The importance of compliance with contractual notice provisions

17th September 2020

Claimants successfully obtain release of US$50,000,000 held in escrow following Defendant's invalid notice of claim, showing how vital compliance with contractual notice provisions is.

In Dodika Ltd v United Luck Group Holdings Ltd [2020] EWHC 2101 (Comm), the Claimants (the ‘Sellers‘) made an application for summary judgment on their Part 8 claim seeking the release of US$50,000,000 held in escrow pursuant to the terms of a Sale and Purchase Agreement (‘SPA‘).

The release of the funds in escrow was dependent on the validity of a written notice of claim under the Tax Covenant in the SPA given by the Defendant (the ‘Buyer‘) to the Sellers on 24 June 2019 (the ‘Notice‘).

In order to be valid, pursuant to the terms of the SPA, the Notice had to state ‘in reasonable detail the matter which gives rise to such Claim, the nature of such Claim and (so far as reasonably practical) the amount claimed in respect thereof‘.

It was common ground that the Notice provided reasonable detail of the nature of the claim. Further, the court found the Buyer had a real prospect of success on the issue of the amount claimed; no amount was stated (or estimated) in the Notice, but the notification provision in the SPA did not require a figure to be stated in circumstances where it was not reasonably practical to do so.

The key issue therefore was whether the Notice provided reasonable detail of the ‘matter which gives rise to such Claim‘, and the Court held that the Notice did not provide such reasonable detail. This was because:

  • (i) the Notice did not set out the facts, events or circumstances giving rise to the Claim under the Tax Covenant;
  • (ii) the reference to a Tax Investigation in the Notice did not serve the purpose of informing the Sellers of the matter giving rise to the Claim;
  • (iii) a reasonable recipient would not know on the basis of what general facts the Buyer’s claim was being made;
  • (iv) even assuming the Sellers’ representatives were separately aware of the matter giving rise to the Claim, this was not enough to render the Notice compliant with the requirements of the SPA.

The Sellers were therefore entitled to summary judgment.

The Court’s decision highlights the importance of close compliance with contractual notice provisions regarding claims, the value of setting out full details of any claim to minimise the risk of non-compliance (and allowing sufficient time to do so before any deadline for providing the notice under the contract), and the danger of relying to any extent on a party’s pre-existing (and potentially detailed) knowledge of the claim prior to receiving formal written notice of a claim under the relevant contract.

Speak to one of our Litigation & Dispute Resolution experts

Arrange a call

Enjoy That? You Might Like These:


27 July -
How have courts approached the issue of force majeure clauses over the pandemic? Back in March 2020 we published an article which considered force majeure clauses in the context of... Read More


27 July -
Relevant to new, growing and established businesses, our intellectual property (IP) and research & development (R&D) experts will provide relevant, hands on guidance for business leaders. Read More


19 July -
What is the state of health and social care at present and how is the sector moving forward? This opening event will explore significant areas of consideration for the sector. Read More