Menu
The life and times of Gilbert-Ash, the latest chapter – Scottish Power

News / / The life and times of Gilbert-Ash, the latest chapter – Scottish Power

Nice snappy quotes from cases can be hard to find. Which is perhaps why the words of Lord Diplock in Gilbert–Ash1 that  

“…in construing such a contract one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used to rebut this presumption”

have been used so often.  

In fact Gilbert-Ash has featured in many of the most familiar English commercial cases.  It was applied in Stocznia Gdynia SA v GearbulkSonatSeadrill v Gazpromand in the recent dispute between Transocean and Providence.  It was followed in Fujitsu Services and it was mentioned in Nobahar-Cookson v Hut GroupCavendish v MakdessiBunge v NideraPolypearl v E.ONKudos CateringShell Egypt v Dana GasRe KaupthingDalkia UtilitiesBovis Lend Lease and in the Multiplex litigation to name but a few2.  Not many cases can claim such a consistent run of appearances over the years.
 

The latest in this run was in the Court of Appeal’s judgment in November last year in Scottish Power UK PLC v BP3.
 

Scottish Power had entered into a series of long-term materially identical supply contracts with BP to purchase natural gas produced from the Andrew oil and gas field in the North Sea. The court found that BP had breached the supply contracts by failing to supply gas from the Andrew Field for a period of 3½ years while work was being performed on pipelines and other infrastructure. As part of its claim, Scottish Power sought to recover general damages for the additional costs it incurred in purchasing replacement natural gas from third party suppliers at a higher price than BP had agreed to supply it.  
 

Article 16 of the contracts established a regime whereby, when an underdelivery occurred on any day, the quantity of gas which the Sellers had failed to deliver was classified as Default Gas and the prescribed remedy was for the Buyer to receive a like quantity of gas in a subsequent month at a discounted Default Gas Price. 
 

BP argued that Article 16 Default Gas was the only remedy available to Scottish Power for underdeliveries.  Scottish Power in contrast argued that where the underdelivery arose from a breach of contract additional remedies at law were available. The High Court had held that there were two possible meanings to Article 16 but held that the correct one was that Article 16 applied to underdeliveries whether or not the underdelivery was the result of a breach.  On appeal Scottish Power argued that the judge had lost sight of the Gilbert-Ash presumption and that, since two meanings had been held to exist, the meaning which did not involve the loss of common law rights should have been adopted.
 

The Court of Appeal disagreed.  Quoting Briggs LJ in Hut Group, Clarke LJ said that it was for the courts to apply “all its tools of linguistic, contextual, purposive and common sense analysis to discern what the clause really means”.  He went on to say that “If as a result of so doing the answer becomes clear the court should give effect to it even though the interpretation may deprive a party of a right at law which he might otherwise have had. It is open to parties to make an agreement which has that effect”.  Judgment in the Hut Group had been handed down after the first instance decision in Scottish Power and before the Court of Appeal and had cast doubt upon whether the “presumption” was in truth a presumption at all, stating “This approach to exclusion clauses is not now regarded as a presumption, still less as a special rule justifying the giving of a strained meaning to a provision merely because it is an exclusion clause”.
 

The approach taken in Scottish Power is therefore broadly consistent with the approach taken by the Court of Appeal in the Providence litigation.  In Providence Lord Justice Moore-Bick noted that the Gilbert-Ash case itself had concerned whether rights of abatement or set-off specifically had been given up by an agreement to pay against certificates issued by an architect. Those rights were said to have particular importance in those circumstances such that it was correct to presume they were not given up unless that was made clear. However, following Providence and Scottish Power it seems that the “presumption” will apply less readily where a clause is evidently directed at excluding some rights and the debate centres on the extent of those rights.    
 

The Court of Appeal in Providence went on to say that “since the decision in Photo Production any presumption that parties to a contract do not intend to give up their right to claim damages for breach of contract must likewise give way to the language of the contract.”  Photo Production4 was decided by the House of Lords in 1980 but that had not stopped the Gilbert-Ash “presumption” being heavily cited since.  The Hut GroupProvidence, and now, particularly, Scottish Power do appear to mark a judicial move away from strained construction and presumption and towards a plain construction of what the parties objectively intended by the words used.   The “presumption” still appears to have its place but its days as the star of the show on exclusion clauses look a little more limited.  

