In Ageas (UK) Limited v Kwik-Fit (GB) Limited, the court considered a preliminary issue regarding service of proceedings in a breach of warranty claim. In holding that proceedings had been validly served, the court made a number of interesting comments particularly in relation to the service provisions in the Civil Procedure Rules (the CPR) and notice generally.
Ageas (UK) Limited (Ageas) purchased a subsidiary of Kwik-Fit (GB) Limited (KF) under a sale and purchase agreement dated 1 July 2010 (the SPA). KF provided various warranties under the SPA, including relating to the subsidiary’s accounts and records. Following completion of the purchase on 2 August 2010, Ageas discovered accounting entries which, it alleged, misstated the subsidiary’s assets and liabilities thereby inflating its value.
Schedule 4 to the SPA obliged Ageas to notify KF of any potential breach of warranty claims as follows:
- Schedule 4(1.3): “the Vendor shall not be liable for any breach of the Warranties unless a written claim has been made by the Purchaser to the Vendor within one year of Completion...”
- Schedule 4.1: “Any claim for breach of Warranties … which is made within the relevant time limit specified above shall, unless previously satisfied, settled or withdrawn, be deemed to be withdrawn and no longer enforceable unless legal proceedings in respect thereof are (i) commenced by validly issuing and serving legal process within six months of the making of such claim and (ii) being pursued with reasonable diligence.” [emphasis added]
Clause 15.17 of the SPA also contained notice provisions for giving all “notices, requests, demands or other communications”, including deemed service provisions.
On 28 July 2011 Ageas sent written notice of its warranty claim to KF by fax (the Notice of Claim). The validity of the Notice of Claim was not disputed by KF. Accordingly, Ageas had to issue and serve legal proceedings within six months – ie by 28 January 2012 – to pursue its claim.
On 18 January 2012 Ageas issued legal proceedings. On 26 January 2012, the Claim Form was sent to KF’s solicitors (who had confirmed instructions to accept service) by fax, email and DX. It was common ground that KF was aware of the claim from
26 January 2012 and that the Claim Form had been validly issued and served in accordance with the CPR. The question for the court to consider was whether service in accordance with the SPA had been out of time and was therefore invalid.
The parties’ positions
KF submitted that valid service had not taken place because:
- properly construed, schedule 4 to the SPA envisaged service should take place in accordance with the CPR and, in particular, CPR 6.14 (which governs when service is deemed to have occurred); and
- applying CPR 6.14, service did not take effect until 30 January 2012 (two days after the deadline for service under the SPA).
Ageas disputed that schedule 4 to the SPA imported the CPR. Ageas also submitted that:
- if the CPR was to be imported into the SPA, the relevant provision would be CPR 7.5 (regarding service of claim forms) and not CPR 6.14. Under CPR 7.5, service had been properly effected within the prescribed six month time limit; and
- alternatively, the claim form could be served pursuant to the general notice provisions under clause 15.17 of the SPA. These included provision that a document sent by fax during normal business hours was deemed to be served on the day of transmission. Accordingly, service was effected within the six month time limit.
- Contractual construction and interpretation
The court’s starting point was to consider whether, as KF contended, schedule 4 to the SPA envisaged service of proceedings taking place in accordance with the CPR despite not expressly stating this. The judge considered the general principles of contractual interpretation, citing the key authority Rainy Sky S.A. and others v Kookmin Bank1. The judge focussed on the meaning of the word “serving”, noting that the word can bear “a number of different and conflicting meanings covering points in time before, on, and after receipt.” The judge concluded that this was not a case in which “the parties have carefully and deliberately chosen a very precise legal term of art which, accordingly to consistent case law, should be accorded its technical meaning.” Therefore, the judge disagreed with KF’s submission that service should be “understood in the context of domestic procedural law” and preferred instead to give the word its ordinary meaning: “delivery upon and receipt by the intended recipient”. In short, the judge declined to interpret schedule 4 to the SPA as importing the provisions of the CPR relating to service.
Given that KF had as a matter of fact received the Claim Form on 26 January 2012, the judge concluded that Ageas had validly served KF within the prescribed six month period. He added that this accorded with what was in his view the purpose of schedule 4, namely to bring to KF’s attention the existence of a warranty claim within a specified time period. He noted that it would require very clear words to “ascribe to the parties an intention to treat a person who has actually been served as being deemed not to have been served at all”.
- The CPR
The court also considered the relevant CPR service provisions, namely:
- CPR 6.14 which provides that a Claim Form will be deemed served on the second business day after dispatch under CPR 7.5(1) regardless of the service method; and
- CPR 7.5 which sets out a number of methods to serve Claim Forms and prescribes to each method a step which must be completed by midnight on the calendar day four months after the Claim Form is issued.
The judge concluded that the purpose of CPR 6.14 was “to identify the point in time upon which the Defendant is deemed to have been served for the purpose of identifying consequent steps in the litigation.” He agreed with Ageas’s submission on CPR 7.5 that “provided that the Claimant took the step required within the requisite time then the claim was validly served and the fact that time did not begin to run for the Defendant until a few days after was neither here nor there.”
Accordingly the judge held that, if the CPR service provisions were to be relevant when interpreting schedule 4 to the SPA, service had occurred on 26 January 2012 under CPR 7.5 (ie within time).
- Service under the SPA’s general notice provisions
Although not strictly necessary due to his findings on (a) and (b) above, the judge also considered whether the claim form was in any event validly served in accordance with the general notice provisions in clause 15.17 of the SPA. If so, it would have been served on 26 January 2012 under the deemed service provisions in that clause.
In summary KF’s submissions on this point were that the general notice provisions in the SPA (a) did not apply to service of legal proceedings, (b) related only to mandatory notices and serving legal proceedings was not mandatory, and (c) could not be used for service on an agent meaning that service on KF’s solicitors was not permitted. The judge disagreed with these submissions and found in favour of Ageas, holding that the Claim Form had also been validly served under the SPA’s general notice provisions.
In finding against KF on this preliminary issue, the court held that valid service of proceedings was not defeated by technical arguments relating to interpretation of the SPA and/or deemed service under the CPR. The judge approached the construction exercise taking account of, on an objective basis, what the SPA provisions in question were intended to achieve. There was no dispute that the Claim Form did reach KF within the prescribed time limit and the judge was not persuaded that this could be ignored in favour of a technical and arguably artificial construction of the contract. Overall, the judge’s reasoning appears to have created a commercially sensible and fair outcome on the facts.
The judge’s comments on construction and interpretation of contracts provide a useful summary of the authorities. However, perhaps of most interest are his comments on CPR 6.14 and CPR 7.5 where he distinguished between them on the basis that:
- CPR 7.5 determines the last date on which the relevant step must be taken to serve proceedings after they have been issued; and
- CPR 6.14 determines the date on which service is deemed to have taken place for the purposes of setting the future timetable of the proceedings.
The case also reminds contract draftsmen of the importance of clearly specifying how documents are to be served and notice is to be given. If provisions of the CPR are to be relevant to service, this should be stated expressly. If not, the wording should be as clear and exhaustive as possible to avoid future argument over regarding method and timing.