RIVERROCK EUROPEAN CAPITAL PARTNERS LLP v NICOLAUS HARNACK & Anor.

A contractual right to terminate for material breach requires a substantial breach with serious consequences for the innocent party. An easily remediable oversight causing no meaningful loss, regulatory action or adverse effect will not ordinarily satisfy that standard.

Regulatory termination provisions must be exercised consistently with their contractual purpose. Approval requirements are confined to approvals reasonably considered necessary or advisable for the regulated services and cannot be used for an ulterior purpose.

Detailed commercial agreements will not readily have additional terms implied where their existing provisions address the practical consequences of the relevant event.

RiverRock claimed €1,617,270 from Nicolaus Harnack and Franz Lucien Mörsdorf under consultancy, appointed-representative and secondment agreements, together with deeds of covenant. It alleged that the striking off and dissolution of Deutsche Real Estate Asset Management Limited, which acted as its appointed representative, entitled it to terminate the contractual arrangements and recover specified sums.

The agreed issues were whether the dissolution constituted a breach entitling termination; whether termination payments were unenforceable penalties; and, if not, whether sums in a revised schedule of fees and expenses were recoverable.

1. Claim dismissed. The dissolution did not entitle RiverRock to terminate the Consultancy Agreement under any pleaded contractual ground.
2. For clause 6.3.1, “material breach” meant a substantial breach involving serious consequences for the innocent party, although repudiation was unnecessary. Materiality was assessed contextually, including the nature and explanation of the breach, its remedial character, its consequences and the consequences of termination. The oversight was readily remediable, caused no loss or regulatory action, and had no material practical consequence.
3. The dissolution alone did not cause RiverRock to breach FCA rules through the appointed-representative relationship. Under