“DEEMED SERVICE” PROVISIONS IN ARTICLES OF ASSOCIATION

• Author: WALTER WOON
• Citation: (1995) 7 SAcLJ 191
• Published date: 01 December 1995
• Date: 01 December 1995

It is common for articles of association of companies to provide for service of documents upon members by posting to the member’s registered address. Some companies’ articles go even further and provide that where notice is sent by post, service is deemed to be effective if the letter is properly addressed, stamped and posted. The efficacy of this sort of “deemed service” provision was recently considered by Judge Paul Baker QC in Re Thundercrest Ltd (Chancery Division, May 27 1994).1

The plaintiff was a member of Thundercrest Ltd. A rights issue was proposed and agreed to by all three members of the company. Each member was to be offered 10,000 new shares. On March 24 1994 a letter of provisional allotment and form of acceptance was sent to the plaintiff by recorded delivery post. The plaintiff was given until April 11 to accept.

Unfortunately, no one was home when the postman called. The letter was returned to the sorting office. On April 15 the directors of the company met to discuss what to do with the plaintiff’s shares. No response had been received from him. It was decided that the shares provisionally alloted to the plaintiff should be alloted in equal proportions to the other two members of the company. The deadline for payment was extended from April 18 to April 25.

Three days after the directors’ meeting, on April 18, the company’s letter to the plaintiff was returned by the Post Office. It was clear that there was only one attempt to deliver it and that thereafter it had been retained by the Post Office in the expectation that someone would collect it on the plaintiff’s behalf.

Thundercrest Ltd took the position that since no response had been received from the plaintiff by April 11, they were entitled to allot his shares to the other shareholders. The plaintiff’s evidence was that he never received the letter of provisional allotment, nor was he informed that it was at the Post Office awaiting his collection. The key issue was whether Article 22 of the company’s articles effectively precluded the plaintiff from claiming that he had no notice of the letter of provisional allotment. That article provided as follows:

“Where notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, pre-paying and posting a letter containing the notice, and if posted by pre-paid first class mail, to have been effected at the expiration of 24 hours after the letter

containing the same is posted, and if...