The dangers of an invalid notice.....

We recently reported in our Summer Commercial Update on the dangers of not following notice provisions properly and how "as soon as reasonably possible" means exactly that even if there is a long stop date. In a recent case, the High Court held that information contained in a notice did not contain sufficient detail to meet the wording of that notice.

The Facts

In Dodika Ltd v United Luck Group Holding Limited [2020], a tax covenant contained in an Sale and Purchase Agreement (SPA) promised to reimburse the buyer in the event of any tax liabilities arising prior to completion. Money was placed in escrow as part of the arrangement which the buyer could access against any claim. The SPA required that any notice had to be served before a long stop date and that the notice had to set out "in reasonable detail that matter which gave rise to such claim, the nature of such claim and (so far as reasonably practical) the amount claimed". So far so good!

Inevitably a claim arose when the buyers became aware of an investigation by the Slovenian tax authorities. They duly served notice (just before the long stop date). As this was an ongoing investigation, the notice specified that the amount being claimed was equivalent to the amount they would have to pay following any investigation.

Decision

Whilst the court accepted that the failure to provide an actual amount claimed in the notice did not invalidate the claim (this was due to the SPA stating that the notice should set out the amount to the extent "reasonably possible"), the court went on to decide that the notice was invalid as it did not provide enough "reasonable detail" about the claim.

What can we learn?

Whilst the case related specifically to an SPA indemnity claim, the case reinforces the wider mportance of ensuring that notice provisions in any contract are clear and unambigous and do not leave any room for interpretation or argument. Many notices are served at the last minute and there is little room to amend or re-serve and so ensuring that the notice requirements are clear from the outset is paramount. Inevitably, every case will be determined on its specific facts but businesses should at the very least:

a. make sure that any notice provisions are clear and set out what is required and by when;

b. when sending a notice make sure you provide all of the information that is required under the contract;

c. if there is any ambiguity on what is required then make sure you provide as much information as possible about the notice including any factual information that you have.