Teoco UK Ltd v) Aircom Jersey 4 Ltd & Anor

A contractual notice of claim must satisfy the language of the particular notification clause. Where a share purchase agreement requires the claimant to set out the grounds of its claim, the notice must generally identify its legal basis by referring explicitly to the particular warranties or other contractual provisions relied upon.

Exceptionally, an express reference may be unnecessary where the stated facts unequivocally identify the relevant provision. An incorrect reference may also be harmless where a reasonable recipient would understand the provision intended and would not be misled. An omnibus reference preserving multiple possible legal bases will not provide the contractual certainty required.

The purchaser acquired two companies from the sellers under a share purchase agreement. It later claimed damages or tax indemnities concerning liabilities of Brazilian and Philippine subsidiaries. Schedule 4 made the sellers’ liability conditional on receiving notice setting out reasonable details of each claim, including its grounds.

The Deputy High Court Judge struck out the claims because letters sent by the purchaser did not comply with the contractual notification requirements. The purchaser appealed, except in respect of part of the Philippine claim concerning withholding tax.

The central issue was whether the letters adequately set out the grounds of the remaining claims despite failing to identify the particular warranties or Tax Covenant provisions relied upon.

1. Appeal dismissed. The letters did not comply with paragraph 4 of schedule 4 to the share purchase agreement because they failed to identify the particular warranties and Tax Covenant provisions on which the Brazilian and Philippine claims were based. The Deputy High Court Judge’s order was therefore correct: paras 27–31.

2. Every contractual notification clause turns on its own wording. Previous decisions nevertheless assist in identifying the importance of certainty and the degree of particularity which a clause may require: paras 21–24.

3. The requirement to set out the “grounds” of a claim required the purchaser to identify its legal basis, not merely the underlying facts. In general, compliance therefore required explicit reference to the particular warranties or other contractual provisions relied upon: para 27.

4. That requirement was not absolute. Exceptionally, a recital of facts could unequivocally identify a particular warranty without naming it. A reference to the wrong warranty might also be effective where a reasonable recipient would not be misled and would understand which warranty was intended, consistently with Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749: para 27.

5. Neither exception applied. There was genuine doubt about which provisions the purchaser intended to invoke. The omnibus references to warranty claims, tax claims, the Tax Warranties and the Tax Covenant encompassed numerous possibilities and preserved the purchaser’s options. They therefore failed to identify the grounds of the claims: para 27.

6. This construction promoted the certainty recognised in Senate Electrical Wholesalers Ltd v Alcatel Submarine Networks Ltd [1999] 2 Lloyd’s Rep 423. The contra proferentem principle did not justify a different construction because linguistic, contextual, purposive and common-sense analysis resolved the clause’s meaning. Nor did the possibility that a later barrister’s opinion might identify the contractual provisions cure the notices: para 28.

7. It was unnecessary to decide the sellers’ other grounds for upholding the strike-out: para 30. Lindblom LJ and the Senior President of Tribunals agreed with Newey LJ: paras 31–33.

• Court of Appeal (Civil Division): Dismissed the purchaser’s appeal and affirmed the order striking out the remaining Brazilian and Philippine claims: [2018] EWCA Civ 23.
• High Court of Justice, Chancery Division: On 28 April 2016, Mr Richard Millett QC, sitting as a Deputy High Court Judge, struck out the claims because the contractual notification requirements had not been satisfied. No neutral citation is stated in the judgment.