The UK Commercial Court examined the notice provisions in a
share purchase agreement ("SPA") between the parties in
the case of Ener-G Holdings plc v
Hormell1. In a surprising decision, the court
found that while the plaintiff's claim was time-barred due to
the Court's construction of the notice provisions, the methods
of service set out in the SPA were not deemed to be
exhaustive.
Background
The SPA required that proceedings in respect of a claim to be
issued and served on the vendor within 12 months of the notice of
claim.
The SPA also contained provisions in relation to service and
deemed service. It was the construction and interpretation of
these provisions that led to the preliminary hearing. The SPA
provided that notices "may" be served personally or by
pre-paid recorded post. It also provided that documents
required to start legal proceedings could also be served in any
other manner permitted by law.
The first issue concerned the service of the notice of
claim. A process server, on behalf of the plaintiff, left the
notice in the front porch on 30 March 2010, where it was found and
opened by the defendant later that day. The second issue
concerned the service of the proceedings, which were posted by the
process server through a letter box on the defendant's premises
on 29 March 2011. The defendant did not receive the documents
until 2 April 2011.
The Court was required to determine whether:
- Service of the notice of claim on 30 March 2010 was effective, notwithstanding that it was not delivered "personally" on the defendant; and
- Service of the proceedings on 29 March 2011 was effective and if so, the date of deemed service.
Decision
The Court ruled that if there were two possible constructions of a
document, it was entitled to prefer the construction which was
consistent with business common sense. Although, the SPA
required notices to be delivered either personally or by recorded
post, the Court found that the methods of service were not
exhaustive.
The Court noted that it would be contrary to common sense to find
that the defendant did not have notice of the claim on 30 March
2010, in circumstances where the defendant did in fact receive the
notice on that day, therefore this constituted valid service of the
notice of claim.
On the second issue the Court found that the plaintiff did not
comply with the SPA as the notice was not delivered
"personally" on the defendant. The Court found that
service was permitted under the provisions of the Civil Procedure
Rules, which meant that there was deemed service of proceedings on
31 March 2011 and therefore the plaintiff's claim was one day
late.
The Appeal
Lord Neuberger MR in deciding the appeal held that the
first notice of 30 March 2010 was not "personally"
delivered but nonetheless was effectively delivered on that date.
Further the claim form was not delivered personally on 30 March
2010 but that it was deemed to have been validly served on 1 April
2011.
At the heart of this reasoning is that the notice provisions of
the SPA must be interpreted as being "permissive" of
other means of service. To this end the service of both the notice
and the claim form whilst not affected "personally" as
set out, were nonetheless still effective although late.
The appeal was dismissed.
Conclusion
The Court's finding that the methods of service
stipulated in the SPA were not exhaustive is interesting and
highlights the importance of drafting definitive notice provisions
in contracts. Where there is ambiguity in the clause as
drafted, it shows the importance for litigants to assume a cautious
approach in the interpretation of the clause and the need to
strictly follow its terms.
Footnotes
1 [2012] EWCA Civ 1059 (31 July 2012)
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