Endeavour Energy v Hess Ltd (Defendant/Applicant)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Males |
| Judgment Date | 10 February 2017 |
| Neutral Citation | [2017] EWHC 1087 (Comm) |
| Docket Number | Case No: CL-2016-000208 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 10 February 2017 |
[2017] EWHC 1087 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH
COMMERCIAL COURT
The Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
Mr Justice Males
Case No: CL-2016-000208
Ms A Boase appeared on behalf of the Claimant/Respondent
Mr L Emmett appeared on behalf of the Defendant/Applicant
This is an application for security for the costs of this action by the defendant, Hess Ltd; the claimant is Endeavour Energy UK Ltd.
The dispute relates to a claim made by Hess pursuant to a letter of credit for Endeavour's share of decommissioning costs in connection with the supply of a rig following a North Sea oil venture. Hess charged Endeavour something over £9 million as its share of the charges for the work done by the rig in decommissioning, and used the letter of credit (which Endeavour had been required to provide) in order to claim that payment. Endeavour disputes liability to pay that sum, and seeks to recover it, either as a debt or by way of a damages claim.
The court has jurisdiction to order security for costs, applying the test set out in CPR 25.13. The condition relied upon in this case is that the claimant, Endeavour, is a company or other body, whether incorporated inside or outside Great Britain, and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so. Accordingly, it is necessary to consider whether that condition is satisfied; if it is, the court has a discretion whether to order security for costs depending on consideration of the justice of the case in the light of all the circumstances.
I have been referred to a passage in the judgment of Lady Justice Arden in Jirehouse Capital v Beller, [2008] EWCA Civ 908, [2009] 1 WLR 751, paragraph 23, in which Lady Justice Arden quoted from the judgment of Sir Donald Nicholls, V-C in a previous case. The citation is as follows:
"I start consideration of the subsection by noting that the phrase 'the company will be unable to pay the defendant's costs if successful in its defence' is clear and unequivocal. The phrase is 'will be unable', not 'may be unable'. Inability to pay in this context, I take to mean inability to pay the costs as and when they fall due for payment. Thus, the question is: will the company be able to meet the costs order at the time when the order is made and requires to be met? That is a question to be judged and answered as matters stand when the application is heard by the court, although the court will take into account and give appropriate weight to evidence about what is expected to happen in the interval before the costs order would fall to be met."
That, I think, is where the citation to me ended, but I draw attention to the fact that it continues:
"The court will draw appropriate inferences and here, as elsewhere, it will not let common sense fly out of the window."
The position in this case is that it is accepted that the claimant is balance sheet-insolvent. It has two very large debts which are owed to other companies within the group of which it forms part. It is said that the holding company and the lenders have no present intention to call in those debts, and that it would not be in their interests to do so. I have been referred to agreements where they have agreed to forbear from doing so, at any rate, for the time being. The claimant itself, however, is not a party to those agreements, and is therefore entirely at the mercy of the lenders and its parent company in the event that circumstances change.
The accounts, both of the claimant and its parent company, contain, as would be expected, warnings in stark terms as to the company's financial position and the fact that it is not a going concern but is dependent on forbearance on those inter-company debts. The accounts also refer to efforts being made to sell assets, including North Sea assets, which may include the claimant itself or the claimant's assets. If that were to happen, the claimant would no longer have the wherewithal to generate such cash as it is currently generating.
While it may not be, at present, in the lenders' interests to call in their loans, it seems to me to be entirely speculative to think that they will not do so in the future. I would infer that they are likely to do so, as their accounts suggest, if they consider that that would be a way of obtaining a better return on their investment. They could not be criticised for doing so. There is no binding commitment offered by any parent company or lender not to call in the loan or anything of that nature.
It is said that it would be preferable, rather than looking at the claimant's balance sheet, to consider its cash position. That position is that three snapshots taken during the last few months show that the claimant had balances of £30 million or a little more, either in sterling or the equivalent in other currencies, in its accounts. But although that money is shown to be there, little or nothing is known as to the liabilities for which that money would be needed. It seems implausible to think that the money will simply be left there if it is not needed for operational requirements. It would seem to be obvious that it would be used to pay interest on or even principal on the loans which are outstanding.
It seems to me, applying a common sense view of...
To continue reading
Request your trial