The UK Commercial Court examined the notice provisions in a share purchase agreement (“SPA”) between the parties in the case of Ener-G Holdings plc v Hormell1. In a surprising decision, the court found that while the plaintiff’s claim was time-barred due to the Court’s construction of the notice provisions, the methods of service set out in the SPA were not deemed to be exhaustive.

Background

The SPA required that proceedings in respect of a claim to be issued and served on the vendor within 12 months of the notice of claim.

The SPA also contained provisions in relation to service and deemed service. It was the construction and interpretation of these provisions that led to the preliminary hearing. The SPA provided that notices “may” be served personally or by pre-paid recorded post. It also provided that documents required to start legal proceedings could also be served in any other manner permitted by law.

The first issue concerned the service of the notice of claim. A process server, on behalf of the plaintiff, left the notice in the front porch on 30 March 2010, where it was found and opened by the defendant later that day. The second issue concerned the service of the proceedings, which were posted by the process server through a letter box on the defendant’s premises on 29 March 2011. The defendant did not receive the documents until 2 April 2011.

The Court was required to determine whether:

  • Service of the notice of claim on 30 March 2010 was effective, notwithstanding that it was not delivered “personally” on the defendant; and
  • Service of the proceedings on 29 March 2011 was effective and if so, the date of deemed service.

Decision

The Court ruled that if there were two possible constructions of a document, it was entitled to prefer the construction which was consistent with business common sense. Although, the SPA required notices to be delivered either personally or by recorded post, the Court found that the methods of service were not exhaustive.

The Court noted that it would be contrary to common sense to find that the defendant did not have notice of the claim on 30 March 2010, in circumstances where the defendant did in fact receive the notice on that day, therefore this constituted valid service of the notice of claim.

On the second issue the Court found that the plaintiff did not comply with the SPA as the notice was not delivered “personally” on the defendant. The Court found that service was permitted under the provisions of the Civil Procedure Rules, which meant that there was deemed service of proceedings on 31 March 2011 and therefore the plaintiff’s claim was one day late.

The Appeal

Lord Neuberger MR in deciding the appeal held that the first notice of 30 March 2010 was not “personally” delivered but nonetheless was effectively delivered on that date. Further the claim form was not delivered personally on 30 March 2010 but that it was deemed to have been validly served on 1 April 2011.

At the heart of this reasoning is that the notice provisions of the SPA must be interpreted as being “permissive” of other means of service. To this end the service of both the notice and the claim form whilst not affected “personally” as set out, were nonetheless still effective although late.

The appeal was dismissed.

Conclusion

The Court’s finding that the methods of service stipulated in the SPA were not exhaustive is interesting and highlights the importance of drafting definitive notice provisions in contracts. Where there is ambiguity in the clause as drafted, it shows the importance for litigants to assume a cautious approach in the interpretation of the clause and the need to strictly follow its terms.