High Court held warranty claim served in time, though not deemed served under CPR till two days later

The High Court has held that a warranty claim was served on a defendant within the contractual time limit. On its proper construction the relevant clause did not require service to have taken place in accordance with the Civil Procedure Rules (CPR) by the relevant deadline; the claim merely had to be served in the sense of delivered to the defendant: Ageas (UK) Limited v Kwik-Fit (GB) Limited [2013] EWHC 3261 (QB).

The question of what is meant by a contractual requirement to "serve" a claim within a particular period is one that arises surprisingly often. The present decision suggests that, in the absence of clear words to the contrary, actual delivery of the claim will ordinarily be sufficient, even if the claim is not yet formally deemed served under the CPR. However, as with all matters of contractual construction, the decision will turn on the words used in the context of the contract as a whole and the relevant background; the same clause appearing in two different contracts may not have the same meaning.

As a practical matter, a claimant who is up against a contractual (or any other) time bar would be well advised to assume the least favourable interpretation of the relevant service provisions. And of course not to wait until the eleventh hour before serving. Ian Gatt QC and Maura McIntosh consider the decision further below.

	Ian Gatt QC Partner +44 20 7466 2683

Background

The underlying claim was for breach of accounting warranties in a share purchase agreement ("SPA"). The claimant complied with the requirement under the SPA to give notice of the claim within one year of completion. The question the court had to determine was whether the claimant had complied with the service requirements at schedule 4(3) of the SPA, which stated:

"Any claim for breach of Warranties ... which is made within the relevant time limit specified above shall ... be deemed to be withdrawn and no longer enforceable unless legal proceedings in respect thereof are (i) commenced by validly issuing and serving legal process within six months of the making of such claim ...."

The relevant six month period expired on Saturday 28 January 2012. The claimant issued the claim form on 18 January and sent it to the defendant's solicitors (who had confirmed they were instructed to accept service of proceedings) on Thursday 26 January by fax, e-mail and DX.

The defendant's position was that schedule 4(3) required service to have taken place in accordance with the CPR by the 28 January deadline. Under CPR 6.14 a claim form is deemed served on the second business day after the claim form is dispatched (by whatever method of service is used). Accordingly, the defendant argued, the claim form was not served in time.

The claimant disputed the defendant's construction of schedule 4(3). In the alternative it argued that:

1. If schedule 4(3) required service under the CPR, the relevant provision was CPR 7.5 which provides that where the claim form is served within the jurisdiction the claimant has to take the "required step" to dispatch the claim form by the chosen method of service within four months after the claim form is issued - i.e. schedule 4(3) required dispatch rather than deemed service within the six month period.
2. Schedule 4(3) permitted service by virtue of the notice provisions under the SPA, which stated that "all notices, requests, demands or other communications under this Agreement" may be given in various ways including by fax, in which case the faxed copy of the claim form would be deemed to have been served on the day of transmission, i.e. 26 January.

Decision

The court (Green J) held that the claimant did comply with the service requirements. On its proper construction, schedule 4(3) did not require service to have taken place in a technical legal sense. The term had not been defined in the SPA nor linked to any specific procedural rule. The ordinary meaning of "serving" is delivery upon and receipt by the intended recipient. That can be modified by contractual provisions, but it had not been in this case. That conclusion was supported by a number of additional considerations:

• It was in line with the purpose of schedule 4(3), namely to bring the existence of a warranty claim to the attention of the vendor within a relatively abbreviated period of time such that, once the time limits had passed and no notice or proceedings had been served, the vendor would know that it was free from the risk of proceedings. That made sound commercial sense.
• In Ener-G Holdings Plc v Hormell [2012] EWCA Civ 1059 Lord Justice Gross observed that "clear words would normally be required before one could ascribe to the parties an intention that a recipient who actually receives a notice in time should nonetheless be treated as not having received the notice at all". Here there were no clear words in the SPA which indicated such an intention. The draftsman could have made it clear that the phrase "serving" was to be construed in a strictly legal sense for instance by adding: "in accordance with the Civil Procedure Rules in force at the relevant time" or "in accordance with the time limits set out in Civil Procedure Rules r. 6.14".
• This conclusion created greater certainty than the defendant's construction, under which what looked like a straightforward clause became a trap for the unwary. Further, and importantly, the defendant's interpretation assumed that the only relevant part of the CPR was rule 6.14. But if the CPR was imported, that triggered a complex debate about whether it was CPR rule 6.14 or 7.5 that was relevant.
• The word "serving" and related phrases were found throughout the SPA in a context where they clearly referred to actual delivery. This supported the conclusion that the parties, and a reasonable person, considering the word "serving" in schedule 4(3) in the context of the SPA as a whole would treat that phrase as meaning actual delivery.

That conclusion meant it was not necessary to consider the claimant's alternative arguments. However, the judge expressed the following views:

1. If he had concluded that schedule 4(3) required service under the CPR, he would have found that the relevant provision was CPR 7.5. The CPR Glossary defined service as "steps required by rules of court to bring documents used in court proceedings to a person's attention". The purpose of schedule 4(3) was to indicate what the claimant had to do to bring the claim to the attention of the vendor. Both factors pointed toward CPR 7.5 rather than CPR 6.14 as the relevant provision. Accordingly, the claimant only had to dispatch the claim form within the six month period; there did not have to be deemed service under CPR 6.14.
2. In any event, the notice provisions under the SPA did apply to service of a legal claim. The provisions were broadly drafted and there was nothing in the SPA to suggest that a claim that had to be served under schedule 4(3) was excluded.

Comment

The judge in this case referred to the Court of Appeal decision in Ener-G Holdings as underlining the importance of certainty in commercial transactions, and the fact that strict time bars are an aspect of certainty, as well as for the observation that clear words will normally be required if the intention is that actual delivery will not count as service (an observation that was made, in the Ener-G Holdings case, in the context of service of the initial notice of claim rather than the claim itself).

Interestingly, in Ener-G Holdings the court seems to have assumed that the claim form was deemed served under CPR 6.14 on the second business day after it was left at the defendant's address (if it had not been "delivered personally" for the purposes of the relevant contractual service clause) - which, on the facts, meant it was out of time. Neither the first instance nor the appeal judgment addresses an alternative argument that the claim form had been sufficiently "served" once it had been left at the defendant's address, so that the claimant had taken the required step to bring it to the defendant's attention under CPR 7.5. We can only assume that the point was not argued. And of course we cannot know whether the Court of Appeal would have been as receptive to it as the judge in the present case (whose comments on the point were obiter).

In Ener-G Holdings the claimant could not be saved by an argument that actual delivery was sufficient for service. On the facts, the defendant was away from home when the claim form was left at his address and only discovered it after the deemed service date.