(1) Braspetro Oil Services Company (2) Petroleo Brasileiro S.A Petrobras v (1) Fpso Construction Inc. Construction Inc. (2) Fpso Engeneering Inc.
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CRESSWELL |
| Judgment Date | 12 June 2007 |
| Neutral Citation | [2007] EWHC 1359 (Comm) |
| Docket Number | Case No. 2002 Folio 491 Case Nos: 2002 FOLIO 491 & 492 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 12 June 2007 |
[2007] EWHC 1359 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Justice Cresswell
Case No. 2002 Folio 491
Case No. 2002 Folio 492
Case Nos: 2002 FOLIO 491 & 492
Mr S Picken QC, Mr J Bignall and Ms J Higgs (instructed by Clifford Chance LLP) for the claimants No representation for the defendants
Hearing dates:
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr. Justice Cresswell:
INTRODUCTION
This trial follows a trial of preliminary issues in 2005 in both the Folio 492 proceedings (the P38 proceedings) and the Folio 491 proceedings (the P40 proceedings). The judgment at the conclusion of the 2005 trial determined that the first claimant ('Brasoil') was 'in principle' entitled to recover from the first defendants FSO Construction Inc and FPSO Construction Inc (collectively 'FCI') sums which Brasoil paid to numerous third party suppliers pursuant to numerous agreements called 'Side Letter Agreements': see Braspetro Oil Services Company & Anr v FSO Construction Inc & Anr [2005] EWHC 1316 (Comm).
At a hearing on 29 September 2005 following the Preliminary Issues judgment the Court gave directions for a full trial to determine what sums were 'in fact' due to Brasoil under the Side Letter Agreements and what other sums Brasoil was entitled to recover in restitution and/or on other bases (i.e. where there was no relevant Side Letter Agreement or where the payment made by Brasoil exceeded the value of the particular Side Letter Agreement).
In total Brasoil's pleaded claims amount to US$ 87,225,217.64 in the P38 proceedings, and US$ 185,714,463.12 in the P40 proceedings, together with very substantial interest.
FCI has admitted claims totalling US$ 36,115,186.14 in P38, and US$ 67,189,990.27 in P40 (with an appropriate adjustment to take account of a calculation error, equating to US$68,143,131.02). Accordingly, this trial does not concern these claims except that the judgment reflects these admissions.
The remainder of the claims have either been not admitted or denied. It is these claims which need to be determined at this trial. Certain claims are no longer pursued.
At the 29 September 2005 hearing directions were given for the trial of the defendants' cross-claims. Those directions were, in the event, not complied with by the defendants. The result of that non-compliance is that the defendants' cross-claims were ultimately struck out, the defendants having been given every opportunity to comply with the orders and directions of the Court.
SUMMARY OF THE BACKGROUND TO THE CLAIMS
The claims arise in relation to two projects consisting of the conversion of a very large crude oil carrier ('VLCC') into a floating oil storage and off-loading vessel (or 'FSO') (named 'P38') and the conversion of a semi-submersible oil production, storage and off-loading unit (or, 'FPSU') (named 'P40').
The second claimant in each action, Petrobras, is a Brazilian oil company. Brasoil, the first claimant in each action (incorporated in the Cayman Islands) and a subsidiary of Petrobras, is the real claimant, the party seeking to recover the monies expended in this case.
In 1996, Petrobras and Brasoil commenced development of the Marlim Sul oilfield, which is situated within the Campos Basin offshore from Rio de Janeiro, Brazil. The project included the construction/conversion of oil production hardware required for exploitation of these offshore oil reserves, including the FPSU P40 and the FSO P38.
FCI undertook responsibilities in relation to the acquisition and conversion/construction of these units. For the P38 FSO, a VLCC (The 'World Eminence') was acquired for conversion; for the P40 FPSU, a floating production unit was acquired for conversion. The conversion works took place during 1998 to 2001.
In these proceedings, Brasoil seeks recovery of sums which it paid to third party suppliers of equipment, material and services for the purposes of the conversion works, which sums should have been (but were not) paid to the suppliers by FCI.
