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Cite as: [2018] CSOH 124, 2019 SCLR 482, 2019 GWD 2-27, [2018] ScotCS CSOH_124

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CA3/18

OUTER HOUSE, COURT OF SESSION

[2018] CSOH 124

OPINION OF LADY WOLFFE

In the cause

OUR GENERATION LIMITED

Pursuer

against

ABERDEEN CITY COUNCIL

Defender

Pursuers’ Counsel: MacColl QC et Turner; Eversheds Sutherland (International) LLP

Defenders Counsel: Mure QC; Morton Fraser

21 December 2018

Introduction

Background

[1] The pursuer owns and operates roof-mounted photovoltaic systems on buildings

(“the equipment”). The equipment collects solar energy and converts it into electricity,

which the pursuer thereafter sells. The defender, a local authority, owns and operates a

large number of properties in Aberdeen where the equipment is installed. These

arrangements and installations are covered by a Master Agreement (entered into between

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the pursuer and defender) and by 72 individual site agreements (entered into among the

pursuer, the defender and a third party “the Mark Group Limited” (hereinafter “the third

party”)) governing the installations of the system on each of the defender’s properties.

[2] By emails sent on 25 July 2017 (“the email”) and subsequent termination notices the

pursuer endeavoured to terminate each of the site agreements.

[3] In this action the pursuer seeks declarator that it has validly terminated each of the

site agreements (in conclusion one) and declarator of the defender’s liability to pay the

necessary cost of removing the equipment comprising the systems (in conclusion two). It

also seeks payment of a figure exceeding £8 million (in conclusion three). The defender

challenges the validity of the termination notice relied upon by the pursuer for the purposes

of its first conclusion for declarator. As the pursuer’s other conclusions are dependant on

the validity of the termination notices, if the defender is correct then the pursuer’s whole

action falls.

Issue debated

[4] At procedure roll debate the defender challenged the validity of the termination

notice relied upon by the pursuer. There was no discreet challenge to the form of the

termination notice itself. Rather, the question was whether the email constituted a “written

notice from the former Party requiring payment” in accordance with clause 8.4.3. The

defender argued that, as a necessary precondition to the service of any termination notice,

the pursuer first required to give written notice requiring payment which complied with

clause 8.4.3 of the site agreement. Before considering parties’ arguments, it is necessary to

set out the relevant contractual provisions in the site agreements and the terms of the email

and termination notice relied upon. It is necessary to refer only to one of each of the site

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agreements, emails and termination notices as, apart from relating to the specific properties,

they are otherwise in identical terms.

The contractual provisions in the site agreements

Clause 8: Termination

[5] Extensive reference was made in the pleadings to provisions in the Master

Agreement and the site agreements. For the purposes of the debate it suffices to note the

terms of clause 8 and, as parties made reference to some other clauses, to summarise these

other clauses (namely, clauses 1.1, 6.1, 6.2, 6.7 to 6.8, 10 and 12 of the site agreement).

Clause 8 is headed “TERMINATION”. Clause 8.1 provides that the site agreement is to

subsist until the 25th anniversary of the commencement date, subject to the remaining

provisions of clause 8. Clauses 8.2 and 8.3 govern removal of the equipment following the

expiry date and enables the defender to offer to purchase the equipment.

Clause 8.4: early termination of the site agreement

[6] Clause 8.4, which is more detailed, provides the mechanism for early termination of

the site agreement in three circumstances specified in sub-clauses 8.4.1 to 8.4.3. So far as

material it states:

“8.4. Any Party may terminate this agreement with immediate effect upon written

notice to the other Parties if any of the following events shall occur (but subject

always to the terms of any Direct agreement entered into):

8.4.1 if the other Party commits any breach of its material obligations under

this agreement (including the obligations contained in clause 18) and fails to

remedy such breach, if capable of remedy, within 30 days after receiving

written notice form (sic) the other Party requiring it to do so; or

[….]

8.4.3 if the other Party fails to make punctual payment of any amount

properly due to the former Party under this agreement and such amount

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remains unpaid at the expiry of 20 Banking Days after receiving written

notice from the former Party requiring payment;” (emphasis added).

The pursuer relies on clause 8.4.3 to terminate the site agreements. The parties differed as to

whether the email complied with the words in bold in clause 8.4.3. (An argument about an

alleged want of proper service of the written notice was not insisted in.) Clause 8.5 provides

for the pursuer’s right to terminate in other circumstances which are not here relevant.

Clause 8.7 requires the defender to pay the pursuer a sum calculated by reference to

schedule part 3 of the site agreement in the event the termination arises as a result of the

“default” of the defender under inter alia clause 8.4.3.

The other clauses of the site agreements referred to: 1.1, 6.1, 6.2, 6.7 to 6.8, 10 and 12

[7] Passing reference was made in the course of the debate to several other provisions, as

follows:

1.1 “Party” means Mark Group, the Council or Our Generation and, together, the

Parties.

