Powergen Retail Ltd. v British Sugar Plc

In construing a detailed asset-sale agreement, the court must give effect to the ordinary meaning of material contractual language unless the agreement clearly demonstrates a different intention. The word “current” in a definition of contracts transferred as part of a supply business could not simply be ignored. A contract under which supply had ended several years earlier was not current merely because a later accounting claim might arise under it. An unknown and unquantified claim, which had not been demanded at completion, was not a book debt or a sum owed within a separate definition of debtors. General provisions transferring a business as a going concern did not transfer that claim where the agreement contained no sufficiently clear provision doing so.

Powergen Retail Limited appealed against a decision of His Honour Judge Cowell striking out its claim against British Sugar Plc. The claim concerned an alleged undercharge for gas supplied under an agreement made in 1998. Powergen contended that it had acquired the contractual claim under a 2002 sale and purchase agreement by which it purchased TXU’s supply business.

The relevant agreement transferred the benefit of defined “Supply Business Contracts”, being current contracts and engagements relating to the supply business, but did not expressly transfer supply-business debtors. The alleged undercharge was not discovered, quantified or demanded until after completion. The central issue was whether the sale and purchase agreement transferred that claim.

1. Appeal dismissed. The decision of His Honour Judge Cowell striking out the claim was upheld.
2. The alleged undercharge could not be treated as an accrued debt at the date of completion. Under the supply agreement, liability arose only when an inaccurate meter reading or incorrect translation into charges was discovered and a demand was made. At completion there was, at most, a contingent right and contingent liability.
3. The phrase “current contracts and engagements” in the sale and purchase agreement had to be given its ordinary meaning. It referred to continuing contracts and engagements under which the supply business vendors were supplying energy at the date of the agreement. The word “engagement” did not materially alter that meaning.
4. An expired contract might arguably remain current where a final invoice was still due or unpaid. However, it would be contrary to the language of the agreement to describe a gas-supply agreement which had ended years earlier, with supply and invoicing assumed to have ended, as current.
5. The transfer of business records provided some indication that the parties intended to transfer debtors, but it did not justify ignoring the word “current”. The agreement contained no sufficiently clear general transfer of overdue sums under expired contracts, and no express transfer of the relevant debtors or book debts.
6. The alleged claim was unknown and unquantified at completion. It was therefore not a book debt recorded in TXU’s books and was not within the contractual definition of “Debtors”. The claim was not transferred by the general wording of the agreement, and no specific assignment was effective.

• High Court (Queen’s Bench Division): On 27 February 2006, the appeal from the decision of His Honour Judge Cowell was dismissed.
• County Court: On 29 September 2005, His Honour Judge Cowell struck out Powergen’s claim on the ground that it had no right to bring it.