Are you being served?

Service of notices has always been a particularly litigious area, with best practice to instruct a professional to send the notice for you, not least because it is then covered by their indemnity insurance. However, a recent case has really highlighted why it is important to take advice when receiving notices either direct or through third parties too.

The recent findings of the Supreme Court in UKI (Kingsway) Limited v Westminster City Council [2018] UK SC67 have cast some significant doubt on what were previously thought to be well-established common law principles about the service of notices in relation to property.

In this case the Supreme Court determined that there could still be good service in the following circumstances:

• Where a completion notice was served when it was not actually delivered to the recipient but passed on via a third party.
• That even where an agent was not instructed to accept service they could still be part of the causal chain that amounted to good service; and
• That the email receipt of a notice should be considered good service.

This decision related specifically in the context of business ratings completion notices.  However, since the local authority relied on common law service, rather than the statutory methods of service, the consequences of the decision may have much wider consequences.

The Background

An owner of a newly built or redeveloped commercial property becomes liable to pay National Non-Domestic Rates (“Business Rates”) once that property is entered into the ratings list, assuming that they are not entitled to relief.

The procedure for entering the property on to a ratings list is set out in Schedule 4A of the Local Government Finance Act 1988.  This provision allows a local authority to serve a “Completion Notice” on an owner if it appears that the building has been completed or is reasonably expected to be completed within 3 months.  The effective date of that notice then determines when the liability for business rates will begin.  A property owner can appeal against a completion notice on various grounds, including that the notice was not validly served.

The Facts

In the UKI case, the owner was redeveloping premises at 1 Kingsway, London.  In March 2012 Westminster City Council hand delivered a completion notice to the Property to take effect in June 2012.

The local authority had not taken the time to establish the identity of the owner of the property and so simply addressed the notice to “Owner, 1 Kingsway, London, WC2B 6AN”.  The notice was left with a receptionist at the property, who was not actually employed by the Owner, but by the Owner’s agents.

The agents were not authorised to accept service and the local authority was made aware that they had not served on the Owner.  However, the receptionist subsequently sent a scanned copy of the notice by email to the Owner.  The Owner then subsequently appealed the notice on the grounds that it had not been validly served.

The Court was asked to determine two issues:

1. Could there be good service of the notice when it was done indirectly and through the hands of a third party that had no authority?
2. Could a notice be validly served if only received in email format?

The Indirect Service

The judgment emphasised the “causal link” between the local authority delivering the notice to the Property and the Owner actually receiving it.  The Supreme Court found that it did not matter that the notice had been left with a receptionist of an agent company or that the local authority had no control over the receptionist to direct her to forward it to the Owner.  It was considered that in passing the notice on, the receptionist had done nothing more than that which would reasonably be expected of a responsible employee.  An analogy may be drawn to a friendly neighbour passing post to the correct recipient.

The Court felt that as there was a clear causal connection between the local authority delivering the notice to the receptionist of the agent and the Owner’s actual receipt that service. That meant there could be valid service under the ordinary principles of causation.

In respect of the second question, the Court considered the provisions of the Electronic Communications Act 2000, which enabled specific modification of statutes to permit communication by electronic means.

The majority of cases for which the 2000 Act has been used relate to service by fax transmission.  However, the Court stated that it could not see any good reason to distinguish email communication.

Where are we now?

It remains to be seen whether the decision is going to be applied beyond the context of business ratings completion notices.  However, as it was considered based on the principles of common law service, there is no obvious reason why the findings of this case would be limited to business ratings alone.

The impact and risk may be limited as it still needs to be shown that the Owner actually receives the notice for a causal link to be completed. However, there is clearly scope now for more disputes in what was already a fairly complex area of law.

In respect of business ratings notices in particular, it is now going to be incredibly difficult to challenge them on the basis of service grounds.  The local authority already have wide ranging statutory methods of service anyway and, with this additional flexibility, challenging a completion notice on purely service grounds is much more unlikely to succeed.

How can risk be reduced? 

When a notice is received either directly or through a third party  then advice should be taken prior to any acknowledgment of response being made.

When serving a notice, it remains best practice to seek advice and to leave as much time as possible before any deadline to avoid a last minute rush, which may increase the risk of service being frustrated or mistakes being made.

Article by Claire-Elaine Arthurs, Property Litigation Partner
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