Aston Hill Financial Inc & Ors v African Minerals Finance Ltd

In construing a sophisticated commercial agreement, the court should consider business common sense and the commercial consequences of competing constructions. That approach cannot justify departing from clear contractual language, particularly where commercial arguments are finely balanced. A refinancing may be voluntary, while the resulting prepayment is mandatory under a separate contractual provision. Where a fee is payable only on prepayment made pursuant to a specified clause, it is not payable on a prepayment required by another clause merely because the refinancing leading to it was voluntary.

The claimants were lenders under a US$500 million facility agreement. The defendant refinanced the facility and prepaid the outstanding loan before the first anniversary of the closing date.

The claimants sought summary judgment for a 6 per cent prepayment fee under clause 8.8(d), arguing that the prepayment was also a voluntary prepayment under clause 8.5. The defendant sought summary judgment declaring that no fee was payable, because the refinancing proceeds constituted Finance Proceeds requiring prepayment under clause 8.3. The central issue was whether the prepayment was made pursuant to clause 8.5 for the purposes of clause 8.8(d).

1. Construction. The court applied the approach stated in [2011] 1 WLR 2900; [2011] UKSC 50. A commercial contract should be construed, where possible, consistently with business common sense and the commercial consequences of competing constructions. However, where those considerations are inconclusive, the contractual language remains decisive.
2. The court rejected the submission that the word “voluntary” in the heading to clause 8.5 had to be ignored. It also rejected the submission that the absence of the specified notice prevented the prepayment from being treated as made pursuant to clause 8.5, since the notice requirement was procedural and could be waived by the lenders.
3. The refinancing was properly capable of being characterised as voluntary. Nevertheless, the refinancing proceeds were Finance Proceeds and therefore triggered the defendant’s obligation under clause 8.3 to prepay the loan promptly upon receipt. The refinancing and the prepayment had to be distinguished: the former was voluntary, but the latter was mandatory.
4. Clause 8.8(d) imposed the fee only on prepayment made pursuant to clause 8.5. The court found no proper basis for treating a prepayment required by clause 8.3 as a clause 8.5 prepayment merely because the borrowing was undertaken to fund it. There was no relevant distinction between money borrowed specifically to make the prepayment and money borrowed generally.
5. The claimants’ summary judgment application was dismissed. The defendant’s summary judgment application was upheld. Counsel were directed to seek agreement on the draft order.

Not stated in the judgment.