Albion Resources Ltd v Heritage Oil Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Adrian Beltrami |
| Judgment Date | 28 January 2022 |
| Neutral Citation | [2022] EWHC 162 (Comm) |
| Docket Number | CL 2021 000118 |
| Year | 2022 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 162 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A, 1NL
Mr. Adrian Beltrami QC
Sitting as a Judge of the High Court
CL 2021 000118
Michal Hain, instructed by Charles Fussell & Co LLP, on behalf of the Claimant.
Celia Rooney, instructed by Macfarlanes LLP, on behalf of the Defendants.
Hearing dates: 17–20 January 2022.
I direct that pursuant to CPR PD 39A paragraph 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 Adrian Beltrami QC:
This is a claim by the Claimant ( Albion) for the balance said to be due under a loan facility agreement dated 13 August 2015, as amended on 4 July 2016 ( Loan Agreement) and a related Share Purchase Agreement dated 31 January 2018 ( SPA). The Borrower under the Loan Agreement was the First Defendant ( Heritage Oil). The Second Defendant ( EIGL), the sole shareholder of Heritage Oil, agreed under the SPA to procure the repayment of the outstanding loan amount and it is agreed that the Defendants are jointly and severally liable for any balance that is in fact due. It is common ground that Albion advanced US$9,241,642.00 under the Loan Agreement and that there was a repayment on 24 December 2020 in the sum of US$7,772,216.81. At the date of the Particulars of Claim, the remaining balance, including interest, was said to be US$6,495,927.65.
The Defence, in short, is that no further sum is due because the Defendants are entitled to deduct from any outstanding balance the total of what are said to be repayable expenses incurred by the ultimate beneficial owner of Albion, Mr Anthony Buckingham ( Mr Buckingham). It is accepted in the Particulars of Claim that some of Mr Buckingham's expenses should be deducted, and Albion has during the course of the trial conceded the deduction of further expenses. That has left two controversial categories of expenses in issue, and the question for the court is whether (and if so in what amount) any further deductions should be made.
Mr Michal Hain appeared on behalf of the Claimant. Miss Celia Rooney appeared on behalf of the Defendants. I am grateful to both Counsel, and their instructing solicitors, for the assistance they have provided.
Background
Mr Buckingham was the founder of Heritage Oil. The company, through its group, has been engaged in the exploration, development, production and acquisition of oil and gas assets internationally. Heritage Oil (then a plc) was until 2014 listed on the London Stock Exchange as a FTSE 250 company. Mr Buckingham, personally and through his company Albion Energy Ltd ( Albion Energy), was a major shareholder, and he was also the Chief Executive Officer.
Heritage Oil was taken private in 2014, pursuant to a scheme of arrangement under Article 125 of the Jersey Companies Law, under which EIGL purchased 80% of the issued share capital. EIGL is a special purpose vehicle registered in the British Virgin islands, a wholly owned subsidiary of Al Mirqab SPC, and beneficially owned by his Excellency Sheikh Hamad Bin Jassim Bin Jabor Al Thani ( HBJ). HBJ was, or at least was understood by Mr Buckingham to be, the business partner of His Excellency Sheikh Hamad bin Khalifa Al Thani, the former Emir of Qatar. The remaining 20% of the issued share capital was retained by Albion Energy and there was a Shareholders Agreement dated 29 April 2014 between the two shareholders ( Shareholders' Agreement). The cash price for the ordinary shares of Heritage Oil was 320 pence and this valued the company at approximately £924 million.
Mr Buckingham thereupon stepped down as Chief Executive Officer and became a Consultant, with a view to developing new business and assisting with the management of existing assets. This was achieved by an Advisory Agreement dated 30 June 2014, as amended and restated on 30 July 2014 ( Advisory Agreement). The parties to the Advisory Agreement were: (1) Heritage Oil; (2) Sundance Investments Ltd ( Sundance), a company beneficially owned by Mr Buckingham, as Advisor; and (3) Mr Buckingham, as Consultant.
