Nobahar-Cookson & Ors v The Hut Group Ltd

A contractual time limit for notifying a warranty claim is an exclusion clause. If, after ordinary linguistic, contextual, purposive and commercial analysis, such a clause remains genuinely ambiguous, the ambiguity may be resolved by the narrower construction. This is not a presumption or a licence to strain the language. It reflects the common-sense proposition that parties do not ordinarily surrender valuable remedies for breach without clear words.

A notice period running from awareness of “the matter” was construed as running when the buyer became aware of a claim with a proper basis, rather than when it knew the underlying facts or merely suspected that a claim might exist. That construction best served the purpose of preventing known claims from being held back.

Nobahar-Cookson & Ors v The Hut Group Ltd concerned mutual warranties in a share purchase agreement for the sale of Cend. The agreement required the buyer to notify a warranty claim as soon as reasonably practicable and, in any event, within 20 business days after becoming aware of “the matter”.

The buyer notified its claim on 6 February 2012. The sellers contended that it was time-barred because the buyer had known sufficient underlying facts, and that it might have a warranty claim, by 9 January. Blair J rejected that defence in the Queen’s Bench Division: [2014] EWHC 3842 (QB). He held that the relevant awareness arose only when the buyer had a proper basis for the claim following advice from forensic accountants.

The appeal concerned the meaning of “aware of the matter” and the relevance of the narrow construction of an ambiguous exclusion clause.

1. Appeal dismissed. The court upheld Blair J’s conclusion that the buyer’s warranty claim was notified in time.

2. Clause 5.1 of the share purchase agreement was a contractual time-bar and therefore an exclusion clause. The court rejected the view that the narrow-construction principle is unavailable merely because the agreement contained reciprocal warranty limits. The principle does not depend on identifying a proferens. It reflects the need for clear words before a party is taken to have cut down an important contractual obligation or remedy.

3. The principle has a limited role. It is neither a presumption nor a special rule allowing a strained interpretation. The court must first deploy the ordinary tools of construction, including language, context, purpose and commercial common sense. If genuine ambiguity remains, a narrower available meaning may properly be preferred.

4. The phrase “aware of the matter” did not clearly identify whether awareness of facts, of a possible claim, or of a properly founded claim started time running. Awareness merely that there might be a claim was too commercially unsatisfactory to be the intended trigger. The purpose of clause 5.1 was to prevent the buyer from pursuing claims it had kept in reserve, rather than to compel it to obtain advice on known facts within 20 business days.

5. Accordingly, the clause was best read as requiring awareness of the claim in the sense that there was a proper basis on which it could conscientiously be advanced. That purposive conclusion was reinforced by the narrower construction of the seriously ambiguous exclusion clause. Lady Justice Hallett agreed with the dismissal, placing greater emphasis on the commerciality of that interpretation. Mr Justice Moylan agreed with the outcome.

• Court of Appeal (Civil Division): The sellers’ appeal was dismissed in [2016] EWCA Civ 128. The court upheld the construction of the contractual notice provision adopted below.
• High Court, Queen’s Bench Division: Blair J rejected the sellers’ contractual time-bar defence to the buyer’s warranty claim: [2014] EWHC 3842 (QB).