6.1 Mark Group (on behalf of Our Generation [ie the pursuer]) will issue an

electronic invoice for the Metered Output once a month and the Council [ie

the defender] shall pay the Charges set out in each invoice within 20 days of

its receipt. […]

6.2 If in respect of any invoice referred to in clause 6.1, a Party ascertains that

information used in preparation of such an invoice is subsequently altered,

the Party shall within 14 days of so ascertaining such alteration issue a

statement showing the difference between the Charges paid or payable in

accordance with such statement and the Charges which would have been so

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payable if such statement had been prepared on the basis of the altered

information. Statements will be submitted with an invoice for the revised

amount due, or by agreement of the Parties the reconciliation shall be carried

out at the time the next Monthly or other statement is submitted and included

in the invoice issued in respect of it.

6.7 If any statement or invoice submitted in accordance with clauses 6.1 or 6.2 is

disputed or subject to question by either Party: […]

6.8 In the event that Our Generation changes its collection agent it shall give at

least 10 Banking Days prior written notice to the Council.

The site agreement also contained an entitlement of the pursuer to assign its rights and

obligations to a subsidiary or holding company (clause 10.2) or to transfer its rights and

obligations under the site agreement and its title to the equipment (clause 10.3). Reference

was also made to clause 12, containing the provision for “NOTICES”. Clause 12.1 stipulated

that “Any notice given by either Party to this agreement shall be in writing and shall be

deemed duly served if delivered personally or sent by facsimile transmission or by prepaid

registered post to” specified addresses and fax numbers. There are also more detailed

deeming provisions about the timing of receipt, but these are not relevant to the issue

debated. (An argument about a want of proper service was not insisted in.)

The documentation the pursuer relied upon to effect termination

The email relied on as constituting the written notice under clause 8.4.3

[8] It was common ground between the parties that the pursuer required to give written

notice complying with clause 8.4.3 before it could exercise the right to terminate under

clause 8.4. The pursuer relies on the email sent by a named individual of “Effective Energy”

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dated 25 July 2017 to a named individual of the defender. The subject given for the email

was “Statement of Account”. Apart from a brief salutation and sign off, the whole text of the

email stated: “Please see attached statement of balances now overdue, owing to Our

Generation Solar.”

The statement attached to the email

[9] The document attached to the email (“the statement”) took the form of a summary

statement. This bore to be issued in the name of “Our Generation Solar 2 Ltd” at an address

in East Sussex (at the top left of the statement). Otherwise at the top right the statement

contained a logo (the letter “G” in blue contained within the red letter “O”) above the words

“Our Generation” and, in much smaller font immediately below that, the phrase

“Generating Renewable Energy together” (“the OG logo and strapline”). The statement is

addressed to a named individual within the defender. The body of the statement contains

12 lines of entry with seven columns. It suffices to note that each line contains the same date

as the statement (i.e. 25 July 2017); each was said to be due six days earlier and the invoice

figures on each line range between £1,200 and £67,000. At the foot of the page there is a

further box, typically found on statements of account, recording sums said to be due within

the “current” period, period 1, period 2 and so on. The total of £216,399.24 is recorded as

falling within “period 1”and that same figure appears in boxes at the foot of the page

marked “Invoice Value Overdue” and “Total Amount Due”.

The invoices supporting the statement

[10] Reference was made to a sample invoice dated 19 June 2017 relative to the entry on

the statement for £57,155.11 (at 6/9/1 of process). This invoice was addressed to a named

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individual within the defender’s Council Offices. It contained the OG logo and strapline at

the top right. The narrative referred to “solar photovoltaic services” and stated that “OGS2

Lost Revenue Due to ACC Insurance Position (Apr 15-Mar 17 Inclusive)”. The “Terms”

were stated to be “net monthly account” and the payee details at the foot of the page

correctly stated the name of the pursuer but provided the wrong company number.

Parties’ comments on the terms of the email and on inaccuracies in the statement and

invoice

[11] The defender highlights a number of errors or discrepancies in the email, statement

and accompanying invoices, as follows:

(1) the email had not been served on the third party to the site agreement, namely

the Mark Group Ltd;

(2) the sender of the email, “Effective Energy”, was not a known agent of the

pursuer;

(3) nowhere did the email provide the pursuer’s own company name.

The defender also notes that the invoices were recorded as only 6 days overdue. The

pursuer’s reply is that “Our Generation Solar” is the trading name of the pursuer and the

corporate group to which it belonged.

[12] In relation to the statement itself, the defender notes that a company known as “Our

Generation Solar 2 Ltd” is not a party to either the Master Agreement or any of the site

agreements. Again, the pursuer is nowhere referred to in the statement. While it was

acknowledged that the pursuer could assign its rights under the site agreement, this had not

happened as no intimation of any assignation had ever been given to the defender. The

pursuer did not rely on any assignation. The pursuer points out that the statement contains

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the correct OG logo for the pursuer itself. In relation to the sample invoice, this bears in the

narrative to relate to a different company (“OGS2”). The pursuer again notes that the OG

logo and strap line are those of the pursuer and its corporate group and the pursuer is

correctly referred to as the payee. It was accepted that the wrong company number was

provided.

