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Share purchaser's tax claim notice ineffective
In Stobart Group Ltd & Stobart Rail Ltd v Stobart & Tinkler [2019] EWCA Civ 1376, the Court of Appeal held that purported notice of a tax claim under a share purchase agreement was ineffective.
The Court of Appeal found that the purported notice:
- Made no reference to a tax claim.
- Gave notice in terms of a potential claim.
- Provided a likely estimate of the claim (that is, exposure to HMRC) rather than an indication of the quantum of the tax claim.
In reaching its decision, the Court of Appeal applied the “cardinal principle of construction” that when construing such notices, the test is how a reasonable recipient with knowledge of the objective scene would have understood the notice to operate. The court also noted that, in a commercial context, certainty is fundamental, notice clauses are inserted to provide certainty and failing to observe their terms can rarely be dismissed as a technicality.
Whilst the decision is not surprising given the content of the purported notice in this case, it is a reminder of the importance of paying close attention to the wording of notices to ensure that they are clear and unambiguous, with no scope for doubt about how the notice was intended to operate.