SCOTTISHPOWER ENERGY RETAIL LTD AGAINST EQUORIUM PROPERTY COMPANY LTD

Factual and Procedural Background

The Plaintiff, an electricity supplier, entered into a contract with the Defendant and three other related companies, all within the same corporate group, under which they were jointly and severally liable for payment of electricity supplied to certain premises. The contract was subsequently amended by a Letter of Variation intended to allow additional time for payment of a substantial outstanding sum. The Defendant contends that the Letter of Variation altered the contract so that the Defendant no longer bears joint and several liability, but only a pro rata share. The Plaintiff seeks recovery of the full outstanding sums based on joint and several liability. The dispute centers on the construction of the contract as amended. The case was called for debate with the Plaintiff seeking decree de plano and the Defendant seeking dismissal of the action.

Legal Issues Presented

1. Whether the terms of the Letter of Variation altered the Defendant’s liability from joint and several to a pro rata share.
2. The proper construction of clause 10 of the Letter of Variation in the context of the original Agreement and its general terms.
3. The extent of liability undertaken by added parties to the Letter of Variation who were not originally parties to the Agreement.

Arguments of the Parties

Defendant's Arguments

• The contract should be interpreted primarily by the language used, as the Agreement and Letter of Variation were professionally drafted.
• Clause 10 of the Letter of Variation specifically limits joint and several liability to only two of the parties, superseding the original clause 4.1 which imposed joint and several liability on all four original parties.
• The presumption against superfluous terms supports that clause 10 is a deliberate amendment, not a redundancy.
• The Letter’s bespoke provisions demonstrate an intention to depart from the original joint and several liability arrangement.
• Commercial common sense supports the Defendant’s position given the financial difficulties of some group members and the desire to limit exposure of those not in difficulty.

Plaintiff's Arguments

• The Letter of Variation was not professionally drafted and should be construed purposively, giving effect to the overall intention rather than strict wording.
• Clause 10 does not remove joint and several liability from the Defendant; the original joint and several liability clause remains in force.
• The Letter did not expressly state any intention to depart from joint and several liability, which would have been required if that were the case.
• The addition of new parties to the Letter created new payment obligations but did not alter existing liabilities.
• It would be commercially nonsensical for fewer parties to bear joint and several liability given the financial difficulties faced by some group members.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began with the established principles of contractual interpretation, focusing on the language used by the parties in a professionally drafted contract. The original Agreement imposed joint and several liability on four companies, including the Defendant. The Letter of Variation, which amended the Agreement, introduced new parties and new payment obligations but was poorly drafted and unclear on whether it altered the joint and several liability of the Defendant.

The court identified a conflict between clause 10 of the Letter, which imposed joint and several liability on only two companies, and the original clauses imposing joint and several liability on all four. Clause 1.2 of the Agreement provided that in case of conflict, the earlier document in the list (the Agreement) would prevail unless amended expressly.

The court found that clause 10 of the Letter was intended as an express amendment to the Agreement, not a mere restatement, because:

• Clauses 7 and 8 of the Letter do not limit amendments only to clause 8 subparagraphs since clause 5 (adding parties) is also an amendment.
• The Letter did not specify particular provisions being amended, but its wording was intended to prevail.
• No rational reason existed for restating joint and several liability applying only to two of the four companies if the other two remained liable.
• Clause 10 specifically addressed liability for both the outstanding balance and future supply, indicating deliberate amendment.
• Inclusion of new parties required clarification of joint and several liability, which clause 10 provided.

Although the Letter was poorly drafted, the court did not depart from the natural meaning of its provisions. Commercial common sense did not decisively support either party’s interpretation, and the court was cautious not to rewrite the contract to assist an unwise party. The court rejected the Plaintiff’s argument that clause 10 was a mistake or redundant.

Regarding the added parties who were not originally party to the Agreement, the court found they undertook severally liability for their own premises but did not assume joint and several liability for the group’s obligations.

Holding and Implications

The court dismissed the Plaintiff's action and sustained the Defendant's first plea-in-law.

The court held that the Letter of Variation expressly amended the original Agreement to limit joint and several liability to only two of the original four companies, excluding the Defendant. Consequently, the Defendant is liable only for its pro rata share and not jointly and severally liable for the full outstanding sums.

The decision directly affects the parties by limiting the Defendant's financial exposure under the amended contract. The court did not establish new legal precedent but applied established principles of contractual interpretation to the facts and contractual documents before it.