Hut Group Ltd v Nobahar-Cookson
Court of Appeal
Citations:  EWCA Civ 128;  1 CLC 573.
The parties had given each other warranties. The seller’s warranties included representations as to the state of their accounts and business affairs. The buyer was contractually required to serve any notice of claim within 20 days of becoming ‘aware of the matter’ (‘the time clause’).
The parties later sued each other for breach of warranty. The seller sought to rely on the time clause. The parties disputed what the buyer needed to be aware of for the time limit to begin running. At trial, the judge found that the buyer was aware of enough facts to bring the claim more than 20 days before they served their notice. However, the judge also held that the buyer was not aware of their entitlement to bring the particular claim until it received advice from its forensic accountants. They had served their notice of claim within 20 days of receiving this advice. It was therefore important whether ‘aware of the matter’ meant either:
- ‘Aware of the facts giving rise to a claim’;
- ‘Aware that there might be a claim’; or
- ‘Aware that there was a proper basis for a claim’.
- How should the time clause be construed?
- Should the time clause be construed contra proferentem?
The Court of Appeal held that from a commercial and linguistic sense, ‘aware of the matter’ was ambiguous. This ambiguity could not be resolved using the usual rules of construction. The clause should therefore be construed contra proferentem. Applying this approach, ‘aware of the matter’ meant ‘aware of a proper basis for a claim’. The claimant had, therefore, given timely notice of the claim.
This Case is Authority For…
Historically, exclusion and limitation clauses were interpreted ‘contra proferentem‘. This meant that the court would resolve any ambiguities against the party seeking to rely on the clause.
The Court of Appeal clarified that the contra proferentem rule is no longer a ‘presumption’. They noted that courts should not go out of its way to seize on any little ambiguity and should not use the rule to give clauses a strained meaning. The courts should first try to resolve any apparent ambiguity using the usual rules of contractual interpretation.
However, the Court disagreed with the trial judge, who held that the rule could not apply in this case because the parties had clearly thought out the balance of risk between them. The Court of Appeal held that this was insufficient reason to ignore the rule if there remained a true ambiguity in the clause after the court has applied the usual rules of construction.
Briggs LJ explained the justification of the contra proferetem rule:
‘Ambiguity in an exclusion clause may have to be resolved by a narrow construction because an exclusion clause cuts down or detracts from the ambit of some important obligation in a contract, or a remedy conferred by the general law such as (in the present case) an obligation to give effect to a contractual warranty by paying compensation for breach of it. The parties are not lightly to be taken to have intended to cut down the remedies which the law provides for breach of important contractual obligations without using clear words having that effect.’