#6660 - Pell Frischmann V. Bow Valley Iran - Commercial Remedies BCL

Pell Frischmann v. Bow Valley Iran

Facts

This appeal is concerned with the unfortunate outcome of a plan for a joint venture between the parties to the action. They hoped to conclude a profitable contract with the National Iranian Oil Company ("NIOC") for the development of an offshore oilfield known as the Balal field.

(1) July 1995 to October 1996: PFE invested time and money (with no involvement of BVE or Bakrie) in establishing good relations with NIOC and obtaining recognition as prequalified to bid for the Balal project.

(2) November 1996 to March 1997: BVE and Bakrie both entered into confidentiality agreements with PFE as prospective members of a consortium to undertake the Balal project; PFE submitted its final proposal (19 December 1996) and its final bid (12 March 1997) with some input of expertise from BVE and others; PFE entered into a conditional contract with NIOC, but with some unwelcome last-minute terms (19 March 1997).

(3) April to mid-June 1997: PFE could not comply with the condition (as to a $5m bond) imposed by NIOC; there were discussions as to buy-outs between the prospective consortium members; BVE and Bakrie had direct contact with NIOC at Kuala Lumpur (5 June 1997) and PFE alleged breaches of the confidentiality agreements.

(4) Mid- to end-June 1997: Mr Mirhadi of NIOC was in Calgary; NIOC sent an ultimatum (the "15-day letter") to PFE (16 June 1997); PFE and Monument Oil and Gas had unsuccessful meetings with NIOC in Teheran (22 June 1997).

(5) July 1997: PFE, BVE and Bakrie resumed buy-out negotiations while the 15-day period (slightly extended) ran out; the negotiations came to nothing (8 July 1997); NIOC entered into an agreement with BVE and Bakrie (28 July 1997).

Holding

Lord Walker

Summary of Principles applicable to Wrotham Park Damages

(1) Damages (often termed "user damage") are readily awarded at common law for the invasion of rights to tangible moveable or immoveable property (by detinue, conversion or trespass): Stoke at pp1410-1412; Experience Hendrix at paras 18 and 26.

(2) Damages are also available on a similar basis for patent infringement and breaches of other intellectual property rights of a proprietary character: Stoke at p1412; General Tire and Rubber Co v Firestone Tyre and Rubber Co Ltd [1975] 1 WLR 819.

(3) Damages under Lord Cairns's Act are intended to provide compensation for the court's decision not to grant equitable relief in the form of an order for specific performance or an injunction in cases where the court has jurisdiction to entertain an application for such relief: Lord Nicholls in Blake at p281. Most of the recent cases are concerned with the invasion of property rights such as excessive user of a right of way (Bracewell v. Appleby [1975] Ch 408, Jaggard). The breach of a restrictive covenant is also generally regarded as the invasion of a property right (Peter Gibson LJ in Experience Hendrix at para 56) since a restrictive covenant is akin to a negative easement. (It is therefore a little surprising that Lord Nicholls in Blake, at p283, referred to Wrotham Park as a "solitary beacon" concerned with breach of contract; that case was concerned with the breach of a restrictive covenant to which neither the plaintiff nor the defendant was a party; but the decision of the House of Lords in Blake decisively covers what their Lordships have referred to as a non-proprietary breach of contract.)

(4) Damages under this head (termed "negotiating damages" by Neuberger LJ in Lunn Poly at para 22) represent "such a sum of money as might reasonably have been demanded by [the claimant] from [the defendant] as a quid pro quo for [permitting the continuation of the breach of covenant or other invasion of right]" (Lunn Poly at para 25).

(5) Although damages under Lord Cairns's Act are awarded in lieu of an injunction it is not necessary that an injunction should actually have been claimed in the proceedings, or that there should have been any prospect, on the facts, of it being granted: Millett LJ in Jaggard at p285 (but cf at p291); Lord Nicholls in Blake at p282; Chadwick LJ in World Wide Fund for Nature v World Wrestling Federation Entertainment Inc [2008] 1 WLR 445, para 54. This point was not raised in argument in the appeal but is pertinent since there was such a long delay before PFE issued the order of justice commencing these proceedings.

(6) It is a negotiation between a willing buyer (the contract-breaker) and a willing seller (the party claiming damages) in which the subject-matter of the negotiation is the release of the relevant contractual obligation. Both parties are to be assumed to act reasonably. The fact that one or both parties would in practice have refused to make a deal is therefore to be ignored.

Date of Assessment

Another issue is how far the court is entitled, in its assessment of Wrotham Park damages, to take account of events occurring after the time at which the hypothetical negotiation takes place (and in particular, to take account of how...