Rhodia International Holdings Ltd v Huntsman International LLC [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Mr Julian Flaux QC,sitting as a Deputy High Court Judge |
| Judgment Date | 21 February 2007 |
| Neutral Citation | [2007] EWHC 292 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No. 2005 Folio 1045 |
| Date | 21 February 2007 |
[2007] EWHC 292 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN's BENCH DIVISION
COMMERCIAL COURT
Mr Julian Flaux QC
Sitting as a Deputy High Court Judge
Case No. 2005 Folio 1045
Thomas Beazley QC and Andrew Green (instructed by DLA Piper) for the Claimants
Antony Edwards-Stuart QC and Charles Pimlott (instructed by Dickinson Dees) for the Defendant
Hearing dates: 12, 13 and 14 February 2007
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.
Introduction
By a Sale and Purchase Agreement (“the SPA”) dated 27 February 2001, the First Claimant (then called Allbright & Wilson Overseas Limited) and the Second Claimant (then called Rhodia Consumer Specialties limited) agreed to sell to the Defendant (to whom I will refer as “Huntsman”) and/or its “Designated Purchaser” (identified in the SPA as Huntsman Surfactants UK Limited, referred to hereafter as “HSSUK”) its European chemical surfactants business, including the surfactants business operated by the Second Claimant at Whitehaven in Cumbria. At the time of the sale, the Claimants (to whom I will refer, save where it is necessary to distinguish between them, as “Rhodia”) also operated two other manufacturing facilities at the Whitehaven site, manufacturing phosphates and phosphates derivatives and acrylics respectively which they retained, although those other operations were closed just over a year later.
Steam and electricity at the Whitehaven site were (at the time the SPA was entered into) produced by a Combined Heat and Power Plant (“the CHP Plant”) at the site. The CHP Plant was supplied, and electricity and steam were provided, by National Power (Cogeneration) Limited (to which I will refer hereafter as “Cogen”) pursuant to a CHP Energy Supply Contract dated 31 March 1993, made between the Second Claimant and Cogen (“the Energy Supply Contract”). Subject to a buy-out clause, the CHP Plant was to remain the property of Cogen for the contract duration, which was 15 years from 12 August 1994 (i.e. until 12 August 2009). Clause 24.5 of the Energy Supply Contract provided as follows:
…[the Second Claimant] may assign, novate or otherwise transfer any of its rights or obligations under this Contract Provided Always that [the Second Claimant] satisfies [Cogen] that the party to which the proposed assignment is to be made is capable of fulfilling its obligations and duties under this Contract and [the Second Claimant] gives [Cogen] not less than 90 days prior notice in writing of such intention to assign, novate or otherwise transfer this Contract.
The SPA contained in Clause 15 detailed provisions relating to the obtaining of consent to novation of certain identified Restricted Contracts (of which the Energy Supply Contract was one). In particular, the Clause imposed on both parties obligations to use reasonable endeavours to obtain the consent to the novation of the other party to the relevant Restricted Contract. Pending novation, Huntsman undertook in effect to perform Rhodia's obligations under the Energy Supply Contract and did in fact do so between March 2001 and March 2004. From 1 May 2002, the Second Claimant had no day-to-day involvement with the operation of the CHP Plant, since at that time it closed down its remaining operations at the Whitehaven site.
By March 2004, the Energy Supply Contract had not been novated to HSSUK and on 5 March 2004, Huntsman gave notice to Rhodia that it no longer intended to perform Rhodia's obligations under the Energy Supply Contract. At that time, Rhodia had no operational presence at the Whitehaven site and so was not in a position to perform those obligations itself. On 9 March 2004, the CHP Plant was shut down and has not operated since, having now been substantially dismantled. In October 2004, Huntsman announced that it intended to close down the plant at Whitehaven.
In October 2005, Cogen commenced arbitration proceedings against the Second Claimant for the non-payment of invoices submitted by Cogen for the supply of steam and electricity under the Energy Supply Contract which contains so-called “take or pay” provisions which (Cogen contends) require substantial payments to be made for steam and electricity whether or not such steam and electricity is actually required and produced. That arbitration was heard in December 2006. Cogen is claiming in total some £14.8 million plus interest and costs. An Award has just been published.
