Hoe International Limited v (i) Martha Goodnow Andersen (ii) Sir James Alexander Frederic Aykroyd [2017] CSIH 9

A notice has, on appeal, been found to be valid despite the sender’s failure to comply with strict contractual requirements.

A contract between the parties contained detailed requirements for notices served under it. Although the notice in question was safely received the recipient argued it was invalid because it did not conform to the strict requirements of the contract, eg it was sent by DX (not a prescribed mandatory method of service), and it was not addressed to the correct individual.

The Court at first instance decided that in order to be valid, any notice served pursuant to the agreement needed to strictly comply with the notice provisions and that the parties did not intend to allow deviation from those provisions. The notice was therefore held to be invalid.

On appeal, however, the Court focussed on the purpose of a notice, concluding that a notice “at the lower end of importance” – its characterisation of the notice in this action - requires less “rigid formality”. It also relied on the absence of prejudice as the notice had been received.

Key points

Although a Scottish case, it comes after a series of decisions applicable north and south of the border – the two most significant being the House of Lords case Mannai Investment Co. Ltd v Eagle Star Life Assurance Co. Ltd [1997] A.C. 749 and the Supreme Court case of Arnold v Britton [2012] EWHC 3451 (Ch). Both highlight the need for strict compliance. This decision might now lead the courts to take a different approach when deciding on the validity of notices.

An approach which requires analysis of the purpose and perceived importance of a notice, and which suggests that contractual requirements will be interpreted in light of that purpose and perceived importance, is likely to create uncertainty for both sides and therefore lead to an increase in litigation. This may be unwelcome when, in all likelihood, the service and notice provisions were included in the agreement in order to avoid such uncertainty.

The decision is likely to give rise to prejudice to the recipient becoming an increasingly important consideration in determining validity of notices.

The decision may be appealed to the Supreme Court.