In a previous article ("Getting tenant’s name wrong in a lease notice") we commented on the December 2015 judgement of the Inner House of the Court of Session in the case of West Dunbartonshire Council v William Thompson and Son (Dumbarton) Limited. This case concerned the validity of a rent review notice served on a tenant (the defender). Although the landlord in that case had addressed the notice to "Wm Thompson & Sons Ltd" (which was similar to the correct name of the tenant - which was "William Thompson and Son (Dumbarton) Limited"), and the notice had been received by the tenant, the error in the name meant that the notice did not comply with the notice provisions in the lease, and failed to withstand a challenge to its validity.
In February 2016, hot on the heels of the West Dunbartonshire Council judgement, came another judgement on notices, this time by Lord Woolman in Hoe International Limited v Andersen and Aykroyd. Whereas the earlier judgement related to the content of the notice, a key element in the more recent case was the question of validity of service of the notice, another area full of potential pitfalls for the unwary.
What happened in the Hoe International case?
The basic facts of the case were that Hoe International Limited ("Purchasers") had purchased the entire share capital of a company called Speyside Distillers Company Ltd ("Speyside") from Anderson and Aykroyd ("Sellers"). After the share purchase was completed it emerged that there was an outstanding financial claim against Speyside by a third party which the Purchasers were not aware of, and a notice was served on the Sellers intimating a claim in reliance on a warranty given in the share purchase agreement ("SPA").
The notices provision in the SPA stipulated that notices were to be in writing, and that notices were deemed to be given to the Sellers if served at the Edinburgh office of the Sellers’ solicitors, marked for the attention of a named individual. The SPA also stipulated that notices "shall" (as opposed to "may") be (a) delivered personally or (b) sent by first class post or recorded delivery or (c) sent by airmail (if served from abroad). It was specifically stated in the SPA that email would not be a sufficient means of service.
In the event, the notice in question was sent to the Sellers’ solicitors by DX and email, and was not marked for the attention of the individual solicitor whose name had been given in the SPA.
Although it was not in dispute that the notice had been delivered to the office of the Sellers’ solicitors, the Sellers argued that the notice was not effective as it had not complied with the notice requirements clearly set out in the SPA.
The Purchasers argued that the notice was effective. In their view it was immaterial whether DX or Royal Mail had been used, as the result was the same, namely that the envelope containing the claim letter had arrived at the Sellers’ solicitors, and the Sellers should be considered to have received and understood the claim.
Court decided that the notice had not been validly served
Lord Woolman ruled in favour of the Sellers. He pointed out that the parties had specified in some detail in the SPA how notices had to be served. In Lord Woolman’s opinion, this supported the view that the parties had not intended to allow deviation from the notice provisions, which meant that the Purchasers’ failure to comply was fatal to the notice.
The message from Lord Woolman’s judgement is clear. It serves as yet another reminder from the courts that great care must be taken when considering the requirements of notices provisions, whether contained in commercial purchase contracts or other contractual documents such as leases.
The judgement also highlights the need to ensure compliance with requirements for service, as well as getting the content of notices correct. Time spent checking, and re-checking, that both the content of notices and the method of service will comply with the requirements of the contract, is well-invested time, as it reduces the risk of making avoidable, and potentially very costly, mistakes.