HHR Pascal BV v W2005 Puppet II BV

Contractual notice provisions must be construed in their commercial context, but clear and mandatory requirements as to timing ordinarily require strict compliance. A notice revising a projected completion date must preserve the counterparty’s contractual opportunity to inspect and dispute completion. A party cannot establish completion through an alternative route where the agreement provides a detailed contractual code governing notice, inspection and dispute resolution. Cooperation obligations do not require a party to waive substantive contractual rights. Where completion is conditional upon compliance with that code, failure to comply with its timing requirements prevents the notice from having contractual effect.

The parties disputed the construction of a share sale and purchase agreement concerning the sale of shares in a company owning European hotels. Completion depended on the substantial completion of renovation works at the Amsterdam and La Defense hotels by the contractual long-stop date.

The seller served a notice on 18 December 2008 stating that the Amsterdam works were substantially complete and giving that date as the revised projected substantial completion date. The buyer disputed the notice and sought summary judgment concerning the return of a €25 million deposit. The central issues were whether the notice had contractual effect and whether actual substantial completion by 19 December could satisfy the completion condition independently of the contractual notice procedure.

1. Notice ineffective. The seller’s notice of 18 December had no contractual effect. Under paragraphs 1.6 and 1.7 of Schedule 9, a revised projected substantial completion date had to be notified at least 10 Business Days in advance. The word “projected” indicated a future date, and the notice period protected the buyer’s rights to arrange an inspection and dispute substantial completion. [2009] EWHC 2771 (Comm) [36]-[45].
2. The contractual scheme required precise compliance with the notice provisions. The timing requirement was mandatory and formed part of a scheme allocating procedural rights to both parties. It was not merely an intermediate term giving rise only to damages. The court relied on the approach stated by Lord Wilberforce in Bremer Handelsgesellschaft m.b.H v Vanden Avenne-Izegem P.V.B.A [1978] 2 Lloyds Rep 109. [2009] EWHC 2771 (Comm) [44].
3. No alternative route to completion. Even assuming that the building works were substantively complete by 19 December, that fact did not independently satisfy the completion condition. The SPA established a carefully drafted code involving notice, inspection and expert determination. Clause 5 required cooperation in relation to laws, regulations and completion, but did not require either party to waive substantive rights. Schedule 9 governed the assessment of substantial completion and did not provide a separate means of proving it outside the prescribed process. [2009] EWHC 2771 (Comm) [46]-[49].
4. HHR therefore succeeded on both issues.