Lac Minerals Ltd v Chevron Mineral Corporation of Ireland

JurisdictionIreland
JudgeMr. Justice Francis D. Murphy
Judgment Date01 January 1995
Neutral Citation1994 WJSC-HC 3344
CourtHigh Court
Docket Number1993/3598p
Date01 January 1995

1994 WJSC-HC 3344

THE HIGH COURT

1993/3598p
LAC MINERALS LTD v. CHEVERON MINERALS CORPORATION OF IRL

BETWEEN

LAC MINERALS LIMITED
PLAINTIFFS

AND

CHEVRON MINERAL CORPORATION OF IRELAND, IVERNIA WEST PLC AND TRANSOCEAN CHEVRON CORPORATION
DEFENDANTS

Citations:

FORBES V GIT 1932 1 AC 256

IRISH LIFE ASSURANCE CO LTD V DUBLIN LAND SECURITIES LTD 1989 IR 253

CHITTY ON CONTRACT LAW 26ED PARA 375

MAJESTIC HOMES PROPERTY LTD V WISE 1978 QDR 225

SHEPEARD V GRAHAM & ANOR 1947 NZLR 654

CRADDOCK V HUNT 1923 2 CH 136

LY GEN OBLIG LAW 15 - 301(1) (1989)

LOPER V O'ROURKE 382 NYS 2ND 663

GENET V PRESIDENT OF DELAWARE & HUDSON CANAL CO 136 NY 593

SEITZMAN V HUDSON RIVER ASSOCIATION 513 NY 2ND 148

HARTMAN V WINSOR HOTEL CO 132 W VA 307

FREDERICK INN LTD 1991 ILRM 582

POWER SUPERMARKETS LTD V CRUMLIN INVESTMENTS LTD UNREP COSTELLO 22.6.81 1981/11/2038

MCINERNEY, STATE V DUBLIN CO COUNCIL 1985 ILRM 513

ANDERSON V 50 EAST 72D STREET CONDOMINIUM 119 AD 2D 73, 505 NYS 2D 101

Synopsis:

CONTRACT

Rectification

Remedy - Claimant - Stranger - ~Locus standi~ - Absence - Joint venture agreement between defendants - Proposed assignment of rights of one defendant - Condition - Other defendant entitled to right of pre-emption - Procedure for exercise of right - Limited period for exercise of right - Conflicting terms specifying appropriate period - Claim to rectification by plaintiff stranger G dismissed - (1993/3598 P - Murphy J. - 12/9/94)

|LAC Minerals Ltd. v. Chevron Mineral Corporation of Ireland|

1

Judgment of Mr. Justice Francis D. Murphy delivered the 12th day of September 1994.

2

For some time prior to the summer of 1989, Chevron Mineral Corporation of Ireland (C.M.C.I.) and/or some other company in the Chevron Group held Prospecting Licences for mineral extraction at Lisheen in the County of Tipperary and elsewhere in the Republic of Ireland. Chevron (and in this context I use the word as including C.M.C.I, or other companies in the same group) were anxious to exploit these mineral rights in conjunction with another interested party. For that purpose they identified Ivernia West Plc, a company incorporated in Ireland of which Mr. David Hough was at all material times the Managing Director. On the 15th of November, 1989 an agreement known as the I.P.L. Joint Venture Agreement (to which I shall refer as "the J.V.A.") was concluded. As the name implies this was a joint venture agreement. Under it C.M.C.I, held a 52.5 interest and Ivernia a 47.5 interest.

3

The J.V.A. provided at Clause 15.1 thereof that in general a participant (that is to say a person having an interest in the assets or other rights the subject matter of the J.V.A.) should have the right to transfer, grant, assign, encumber, pledge or otherwise commit or dispose of to any third party all or any part of its participating interest but subject to the other provisions of Section 15 aforesaid. Those limiting or restrictive provisions included the preemptive rights which are all important to the present case and which are specified in Section 15.3 of the J.V.A.. For convenience I am incorporating the entire of Section 15.3 aforesaid as an appendix to this judgment. For the purposes of introducing the issues between the parties it is sufficient to observe that Section 15.3.1.4 provides that where a participant desires to transfer all or any part of any participating interest he is bound to give a written notice to each other participant and that that notice must state (among other things) that "the offer is open for acceptance for a period of forty-five days after receipt of such offer by the offeree". Unhappily, Section 15.3.2 specifies the rights of the offeree - as opposed to the duties of the offeror - in the following terms:-

"The offeree shall have the right and option for a period of sixty days after receipt of the offer, unless enlarged pursuant to Sections 15.3. 3 or 15.3.4 to state by notice in writing (the acceptance) to the offeror whether or not any offeree elects to acquire the subject interest, pro rata in proportion to its participating interests."

