In the case of T&L Sugars Ltd v Tate & Lyle Industries Ltd [2014], the Commercial Court considered the meaning of 'service' in the context of warranty claims in a share and business sale agreement. While the court's decision was obviously specific to the particular contract being considered, many agreements will have similar wording.

The court was asked to decide, as a preliminary issue, whether or not a claim had been "issued and served" in time within the meaning of a share and business sale agreement. Clause 11.2 of the agreement required that warranty claims be notified in writing within 18 months; and clause 11.3 provided that such claims would be deemed irrevocably withdrawn unless, within 12 months thereafter, "legal proceedings in respect of the relevant claim have been commenced by being both issued and served".

The claimant gave the defendant notice of warranty claims on 30 March 2012, the last day of the 18 month period stated in clause 11.2. The claimant's solicitors issued the claim form on 27 March 2013, and delivered it the same day, by hand, to the offices of the defendant's solicitors.

The defendant argued that this was out of time. Rule 6.14 of the Civil Procedure Rules (CPR) provides that a claim form is "deemed to be served on the second business day after completion of the relevant step under rule 7.5(1)" - in this case, the second business day after delivery of the claim form to the defendant's solicitors.

27 March 2013 was the Wednesday before Easter; as a result the second business day thereafter was not until the following Tuesday, 2 April 2013. This was more than 12 months after notice of the warranty claims had been given, and therefore, the defendant argued, too late under clause 11.3.

The court rejected this argument. The judge agreed that "service" in this context meant service in accordance with the CPR (contrary, it should be noted, to the reasoning of Green J in Ageas (UK) Limited v Kwik-Fit (GB) Ltd [2013]). Since the agreement provided for disputes to be determined in the English courts, reference in the clause to 'legal proceedings' meant that the natural meaning of the word 'served' in the clause was 'served in accordance with the procedural rules in force in England at the relevant time': i.e., the CPR.

However, the court said that CPR 7.5 and CPR 6.14 drew a clear distinction between when service is actually effected, and when it is deemed to take place for the purpose of calculating the time for subsequent steps in the proceedings.

  • CPR 7.5 sets out the available methods of service, and states that the claimant must complete the 'relevant step' (in this case, 'delivering to or leaving the document at the relevant place') within four months after issue of the claim form. This is when service is actually effected: when the 'relevant step' is completed.
  • CPR 6.14, in contrast, "is looking at when service will be deemed to have taken place for the purpose of other steps in the proceedings thereafter".

The court therefore concluded that the claimant had 'served' the proceedings in time for the purposes of clause 11.3 of the agreement: the 'relevant step' - delivering the claim form to the offices of the defendant's solicitors - had been taken before the expiry of the 12-month deadline.

Comment

This is useful guidance, but bear in mind that the judge in Ageas came to a different conclusion on a similar clause (that the word 'service' in that agreement did not mean 'in accordance with the CPR'); and the precise wording of the relevant clause will obviously be critical in each case. In this instance, it was significant that the reference to 'service' came in the same clause as a reference to 'legal proceedings', and in the context of an English jurisdiction provision.

To avoid any uncertainty, when agreeing time limits for the service of claims parties should specify expressly whether they mean 'service' as defined in Rule 7.5 of the CPR; and if not, precisely how service is to be accomplished.