Breams Trustees Ltd (as Trustee of the Baker 1988 Discretionary Settlement) v Upsteam Downstream Simulation Services Inc.
| Jurisdiction | England & Wales |
| Judge | Mr Justice Patten |
| Judgment Date | 16 February 2004 |
| Neutral Citation | [2004] EWHC 211 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC03C03447 |
| Date | 16 February 2004 |
[2004] EWHC 211 (Ch)
The Honourable Mr Justice Patten
Case No: HC03C03447
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Jasbir Dhillon (instructed by Wedlake Bell) for the Claimant
Paul McGrath (instructed by Holman Fenwick & Willan) for the Defendants
Hearing dates : 4th February 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.
Introduction
This is in form an application by the Defendants, Upstream Downstream Simulation Services Inc ("UDSS") and Mr Pedro Enrique Orihuela ("Mr Orihuela"), for a stay of these proceedings on grounds of forum non conveniens. The background to the proceedings can be shortly summarised as follows. During the early part of 2002 Mr Orihuela worked as a consultant for Schlumberger Technology Corporation, providing technical and commercial advice and other services in relation to various oil production projects. At the time his line manager was a Mr Alan Baker ("Mr Baker") who was also contracted to Schlumberger. In June 2002 Petróleos Mexicanos SA ("Pemex"), which is a state-owned oil company in Mexico, invited tenders for the provision of consultancy services and technical expertise in relation to projects which it was carrying out in Mexico. The Defendants' evidence is that UDSS, which at all material times has been wholly owned by Mr Orihuela, intended to submit a joint tender with another Schlumberger company, Schlumberger Geoquest. Under this joint venture UDSS would provide technical expertise and Schlumberger Geoquest would provide practical and financial assistance. However, at the beginning of July 2002 Schlumberger Geoquest began to have doubts about the project and on 10 th July 2002 Mr Orihuela sent an e-mail to Mr Baker asking him whether, in the event that Schlumberger Geoquest decided not to proceed with the joint bid, Mr Baker would be "interested in participating in this bid via one of your companies". On the same day Mr Baker responded, again by e-mail, saying that he was aware of the problems relating to Schlumberger Geoquest and adding this:
"For my part; I have signed a "Deed of Restrictive Covenants" … I intend to abide by these undertakings but believe that this contract falls outside the definition …
… I am prepared to assist you insofar as I can."
The Defendants say that following this exchange of e-mails Mr Orihuela continued to prepare a joint tender with Schlumberger Geoquest, but on 30 th July 2002 was informed by them that they had decided not to proceed with the joint bid. Under the tender document issued by Pemex all bids had to be submitted by 31 st July 200The Defendants say that Mr Orihuela telephoned Mr Baker early on the morning of 31 st July to ask for his help and that Mr Baker told Mr Orihuela that he should proceed with a bid through UDSS and that he (Mr Baker) would provide the necessary financial assistance if the bid succeeded. In the event a bid was submitted by UDSS later on 31 st July, and on 28 th August 2002 Pemex accepted it. A contract with Pemex ("the Pemex Contract") was signed on 17 th September 200It was a term of this contract that UDSS would provide two performance bonds for US $404,000 and 37,000 Mexican pesos (equivalent to US $3,700) within ten days; i.e. by 27 th September 2002.
On 24 th September 2002 Mr Orihuela entered into what is described as Heads of Agreement with Heathmans Holdings Limited ("HHL"), a Guernsey company owned and controlled by the Claimant in these proceedings on behalf of a 1988 Guernsey settlement under which Mr Baker and his three brothers are beneficiaries. The Heads of Agreement document records that HHL had appointed Mr Baker to act on its behalf in the management of its relationship with UDSS in relation to the Pemex Contract. It states that Mr Orihuela and HHL will work closely together to profitably execute the Pemex Contract and to seek further contracts and build the joint business for the future with a view to an eventual sale of it at a profit. In the near future Mr Orihuela was to transfer ownership of UDSS to a trust or similar vehicle and to ensure that a 50% interest in that was held beneficially for HHL. The Heads of Agreement then go on to deal with the management of the Pemex Contract and state that HHL will undertake to provide security for the performance bond required by Pemex via a reputable bonding company. The project is said to require some US $350,000 in working capital, which is to be provided by Mr Orihuela and HHL in equal shares. There are then further provisions under which Mr Orihuela undertook to make a full-time commitment to successfully managing the project, for which he would be paid a salary plus reasonable expenses, together with an annual bonus. In a paragraph headed "Concerns and Commitments of AB" the Heads of Agreement states:
"UDSS, PEO and HHL are aware that AB entered into a Deed of Restrictive Covenants as part of the sale of Baker Jardine and Associates Limited to Schlumberger on 3 rd April 2001. This deed is enforceable for four years from the date of sale and restricts AB from any involvement (direct or indirect) in a company or operation that is or could be in competition with Baker Jardine as it was constituted at the time of sale. UDSS and PEO accept the necessity to comply with this Deed of Restrictive Covenants."
