Grizzly Business Ltd v 1) Stena Drilling Ltd and Another
| Jurisdiction | England & Wales |
| Judge | The Right Honourable Lord Justice Longmore,The Right Honourable Lord Justice Lloyd Jones,The Right Honourable Lord Justice Treacy |
| Judgment Date | 24 February 2017 |
| Neutral Citation | [2017] EWCA Civ 94 |
| Docket Number | Case No: A3/2014/2758 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 February 2017 |
[2017] EWCA Civ 94
The Right Honourable Lord Justice Longmore
The Right Honourable Lord Justice Lloyd Jones
and
The Right Honourable Lord Justice Treacy
Case No: A3/2014/2758
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE TEARE
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Andrew Hochhauser QC & Ms Claudia Renton (instructed by Herbert Smith Freehills LLP) for the Appellants
Ms Sue Prevezer QC & Mr Alex Barden (instructed by Quinn Emanuel Urquhart & Sullivan) for the Respondent
Hearing dates: 8 th & 9 th February 2017
Approved Judgment
This is the judgment of the Court to which all its members have contributed:
Introduction
This is an appeal against two judgments of Teare J. The main issue before Teare J (and now, with the permission of Christopher Clarke LJ this court) is whether Mr James Devine for the claimant and Mr Tom Welo for the second defendant agreed in a telephone conversation of 29 th November 2011 that the second defendant would pay the claimant a commission of 0.25% of the revenue to be received from chartering a Stena vessel to Shell, if a charter were to be agreed with Shell as in due course it was. That is, of course, a pure question of fact.
Factual background
The defendants are part of the Stena group of companies engaged in, among other things, offshore drilling. The group was negotiating to charter a drillship called the STENA ICEMAX to Shell. This vessel is said to be the first drillship specifically designed to undertake deepwater drilling operations up to 10,000 feet and in Arctic conditions.
Mr Devine qualified as a solicitor in 1982, joined Stena in 1989 and left in 1996 in order to provide consultancy services. Mr Welo was managing director of the first defendant, Stena Drilling ("Drilling"). The CEO of the Stena group of companies was Mr Dan Olsson. Other members of the Stena project team were Mr Banks, Mr Lumsden and Mr Reinertsen.
From 1 st May 2009 Mr Devine, through the claimant Grizzly Business Ltd ("GBL") had the benefit of a consultancy agreement with Stena Drillmax 1 Limited ("Drillmax"), the second defendant, which stated that GBL would receive an annual retention fee of £150,000 per year and a fee calculated at 500 Euros per hour. It is also stated that:-
"It shall be open to the Company and the Consultant Company to agree, in addition to the Rate, other forms of compensation on a case-by-case basis as a success fee in respect of discrete pieces of business."
Mr Welo was the Stena representative who had authority to deal with all matters relating to the administration of consultancy agreements.
In his first judgment Teare J decided that there was an agreement that GBL should be paid a "success fee" of 0.25% of revenue from the STENA ICEMAX charter to Shell.
The first judgment
In a detailed judgment Teare J set out the factual background to the case. At paragraph 10 he identified factors which could be said to be for and against GBL's case. The factors in favour were that:-
1) it was to be expected that Mr Devine would raise the issue of the success fee on his return to Australia on 27 th November 2011, two days after the fourth meeting with Shell which took place at The Hague; and
2) within a short time of being told that his services were no longer required he emailed Mr Welo saying that he would invoice Stena for the success fee.
The two factors which could be said to support Stena's case were:-
1) the context of the phone call meant that it was unlikely that the subject of the success fee would be raised at all; and
2) the alleged agreement was not confirmed in writing immediately after the call.
With respect to the first factor in favour of GBL's case, he said at paragraphs 111–112 that Mr Devine had on all previous occasions agreed a success fee with Mr Welo when providing services in relation to charters. Also, he had already inquired about what success fee he would receive and had made suggestions based on previous success fees. The agreement for a success fee in relation to a transaction referred to as the Hess transaction specifically contemplated a further success fee in relation to the Shell deal.
As for the context of the call, the defendants said that Mr Welo was angry with Mr Devine in this call because Mr Devine had mis-handled (1) a contractual issue concerning local taxation (which resulted in a suggested increased charter rate for Shell which Shell had rejected) and (2) an agreement in principle said to have been reached with Shell about the neutrality of the cost consequences if an option to substitute the rig was exercised. Mr Welo said that Shell had effectively walked away from the deal at the point of this call and that had been a matter of great concern to him. At paragraph 115 the judge concluded that Shell had not walked away from negotiation and that Mr Welo needed Mr Devine's further input into the negotiations. The judge at paragraph 116 said that Mr Devine did not fail to record any agreement in principle about the cost consequences of substitution, because no such agreement in principle had been reached.
