Astor Management AG (formerly known as MRI Holding AG) and Another v Atalaya Mining Plc (formerly known as Emed Mining Public Ltd) and Others

JurisdictionEngland & Wales
JudgeMr Justice Leggatt
Judgment Date31 March 2017
Neutral Citation[2017] EWHC 680 (Comm)
CourtQueen's Bench Division (Commercial Court)
Date31 March 2017
Docket NumberCase No: CL-2015-000790

[2017] EWHC 680 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Honourable Mr Justice Leggatt

Case No: CL-2015-000790

Between:
(1) Astor Management AG (formerly known as MRI Holding AG)
(2) Astor Resources AG (formerly known as MRI Resources AG)
Claimants
and
(1) Atalaya Mining PLC (formerly known as Emed Mining Public Limited)
(2) Atalaya Riotinto Minera SL (formerly known as Emed Tartessus SL)
(3) Emed Holdings (UK) Limited
Emed Marketing Limited
Defendants

Stephen Smith QC and Christopher Lloyd (instructed by Hogan Lovells International LLP) for the Claimants

Simon Browne-Wilkinson QC and Alexander Milner (instructed by Fieldfisher LLP) for the Defendants

Hearing date: 24 March 2017

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Leggatt Mr Justice Leggatt

Introduction

1

These are my reasons which were reserved at the hearing on 24 March 2017 for my decisions on two issues consequential to the judgment given on 6 March 2017.

Form of declarations

2

The first issue is the appropriate form of the declarations which should be made to give effect to the conclusion summarised at paragraph 110(iii) of the judgment.

3

I consider that, save for making it clear that the reference to the "Consideration" in clause 6(g)(iv) of the Master Agreement includes the Deferred Consideration, the declarations should reflect the language of the clause, and should read as follows:

"1. On a true construction of clause 6(g)(iv)(A) of the Master Agreement, until such time as the Consideration (including the Deferred Consideration) has been paid to the Claimants in full, the Second Defendant must not make, declare or pay any dividend or distribution or make any repayment or other payment in respect of loans from members of the EMED Group ("EMED Group Loans") (other than as required for up to US$10 million per annum in aggregate for EMED Group expenses (excluding dividends or any other distributions to the shareholders of the First Defendant) related to matters other than the project ("EMED Group Expenses")), nor borrow or agree to borrow any amount other than pursuant to the Senior Debt Facility or EMED Group Loans without the prior written consent of the Claimants (not to be unreasonably withheld or delayed).

2. On a true construction of clause 6(g)(iv)(B) of the Master Agreement, the Second Defendant must apply any excess cash (after payment of operating expenses and sustaining capital expenditure for the Project, debt service requirements under the Senior Debt Facility and US$10 million per annum for EMED Group Expenses (without double counting EMED Group Expenses taken into account under clause 6(g)(iv)(A) of the Master Agreement)) to pay any outstanding amounts of the Consideration due to the Claimants (including the Deferred Consideration and amounts payable under the Loan Assignment) early."

4

Counsel for Astor submitted that the "Deferred Consideration" should be defined in the order so as to include the Up-Tick Payments totalling €15.9m as well as the basic amount of €43.8m. I do not accept this. I am recording my reasons for rejecting that submission as, although the point is not at present of practical significance, it may become so in the future.

5

As set out in Schedule 2 of the Master Agreement, the basic amount of the Deferred Consideration is payable in instalments. Schedule 2 also provides in paragraph (c) that, in addition to each instalment of the Deferred Consideration, EMED Tartessus will also be required to pay an additional amount described as an "Up-Tick Payment" if, for the period of three months commencing on the due date for the relevant instalment of the Deferred Consideration, the average copper price is equal to or exceeds $6,613.86 per tonne.

6

The wording of the contract is ambiguous as to whether the Up-Tick Payments are part of the "Deferred Consideration". The wording of clause 6 suggests that they are, but the wording of Schedule 2 treats the Up-Tick Payments as separate from and additional to the Deferred Consideration. The better view seems to me to be that the reference in clause 6 to the Deferred Consideration is to be read as a shorthand for "the Deferred Consideration and any applicable Up-Tick Payments". But whichever view is taken, the fundamental distinction between the two types of payment, as I see it, is that the basic amount of the Deferred Consideration is an outstanding amount owed to Astor, payment of which has been deferred until the dates specified in Schedule 2, whereas the Up-Tick Payments are not amounts owed to Astor. They are merely amounts which EMED Tartessus will also be required to pay to Astor if (and only if), when the dates specified in Schedule 2 arrive, the condition stipulated in paragraph (c) is met.

7

The underlying difference is that the Deferred Consideration is delayed payment for benefits which the defendants have already received under the Master Agreement, whereas the Up-Tick Payments are an additional profit-share arrangement which is only applicable if the defendants derive a benefit from the price of copper reaching a particular level at a particular time.

8

Clause 6(g)(iv)(B), reflected in the second declaration set out above, requires EMED Tartessus to apply any excess cash "to pay any outstanding amounts of the Consideration due to [Astor]…early". If the phrase "due to" Astor were interpreted as meaning "presently payable", the clause would be nonsensical. That is because, if the obligation to pay any outstanding amount pursuant to this clause only arose when an amount is presently payable, there could be no obligation to pay the amount early. I therefore consider that, to make sense of the clause, the words "due to" must be read simply as designating the party to whom the outstanding amount of the Deferred Consideration is owed and not as requiring that the payment date specified in Schedule 2 has arrived.

9

There is a further question whether the clause still operates if it can be said with confidence that the first payment date is never going to arrive.

10

At paragraph 104 of the judgment I expressed the view that the clause does operate in those circumstances. Counsel for Astor have sought to rely on that conclusion to argue that the clause applies as much to the Up-Tick Payments as to the basic Deferred Consideration. They point out that the Up-Tick Payments are triggered on the same timetable as the instalments of the Deferred Consideration. They submit that, by parity of reasoning, even if the stipulated date for payment of any of the Up-Tick Payments is a date which is never going to arrive, payment of the relevant amount can still be made early.

11

The flaw in that submission, in my view, is that the question whether the Up-Tick Payments are required to be made is not simply a matter of timing. They are in a different category from the outstanding amounts of Deferred Consideration which are undoubtedly owed and in relation to which the only question is when the payment obligation accrues. As I have indicated, the Up-Tick Payments are conditional in a different and more fundamental way in that they are not outstanding amounts payment of which has been deferred: they are amounts which are not owed and never will be owed unless the price of copper is at or above the specified level at the specified time. Thus, unless and until the specified time arrives, no Up-Tick Payment is applicable and there is therefore no possibility of making any such payment early.

12

I also agree with counsel for the defendants that Astor's argument can be tested by considering the hypothetical situation where the Deferred Consideration was payable in accordance with Schedule 2 and the copper price was below the level required to trigger Up-Tick Payments. If Astor's interpretation were correct, the requirements of clause 6(g)(iv) would nevertheless continue to apply until EMED Tartessus had made the...

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