Reviewing the notification requirements in the InterClub Agreement in the wake of Ipsos S.A. v Dentsu Aegis Network Limited (previously Aegis Group plc) [2015] EWCH 1171 (Comm)

The Background

The recent decision in Ipsos S.A. v Dentsu Aegis Network Limited (previously Aegis Group plc) (the “Ipsos case”) is a timely reminder of the importance of complying with notice provisions in a claim notification clause. The Ipsos case was not a maritime decision but rather it concerned a claim under a share sale and purchase agreement. However, the discussion of how such clauses will be interpreted and applied is of wider relevance and therefore of interest to the shipping industry, particularly in the context of the claims notification requirements in the InterClub Agreement.

The Facts

Ipsos, as purchaser of shares in the Synovate Group, brought a claim for damages for breach of a seller’s warranty in a share sale and purchase agreement against Aegis, as seller. Aegis contended that Ipsos failed to comply with the contractual notification requirement for such a claim.

The alleged breach of warranty related to disclosure of employment claims against the Synovate Group in Brazil.

The contract provided that a seller warranty claim would be time barred if no written “Claim Notice”was received within two years of completion (and thereafter if no legal proceedings were issued within six months of the “Claim Notice”).

The Claim Notice was required to specify “in reasonable detail: (i) the matter which gives rise to the Claim; (ii) the nature of the Claim; and (iii) (so far as is reasonably practicable at the time of notification) the amount claimed in respect thereof (comprising the Purchaser’s good faith calculation of the loss thereby alleged to have been suffered).”

Ipsos sent two letters to Aegis relevant to the claim, the first of which was accepted by both parties not to be a “Claim Notice” for the purposes of the notification clause. The first letter was, Ipsos said, important only as background to the second letter. Ipsos argued that the second letter was a Claim Notice for the purpose of the notification clause. Aegis disagreed.

The second letter was sent just before the end of the two year period after completion and was nine paragraphs long. It discussed the employment claims in Brazil, but the question for determination by the Court was whether it complied with the requirements of the Claim Notice clause.

The Law

The Ipsos case was ultimately decided on its facts; the terms of the particular clause and the contents of the second letter. In terms of wider application, what is more useful than the ultimate decision (which is set out below) is the discussion by Mr Justice Simon of the law on claims notification clauses.

The starting point is that the only true principles to be derived from the authorities is that every notification clause turns on its own wording (statement of Ward LJ in Forrest v. Glasser [2006] 2 Lloyd’s Rep 392 at [24].)

However, four broad propositions can be derived from the subsequent cases of Senate Electrical Wholesalers Ltd v. Alcatel Submarine Networks Ltd [1999] 2 Lloyd’s Rep 423 and Laminates Acquisitions v BTR Australia Limited [2004] 1 All ER (Comm) 737.

  • The commercial purpose of a claims notification clause include ensuring the defendant knows in sufficiently formal terms that a claim for breach is to be made so that financial provision can be made for it. Such a purpose is not served if the notice is uninformative or unclear.  
  • In construing the notice, the question is how would it be understood by a reasonable recipient with knowledge of the context within which it was sent.  
  • The notice must specify that a claim is actually being made, rather than indicating the possibility that a claim may yet be made.  
  • Often the requirement of the notice of claim is matched by a requirement that certain matters be specified in the notice. The word ‘specifying’ suggests very strongly that it is not sufficient that the matters which are to be specified may be inferred. Mr Justice Simon referred to the judgement of Cooke J in the Laminates case, who stated (in relation to a similar clause);

The notice must specify ‘the matter which gives rise to a the claim’. This must mean the underlying facts, events and circumstances, which constitute the factual basis on which the claim is posited … the notice must specify ‘the nature of the claim’. The parties agree that this must mean notification of what is being claimed and the basis of it by reference to the SPA – namely the form and substance of the claim … the notice must set out the ‘amount claimed’. This specifically requires a calculation on the part of [the purchaser] of the loss which is allegedly suffered.

The Decision

The Judge concluded that a reasonable recipient of the second letter with knowledge of the previous correspondence and the business context within which it was written would not have understood it to be a Claim Notice. 

The decision turned on the particular clause and the particular facts, but the Judge highlighted the following points;

  • There was no reference to a ‘Claim Notice’ nor to the notification clause in the contract nor was there any statement that Aegis was giving notice of a claim for damages for breach of warranty. There was, on the contrary, a reference to “circumstances that might give rise to a [warranty] claim”.  
  • The letter did not specify the matter which gives rise to the claim, as required by the clause. There was no attempt to specify the underlying facts, events or circumstances which constituted the factual basis upon which the claim was posited.  
  • The letter did not specify the nature of the claim, as required by the clause. There was no real attempt to identify the form and substance of the claim.

 Application to the InterClub Agreement

Claims notification and time bar clauses are increasingly common in charterparties and other shipping documents. One example is in the InterClub Agreement (1996, as amended September 2011), which provides, where it is incorporated, for the apportionment of cargo claims between Owners and Charterers.

