Notices: Another Year, Yet More Cautionary Tales

Under most formal contracts it is necessary for the contractor (and, under FIDIC at least, the employer) to give notice of various matters as part of the process of seeking extensions of time and loss and expense. Generally, in the UK, the JCT form imposes a condition that such notices must be given within a reasonable time. However, increasingly, notice clauses are expressed as conditions precedent. In other words, a failure to comply with the requirements of the clause will result in a party being prevented from making what might otherwise be a perfectly valid claim. Sometimes, there may be time limits on when a party can refer a dispute to adjudication. However, it is not just standard forms which contain notice provisions; sometimes carefully negotiated agreements will contain provisions requiring specific notices to be served by a particular date.

Given the potential consequences, as Jeremy Glover highlights, care is needed to comply with any notice provision, as the following two examples from the courts in England and Hong Kong demonstrate:

Do your notices comply with the contract requirements?

In Stobart Group Ltd & Anor v Stobart & Anor1, Simon LJ had to consider whether a notice served was a compliant notice for the purpose of giving notice of claims under a Share Purchase Agreement dated 7 March 2008 (the "SPA"). Paragraph 6.3 of the SPA provided that:

"The Vendors shall not be liable in respect of a Tax Claim unless the Purchaser has given the Vendors written notice of such Tax Claim (stating in reasonable detail the nature of such Tax Claim and, if practicable, the amount claimed) on or before the seventh anniversary of Completion in respect of such Tax Claim unless a Tax Authority is [un]able to assess the Company in respect of the Liability to Taxation or other liability giving rise to the relevant Tax Claim because of fraudulent conduct."

This meant that the vendors were discharged from liability unless a written notice of a Tax Claim was served before 4 April 2015, the seventh anniversary of completion. It was said that the claim before the court could not succeed because SGL had not given notice under paragraph 6.3 of schedule 4 by 4 April 2015. SGL said that their letter of 24 March 2015 did comply. At first instance the Judge decided that on its proper construction the 24 March letter was not an effective notice under paragraph 6.3. Instead it was a notice under paragraph 7.1 in respect of a potential claim by HMRC against SGL.

The letter of 24 March 2015 included:

"We refer to the agreement relating to the sale and purchase of the entire issued share capital of WA Developments Limited entered into on the 7 March 2008 (SPA) ...

We hereby give you formal notice pursuant to the SPA of a potential Liability to Taxation under the Tax Covenant contained in Schedule 4 of the SPA ...

We would be grateful if you would confirm pursuant to paragraph 7 of Part 4 of Schedule 4 as to whether you wish to have continued conduct of discussions with HMRC in relation to the Claim.

We have recently sought from BDO an update of the likely estimate of the quantum of the Claim and they presently believe it is circa £3,267,092 (as per the attached sheet) inclusive of interest but exclusive of penalties ..."

Simon LJ referred to the words of Lord Steyn in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd2 (a case concerning a tenant's notice exercising a break clause in a lease) where he said:

"The question is not how the landlord understood the notices. The construction of the notices must be...