Pursuant to the terms of the Advisory Agreement, Sundance agreed to make available to Mr Buckingham and Mr Buckingham undertook to perform the “ Services”. These were defined as:
“ … providing strategic advice and assistance to the Board of the Company in pursuing the Company's objectives of continuing and expanding the business of upstream oil and gas exploration, development and production activities with and resulting from the exploitation of oil and gas interests in any and all areas and regions of the world including the acquisition of such assets and companies…”
The following further terms of the Advisory Agreement are of relevance:
a. Clause 5.1: “ With effect from the Commencement Date [30 June 2014], the Advisor will procure that the Consultant shall (and the Consultant undertakes that he shall) provide the Services to the Company at such times, at such locations and on such occasions as the Company may reasonably require and for such periods as may be reasonably necessary, provided that the Consultant shall dedicate sufficient time and attention to satisfy his obligations under this Deed.”
b. Clause 5.7: “ The Consultant will be required by the Company to travel extensively overseas on business and to meet with and continue to develop his contacts and connections for the benefit of the Group. Accordingly, the Company shall make available the Company's G550 jet or its equivalent to the Consultant for the purposes of providing the Services.”
c. Clause 7.1: “ The Company shall pay a fee to the Advisor at a rate of one hundred and sixty six thousand six hundred and sixty seven British pounds (£166,667.00) per calendar month (plus applicable taxes, if any) upon production of an invoice in accordance with clause 7.2 below (the Fee).”
d. Clause 7.5: “ The Company shall be entitled to deduct from the fees (and any other sums) due to the Advisor any amounts that are owed by the Advisor or the Consultant to the Company (or any Group Company) at any time.”
e. Clause 8.1: “ The Company shall reimburse the Advisor (on production of such evidence as the Company may reasonably require) any reasonable travelling and accommodation expenses (including hotel and subsistence) and reasonable entertaining expenses which are reasonably and properly incurred by or on behalf of the Advisor and/or Consultant in the course of providing the Services.”
f. Clause 8.2: “ The amount of any expenses shall be submitted separately by invoice by the Advisor on or about the end of each month and the Company shall reimburse the Advisor within fifteen (15) days of receipt of the invoice.”
g. Clause 8.3: “ The Company shall provide the Consultant with a corporate credit card which the Consultant shall use wherever convenient to pay for expenses incurred in connection with the Services.”
This arrangement continued between 2014 and 2018. During this time, Mr Buckingham carried out work as Consultant to Heritage Oil and this involved, amongst other things, extensive international travel. For this purpose, in accordance with clause 5.7 of the Advisory Agreement, he made frequent use of the company's corporate jet (the jet). The jet was also used by Mr Buckingham for personal trips which were not connected with the Services. In addition, Mr Buckingham incurred expenditure (to use a neutral term for the moment) which was ultimately discharged by Heritage Oil or a subsidiary company, in accordance with clause 8 of the Advisory Agreement. He also incurred expenditure of a personal nature unconnected with the Services.
Mr Buckingham's expenditure was subject to a reconciliation process conducted by Mr Paul Atherton ( Mr Atherton). Mr Atherton had been the Chief Financial Officer of Heritage Oil until he replaced Mr Buckingham as Chief Executive Officer. I will explore the detail of the process below, but, in summary, Mr Atherton allocated expenditure between Heritage Oil and Mr Buckingham, and any amounts categorised as personal were recharged to Mr Buckingham and set off against amounts otherwise due to Mr Buckingham or to companies related to him. Such arrangements were the same as or similar to those which had obtained before the acquisition by EIGL, in respect of expenditure incurred by Mr Buckingham when Chief Executive Officer.
On 13 August 2015, as I have mentioned, Albion entered into the Loan Agreement with Heritage Oil, advancing a total sum of US$9,241,642.00 in six unequal instalments. Relevant defined terms are:
a. Repayment Date: “ the fifth (5 th) Business Day immediately following the date of receipt of a written demand for repayment from the Lender of all or part of the Advances.”
b. Interest: “ The Advances shall be subject to interest at the rate of nine percent (9%) per annum… to the day on which the Advances are repaid… In the event that an amount is due and payable but not paid, including interest… it shall be capitalised on the last day of each interest period and shall bear interest at a rate of 10% per annum on any sum from the due date up to the date of actual payment.”
c. Repayment: “ Without prejudice to the other terms of this Facility Letter, the principal balance of the Advances and outstanding interest is repayable on the Repayment Date as notified to the Borrower.”
Sometime in 2017, the relationship between Mr Buckingham and HBJ became strained and, on 31 January 2018, EIGL acquired the remaining 20% percent of Heritage Oil pursuant to the SPA. The parties to the SPA were: (1) Albion Energy; (2) EIGL; (3) Heritage Oil; (4) Albion; (5)...
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