Note: This article relates to service of process in relation to actions raised in English courts but again may be relevant to our Scottish readership

In Ageas (UK) Ltd v Kwik-Fit (GB) Ltd [2013] EWHC 3261 (QB), the court determined the meaning of the word “serving” of legal proceedings in a share purchase agreement in respect of a claim for breach of warranty. In particular, it looked at whether the rules governing service in the civil procedure rules (“CPR”) could be used when construing the agreement.

Without the draftsman linking the agreement to the CPR and in the absence of clearly expressed contractual intent to alter the meaning of the word “serving”, the word was to be given its ordinary meaning of “delivery upon and receipt by the intended recipient”.

Background

The Claimant entered into a share purchase agreement to buy the entire share capital of one of the Defendant’s companies. A claim was issued alleging that the Defendant had breached a warranty contained in the agreement relating to the mis-stating of the company’s assets and liabilities.

The Defendant received the first notice of the claim on 28 July 2011 and therefore, under the agreement, the Claimant had 6 months to issue and serve “legal process”( i.e. until Saturday 28 January 2012).

The Claimant sent the claim form to the Defendant’s solicitors by fax, DX and email on Thursday 26th January 2012 and considered the claim form served validly on this date, within the 6 month time limit.

Service requirements

The court was required to determine the preliminary issue of whether the Claimant had complied with the service requirements of the share purchase agreement. Under the agreement a claim for breach of warranty would be,

“…deemed to be withdrawn and no longer enforceable unless legal proceedings in respect thereof are… commenced by validly issuing and serving legal process within six months of the making of such claim…”

Although the judgment addresses particular words used in a particular agreement, it was highlighted that it is not uncommon to find such a clause and phrase in agreements like share purchase agreements.

Out of time?

The central issue was to determine the rules that would apply to the serving of legal process under the agreement. The Defendant argued that the use of the words “legal proceedings”, “validly” and “legal process” indicated that the concept of serving was to be understood in the context of domestic procedural law and as such must be read in the context of the CPR which governs the proceedings that were contemplated specifically by the clause.

The Defendant referred to CPR 6.14 which provides that the claim form is “…deemed to be served on the second business day after completion of the relevant step under rules 7.5(1)” and as such argued that the claim form was not deemed to have been served until Monday 30th January 2012 which was outwith the service requirements of the agreement.

The Reasonable Lawyer

It was held that the clause had to be interpreted from the perspective of the parties and not the reasonable lawyer nor even from that of a business man “with a lawyer permanently hovering at his shoulder whispering advice”, applying a principle set down in the 2011 Supreme Court case of Rainy Sky SA v Kookmin Bank.

The parties meant the clause to act as a mechanism for bringing the existence of a claim to the notice of the Defendant within a specified time period and, once that time period had passed, the Defendant would know that it was free from the risk of proceedings. The Defendant however had knowledge of the claim and that proceedings were on foot from 26 January 2012, within the time limit, satisfying the purpose of the clause.

Service, within its ordinary meaning, occurred when the claim form was delivered to and received by the Defendant.

Conclusion

The decision has therefore established that where there is a clause in an agreement that relates to the “service” of documents, unless there is clear, express contractual intent to link the act of “service” to the CPR, then “service” is to be given its ordinary meaning of delivery upon and receipt by the intended recipient.

While this review relates to the decision of an English Court on an English law procedural requirement, the growing prevalence of English law governed commercial contracts, particularly in the energy sector, indicates that interpretation of priority such as those considered here is very much a UK inside issue.