ICI Chemicals & Polymers Ltd v TTE Training Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Moore-Bick,Lord Justice Buxton,Lord Justice Ward
Judgment Date13 June 2007
Neutral Citation[2007] EWCA Civ 725
Date13 June 2007
Docket NumberCase No: A3/2006/2231

[2007] EWCA Civ 725

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM MANCHESTER DISTRICT REGISTRY MERCANTILE COURT

QUEEN'S BENCH DIVISION

(HIS HONOUR JUDGE HEGARTY QC)

Before

Lord Justice Ward

Lord Justice Buxton and

Lord Justice Moore-Bick

Case No: A3/2006/2231

Between
ICI Chemicals & Polymers Limited
Appellant
and
TTE Training Limited
Respondent

MR A LATIMER (instructed by Messrs Aaron & Partners LLP) appeared on behalf of the Appellant.

MS L ANDERSON QC (instructed by Messrs DLA Piper UK LLP) appeared on behalf of the Respondent.

Lord Justice Moore-Bick
1

This is an appeal against an order of HHJ Hegarty QC sitting as a judge of the High Court in the Manchester Mercantile Court dismissing an application by the defendant for summary judgment against the claimant. The claimant in this case, ICI Chemicals and Polymers Limited (“C&P”), is seeking to recover from the defendant, TTE Training Limited (“TTE”), the sum of £359,763 said to be due as a debt under or pursuant to an agreement made in March 1990.

2

TTE is a company limited by guarantee which was incorporated in 1990 by three members, C&P, Shell UK Limited and Associated Octel Company Limited, which has since changed its name to Innospect Limited but which can conveniently still be referred to as “Octel”. It was established pursuant to an agreement of 6 March 1990 in order to provide vocational training to the members' employees working in the chemical industry. In accordance with the agreement the members provided financing to TTE to enable it to perform its functions. Clause 8.10 of the agreement recorded that it was the intention of the parties that TTE should at all times have sufficient funds to meet its day-to-day operating expenses and they agreed to pay in advance their shares of the estimated amounts initially required for that purpose. It continued in these terms:

“… this advance will remain outstanding as a debt owed by the Centre to each Party until such time as the Centre has sufficient funds to fully or partially repay the Advance, or the Centre is wound up, or until a Party withdraws its membership of the Centre and from this Agreement. If the Centre is wound up, the Advance will be re-paid to the Parties less any outstanding Operating Expenses or costs of Capital Items attributable to that Party. If a Party withdraws its membership of the Centre and from this Agreement, the advance will be re-paid to that Party less any outstanding operating expenses or costs of Capital Items attributable to that Party at the end of that particular Academic Year.”

It is common ground that none of those events had occurred at the time of the agreement with which this appeal is concerned. By clause 15 the agreement of 6 March 1990 was expressed to remain in force until terminated by agreement between all the parties or until TTE was wound up.

3

Between March 1990 and December 1994 the members of TTE paid various amounts to the company to enable it to carry out its training functions. Some of those funds which were not immediately required for that purpose were subsequently designated by TTE in its accounts as “members' funds”, indicating that they were potentially repayable to the members by whom they had been contributed. It was common ground for the purposes of the application before the judge that as at 31 December 1995 a sum of £495,004 was shown in the company's books as members' funds and that on 18 February 1999 the directors had resolved to designate the members' funds as current liabilities in its accounts. It was also common ground that the bulk of that sum, £359,763, had been contributed by C&P.

4

In or about 2001 C&P sold the assets relating to part of its chemical business at Runcorn to another company now known as Ineos Chlor. It was that part of its business which had given rise to the training requirement that had been met by TTE and so, following the sale of the business, C&P had no further need of those facilities. On the other hand Ineos Chlor, which had taken over the business, did have a need for training and it was therefore sensible for it to become a member of TTE in place of C&P.