The termination notice

[13] The pursuer’s agents sent a letter dated 24 August 2017 to the defender’ offices (“the

termination notice”). The Termination Notice subject headings referred to the pursuer and

stated “Termination Notice in respect of” a specific site agreement at one of the properties.

After referring to the pursuer and the site agreement in respect of the particular property,

the termination notice narrated that the defender had “failed to make punctual payment in

respect of invoices properly due under” the site agreement; that this sum due had remained

unpaid at the expiry of 20 Banking days following the defender’s receipt of the email. The

termination notice thereafter provided that, pursuant to clause 8.4.3 of the site agreement, it

was terminated with “immediate effect”. There followed a demand following the

termination of that particular site agreement.

The law

[14] It was common ground between the parties that the law applicable to the validity of

a notice served in terms of a contract had recently (and for this court, authoritatively) been

discussed by the Second Division in HOE International Ltd v Andersen 2017 SC 313, in which

Lord Drummond Young delivered the Opinion of the Court. The relevant legal

propositions vouched by the case law include the following:

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(1) Where the validity and effect of a notice provided under a contract is in issue,

two distinct types of question may arise. First, are the terms of the notice

sufficient to convey the necessary information to the recipient (“the first HOE

question”)? And second, has the notice been issued in accordance with the

contractual provisions governing the notice procedure (“the second HOE

question”)? (See HOE International Ltd at paras 16 & 28). I shall refer to these

collectively as the “HOE questions”.

(2) The first HOE question turns largely on the construction of the notice itself. This

exercise falls to be carried out in accordance with the ordinary principles of

contractual construction. The construction of the notice must be approached

objectively, the issue being how a reasonable recipient would have understood

the notices, taking into account the relevant objective factual context. The

subjective knowledge or awareness of the actual recipient is not therefore

relevant: see HOE International Ltd at paragraphs 28 and 31; Mannai Investment Co

Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 per Lord Steyn at pp767D-

769B, Lord Hoffmann at p775B-C and Lord Clyde at p782D-E.

(3) The purpose of a contractual notice is important, as is the purpose of any

particular requirement that has not been complied with (HOE International Ltd at

paras 29, 34 and 53).

(4) A notice must be sufficiently clear and unambiguous to leave a reasonable

recipient in no reasonable doubt as to how and when it is intended to operate;

though absolute absence of any ambiguity is not necessary: see Mannai Investment

Co Ltd (sup cit.) at p782B-D per Lord Clyde. The correct test is: “Is the notice

quite clear to a reasonable tenant reading it? Is it plain that he cannot be misled

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by it?” (see Carradine Properties Ltd v Aslam [1976] 1 WLR 442 per Goulding J at

p444, adopted by the House of Lords in Mannai Investment Co Ltd and cited by

Lord Reed in Credential Bath Street Ltd v Venture Investment Placement Ltd 2008

Hous LR 8 at para 46).

(5) As for contractual requirements for a valid notice (the subject matter of the

second HOE question), the crucial question is whether strict compliance is

required with one or more requirements of the clause that empowers the sending

of a notice; a question to which the ordinary principles for the construction of

contracts are applicable. The more drastic the consequences of the notice, the

greater the need for strict compliance (HOE International Ltd at paras 32-34, 40).

(6) Where strict compliance is required by the contract, then any failure to comply

with the contractually agreed requirements will render the notice invalid: see

West Dunbartonshire Council v William Thompson & Son (Dumbarton) Ltd

2016 Hous LR 8 (Ex Div) per Lord Menzies (delivering the Opinion of the Court) at

para 31; Mannai Investment Co Ltd (sup cit.) at p776B per Lord Hoffmann. Thus,

in respect of the second type of question (see para 13(1), above), the test in

Mannai Investment Co Ltd is not relevant.

The parties’ submissions

The submissions on behalf of the defender

[15] Mr Mure QC, who appeared on behalf of the defender, made clear that its debate

proceeded on certain hypotheses (but not otherwise conceded). The hypotheses were

(1) that the sum set out in the invoices were “properly due” in terms of clause 8.4.3;

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(2) that at the time of the termination notices issued on behalf of the pursuer it was

not itself in breach of contract such as to disentitle it from invoking the

termination procedure; and

(3) that the termination notice had also been served upon the Mark Group Ltd.

Accordingly, the narrow issue between the parties at debate is whether the email together

with the accompanying statement and supporting invoices constituted “written notice from

the former Party requiring payment”.

The second HOE question

[16] Mr Mure QC argued that in all the circumstances, the email and its attachments did

not constitute a “written notice from the former Party requiring payment” in terms of

clause 8.4.3, and the termination notices did not validly terminate the site agreements. In

order for the termination notices to be valid under clause 8.4, it is necessary that in respect of

each site agreement a written notice satisfying the requirements of clause 8.4.3 is first served

by the pursuer on the defender and on Mark Group Ltd.

