You've Got Email

At the time of writing, the TCC has issued four judgments so far in 2017, of which two touched on issues relating to notices under construction contracts being served by email.  In Surrey and Sussex Healthcare NHS Trust –v- Logan Construction (South East) Limited [2017] EWHC 17 (TCC) Mr Alexander Nissen QC considered the validity of an Interim Payment Notice sent amongst various attachments to an email.  Timing was the key issue for Mrs Justice O’Farrell DBE in Kersfield Developments (Bridge Road) Limited –v- Bray and Slaughter Limited [2017] EWHC 15 (TCC).  Both cases provide pertinent learning points, primarily for those drafting construction contracts and associated professional appointments.

The TCC’s recent findings

In Surrey, the Trust submitted the email in question failed to draw the recipient’s attention sufficiently to the Interim Payment Notice that was among its attachments.  Conversely it was the contractor’s position that not only was the file name of the attachment sufficiently clear but the document itself, once opened, made clear on its face that it was an Interim Payment Notice. The Court considered whether the notice was in “substance, form and intent” an Interim Payment Notice [in accordance with the provision of the contract]. The Judge noted that, following Jawaby Property Investment Ltd –v- The Interiors Group Ltd [2016] BLR 328, whilst the key issues were indeed ‘substance, form and intent’, it was also appropriate to consider the contractual and factual setting.  Having given these issues due regard, the Court found that Logan’s notice was clear in substance, form and intent. The fact that the covering email had failed expressly to draw the recipient’s attention to the nature of the attachment was not in itself a bar: in the contractual setting the Trust should have been aware that Logan was entitled to issue such a notice and both the file name and indication on the face of the document (once opened) were sufficient to meet the test. 

Turning to Kersfield; amongst the six issues before the TCC was the question of the timing of service of a pay less notice.  The notice in question was sent by email at 9:50pm on a Friday.  The relevant contract clause stated:

"Any notice, certificate or other communication (notice) to be given under Section 4 (Payment) may, in addition to any other permitted method of service, be delivered by hand or sent electronically to the e-mail address of the addressee, provided, if sent by email and not delivered by hand, a copy is sent on the same day to the addressee by pre-paid first class post. Any notice served in accordance with this clause 1.7.3A takes effect as being given and served:

(a) if delivered by hand or sent by email by 4pm on a Business Day, on that day;

but otherwise

(b) on the next Business Day."

The key issue here was that the email was deemed to have been served on the next Business Day which, unfortunately for Kersfield, was one day after the deadline for a valid pay less notice.  In conjunction with the Court’s decisions on the other matters, this left them obliged to make payment to the contractor in excess of £1.1m (together with adjudicator’s fees in excess of £17,000). 

Drafting lessons

Readers will undoubtedly agree that neither of the decisions summarised above was particularly controversial.  However, there are lessons to be learnt from both.  The issues in Surrey could have been avoided had the sender been clearer (or arguably more ‘open’) about the nature of the attachment to the email.  As is the case on most projects, particularly during final account phase, emails passing between key personnel will quickly run to the hundreds and in today’s fast-paced commercial world it will usually benefit both parties to ensure that emails and attachments are clearly marked.  Arguably, it may sometimes benefit the notifying party if the recipient fails to understand its significance (for example, if an oversight means that a pay less notice is not served in time). However, it is equally fair to assume that a contractor’s primary objective on any project is to be paid in full and on time and therefore it would seem to benefit the contractor to ensure that the employer understands when a payment application/notice is being served. Whilst prescriptive contractual provisions may be overkill, other contract documents (such as the Employer’s Requirements), if properly incorporated into the contract, could be used to clarify requirements for emails, for example, that any notices relating to payment must identify their purpose in the subject line and be sent separately to any other communication relating to the project. 

In Kersfield, the drafting in the notice clause quoted above was extremely useful as it provided the parties with certainty: emails sent after 4pm on a Business Day were not deemed served until the next Business Day. It is worth noting that the clause also required a copy to be sent by pre-paid first class post on the same day. The Court was not asked to consider any issues relating to the “back up” pre-paid first class post copy (presumably since the email was out of time, any hard copy would almost certainly also have been late).  However, it is interesting to consider that, had the email been sent at, say, 3:59pm on the Friday but the sender had failed also to send a copy in the post, arguably they would not have complied with the notice clause.  Adding an obligation to follow up emails with a hard copy is commonplace in bespoke construction contracts and amendments to the standard forms where service by email is allowed, but parties should be alive to the potential for the drafting to frustrate the intended benefit of the speed and convenience of email. 

Other issues to consider

When allowing notices to be served by email, there are clearly no right or wrong answers.  Those drafting such provisions should consider the following:

1. Should service by email be accepted for all notices?  What about service of proceedings?
   
   
2. Should notices be sent to more than one email address? 
   
   
3. Should there be an express obligation on the parties to update contact details?
   
   
4. Be sure to expressly state time/date of deemed service.
   
   In Kersfield, it was noted that although the Construction Act does not contain an express provision for service by email, Section 115 of the Act does permit the parties to agree the manner of service of any notice.  She noted that “deemed date of service of a notice is part of any agreement as to the manner of service” and further that since the notice clause provided certainty as to the date on which the notice was to take effect “there [was] no frustration of the timetable under the Act.”. 
   
   
5. Consider carefully the weight of “read receipts” given that recipients are often able to turn off this function thus denying the sender that evidence. 
   
   
6. What is acceptable evidence of failed service? “Bounce back”? “Out of office”?
   
   
7. Should there be an agreed message size limit?  If so, should the parties ‘warrant’ that the email address provided has the capacity to receive emails of a certain message size?
   
   
8. Should there be requirements for the subject line of the email, e.g., project name, type of notice attached?
   
   
9. Can the notice be contained in the body of the email or must it be an attached PDF?
   
   
10. What are the “signature” obligations?  
    
    Note that in Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd and another [2012] EWCA Civ 265 it was held that “an electronic signature is sufficient and that a first name, initials, or perhaps a nickname will suffice.”.  It may be that the parties would prefer a scanned copy of a “wet” signature for certain notices. 
    
    
11. Should there be an obligation to follow up notices served by email with a hard copy in the post?  If so, consider whether timings of deemed service could frustrate the intended benefit of allowing service by email.

Note that this article is intended to deal only with construction projects.  The provisions of the Law of Property (Miscellaneous Provisions) Act 1989 apply to contracts for the sale of land and should be considered carefully where applicable. Further consideration should also be given to the Electronic Communication Act 2000.

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.