Don't Default on Giving Notice
Litigation: 04 December 2024
Author: Erin Prout - Our People
Recently, the Supreme Court clarified when a default notice will be binding under an agreement. Whilst the Court ultimately found in favour of the Plaintiff, the Court stressed the need for the parties to strictly adhere to the terms of the agreement. Further, the Court emphasised that terms are to be interpreted by reference to the agreement as a whole and to the ordinary meaning of its terms.
Facts
In Allsopp v Elly Property Pty Ltd & Ors [2024] VSC 669, Mr Allsopp entered into a loan deed (Deed) pursuant to which he would lend money to Elly Property and its guarantors.
Mr Allsopp subsequently advanced $2,900,000 to Elly Property. Unusually, the proceedings did not concern the amount advanced or whether the Deed was binding.
The main issue was whether the notices and demands made on behalf of Mr Allsopp for repayment were given in accordance with the Deed. If so, Mr Allsopp would be entitled to judgment against the defendants.
Terms of the Deed
The relevant terms of the Deed were contained as follows –
Item 10 of the Schedule
The Lender is required to notify the Borrower, in writing, 30 days prior to the Expiry Date of [12 months from the date the Loan Amount is advanced], if the Lender requires the Secured Monies to be repaid on that Expiry Date. If the Lender does not provide written notice in this timeframe, then the Expiry Date of [12 months from the date the Loan Amount is advanced] shall not apply and instead this loan shall be rolled over on a calendar monthly basis until new roll over terms are agreed and finalised.
Clause 12
(a) A notice or other communication given under this Deed including, but not limited to, a request, demand, consent or approval, to or by a Party to this Deed:
(i) must be in legible writing and in English;
(ii) must be addressed to the addressee at the Service Address of that Party;
(iii) must be correctly executed by the Party or the Party’s solicitor; and
(iv) is deemed to be received by the addressee in accordance with clause 12.1(b).
(b) Without limiting any other means by which a Party may be able to prove that a notice has been received by another Party, a notice is deemed to be received:
(i) if sent by hand, when delivered to the addressee;
(ii) if by post, two Business Days after the date of postage; or
(iii) if sent by email, on the day the email is sent.
(c) If the delivery or receipt is on a day which is not a Business Day or is after 4.00 pm (addressee’s time) it is deemed to be received at 9.00 am on the following Business Day.
Issues in Dispute
Ms Schmidt was appointed as an agent for Mr Allsopp. As his agent, she sent an initial notice to Elly Property on 12 August 2023 which required payment of the loan more than 30 days before the 6 October 2024 loan expiry date. As payment was not made, Ms Schmidt sent a second notice on 15 August 2023.
Elly Property’s submitted to the Court that both notices were non-compliant with the Deed for various reasons, including:
- The notices were sent by a representative, not Mr Allsopp; and
- The notices were not executed, either personally or by electronic signature.
Decision
In deciding whether the notices were compliant with the Deed, the Court considered the terms of the Deed as a whole and the plain meaning of words used in the Deed.
For the first notice, the Court found that it was non-compliant because it was sent by Ms Schmidt as a representative. The Court came to this conclusion on the basis that the Deed allowed the parties to use a representative for various other matters, but was silent on the use of a representative to deliver a notice.
For the second notice, the Court found that it was enforceable. Whilst it was still sent by Ms Schmidt, the email chain in which it was sent contained an email from Mr Allsopp providing his instructions. In effect, Ms Schmidt’s communication was an extension of Mr Allsopp’s previous email.
The Court also held that the email signature met the requirements of executing the notice.
Key Take-Aways
1. Before issuing a notice under a contract, it’s important to carefully review the terms of the contract and ensure that the notice complies with any notice requirement provisions.
2. If a notice is sent on behalf of a third party, the notice should specify the party’s authority to issue the notice.
3. It is important to consider any execution provisions and generally ensure that a notice is signed (either in wet ink or with a digital signature) if it is not being sent via email.
Where the contract or agreement requires a notice of demand or notice of default to be issued before legal proceedings are commenced, it is important to get the notice right and ensure it complies with any notice provisions contained in the contract or agreement. We recommend that you obtain legal advice early.
To confidentially discuss your matter, please contact one of our dispute-resolution lawyers on (03) 8600 6000.