Strict approach to service of notice

26th September 2018

Ropemaker Properties v Bella Italia [1] is the latest in a flurry of cases [2] which have highlighted traps for the unwary when it comes to serving legal notices. In an uncertain economic climate parties often want to escape contracts or leases that are no longer viable, or they want to avail themselves of opportunities to bring claims under warranties or indemnities where contracts and timescales allow.  In recent months we have seen an increase in cases where parties have tried to do all of these things, but have fallen foul of service requirements. Specialist Real Estate Litigator David Manda shares his top tips to mitigate risk.

Invalid notice to terminate agreement for lease

In this case the tenant had, in 2014, entered into an agreement for lease in relation to a retail unit in a proposed new development in Colchester. In May 2017, however, the tenant sought to terminate the agreement by sending written notice to the landlord.  Unfortunately for the tenant, the relevant clause in the agreement for lease also required service on the guarantor for any such notice to be valid.  The High Court held that it was irrelevant: that the tenant and guarantor were group companies; that the relevant requirements had been complied with in substance (if not in form) by virtue of the fact that intention to terminate the agreement for lease had been noted in the board minutes of the tenant’s and guarantor’s parent company; and that the additional service requirement had no apparent purpose or commercial benefit.  In doing so the court insisted upon the well-established strict approach to service of notices, emphasising that service formalities must be complied with absolutely precisely, even if that ultimately means that a notice is found to be invalid on a very technical, even unattractive, basis.  The tenant therefore remained bound to complete the lease, despite that no longer being its preferred commercial course.

Top tips for effective notices

A good tip, when it comes to the service of any legal notice, is to remember the mantra: who, when and how?

Immediately a party considers serving (or, conversely, challenging) a notice, it should ascertain exactly:

Who

Who is required to give notice and on whom the notice should be served. (Consider the party/counter-party itself? Legal representatives? Other agents? Have there been any assignments, novations or variations which change the position? What are the current names and addresses/contract arrangements for the relevant parties/agents?)

When

When the notice should be served, including whether there are any long-stop dates for service or for completion of any other conditional/procedural steps (such as commencing any follow-on court claims, or the like).

It is also important to bear in mind, when calculating dates, that there may be different dates to ascertain. For example, depending on the nature and wording of the notice clause, you may need to know the date on which a notice actually has to take effect; the date by which it has to be served on (i.e. received by) the receiving party; and/or the date by which it has to be issued.

All of those dates can be influenced by other factors (such as the required method of valid service; how long that will take; whether the contract designates when service will take place or whether the contract relies on external deeming provisions; whether there are any weekends/bank holidays to take into account and/or whether only working/business days count (which can differ across different countries); and so on.

How

The ‘how‘ covers: the specific content of the notice; the form of the notice and any strict procedural requirements (in Mannai [3], the leading case, Lord Hoffmann famously said: “if the [termination] clause had said that the notice had to be on blue paper, it would have been no good serving a notice on pink paper“); and the fact that service must be effected in accordance with any contractually specified method. (The latter can, in turn, can lead to problems if notification obligations within contracts are drafted in isolation from, or inconsistently with, more general service clauses and other relevant contractual provisions.  For example, what happens if a party gives a PO box as its service address, but the contract specifies service by recorded delivery?  (You cannot effect recorded delivery on a PO box)  What happens if the contract specifies that the service address is a party’s registered office, but the agreement is assigned to an individual?  (Individuals do not have registered offices).)

WM Comment

The best advice is to leave the service (or, again conversely, the acceptance) of any legal notice entirely to the experts. The consequences of getting it wrong can be too costly to gamble.  Instructing specialist legal representatives to take on the risk for you reduces the chance of any problems arising.

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[1] [2018] EWHC 1002 (Ch)
[2] See our related articles for cases involving lease break notices and warranty claim notices, for example.
[3] Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, HL