A recent decision in the Court of Session in Carmarthen Developments v. Samuel James Pennington examines at what point a notice can be deemed to be served and highlights how critical surrounding circumstances can be.
The Facts
In this case, the pursuers entered into contracts with the defender for the purchase of two plots of land. The contracts both contained a suspensive condition, which basically concerned getting satisfactory reports following a geotechnical survey, and outline planning permission. The pursuers had the unilateral right to waive the conditions or to declare them satisfied. They had to do so within 2 years, failing which, either party could back out of the contracts.
The pursuers obtained planning permission but the defender was annoyed that the pursuers did not then make the contracts unconditional and pay the sums due under the contract. Instead they waited until the 2 year "long-stop" date. He decided that he would back out of the contracts as soon as the long-stop date arrived. He agreed that his lawyer would fax the letters backing out of the contracts on Saturday 20th October 2007, although this would not be effective until 9am on Monday 22nd October 2007. Before he faxed the letters, his lawyer picked up the mail bag for his firm from the sorting office of the Post Office in Jedburgh. His lawyer had warned him that he expected the pursuers to satisfy the conditions before this date.
Meanwhile, the pursuers' solicitors took steps to satisfy the conditions and thus prevent the defender from backing out. Letters were prepared by them on Thursday 18th October, were signed the following day, after which the intention was for the letters to be sent by fax. However, an oversight occurred which resulted in the letters being sent out by first class post.
On the morning of 22nd October, the defender's lawyer picked up the mail bag and then, when he got to his office, re-faxed the letter backing out of the contracts, at 9.08am.
The crucial question arose - which party could be deemed to have intimated first?
The Arguments
It was argued for the pursuers that the suspensive conditions had been satisfied before the defender's withdrawal took effect at 9am on Monday 22nd October. The reasons for this were: the postal acceptance rule took effect from Friday 19th October 2007, when the notices were placed in the first class mail; it was most likely that the letter reached Jedburgh on the Saturday morning when it was picked up by his lawyer; in any event, the latest the mail bag was picked up from the Post Office and in the lawyer's possession was Monday at 8.50am.
For the defender it was argued that the postal acceptance rule could only apply when parties had authorised that the contract could be completed by acceptance before acceptance had been notified.
The Decision
The judge commented that the postal acceptance rule is well established in Scots law. However, the postal acceptance rule simply could not apply here. He said: "Serving notice without notification is a contradiction".
The judge then considered when the letter from the pursuers' lawyers actually reached the defender's lawyer's office. Having heard evidence, the letter was deemed to be part of the Monday post, essentially leading to a race on Monday morning as to which letter could be said to have been intimated first.
The judge ruled that "the delivery by a postman of the letters to the solicitors' office by pushing the envelope containing them through the letter box would have amounted to service of notice whether or not the lawyers promptly opened the envelope. The defender's solicitors would then have had possession of the notices. It is the task of the recipients of mail to arrange for its prompt handling and the sender of a notice cannot be prejudiced by internal delays in so doing." Following this reasoning, the judge ruled that service of notice took place once the letters were in the defender's lawyer's control, and not when he entered his office with the mail bag. So, notice was served on the defender at 8.50am on Monday 22nd October 2007 and the defender could not back out of the contracts.
http://www.scotcourts.gov.uk/opinions/2008CSOH139.html
Disclaimer
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