BP Exploration Company (Libya) Ltd v Hunt
| Jurisdiction | UK Non-devolved |
| Judge | Lord Wilberforce,Lord Diplock,Lord Keith of Kinkel,Lord Scarman,Lord Brandon of Oakbrook |
| Judgment Date | 04 February 1982 |
| Judgment citation (vLex) | [1982] UKHL J0204-1 |
| Date | 04 February 1982 |
| Court | House of Lords |
[1982] UKHL J0204-1
Lord Wilberforce
Lord Diplock
Lord Keith of Kinkel
Lord Scarman
Lord Brandon of Oakbrook
House of Lords
My Lords,
I have had the benefit of reading in draft the speech prepared by my noble and learned friend, Lord Brandon of Oakbrook. I agree with it and for the reasons he has given I too would dismiss the appeal.
My Lords,
I have had the advantage of reading in draft the speech prepared by my noble and learned friend. Lord Brandon of Oakbrook, with which I agree. I also would dismiss the appeal.
My Lords,
I have had the benefit of reading in draft the speech to be delivered by my noble and learned friend, Lord Brandon of Oakbrook. I agree with it, and for the reasons which he gives I too would dismiss the appeal.
My Lords,
I have had the advantage of reading in draft the speech to be delivered by my noble and learned friend, Lord Brandon of Oakbrook. I agree with it, and for the reasons he gives I would dismiss the appeal.
My Lords,
The appellant in this appeal is Mr. Nelson Bunker Hunt, a citizen of the United States of America. The respondent is B.P. Exploration (Libya) Limited, a wholly owned subsidiary in the B.P. group of companies, which I shall call "B.P.".
In May 1975 B.P. began an action against Hunt in the Commercial Court. In that action B.P. alleged that a contract governed by English law, which had been made between Hunt and B.P. in 1960 for the sharing on a non-partnership basis of an oil concession granted to Hunt in Libya, had been frustrated as a result of the expropriation by the Libyan government of B.P.'s half share in the concession, and claimed against Hunt, inter alia, such sum as the court might consider just under section 1(3) of the Law Reform (Frustrated Contracts) Act 1943, which I shall call "the 1943 Act".
The question whether or not the contract was governed by English law was decided by Kerr J., as he then was, in proceedings relating to the propriety of service on Hunt out of the jurisdiction. He held in favour of B.P., and against Hunt, that the contract was so governed, and there was no appeal from, or other challenge to, that decision.
The action itself was tried by Goff J. over 57 days in 1977 and 1978. On the 30th June 1978 and the 16th March 1979 he gave two reserved judgments, on the basis of which he made an order for the payment by Hunt to B.P. of the following sums under section 1(3) of the 1943 Act: first, a principal sum of U.S. $10,801,534, with interest thereon from the 14th June 1974 of U.S. $4,774,289; and, secondly, a further principal sum of £5,666,399, with interest thereon from the same date of £3,060,219.
In June 1980 the Court of Appeal (Lawton L.J., Bridge L.J., as he then was, and Shaw L.J.) dismissed both Hunt's appeal and B.P.'s cross-appeal against the order of Goff J., and refused Hunt leave to present a petition of appeal to your Lordships' House. Leave for Hunt to do so was, however, given later by the Appeal Committee, no doubt in part at least because this case appears to have been the first contested case under the 1943 Act since that Act came into force more than 38 years ago.
For the purpose of his present appeal to your Lordships' House, Hunt concedes a large number of matters which were in dispute and decided against him by one or both of the two courts below, and limits his case to the advancement, as grounds of appeal, of two points only. The first and major point is that, having regard to the terms of the contract between the parties, and the circumstances surrounding the making of it, Goff J. was wrong to order Hunt to pay B.P. under the 1943 Act any principal sum or sums at all. The second and subsidiary point is that, assuming, contrary to Hunt's case on the first point, that Goff J. was right to order Hunt to pay to B.P. under the 1943 Act the principal sums which Goff J. did order him to pay, then he was wrong to order also the payment by Hunt to B.P. of interest on those sums, either at all or in any case from a date as early as the 14th June 1974.
