Fraser Turner Ltd v Pricewaterhousecoopers LLP & Ors

Contractual wording must be construed objectively in its documentary, factual and commercial context. Commercial common sense cannot override clear language. A term will not be implied merely to repair a professionally drafted agreement or improve an imprudent bargain. Where the contract addresses the subject, implication is especially unlikely; any term must be necessary and obvious and must not contradict an express term.

An administrator’s duty is to the company and creditors as a whole. A creditor establishes a separate duty concerning individual loss only by showing an objective assumption of responsibility creating a special relationship. Conduct causing harm while the administrator acts in good faith for creditors generally is not unfair harm under paragraph 74 of Schedule B1 to the Insolvency Act 1986.

Fraser Turner Limited claimed royalties under a settlement royalty deed relating to a mining operation. After London Mining PLC and its subsidiary became insolvent, the mine and assets were sold to Timis Mining without the purchaser assuming the royalty obligations.

The High Court struck out claims against PricewaterhouseCoopers LLP and the administrators, and refused permission to amend the particulars of claim. The claims concerned contractual interpretation, implied terms, duties allegedly owed by administrators to an individual creditor, and unfair harm under paragraph 74 of Schedule B1 to the Insolvency Act 1986. The central issues were whether the deed required the royalty to be transferred to a purchaser and whether the administrators were liable for failing to procure that result.

1. Appeal dismissed. The High Court was right to strike out the contractual, duty and paragraph 74 claims.
2. Contractual interpretation. The Royalty Deed had to be construed by reference to its words, provisions, purpose, relevant circumstances and commercial common sense, while disregarding subjective intentions. The court could not use commercial common sense to override clear contractual language. The principles discussed in Arnold v Britton [2015] UKSC 36 and Marks & Spencer plc v BNP Paribas Securities Services [2016] AC 742 pointed against the proposed construction.
3. Clause 3.5 merely adjusted the invoicing machinery after an asset sale. It did not impose enforceable obligations on a New Asset Holder, which was a third party to the deed. Clauses 6.2.1 and 6.2.2 specified when London Mining’s obligations and guarantee would cease after an accession or guarantee deed, but did not require London Mining or LMCL to procure either deed. Clause 12.11 was a further-assurance provision. Consistently with Dear v Jackson [2013] EWCA Civ 89, it could give effect only to obligations actually agreed and could not create a new substantive obligation.
4. No term could be implied requiring London Mining or LMCL to procure a purchaser to pay the royalty or enter an accession deed. The proposed term contradicted the express provisions, was neither obvious nor necessary, and had no single clear formulation. Following an asset sale, the guarantee had no royalty obligation to which it could apply, apart from accrued liabilities.
5. Administrators’ duties. Liability for economic loss required an objective assumption of responsibility creating a special relationship, judged by what was said or done in context. The position of administrators was no different. The evidence showed only that FT raised its concern and the administrators said they would look into it. They owed duties to achieve the best realisation for creditors as a whole and could not prefer FT or risk reducing the sale price for its benefit.
6. Paragraph 74. Under Schedule B1 to the Insolvency Act 1986, unfair harm was not established where administrators acted in good faith in accordance with their statutory obligations. FT’s substantive complaint concerned obtaining a new private royalty contract with the purchaser, rather than harm suffered in its capacity as a creditor. It had proved in the administration and received a dividend. The paragraph 74 claim therefore failed.

• Court of Appeal (Civil Division) [2019] EWCA Civ 1290: dismissed the appeal.
• High Court of Justice, Business and Property Courts, Business List (ChD) [2018] EWHC 1743 (Ch): struck out all claims and refused permission to amend the particulars of claim.