Ashborder BV and Others v Green Gas Power Ltd and Others
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice ETHERTON,MR JUSTICE ETHERTON,MR JUSTICE DAVID RICHARDS,Mr Justice Etherton |
| Judgment Date | 15 March 2005 |
| Neutral Citation | [2005] EWHC 1031 (Ch),[2005] EWHC 989 (Ch),[2004] EWHC 1517 (Ch) |
| Docket Number | HC03CO3547,Case No: HC 03C03597 |
| Court | Chancery Division |
| Date | 15 March 2005 |
[2004] EWHC 1517 (Ch)
The Honourable Mr Justice Etherton
Case No: HC 03C03597
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Gabriel Moss QC and Mr Edward Cohen (instructed by Salans) for the Claimants
Mr Richard Adkins QC and Mr David Alexander (instructed by Norton Rose) for the Defendants
Hearing dates: 17–28 May 2004 and 9–15 June 2004
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.
Index
Introduction 1–5
Summary of background facts 6–77
The issues 78–83
The trial 84–87
The witnesses 88–103
The Licences 104–111
The Security Documents
The Facility Agreement 112–126
The moral high ground 155–160
Fixed or floating charge 161–191
Ordinary course of business 192–227
Transfer to Cabot of 41% of PEDLs 11 and 12 228–286
Transfer of 10% interest in Original Licences 287–308
Sale of the OGL Shares and the After-Acquired Licences 309–368
Transfer of 90% interests to E&P in EXL 273, EXL 284, PEDL 10,
PEDL 13 and PEDL 43 369–441
Wrongful interference with the Drilling Rig and the Equipment 442–448
Summary of conclusions 449
Mr Justice Etherton:
Introduction
This action concerns a dispute as to the ownership of, and right to operate, various petroleum licences ("the Licences") granted by the Secretary of State for Trade and Industry ("the Secretary of State"), which permit the extraction of oil and gas from various regions within the United Kingdom.
There is also an issue as to the ownership of one half of the share capital of the First Defendant, which was formerly called Octagon Gas Limited ("OGL").
The Claimants and the Defendants seek rival declarations as to their ownership of the Licences and the disputed shares in OGL, and as to the person entitled to act as Operator of each of the Licences.
The Defendants further counterclaim that, if they are not the owners of, and have no entitlement to assignment of, any of the Licences or the disputed shares, there should be made an order for repayment of all sums expended by them in relation to the Licences and the shares.
OGL also counterclaims for a declaration that the Third Claimant ("Greenpark") has wrongfully interfered with a drilling rig ("the Drilling Rig") and ancillary equipment ("the Equipment"), and an order for delivery up of the same, and damages.
Summary of the background facts
The factual background to the dispute is complex. The following is a brief summary.
Octagon Energy Limited ("OEL") had two wholly-owned subsidiaries, namely Octagon (CBM) Limited ("OCL") and Octagon (CBM) Resources Limited ("OCRL").
In 1999 those three companies ("the Octagon Group Companies") were controlled by Mr John Garratt. He was the managing director and the controlling shareholder of OEL by virtue of his 14.8% stake in OEL's issued ordinary share capital and a 98.2% stake in the issued ordinary share capital of Exeter Oil & Gas Limited ("Exeter"), which owned in turn a further 50.7% stake in OEL.
Mr Garratt was also a director of OCL and OCRL.
At that time OEL owned 50 shares in OGL ("the OGL Shares"), which was half OGL's issued share capital. The remaining 50 shares were held by the Third Defendant ("Cabot").
Mr Garratt was also the managing director of OGL.
At that time OCL and OCRL held seven Licences ("the Original Licences") in respect of the following locations: EXL 273 (Warrington), EXL 284 (South Wales), PEDL 10 (Canonbie), PEDL 11 (Hickleton), PEDL 12 (Nottinghamshire), PEDL 13 (Whitehaven) and PEDL 43 (Maltby).
The Octagon Group Companies were engaged in the business of exploring and extracting coal mine methane ("CMM") and coal bed methane ("CBM") for use as clean burning fuel in industry.
For the purpose of their business, the Octagon Group Companies required funding. Between December 1999 and February 2000 they entered into financing arrangements for £11.5m with ECT Europe Finance Inc and Joint Energy Development Investments II L.P. as lenders ("the Enron Lenders"), and Enron Power Operations Limited ("EPOL"), which acted at that time as agent for the Enron Lenders.
The principal documents giving effect to, or otherwise relevant to, the financing arrangements ("the Security Documents") comprised the following: a facility agreement dated 22 December 1999, which was subsequently amended on 11 February 2000, 12 October 2001 and 25 July 2002 ("the Facility Agreement" meaning the facility agreement as so amended); debentures by each of the Octagon Group Companies ("the Debentures"), by which each of the Octagon Group Companies charged their assets; an Earn-In-Agreement ("the Earn-In-Agreement") between OCL, OCRL and the Second Defendant ("E&P"), which in broad terms provided for circumstances in which E&P was to obtain a 10% interest in the Existing Licences; and an agreement ("the Direct Agreement") between EPOL, the Octagon Group Companies and various counterparties, including E&P, under which, in particular, E&P accepted various direct obligations to EPOL with regard to the possible exercise of rights under a proposed detailed Joint Operating Agreement ("JOA") intended to regulate the future development and operation of each of the Licences, including the identity of the Operator and procedures for the removal and replacement of the Operator.
E&P's participation was the result of insistence by the Enron Lenders that the Octagon Group Companies bring in an operator experienced in CMM/CBM, who would take at least a 10% interest. E&P was a company which, at that time, was owned by people with experience in the CMM/CBM business.
