Generally speaking, where a contract sets down requirements for the service of notices under it, parties should comply with these strictly. A notice that fails to comply will be invalid. This has been established in a number of cases including the House of Lords case of Mannai Investment Co Ltd v. Eagle Star Life Assurance Co Ltd in which Lord Hoffman famously stated "If the clause had said that the notice had to be on blue paper, it would have been no good serving a notice on pink paper, however clear it might have been that the tenant wanted to terminate the lease."
There have been a couple of recent cases that have turned upon whether notices have been validly served under finance agreements. Unfortunately they give not entirely consistent messages!
Service by email
Parties often deal with each other almost entirely by email. But can contractual notices validly be served by email?
In Greenclose v NatWest in 2014, notice sent by email under the terms of a 1992 ISDA master agreement was held not to have been validly served. The court held that email was not an “electronic messaging system”. Reasons given included that email was not widely used in 1992 and that the 2002 ISDA master drew a distinction between email and electronic messaging systems.
Earlier this year, in LBIE v Exxonmobil Financial Services, the High Court looked at the notices clause under the 2000 version of the Global Master Repurchase Agreement (GMRA) which also permits notices to be served by “electronic messaging service”. Unlike the 1992 ISDA master however, the GMRA includes in Annex 1 email addresses as a contact detail for notices. As such, Mr Justice Blair determined that this permitted the service of notices by email as there would otherwise be no reason for including email addresses in the Annex.
Service other than in strict compliance with terms of notice clause
In the Exxonmobil case, notices were also served by fax, albeit to a different fax number to the one specified in the agreement. By way of background, the notices were sent on the day that LBIE was put into administration. The sender was trying to send the notice through by fax but LBIE’s fax machine was (understandably!) busy and so transmission was unsuccessful. Eventually the faxed notices were transmitted to an alternative fax number. Mr Justice Blair ruled that where the non-defaulting party has made all practicable efforts to serve notice by one of the methods specified in the agreement but has been unable to do so, a different method can be used. The extreme factual circumstances of LBIEs placing into administration clearly had a role to play in coming to this decision. The judge also noted that the fax was sent to the wrong fax number was not picked up by the bank at the time and was only pleaded in amended particulars issued 6 years later. If a party wants to object to a method of service, it must do so promptly or will be taken to have waived the particular requirements of the clause.
Most recently, the Commercial Court was asked to determine the validity of demands served under a demand guarantee issued by a Monaco bank. In MUR Joint Ventures BV v Compagnie Monegasque de Banque, demands were required to be served by “registered mail”. The demand was served in a number of ways including by email, fax and courier (but not by registered mail). The court held that the requirement for registered mail was directory not mandatory. The guiding principle is one of effective presentation of a demand. Mr Justice Cranston highlighted that the importance of registered mail is that the communication in question is signed for by the recipient and signature precludes any suggestion that it was not received. He held that in this case there was no question that the demand had been received by the Bank and so the demand was effective.
In MUR, there was also an argument around whether the notice served by the claimant (a Dutch company) had been signed, as required, by “a duly authorised legal representative of MUR”. The demand guarantee specified that “For the purpose of identifying the Legal authorised representatives, the Beneficiary shall provide to the Bank, together with the request for payment, certified copies of MUR's Extract of Registry and the passport of the signatory signing the request for payment; the request of payment should be authenticate as well as representative's powers of MUR by a notary and duly apostilled..." (sic). The demand was signed by a director of MUR and was notarised and apostilled and his passport also duly authenticated. The bank argued that the notary should have carried out a factual check to ascertain that, a matter of Dutch law, the director was indeed duly authorised to represent his company. The judge rejected this interpretation and said that the role of the notary was merely to authenticate the signature on the demand letter and the copy of the signatory’s passport - not in effect a legal opinion as regards the enforceability of the demand letter. He reiterated that the terms for demanding payment under a demand guarantee should be clear and precise.
What lessons can be learned?
To ensure that you avoid any argument about the validity of notices/demands (and related costs and time associated with litigating), generally parties should comply strictly with the terms of the relevant contract. If they want to be able to serve notices by email, it is best to expressly incorporate this in the contract and to include the email addresses of the parties that should be used. If a party wants to insist on another party sticking strictly to the terms of the agreement, they should raise any objection as soon as possible and not leave it until later litigation is commenced.
However, it is of some comfort to note that courts appear to be taking a relatively sensible/commercial approach where it is clear that a party has received a notice but is looking to avoid liability on a relative technicality. As it is never entirely clear how a court will exercise its discretion and the precise factual circumstances will inevitably come to bear, the safest approach is to service notices entirely by the book and check the terms of your agreement carefully.
Greenclose Limited v National Westminster Bank  EWHC 1156 (Ch)
Lehman Brothers International (Europe)(in administration) v. Exxonmobil Financial Services BV  EWHC 2699 (Comm)
MUR Joint Ventures BV v Compagnie Monegasque de Banque  EWHC 2699 (Comm)