A construction law solicitor has given a warning over the potential consequences of sending formal contractual notices by post, as workers are still being urged to stay at home.
Ross Taylor, partner and construction law specialist at Wright, Johnston & Mackenzie LLP, has called on businesses to adopt a common practice of digital communication. He believes there is a risk that the special status given in commercial contracts to notices served by post could be exploited during lockdown.
Under the Coronavirus (Scotland) Act 2020, court documents and legal contracts which previously had to be delivered physically can be signed and served electronically, but service by post also remains valid.
"This could pose a significant problem for businesses as contractual notices sent by post may have a special status", Mr Taylor explained. "In construction contracts in particular, legislation dictates that a ‘notice or other communication shall be treated as effectively given or served if addressed and sent by pre-paid post to the recipient’s last known principal place of business or its registered office’.
"In normal circumstances this makes post a favoured method of communication when serving notice, as it ensures the payer can’t claim they didn’t receive it. But as lockdown sees the vast majority of construction workers staying at home, many business owners won’t be physically at their place of work to check the mail."
Some unscrupulous workers might seek to take unfair advantage of the situation, by serving notice by post, knowing it would not be discovered until too late, Mr Taylor added.
Construction contracts brought the issue into sharp focus, as there is a statutory payment regime which demands the service of notices.
Subject to the terms of the contract, the payee may issue a notice to the payer, which creates a notified sum. The payer then has five days to issue a "pay less notice". If it does not, the payer must pay the notified sum, even if the amount is wrong, or not due at all.
"There is no cap on the amount that can form the notified sum, as long as the payee genuinely considers it to be due", Mr Taylor continued. "If postal service has the special status of deemed service, but business owners can’t physically attend their registered offices to collect their post, they will be deprived of the opportunity to challenge.
"Although fairness in the current circumstances may dictate a different approach, it’s important to bear in mind that precedent has been set, and the court’s hands may now be tied. To evade deeming provisions about postal service now may muddy the waters when it comes to other provisions which are virtuous to the battle against COVID-19."
The obvious solution might be for Parliament to pass further legislation, but this was unlikely and might take too long. Mail redirection was another option, but was not always available and might prove difficult during the restrictions.
"Therefore, my advice would be to avoid sending notices by post during this period, not because you can’t, but because it is the right thing to do. It’s important to make an agreement on this with any parties you’re currently working with who may be affected by this problem.
"Solicitors should refuse advancing any claims based upon notices served by post and therefore deemed effective. This is the only way businesses can feel confident that staying home and following the Government’s guidance won’t result in their own ruin."