(1) Rosserlane Consultants Ltd (2) Swinbrook Developments Ltd v. Credit Suisse International [2017] EWCA Civ 91

This was the appeal of an unsuccessful claim against Credit Suisse International (the Bank), in which the claimants alleged that the Bank had failed to secure the best price reasonably obtainable when it exercised its powers of sale under a participation agreement (the Agreement) entered into between the parties.

The claimants had entered into a short-term loan of US$127 million with the Bank in December 2006, to refinance existing debt, and for future expenditure for Caspian Energy Group (CEG), a partnership between the claimants, which owned a stake in a company operating an oilfield (Shirvan).

The loan was secured, to be repaid upon a sale of the claimants’ interests in CEG. The parties entered into the Agreement, pursuant to which the Bank was granted the right to force a sale of CEG if a sale of it or its related assets (including the stake in Shirvan) had not been achieved by mid- August 2007, provided that the sale proceeds were not less than US$180 million. The Agreement included an express duty on the claimants to use reasonable endeavours to achieve the best possible price but no such corresponding duty on the Bank.

The claimants failed to achieve a sale and the Bank enforced its right to sell CEG achieving a sale price of US$245 million in February 2008. The claimants alleged that there was an implied duty of care in the Agreement (similar to a mortgagee’s duty to obtain the best price when exercising a power of sale over its security), which the Bank breached by selling CEG for less than its true value. It was said that the claimants had lost the chance to sell CEG to Gazprom Neft for US$650 million.

At the hearing in February 2015, the court refused to find that such a duty was owed by the Bank in relation to its right of forced sale, because the Agreement had: (i) been negotiated between sophisticated parties; and (ii) included an express duty owed by the claimants in relation to the sale price, but was silent as to any duty owed by the Bank. The court also concluded that the Bank had not been appointed as agent of CEG, and therefore owed no fiduciary duties to it. As to the loss of chance, the claimants could not establish that they had lost the chance of securing a sale to Gazprom Neft, because Gazprom Neft would not have made an offer without a site visit, which the claimants/CEG would have refused.

The appeal was heard by Lord Justice Christopher Clarke in February 2017 and concerned two issues: whether the judge was wrong to find that: (i) there was no implied duty; and (ii) the claimants would have refused a site visit.

Clarke LJ decided to hear argument on the second issue first. He found that the judge was entitled to reach the conclusions that he did, and accordingly he dismissed the appeal without it being necessary to consider the first issue. His reasoning on the second issue was based on three factual issues as to whether: (i) CEG had a policy about site visits; (ii) Gazprom Neft would have been treated as an exception to any such policy; and (iii) the Bank would have overridden that policy. Having considered the evidence on these matters, Clarke LJ decided that the claimants would not have permitted a site visit.

The judgment did not, however, address the wider point in the first issue as to whether the judge at first instance was wrong to conclude there was no implied duty in the Agreement. The first instance decision therefore remains good law, and reinforces the position that claimants may find it difficult successfully to imply terms into complex agreements negotiated by sophisticated parties.