5

That was the context in which C&P entered into an agreement with Shell, Octel, TTE and Ineos Chlor dated 10 June 2002 which lies at the heart of the present appeal and to which it is therefore necessary to refer in some detail. The agreement was drafted by Mr David Edwards, then the company secretary of TTE, who says in a witness statement made for the purposes of the application that he was asked to prepare an agreement to enable Ineos Chlor to step into the shoes of C&P. That was to be achieved by the withdrawal of C&P and the admission of Ineos Chlor as a member of TTE and by the transfer from C&P to Ineos Chlor of all rights and obligations in relation to TTE, other than any liability there might be for existing breaches of contract (although no one was aware of any at the time).

6

The parties to the agreement of 10 June 2002 were C&P, Shell, Octel, Ineos Chlor and TTE itself. Having referred in the first paragraph of the recitals to the agreement of 6 March 1990, it continued as follows:

“WHEREAS

……… .

B) C&P wishes to cease to be a member of the Centre

“C) Ineos has agreed to become a member of the Centre and wishes to become a party to the Principal Agreement in place of C&P on the terms of this Agreement.

“D) This Agreement is supplemental to the Principal Agreement.”

7

The operative provisions of the agreement are to be found in clauses 2 and 3 which provided as follows:

“2. Principal Agreement

With effect from the date of this Agreement:—

2.1 Ineos will assume the rights and be bound by the obligations of C&P under the Principal Agreement or otherwise in respect of the Centre (other than any obligations in relation to which C&P may be in breach of the Principal Agreement);

2.2 The expression “the Parties” and any similar expression contained in the Principal Agreement will be read and construed as though they included Ineos; and

2.3 Shell, Octel and the Centre release and discharge C&P from any further obligations under the Principal Agreement.

2.4 C&P will cease to be a member of the Centre.

3. Miscellaneous

3.1 Save as expressly amended by this Agreement, the Principal Agreement will continue in full force and effect and this Agreement and the Principal Agreement will be read and construed as one Agreement.”

It is unnecessary to refer in detail to clauses 3.2 and 3.3.

8

It appears that from an early stage after the execution of the agreement C&P took the view that, notwithstanding its terms, it was still entitled to recover from TTE the balance of the funds that it had provided prior to June 2002 which were not required to enable TTE to carry out its operations. Eventually on 18 May 2006 it began proceedings against TTE in the Mercantile Court in Manchester to recover that balance as an outstanding debt.

9

In its defence TTE denied that the members' funds constituted a debt payable to the members of the company. It also alleged that since the members were obliged to provide funds needed to meet the company's operating expenses the members' funds should be set off against, and in the case of C&P were extinguished by, the operating losses it had incurred during the period 1992 to 2002. More importantly for present purposes however, TTE relied on the agreement of 10 June 2002 as constituting a novation in favour of Ineos Chlor of C&P's rights under the agreement of 6 March 1990 and any other rights it might have or acquire against TTE.

10

On 21 June 2006, TTE issued an application under CPR Part 24 for summary judgment against C&P on the grounds that by reason of the agreement of 10 June 2002 the claim was bound to fail. Although the argument had not been foreshadowed in its defence, on the hearing of the application TTE also sought to rely on a letter dated 6 December 2000 written by C&P to its auditors in which C&P said that it regarded the excess contributions as recoverable at such time as TTE and its three members determined. It was said that the letter evidenced an agreement that the funds in question were not to be repayable on demand, but only at a time agreed by all the members and TTE itself. It was not suggested that there had been any such agreement at the time the proceedings were brought.

11

The first of these arguments raises a short point of construction which on the face of it the court could conveniently decide on an application of this kind. Indeed the judge invited the parties to agree that he should decide it as a preliminary issue, but they were unwilling for him to take that course. Counsel for TTE apparently was unable to obtain instructions to enable him to agree to it and counsel for C&P was reluctant to do so because of the potential relevance, so it was said, of extrinsic evidence not then before the court. The judge therefore proceeded on the footing that it was necessary for him to decide only whether C&P had a real prospect of succeeding in its claim notwithstanding the terms of the agreement of 10 June 2002.

12

In my view the judge...

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