Drax Smart Generation Holdco Limited v Scottish Power Retail Holdings Limited

A contractual notification clause is construed according to its wording and commercial purpose. Where notice must state the nature and amount of a claim in reasonable detail, it must identify how the claimant says loss was suffered and how the amount was calculated. A notice advancing company-level future costs does not notify a different claim based on the claimant’s diminution in share value.

Separate contractual requirements must be kept distinct. A requirement for a written demand of an ascertained sum under an indemnity does not, without clear wording, become subject to the time limit applicable to notification of the underlying claim. Overlapping notification categories are resolved by construction, not by a general rule that the shorter period applies.

Drax brought claims under a share purchase agreement concerning the ineffective assignment of an option relating to land at Kingsnorth. It alleged breaches of warranty and contract, and claimed an indemnity for losses connected with the reorganisation.

Scottish Power applied for summary judgment. Drax applied to amend its Particulars of Claim. The original notice described potential future costs to be incurred by the company, for which Drax said it remained liable. The proposed amendments instead advanced a diminution-in-value claim based on the value of Drax’s shares. The central issues were whether the notice complied with the contractual notification clause and whether the indemnity claim was out of time or insufficiently quantified.

1. Summary judgment and amendment. The relevant test for both applications was whether the proposed case had a real, rather than fanciful, prospect of success. The court was willing to determine the contractual construction issues summarily.
2. Notification of warranty and contract claims. The Notice of Claim identified the relevant contractual provisions and alleged breaches, but its treatment of loss concerned future costs and liabilities of the Company for which Drax said it remained responsible. It did not identify a direct diminution in the value of Drax’s shareholding. That difference concerned the form and substance of the claim, not merely the legal measure of damages.
3. Paragraph 2 of Schedule 4 required reasonable detail of the nature of the claim and amount claimed, including Drax’s calculation of the alleged loss. That required sufficient information to understand how loss was said to have been suffered, why the claimed figure arose, and whether the liability was actual or contingent. The information served the commercial purposes of assessing merits, quantum, evidence and potential liability.
4. Indemnity claim. The written demand for an ascertained sum under clause 11.1 and the notification of the claim under paragraph 2 of Schedule 4 were separate requirements. The paragraph 2 time limits did not govern the later demand. In any event, the notice gave reasonable detail of the indemnity claim, including estimates and categories of future loss; it did not have to state an ascertained sum where the loss was not yet fully ascertainable.
5. The indemnity claim fell within the seven-year period for a Reorganisation Indemnity Claim under paragraph 2.1.7(b), rather than the 30-month period for a Damhead Creek II Option Agreement Claim. The amendments were therefore permitted for that claim. A declaration could also proceed because its usefulness remained a matter for the court’s discretion.

Summary judgment was granted on the warranty and other contract claims. It was dismissed on the indemnity claim. The amendment application was allowed for the indemnity claim and refused for the other claims.

First instance decision. No earlier appellate decision is stated in the judgment.