 

1    Gilbert–Ash (Northern) Limited v Modern Engineering (Bristol) Limited [1974] AC 689
2   Stocznia Gdynia SA v Gearbulk Holdings Ltd [2009] EWCA Civ 75; Sonat Offshore SA v Amerada Hess Development and Texaco (Britain) [1988]     1           Lloyd’s Rep 145; Seadrill Management Services Ltd v OAO Gazprom [2010] EWCA Civ 691; Transocean Drilling UK Ltd v Providence Resources Plc              [2016] EWCA Civ 372; Fujitsu Services Ltd v IBM United Kingdom Ltd [2014] EWHC 752 (TCC); 153 Con. L.R. 203; Nobahar-Cookson v Hut Group Ltd           [2016] EWCA Civ 128; Cavendish Square Holdings BV v Makdessi [2015] UKSC 67; Bunge SA v Nidera BV (formerly Nidera Handelscompagnie BV)             [2015] UKSC 43; Polypearl Ltd v E.ON Energy Solutions Ltd [2014] EWHC 3045 (QB); Kudos Catering (UK) Ltd v Manchester Central Convention                  Complex Ltd [2013] EWCA Civ 38; Shell Egypt West Manzala GmbH v Dana Gas Egypt Ltd (formerly Centurion Petroleum Corp) [2010] EWHC 465               (Comm); Kaupthing Singer & Friedlander Ltd (In Administration), Re [2009] EWHC 740; Dalkia Utilities Services Plc v Celtech International Ltd [2006]         EWHC 63 (Comm); Bovis Lend Lease Ltd (formerly Bovis Construction Ltd) v RD Fire Protection Ltd [2003] EWHC 939 (TCC); Multiplex Constructions         (UK) Ltd v Cleveland Bridge UK Ltd [2006] EWHC 1341 (TCC)
3    Scottish Power UK PLC v BP Exploration Operating Company Limited and others [2016] EWCA Civ 1043

4    Photo Production Ltd v Securicor Transport Ltd  [1980] 2 W.L.R. 283

Related news & insights

News / Court rejects jurisdictional challenge in petroleum dispute

18-02-2022 / Commodities & Trade

Addax Energy S.A. v. Petro Trade Inc. [2022] EWHC 237 (Comm) In a dispute arising out of the supply of petroleum products, the English Court has dismissed a challenge to its jurisdiction, finding that the claimant supplier had a good arguable case that an English jurisdiction clause was incorporated into an alleged oral agreement by way of course of dealing. In doing so, the Court confirmed that the evidence required to establish a course of dealing need not be extensive or consistent to meet the relevant legal test.

Court rejects jurisdictional challenge in petroleum dispute

News / EU Blocking Regulation, US sanctions and contractual termination – when sanctions and business collide

18-02-2022 / Commodities & Trade, Maritime

In a recent ruling, the European Court of Justice (“ECJ”) was asked to consider the interpretation of Article 5 of EC Regulation No. 2771/96 of 22 November 1996 (commonly referred to as the “Blocking Regulation”) in relation to the termination, by a German telecoms company, of a contract with a bank subject to US sanctions.

EU Blocking Regulation, US sanctions and contractual termination – when sanctions and business collide

Insights / Court upholds validity of Notice of Arbitration in commodities dispute

12-01-2022 / Commodities & Trade

This commodities dispute highlights the importance of drafting a notice of arbitration carefully to ensure that it covers all the disputes that are intended to be referred to arbitration.

Court upholds validity of Notice of Arbitration in commodities dispute

Insights / Tribunal’s findings in commodities dispute result in substantial injustice

04-08-2021 / Commodities & Trade

PBO v. DONPRO & others [2021] EWHC 1951 (Comm)

Tribunal’s findings in commodities dispute result in substantial injustice

Insights / Where’s my crude oil? Court upholds claim for return of monies paid under FOB contract

24-06-2021 / Commodities & Trade

BP Oil International Limited v. (1) Vega Petroleum Limited & (2) Dover Investments Limited [2021] EWHC 1364 (Comm)

Where’s my crude oil? Court upholds claim for return of monies paid under FOB contract

Insights / Court concludes parties had not agreed to arbitrate commodities dispute

01-03-2021 / Commodities & Trade

Black Sea Commodities Ltd v. Lemarc Agromond Pte Ltd [2021] EWHC 287 (Comm)

Court concludes parties had not agreed to arbitrate commodities dispute