"BP and Sonatrach wish to set out in this Agreement the terms for sharing the Grain Capacity and for scheduling and other operational arrangements with respect to the Services (as defined in the Service Agreement), and with respect to the rights and obligations of the Contracting Shipper (as defined below)."
"The Co-Shippers agree that the following principles shall apply, and the Agent shall apply the following principles, in determining how any cost or amount payable to or received from [Grain] under the Services, Transco under the TSA and any other parties in relation to the usage of the Terminal by the Co-Shippers are to be borne by, or allocated between, the Co-Shippers."
"14 Over the past 45 years, the House of Lords and Supreme Court have discussed the correct approach to be adopted to the interpretation, or construction, of contracts in a number of cases starting with Prenn v Simmonds[1971] 1 WLR 1381 and culminating in Rainy Sky SA v Kookmin Bank[2011] 1 WLR 2900 . 15 When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to “what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”, to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd[2009] AC 1101 , para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. In this connection, see Prenn[1971] 1 WLR 1381 , 1384-1386; Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as HE Hansen-Tangen)[1976] 1 WLR 989 , 995-997, per Lord Wilberforce; Bank of Credit and Commerce International SA v Ali[2002] 1 AC 251 , para 8, per Lord Bingham of Cornhill; and the survey of more recent authorities in Rainy Sky[2011] 1 WLR 2900 , paras 21-30, per Lord Clarke of Stone-cum-Ebony JSC. 16 For present purposes, I think it is important to emphasise seven factors. 17 First, the reliance placed in some cases on commercial common sense and surrounding circumstances (e.g. in Chartbrook[2009] AC 1101 , paras 16-26) should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision. 18 Secondly, when it comes to considering the centrally relevant words to be interpreted, I accept that the less clear they are, or, to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning. That is simply the obverse of the sensible proposition that the clearer the natural meaning the more difficult it is to justify departing from it. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning. If there is a specific error in the drafting, it may often have no relevance to the issue of interpretation which the court has to resolve. 19 The third point I should mention is that commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language. Commercial common sense is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date that the contract was made. Judicial observations such as those of Lord Reid in Wickman Machine Tools Sales Ltd v L Schuler AG[1974] AC 235 , 251 and Lord Diplock in Antaios Cia Naviera SA v Salen Rederierna AB (The Antaios)[1985] AC 191 , 201, quoted by Lord Carnwath JSC at para 110, have to be read and applied bearing that important point in mind. 20 Fourthly, while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. Experience shows that it is by no means unknown for people to enter into arrangements which are ill-advised, even ignoring the benefit of wisdom of hindsight, and it is not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. Accordingly, when interpreting a contract a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party. 21 The fifth point concerns the facts known to the parties. When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties. Given that a contract is a bilateral, or synallagmatic, arrangement involving both parties, it cannot be right, when interpreting a contractual provision, to take into account a fact or circumstance known only to one of the parties. 22 Sixthly, in some cases, an event subsequently occurs which was plainly not intended or contemplated by the parties, judging from the language of their contract. In such a case, if it is clear what the parties would have intended, the court will give effect to that intention. An example of such a case is Aberdeen City Council v Stewart Milne Group Ltd 2012 SC (UKSC) 240, where the court concluded that “any … approach” other than that which was adopted “would defeat the parties' clear objectives”, but the conclusion was based on what the parties “had in mind when they entered into” the contract: see paras 21 and 22. 23 Seventhly, reference was made in argument to service charge clauses being construed “restrictively”. I am unconvinced by the notion that service charge clauses are to be subject to any special rule of interpretation. Even if (which it is unnecessary to decide) a landlord may have simpler remedies than a tenant to enforce service charge provisions, that is not relevant to the issue of how one interprets the contractual machinery for assessing the tenant's contribution. The origin of the adverb was in a judgment of Rix LJ in McHale v Earl Cadogan[2010] HLR 412 , para 17. What he was saying, quite correctly, was that the court should not “bring within the general words of a service charge clause anything which does not clearly belong there”. However, that does not help resolve the sort of issue of interpretation raised in this case."
“‘Of course, so and so will happen; we did not trouble to say that; it is too clear.’”
“for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.” 19 In Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472, 481, Bingham MR set out Lord Simon's formulation, and described it as a summary which “distil[led] the essence of much learning on implied terms” but whose “simplicity could be almost misleading.”