It was not contended for Hunt on the present appeal, as it had been in the courts below, that, if Goff J. was right to order him to pay to B.P. any principal sums at all, the sums ordered to be paid were either in the wrong currency or excessive. This important concession relieves your Lordships of what might otherwise have been the difficult task of examining and expounding the principles upon which sums recoverable under the 1943 Act should be assessed, or those upon which an appellate court may review a trial judge's assessment under section 1(3).
My Lords, the facts of this case have been set out at length in the judgments of Goff J. ( reported (1979] 1 W.L.R. 783), and more concisely in the judgment of the Court of Appeal delivered by Lawton L.J. ( reported [1981] 1 W.L.R. 232). In what follows I shall endeavour to give only such an account of the facts as appears to me to be necessary in order to enable the only two points raised by Hunt in your Lordships' House to be determined.
In December 1957 the Libyan government granted to Hunt a concession to explore for oil in, and extract any oil found from, a specified area of the Libyan desert lying about 500 kilometres south of Tobruk and described as Concession No. 65. The concession so granted was to be for a period of fifty years, and drilling for oil was required to be begun within three years.
In June 1960 Hunt, who did not possess the resources, equipment or practical knowledge and experience necessary to explore and develop the concession himself, concluded what is known in the oil industry as a farm-in agreement with B.P., who did. This was a written contract contained in two documents described as "the letter agreement" and "the draft operating agreement" respectively. The second of these documents, though never signed by the parties, has been treated throughout as if it has been so signed, and I shall accordingly refer to it simply as the operating agreement.
The main terms of the contract between Hunt and B.P. can be summarised as follows. First, Hunt was to assign to B.P., subject to the consent of the Libyan government, a half share in the concession which had been granted to him. Secondly, B.P. was to explore, develop and operate the whole of the concession entirely from its own resources and at its own expense. Thirdly, B.P. was to make to Hunt by the 1st July 1960 what is known in the oil industry as a "farm-in payment" of U.S. $2,000,000. Fourthly, B.P. was to make available to Hunt over a period of four years from the 1st January 1961, in the form of what is known in the oil industry as "farm-in oil", a quantity of 4,000,000 barrels of Iranian oil of a specified kind and quality. Fifthly, if and when the concession, following exploration and development by B.P., "came on stream", that is to say, produced oil available at a seaboard terminal in commercially worthwhile quantities, the operating expenses were thereafter to be shared equally by B.P. and Hunt. Sixthly, if and when the concession came on stream, B.P. was to receive thereafter, in the form of three-eighths of the half share of the oil produced to which Hunt would be entitled, full reimbursement plus 25%, based on the current value of such oil, in respect of the benefits conferred by B.P. on Hunt under the second, third and fourth terms set out above.
I have used the expression "if and when" at the commencement of the fifth and sixth terms set out above for a good reason. The reason is that, at the time in 1960 when the farm-in agreement was concluded, it was not known, and could not have been known with any degree of certainty, either by B.P. or Hunt, whether the exploration and development of the concession would result in the production of oil in commercially worth-while quantities or not. If they did so result, B.P. would receive full reimbursement plus 25% in oil in respect of the benefits conferred by it on Hunt under the second, third and fourth terms set out above. If they did not so result, B.P. would not receive any reimbursement in respect of those benefits at all. The main risk of failure in the combined adventure was accordingly borne by B.P. and not by Hunt.
Following the conclusion of the farm-in agreement, Hunt duly assigned to B.P., with the consent of the Libyan government, a half share in his concession, and B.P. duly performed their three obligations of (a) exploring, developing and operating the concession, (b) making to Hunt by the 1st July 1960 the farm-in payment of U.S. $2,000,000, and (c) making available to Hunt the 4,000,000 barrels of farm-in Iranian oil.
The exploration and development of the concession by B.P. proved to be extremely successful, in that recoverable oil in commercially worthwhile quantities was found in it. B.P. built a pipe line to carry oil from the concession to the Mediterranean coast near Tobruk and also a sea terminal at which tankers could load the oil so carried. By the 11th January 1967, about 6½ years after the conclusion of the farm-in agreement, oil came on stream at that terminal.
