Mir Steel UK Ltd v Morris & Ors

The Court of Appeal dismissed Mir Steel's appeal against an order refusing permission to join Alphasteel and its joint administrators as CPR Part 20 defendants to a proposed contribution claim under the Civil Liability (Contribution) Act 1978. The court held that clause 9.5 of the hive-down agreement unambiguously allocated to Mir Steel the responsibility for "any claim" made by Lictor Anstalt in respect of the hot strip mill, and therefore Mir Steel had no real prospect of establishing a contribution claim against Alphasteel or the administrators. The court applied ordinary principles of contractual interpretation (Investors Compensation Scheme v West Bromwich Building Society) and considered the Canada Steamship guidelines as non-mechanistic aids to construction; the commercial purpose and known background facts supported reading clause 9.5 as shifting the entire risk to Mir Steel. Because clause 9.5 provided a complete answer, it was unnecessary to decide whether the rule in Said v Butt would independently protect the administrators from tortious claims for procuring a breach of contract.

Background and parties: Alphasteel owned and operated a hot strip mill. Lictor Anstalt claimed ownership of the equipment under a letter dated 3 April 2000. Alphasteel entered administration in December 2007. Administrators marketed the business and assets and negotiated a hive-down sale to Mir Steel which completed in July 2008 (with Libala as purchaser's nominee and guarantor). Lictor later sued Mir Steel and Libala for conversion and for damages for inducing breach of contract and conspiracy.

Procedural posture and relief sought:

• Mir Steel applied for permission to join Alphasteel and the administrators as Part 20 defendants so it could pursue contribution claims (under the Civil Liability (Contribution) Act 1978) and related causes of action against them.
• The High Court (David Richards J) dismissed the Part 20 application. Mir Steel appealed to the Court of Appeal. Permission to appeal had been granted.

Issues framed:

• Whether clause 9.5 of the hive-down agreement should be construed as excluding any right in Mir Steel to seek contribution from Alphasteel or the administrators for claims brought by Lictor in respect of the hot strip mill.
• Whether, alternatively, the administrators could rely on the rule in Said v Butt to avoid liability in tort for procuring a breach of contract.

Court's reasoning: The court interpreted clause 9.5 against the commercial background known to all parties: the administrators were selling assets subject to a known title dispute and Mir Steel (via Libala) knowingly accepted the risk. Applying principles of contractual construction (Investors Compensation Scheme) and treating Canada Steamship as guidance rather than a rigid test, the court concluded that the natural and commercially sensible meaning of "any claim made against [Mir Steel] in respect of the hot strip mill" included the damages claims for inducing breach and conspiracy as well as conversion. Clause 9.5 therefore allocated the entire risk to Mir Steel. Because clause 9.5 answered the contribution claim, the court did not need to decide the Said v Butt point, though the judge had indicated Said v Butt could bar tortious claims against administrators in some circumstances.

Outcome and wider context: The appeal was dismissed. The court emphasised that contractual allocation of risk will be construed in light of commercial purpose and background knowledge; Canada Steamship principles are guidelines, not a rigid code.

The appeal is dismissed. The Court of Appeal held that clause 9.5 of the hive-down agreement, read in its commercial context and against the background knowledge available to the parties, unambiguously allocated to Mir Steel the responsibility for "any claim" made by Lictor in respect of the hot strip mill, so Mir Steel had no real prospect of obtaining contribution from Alphasteel or the administrators; in consequence, permission to join them as Part 20 defendants was correctly refused and the appeal fails.

Appeal to the Court of Appeal from the High Court of Justice, Chancery Division (David Richards J) ([2011] EWHC 3310 (Ch)). Permission to appeal was granted by Lewison LJ. The Court of Appeal delivered judgment at [2012] EWCA Civ 1397.