Astor Management AG & Anor v Atalaya Mining Plc & Ors

A contractual condition precedent does not cease to apply merely because compliance has become unnecessary or futile. Its continued operation depends on the language and proper interpretation of the contract.

An undertaking to use all reasonable endeavours to obtain an agreement or finance from a third party will ordinarily be enforceable. The court may assess reasonableness despite commercial complexity, although the claimant bears the burden of proving breach. A stated completion date will usually be a target rather than the expiry of the obligation.

Such an undertaking need not require action which would make the underlying venture commercially unviable. An implied duty of good faith adds nothing where its alleged content is already subsumed within a more demanding express endeavours obligation.

The claimants sold their interest in a Spanish copper-mining project to companies in the defendants’ group. Most of the consideration was deferred. Under the Master Agreement, payment was triggered when the necessary permits had been obtained and a sufficient Senior Debt Facility had been secured.

The mine was ultimately restarted using equity funding channelled through intra-group loans. The claimants contended that the debt-finance condition had fallen away, or that the intra-group loans satisfied it. Alternatively, they alleged breach of an obligation to use all reasonable endeavours to obtain senior debt and breach of an implied duty of good faith.

The claimants also sought declarations that the project company could not repay group loans or make distributions, subject to a specified exception, and had to apply excess cash towards the deferred consideration.

1. The payment and breach claims were rejected, but the claimants succeeded on the construction of the restrictions governing distributions, group-loan repayments and excess cash. The express condition requiring a Senior Debt Facility remained applicable. English law recognises no general principle by which a contractual condition precedent may be disapplied merely because compliance would be futile or unnecessary. The agreement deliberately specified senior debt rather than finance of any kind: paras [41]–[54].

2. The intra-group loans were not a Senior Debt Facility. Senior debt is characterised by priority of repayment over the borrower’s other payment obligations in insolvency. The unsecured group loans had no such priority and were distinguished in the agreement from the external facility contemplated by the parties: paras [55]–[58].

3. The obligation to use all reasonable endeavours to obtain senior debt was enforceable. Courts should give effect to deliberately assumed commercial obligations unless it is legally or practically impossible to give them sensible content. The range of possible financing terms and the need to assess commercial judgment did not make the obligation uncertain. Those matters affected proof of breach, for which the claimants bore the burden: paras [62]–[72].

4. The specified date was a target, not a cut-off. The obligation required reasonable endeavours to obtain the facility and restart mining by that date if practicable, and otherwise as soon as practicable thereafter: paras [73]–[81].

5. The claimants did not prove breach. The obligation could not require finance which, on reasonable assumptions, would render the project commercially unviable. Two principal shareholders would not provide senior debt, while the available proposal from another shareholder was not shown to be viable. No evidence established a viable senior-debt alternative which the defendants should have pursued: paras [82]–[96].

6. Any implied duty of good faith was subsumed within the more demanding express endeavours obligation. Good faith requires honesty and excludes conduct calculated to frustrate the contract’s purpose or regarded as commercially unacceptable by reasonable and honest people. Failure to prove breach of the express obligation also defeated the bad-faith case: paras [97]–[99].

7. Until the deferred consideration is paid in full, the project company cannot make distributions or repay the relevant group loan, save for the specified annual allowance for unrelated group expenses. It must apply excess cash towards the deferred consideration. The fact that the ordinary payment trigger had not occurred did not remove the deferred consideration from the contractually defined consideration: paras [100]–[110].

not stated in the judgment.