Von Essen Hotels 5 Ltd v Vaughan & Anor

A contractual deemed-service clause must be read as a whole and given effect according to its express terms. Where it requires notice to be sent to the contracting party and a copy to that party’s named solicitors, both steps are mandatory unless the agreement indicates otherwise. The court cannot omit the copy requirement because another method was more likely to give notice or caused no practical prejudice. A named firm is not ordinarily replaced by another firm later instructed for related work. A solicitor’s limited retainer and duty to pass on a document do not, without supporting evidence, establish implied authority to accept service. The notice was therefore ineffective when the agreed procedure was not followed.

The Vaughans sold their shares in Courtlands Country House Hotels Ltd to Von Essen under an agreement containing warranties and contractual notice provisions. A warranty claim had to be notified by 30 September 2005. Von Essen posted the notice to the Vaughans’ contractual home address and sent a copy to Paul Davidson Taylor, which was then acting for the Vaughans on related matters, but not to the named firm of Kendall & Davies.

The Vaughans were away and did not receive the posted notice. Etherton J declared that no valid warranty notice had been served in time and dismissed Von Essen’s counterclaim. The appeal concerned whether the notice provisions required a copy to be sent to Kendall & Davies, whether Paul Davidson Taylor fell within the contractual definition of the vendors’ solicitors, and whether that firm had authority to receive the notice.

1. Appeal dismissed. Von Essen had not shown that Etherton J’s construction of the contractual notice provisions was wrong.
2. Clause 11.9.1 had to be read as a coherent whole. It provided a sequence for service, identified the persons to be served, and then specified the deemed time of service according to the method used. The court could not separate the timing provisions from the earlier service requirements or read out the express provision requiring a copy to be sent to the vendors’ solicitors.
3. The original notice to the Vaughans and the copy notice to their solicitors were both documents to be served under the agreement. The copy requirement was mandatory, not merely directory. Clause 11.9.3 provided a mechanism for notifying a change of solicitors, but no such notification had been given. The contractual definition, read with the reference to Mr RL Davies, identified Kendall & Davies. It did not extend to Paul Davidson Taylor merely because that firm had later been instructed as agents for related matters.
4. Actual notice was also unavailable. A solicitor does not generally have implied authority to accept a notice on behalf of a client: In re Munroe [1981] 1 WLR 1358. The particular facts may establish such authority, as illustrated by Westway Homes Limited v Moores [1991] 2 EGLR 193, but the evidence here did not establish express, implied, or apparent authority in Paul Davidson Taylor.
5. The firm’s limited retainer may have created a duty to pass the letter to the Vaughans, but that did not confer authority to accept service. Otherwise, every person acting for a limited purpose would have implied authority to accept documents on any subject. The reasoning relied on Tanham v Nicholson (1872) 5 App Cas 561 therefore did not assist Von Essen.
6. Posting the notice to the Vaughans alone was insufficient, and sending the copy to Paul Davidson Taylor did not satisfy the agreement or constitute actual notice. The declaration and consequential orders below stood.

• Court of Appeal (Civil Division) dismissed Von Essen’s appeal.
• High Court of Justice, Chancery Division Etherton J determined the preliminary issue in favour of the Vaughans by declaration dated 15 December 2006, dismissed Von Essen’s Part 20 counterclaim, and ordered Von Essen to pay the Vaughans’ costs.