High Court rules on meaning of ‘grant’ and ‘receipt’ under Commission Agreement

30/04/20

Today the High Court (Mr Justice Robin Knowles CBE) ruled on a claim by Clark Street Associates LLC against Norsk Titanium AS in respect of commission due under a Consulting Agreement effective 1 April 2014.

Clark Street provides consultancy services to assist technology companies identify and secure contracts and funding connected to United States government initiatives.  It provided such services to Norsk, a company that manufactures aerospace-grade titanium structures and which sought US government funding to establish a flagship US manufacturing facility.

Clark Street alleged that Norsk AS had received an “Award” within the meaning of the Consulting Agreement, by way of a grant of $125m provided by the State of New York to the Fort Schuyler Management Corporation, a not-for-profit agency based in Albany. 

FSMC contracted with a US sub-subsidiary of Norsk AS, Norsk US, to spend $75m of the $125m on rapid plasma deposition machines that FSMC would then lease to Norsk US to use a manufacturing facility in Plattsburgh New York. The manufacturing facility would be constructed by the State at a cost of up to $50m and which would also be leased to Norsk US.  The project stalled however, with the result that although the RPDs had been purchased, the manufacturing facility was still under construction at the time of trial, and would only be occupied by Norsk US in the early part of 2020.

Clark Street’s primary case was that this arrangement constituted an Award of $125m under section 1(b) of the Statement of Services annexed to the Consulting Agreement. In the Statement of Services Award was defined as comprising the aggregate of a series of types of “monetary grant” and “non-monetary grant” including:

“(b)        monetary grant, including, without limitation, any cash grant or cash incentive (“Cash Grants”) actually received by or granted to any other Entity that, in connection with or as a result of an Award, provides any services for [Norsk AS’s] benefit to a monetary value equal to the grant”.

Clark Street claimed that by the application of the commission formula, commission of $12.05m was due on the primary case.  It also ran a series of alternative cases, of varying value, based on different sub-heads of the definition of Award in the Consulting Agreement, in the event that the section 1(b) claim failed.

Norsk AS denied the claim in its entirety on numerous bases, including that: (a) there was no grant within the meaning of the Consulting Agreement; (b) there was no ‘actual receipt’ by Norsk AS at all because all funds and benefits were provided to Norsk US; (c) the value of any grant could not be $125m because this was expended on tools and construction on a facility that would be owned by the State and only leased to Norsk US; (d) that the value was instead the rent saving on the facility; and (e) that any receipt was outside of a contractual tail period and thus not commissionable.

Following a two-week trial in November 2019, at which the Court heard factual and expert evidence, the Court allowed Clark Street’s primary case and allowed the claim for $12.05m in full.  The Court found that there was a monetary grant of $125m granted to FSMC that provided services for Norsk AS’s benefit to a monetary value equal to $125m.

The Court distinguished the Court of Appeal’s decision in Eurofi Ltd v Teletech UK Ltd in which the CA had defined the “ordinary meaning of ‘grant’”. The Judge agreed with Clark Street that the parties clearly did not use the ordinary meaning of “grant” when they concluded the Consulting Agreement but had instead intended a different meaning.

The Court also agreed with Clark Street that the Award had been “actually received” so as to trigger the payment of commission at the point at which it had been appropriated for that purpose, in the State budget and notwithstanding that the funds had not at that point been paid to FSMC or any Norsk entity or expended on the RPDs or the facility.

The judgment is here.