Key Facts
- •Chocolate City Limited (Nigerian music company) sought summary judgment against WEA International Inc. (part of Warner Music Group) for the right to prepay a convertible term loan facility.
- •The loan facility agreement (dated March 27, 2019) included clauses regarding repayment on the maturity date, conversion options for WEA, and prepayment and cancellation conditions.
- •Chocolate City served a prepayment notice, which WEA rejected.
- •The case centered on the interpretation of Clause 8.3 of the Facility Agreement, specifically whether it granted Chocolate City a right to prepay before the maturity date.
Legal Principles
Contractual interpretation should be based on the natural and ordinary meaning of the words used, read in the context of the entire contract.
Wood v Capita Insurance Services Ltd [2017] AC 1173, [10]-[14]
Pre-contractual negotiations are admissible to establish the factual background known to the parties but should be restricted to the genesis and aim of the transaction.
Prenn v Simmonds [1971] 1 WLR 1381, 1384-85
Arguments from surplusage or redundancy cannot justify attributing a meaning that the contract, interpreted as a whole, cannot bear.
Merthyr (South Wales) Limited v Merthyr Tydfill County BC [2019] EWCA Civ 526, [39]
Interpretation is a unitary exercise where each suggested interpretation is checked against the contract's provisions and commercial consequences.
The Ocean Neptune [2018] EWHC 163 (Comm), [2018] 1 Lloyd’s Rep 654, [8]
Outcomes
Chocolate City's application for summary judgment was dismissed.
The court found that Clause 8.3 did not grant Chocolate City an unconditional right to prepay before the maturity date. Considering the entire suite of agreements (including the Option and ADA Distribution Agreements), the court concluded that WEA's interpretation was correct and aligned with the commercial purpose of the transaction.
WEA's cross-application for summary judgment was granted.
The court determined that Chocolate City lacked a real prospect of establishing its right to prepay, upholding WEA's interpretation of the contract as consistent with the overall commercial intent.