4

Whilst many difficult questions of fact and law (both Irish and New York) arise the essential problem has been whether these two apparently irreconcilable time limits can be harmonised and, if not, which should be rejected.

5

Some time about June 1993, Dr. Westoll, a Senior Geologist with Lac Minerals Limited (Lac) learned that Chevron intended to dispose of some of its mineral assets situate in South America and Ireland. As there were a number of interested parties the transaction was carried out by a system of private tenders in which Lac was successful and ultimately an agreement was executed on the 31st of August 1993 by virtue of which Lac agreed to acquire - albeit indirectly - the interest of Chevron under the J.V.A.. Whilst the original proposal had been that Lac would purchase the tangible and intangible assets, the subject matter of that agreement, it was subsequently proposed and agreed that the transaction would be carried out by means of a transfer of shares of a new company (Newco) to which would have been transferred the assets in question. I believe that both Chevron and Lac were bona fide of the opinion that if this procedure were adopted, a right of preemption under Section 15.3 of the J.V.A. in favour of Ivernia would not arise. I do not believe that the actions of either party in this regard involved any improper conduct. Indeed it seems clear that Ivernia were kept fully advised as to what was taking place.

6

The agreement of the 31st of August, 1992 (the Lac Agreement) expressly referred to the preemption clause in Schedule 3 thereof under the heading "Sellers Disclosure Schedule" which at Section 7.10A stated as follows:-

"Ivernia West Plc contends that it has preemptive rights under Section 15.3 of the Lisheen Joint Venture Agreement".

7

The Lac Agreement was accompanied by a letter of the 31st of August, 1992 (generally referred to as the August side letter). That letter having repeated the statement that Ivernia claimed the preemptive rights aforesaid, went on in the third paragraph thereof to state as follows:-

"This is to confirm our agreement that, notwithstanding any provisions in the agreement to the contrary, neither Seller nor Buyer shall have any obligation to consummate the transaction contemplated by the agreement unless and until"

(i) Ivernia acknowledges that such rights do not apply to the transaction contemplated by the agreement or waives such rights, such acknowledgement or waiver to be in form and substance satisfactory to both Seller and Buyer, or

(ii) a Court of competent jurisdiction or arbitrator pursuant to the terms of the Lesheen Joint Venture Agreement shall have issued a final and binding order to the effect that such rights do not apply to the transaction contemplated by the agreement. In the event either Ivernia or Seller commences arbitration or a Court action to determine such rights, Buyer agrees that the date set forth in Section 4.2 shall be amended to be a date thirty days after such final and binding order is issued."

8

Whilst the August side letter was clearly and obviously designed to protect both parties in the event of a claim by Ivernia succeeding or, more particularly, in the event of that claim not being resolved and disposed of, the alternative method of dealing with the problem would have been to include a provision in the Lac Agreement itself dealing with the matter. It was explained in evidence that the parties were reluctant to highlight the problem by including it in the agreement of which Ivernia would have sight.

9

The contention of Ivernia that the purported or conditional sale of stock by Chevron in Newco to Lac, by the Lac Agreement, triggered off the preemption clause in the J.V.A. was submitted to the arbitration of Mr. A.L. Marriott, an English Solicitor, who published his award on the issue on the 15th of March, 1993. He found in favour of the contention put forward by Ivernia. That being so, it was the clear and undisputed duty of Chevron to give the appropriate preemptive offer notice to Ivernia in accordance with Section 15.3.1 of the J.V.A.. That they did by letter dated the 19th of March, 1993, a copy of which was circulated to Lac. That letter expressly invokes Section 15.3 aforesaid and expressly - as it is required by that subsection so to do - provides that the offer was to be open for acceptance for a period of forty-five (45) days after Ivernia's receipt of the offer.

10

Attention was also drawn to the fact that the letter also notes as follows:-

"Ivernia has previously been provided with a copy of the Lac Agreement".

11

It was that agreement - as was recited in the arbitrator's award - which gave rise to the exercise of the preemptive right.

12

Between the 19th of March, 1993 and the 7th of May some communications took place between the legal advisers of Chevron and of Lac. In a letter of the 23rd of March, 1993 Mr. Straub, the Vice President and Chief Legal Officer of Lac, made proposals to prevent the Lac Agreement terminating prior to the period within which Ivernia might exercise its preemption right. To that extent, at the very least, he was recognising the continued validity of that agreement.

13

In a letter described as "a draft" dated the 30th of March, 1993, Chevron confirmed agreement (apparently reached in telephone conversation) dealing with the alternative situations which would necessarily arise in the coming weeks, that is to say, depending on whether or not Ivernia exercised its right of preemption under Section 15.3. The draft letter provided that in the event of Ivernia exercising its right that Transocean Chevron company would return the deposit paid to it and that the Lac Agreement would terminate and that neither party should have any further obligation to the other thereunder. The...

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