Fraser Turner Ltd v Pricewaterhousecoopers LLP

JurisdictionEngland & Wales
JudgeSir Geoffrey Vos,Lord Justice Males,Mr Justice Snowden
Judgment Date19 July 2019
Neutral Citation[2019] EWCA Civ 1290
CourtCourt of Appeal (Civil Division)
Docket NumberAppeal Ref: A3/2018/1802
Date19 July 2019
Fraser Turner Limited
(1) Pricewaterhousecoopers LLP
(2) Mr Peter Dickens
(3) Mr Russell Downs

[2019] EWCA Civ 1290



Lord Justice Males


Mr Justice Snowden

Appeal Ref: A3/2018/1802

Claim No. HC-2017-001575




(Mr Phillip Marshall QC sitting as a deputy judge of the High Court)

Royal Courts of Justice

The Rolls Building

London, EC4A 1NL

Mr David Lord QC and Mr Richard Bowles (instructed by Collyer Bristow LLP) for the Appellants

Mr Daniel Bayfield QC and Mr Stephen Robins (instructed by Clifford Chance LLP) for the Respondents

Hearing dates: 25 th and 26 th June 2019

Approved Judgment

Sir Geoffrey Vos, Chancellor of the High Court:



This appeal raises questions of both contractual interpretation and the duties owed by administrators at common law and under paragraph 74 of Schedule B1 to the Insolvency Act 1986 (“paragraph 74”).


Mr Phillip Marshall QC, sitting as a deputy judge of the High Court, struck out all the claims made by the claimant, Fraser Turner Limited (“FT”), against the first defendant, PricewaterhouseCoopers LLP (“PwC”), and against the second and third defendants, Mr Peter Dickens (“Mr Dickens”), an erstwhile director of PwC and Mr Russell Downs (“Mr Downs”), a partner in PwC. 1 The judge also refused FT permission to amend its Particulars of Claim in the form of a draft that was before the first instance court (the “APOC”).


Messrs Dickens and Downs (the “Administrators”) were joint administrators of a mining company, London Mining PLC (“London Mining”) and joint receivers (with Mr Felix Addo of PwC (Ghana) Ltd) of London Mining's wholly owned Sierra Leonean subsidiary, London Mining Company Ltd (“LMCL”).


In outline, a settlement agreement was entered into on 8 th June 2012 between FT, London Mining, and LMCL, under which FT was to receive a royalty of 0.3% of the market value of iron ore produced at the Marampa mine (the “mine”), which was at the time owned by LMCL (the “Royalty Deed”). London Mining had obligations to procure “LMCL or the Relevant Entity [defined as a subsidiary of London Mining or LMCL holding a licence to operate the mine]” to pay the royalty, 2 to provide certain sales and tonnage statements, 3 and to guarantee LMCL's or the Relevant Entity's payment of the royalty. 4


When the insolvencies of London Mining and LMCL supervened in October 2014, questions arose as to FT's continuing right to receive royalties under the Royalty Deed. Ultimately, the business and assets of LMCL, including the mine itself, were sold by the joint receivers of LMCL to Timis Mining Corporation (SL) Limited (“Timis Mining”) without the purchaser knowing anything about, let alone agreeing to be bound by the terms of, the Royalty Deed.


There are really only the following four main issues before the court on this appeal:-

i) Was the judge right to hold that, after a sale of the mine, terms should be implied into the Royalty Deed to the effect that London Mining had a continuing obligation to procure and guarantee payment of royalties? 5

ii) Was the judge right to refuse to interpret the Royalty Deed or to imply a term so as to provide an obligation on London Mining and/or LMCL to procure a purchaser of the mine to pay the royalties or enter into an accession deed? 6

iii) Was the judge right to hold that the Administrators owed FT no duty to protect it against losses caused by the failure to procure a purchaser to pay the royalties or to enter into an accession deed?

iv) Was the judge right to hold that FT could have no claim against the Administrators under paragraph 74?


I will return to these issues, after summarising some essential factual background, the terms of the Royalty Deed and the judge's judgment (the “judgment”).

Factual background


I have taken most of the essential facts from paragraphs 9–26 of the judgment.


FT provided consultancy services to the mining industry, with particular expertise in West Africa. In October 2005, FT was engaged by London Mining to help it procure the purchase of a lease of the mine in Sierra Leone. That engagement was subsequently formalised in a Facilitation Agreement dated 28 th February 2007 under which FT would receive a royalty of US$0.10 per tonne of iron ore sold from the mine and a further royalty of 2% of gross yearly sales.