The claims relate to sums paid pursuant to a very large number of individual Side Letter Agreements entered into between Brasoil, FCI and the various third party suppliers during the course of the conversion projects, by which FCI agreed to repay to Brasoil the sums paid by Brasoil to the third party suppliers.
Whilst FSO Engineering Inc and FPSO Engeneering Inc (collectively 'FEI') are named as the second defendant in the P38 and P40 proceedings respectively, the claims are only pursued against FCI, not FEI.
PROCEDURAL HISTORY
The procedural history of these proceedings has been long and complicated. I refer to all previous judgments in this matter including my ruling on 9 February 2007.
The proceedings commenced in May 2002. The defendants served Heads of Defence and Counterclaim on 16 September 2002. These included at Schedule B very brief details of the cross-claims advanced by the defendants: in the case of P38, numbering 30; in the case of P40, some 32; in both cases, some of the individual cross-claims were composite claims. The claimants served Heads of Reply and Defence to Counterclaims in each action in October 2002. Following judgment in relation to the Preliminary Issues, directions were given in September 2005 leading up to a trial to take place in April 2007. Those directions included, as a necessary first step, the service of revised and, importantly, fully particularised Defences and Counterclaims. The defendants asked for, and were given, about six months in which to serve these statements of case. The defendants told the Court that this was the period they needed to carry out the extensive factual and expert investigations which was necessary to produce fully particularised statements of case. The order of 29 September 2005 recorded the defendants' assurance that this period was necessary and sufficient to enable the defendants to prepare their statements of case. The defendants' statements of case were accordingly due to be served by 31 March 2006. Draft Amended Defences and Counterclaims were in the event not served until 8 May 2006.
The draft Amended Defences and Counterclaims did not contain the full particulars which the defendants had been ordered to provide in September 2005. The claimants accordingly prepared Requests for Further Information as a means of identifying the respects in which the defendants' statements of case were insufficiently particularised. The defendants subsequently agreed that the vast majority of these requests were requests which they should answer.
The inadequacies with the defendants' statements of case were considered by the Court at a hearing on 19 May 2006 and necessitated further hearings on 16 June, 30 June and 27/28 September 2006.
At the hearing on 30 June 2006, shortly prior to which the defendants had produced further versions of the draft Amended Defences and Counterclaim, the defendants conceded that they had not complied with the order of 29 September 2005 in that certain cross-claims were still inadequately pleaded, that they had not in fact done what they said they would do at the hearing on 29 September 2005 and that they should have returned to the Court and explained the position to the Court, but had not done so. Although permission was given to the defendants to make amendments in relation to certain cross-claims, permission was refused in relation to a substantial number of other cross-claims which the claimants maintained were inadequately pleaded.
In relation to those cross-claims where the claimants maintained their objection, an 'unless' order was made to the effect that, unless the defendants served draft statements of case complying with CPR Part 16 and the terms of para. 2 of the 30 June order, by 4 August 2006, they were to be debarred from advancing those cross-claims against the claimants on their alternative, non-quantum meruit, case.
In the Amended Defences and Counterclaims which were served on 4 August 2006 the defendants abandoned a number of cross-claims and contentions which they had previously been advancing. However, the defendants continued to advance the remainder of the cross-claims which the claimants still maintained were inadequately pleaded. In relation to some of these cross-claims, minor changes had been made to the pleaded case. In other cases, no changes at all had been made to the versions of the pleading which the claimants had contended were inadequately pleaded; indeed no changes had been made to some pleadings which the defendants themselves had conceded were inadequate at the 30 June 2006 hearing.
When the matter came back before the Court, on 27/28 September 2006, a number of cross-claims were struck out for non-compliance with the 'unless' order made on 30 June. An order was also made requiring the defendants to serve Amended Defences and Counterclaims reflecting the terms of the order and verified by statements of truth, by 5pm on 30 October 2006 (para. 4 of the order made on 28 September 2006). I refer to the judgment of 27 September 2006 for its full terms, reasoning and effect.
The defendants did not serve Amended Defences and Counterclaims reflecting the terms of the order and verified by statements of truth by the...
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