[17] He argued that a clause such as 8.4.3 served several purposes, namely:

(i)

to empower the pursuer to terminate each site agreement with immediate

effect if any amount properly due and identified in the notice in respect of

that site agreement remains unpaid at the expiry of 20 Banking Days after

service of the notice;

(ii)

to put the recipient of the notice on warning that in order to enable that

power to be used the other party is requiring payment of an identified

amount remaining properly due in respect of that site agreement, that

being the amount to be paid if the recipient is to prevent the pursuer from

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obtaining the power to terminate the site agreement with immediate

effect; and

(iii)

to specify in respect of the particular site agreement to which the notice

relates, the amount that the pursuer requires the defender to pay.

The notice’s function is therefore to notify information to the recipient in accordance with

the contractual requirement, on which that recipient can then act to protect or vindicate its

rights.

[18] It is not the existence of overdue invoices but the recipient’s failure to comply with

the requirement in a valid clause 8.4.3 written notice which provides the basis for the

pursuer to terminate the site agreements. The consequence of a valid termination notice is

drastic, bringing the parties’ contract to an end, potentially long before its intended expiry

25 years from the Commencement Date: see clause 8.1. The termination provisions in clause

8.4 are key terms of the parties’ site agreements. Strict compliance with clause 8.4.3 is

therefore required.

[19] I did not understand Mr Mure QC to insist on his submission that there had not been

due “service” of the written notice (ie the email and supporting documentation). Otherwise,

he argued in relation to the formality of the “notice” that the concept of a “written notice” in

the site agreements imports an element of formality commensurate with the seriousness of

the consequences that may follow. He noted that the site agreement deals with invoices and

statements in terms, in other provisions: see e.g. clause 6.1, 6.2 and 6.7. A notice is not

therefore to be equiparated with an invoice or statement.

[20] Turning to the email, this stated that it attached a “statement of balances now

overdue”. The attached document was headed “Statement” and included the reference to

individual invoices (I have described this above, at paras [8] to [10]). Invoices and

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statements may be expected to indicate what sums one party asserts are due in terms of each

particular site agreement. However, he submitted that such documents are not equivalent

to written notices requiring payment of particular sums in respect of particular site

agreements. The email and attachment are not, therefore, formally valid as notices under

clause 8.4.3 such as to empower the pursuer thereafter to issue a termination notice in

respect of any or all of the site agreements.

The first HOE question

[21] As a fall back he argued that, contrary to the above submission strict compliance is

not required and/or the email and attachment are to be regarded as constituting a “written

notice”, they are nonetheless invalid on the basis that the reasonable recipient would be left

in no doubt about the pursuer’s intention. In other words, the terms of the email and

attachment do not convey to the reasonable recipient the meaning required by the purposes

which the parties have agreed the provision in clause 8.4.3 should serve. In particular,

(1) The email and attachment did not intimate anything beyond the fact that

invoices have been issued and are overdue. Re-statement of that fact does not

constitute a notice “requiring payment”.

(2) The email and attachment did not mention clause 8.4.3 of any site agreement.

(3) The statement attached to the email was not a written notice bearing to be

issued by or on behalf of the pursuer. It was a statement from a separate

company, Our Generation Solar 2 Ltd with an address in Hove. That name

matches the company number listed on the invoices. The defender owed no

obligation to that company under either the Master Agreement or the site

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agreements. Neither the email nor the statement makes reference to the

pursuer.

(4) Given (i) the contractual provisions anent assignation and transfer, (ii) the use

in the email and statement of a company and number different from the

pursuer’s, and (iii) the fact that the email was issued by a party other than the

Mark Group Ltd (cp clause 6.8), even if the email and statement could be

construed as “requiring payment” and thus evincing an intention to create the

power provided for in clause 8.4 (which is denied), the reasonable recipient

would be in doubt about the proper payee.

(5) The invoices referred to in the statement dated 25 July 2017, although dated 16

and 19 June 2017, bear to include sums being charged in relation to periods

from April 2015 to 31 May 2017. Standing the dates of such invoices, and the

periods to which they and their attendant breakdowns refer, the email and

statement do not convey the impression that the pursuer intends to exercise

any rights it may have had under clause 8.4.3 to terminate any site agreement

with immediate effect.

(6) Clause 8.4.3 requires service of a written notice under the individual site

agreement, concerning amounts properly due under that site agreement. The

email and attachment mention no specific premises nor any specific site

agreement under which notice was being served.

(7) Clause 12 of each site agreement provides for notices to be in writing and to be

served upon the addressees or facsimile numbers of each of the three parties to

the site agreements. The email and attached statement were not served upon

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Mark Group Ltd; nor were they served personally, by facsimile transmission or

by prepaid registered post.

(8) In these circumstances, even if the procedure was formally valid, a reasonable

recipient of the email and attached statement would not have understood those

documents as (i) being more than a statement of account or (ii) intended to

form the basis for service of a notice of termination by the pursuer under clause

8.4.3; or at least would have been in doubt about the contractual position.

(9) The circumstances founded upon above are not mere technical matters, but are,

both individually and in combination, essential matters going to the pursuer’s

jurisdiction or power to issue a notice terminating the various site agreements

with immediate effect.

