Fraser Turner Ltd v Pricewaterhousecoopers LLP & Ors

The court considered applications by the defendants to strike out the claimant's particulars of claim or, alternatively, for summary judgment. The amended particulars advanced five heads of claim: procuring a breach of contract, conspiracy to cause loss by unlawful means, breach of administrators' duties, misfeasance and relief under paragraph 74(3)(a) of Schedule B1 of the Insolvency Act 1986.

The primary legal issues were (i) the proper construction of the Royalty Deed and whether it contained express or implied terms obliging London Mining/LMCL to procure that any purchaser of the Marampa mine assume the royalty obligation (including by executing an Accession Deed or Deed of Guarantee), and (ii) whether the administrators owed a direct duty to the claimant or whether the claimant had remedies under Schedule B1 (including paragraph 74) or at common law.

Applying established principles of contractual construction (Arnold, Rainy Sky, Wood) and the strict tests for implication of terms (Marks & Spencer, BP Refinery), the judge held there was no express term and no term ought to be implied in the Royalty Deed in the form alleged. The deed's clauses (notably clauses 3.4–3.5 and clause 6) permitted the possibility of accession and guarantees but did not impose the mandatory procurement obligations alleged. The court also held there was no special relationship or assumption of responsibility by the administrators giving rise to a direct duty to the claimant, and that the claimant's reliance on the company having been dissolved or on special damage did not found such a duty. Finally, paragraph 74 of Schedule B1 did not afford relief because the alleged harm was not unfair in the statutory sense. The judge refused permission to amend and dismissed the proceedings.

This was an application by the defendants to strike out the claimant's pleaded case or obtain summary judgment, considered against the claimant's proposed amended particulars of claim (APOC). The claimant, a mining consultant, alleged that it was entitled to royalties under a 2012 Royalty Deed (part of a settlement of prior litigation with London Mining). The claimant pleaded that the Royalty Deed either expressly or by implication obliged London Mining/LMCL to secure that any purchaser of the Marampa mine would assume the royalty obligation (including by executing an Accession Deed or Deed of Guarantee), and that the defendants (PwC and two administrators appointed in October 2014) caused or procured a breach of that obligation by selling the assets to Timis Mining without ensuring the royalty was drawn to the purchaser's attention or assigned. The APOC also alleged administrators' breaches, misfeasance and sought relief under paragraph 74(3)(a) of Schedule B1.

The procedural posture was first instance: the defendants applied to strike out or obtain summary judgment under Part 24 Civil Procedure Rules and the court considered the APOC as the relevant pleaded case. The key issues framed by the court were:

• Construction and implication: whether the Royalty Deed contained express or implied terms obliging procurement of an accession/transfer of the royalty on a sale of the mine (analysis of clauses 3.1–3.5, 6.1–6.3, 7.8, 12.11 and the form Accession Deed in Schedule 1).
• Administrators' duties and remedies: whether the administrators owed a direct duty to the claimant (special relationship/assumption of responsibility or special circumstances arising from dissolution or special loss) and whether paragraph 74 of Schedule B1 permitted relief for unfair harm.

On construction and implication the judge applied leading authorities on contractual interpretation and implication of terms. He emphasised the detailed, professionally negotiated drafting of the deed and concluded that the natural meaning of the provisions did not support the claimant's asserted express obligations. Clause 3.5 merely addressed to whom invoices might be addressed if an accession occurred; clause 6 expressly set out the consequences of change of control or acquisition and preserved London Mining's continuing guarantee in the absence of an accession or deed of guarantee. The court accepted that, where necessary to make the deed work, certain references could be read so as to cover a purchaser's production/sale of ore but rejected any wider implied obligation to procure accession or transfer. The judge applied the strict BP Refinery/Marks & Spencer tests and concluded implication was not justified.

On the administrators' duties the claimant relied on an alleged assumption of responsibility based on communications between the claimant's director and one administrator, the claimant's proof of debt and the fact of company dissolution. The court found no factual basis for a special relationship or assumption of responsibility: the communications did not amount to undertakings and an administrator acting for the creditors generally would not assume obligations favouring one creditor in a way prejudicial to others. The claimant's reliance on dissolution (and authorities such as Pulsford v Devenish) did not produce a cause of action of the kind asserted. Finally, paragraph 74 was considered: the court held the alleged harm was not 'unfair' within the statutory scheme, in light of the administrators' duty to act in the interests of creditors as a whole. Consequently the judge refused permission to amend and dismissed the proceedings.

First instance: The court refused permission to amend and dismissed the claimant's proceedings. The judge concluded that (i) the Royalty Deed did not contain the express or implied terms alleged; (ii) there was no special relationship or assumption of responsibility creating a direct duty by the administrators to the claimant; and (iii) paragraph 74 of Schedule B1 did not afford relief because the harm alleged was not unfair in the statutory sense. The pleaded causes of action based on procuring breach of contract, conspiracy and misfeasance therefore failed.