As for the taxation point, Mr Welo knew that the question whether the proposed hire rate should be increased to take into account tax which Stena would have to pay in French Guyana (where the drillship was to be used by Shell) remained to be addressed in the negotiations and that Mr Devine had asked for and received instructions on the point. Mr Welo had accepted that in cross-examination. There was therefore no reason to suppose that the telephone call had been an angry conversation.
As for the issue of a lack of confirmation email, the defendants argued that it was Mr Devine's invariable practice to send a confirmation email after any agreement. At paragraph 125 Teare J outlined 10 previous deals in which Mr Devine provided services to the defendants and earned a success fee. On the basis of this information the judge said at paragraph 126 that there did not appear to have been a practice of confirming an agreement for a success fee based upon a percentage of revenues where the fee had not been translated into a fixed figure payable on certain dates.
It was Mr Devine's case that since he resumed UK tax residency in 2009 he no longer had any need to confirm his oral agreements because the purpose of doing so was to prove exactly when the money was earned. When asked why his residency was relevant since it was his company's earnings and not his personal salary, he said that there was a "back-to-back" agreement with one of his companies which made his residence relevant. As to why he had in fact confirmed success fees since 2009, he said that he only confirmed in situations in which the fee had been translated into a sum of money with specified payment dates.
In paragraph 133 the judge advanced three reasons for concluding that he could not fairly infer from the lack of confirmation email that no success fee was agreed. These are that (1) his explanation at trial was consistent with previous practice (2) his place of residency was relevant to his practice due to a back-to-back agreement with his company and (3) there was a relationship of trust between Mr Devine and Mr Welo.
The second judgment
The second judgment was on costs. The main issue was whether the first defendant should pay GBL's costs or whether it should be awarded its costs. The submission for the first defendant was that it had succeeded in showing that it was not liable under the consultancy contract to pay the success fee. The second defendant, party to the consultancy agreement, was the party liable. This was important because it emerged after the hearing that the second defendant was a company with only US$106,000 of assets.
The judge decided that the first defendant ought to pay 90% of GBL's costs, the reduction of 10% reflecting its victory on the contractual point. The judge said that, if the first defendant had not been made a party, then it would nevertheless have been ordered to pay costs because it had funded the entire defence, even though the second defendant had been made a party ten months after the claim form had originally been issued on 8 th October 2012. We return to this below.
The First Appeal
The findings of fact challenged are:-
1) (at paras 115 and 141) that Shell had not walked away from the negotiating table at the time of the telephone call on 29 th November 2011;
2) (at para 114 to 122 and 141) that Mr Welo was not angry in the telephone call; and
3) (at paras 133 to 134 and 141) that it was not Mr Devine's invariable practice to confirm by email an agreement to pay a success fee equal to a percentage of revenues.
The correct findings are said to be (1) Shell had walked away from the negotiations (2) Mr Welo was angry in the critical phone call (3) it was therefore unlikely that Mr Devine had initiated a request for agreement about a success fee or that Mr Welo would have agreed to it and (4) any agreement was always confirmed in writing by Mr Devine once it had been made.
The judge found that both Mr Devine and Welo were unsatisfactory witnesses in certain respects. He did not consider that either of them was lying or trying to deceive the court in any relevant way. He instead found it necessary to consider the manner in which negotiations with Shell developed in great detail and the manner in which success fees had been agreed between Mr Devine and Stena in ten previous transactions. He then drew what he considered to be appropriate inferences from his conclusions about those matters. It is said that, since the judge's decision...
To continue reading
Request your trial
-
Frank Perry (Appellant/Claimant) v Raleys Solicitors (Respondents/Defendants)
...the circumstances in which an appellate court is entitled to overrule the factual findings of a trial judge is Grizzly Business Ltd v Stena Drilling Ltd & Anor [2017] EWCA Civ 94. The relevant passage is as follows: "39. The parties were broadly agreed upon the relevant law in the light of......
-
Wheeldon Brothers Waste Ltd v Millennium Insurance Company Ltd; Note
...of an appellate court to appeals based on matters of fact, the only other authority to which reference should be made is Grizzly Business Ltd v Stena Drilling Ltd [2017] EWCA Civ 94. At paragraphs 39 and 40, Longmore LJ said: “39. The parties were broadly agreed upon the relevant law in th......
-
Esengul Woodcock v The Chief Constable of Northamptonshire Police
...court; order a new trial or hearing etc. Findings of fact 97 I take into account the decision in Grizzly Business v Stena Drilling [2017] EWCA civ 94 at 39–40. Any challenges to findings of fact in the court below have to pass a high threshold test. Analysis and conclusions Duty of care – ......
-
Susan Glover v Iain Paul Barker
...Wood [1908] 2 KB 458, CA; [1910] AC 404, HL(E)Englefield v Round (1727) Cooke, Common Pleas 32Grizzly Business Ltd v Stena Drilling Ltd [2017] EWCA Civ 94, CASymphony Group plc v Hodgson [1994] QB 179; [1993] 3 WLR 830; [1993] 4 All ER 143, CASystemcare (UK) Ltd v Services Design Technology......