(10) The reasonable recipient would have been aware that certain invoices had

become overdue; but would not have been aware from the email and

attachment that payment in respect of each site agreement was now being

“required” so as to trigger the pursuer’s power to terminate each agreement

with immediate effect.

[22] In construing the parties’ contract, and the purported notice, a commercially sensible

construction points to the need for strict compliance, and in favour of the defender’s

position. Commercial people understand the basic distinction between an invoice or

statement, and a formal written notice requiring payment and intended to trigger a right to

terminate a long term contract. Commercial people would not understand the mere

repetition of an invoice previously issued as importing a special requirement to pay in terms

of clause 8.4.3. Given the structure of the parties’ contracts, the potential consequences in

terms of termination, the circumstances above, and the prejudice to the defender of failing to

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give formal notice requiring payment (thus putting the defender on notice that clause 8.4.3

was in play), a commercially sensible construction does not support the pursuer’s position.

[23] Accordingly, even if the three hypotheses he identified (see para [16], above) were to

be the subject of proof and were resolved in the pursuer’s favour, the pursuer would have

failed validly to terminate the site agreements. The Court should sustain the defender’s first

plea in law and dismiss the action.

Submissions on behalf of the pursuers

Motion

[24] Mr MacColl QC, who appeared on behalf of the pursuer, explained that his primary

position was that the relevancy of the pursuer’s case can only be determined after proof and

he invited the Court to refuse in hoc statu the defender’s motion to sustain its first plea-in-

law. He moved the Court to allow a proof before answer on all issues. He sought a proof of

8 days.

Outline of pursuer’s position

[25] In relation to the documentation, the pursuer accepts that there are minor errors

(some details belonging to a related company) within the terms of the statements that

accompanied the email and the invoices to which it refers. However, there were no errors

within the terms of the emails (which Mr MacColl QC referred to as “Default Notices”)

themselves. The parties had been dealing with the project for several years; there was no

ambiguity as to the co-parties to the contract or the obligations owed thereby. A reasonable

recipient would have construed that the invoices were issued on behalf of the pursuer. In

the circumstances, a reasonable recipient in the position of the defender would have

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understood the terms and effect of the emails and the termination notices. On a proper

construction they were effective to terminate the site agreements. Mr MacColl QC referred to

clauses 6.1 and 8.4.3 of the site agreements. It is was the pursuer’s case that these provisions

were followed. In particular, the pursuer issued invoices to the defender; it gave notice

constituted by email pursuant to clause 8.4.3 requiring payment of sums overdue in terms of

the invoices as set out in a statement of account attached thereto; and it thereafter

terminated the site agreements by written notices constituted by termination notices.

Interpretation of the documentation: the first HOE question

[26] Mr MacColl QC argued that the relevant context for the interpretation of the email

was comprised of the invoices and statements. In relation to the invoices, Mr MacColl QC

submitted that the invoices form a major constituent of the context within which the

contractual notices must be interpreted. The invoices were issued under the terms of the site

agreements. The pursuer offers to prove as much. Subject to questions surrounding the

rates applicable, the invoices have been paid by the defender. Invoices had been paid for 4

years. The invoices were issued in the name of the pursuer. They contained the pursuer’s

VAT number. For reasons unknown, they have been issued with the wrong company

number - for a company related to the pursuer. However, as the defender observes, it is

only the pursuer that is party to the site agreements. There was no assignation or transfer of

rights to “Our Generation Solar 2 Limited”. That was known by the defender and a

reasonable recipient in the position of the defender would have understood that any

references to Our Generation Solar 2 Limited’s details must accordingly be erroneous. He

submitted that on any reasonable view, the invoices bear to have been issued by the pursuer.

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There is no possible ambiguity and any reasonable observer would have known that these

invoices related to the site agreements. Indeed, the defender itself has so proceeded.

Invoices to be issued/disputed

[27] Under reference to certain other provisions of the site agreement, Mr MacColl QC

submitted further that the defender is deemed to know that in terms of the site agreements

monthly invoices were to be issued (clause 6.1). If the defender disputed any invoice, it was

required to pay the undisputed and unquestioned items (clause 6.7.1) and otherwise set out

its reasons for disputing or questioning the amounts in writing (clause 6.7.2). The invoices

were not disputed. The site agreements provide for this position to be remedied in terms of

a clause 8.4.3 default notice. As a provision of the site agreements, the defender is deemed

to be aware of that consequence. It is in this context that the email was given.

The email

[28] Mr MacColl QC noted that the email referred to the trading name of the pursuer

rather than its company name. No issue is taken with the addressee, who was an employee

of the defender dealing with the site agreements. He submitted that a reasonable recipient

in the position of the defender (or its employee) would have known that this was being sent

on behalf of the pursuer. Even if that were not the case, the correspondence was sent by the

pursuer’s collecting agent, Effective Energy. The pursuer was entitled to appoint Effective

Energy as its collecting agent (clause 6.8 of the Site Agreement). The pursuer offers to prove

that Effective Energy had been so appointed and the defender informed timeously to the

issue of the email. In that context, a reasonable recipient would have construed that

Effective Energy were referring to the pursuer and dispatching a notice on their behalf. On a

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plain reading, the purpose of the email was to inform the defender that the invoices referred

in the statement attached thereto were overdue.

