Out-Law News 3 min. read

'No prejudice' to recipient when notice delivered by DX rather than mail, Scottish appeal court rules


Serving a notice of claim using the DX business to business delivery service, rather than by way of one of the methods set out in the contract, did not breach a notice clause in that contract, the appeal court in Scotland has found.

Although the contract specified that notice should be delivered personally, by first class post or recorded delivery or by email in certain circumstances, the Inner House of the Court of Session ruled that the fact that DX was used caused "no prejudice" to the recipient. In any event, the use of DX could be equated with "personal delivery" in the circumstances of this case, the court said.

"If there is no prejudice the court should be slow to hold that non-observance of a formal requirement is fatal," said Lord Drummond Young, giving the judgment of the court. "This is such a case."

"Secondly, DX is a system of delivery used in the legal profession in Scotland (and more widely) to transmit documents between one firm of solicitors and another. In our opinion that amounts to personal delivery within the meaning of [the clause] ... An artificial legal person such as a firm can only act through agents, and normally handing over a communication to any person within the firm with authority to process that communication, by dealing with it or passing it to the correct person, will suffice to effect proper delivery," he said.

The Inner House overturned last year's judgment of the Outer House of the Court of Session, which had interpreted the contractual requirements more strictly. Trial judge Lord Woolman had taken "too strict an approach", bearing in mind that fact that the notice had made its way into the hands of the intended recipient and the notice itself was merely "informative in nature", Lord Drummond Young said.

"We consider that particular importance must be given both to the purpose of the notice that is to be sent and to the purpose of the particular contractual requirements that are said not to have been complied with," the judge said.

"In the present case … the notice was intended to give [the recipients] warning of a claim made against [their former company], to enable them to decide whether to take over the defence against such a claim. It is not an executive notice, such as the exercise of a break clause or the repudiation of a contract; it is essentially informative in nature. In these circumstances its purposes can be achieved without construing the requirements for service of the notice with undue strictness," he said.

The judge also explicitly distinguished the circumstances of the case from the most recent Scottish case involving notice provisions. In that case, a notice found to be invalid incorporated a number of errors, including the fact that it was addressed to the wrong person.

Earlier in his judgment, Lord Drummond Young made a number of points about contractual interpretation more generally. In particular, he noted that if the courts were to adopt an "over-strict and over-literal approach", contracts would inevitably have to become longer and more complex. This would also impose "substantial" unnecessary drafting costs on the parties, he said.

Commercial litigation expert Steven Blane of Pinsent Masons, the law firm behind Out-Law.com, said that the court's decision confirmed the approach that should be taken to interpretation of contracts in Scotland, following two recent decisions by the UK Supreme Court.

"The Inner House has now confirmed that the interpretation which is consistent with business common sense can be preferred," he said. "This clarification is welcome. The court also makes some interesting observations of the potential effect in each of the drafting process, transaction costs and dispute costs flowing from differing approaches to contractual interpretation."

"On the notice issue, there is perhaps a slight softening by the court on what may have been an overly strict requirement in past cases to comply absolutely with the terms of the contract to the letter to avoid a notice being invalid. Here, the Inner House is suggesting a more purposive approach to determining whether there has been any prejudice to the recipient – but only time will tell whether this case resolves either issue," he said.

However Craig Connal QC of Pinsent Masons said that commercial parties should approach the judgment with caution.

"While the approach to interpretation generally – a focus on purpose – is undoubtedly welcome, two notes of caution can be sounded," he said.

"Firstly, the decision could be regarded as discouraging careful attention to notice provisions and their detail. That could have consequences. Secondly, can it be right to decide questions of what is required by a notice clause by the purely practical consideration of whether the notice reached its intended recipient?" he said.

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