Canyon Offshore Ltd v GDF Suez E&P Nederland BV
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Mackie |
| Judgment Date | 27 November 2014 |
| Neutral Citation | [2014] EWHC 3810 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 27 November 2014 |
| Docket Number | Case No: 2014 FOLIO 604 |
[2014] EWHC 3810 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
His Honour Judge Mackie QC
Case No: 2014 FOLIO 604
John Russell QC (instructed by Clyde & Co) for the Claimant
Michael Fealy QC (instructed by CMS Cameron McKenna LLP) for the Defendant
Hearing dates: 3 rd November 2014
His Honour Judge Mackie QC:
This application to contest jurisdiction is mainly about Article 5(1) of Council Regulation (EC) 44/2001("the Judgments Regulation") and the place of performance of obligations.
The Court has four bundles of documents including two helpful witness statements from Mr Ashley and Ms Woodward Quail of the parties' solicitors which set out the facts. None of the facts are in dispute except what happened at a meeting on 17 January 2014 and some points of timing, issues which I cannot resolve on this application.
Facts
The Claimant ("Canyon") is a Scottish company with its registered office in Aberdeen. The Defendant applicant ("GDF"), a Dutch company, is a large owner and operator of oil and gas fields. In particular, GDF operates wells in the Dutch sector of the Orca, Sierra and Amstel fields in the North Sea.
GDF wished to develop further those fields by the erection of additional platforms, which in turn required the installation of subsea pipelines. On 4 September 2012 GDF entered into three contracts in materially the same form, with Cecon NL BV ("Cecon"), another Dutch company, for the transportation and installation of these pipelines ("the Project Agreements"). Each Agreement is expressly subject to Dutch law and jurisdiction. The Project Agreements permitted Cecon to sub-contract its work and provided for the costs of sub-contractors, "… to be reimbursed to [Cecon] by [GDF] on a cost plus basis, i.e. cost plus ten (10) per cent…."
Cecon sub-contracted part of the work to Canyon under an agreement dated 1 July 2013 ("The Trenching Contract"). Article 39 of the Trenching Contract provides that it is governed by English law and subject to arbitration in Rotterdam. The only other provisions relevant to this application are Clause 3 of section 1 that Cecon " shall pay to [Canyon] the Price" and Article 15 of section 2 which deals with time of payment.
In about November 2013, Cecon fell behind in its payment obligations to its sub-contractors, including Canyon. Canyon had done work and issued invoices. Each invoice stipulated that payment was to be made by wire transfer to Canyon's Bank of America account in London or by mail payment to Canyon's address in Aberdeen. GDF was concerned that these payment difficulties would have an impact on the project if sub-contractors were to cease work due to non-payment. So GDF made the proposal set out in a letter addressed to Cecon of 16 January 2014 ("the Letter") the relevant parts of which read as follows. The Letter must of course be read as a whole and in context.
"Further to our meeting of today we herewith inform you as follows.
We understand that certain sub-contractors contracted by Cecon NL B.V. ("Cecon") and engaged in the execution of the work for the transport and installation of the pipelines ("projects") as referred to above have been left unpaid for a substantial period of time. This has resulted in a large backlog of outstanding invoices. We also understand that Cecon is not in the position to fulfil its payment obligations under the respective sub-contracts.
The above situation is causing a threat to the projects considering that these sub-contractors may suspend their services any time now they have not been paid by Cecon. If these sub-contractors would stop their activities this could lead to a delay and an increase of costs. Although GDF SUEZ E&P Nederland B.V. ("GDF SUEZ") is not obliged in any way or form to take over this payment obligation, in order to mitigate cost and potential damages GDF SUEZ sees no other option than to, on behalf of Cecon, pay the relevant sub-contractors directly. GDF SUEZ is only prepared to pay the relevant sub-contractors based on the following conditions:
The amount of the invoices is undisputed and approved for payment by Cecon;
The invoices are not related to the operation of the Pipelay Vessel 'Lewek Centurion' except for the works done by sub-contractor CRC-EVANS Ltd;
The invoices are not subject to any variation order, already in process by GDF SUEZ;
The invoices are not subject to any future variation order;
The relevant invoice is not disputed by GDF SUEZ.