The statement

[29] Turning to the statement Mr MacColl QC noted that it contained the pursuer’s logo.

It referred to a number of invoices by reference to their individual dates, invoice references

and amounts. He accepted that the statement bears to have been issued erroneously with

the name of “Our Generation Solar 2 Limited”. However, for the reasons he had already

submitted, there can be no reasonable doubt that the invoices referred therein were those

issued by the pursuer and falling due in terms of the site agreements to the pursuer.

[30] In the circumstances, any reasonable recipient with the knowledge of the fact of the

site agreements between these parties; the installation of the PV Equipment; the Energy

production therefrom; the overdue invoices; that payment remained outstanding; and that

this was due to the pursuer, would have construed the statement and hence the email to

refer to the obligations in respect of which the defender was in default.

The second HOE question

[31] In relation to the second of the HOE questions, Mr MacColl QC argued that

clause 8.4.3 does not require any particular form, merely that the notice be in writing. On an

ordinary construction, email is a form of writing. At times, the defender appeared to

suggest that a statement with a request for payment would not constitute a notice under

8.4.3. It appeared to do so under reference to clauses 6.2 and 6.7 and an extrapolation that a

“statement” is a specific form of document under the site agreements. All contractual

references to “statements” within clauses 6.1, 6.2, 6.3 and 6.7 relate to statements of account

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for sums which are not overdue. However, there is nothing within the terms of those

clauses to suggest that this is in the only purpose to which a statement might be used.

Indeed, Mr MacColl QC argued it is commercially nonsensical to suggest that a statement

could not be issued to set out the sums which the defender is required to pay in satisfaction

of a notice under clause 8.4.3. Provided the terms of the notice accompanying that

communicated that payment was required, that is all that is formally necessary.

The terms of the site agreement

[32] Mr MacColl QC noted that there is no provision within the terms of the site

agreements for the pursuer to provide details of the sums due other than in respect of sums

which have not yet fallen due as a result of an invoice (clause 6.1), a statement following

alteration of an invoice (clause 6.2), a statement following reconciliation (clause 6.3), or sums

requiring payment as overdue (clause 8.4.3). He submitted that the email (whether

accompanied by a statement or not), being expressly in respect of overdue sums, was not a

statement under clause 6.2 or 6.3. It was not an invoice under clause 6.1. It stated in plain

terms that the amounts referred in the statement were overdue. On a proper construction,

the term “overdue” to a reasonable recipient dictates and stipulates that immediate payment

is required. That is all that is required to satisfy the terms of clause 8.4.3. Accordingly, the

email satisfies the requirements of clause 8.4.3 and was valid.

Intention to create a power

[33] In relation to the defender ‘s suggestion that notice of an intention to “create a

power” is required, Mr MacColl QC submitted that no such requirement can be gleaned

from a proper construction of clause 8.4.3. The reasonable co-party recipient is deemed to be

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aware of the terms of the contract (HOE International Limited at para 29). There is no reason,

therefore, for such notice to be required. Moreover, no such notice requirements are

provided in respect of other termination rights: as, for example, clause 8.5. It is not clear

why, in this context, a more onerous interpretation should be afforded to clause 8.4.3 to

protect the defender from consequences of which it is deemed to be aware.

[34] Mr MacColl QC argued that it is not clear whether the defender seeks to take issue

with the notice being served by an agent. There is nothing within the terms of the site

agreement to suggest that agents cannot effect notices. It has no bearing on the reasonable

recipient’s understanding beyond the issues previously addressed. This is not an additional

formal requirement. If this criticism is directed at the lack of a written notice more generally,

that is constituted by the email.

[35] The email was:

(1) served by the pursuer’s duly appointed collecting agent;

(2) on behalf of a principal identified by their trading name;

(3) in respect of whom there was no ambiguity in the full context of the parties’

dealings;

(4) with reference to invoices patently referring to the sums due under the site

agreements;

(5) in respect of sums that were overdue and required immediate payment; and

(6) to a party who is deemed to be fully aware of its contractual obligations.

In that context it would have been construed by a reasonable recipient as a notice for the

purposes of clause 8.4.3.

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The termination notice

[36] Mr McCall noted that no distinct argument was addressed to the termination notice.

On a proper construction, it met the formal requirements of clause 8.4 to be in writing. For

the purposes of this debate, it is accepted that the sums were due and that the pursuer was

not in breach. The termination notices were accordingly effective to terminate the site

agreements. Accordingly, the pursuer should be allowed a proof of its averments.

Discussion

The second of the HOE questions: the compliance of the email with clause 8.4.3

[37] As noted in the case of HOE International Limited (at para 16, see para [14(1)], above),

two questions generally arise in cases concerning the validity and effect of a notice provided

under a contract. It is convenient to begin with the second question, namely, whether the

written notice comprising the email complied with clause 8.4.3.

