Case summary: Drive (Edgware) Ltd v S&T (UK) Ltd [2019] EWHC 3139 (TCC)

The process for issuing notices is a well-known potential source of dispute for parties to a construction contract. More than ever, with most offices operating remotely, contractual notices are necessarily being sent by email. This judgment in the High Court shed light on some of the challenges presented by this method of service, and is worth revisiting in the current climate.

Background

Drive (Edgware) Ltd (Drive) was appointed by S&T (UK) Ltd (S&T) as a subcontractor to complete enabling, demolition and sub-structure works. The works began in August 2017 and ceased in October 2017. Provisions were contained in the contract for notices (including monthly applications for payment) to be issued ‘via email to the S&T project surveyor’.

Drive made applications for payment in the form of monthly notices issued by email to the S&T project surveyor. These were answered by pay less notices from S&T. On 20 July 2018, Drive sent an application for payment relating to the same works which was not met by a pay less notice from S&T. Under the terms of the contract, S&T was therefore required to make the payment to Drive.

The matter was brought before an adjudicator. The principal issue to be decided concerned whether the application for payment was valid and thus whether Drive was entitled to receive payment from S&T. S&T argued that the notice issued by Drive had been sent to the email address of a project surveyor who had since left S&T, and because it had not seen Drive’s application, it had not issued a pay less notice in response. The adjudicator discounted S&T’s arguments and found in favour of Drive, ordering S&T to pay Drive £382,936.85 plus VAT and interest.

Judgement at the Technology and Construction Court (TCC)

Drive applied to the TCC for enforcement of the adjudicator’s decision. Simultaneously, the decision was challenged by S&T by means of a Part 8 application. Mr Justice Waksman heard both applications together.

The central issue at this hearing related to an email sent by S&T on 26 January 2018, by which it contended that it had instructed its sub-contractors to issue subsequent notices to a specific email address. The email did not list an addressee in the second line (the place normally expected to contain the addressee). Instead there were addressees copied in who were all individuals at S&T. Several sub-contractors (including two individuals at Drive) were blind copied into the email. Drive stated that this email was not seen or read by them at this time and was not discovered until S&T told them of its existence on 5 November 2018. It had in fact gone to the junk folder of the two addresses from Drive who were blind copied into the email.

Drive had therefore continued to issue notices in the same way as before this email had been sent. S&T argued that the email had affected a contractual change and the failure of Drive to issue its payment application to the specified email address rendered their payment application invalid under the contract.

Mr Justice Waksman disagreed with S&T’s arguments and enforced the decision of the adjudicator. He stated that the alleged instruction by S&T to subcontractors in the January email should have been clear in its content and should have been addressed directly to the intended recipient. At paragraph 33 of his judgment, he stated that

“it seems to me that both commercially and linguistically, to see this email as constituting in its entirety a direct instruction to all the subcontractors with nothing further to come simply does not fit a language, and it does not fit well with the notion of only blindcopying the subcontractors in….they are copied in because they are told that a change is coming and it gives them advance notice of what is to come hereafter”.

At paragraph 50, J Waksman made the additional observation that if the instruction had been intended by S&T to take the form of a notice:

“it should look like a notice and be addressed like a notice. This email was not”.

However, J Waksman also made clear that, if the email had been a valid notice, it would not have been a defence by Drive to say that it had arrived in their junk folder and so they had not read its contents. It would still in these circumstances have constituted a valid notice.

In addition, S&T’s subsequent actions seemed to reinforce the arguments in favour of the validity of Drive’s payment application. S&T had continued in the subsequent months of February and March 2018 to interact with Drive in the same way as before and to issue pay less notices in response to their payment applications. No point was made by S&T at this stage that they believed Drive to be serving the notices to the wrong email address in breach of any contractual provisions.

Points to take away

Consideration must be given to the precise notice provisions set out in the contract. Notice provisions are often quite strict and there are serious implications if they are breached. If it is intended for email to constitute effective service, this should be set out expressly in the contractual terms, or in formal contract variations. Parties should also consider what would constitute deemed notice.

The most important issue raised by this case in practical terms is the need for parties to take care with the use of emails to issue notices on the other party. The recipient of the notice should be directly addressed and not copied or blind-copied into an email. The email should also be clear on its face that it constitutes a notice and it should identify the subject-matter of the notice. To avoid doubt, it is advisable to check that the email has been safely received by the recipient and to make a note of the details of receipt.

This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any of the issues raised in this article, please contact us today by telephone or email  enquiries@sharpepritchard.co.uk.

Posted in Construction, Construction contracts, Construction disputes resolution, including adjudication, Justin Mendelle, Latest news and blog, Sarah Rhodes.