Global Coal Ltd v Icap Energy Ltd

At the interlocutory stage, the court need not finally determine the construction of a commercial agreement. It must ask whether the claimant has a seriously arguable case for relief at trial. A contextual construction may be seriously arguable where a literal reading produces a commercially surprising result, even if the literal reading has textual support. An undefined phrase such as on-screen trading environment may require evidence of background and commercial effect. Partial on-screen processes may therefore make the contrary construction arguable. Where damages may be inadequate for either party, the court weighs the relative risks and should preserve the proper status quo. That may be the position before the impugned conduct where the claimant acted promptly.

Global Coal developed standard coal-trading products, including SCoTA and the NEWC Index, and granted ICAP Energy a Product Licence Agreement. Global Coal alleged that ICAP’s screen for Newcastle coal swaps breached clause 2.2.3 by using Global Coal products in an on-screen trading environment.

Patten J refused an interim injunction, holding that Global Coal had no seriously arguable case on the construction of the agreement, in [2005] EWHC 3006 (Ch). Global Coal appealed. The central issues were whether the meanings of use and on-screen trading environment were seriously arguable and, if so, where the balance of convenience lay.

Lord Justice Lloyd delivered the judgment. Lord Justices Wilson and Ward agreed.

1. Disposition. The appeal was allowed and an interim injunction was granted until trial or further order. The Court of Appeal did not finally determine the contractual construction.
2. Meaning of use. Although the Product Licence Agreement was framed around intellectual-property rights, it was seriously arguable that use in clause 2.2, and correspondingly in recital B, meant any use by the licensee of material made available under the agreement, whether or not the use would potentially infringe intellectual-property rights. On that construction, ICAP arguably used the NEWC Index, SCoTA and the Newcastle coal specification by presenting the relevant trading column to its clients. The literal construction had textual support, but its consequences could be commercially surprising and inconsistent with the apparent purpose of the arrangement. Further evidence of the surrounding circumstances might be relevant.
3. On-screen trading environment. The phrase was undefined and was not shown to be a term of art. Trading involved opening a bid or offer, acceptance or negotiation, and recording the completed transaction. It was seriously arguable that a system placing the first and third stages on screen, while leaving acceptance or negotiation off screen, constituted an on-screen trading environment. The competing constructions required evidence of background and commercial effect.
4. Balance of convenience. Applying the guidance in American Cyanamid Co. v Ethicon Ltd [1975] AC 396, clause 6.3 was relevant but did not determine whether damages were adequate. Both parties faced possible uncompensatable loss. Global Coal faced the greater risk, while ICAP’s alleged lost commissions were speculative and its reputational concern was not a substantial factor. The balance therefore favoured Global Coal.
5. Status quo and directions. The proper status quo was the position before 28 November 2005, when ICAP introduced the relevant screen facility, because Global Coal acted promptly. The matter was suitable for speedy trial, and ICAP’s application under CPR Part 24 would fall away.

• Court of Appeal (Civil Division): Allowed the appeal and granted an interim injunction until trial or further order.
• High Court of Justice, Chancery Division: Patten J refused Global Coal’s application for an interim injunction on the construction issue in [2005] EWHC 3006 (Ch).