Two-nil to Dentons in “take or pay' litigation

Denton Hall has chalked up a second gas “take-or-pay” supply case victory over Herbert Smith in just two months.

Last week Mr Justice Colman found in favour of National Power, advised by Denton Hall litigation partner Cathy Wilcox, in its action to recover over £20m plus interest which it claimed was due for gas delivered to Herbert Smith's client, United Gas.

Mr Justice Colman ruled that United had accepted the delivery of the gas – and therefore lost the right to reject it – when it delivered it on to its clients. The judge did find that National Power was in breach of its contract in failing to provide delivery information specified under the agreement.

But he ruled that these breaches were not “material”.

But Herbert Smith litigation partner Ted Greeno said that an appeal was “inevitable” and warned that the case was “not over yet”.

Greeno said that United would challenge the ruling that it had accepted the gas when it sold it on, as British Gas' transportation system “does not work like that”.

“It's more like a bank, where you put money in and take it out. It doesn't mean it is the same money,” he said.

Greeno said that United would also challenge the ruling that National Power's breaches were not material, adding that the financial consequences of the breaches were at least £500,000.

Many gas purchasers are locked into “take-or-pay” contracts with suppliers, agreed when gas was more expensive. Dentons and Herbert Smith are doing well from the resulting litigation market.

In June Dentons' client Total Gas Marketing mounted the first successful challenge to a take-or-pay gas supply contract. The House of Lords ruled that Total was not bound by the terms of a long-term contract with Arco and its partners, which were advised by Herbert Smith, as Arco and its partners had failed to satisfy a pre-condition to the contract.