In the recent case of Ener-G Holdings Plc v Philip Hormell [2012] EWCA Civ 1059, whilst a commercial approach was taken interpreting notice provisions, time limits in the share purchase agreement were strictly enforced.

As a result, the claimant lost the opportunity to bring a claim potentially worth £2m.

This article considers how to ensure warranty claims are not time barred.

Background

Ener-G Holdings Plc (the seller) decided it had claims against Philip Hormel (buyer) for breach of warranty under a share purchase agreement.

The agreement stated that the buyer had to serve notice of a claim on the seller by the second anniversary of completion being 2 April 2010.

The agreement stated that any notice:

  • 'may be served by delivering it personally or by sending it by pre-paid recorded delivery post'
  • if personally delivered was deemed received when delivered (or if delivered after 5pm on a business day, the next business day)
  • if sent by pre-paid recorded delivery was deemed received two business days after posting

Under the agreement, the claim was deemed to have been irrevocably withdrawn unless proceedings were issued and served on the seller within 12 months from the date of the notice.

Facts

A process server delivered a notice to the seller at his home address on 30 March 2010 (the first notice).

As nobody was present at the premises, the envelope was left on the porch. Before 5pm that afternoon, Mr Hormell found and read the first notice.

On 30 March 2010 an identical copy of the notice was sent by recorded delivery (the second notice). Under the agreement, this was deemed served on 1 April 2010.

One year later, a claim form was delivered by a process server to the seller at his home address on 29 March 2011. As nobody was home, it was posted through the letterbox. The claimant maintained it had complied with the service provisions in the agreement.

Judgment

The following conclusions were made (with Lord Justice Longmore dissenting):

  • the first notice was not personally delivered. The term 'delivering it personally' was interpreted to mean that notice must be served on the recipient personally, not served by a personal deliverer. The identity of the recipient was of central importance, the identity of the server was rarely important (otherwise a postman delivering a letter sent by post would be serving the notice personally)
  • the methods of service included in the agreement were permissive, rather than exclusive. Emphasis was put on the word 'may', and the use of the word "shall' in other clauses. Further, the agreement stated that 'any notice. shall be in writing', which was defined as including faxes. This was seen as inconsistent with the two prescribed methods of delivery
  • a document delivered personally or by recorded delivery was deemed served even if it did not come to the recipient's attention. If the document was delivered in any other way, there was no such presumption
  • the first notice was validly delivered when the seller saw it on 30 March 2010. This was based on 'business common sense'. This interpretation follows the same trend as that set in Whitecap Leisure Ltd v John H Rundle Ltd [2008] EWCA Civ 429
  • although the second notice was served strictly in accordance with the prescribed methods under the agreement, it could not invalidate the first notice.

For the same reason as the first notice, the claim form was held not to have been personally delivered; it was therefore deemed served on 31 March 2011 in accordance with the CPR.

This fell outside the 12 month time limit for serving a claim, so the buyer's warranty claim was time barred.

Advice

When drafting commercial contracts, including share purchase agreements, ensure that:

  • permitted methods of delivery are clearly expressed, with particular attention to the use of the words 'may' and 'shall'
  • a definition of 'in writing' is consistent with the permitted methods of delivery
  • clients are made fully aware of time limits so any claim is brought clearly within the relevant time frame