IRT Oil and Gas Ltd v Fiber Optic Systems Technology (Canada) Inc

An agency agreement is not assigned, or purportedly assigned, merely because the agent collaborates with another business or proposes a joint venture. Assignment requires an agreement between assignor and assignee. A representation that a company exists does not, without more, represent that the company has become the assignee of contractual rights. A contractual obligation to develop a market does not necessarily require the preparation of a particular business plan. Damages for breach of contract remain recoverable where loss is clear but difficult to quantify. The court must assess the loss as best it can on the available evidence, allowing for the chance that the anticipated profit would have been earned.

IRT entered into an exclusive five-year sales agency agreement with Fox-Tek for Africa. Fox-Tek purported to terminate the agreement in April 2007, alleging that IRT had assigned, or purported to assign, its rights through a memorandum of understanding with P-Lyne Energy and the proposed joint venture company iRTP-Lyne.

Fox-Tek later relied on an alleged estoppel concerning representations that iRTP-Lyne existed. IRT denied any assignment and claimed damages for the remaining term of the agreement. The issues were whether Fox-Tek was entitled to terminate for assignment or purported assignment, whether IRT would probably have breached its market-development obligations, and the amount of recoverable loss.

1. Assignment. The memorandum of understanding did not assign, or purport to assign, IRT’s contractual rights. Although it contemplated a future joint venture company and referred to the exclusive right to operate the licence, it also required the company to preserve IRT’s rights. The parties would have defeated their own purposes by acting without Fox-Tek’s consent. The subsequent conduct of IRT and P-Lyne did not alter that conclusion.
2. An assignment, and therefore a purported assignment, requires an agreement between assignor and assignee. There was no evidence that the proposed joint venture company had entered into such an agreement. Incorporation of that company, even if it had occurred, would not itself have completed an assignment or purported assignment.
3. Estoppel. The representation that iRTP-Lyne existed as a company, assumed to be clear and unequivocal so far as it went, did not represent that it had become assignee of IRT’s rights. The representation on that issue was expressly to the contrary. Fox-Tek could not have relied on the representation as a basis for terminating the agreement.
4. Performance obligations. IRT was not contractually required to produce the particular business plan requested by Fox-Tek. A failure to provide a plan might, in some circumstances, be evidence of breach of the market-development obligation, but it was not a breach on the facts found. By April 2007 IRT and P-Lyne were making efforts to perform, and Fox-Tek had not shown that IRT was likely to breach clause 4(a).
5. Damages. The evidence did not justify the claimant’s detailed sales and maintenance calculations. Nevertheless, IRT had suffered loss of a real chance of making sales. The court adopted a 30 per cent mark-up as reasonable, but discounted the claim for uncertainty, overheads, the probable sharing of profits with P-Lyne, and the absence of reliable evidence as to future sales. Damages were assessed at £50,000.

The judgment describes earlier procedural steps, including default judgment for IRT and an order setting it aside on 2 December 2008. The present decision was a first-instance trial in the High Court.