Zayo Group International Ltd v Michael Ainger & 6 Ors (2017)
Claims against seven defendants alleging breaches of management warranties given in a share purchase agreement were dismissed. The claimant had failed to serve the notice of claim on one of the defendants by the final date for service, so, under the terms of the agreement, none of the claims could proceed.
The defendants applied to strike out claims against them alleging breach of warranty, or alternatively for summary judgment.
The proceedings concerned a share purchase agreement (SPA) by which the claimant purchased the entire share capital of a company and its subsidiaries from the defendants and a third party. The seven individual defendants were the management of the company. The claimant's claims arose out of alleged breaches of management warranties given by the defendants in the SPA. The SPA required that any claims against the defendants be notified to them within 18 months of the SPA. Clause 12 provided that notice could be served by delivering the notice by hand to the relevant address, or sending it by special delivery. All of the defendants apart from the fifth defendant were validly served by courier before 17.00 on the final date for service. When the courier arrived at the address given in the SPA for the fifth defendant, it became clear that she no longer resided there. He left the property, taking the notice with him, and subsequently delivered it to the first defendant. It was the defendants' case that the claim against the fifth defendant was out of time, with the result that she had no liability to the claimant. Schedule 6 para.3 of the SPA provided that "No Management Warranty Claim shall be made against any Management Vendor in respect of facts or circumstances unless a claim is made against all Management Vendors who are liable in respect of the same facts or circumstances". Schedule 6 para.3.2 provided that "No Management Vendor shall have any liability for a Management Warranty Claim except in circumstances where the Purchaser gives notice to the Management Vendors before the [relevant date]". Accordingly, the defendants claimed that the failure to serve the fifth defendant within time meant that none of them had any liability to the claimant.
Construction of notification clauses - Ultimately, every provision in an SPA had to be construed in accordance with its own wording, and the language of the clause in question, Ipsos SA v Dentsu Aegis Network Ltd (Formerly Aegis Group Plc)  EWHC 1171 (Comm) applied. The commercial purpose of contractual notices in this area was that of commercial certainty. Proper compliance with contractual notice requirements was not a technical or trivial matter, Laminates Acquisition Co v BTR Australia Ltd  EWHC 2540 (Comm) and Teoco UK Ltd v Aircom Jersey 4 Ltd unreported applied. Schedule 6 para.3.2 was part of a series of limitations on the claimant's rights. To the extent that particular provisions were properly to be characterised as exclusion clauses, then if they were ambiguous, they were to be construed if not contra proferentem then narrowly (see paras 39-52 of judgment).
Service of notice of claim on fifth defendant - It was apparent from the express language of cl.12 that, where a courier was used, notice was served by delivering it to the relevant address and leaving it there. The claimant sought to argue that "delivery" had to be understood differently where there had been a failure to notify a change of address, and that there was an implied term that where a notification address had not been updated, valid notice was given if a reasonable attempt to deliver at the original address was made. As a matter of construction, no such term could be implied. Such a term was not necessary for business efficacy, and failed any test of necessity. It could not be said that without such a term the contract would lack commercial or practical coherence. Firstly, cl.12 worked perfectly well without it, setting out a clear regime for delivery by special delivery or by courier. Secondly, it was based on the misconception that the "Management Vendors" were required to notify any change of address, when there was no such requirement. Thirdly, it failed to have regard to the express terms of cl.12.2, which clearly set out how delivery was to take place. The methods of delivery were not dependent on the presence or otherwise of the party at the address. Fourthly, it was uncertain in its ambit. It was not clear what would be required by way of an attempt. Fifthly, it was inconsistent with the express terms of cl.12 which required (in the context of delivery by courier) that the notice be left at the address, which was itself fatal to the implication of any such term. The notice of claim was not served on the fifth defendant in accordance with the provisions of cl.12 by 17.00 on the final date for service. In such circumstances, she had no liability to the claimant. The claim against her was dismissed (paras 72-89).
Consequences for the other defendants - The ordinary and natural meaning of Sch.6 para.3.2 was that contended for by the defendants, namely that no Management Vendor should have any liability for a Management Warranty Claim except in circumstances where the purchaser gave notice to the Management Vendors, namely the seven named persons in Sch.1 to the SPA. As the fifth defendant was not validly served, no Management Vendor was under any liability to the claimant. The claim against each defendant was dismissed (paras 90-101).
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13 Oct 2017
Queen's Bench Division
Simon Bryan QC
James Aldridge QC