Rhodia International Holdings Ltd & Anor v Huntsman International

A contractual requirement for prior consent to subcontracting or delegation is distinct from retrospective forgiveness or waiver. Acquiescence after performance has begun does not, without more, establish the prior consent required by the contract. It may, however, raise a separate question whether conduct during a continuing contract amounts to consent for a later period. That question is sufficiently arguable to warrant permission to appeal where the applicant shows a real prospect of success. The Court of Appeal therefore granted permission without finally deciding the construction of the relevant contractual clauses.

Huntsman sought permission to appeal an order made by Mr Julian Flaux QC sitting as a deputy judge in the Commercial Court. Under a sale and purchase agreement, Huntsman was required in defined circumstances to perform Rhodia’s obligations under an energy contract. The energy contract permitted subcontracting or delegation only with Cogen’s prior consent, which was not obtained before Huntsman began performance.

The judge held that Huntsman remained liable because the contract did not impose a blanket prohibition and Cogen’s subsequent acquiescence gave rise to waiver and estoppel. Findings that Huntsman had breached its reasonable-endeavours obligation and that a notice excluding the energy contract was invalid were not challenged. The central issue was whether later acquiescence could amount to consent, including possible intermediate consent for a subsequent period of a continuing contract.

Application granted. Ward LJ gave the judgment, with Moore-Bick LJ agreeing. The court granted Huntsman permission to appeal because the proposed challenge had a real prospect of success. It did not finally determine the construction of the sale and purchase agreement or the energy contract.

1. The relevant sale and purchase clause required Huntsman to perform the obligations under the restricted contract unless that contract prohibited subcontracting or delegation. The energy contract allowed such conduct only with Cogen’s prior consent, not to be unreasonably withheld. It was common ground that no consent had been obtained before Huntsman undertook performance.
2. The court accepted the distinction between prior consent and retrospective forgiveness. In Hyde v Pimley [1952] 2 All ER 102, consent to an act was treated as distinct from forgiveness after the act had occurred. The same principle was reflected in Hendry v Chartsearch Ltd, where the Court of Appeal emphasised that consent must be sought before the relevant transaction and that retrospective consent may operate as waiver but cannot supply the contractual consent required.
3. The court also considered the proposition attributed to Diplock J in Enrico Furst and Co v W E Fischer Limited [1960] Vol 2 Lloyd’s Reports 340, that waiver affects remedies for breach rather than varying contractual terms. These arguments made it reasonably arguable that Cogen’s acquiescence could not itself satisfy the prior-consent condition.
4. A further issue arose as to whether, in a continuing contract, performance without prior consent during one period followed by non-objection could amount to consent for a later period. The court regarded that issue as not fanciful and granted permission on that ground.

Order: application granted.

• Court of Appeal (Civil Division): On 11 June 2007, permission to appeal was granted because the proposed appeal had a real prospect of success: [2007] EWCA Civ 621.
• High Court of Justice, Queen’s Bench Division, Commercial Court: Mr Julian Flaux QC held that Huntsman remained obliged under clause 15.1.3(b) to perform Rhodia’s obligations under the energy contract on or after 5 March 2004. The findings of breach and invalidity of the exclusion notice were not appealed.