Serving notice – still not as simple as it sounds!

The serving of notices sometimes feels more akin to bomb disposal, than posting a letter. The slightest wrong turn can potentially prove fatal! Unfortunately that has only been compounded by a recent Scottish case.

Courts have generally taken a strict approach to the contractual or statutory requirements governing the form and service of notices. The safety nets they have provided, notably in the case of Mannai Investment Company vs Eagle Star Life Assurance, allow some room for error, but not much! So the approach has essentially had to be: get them exactly right, or else!

The Scottish case of Hoe International Limited vs Anderson [2017] CSIH9 runs against that, but not in a particularly helpful way.

The case focused on the service of a notice under a share purchase agreement, alerting the sellers to a warranty claim. The notice had not been served in full compliance with terms of the agreement: it was sent to the seller’s solicitors, but not by one of the methods prescribed in the agreement (instead, having been sent by DX), and it wasn’t marked for the attention of the person prescribed by the agreement. However, on appeal, the Inner House held that those irregularities did not invalidate it. Strict compliance was not required. The purpose of the notice was primarily to notify the sellers of the existence of a warranty claim so that, if they wanted, they could take over the defence. It was informative in nature and its purpose could be achieved without strict adherence to the requirements for service. That purpose had been achieved. Furthermore, the notice was considered to be at the “less drastic” end of the scale, compared to break notices: “If there is no prejudice, insisting on strict compliance for its own sake serves no useful purpose”.

Whilst that position may seem sensible, it does run somewhat against the grain of existing case law. Moreover, it does make the position more difficult both for recipients of notices, as well as those serving them. Must we now assess whether a notice is “drastic” enough to require strict compliance? In sending it, do I need to be very careful or can I be a little bit more relaxed? On the other end, in receiving a notice that I can see is not in strict compliance, can I ignore it? Does the previous rule of thumb that you say nothing in response to a notice that is evidently wrong or incorrectly served apply? Or do I have to try to apply the approach taken by the Inner House to work out whether or not to do anything?

A further appeal of the decision is pending, but whatever the outcome of that, the service of notices will almost certainly remain a bit of a minefield.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.