“The question of whether a term should be implied, and if so what, almost inevitably arises after a crisis has been reached in the performance of the contract. So the court comes to the task of implication with the benefit of hindsight, and it is tempting for the court then to fashion a term which will reflect the merits of the situation as they then appear. Tempting, but wrong. [He then quoted the observations of Scrutton LJ in the Reigate case, and continued] it is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred …” 20 Bingham MR's approach in the Philips case was consistent with his reasoning, as Bingham LJ in the earlier case Atkins International HA v Islamic Republic of Iran Shipping Lines (The APJ Priti)[1987] 2 Lloyd's Rep 37 , 42, where he rejected the argument that a warranty, to the effect that the port declared was prospectively safe, could be implied into a voyage charterparty. His reasons for rejecting the implication were “because the omission of an express warranty may well have been deliberate, because such an implied term is not necessary for the business efficacy of the charter and because such an implied term would at best lie uneasily beside the express terms of the charter.” 21 In my judgment, the judicial observations so far considered represent a clear, consistent and principled approach…”
“It could be dangerous to reformulate the principles, but I would add six comments on the summary given by Lord Simon in the BP Refinery case 180 CLR 266, 283 as extended by Bingham MR in the Philips case [1995] EMLR 472 and exemplified in The APJ Priti[1987] 2 Lloyd's Rep 37 . First, in Equitable Life Assurance Society v Hyman[2002] 1 AC 408 , 459, Lord Steyn rightly observed that the implication of a term was “not critically dependent on proof of an actual intention of the parties” when negotiating the contract. If one approaches the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting. Secondly, a term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them. Those are necessary but not sufficient grounds for including a term. However, and thirdly, it is questionable whether Lord Simon's first requirement, reasonableness and equitableness, will usually, if ever, add anything: if a term satisfies the other requirements, it is hard to think that it would not be reasonable and equitable. Fourthly, as Lord Hoffmann I think suggested in Attorney General of Belize v Belize Telecom Ltd[2009] 1 WLR 1988 , para 27, although Lord Simon's requirements are otherwise cumulative, I would accept that business necessity and obviousness, his second and third requirements, can be alternatives in the sense that only one of them needs to be satisfied, although I suspect that in practice it would be a rare case where only one of those two requirements would be satisfied. Fifthly, if one approaches the issue by reference to the officious bystander, it is “vital to formulate the question to be posed by [him] with the utmost care”, to quote from Lewison, The Interpretation of Contracts 5th ed (2011), p 300, para 6.09. Sixthly, necessity for business efficacy involves a value judgment. It is rightly common ground on this appeal that the test is not one of “absolute necessity”, not least because the necessity is judged by reference to business efficacy. It may well be that a more helpful way of putting Lord Simon's second requirement is, as suggested by Lord Sumption JSC in argument, that a term can only be implied if, without the term, the contract would lack commercial or practical coherence.”
“The courts' usual role in contractual interpretation is, by resolving ambiguities or reconciling apparent inconsistencies, to attribute the true meaning to the language in which the parties themselves have expressed their contract. The implication of contract terms involves a different and altogether more ambitious undertaking: the interpolation of terms to deal with matters for which, ex hypothesi, the parties themselves have made no provision. It is because the implication of terms is so potentially intrusive that the law imposes strict constraints on the exercise of this extraordinary power.” 30 It is of some interest to see how implication was dealt with in the recent case in this court of Aberdeen City Council v Stewart Milne Group Ltd 2012 SC (UKSC) 240. At para 20, Lord Hope of Craighead DPSC described the implication of a term into the contract in that case as “the product of the way I would interpret this contract”
“… a term prima facie to be implied must, according to well established principle, always yield to the express letter of the bargain.”
“It is trite law that a term will not be implied which contradicts the express terms of the contract.”
“It is, of course, impossible to imply in a contract any term or condition inconsistent with its express provisions, or with the intention of the parties as gathered from those provisions. The first thing, therefore, in every case is to compare the term or condition which it is sought to imply with the express provisions of the contract, and with the intention of the parties as gathered from those provisions, and ascertain whether there is any inconsistency.”
“This principle is sparingly and cautiously used and may never be employed to imply a term in conflict with the express terms of the text.”
“… any terms which the courts imply into a contract must be consistent with the express terms. Implied terms may supplement the express terms of the contract but cannot contradict them. Only Parliament may actually override what the parties have agreed.”
“you cannot imply a term which contradicts an expressed term, because the parties cannot have intended that.”
"the Terminal would blend regasified LNG to the upper limit Wobbe value of 51.41"
“‘Of course, so and so will happen; we did not trouble to say that; it is too clear.’”
“‘Of course, so and so will happen; we did not trouble to say that; it is too clear.’”