Please note that payments made by GDF Suez to the relevant sub-contractors shall discharge GDF SUEZ from any payment obligation towards Cecon (in Dutch; "bevrijdende betaling") under the agreements referred to above for that same amount. GDF SUEZ shall not take over the contractual position of Cecon under the relevant sub-contract and this letter should therefore not be interpreted in such way that this could be assumed. Cecon shall ensure and document that any and all payments done by GDF SUEZ shall discharge Cecon from its payment obligation towards the relevant sub-contractor.
This arrangement shall apply to invoices from sub-contractors that have been left unpaid until the date of this letter, provided that the conditions reflected above are being met.
Upon receipt of this letter counter signed by Cecon, the agreement set out in this letter will come into force…."
There was a meeting between Canyon and Cecon on 17 January 2014. The evidence about the meeting from Ms Woodward Quail, on instructions, is that Cecon, mainly through Mr Stinenbosch told Canyon that Cecon had met GDF on 15 January 2014 (that is consistent with the terms of the Letter). Cecon told Canyon that GDF " had given a commitment" that GDF would pay the sub-contractors' invoices to ensure that the sub-contractors did not suspend performance. As a result Mr McIntosh of Canyon, "was in no doubt that the agreement was that GDF would pay Canyon directly, if Canyon kept on working." The evidence (see paragraph 32(3)) suggests that Canyon understood, although it is unclear whether that was from what it was told or simply from inference, that future as well as past invoices would be covered. Further, it is said that Mr McIntosh understood that GDF had authorised Cecon to pass on a contractual offer to Canyon. GDF responds in general terms stating that it did not agree that Cecon could act as GDF's agent or hold out Cecon to Canyon as GDF's agent. There is a dispute between the parties as to whether Cecon accepted the offer before GDF told Cecon that it had withdrawn it. The Court cannot resolve these factual issues on this application.
Canyon says that it relied on the Letter and what was said at the 17 January 2014 meeting and decided to carry on working until the job was completed at the end of January.
Canyon's claims in the action
At paragraph 7 of the Particulars of Claim, Canyon alleges that Canyon and GDF made a contract and that, " GDF agreed that it would pay directly to Canyon any sums invoiced by Canyon to Cecon under the Trenching Contract." Canyon relies upon the Letter as an offer by GDF to Canyon to pay sums due to Canyon under the Trenching Contract, " if Canyon agreed to continue to perform its obligations under the Trenching Contract and/or continued to perform such obligations" (paragraph 8(4)). Canyon claims some £2.1m in respect of work done before 16 January 2014 (paragraph 15(2)).
Canyon also claims that at a meeting on 17 January 2014 between representatives of Cecon and Canyon, GDF, acting through the agency of Cecon, " offered, once such invoices were approved by Cecon, to pay to Canyon sums invoiced by Canyon to Cecon, in respect of invoices to be rendered in relation to the continuation of the work then being performed by Canyon's vessel, the "GRAND CANYON"" (paragraph 8(5)). Canyon says that it accepted these offers (paragraph 8(8)).
Canyon claims, based on the commitment given at the meeting, some £3.4m from GDF for work carried out after 16 January 2014.
In the alternative, Canyon alleges that the Letter gave rise to a contract between GDF and Cecon for the benefit of Cecon's sub-contractors and that as a member of that class, Canyon can enforce it against GDF under the Contracts (Rights of Third Parties) Act 1999.
Common Ground.
GDF accepts, for the purpose of this application, that any alleged contract between the parties and the question whether it was made is governed by English law. At first GDF had argued that this was a Dutch law issue and expert evidence was exchanged.
It is common ground, from the otherwise now irrelevant expert evidence, that under Dutch law, which governs the Project Agreements, an employer, such as GDF, may make a direct payment to a sub-contractor, such as Canyon, to discharge the main contractor's debt to the sub-contractor. In the absence of agreement by the main contractor, such a direct payment does not discharge the employer's payment obligation to the main contractor.
It is also common ground first that GDF is domiciled in the Netherlands so that the Judgment Regulation applies and secondly that the English court does not have jurisdiction over GDF under Article 2 given its Dutch domicile. For Canyon it is Article 5(1) or nothing.
Article 5
The Article provides:
"Article 5.
A person domiciled in a Member State may, in another Member State, be sued:
1.(a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;
(b) for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be:
— in the case of the sale of goods, the place in a Member State where, under the contract, the...
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