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A victory for common sense

The law (and lawyers) crave certainty, and are often accused of being overly pedantic.

Perhaps unfairly so: part of the reason for this is that the law demands precision and strict adherence to procedure, however frivolous it might seem.

Yet, a recent Inner House decision not to insist on strict compliance with notice requirements seems to indicate the tide may be turning.

What remains to be seen though is whether this decision is, in fact, a victory for common sense, or a means of adding unnecessary complexity.

Contractual notice clauses

Let’s take clauses dealing with contractual notices as an example.

Many a termination notice has been deemed invalid simply because the clause was not followed to the letter, even when parties were well aware of the notice, and the party issuing the notice was well within their rights to do so.

In a decision that caused equal parts derision and fear amongst solicitors several years ago, the Court of Session held that a notice had not been validly served because it was delivered personally rather than by recorded delivery, as per the contract.

The fact that Royal Mail was on strike at the time and, as such, the tenant would not have received the notice had it been sent by recorded delivery was considered irrelevant.

The need for rigid compliance?

However, it seems change is afoot.

In a recent appeal decision of three judges in the Inner House of the Court of Session, it was held that the contractual notice requirements should be “construed purposively, taking account of commercial considerations”, meaning it is necessary to consider the purpose of the notice, as well as its requirements.

The case involved a claim for breach of warranties under a share purchase agreement, requiring the buyer to give the seller’s solicitors notice of any claim for breach in writing.

The agreement also said the notice should be sent for the attention of a particular solicitor at the firm, and to a specific postal address.

It also had to be delivered personally, or sent by first class or recorded delivery.

The buyer sent a notice to the seller’s solicitor’s firm, but marked it for the attention of a different solicitor.

The notice was also sent by the document exchange delivery service between law firms, rather than by first class or recorded delivery post.

The seller tried to argue that the notice had not been validly served, and the court at first agreed.

Compliance for compliance’s sake

On appeal, and considering both the purpose of the notice and the purpose of the notice requirements, the Inner House found that because the former was to make the sellers aware of the claim, there was no need for rigid compliance with the notice requirements.

In terms of the purpose of the contractual requirements for serving notice themselves, the court held that while the notice should be directed to someone with authority to act on behalf of the seller, the fundamental question is whether the seller was prejudiced by the notice being directed to solicitor B rather than solicitor A.

The Inner House held there was no prejudice and “insisting on strict compliance for own sake serves no useful purpose.”

While the Inner House’s decision appears, on the face of it, to be a victory for common sense, does it in fact complicate the position further?

Specifically, if the courts are no longer going to insist on strict compliance with notice requirements, how will parties know whether a notice has been properly served?

Perhaps there was some method in the (pedantic) madness, after all.

Rebecca Walker

Rebecca Walker is a senior associate based in Aberdeen, specialising in commercial litigation.

Posted, 06 March 2017 by Rebecca Walker
Categories: Commercial property | Construction | Corporate | Litigation