The guidance in HOE International Limited

[38] The Inner House in HOE International Limited affirmed that this is a question of

contractual interpretation applying the ordinary principles of the construction of contracts.

The crucial question was whether the relevant contractual provision required strict

compliance with one or more of the requirements empowering the sending of a notice. The

court emphasised three additional matters: first, that, in this context, a purposive

construction was particularly important; further, that the more drastic the consequence of a

notice the greater the need for strict compliance; and finally, that in the absence of prejudice

to the recipient party the court should be slow to hold that failure was fatal to the validity of

the notice. (See paras 17, and 32 to 36 of HOE International Limited.)

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What does clause 8.4.3 require?

[39] It was common ground between the parties that clause 8.4.1 empowered a party to

terminate the site agreement in certain circumstances. The particular circumstance the

pursuer relied on for the purpose of clause 8.4.3 was the asserted failure of the defender to

make punctual payment of amounts due to the pursuer. It was accepted by both parties, in

my view correctly, that the giving of the appropriate written notice under clause 8.4.3 was a

necessary precondition to the subsequent service of any termination notice by the party

wishing to terminate.

[40] The giving of the written notice operated as a “trigger” putting the defender on

notice that the pursuer wished to exercise the power to bring about an early termination of

the site agreement. Whether the pursuer could permissibly exercise that right of immediate

termination depended on whether the amount properly due remained unpaid after the

expiry of 20 Banking Days after the defender had received “written notice from [the

pursuer] requiring payment” (emphasis added). In my view, this is an important

qualification of the exercise of the power to terminate in two respects. First, it was clearly

intended to give the party against whom the power of termination might potentially be

exercised the right to take certain steps, if it chose, to preclude the exercise of that power.

That took the form of being afforded a period of some four weeks to pay the amounts

properly due (or, arguably, to dispute whether some or all of the sums claimed were

“properly due”- though that issue is presumed for the purpose of the debate). This is a

significant countervailing right to what is undoubtedly a drastic consequence flowing from

the exercise of the power to terminate and the issue of the termination notice. Secondly,

and related to the first observation, the simple fact that sums are unpaid is not what entitles

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the pursuer to exercise the right of termination. It is the defender’s subsequent failure to pay

the unpaid amount within 20 Banking Days required of it by the written notice. The effect of

this part of clause 8.4.3 is to change the character of an overdue balance (which is a neutral

factor in and of itself and which parties may or may not have tolerated in their dealings),

into a form of default (ie unpaid for 20 Banking Days after receipt of the notice requiring

payment). Mr MacColl QC appeared to accept this, as he consistently referred to the email as

a “Default Notice”. If all that was required was a sum that was overdue, then clause 8.4.3

would be otiose. The requirement that there be a “default” (not just an unpaid sum) is in my

view wholly consistent with the drastic consequence flowing from exercise of the

contractual power to bring about immediate termination. There could hardly be a more

drastic consequence than immediate termination. Accordingly, this invites stricter

compliance with the terms of clause 8.4.3. Further, in my view, on a proper interpretation of

clause 8.4.3 (and following the approach enjoined in HOE International Limited) clause 8.4.3

has a dual quality. First, the factual circumstance stipulated in clause 8.4.3 as the

precondition for the exercise of the right in clause 8.4 (to effect immediate termination) is the

occurrence of the default. The party seeking to exercise that power must send a written

notice capable of bringing about that default. In other words, the sums due (even if overdue)

must be converted into a default. A simple statement of fact that the sums are due or

overdue will not suffice; payment must be required. Secondly, in order to comply, the

written notice must also communicate to the other party that the pursuer is requiring

payment and doing so to establish a default (ie to bring about the circumstance stipulated in

clause 8.4.3). This could be communicated in a variety of ways. While it is correct that, as

Mr MacColl QC argued, parties are presumed to know the terms of the site agreement, one

of the functions of clause 8.4.3 is to give the other party notice that a potential default is

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being triggered and to afford it the contractually stipulated standstill period within which it

may remedy that default.

[41] The terms of clause 8.4.1 (quoted above, at para [5]) reinforce this analysis. Of the

two other circumstances entitling the exercise of the power under clause 8.4 to terminate,

clause 8.4.1 is analogous to clause 8.4.3. (Clause 8.4.2 is not analogous, because it concerns

events brought about by the actions of the third parties.) In clause 8.4.1 a similar

mechanism is deployed: one party may serve a written notice to the other informing it of a

material breach; the other party is allowed a period of time within which to remedy that

material breach; which failing, the party who sent that notice can terminate the site

agreement with immediate effect. Again, being in material beach does not suffice: it is the

creation of the default by sending a written notice of material breach coupled with the other

party’s failure to purge that default, which enables the sender of the notice to exercise the

power of immediate termination.

[42] Properly construed, as a minimum clause 8.4.3 required a “written notice from the

former Party requiring payment”. Did the email (read with the supporting documentation)

comply? I turn to address that question.

Did the email comply with clause 8.4.3?

