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The meaning of “acting by the receivers”

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03/07/2015

The High Court has recently been faced with a case in which it had to determine who were the proper parties to a property sale agreement and who was the proper party to the agreement to give notice, in circumstances where receivers were appointed.

In the case [1] the claimant had defaulted on a bank loan and receivers had been appointed in respect of properties charged to the bank. The claimant had entered into a contract for the sale of the properties to the defendant. The sale did not complete by the specified date and the claimant’s solicitors served the defendant with a notice to complete. The defendant did not complete and the claimant rescinded the contract, the properties then being sold to a third party.

The issue before the court was whether the notice to complete had been validly served in accordance with the sale contract. The defendant maintained that the notice was not valid for four reasons:

  • it was not signed
  • the relevant party to the agreement who could give notice to complete was the claimant “acting by the receivers” who were defined in the agreement by reference to the names of the original receivers and not their successors in title and that a notice to complete could only be given by those specific individuals
  • the notice was confusing as it contained errors
  • in particular, the notice contained the wrong date.

The High Court ruled:

  • the fact that the notice was not signed did not invalidate the notice or mean that it was only ever intended to be a draft. A reasonable recipient would understand that the fact that the notice had been sent (with a copy to the defendant’s solicitors) meant that it was intended to take effect, despite the lack of a signature
  • under the agreement, the party to the agreement who could give notice was the defendant and not the defendant “acting by its receivers”.The agreement was quite clear that the receivers were acting as agents of the claimant. The words “acting by its receivers” were intended to be descriptive rather than acting as words of limitation or compulsion. In addition, it would be absurd to give such a literal construction to the term “receivers” as to exclude successors
  • the errors in the notice, though numerous, were minor and could not create any doubt in the mind of the recipient as to the purpose or effect of the notice
  • a reasonable recipient would also understand from the notice the date required for completion of the sale agreement.

Although in this case the lack of signature did not invalidate the notice it is still best practice to ensure agreements are signed to avoid any argument that the notice is a draft only.

It is also sensible to make clear in the drafting of an agreement, that reference to parties includes their successors in title.

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[1] TBAC Investments Ltd v Valmar Works Ltd [2015] EWHC 1213 (Ch)T