Where the InterClub Agreement applies, an Owner or Charterer will face a claim from cargo interests. The Owner or Charterer will then seek a contribution from the Charterer or Owner pursuant to the apportionment regime set out in the Agreement. For the purposes of this Article, and for ease of reference, we refer to the party facing the cargo claim and seeking a contribution as“the Owner”.

Clause six of the InterClub Agreement, the time bar clause, states;

Recovery under this Agreement by an Owner or Charterer shall be deemed to be waived and absolutely barred unless written notification of the Cargo Claim has been given to the other party to the charterparty within 24 months of the date of delivery of the cargo or the date the cargo should have been delivered, save that where the Hamburg Rules or any national legislation giving effect thereto are compulsorily applicable by operation of law to the contract of carriage or to that part of the transit that comprised the contract of carriage on the chartered vessel, the period shall be 36 months. Such notification shall if possible include details of the contract of carriage the nature of the claim and the amount claimed.

The notification requirements have been watered down from the earlier 1984 version of the InterClub Agreement, which stated at clause (1)(iv) that the notification “should record bill of lading details and the nature and amount of the claim”. However, the introduction of the “if possible” wording does not alleviate the Owner of the responsibility to include the stipulated information in the notice. If it is possible to include such information (in other words if such information is known or ascertainable) then the notification will be insufficient unless it includes the information.

It is important to remember that notice under clause six must be ‘written’ and given within the stipulated timescale. It is clear from the Ipsos case that the notice should state that it is a notice under clause six of the Interclub Agreement. We suggest that the notice should also refer to the relevant charterparty and the clause incorporating the Interclub Agreement. Furthermore, the notice must contain the specified information.

In terms of the specified information, it is useful to bear in mind the context in which notice is usually given under clause six. Within the two year notification period, the cargo interests may have commenced proceedings against the Owner, but alternatively they may have simply notified the Owner of the claim and agreed time extensions to any applicable Hague Visby or other time limit. Therefore, the Owner may have been provided with full details of the substance and amount of the claim by cargo interests, or he may still be awaiting such details.

Clause six requires that notice is given of the “Cargo Claim”, which is defined in the Agreement as the underlying claim including legal costs and interest claimed by the cargo interests and legal, club correspondent and expert costs of the Owner. Thus, the requirement is to give notice of the underlying claim. It seems that there is no requirement, at this stage, for the Owner to state which particular apportionment provision in clause eight he asserts applies. 

In terms of the requirement to provide details of the nature of the claim, the Ipsos case provides further guidance as to what is required in that the notice should include notification of what is being claimed and the basis of it by reference to the contract of carriage; namely the form and substance of the claim. If cargo interests have not provided Owners with sufficient detail of the form and substance of the claim, then in our view, Owners are bound to seek further information from them (or by alternative means) in order to comply with the notification requirements. It will be difficult for Owners to say that it was not possible to provide such details unless they have exhausted all avenues available to acquire the information.

Whilst, as stated above, the notification requirement is in relation to the Cargo Claim, in our view it is prudent for the notice to clearly state that the Owner is progressing a claim for apportionment under the InterClub Agreement.

It is a feature of claims under the InterClub Agreement that they are contingent on the underlying cargo claim. It is not uncommon for notice to be given in circumstances where subsequently the underlying cargo claim is not progressed. There is necessarily therefore, an element of uncertainty as to whether the claim being notified will ever be progressed. On the face of it, this may be difficult to reconcile with the clear guidance in the Ipsos case that the notice must constitute notice of a claim rather than notice of circumstances which might give rise to a claim. However, the inherent uncertainty in a contingent claim does not prevent the Owner from stating that, at the time the notice is given, there is a Cargo Claim and he has a claim for apportionment under the Interclub Agreement. If the underlying claim is not progressed, then the Owner will simply not progress his apportionment claim.

The requirement for notification of the amount claimed was also clarified in the Ipsos case, in that this specifically requires a calculation of the amount of the Cargo Claim. Even if cargo interests have not provided the Owner with sufficient details of the claim amount, the Owner must nevertheless provide details of the amount if it is possible for the Owner to either obtain that information from cargo interests or to undertake the calculation themselves from alternative sources of the information (for example by reference to market price information for the cargo.)

Application to demurrage and other claims time bar clauses

The notice requirements discussed in this article apply equally to other claims notification clauses in charterparties, such as the demurrage and other claims time bar clause at clause 20 of BPVoy 4. However, such clauses tend to be less prescriptive about the form and content of the notice and focus more on the requirement for supporting documents. A discussion of the case law concerning this issue is outside the scope of this article, but can be found in our earlier article entitled "Demurrage Time Bars - An Overview" please click here to view.

Conclusion

The Ipsos case is a timely reminder of the importance of getting contractual notices right. We have seen high profile examples of the impact of non-contractual notices in other areas of charterparty law, such as anti-technicality notices on withdrawal of the vessel from service for non-payment of hire under a time charter (the Li Hai case; [2005] EWHC 735 (Comm)). 

Notices under clause six of the InterClub Agreement should be in writing, clear, unambiguous and contain as much information about the underlying cargo claim as possible, including the form, substance and amount, as well, of course, as details of the contract of carriage. The Owner should exhaust all avenues for obtaining the required information before he can be confident that it is not possible to include the relevant information and so that can rely on the carve out in clause six.