Albion Energy Ltd v Energy Investments Global BRL

Where principal and security agreements contain different dispute-resolution clauses, the court should identify the subject matter and commercial purpose of each agreement. A clause focused on the security agreement will not ordinarily displace the jurisdiction clause governing the underlying debt.

For summary judgment, the court asks whether the relevant claim or defence has a realistic prospect of success. It should not conduct a mini-trial, but should decide a short point of law or construction where the evidence is sufficient.

An equitable set-off requires cross-claims so closely connected that it would be manifestly unjust to enforce the claimant’s demand without taking the cross-claim into account. The unfair-prejudice jurisdiction is not a means of converting a company’s claim for misconduct into a shareholder’s personal claim where the shareholder already controls the company and can obtain the benefit of recovery.

Albion sold its remaining 20% interest in Heritage Oil Limited to EIGL under a share purchase agreement. The agreement contained an exclusive English jurisdiction clause. After the final instalment was placed in escrow under a later agreement containing an ICC arbitration clause, EIGL withheld payment and asserted that alleged mismanagement of Heritage supported an unfair-prejudice claim against Albion under Jersey law.

Albion sought summary judgment for the escrow amount. EIGL sought a stay under Arbitration Act 1996, alternatively leave to defend and a stay pending proposed Jersey proceedings. The issues were whether the arbitration clause covered Albion’s debt claim and whether EIGL had a realistic prospect of establishing an equitable set-off.

1. Stay under section 9. The arbitration clause in the escrow agreement concerned disputes arising out of that agreement and its ancillary security obligations. It did not cover Albion’s claim to establish liability for the purchase-price instalment under the share purchase agreement. The different purposes of principal and security agreements, the language of the clause, the without-prejudice preservation of rights under the share purchase agreement, and the fact that the escrow agreement involved only three of six parties all supported that conclusion.
2. Releases. The Alvarez audit carve-out in the definition of Buyer Released Claims qualified the general releases in clauses 7 and 8 of the share purchase agreement. The more specific carve-out prevailed over the general wording. Had that conclusion been otherwise, an unfair-prejudice claim based on facts capable of constituting breaches of the relevant agreements would still have fallen within the broad release language.
3. Summary judgment and set-off. The promise to pay in cash did not clearly exclude equitable set-off. The judge assumed, without deciding the point, that a claim for future discretionary statutory relief based on existing facts could potentially support set-off. EIGL nevertheless failed to show a realistic prospect of relief payable to it. Heritage retained conventional claims for alleged fiduciary breaches, EIGL controlled Heritage and would receive the benefit of recovery, and the alleged prejudice was not sufficiently connected with EIGL’s position as shareholder.
4. The proposed unfair-prejudice claim was in substance a claim for misconduct causing loss to Heritage, not unfairly prejudicial management requiring personal relief to EIGL. EIGL also had knowledge of the relevant matters before agreeing the purchase price and could not use the carve-out retrospectively to obtain a price reduction. The cross-claim therefore failed the Geldof test for equitable set-off.
5. EIGL’s applications for both stays were refused. Albion’s application for summary judgment for the balance of the purchase price and interest was allowed.