Most legal documents include provisions specifying how notices should be served. It is all too easy to skim over them. However, litigation is often won or lost where one of the parties has ignored or misunderstood the meaning and effect of the notices provisions in a contract.
In Ener-G Holdings plc v Hormell [2012] EWCA Civ 1059, the service of a notice was a condition precedent to a claim for breach of any of the warranties in an agreement. The parties also agreed that any such claim would lapse unless the buyer served proceedings on the seller within a further 12 months.
Most legal documents include provisions specifying how notices should be served. It is all too easy to skim over them. However, litigation is often won or lost where one of the parties has ignored or misunderstood the meaning and effect of the notices provisions in a contract.
In Ener-G Holdings plc v Hormell [2012] EWCA Civ 1059, the service of a notice was a condition precedent to a claim for breach of any of the warranties in an agreement. The parties also agreed that any such claim would lapse unless the buyer served proceedings on the seller within a further 12 months.
The agreement provided that any notice that needed to be given “may be served by delivering it personally, or by sending it by pre-paid recorded delivery post” to the other party. The clause also included provisions dealing with the dates on which such notices were to be treated as having been served.
The buyer gave notice of a potential claim under the agreement, but left it to the very last minute to serve proceedings on the seller. The seller seized the opportunity to argue that the buyer was out of time – because it received notice of the claim on 30 March 2010 and was not served with the proceedings until 31 March 2011.
The buyer disputed the seller’s claims. It argued that it had tried to effect service by both methods permitted in the agreement. The concept of “personal service” is well understood to mean delivery to the recipient himself. However, the process server employed to effect personal service on the seller left the notice on a table in a porch. The seller found the envelope later that day. Nonetheless, the buyer argued that the seller was not formally notified of its claim until service of the buyer’s recorded delivery letter, which was deemed to have occurred on 1 April 2010.
The Court of Appeal agreed that the process server should have handed the envelope to the seller. Consequently, it had to decide whether the notice provisions were permissive or mandatory. If the provisions were mandatory, the court could ignore the notice left in the porch, because it had not been properly served. Therefore, time would have started to run on 1 April 2010, when the recorded delivery letter was served. The majority decided that the notice provisions were permissive, as opposed to mandatory. They were clearly swayed by the fact that the notice provision used the word “may” as opposed to “must” or “shall”. This meant that both notices were valid. Consequently, time began running on 30 March 2010 when the seller was first notified of the potential claim – and the proceedings were out of time.
We can learn several practical lessons from this case. It is always helpful to indicate whether the methods of service referred to in an agreement are mandatory, or whether the parties will be permitted to serve notices in other ways. Parties would also be well-advised to leave plenty of time for the service of notices and practitioners should err on the side of caution when considering the range of possible dates from which time could realistically begin to run.
Allyson Colby, Property law consultant
