Emailed statement of overdue balances did not set up default, judge rules
An email which read "Please see attached statement of balances now overdue" did not amount to a "written notice... requiring payment" such as to entitle the sender to exercise termination rights following default, a judge has held.
Lady Wolffe in the Court of Session gave her decision in favour of Aberdeen City Council in an action brought by Our Generation Ltd, which sought declarator that it was entitled to terminate agreements for the generation of solar energy through panels on the roofs of many properties owned by the defenders. The dispute arose five years into a 25 year agreement and the pursuers also sought payment of more than £8m.
The pursuers relied on a right to terminate under clause 8.4.3 of the master agreement, which referred to sums remaining unpaid at the expiry of 20 banking days after receipt of "written notice from the [other] party requiring payment". They claimed to be entitled to exercise the right on the basis of an email which simply stated: "Please see attached statement of balances now overdue, owing to Our Generation Solar", and the defenders' failure to make payment in response.
For the pursuers it was argued that the relevancy of their case could only be determined after proof. The parties had been dealing with the project for several years; there was no ambiguity as to the obligations owed and a reasonable recipient would have construed that the invoices were issued on behalf of the pursuer and would have understood the terms and effect of the emails and the termination notices. The email was in respect of sums that were overdue and required immediate payment, and
was sent to a party who was deemed to be fully aware of its contractual obligations.
Lady Wolffe said the terms of clause 8.4.3 contained 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, by being afforded a period of some four weeks to pay the amounts properly due (or, arguably, to dispute this). "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 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... into a form of default".
Considering whether the email complied with clause 8.4.3, she held: "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... In my view, a simple statement that the balances were 'overdue' (by six days) and 'owed' to Our Generation Solar does not fulfil the requirement of a default notice 'requiring payment'."
It followed that the termination notice was invalid and the action fell to be dismissed.