A JOA was entered into between OCRL and OCL in respect of each of the Existing Licences.
Following the signing of the Security Documents, requests for funding were made during 2000. Some were met. Others were not. The Defendants maintain that there were serious delays in the provision of funding.
On 29 August 2000 OCL acquired four new licences from the DTI, namely PEDL 64 (Carlisle), PEDL 65 (Selby), PEDL 66 (Thurcroft) and PEDL 67 (Abercarn) ("the After-Acquired Licences").
Relations between the Octagon Group Companies and the Enron group of companies ("Enron") deteriorated.
On 11 April 2001 Enron Europe Finance & Trading Ltd ("EEFTL") wrote to OEL notifying OEL that an event of default had occurred under clause 20.1.23 of the Facility Agreement, and reserved all rights in respect of it.
In August and September 2001 OEL wrote to Enron Europe Ltd ("EEL") explaining that funding was required to make rental payments under the Licences and to enable wells to be drilled by the dates required by the Licences, and of the risk of termination of the Licences by the Department of Trade and Industry ("the DTI") in the event of non-compliance.
On 12 October 2001 an amendment agreement was made in relation to the Facility Agreement, providing for a further £700,000 of loan finance, and part of the transaction being a waiver of any prior default.
On 13 November 2001 Octagon requested EEL to permit a drawdown of £500,000 in respect of drilling finance. On 28 November 2001 Octagon made a further request for a drawdown of £200,000 for general corporate purposes.
None of the £500,000 drilling finance requested was advanced.
At the end of November or beginning of December 2001, various Enron companies filed for Chapter 11 bankruptcy.
On 18 December 2001 one or more of the Octagon Group Companies received £65,294 from Enron in respect of the drawdown request of £200,000.
On 16 January 2002 OEL wrote to EPOL's general counsel saying, among other things, that the balance of £135,131.70 in respect of its £200,000 drawdown request was urgently required, and that the Enron Lenders were in default of the Facility Agreement as a result of not providing those funds. A similar observation was made in relation to the failure of the Enron Lenders to advance the £500,000 drilling finance. The letter stated that Octagon was at risk of losing some of its most beneficial Licences and core assets. It further said that, if the Enron Lenders did not provide the £500,000 by 1 February 2002, then Octagon would take action to mitigate its losses, and would, if necessary, try and enter into a joint venture agreement whereby a third party carried out the required drilling for a percentage of the Licences concerned.
On 8 February 2002 the Enron Lenders indicated they were not in a position to fund the requested drawdown of £135,000 for corporate purposes, and were not willing to advance the £500,000 drilling finance requested.
On 26 March 2002 EPOL served a notice of default on the Octagon Group Companies.
On 12 April 2002 OCL and Quality Drilling (UK) Limited ("Quality Drilling UK") entered into an agreement for the drilling of a well by Quality Drilling UK on PEDL 12 for the sum of £250,000 payable by 31 December 2002 ("the Drilling Agreement"). The Drilling Agreement provided that, if such sum had not been paid by then, Quality Drilling UK would instead be entitled to a 41% earn-in interest in PEDL 11 and PEDL 12.
On 19 April 2002 Cabot agreed to purchase all of Quality Drilling UK's legal and beneficial interest under the Drilling Agreement ("the 41% Transfer Agreement").
In March 2002 Parkfield Management Limited ("Parkfield") acquired 49% of E&P. Mr Michael Grove and Mr John Atencio became directors of E&P in March 2002, on the initiative of Parkfield.
On 27 May 2002 ECT Europe...
To continue reading
Request your trial
-
Re Freerider Ltd
...and Ms. K. Brown for Mr. Heinen; A. Turner and Ms. R. Lawrence for Mr. Le Comte. Cases cited: (1) Ashborder BV v. Green Gas Power Ltd., [2005] 1 BCLC 623; [2005] BCC 634; [2004] EWHC 1517 (Ch), applied. (2) Burton & Deakin Ltd., In re, [1977] 1 W.L.R. 390; [1977] 1 All E.R. 631, referred to......
- Ashborder BV and Others v Green Gas Power Ltd and Others
-
Re Equipment Maintenance Ltd
...of his proposition Mr. Hylton cited the cases of Countrywide Banking Corporation Ltd v bean [1998] A.C. 338 and Ashborder v Green Gas [2005] B.C.C. 634. The former is a decision of the Judicial Committee on appeal from New Zealand and the latter is a first instance judgment of Etherton J. ......
-
Avanti Communications Ltd ((in Administration))
...at [31]. The court is fundamentally concerned with the nature of the rights and obligations the parties intended to create; see Ashborder BV v Green Gas Power Ltd [2004] EWHC 1517 (Ch) at 35 The nature of the assets in question may also be taken into account. A distinction often drawn in t......
-
Banking Law
...Bhd v Bakri Navigation Co Ltd [2020] 2 SLR 167 at [86]. 63 Malayan Banking Bhd v Bakri Navigation Co Ltd [2020] 2 SLR 167 at [91]. 64 [2004] EWHC 1517 (Ch). 65 [2018] 2 SLR 12. 66 Ashborder BV v Green Gas Power Ltd [2004] EWHC 1517 (Ch) at [277]; Malayan Banking Bhd v Bakri Navigation Co Lt......
-
Note:WHEN IS AN ELEPHANT A BIRD?
...fixed charge over the book debts from inception either. To the same effect is the recent decision of Ashborder BV v Green Gas Power Ltd[2005] 1 BCLC 623 where clauses in the loan documentation (when given their natural meaning) expressly permitted disposal of the collateral in the ordinary ......