LONGHILL WIND FARM LLP AGAINST MUIRHALL ENERGY LTD AND OTHERS

Factual and Procedural Background

The case concerns the construction of a contractual provision within a contract between wind farm developers. The Defenders were developing a wind farm near an airport and, to mitigate radar interference caused by turbines, the sixth Defender procured and paid for a new radar system operated by NATS. The Mitigation and Services Contract ("MSC") dated 21 October 2015 and amended in 2017 governed the arrangements regarding the radar system, including a clause requiring third party developers to pay a capex repayment fee to NATS, which NATS would then pay to the sixth Defender.

The Pursuer, a third party developer, was developing a wind farm nearby and sought permission to use the new radar system. In return, the Pursuer's former parent company agreed to grant access rights to the Defenders' development site. These arrangements were formalised in Consent Missives dated 16 August 2019, which included a provision stating that no sums would be due to the sixth Defender or related companies from the Pursuer or its group by virtue of the grant of radar use consents and the operation of the MSC.

In February 2021, upon the sale of the Pursuer to a new parent company, an assignation transferred the benefit of the relevant contractual condition to the Pursuer. Subsequently, the Pursuer paid a capex recovery fee of £1.6 million to NATS, which NATS passed to the sixth Defender. The sixth Defender has not returned the fee, leading the Pursuer to seek a declarator that the benefit of the contractual condition was validly assigned, that the sixth Defender breached the provision, and damages of £1.6 million.

The commercial judge found in favour of the Pursuer, holding that the provision had contractual effect, the assignation was valid, and the sixth Defender was in breach. The sixth Defender appealed, and the Pursuer cross-appealed on a related issue.

Legal Issues Presented

1. Whether the contractual provision in the Consent Missives had contractual effect.
2. If so, how the provision should be interpreted, specifically whether it covered payments made indirectly through the operation of the Mitigation and Services Contract.
3. Whether the benefit of the relevant contractual condition was validly assigned to the Pursuer.
4. Whether the sixth Defender was obliged to waive and desist from exercising any right to obtain payment of the capex recovery fee.

Arguments of the Parties

Sixth Defender's Arguments

• The provision was not a warranty or binding contractual term but a mere statement of understanding without contractual effect.
• The phrase "through the operation of the Mitigation and Services Contract" lacked substantive content and should not be construed to impose obligations on the sixth Defender.
• The provision applied only to direct payments and did not cover payments made by third parties such as NATS.
• The provision did not extend to payments made by an assignee, and the assignation was ineffective due to an element of delectus personae.
• The sixth Defender was not obliged to waive any rights under the MSC to obtain payment of the capex recovery fee.

Pursuer's Arguments

• The provision had contractual effect, supported by the presumption that all parts of a formal contract are intended to be operative.
• The provision was intended to assure that no undisclosed consideration would be received by the Defenders via the MSC as a result of the grant of radar use consents.
• The provision covered payments made directly or indirectly by the Pursuer, its group, or assignees through the operation of the MSC.
• The benefit of the contractual condition was assignable and had been validly assigned to the Pursuer.
• The provision was a warranty breached by the sixth Defender, entitling the Pursuer to damages of £1.6 million.
• The sixth Defender was not obliged to waive its rights under the MSC, but this was a secondary point.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by confirming that the provision in question was part of a negotiated, written contract with legal advice, and thus had contractual effect. The phrase "for the avoidance of doubt" was interpreted as emphasizing the contractual intention rather than negating it. The court held that the provision constituted an undertaking that no sums would be paid or be due to be paid to the sixth Defender or related companies by the Pursuer or its group through the operation of the MSC as a result of the grant of radar use consents.

Regarding assignability, the court found no indication of delectus personae restricting the assignation of the benefit of the provision. Given the nature of wind farm development and the commercial context, it was commercially sensible that the rights be assignable, especially since ownership changes were contemplated.

On whether payments by assignees were covered, the court held that the absence of explicit reference to assignees in the provision or definitions was not determinative. The reasonable reader would interpret references to EKUK and its group companies as including assignees, consistent with commercial common sense and industry practice.

The court rejected the sixth Defender's narrower interpretation that the provision applied only to direct payments or to premiums rather than capex recovery fees. The provision's language and factual context supported the Pursuer's interpretation that it covered indirect payments made via NATS under the MSC.

Finally, the court declined to consider the cross-appeal concerning whether the provision required the sixth Defender to waive its rights, as it was not actively pursued.

Holding and Implications

The court REFUSED the sixth Defender's reclaiming motion (appeal) and the Pursuer's cross-appeal.

The court affirmed the commercial judge's decision that the provision had contractual effect, that the benefit of the provision was validly assigned to the Pursuer, and that the sixth Defender was in breach of the provision. Consequently, the sixth Defender was liable to pay damages of £1.6 million to the Pursuer.

No broader implications or new legal precedents were established beyond the direct effect of confirming the contractual interpretation and assignability in this specific commercial context. The court also corrected procedural slips in the interlocutor relating to the terms of declarator and expenses.