2 Duty to Notify and to Take Reasonable Steps
7.1.1 notify the Covenantors in writing of the existence or possibility of the right to Recovery as soon as reasonably practicable; and
7.1.2 provided the Covenantors shall have indemnified and secured the Buyer and the Company against all reasonable costs, losses, damages and additional Tax that may arise as a result of the Recovery to the reasonable satisfaction of the Buyer, take all reasonable steps to enforce such Recovery, keeping the Covenantors regularly informed of the progress of such steps, provided that the Buyer and the Company shall not be obliged to take any action which is likely to affect the future conduct of the business of the Buyer or the Company or affect the rights or reputations of any of them; 2.1 The requirement to notify the Covenantors is understandable: they will not be aware of the progress or even the existence of some Recoveries, and the Buyer is therefore required to provide this information. 2.2 There are many Recoveries which will be received without having to resort to dentistry. The above drafting understandably embraces those Recoveries which may be akin to pulling teeth, such as claims for negligence against the tax agents. 2.3 Sometimes this clause is drafted so that the Buyer is not obliged to take any action which might jeopardise relationships with any parties with whom the Company has had dealings in the past. This is almost certainly too broad: professional relationships seldom survive a valid claim for negligence, but that is no reason not to pursue the tax agents. Similarly, it would probably not be reasonable for Rushmere Consultants Limited to decide not to pursue the associates if they have given signed undertakings to reimburse PAYE and NICs: they will have received tax refunds from HMRC in respect of tax that they had previously paid.
3Repayment to Covenantors
7.2 If the Buyer or the Company recovers any sum in accordance with clause 7.1 above and the Covenantors have already made a payment to the Buyer under this Deed, the Buyer shall promptly pay to the Covenantors the lesser of: 7.2.1 the sum so recovered by the Buyer or the Company from such other person (including sums recovered in respect of costs and interest received in respect of the sum recovered, but less any reasonable costs of recovery not previously reimbursed, and less any Tax which is, or, but for the availability of a Buyer’s Relief would be, chargeable on the sum recovered); and
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