"Details 1. Claim Air Products BP noted that Paul Sullivan of GLNG had intimated that GLNG expect Air Products to be open to settling their£1.9M claim for a figure somewhere in the range of£900,000 to£1.2 million . BP agreed that there was no legal basis of claim by Air Products but had some sympathy commercially with their position and that GLNG should take responsibility for the cost recognising the delay in the start up of the recondenser. BP then proposed the following: ..... • BP raised concerns about the fact that due to a manifest error in the JSA cost allocation formula, BP had been paying for nitrogen which BP believes is being used by Sonatrach and that a new formula for sharing nitrogen costs under the Joint Shippers Agreement (JSA) had been discussed on several occasions at the operational level and agreed in principle between Sonatrach and BP. Sonatrach commented that not all nitrogen use has been for Sonatrach and that there are times when nitrogen use has been significant even though Sonatrach was not sending out and to what [sic] extent GLNG were using nitrogen for their own purposes. BP intimated that the current stock composition in tank is a GL 1Z and a BP cargo commingled and BP have been recently sending out, so the increase in nitrogen usage recently has been for the purpose of this commingling. • BP's proposal to share in the settlement of the Air Products claim is on the basis that a reconciliation of nitrogen cost allocation is carried out by BP and Sonatrach for last year (i.e. for the period July 05 to July 06) under the terms of the annual reconciliation procedures in the JSA but using the new Nitrogen cost allocation formula. Since July 06 it appears that the Agent has been applying the new formula notwithstanding the terms of the JSA for the allocation of the nitrogen costs. BP have not yet calculated this amount but have an expectation that the reconciliation could be as much as£1.5 million . Sonatrach agreed in principle with a historic reconciliation (i.e. for the period from July 2005 - 2006) as it was accepted that there was a manifest error in the formula in the JSA, but stated that this calculation should be thoroughly checked first. BP suggested that the Agent would carry out the calculation and then report to each of the co-shippers to check the numbers. IT WAS AGREED that the Agent be instructed to carry out such a calculation and revert to BP and Sonatrach with its calculations and justification. Sonatrach stated that BP and Sonatrach would need to explore how payment for the nitrogen reconciliation could be made to BP (i.e. that it may be done over a period of months netting off the amount owed through the sharing of all terminal costs). It was noted that until the JSA had been amended and modified it would not be appropriate to use a new formula in an ad hoc manner. BP commented that the new formula was being applied by the Agent despite the terms of the JSA so as to avoid building up a greater liability between BP and Sonatrach. Nick Stranks stated that the new formula was applied to last month's invoice (August) but approval had not been given yet by Sonatrach to this application. Apparently Ian MacLeod at the agency believed that Nick Stranks had given verbal approval but this is not the case. IT WAS AGREED that the JSA would be modified so as to deal with this issue of the appropriate allocation of nitrogen costs."
"BP and Sonatrach agreeing ..."
"BP and Sonatrach agreeing and fixing historical costs for nitrogen use, these being reconciled between BP and Sonatrach and a new formula being applied via amendment to the JSA."
"N2 Error in JSA Formula – JSA needs rectifying. BP/SH accepted that calculation was wrong. Agents to produce report for SH/BP (Blas providing SS needed) by next Wednesday. Annual rec need to consider."
"N2 – error in formula, accepted by SH, SH waiting to receive report before approaching BP on how to resolve reconciliation and correct allocation going forward (AW). I agreed to the formula being kept as is now (wrong) until SH report issued and SH come back to us. Keeping ICF and Wobbe in formula as are (not as plant operates) which benefits BP."
"If [BP and Sonatrach] did not...agree at the September 2006 or February 2007 Steering Committee meetings [to amend the JSA to replace 51.41 in D2.2.2(ii)(b) with the monthly weighted average Wobbe value in fact blended to by Grain], whether BP thereby breached its express obligation of good faith under the JSA."
"A while ago I was asked, in my capacity as Agent, to produce a spreadsheet on the reconciliation of LIN costs as paid by the co-shippers since the start of terminal operations. As the method of cost allocation seems to be open to interpretation, in regards to Wobbe and line cooling, please find attached a spreadsheet with my results for 4 different scenarios... Additionally attached is a basic memo on how to enable the various options in the spreadsheet and the methodology behind the LIN cost allocation - particularly relevant for the pre-4th September 2005 costs. ..."
"-We were expecting SH to raise at some point that 51.1 should be used instead of 51.41. I think this is a fair request from them, and we would show an open mind and willing to work with SH if we accepted this change. But I don't feel comfortable with us being the only ones giving in. If this factor of the formula is changed to 51.1, we need to make clear that we want Grain to work with smaller margins, and that this factor should be revised in mid-2007, when Grain will hopefully be operating targeting a higher Wobbe."
"1.6.1 An invoicing Shipper may deliver to a Paying Shipper an invoice of the amount which may be invoiced by such Invoicing Shipper: (i) as notified by the Agent in a Monthly Statement, a reconciliation statement under Section D2.2.3 or otherwise under Sections D1.3.2(ii) or D1.3.3(ii), no later than two (2) Business Days after receipt of such statement or notification; and (ii) as permitted under paragraph 5.3 of Schedule 1, Provided that, in each case, no delay in submitting an invoice shall prejudice the liability of the Paying Shipper for any amounts under this Agreement."
"1.6.2 The Co-Shippers acknowledge that the duties of the Agent include the following, in each case to be carried out efficiently and effectively, acting as a Reasonable and Prudent Operator and in accordance with, and subject to, the provisions of this Agreement or as otherwise agreed between the Co-Shippers: ... (iv) to determine how costs are shared between the Co-Shippers ... And that where the Agent is uncertain as to how any of its duties is to be carried out or how any determination is to be carried out, it shall promptly refer such matter to, and seek guidance from, the Co-Shippers Steering Committee." (my emphasis) In addition, Schedule 1 to the JSA ("
"* The N allocation formula used in the previous versions was incorrect. It incorporated the correction for the molar weight of air and it also capped the X & Y Correction Factors between 0 and 100%. Both of these additions are not present in the JSA formula. * The "