Rotam Agrochemical Company Ltd & Anor v GAT Microencapsulation GMBH

A binding commercial contract depends on objectively communicated intention and agreement on the terms which the parties regarded, or the law regarded, as necessary. Where negotiations concern a complex transaction and the parties’ dealings show that formal execution is required, agreement on commercial points does not itself create contractual obligations. A document may remain non-binding until signed by both parties where the surrounding dealings and its terms establish that requirement. Payments made towards an anticipated transaction may nevertheless be recoverable in unjust enrichment where the contemplated contractual state of affairs fails to materialise. Sophisticated parties negotiating at arm’s length will not ordinarily owe one another a Hedley Byrne duty of care without an assumption of responsibility.

Rotam sought to develop and commercialise a capsule suspension formulation of Clomazone with GAT. The parties signed a confidentiality agreement, exchanged drafts and negotiated arrangements concerning regulatory data, technology, licensing and manufacture.

Rotam alleged that a binding oral collaboration agreement was concluded at a meeting on 30 August 2010 and that a data transfer agreement was concluded in August or September 2012. GAT later sold its business and intellectual property to FMC. Rotam claimed breach of contract, unjust enrichment and negligent misstatement, alternatively relying on a duty of care. The central issues were whether either alleged agreement was binding, whether payments were recoverable, and whether GAT assumed responsibility in tort.

1. No collaboration agreement. Applying the objective approach stated in RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG [2010] UKSC 14, the court held that no binding oral agreement was concluded on 30 August 2010. The parties had been negotiating a complex written contract, had previously used signed agreements, and had not indicated any departure from that practice.
2. The parties had not resolved matters which they objectively regarded as essential, including the manufacturing margin and allocation of the risk and costs of patent infringement. Subsequent negotiations, draft exchanges and correspondence confirmed that the transaction remained a work in progress. The principles in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 610, Hussey v Horne-Payne (1879) 4 App Cas 311 and Donwin Productions Limited v Emi Films Limited (Times, March 9, 1984) did not alter that conclusion.
3. No data transfer agreement. The parties’ prior dealings and the draft’s signature provisions, including the reference to the “last day of signature”, established a consensus that the agreement would not bind them until signed by both parties. The agreed terms recorded at the meeting did not constitute a separate contract.
4. Even if the data transfer agreement had been binding, clause 4.1 and Recital E made payment of €78,038.49 a condition precedent to GAT’s obligation to transfer the rights. That payment was not made. Any damages would also have been subject to the contractual liability cap.
5. Unjust enrichment. GAT was enriched by €291,087.03 paid at Rotam’s expense. The payments were made in expectation of a collaboration or data transfer agreement giving Rotam ownership or exclusive use of the data. That state of affairs failed to materialise, constituting a failure of consideration under Sharma v Simposh Ltd [2011] EWCA Civ 1383 and the principles explained in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32.
6. Duty of care. The claim under Hedley Byrne & Co v Heller & Partners Ltd [1964] AC 465 failed. The parties were sophisticated contractual counterparties negotiating with legal advice and from broadly equal bargaining positions. GAT had not assumed responsibility.

Rotam recovered €291,087.03 in unjust enrichment. All other claims failed.