In December 2009, LMCL obtained a 25-year mining lease (subsequently, in 2012, extended to 40 years) to exploit the mine. A dispute developed as to whether London Mining still owed the further royalties to FT under the Facilitation Agreement. FT issued proceedings in the High Court in December 2011. The settlement of those proceedings resulted in the Royalty Deed (and two other agreements), 7 which provided for LMCL to pay FT the 0.3% royalty guaranteed by London Mining (the “Royalty”). The Royalty was duly paid between October 2012 and April 2014.


In July 2014, PwC was engaged by London Mining to provide analysis and advice in relation to the short-term cash flow of both London Mining and LMCL. In September 2014, it became clear to FT that London Mining was in some financial difficulty. LMCL had failed to pay FT's invoice dated 1 st September 2014 in respect of the Royalty. On 7 th October 2014, PwC was engaged to act for London Mining and its secured creditors to provide advice in relation to future financing. On 10 th October 2014, the board of London Mining announced that it and PwC would put London Mining into administration, which happened on 16 th October 2014.


After the administration commenced, Mr James Turner, a director of FT (“Mr Turner”), made contact with PwC. Mr Turner's evidence was that he had emailed and spoken to Mr Downs between 16 th and 27 th October 2014. He had informed Mr Downs of the basic terms of the Royalty Deed. He had stressed that the Royalty was an obligation that was transferrable to any buyer of London Mining, LMCL or the mine and that the Royalty Deed needed to be drawn to the attention of any potential buyer of the mine, and he had sent Mr Downs a copy of the Royalty Deed. At no

stage did Mr Downs disagree with anything Mr Turner had said. Mr Turner's evidence was that he understood that the Administrators would review the Royalty Deed and consider its effect, and that they would draw the Royalty Deed to the attention of any purchaser. Mr Turner said that Mr Downs had led him to believe that he was aware of the terms of the Royalty Deed and that FT considered that it had to be transferred to any purchaser, that Mr Dickens would do everything necessary to draw the Royalty Deed to the attention of a purchaser of the mine and that the Administrators would ensure that a purchaser would agree to take on responsibility for the Royalty. 8

On 22 nd October 2014, terms were agreed with Timis Mining for the purchase of the business and assets of LMCL. The term sheet provided the terms of purchase, but did not cater for the assumption by Timis Mining of any obligation to pay the Royalty.


The joint receivers of LMCL were appointed on 31 st October 2014, and immediately completed the sale of the business and assets of LMCL to Timis Mining. FT complains that, despite Mr Turner's frequent conversations with Mr Downs about the Royalty Deed and the previous involvement of PwC, the Royalty Deed was not drawn to Timis Mining's attention. Timis Mining's solicitors confirmed on 2 nd March 2015 that it had no knowledge of the Royalty Deed at the time of the sale.


Mr Vasile Timis, the ostensible owner and controlling influence of Timis Mining, made a statement saying that he believed that, had he known about the Royalty prior to the acquisition of the mine, he “would have likely endeavoured to ensure that such royalty was honoured, either by having Timis Mining take on the royalty obligation … or alternatively, by seeking to negotiate some comparable commercial arrangement with [FT] in respect of their royalty…”. Mr Timis also said in his statement that Mr Turner's connections in Sierra Leone “would have been very helpful in terms of making [the mine] a success after the transaction”. 9


On 10 th March 2015, FT proved in London Mining's administration for an ongoing royalty saying that “[t]he Royalty Deed dated June 2012 was ongoing for the life of the mine and was to be transferred upon acquisition of the mine by any third party … see in particular clauses 3.5 and 6.2 of the Royalty Deed. In short it was incumbent to ensure that the royalty transferred to [Timis Mining]”. On 15 th March 2017, the administrators admitted the proof in full in the sum of £14.3 million subject to a note stating that the ongoing element was “admitted on the basis that [London Mining] guaranteed royalty payments to FT under the Royalty Deed. The references to purported obligations to transfer the royalty obligations to [Timis Mining] were not relied on in reaching the decision to admit”. FT ultimately received a dividend of £16,459.74.


On 24 th April 2017, the Administrators were discharged from liability save in relation to FT's claims, and on 30 th July 2017 London Mining was dissolved.


On 26 th May 2017, FT issued a claim form alleging that:-

i) The defendants breached the Royalty Deed by failing to draw it or the Royalty to the attention of Timis Mining and failing to transfer the Royalty Deed (or the underlying obligation to pay the Royalty) upon the sale of the mine.

ii) The defendants induced and/or procured London Mining and LMCL to breach the Royalty Deed.

iii) The defendants acted together to ensure that the mine was sold to Timis Mining (i) without the Royalty Deed being drawn to the attention of Timis...

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