[43] While there might be arguments arising under this clause about whether sums were

“properly due” or whether the defender failed to make punctual payment, the factual

hypotheses on which the debate proceeded (see para [16], above) preclude such arguments.

[44] It is relevant to note that the site agreement was anticipated to operate for 25 years.

Absent early termination, therefore, it would subsist until April 2037. The pursuer sought to

exercise the right of immediate termination just over five years into that 25 year period.

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That potentially drastic consequence of operating the clause 8.4 termination provision brings

in its train a need for stricter compliance with the requirement to give “written

notice…requiring payment”. This does not mean that the communication sent required to

be headed up “notice” or “notice for the purposes of clause 8.4.3” or something similar. The

defender did not argue for this. On the other hand, the fact that the email was neither a

“statement” nor an “invoice” (as defined under the site agreement) did not mean that it

necessarily was of the character of a “notice”, as the pursuer’s counsel appeared to suggest.

The fact that the clause 8.4.3 is not prescriptive of the form of the notice (so long as it is

written) does not relieve the pursuer of complying with what clause 8.4.3 requires.

[45] The simple but fundamental question is, did the email “require payment” to the

pursuer such as to create a potential default for the purposes of clause 8.4.3? In my view that

email, even read together with the accompany statement and the supporting invoices, did

not do so. Having regard to the draconian consequence of a termination notice, in my view,

the pursuer required to communicate to the defender its intention to bring about the

circumstances provided for in clause 8.4.3 for the purposes of exercising the right of

immediate termination in clause 8.4. A notice compliant with clause 8.4.3 required to be in

these terms in order to convert unpaid sums into a default (the first function of the clause

8.4.3 notice). It had to require payment for that purpose. However, the text of the email is

almost precatory in its terms: “Please see the attached statement of balances now overdue,

owing to Our Generation Solar.” In my view, a simple statement that the balances were

“overdue” (by 6 days) and “owed” to Our Generation Solar does not fulfil the requirement

of a default notice “requiring payment”. Even if “Our Generation Solar” is understood as

encompassing the pursuer, the written notice for the purpose of bringing about the

circumstance in clause 8.4.3 required, in my view, to make it clear in some manner that

Page 27 ⇓

non-payment within the required period would have particular consequences, ie the

pursuer’s exercise of its contractual rights to effect immediate termination. The written

notice requiring payment required to communicate that the “default” circumstance (ie if

sums remained unpaid after 20 Banking Days) was going to be relied upon. This was

essential, not least to ensure that the defender could consider whether to purge that

prospective default and to afford the defender the contractually stipulated period (of 20

Banking Days) to do so. The email (and its supporting documentation) did not

communicate this. It did not comply with the requirements of clause 8.4.3.

[46] I did not understand Mr MacColl QC to contradict Mr Mure QC ’s submission that

the clause 8.4.3 also required written notice to be sent to the third party and that the pursuer

failed to do so. On the other hand, I did not understand Mr Mure QC to suggest that there

was any prejudice. I would not have been persuaded that this factor, taken on its own,

would have rendered the email (had it otherwise complied) non-compliant. Had the email

otherwise complied, I would have allowed the pursuer a proof on its averments that the

notice had been sent on its behalf by an agent, and that that agent was Effective Energy.

[47] It follows that the termination notice (accepted itself to be sufficient in terms) was

nonetheless not preceded, as it required to be, by a written notice requiring payment that

complied with clause 8.4.3 . It is therefore invalid. As a consequence, the pursuer has no

relevant basis to contend that it has brought about the termination of the site agreements.

As the remainder of its conclusions are dependent upon the validity of the termination

notice, the action falls to be dismissed.

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The first of the HOE questions

[48] In light of my answer to the second HOE question, it is not necessary to determine

this question. However, on that matter, had it been necessary to determine it, I accept the

defender’s submissions. In particular, I accept all of the points Mr Mure QC made (and

which are recorded in para [21], above). Of these I found points (1), (5) and (8) the most

compelling. The terms of the email, read together with the accompanying statement and

supporting invoices, construed objectively and taking into account the knowledge of the

parties, did not convey (much less unambiguously convey) to the recipient that the pursuer

was “requiring payment” in the sense of bringing into existence the circumstances stipulated

for in clause 8.4.3. In my view, the reasonable recipient of the email with all of the

background knowledge that was reasonably available to the parties, would not have

understood the email (and its supporting documentation) as doing any more than stating

that sums were claimed; that these were overdue by 6 days (even though some bore to be

calculated by, or accumulated with reference to, a time-frame of up to two years preceding

the relative invoice); and (on a generous reading of “Our Generation Solar”) owed to the

pursuer. The reasonable recipient would not have understood the email (and supporting

documentation) as communicating the pursuer’s intention to treat those unpaid sums as

constituting a default and which, if unpaid after 20 Banking Days, such as to entitle it to

terminate the site agreement with immediate effect. Accordingly, I would have upheld the

defender’s challenge and answered the first HOE question in favour of the defender.

Decision

[49] For the foregoing reasons, I accede to the defender’s motion and will dismiss the

action. I will reserve meantime all question of expenses.