19 December 2017

The Scottish legal system is dependent on the requirement to give notice – a fundamental concept that parties need to be formally made aware of certain developments for them to be valid.

If you’re a landlord or a tenant in a commercial lease, or indeed a party to any commercial agreement, the need for the content of notices to be accurate, and compliant with requirements for service (particularly timing), is key - mistakes can be costly.

One mistake too many?

The 2015 case of West Dunbartonshire Council v William Thompson and Son (Dumbarton) Ltd highlights the importance of accuracy in serving notices. Here, the landlord served a rent review notice on their tenant. The notice contained an accumulation of minor errors in designing the tenant. The question for the Court was whether, notwithstanding these errors, it (i) constituted a valid notice to the tenant, and (ii) triggered the rent review provisions.

The designation of the tenant in the lease was ‘William Thompson and Son (Dumbarton) Limited.’ The rent review notice was issued to ‘Wm Thompson & Sons Ltd.’ Note the omission of "(Dumbarton)" from the designation, the use of "Sons" rather than "Son" and abbreviations.

On appeal, the Court of Session took the view that a clear distinction had to be made between a failure to comply with the requirements of the empowering document (the lease) and errors in the content of the notice.

The Court observed that the party challenging the notice does not need to show that they were misled. It was enough to show that the notice simply did not comply with the contractual Lease requirements.

As the tenant was clearly defined in the lease, the Court decided that the notice had not been addressed to them. As a result, the ability to invoke the rent review was lost – a harsh consequence of seemingly minor errors.

Maybe we don’t need to be so correct after all!

The recent 2017 decision in the Court of Session Hoe International Ltd v Andersen case takes a different approach altogether. This case related to the intimation of a breach of warranty claim in a Share Purchase Agreement. Prescribed requirements were set out in the agreement relating to the service of notices. Notices had to be:

• sent recorded delivery; 
• marked for the attention of a named individual; 
• sent to the other party’s solicitor, as well as to the address of the other party. 

A Notice of Warranty Claim was issued. The notice was challenged because it had not been directed to the named individual at the address of the other party, nor served by recorded delivery. It had just gone to the other party’s solicitor.

Nonetheless, it did manage to find its way to the correct person eventually. The Court took the view that, despite several failings, the notice was validly served.

They concluded that the intended recipient had not been prejudiced, in a practical sense, by failure to adhere to the notice requirements. Therefore, insisting on compliance for its own sake served no useful purpose.

Will the Courts not be so insistent on strict compliance with notice provisions going forward?

Despite the decision in the Hoe International case, accuracy in form and service is essential.  The more mistakes, the less likely a Court will be to accept that the recipient knew what any notice was intended to mean, or that it reached the correct recipient, in the first place.

Contacts:
Graeme Kelly, Partner gak@bto.co.uk T: 0131 222 2939