Ener-G Holdings Plc v Hormell

A contractual requirement that a notice may be served by specified methods is ordinarily permissive unless clear language makes those methods exclusive. Compliance gives the sender the benefit of the contractual deeming provisions and transfers the risk of non-receipt. Service by another method may still be effective, but the sender must prove actual receipt and its date.

Delivery of a notice “personally” means delivery to the intended recipient personally, rather than delivery by an individual process server. Where an earlier notice has been validly received, a later notice cannot retrospectively invalidate it or postpone the start of a related contractual time limit.

ENER-G Holdings Plc sought nearly £2 million for alleged breaches of warranties in a share sale agreement. The agreement required notice of a warranty claim within two years and provided that the claim would lapse unless proceedings were issued and served within 12 months after that notice.

A process server left the first notice at the respondent’s home, where the respondent read it that day. An identical notice sent by recorded delivery was contractually deemed received two days later. The claim form was subsequently served at the end of the resulting 12-month period.

Burton J determined preliminary issues against ENER-G. The appeal concerned whether leaving the first notice at the property constituted personal delivery and, alternatively, whether the agreement’s two specified methods of service were exclusive. The answer determined when the 12-month period began and whether the warranty claim had lapsed.

1. Appeal dismissed by a majority. The Master of the Rolls and Gross LJ held that the contractual methods of serving notices were permissive rather than exclusive. Longmore LJ dissented on that issue. All three members of the court agreed that leaving the first notice at the property did not constitute delivery “personally”.

2. The words “delivering it personally” required delivery to the intended recipient personally. They did not refer to delivery by an individual acting for the sender. The familiar legal meaning of personal service, the importance of the recipient’s identity and the reasoning in Bottin (International) Investments Ltd v Venson Group Plc [2004] EWCA Civ 1386 supported that construction.

3. By a majority, the use of “may” in the service clause, contrasted with “shall” in the preceding clause, strongly indicated that the specified methods were permissive. Clear words would ordinarily be required before parties were taken to have agreed that a notice actually received in time was ineffective solely because it had arrived by another method.

4. The specified methods nevertheless had an important commercial function. Their use transferred the risk of non-receipt to the recipient and attracted the contractual deemed-service provisions. A sender choosing another method had to prove both receipt and its date. Construing the clause permissively therefore did not deprive the detailed service scheme of effect.

5. The first notice became effective when the respondent received and read it. Its valid service began the contractual 12-month period. The later recorded-delivery notice could not retrospectively invalidate or replace that earlier notice. Under rule 6.14 of the Civil Procedure Rules 1998, the claim form was served after the period had expired. The proposed warranty claims had therefore lapsed.

6. Longmore LJ would have held the specified methods exclusive. In his view, identifying two methods, together with the agreement’s express permission to serve proceedings by any other lawful method, indicated that notices could not be served in another way. He would consequently have allowed the appeal.

1. Court of Appeal (Civil Division): By a majority, dismissed ENER-G’s appeal and upheld Burton J’s determination that the proposed warranty claims were time barred.

2. High Court, Queen’s Bench Division, Commercial Court: Burton J determined preliminary issues following judgment on 14 December 2011. He held that the first notice was effective when received, although it had not been personally delivered under the contractual service clause, and that the claim form was served too late.