Scottish Power UK plc v BP Exploration Operating Co Ltd & Others

[2015] EWHC 2658 (Comm)

A dispute arose over the shutdown of the production of natural gas from the Andrew Field in the North Sea. One of the preliminary issues that Mr Justice Leggatt had to decide was whether or not, following the notification of a claim for force majeure, the subsequent reporting requirements were a condition precedent to a successful claim for relief. Article 15.4 of the contract imposed a number of requirements on a party claiming relief for force majeure. These included that:

“A Party, when claiming relief under Clause 15.2 shall: -
(1) within ten (10) Days of the failure … for which relief is sought, notify the other Party thereof and shall within five (5) Working Days of such notification provide an interim report which shall furnish such relevant information as is available … including the place thereof, the reasons for the failure and the reasons why obligations under this Agreement were affected, and give an estimate of the period of time required to remedy the failure;
(2) within twenty (20) Working Days of such notification, if requested, provide a detailed report which shall amplify the information contained in the interim report...”

The BP Defendants maintained that they had complied with Article 15.4(1) by notifying Scottish Power by a letter and by providing them with an interim report. But the Defendants admitted that they did not provide a further detailed report pursuant to Article 15.4(2). Scottish Power said that compliance with Article 15.4(2) was a condition precedent to a successful claim for relief under Article 15.2. If that was right, the defence of force majeure would fail. The Judge reviewed the relevant authorities in relation to force majeure clauses in the Commercial Court. For example, in Great Elephant Corporation v Trafigura Beheer BV [2012] EWHC 1745 (Comm), Teare J held that a provision was not to be construed as a condition precedent to reliance upon the force majeure clause for three reasons:

“i) The clause is not framed as a condition precedent.
ii) The requirement is not for notice within a clear and specified number of days but notice which is immediate and prompt. What is immediate and prompt will depend upon factual context... This is not the context in which the parties are likely to have intended that failure to provide immediate or prompt notice would debar a party from relying upon a force majeure event.
iii) Where a specific sanction is intended the parties tend to say so expressly. ...”

Here the Judge came to what he termed the “clear view” that compliance with Article 15.4(2) was not a condition precedent to a successful claim for relief. There were no words in the contract stating that the consequence of failure to comply with any of the requirements of Article 15.4 was to preclude a claim for relief. Article 15.4 required a party to do various things when claiming relief. It did not say that the right to claim relief from liability under Article 15.2 was conditional on doing the things set out in Article 15.4. The Judge noted that:

“The absence of any such language seems to me to be all the more significant in the context of what is a very detailed and elaborate contract that has obviously been professionally drafted.”

The Judge did not consider that it could be said that reasonable people entering into the contract would have thought it appropriate to make compliance with this requirement a condition of the right to claim relief for force majeure. Further, there were no words such as “without delay” or which set out a precise time within which the Defendants had to do something. Here the Judge queried quite what the clause meant. It was not clear. For example, when did the 20 day period start? There was also potentially significant scope for argument about what degree of detail and amplification of the interim report was necessary in order to satisfy the clause.

The Judge recognised that it was possible to envisage cases in which failure to comply with Article 15.4 could cause serious prejudice. Scottish Power gave the example of a claim for force majeure relief first made years after the events in question. Here the Judge noted that this example illustrated that failure to comply with the notification requirements of Article 15.4 could cause financial loss which was capable of being compensated by the Defendants by an award of damages.

The Judge also noted that delay may have some evidential significance. A party that failed to comply with the requirements of Article 15.4 when claiming relief will need to explain its failure to do so. Unless there was some good alternative explanation, the inference may be drawn that the reason why it did not comply was that its claim for relief was not justified. Here, the failure to comply with the request for a detailed report as required by Article 15.4(2) laid the Defendants open to the suggestion that they could not have substantiated their claim.

In short, the Judge concluded that no reasonable party would have intended the requirements of Article 15.4 to constitute conditions precedent to a claim for relief without thinking it necessary to say so expressly.

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