A L Challis Ltd (Claimant Respondent) v British Gas Trading Ltd (Defendant Applicant)

JurisdictionEngland & Wales
JudgeThe Hon. Mr Justice Popplewell
Judgment Date02 February 2015
Neutral Citation[2015] EWHC 141 (Comm)
Docket Number2014 Folio 477
Date02 February 2015
CourtQueen's Bench Division (Commercial Court)

2015 EWHC 141 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

7 Rolls Building, Fetter Lane

London, EC4A 1NL

Before:

The Hon. Mr Justice Popplewell

2014 Folio 477

Between:
A L Challis Limited
Claimant Respondent
and
British Gas Trading Limited
Defendant Applicant

Philip Shepherd QC (instructed by Gordons Solicitors Ltd) for the Claimant

Orlando Gledhill (instructed by Bond Dickinson LLP) for the Defendant

Hearing dates: 22 January 2015

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.

The Hon. Mr Justice Popplewell The Hon. Mr Justice Popplewell

Introduction

1

The Claimant ("Challis") is an English company specialising in the design, manufacture and distribution across the United Kingdom and Europe of a range of water saving products aimed at reducing water and energy consumption and consumer cost. The Defendant, British Gas ("British Gas"), is the well known licensed supplier of gas and electricity.

2

The Defendant applies by notice dated 15 September 2014 to strike out the particulars of claim and/or for summary judgment.

3

The dispute arises under two agreements between the parties relating to a product developed by Challis known as a water widget. The water widget is a device designed to be inserted into shower heads to regulate the flow of water by aerating it, thereby reducing the flow and saving energy.

4

The agreements were made against the background of the Government's Carbon Emission Reduction Target ("CERT") to give effect to a reduction in carbon emissions pursuant to the Kyoto Protocol. The CERT scheme originally covered the period between April 2008 and April 2011, but was later extended to 31 December 2012. It was administered on behalf of the Gas and Electricity Markets Authority by the Office of Gas and Electricity Markets ("Ofgem"). British Gas was subject to obligations to deliver schemes in domestic households which achieved carbon emissions reductions. The agreements between the parties provided for Challis to supply water widgets directly or indirectly to consumers in a way which enabled British Gas to obtain carbon credits in respect thereof to count towards its obligations.

5

Under the CERT scheme, products which achieved a requisite degree of innovation qualified for a market transformation uplift ("MTU") such that an additional 50% of carbon savings could be attributed to them for the purposes of the supplier's CERT target. The water widgets qualified as such innovative products. The dispute between the parties is, in essence, whether on a true construction of the agreements, or by reason of terms to be implied therein, British Gas was obliged to claim the MTU in respect of the water widgets and to pay to Challis an additional 50% to reflect the uplift in the carbon credit. Challis claims that it was entitled to be paid by reference to the MTU uplift claimed or claimable by British Gas from Ofgem in relation to the water widgets. British Gas contends that the agreements contained a fixed price formula which provided for defined payments irrespective of the carbon credits ultimately awarded by Ofgem to British Gas or the application of the MTU uplift.

The Law

6

The application to strike out the particulars of claim is made pursuant to CPR Rule 3.4(2)(a) on the grounds that it discloses no reasonable grounds for bringing the claim. The application for summary judgment is made under CPR Rule 24.2(a) on the ground that the claim has no real prospect of success. The former adds nothing to the latter.

7

The principles to be applied on applications for summary judgment are well established. In respect of defendants' applications, they were summarised by Lewison J, as he then was, in Easyair Limited v Opal Telecom Limited [2009] EWHC 339 (Ch), in a formulation approved in a number of subsequent cases at appellate level, including AC Ward & Sons v Catlin (Five) Limited [2010] Lloyd's Rep. I.R. 301 and Mellor v Partridge [2013] EWCA Civ 477:

(1) The Court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 1 All ER 91.

(2) A "realistic" claim is one which carries some degree of conviction. This means a claim which is more than merely arguable: E D & F Man Liquid Products v Patel [2003] EWCA Civ 472 at paragraph [8].

(3) In reaching its conclusion the Court must not conduct a "mini trial": Swain v Hillman.

(4) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the Court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: E D & F Man Liquid Products v Patel at paragraph [10].

(5) However, in reaching its conclusion the Court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence which can reasonably be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] Lloyd's Rep. P.N. 526.

(6) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making its final decision without a trial, even where there is no obvious conflict to fact at the time of application, where reasonable grounds exist for believing a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Limited v Bolton Pharmaceutical Co 100 Limited [2007] FSR 3.

(7) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction, and if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim. Similarly if the applicant's case is bad in law the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals and Polymers Limited v TTE Training Limited [2007] EWCA Civ 725.

8

The principles applicable to the exercise of construction of contractual documents are also well established by decisions which include Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896, Chartbrook v Persimmon Homes Limited [2009] 1 AC 1101, Rainy Sky v Kookmin Bank [2011] 1 WLR 2900 and Napier Park European Credit Opportunities Fund Limited v Harbourmaster Pro-Rata CLO 2 BV and Others [2014] EWCA Civ 984. In particular the Court must consider the language used and ascertain what a reasonable person, having all the background knowledge which was reasonably available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. The content of such background knowledge is what is commonly referred to as the factual matrix. It is not necessary to find some ambiguity in the language before having regard to the factual matrix, and a consideration of the factual matrix may indicate that the meaning which the parties would reasonably be taken to have intended can be given effect despite the fact that it was not, according to conventional usage, an "available" meaning of the words or syntax which they had actually used: per Lord Hoffmann in Chartbrook at paragraph 37. In Investec Bank (Channel Islands Limited) v The Retail Group plc [2009] EWHC 476 (Ch) Sales J, as he then was, remarked that:

"In interpreting a contract, regard may be had to the content of the parties' negotiations to establish "the genesis and object" of a provision. This seems to me to be a relevant part of the factual matrix, since if the parties in the course of their negotiations are agreed on a general objective which is to be achieved by inclusion of a provision in their contract, that objective would naturally inform the way in which a reasonable person in the position of the parties would approach the task of interpreting the provision in question."

9

The approach to contractual construction is what Lord Neuberger MR in Re Sigma Finance Corp [2009] B.C.C. 393 described as "an iterative process" which involves "checking each of the rival meanings against the other provisions of the document and investigating its commercial consequences", an observation endorsed by Lord Mance in the Supreme Court in that case ( [2010] 1 All ER 571) at paragraph [12].

The CERT Scheme

10

The Electricity and Gas (Carbons Emissions Reduction) Order 2008 ("the Order") required Ofgem to impose obligations on British Gas to deliver schemes achieving carbon emission reductions in domestic households. Under the Order each large energy supplier was set a carbon emissions reduction obligation by reference to its share of the domestic...

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    ...for determination on an application for summary judgment or striking out: see for example AL Challis Ltd v British Gas Trading Ltd [2015] EWHC 141 (Comm)per Popplewell J at [24] – [25]. In substance, Mr Zacaroli's oral submissions in effect recognised this by treating material relevant to g......
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    ...has no reasonable prospect of succeeding in its challenge. Ms Dohmann referred me to the helpful summary by Popplewell J in A.L.Challis Ltd v. British Gas Trading Ltd [2015] EWHC 141 (Comm) at para 7, itself collating a number of cases back to Swain v. Hillman [2001] 2 AER 91, and repeating......
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