Forrest & Ors v Glasser & Anor

A contractual warranty time-bar which requires only written notification of a claim does not require particulars unless its wording says so. A separate obligation to give prompt, detailed notice, expressed to operate without prejudice to the time-bar, does not import its detail requirement into the time-bar provision.

Each notification clause turns on its own wording. A notice is construed as a reasonable recipient would understand it in its factual context, including relevant earlier correspondence. A letter formally notifying a warranty claim based on inaccuracies in identified management accounts was sufficient to preserve the claim.

The appellants subscribed for and acquired shares in a company from the respondents under two materially similar agreements. The agreements contained warranties concerning the company’s accounts and a contractual limitation regime for warranty claims.

After the company entered liquidation, the appellants alleged that management accounts supplied before the transactions overstated work in progress and understated creditors. Their solicitors sent notices on 24 November 2003 and proceedings for breach of warranty were issued on 17 November 2004.

Stanley Burnton J determined preliminary issues in favour of the respondents, holding that the notices lacked sufficient detail and that the claims were deemed waived. The appeal concerned whether clause 6.3.1 required detailed notification and, if so, whether the earlier correspondence could inform the notices’ meaning.

1. Appeal allowed unanimously. Ward LJ, with whom Laws and Longmore LJJ agreed, set aside the preliminary-issue order. The notices complied with clause 6.3.1, so no answer was required to the question whether the claims had been waived.

2. Clauses 6.3 and 6.4 had distinct legal functions. Clause 6.3 imposed contractual time-bars: a claim not notified by the stipulated date, or not pursued by proceedings within 12 months of notification, was deemed waived. Clause 6.4 imposed a separate obligation to notify the company and warrantors promptly and in sufficient detail. Its words, “without prejudice to”, made clear that clause 6.4 neither altered nor imported its detailed-notice requirement into clause 6.3.

3. On the proper construction of clause 6.3.1, written notification of a claim under the warranties was enough. The provision did not require particulars of the breach, loss or amount claimed. The contrast with clause 6.4, and with notice provisions that expressly require particulars, was material. Contractual notification clauses must be construed according to their own wording, consistently with the general approach to contractual interpretation in [1998] 1 W.L.R. 896.

4. The letters of 24 November 2003 notified an existing claim, rather than merely a future intention to claim. A reasonable recipient would understand that the appellants claimed for breach of warranty arising from inaccuracies in the management accounts. The letters therefore satisfied clause 6.3.1.

5. In any event, Ward LJ held that notices must be read in their context. Earlier correspondence and emails could be considered even though the letters did not expressly incorporate them. That background identified the disputed work in progress and creditor entries, and would have supplied sufficient detail had particulars been required. This alternative conclusion was expressly unnecessary to the result.

• Court of Appeal (Civil Division). In [2006] EWCA Civ 1086, Ward LJ, with Laws and Longmore LJJ agreeing, allowed the appeal and set aside the preliminary-issue order.
• Queen’s Bench Division. Stanley Burnton J determined preliminary issues on 7 December 2005. He held that the 24 November 2003 notices did not comply with clause 6.3 and that the claims were deemed waived. No citation for that decision is stated in the judgment.