Clark Street Associates LLC v Norsk Titanium AS

A contractual commission clause may require payment by reference to a monetary grant made to an entity other than the contracting defendant, where that entity provides services for the defendant’s benefit in connection with the grant. The expression “services” is construed in its contractual context and may include economic support arrangements, including facilities and equipment made available at nominal rents. The grant need not be paid directly to the defendant, and receipt of the grant does not require transfer of the underlying money. Where the agreement defines the relevant award and specifies a tail period, the court must apply the contractual cut-off rather than imply a different one. Corporate subsidiaries may benefit the parent for contractual purposes, but awards made directly to subsidiaries do not thereby become awards to the parent under differently worded provisions.

Clark Street Associates LLC provided consultancy services to Norsk Titanium AS under a Consulting Agreement governed by English law. The agreement provided for monthly fees and percentage-based commission on defined “Awards”, including monetary grants made to another entity where that entity provided services for Norsk’s benefit.

Norsk later established subsidiaries and entered into arrangements with entities connected with the State of New York. Those arrangements involved State funding, a manufacturing facility and equipment. Norsk terminated the Consulting Agreement, and Clark Street claimed commission. The principal issues were whether the State funding constituted an Award under paragraph 1(b) of Exhibit A, whether the related arrangements constituted services for Norsk’s benefit, whether the 24-month tail period barred the claim, and whether separate awards to Norsk subsidiaries fell within other provisions.

1. Construction. The court applied the unitary and iterative approach to contractual interpretation reflected in [2017] UKSC 24. The Consulting Agreement had to be construed as a whole, balancing its language, context and commercial consequences.
2. Paragraph 1(b). The State’s allocation of US$125 million to FSMC was a monetary grant made to an Entity other than Norsk. The grant was “granted” when allocated; paragraph 1(b) did not require the underlying money to have been transferred to FSMC before an Award existed.
3. FSMC’s obligations to provide a manufacturing facility and equipment constituted services in the broad contractual context of securing funding opportunities. Services provided to Norsk US were for Norsk’s benefit because Norsk US was its wholly owned sub-subsidiary, and the drafting extended beyond services provided directly to Norsk.
4. The requirement that the services have a monetary value equal to the grant did not require an elaborate expert valuation of leases, equipment or reversionary interests. In this case the whole US$125 million grant was to be spent by FSMC in providing for Norsk’s benefit, so the required value was satisfied.
5. The 24-month tail period applied according to its wording. The relevant Award was received within that period. The court rejected an inference that commissionability depended on later transfer or expenditure of the funds.
6. Claims under paragraphs 1(a) and 1(c) failed because those provisions concerned awards to Norsk, whereas the relevant awards were to Norsk Equipment or Norsk US. No term preventing the use of subsidiaries was necessary for business efficacy, applying the necessity approach in [2015] UKSC 71.
7. The claim succeeded on the primary case. Commission was calculated by reference to US$125 million, agreed at US$12.05 million, and was due on 13 April 2016, payable within 30 days.