party’s conduct, Lord Ericht stressed that this was not a universal requirement: “Any requirement for the respondents to have acted in reliance on the warranty arises out of fairness. Fairness usually, but not always, requires reliance.” (para [36])Given the “novel” context of alleged waiver between co‑warrantors, the Court concluded that the issue should only be resolved after hearing evidence.
The Inner House allowed the reclaiming motion, recalled the commercial judge’s interlocutors, and allowed a proof before answer, holding that neither waiver nor personal bar could be determined at debate.
The core points for practitioners are –
The decision is a clear signal that, in complex commercial disputes, the Scottish courts will be slow to shut parties out without proof and especially so where standard transactional instruments are pressed into service as alleged waivers.
Paul Motion is a Partner and Solicitor Advocate at BTO Solicitors LLP who acted for the successful reclaimer.
Andrew Bowen KC conducted the reclaiming motion.
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