There is then a further paragraph dealing with a disputes procedure, which states as follows:
"It is the stated intention of both parties to work in a positive manner as a "partnership". In the event of an irreconcilable dispute PEO and HHL agree to submit to binding arbitration under the laws of Florida or as otherwise mutually agreed."
The Heads of Agreement document was followed on 30 th October 2002 by a more formal "Deed of Agreement" made between Mr Orihuela, UDSS, Raid & Taylor Services Corporation ("RTS") (a BVI company) and the Claimant ("BTL"). Although Mr McGrath on behalf of the Defendants made no formal concessions about the extent to which this document has superseded the earlier Heads of Agreement, it seems clear that this became the contract which governed the parties' relationship in the conduct of the joint venture, and it is this Deed of Agreement rather than the Heads of Agreement which forms the subject-matter of these proceedings and the dispute between the parties. The terms of the Deed of Agreement are not identical to those of the Heads of Agreement, but the principal obligations on each side remain in substance the same. Clause 2 sets out a series of provisions under which the parties agree to use all reasonable endeavours to promote the business of UDSS and to act in good faith with regard to each other. There is then in clause 3 a specific undertaking by BTL to provide security for the performance bonds under the Pemex Contract, subject to a proviso that UDSS shall use its best endeavours to assume responsibility for providing such security in place of BTL as soon as it is in a position to do so. Clause 4 of the agreement deals with funding, including an obligation by BTL to lend to UDSS the sum of US $175,000. Clause 5 contains what is in effect an option granted to BTL to subscribe for and receive 50% of the share capital of UDSS. This right is exercisable on or before 30 th April 2005, provided that UDSS and RTS are solvent at the relevant time. The agreement goes on to set out various restraints on the power of Mr Orihuela (prior to the exercise of the share option) to exercise his powers as shareholder to deal with or dispose of the property and income of UDSS. It also (in clause 8) sets out various terms governing his management of the company. Clause 8.1 provides that he shall have full responsibility for the day-to-day management of UDSS and shall (clause 8.1.1) "keep books and records of accounts for the business of UDSS (including but not limited to the Contract) using recognised accounting systems and updating the accounts on a monthly basis". Clause 8.1.3 also provides that Mr Orihuela shall ensure that "all accounts (whether audited or otherwise), tax returns and taxes are submitted and paid to the relevant authorities promptly".
In clause 9 of the Deed of Agreement there is a similar provision to the Heads of Agreement which relates to the restrictive covenant entered into between Mr Baker and Schlumberger. This provides as follows:
"The parties acknowledge that Breams will be represented by Alan Baker on a day to day basis. The parties acknowledge that Alan Baker has certain prior obligations to Schlumberger Evaluation and Production Services (UK) Limited ("Schlumberger") pursuant to a deed of restrictive covenants made between (among others) Alan Baker and Schlumberger and effective from 3 April 2002. This deed is enforceable for four years from the date of sale and restricts Alan Baker from any involvement (direct or indirect) in a company or operation that is or is likely to be in competition with Baker Jardine as it was constituted at the time of sale. The parties acknowledge and agree that no action shall be taken by them which would or could be likely to result in an infringement by Alan Baker (or any other party) of his obligation under the said deed of restrictive covenants."
Finally I need to mention clause 12. This is headed "Law and Jurisdiction" and provides as follows:
"This Agreement shall be governed by and construed in accordance with English law and each of the parties agrees to submit to the non-exclusive jurisdiction of the English courts as regards...
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