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Breach of warranty claims: Don't fall at the first hurdle

A recent UK Commercial Court case, Zayo Group International Ltd v Ainger and others [2017] EWHC 2542 (Comm), provides a stark reminder that a technical breach of the notice provisions in a contract is not a trivial or inconsequential matter. A failure to strictly comply with notice provisions resulted in the court dismissing a claim for breach of warranties. 

Background

The proceedings concerned a share purchase agreement (SPA) by which Zayo acquired a company from the defendant managers. Zayo claimed that deficient accounts were prepared by the defendants and it brought a claim for breach of the relevant warranties in the SPA. 

The SPA provided that, to bring a warranty claim, notice must be served at the addresses specified in the SPA within a particular period. On the last day of that period, Zayo attempted to serve each of the defendants with a notice of claim. It managed to serve six of the seven defendants by the cut-off time but failed to serve one defendant, Ms Jaggard, who no longer lived at the address specified in the SPA. The courier left the address, taking the notice with him, which he then delivered to one of the other defendants.

The defendants argued that the claim had not been validly notified to Ms Jaggard, and, since the SPA provided that a claim against one of the defendants be notified to all, the claims failed in their entirety. 

Judgment

The court dismissed Zayo's claim on the basis that service of the notices was defective. The court held that the purpose of the notice provisions in the SPA was that of commercial certainty and the ordinary and natural meaning of the provisions were clear in debarring claims which had not been notified within the required period.

The court held that it was irrelevant that Ms Jaggard no longer lived at the specified address; and commented that in failing to notify a change of address, she ran the risk of being unaware of claims against her. Equally irrelevant was the fact that Ms Jaggard became aware of the notice of warranty claim shortly after the failed attempt at delivery. The crucial issue was whether the notice given complied with the provisions of the SPA.

In addition, it was held that there was no requirement under the SPA on Ms Jaggard to notify a change of address and none was implied by the court.

While Zayo argued that a failure to notify Ms Jaggard relieved only that one defendant from liability, the court held that the natural commercial interpretation of the notice provision was that a failure to notify all of the defendants meant that none of the defendants had any liability.

Although additional issues were argued by Zayo relating to the warranty claims, the judge found that the notice issue was a "knock-out" blow in favour of the defendants, rendering all other issues academic. 

Implications

This case highlights the importance of both acting promptly when bringing a claim for breach of warranty and strictly adhering to the terms of the contract under which a claim is being brought. Leaving service until the last day resulted in Zayo having no additional time to rectify its technical breach of the notice provisions. The case also illustrates the possibility that a notice of claim may not reach the attention of the intended recipient and yet still be valid