Thames Valley Power Ltd. v Total Gas & Power Ltd.

A contractual force majeure clause does not ordinarily release a party from an obligation merely because performance has become more expensive or commercially unattractive. The clause must be construed according to its language and commercial context. A supplier able physically to obtain and deliver gas cannot establish inability to perform solely by showing that supply would cause a substantial loss. A dispute-resolution clause providing for expert determination may encompass disputes as to the operation of a force majeure clause. However, the court retains a discretion to refuse a stay where, after an expedited hearing, the claim is unsustainable as a matter of construction and referral would duplicate the proceedings. An exclusion clause is not construed to deprive a party of any remedy for failure to perform a core contractual obligation unless clear language produces that result.

Thames Valley Power Limited operated a combined heat and power facility at Heathrow Airport and had contracted with Total for the exclusive supply of gas for 15 years under a Gas Supply Agreement. The agreement contained a force majeure clause and a multi-stage dispute-resolution procedure involving negotiation, expert determination and, in some circumstances, arbitration.

Total served notice stating that rising market prices and the contractual pricing formula would make supply uneconomic, and that it would cease supplying gas. TVPL sought declarations, damages and specific performance. Total applied for a stay under the dispute-resolution provisions. The central issues were whether the notice was valid, whether the dispute had to be referred to an expert, and whether TVPL retained remedies under the agreement.

1. Stay refused. The court held that the dispute-resolution procedure applied to any dispute notified under special condition 11.1, not merely disputes under special condition 8.12 or standard condition 21. The wording and structure of the agreement supported a procedure of notice, negotiation and, if necessary, expert determination: paras [30]-[36].
2. The ordinary meaning of “dispute or disagreement” was applicable. The parties disputed whether Total could invoke force majeure. The authorities under the Arbitration Act 1975 and Arbitration Act 1996 showed that a dispute ordinarily exists where a party resists a claim, even if the claim appears legally unanswerable: paras [20]-[25], [37]-[42].
3. Total could rely on force majeure only by establishing: an event or circumstance beyond its control; resulting inability wholly or partly to perform; inability to prevent or overcome it despite reasonable diligence and foresight; and timely written notice: para [44].
4. Inability meant inability to supply gas, not merely inability to supply it profitably. The contractual obligation was physical delivery of gas. The express terms did not make performance conditional on market prices remaining commercially acceptable. The final sentence of standard condition 15.2 excluded the customer’s price from consideration; it did not permit the supplier to rely on an adverse price movement. The notice itself showed that Total could continue supplying gas at a loss or at a pass-through price: paras [45]-[50].
5. The court exercised its discretion to refuse a stay because Total’s construction was unsustainable, the issue had been fully tried, referral would duplicate the work already done, and speedy resolution was important: paras [51]-[57].
6. Standard condition 9 did not exclude all remedies for failure to supply gas. It concerned physical damage and consequential loss, and did not deprive TVPL of damages for breach of the core supply obligation. Specific performance would also be appropriate because damages would substantially deprive TVPL of the benefit of its long-term supply arrangement: paras [58]-[64].
7. The stay application was dismissed. The court declared that Total was not entitled to serve the force majeure notice and that TVPL would be entitled to damages and specific performance if Total failed to supply gas in reliance on it: para [65].

First instance decision. No prior appellate decision is stated in the judgment.