In the present proceedings, Rhodia claims that any liability it has to Cogen was caused by Huntsman's breaches of the terms of the SPA, particularly Clause 15. Rhodia claims an indemnity, alternatively damages. The central dispute thus concerns whether or not Huntsman complied with its obligations under Clause 15. By virtue of an Order of Mr Justice Langley dated 15 December 2006, the trial was limited to issues of liability only, with all issues of quantum (including issues of causation, mitigation, remoteness and quantification) stood over for determination at a later trial.
The terms of the SPA
The relevant terms of the SPA with which the case is principally concerned provided as follows:
1.2.14 Any right or benefit conferred on or granted to or obligation owed to the Purchaser shall be conferred on, granted or owed to and capable of exercise by the relevant Designated Purchaser(s) and any obligation of the Purchaser shall be capable of being performed by the relevant Designated Purchaser(s) provided that this provision shall not discharge the Purchaser from its obligations hereunder save to the extent such obligations are duly and properly discharged by any relevant Designated Purchaser, with the intent that the Purchaser enters into this Agreement for itself and as trustee and agent for each Designated Purchaser, and (where the context permits) references to “the Purchaser” shall be construed accordingly provided always that at no time will the provisions of this sub-clause 1.2.14 apply to the provisions of Schedule 17 [the Environmental Covenant].
2.2 Sale and Purchase of the UK Business
2.2.1 Subject to Clause 2.2.2, [the Second Claimant] shall sell, or procure the sale of, and the Purchaser shall purchase with effect from Completion, subject to and in accordance with the terms of this Agreement with a view, inter alia, to the Purchaser carrying on the UK Business as a going concern free from all mortgages, charges, options, rights of pre-emption and other security interests:-
(b) subject to Clause 15, the benefit (subject to the burden) of the Contracts [which were defined as including Customer Contracts and Supplier Contracts]
2.9 Designated Purchasers
In the event that the Purchaser nominates a Designated Purchaser the Purchaser agrees to guarantee all liabilities and obligations of each Designated Purchaser under this Agreement in the terms set out in Clause 18.
14.1 Purchaser to complete Contracts
With effect from Completion…the Purchaser shall, subject to Clause 15.2, carry out and complete each of the Contracts (so far as the Purchaser is lawfully able to do so) and the Purchaser will, subject to Clause 15.2, duly and punctually perform and discharge each of [the Second Claimant's] …obligations and liabilities under the Contracts….
15.1 Restricted Contracts….
15.1.1 The [Sale and Purchase] Agreement shall not constitute an assignment or an attempted or purported assignment of any Contract if and to the extent that such an assignment or attempted or purported assignment would constitute a breach of that Contract (“Restricted Contract”).
15.1.2 With effect from the date of the [Sale and Purchase] Agreement, [the Second Claimant] and the Purchaser [ie Huntsman] shall use their respective reasonable endeavours (with the Purchaser making the relevant application with assistance from [the Second Claimant] save that where the relevant contract stipulates or if it is agreed that [the Second Claimant] shall make the application, in which event [the Second Claimant] shall make the application with assistance from the Purchaser) to obtain all requisite consents or agreements of all parties to each Restricted Contract to whatever assignment, transfer or novation is necessary to enable the Purchaser to perform such Restricted Contract on or after Completion or, as the case may be, to transfer the benefit and, subject to clause 15.2, burden of such Restricted Contract to the Purchaser after Completion. For the purpose of obtaining any such consent or agreement, the Purchaser shall supply to [the Second Claimant]and the relevant third party such information reasonably requested (including information reasonably requested about the financial position of the Purchaser's Group) and other assistance as may reasonably be required by [the Second Claimant] or any other party to a Restricted Contract…and, if such other party to the Restricted Contract…so reasonably requires, the Purchaser, its immediate parent company or one of the Purchaser's subsidiaries or subsidiary undertakings with sufficient standing and net worth shall enter into a direct covenant with such other party to perform and observe such Restricted Contract…from the date of its assignment, novation or transfer in favour of the Purchaser.
15.1.3 Subject to and with effect from Completion, and until such time as (in relation to each Restricted Contract…) the consents or agreements referred to in Clause 15.1 are obtained or the provisions contained in the final sentence of Clause 15.1.3(c) come into effect:
…
(b) unless the relevant Restricted Contract…prohibits it, the Purchaser shall,...
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