Macquarie Internationale Investments Ltd v Glencore (UK) Ltd

A contractual covenant preventing sellers from claiming against a company’s directors, employees or officers may extend to claims based on personal duties, negligence and reliance arising from the sale transaction. Its scope is determined by the commercial purpose and wording of the agreement read in context. A covenant designed to prevent warranty claims being undermined is not confined to conduct performed within the individual’s directorial capacity. The approach in HIH Casualty and General Insurance Ltd v Chase Manhattan Bank requires commercial construction rather than mechanical application of the Canada Steamship guidelines. Where the parties are substantial commercial entities, the clause is clear, professionally advised and part of a negotiated transaction, its reasonableness under the Unfair Contract Terms Act 1977 may be resolved summarily.

Macquarie purchased the entire issued share capital of Corona Energy Holdings Ltd from Glencore and other sellers. Glencore was the sole warrantor under the sale and purchase agreement. After Macquarie brought warranty claims concerning alleged liabilities to xoserve, Glencore issued Part 20 claims against Corona’s former managing director and finance director.

The Part 20 claims alleged breaches of common law duties of care and fiduciary duties in preparing accounts and providing information used in the sale process. Macquarie and the Part 20 defendants sought to dismiss or stay those claims, relying on clause 6.8 of the agreement. The issues were whether clause 6.8 covered the claims, including negligence and losses connected with Glencore’s agreement to assume the other sellers’ warranty exposure, and whether the clause was arguably unreasonable under the Unfair Contract Terms Act 1977.

1. Application granted. Glencore was not entitled to bring the Additional Claims against the Part 20 defendants. Consequential orders were left for the parties to agree.

2. Clause 6.8 was a covenant not to sue. Its commercial purpose was at least partly to prevent claims against Corona or persons connected with Corona from undermining the value of Macquarie’s warranty rights. The words did not contain a limitation to claims arising from acts or omissions within the defendants’ directorial capacity or scope of employment.

3. The defendants’ reduced bonuses, reflecting their refusal to give personal warranties, reinforced their legitimate interest in protection under clauses 6.8 and 17.4. The court also regarded protection against collateral litigation damaging Corona and diverting its staff as a sound commercial consideration.

4. The reasoning in Williams v Natural Life Health Foods Ltd and Peskin v Anderson did not support a workable distinction between personal and directorial responsibility. The relevant duties could arise from a special factual relationship, but that did not place the claims outside clause 6.8. Partco v Wragg did not assist because the construction of its clause 7.2 had not been decided by the Court of Appeal.

5. Applying the commercial approach in HIH Casualty and General Insurance Ltd v Chase Manhattan Bank, clause 6.8 covered negligence. In the circumstances, a claim alleging negligence by directors or employees was an obvious claim which the parties would have intended the clause to address. The clause also covered the part of Glencore’s alleged loss attributable to its agreement with the other sellers to assume their warranty exposure.

6. The reasonableness issue under sections 2(2) and 11 of the Unfair Contract Terms Act 1977 was fact-sensitive in principle, but this was a case where it could be resolved summarily. The clause was clear, professionally advised and part of a carefully calibrated commercial agreement. Glencore had substantial resources, no unusual pressure to contract, and no evidence that it misunderstood the clause. The clause was therefore reasonable. It was unnecessary to decide whether the Act applied to clause 6.8.