In June 1967 B.P. and Hunt agreed certain modifications to the terms of the original farm-in agreement. First, Hunt's obligation to make to B.P. full reimbursement plus 25% in respect of the benefits conferred on Hunt by B.P. prior to the concession coming on stream was quantified at 50,000,000 barrels of oil. Secondly, Hunt's half share of the costs of operation after the coming on stream was to be paid to B.P. in the form of further quantities of oil from the half share of the oil produced to which he was in the first place entitled. Thirdly, as from the 1st July 1967, all reimbursements by Hunt out of...
To continue reading
Request your trial
- YK Fung Securities Sdn Bhd v James Capel (Far East) Ltd
- Syarikat Perumahan Luas Sdn Bhd; United Malayan Banking Corporation
-
Westdeutsche Landesbank Girozentrale v. London Borough of Islington, (1996) 198 N.R. 241 (HL)
...in Woolwich Building Society v. I.R.C. , [1992] 3 All E.R. 737; [1993] A.C. 70, and in BP Exploration (Libya) v. Hunt (No. 2) , [1982] 1 All E.R. 925; [1979] 1 W.L.R. 783, and both those cases involved an application of restitutionary principles which carried with them remedies in personam ......
-
Coughlan et al. v. Westminer Canada Ltd. et al., (1994) 127 N.S.R.(2d) 241 (CA)
...203]. Blair v. Consolidated Enfield Corp. (1993), 66 O.A.C. 121 (C.A.), refd to. [para. 207]. B.P. Exploration Co. v. Hunt (No. 2), [1982] 1 All E.R. 925 (H.L.), refd to. [para. Bishop, Re (1880), 15 Ch. D. 400 (A.C.), refd to. [para. 212]. Maryon (John) International Ltd. et al. v. New Bru......
-
The Most Important Statute In B.C. Right Now (That You've Never Heard Of)
...to a restitution claim (such as change of position) apply to a claim under the FCA (BP Exploration Co. (Libya) Ltd. v. Hunt (No 2), [1983] 2 A.C. 352 (H.L.), an English case on similar legislation); and Interest may or may not be payable on any payments being repaid, and will depend on what......
-
Frustration
...(QB), Garland J; BP Exploration Co (Libya) Ltd v Hunt (No 2) , [1979] 1 WLR 783 at 800 (QB), Goff J, aff’d [1981] 1 WLR 232 (CA), aff’d [1983] 2 AC 352 (HL). 219 Above note 199. 220 Above note 200. The new uniform legislation has been adopted in the Yukon, above note 201, and, in modified ......
-
Frustration
...B.P. Exploration Co. (Libya) Ltd. v. Hunt (No. 2) , [1979] 1 W.L.R. 783 at 800 (Q.B.), Goff J., aff’d [1981] 1 W.L.R. 232 (C.A.), aff’d [1983] 2 A.C. 352 (H.L.). 210 Above note 190. 211 Above note 191. The new uniform legislation has been adopted in the Yukon, above note 192 and, in modifi......
-
Reconsidering Disgorgement for Wrongs
...than out of pocket expenses).49 These are difficult cases, but see eg, BP Exploration Co (Libya) Ltd vHunt (No 2) [1979] 1 WLR783, aff’d [1983] 2 AC 352; Greenwood vBennett [1973] QB 195; Deglman vGuaranty Trust Co ofCanada [1954] SCR 725, [1954] 3 DLR 785 (Can).50 And is clearly recognised......
-
CURRENT ISSUES IN CONSTRUCTION CONTRACT CLAIMS IN SINGAPORE AND THE TROPICON’S CASE
...An Outline of the Law & Practice of Construction Contract Claims, at. p. 196 where a similar view was expressed. 43 See infra at p. 44 [1982] 1 All ER 925. 45 Op. cit., at p. * LL.B. (Sing.), Advocate & Solicitor, Singapore....