Mitsui and Company Ltd v Nexen Petroleum UK Ltd

JurisdictionEngland & Wales
JudgeTHE HONOURABLE MR JUSTICE LIGHTMAN,Mr Justice Lightman
Judgment Date29 April 2005
Neutral Citation[2005] EWHC 625 (Ch)
Docket NumberCase No: HC05 00060
CourtChancery Division
Date29 April 2005
Between
Mitsui & Co, Limited
Claimant
and
Nexen Petroleum Uk Limited
Defendant

[2005] EWHC 625 (Ch)

Before

The Honourable Mr Justice Lightman

Case No: HC05 00060

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Mr Christopher Carr QC & Mr David Sulan, Solicitor of Herbert Smith (instructed by Herbert Smith LLP, Exchange House, Primrose Street, London EC2A 2HS) for the Claimant

Mr Ian Glick QC & Mr Philip Reed, Solicitor of Norton Rose (instructed by Norton Rose, Kempson House, Camomile Street, London EC3A 7AN) for the Defendant

Hearing dates: 12 th– 13 th April 2005

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.

THE HONOURABLE MR JUSTICE LIGHTMAN Mr Justice Lightman

Mr Justice Lightman

INTRODUCTION

1

By the application before me dated the 14 th January 2005, the claimant Mitsui & Co, Limited ("the Claimant") a very substantial company incorporated in Japan seeks orders pursuant to the principles established in Norwich Pharmacal v. Customs & Excise Commissioners (" Norwich Pharmacal") [1974] AC 133 (as subsequently developed) against the defendant Nexen Petroleum UK Limited (formerly EnCana UK Limited) ("the Defendant") for disclosure of documents and for provision of an affidavit by Mr Alan Booth ("Mr Booth") the former managing director of the Defendant and of its former holding company, EnCana UK Holdings Limited ("Holdings").

2

The application arises out of the entry by Holdings and Nexen Energy Holdings International Limited ("Nexen Energy") into an agreement dated the 28 th October 2004 ("the Sale Agreement") for the sale by Holdings to Nexen Energy of the entire issued share capital of the Defendant for $2.1 billion and the completion of the Sale Agreement on the 1 st December 2004. The Claimant contends that EnCana Corp (Holdings' parent company) had by a prior oral agreement with the Claimant agreed not to solicit offers from third parties in relation to the primary asset of the Defendant, namely its interest in the Buzzard Field, and strongly suspects that in breach of that agreement EnCana Corp solicited from Nexen Energy's holding company Nexen Inc ("Nexen") an offer to purchase the Defendant. The purpose of the Claimant's application is to obtain from the Defendant information required to enable it to determine whether to sue EnCana Corp for such breach of contract.

FACTUAL BACKGROUND

3

The Defendant and Holdings are both incorporated in England and Wales. Both EnCana Corp and Nexen are incorporated in Canada. EnCana Corp has registered here as an overseas company. Nexen Energy is incorporated in the Channel Islands.

4

In early 2004 the Defendant owned (together with interests in the Scott and Telford Fields) a 43.2% interest in the Buzzard Field, the most significant oil field to be discovered in the North Sea in the past decade. The other parties interested in the Buzzard Field were Intrepid Energy North Sea Limited ("Intrepid"), which held a 29.9% interest, BG Group, which held a 21.7% interest, and Edinburgh Oil and Gas Plc, which held a 5.1% interest.

5

Between January and April 2004 the Claimant attempted to purchase Intrepid's interest in the Buzzard Field. It was unsuccessful in doing so, but the Claimant remained keen to acquire an alternative interest in the Buzzard Field at the first available opportunity. It retained JPMorgan to assist it to do so. JPMorgan advised the Claimant that EnCana Corp was currently re-evaluating its North Sea strategy. As a result the Claimant approached EnCana Corp and expressed an interest in acquiring its interest in the Buzzard Field.

6

EnCana Corp responded positively. An initial meeting was held between the senior executives of the parties in Calgary, Canada on the 4th August 2004. During the 4th August 2004 meeting a confidentiality agreement (of which the applicable law was English law) was entered into between: (1) EnCana Corp, Holdings and the Defendant; and (2) the Claimant ("the Confidentiality Agreement"). The Confidentiality Agreement imposed on EnCana Corp, Holdings and the Defendant a duty of confidence in respect of the proposed transaction and in particular the identity of the Claimant, the offer price and the financing arrangements. In its skeleton argument the Claimant raised the question whether EnCana Corp breached its obligations under the Confidentiality Agreement, but it is common ground that this question is not relevant on this application. The proposed purchase was a significant transaction for the Claimant and, since a large amount of senior management time was to be invested in the negotiations and the Claimant was to incur significant external consultant fees, it was very important to the Claimant to complete the deal successfully. To that end, the Claimant attempted to obtain EnCana Corp's agreement to negotiate exclusively with the Claimant. But EnCana Corp would not agree to this.

7

Nonetheless the Claimant contends that EnCana Corp did agree on a lesser form of protection for the Claimant and that for this purpose entered into an oral agreement with the Claimant referred to as the Protocol Agreement ("the Protocol"). The Claimant does not suggest that the applicable law of the Protocol was other than English law and I must proceed on that basis. The Claimant says that by the Protocol EnCana Corp agreed:

i) not to solicit offers from third parties in relation to the Defendant's interest in the Buzzard Field (the "First Limb"); and

ii) to advise the Claimant of any bona fide offers from third parties in relation to the Buzzard Field Assets and to allow the Claimant an appropriate time to respond to any such offers ("the Second Limb").

EnCana Corp denies that it entered into any such agreement and that, if any such agreement was entered into, it had or was intended to have any legal effect. It is common ground that it is not for me on this application to examine the merits of this dispute and I must proceed on the basis that the Claimant has a real prospect of establishing the existence and enforceability of the Protocol. I must however later say a word about the First Limb.

8

Negotiations between the parties continued from August 2004 to the end of October 2004 and were conducted on behalf of EnCana Corp by Mr Brian Ferguson and on behalf of Holdings and the Defendant by Mr Booth. Both of these persons were at all key meetings between the parties. All key terms of the proposed deal (including price) were agreed. The proposed deal was to the effect that the Claimant should purchase the entire share capital of the Defendant and that arrangements would be made to strip out of the Defendant assets which the Claimant did not wish to purchase (which included part of the Defendant's interest in the Buzzard Field and the Defendant's interest in two other fields). During the negotiations, (according to the Claimant in accordance with the Second Limb) EnCana Corp notified the Claimant on or about the 7th October 2004 of an offer made by Oil and National Gas Corp Limited for the interest of the Defendant in the Buzzard Field.

9

Towards the end of October 2004 the Claimant and EnCana Corp were in an advanced stage of negotiation and were due to sign the legal documentation in London in the week beginning the 1st November 2004. But on the 29th October 2004 EnCana Corp announced that it had entered into the Sale Agreement. By clause 20(1)(a) of the Sale Agreement, Holdings and Nexen Energy covenanted with each other that they and their affiliate companies (a term which included their subsidiaries) would keep confidential information relating to the negotiations leading to the Sale Agreement. EnCana Corp did not previously at any stage advise the Claimant of Nexen's interest in purchasing the Defendant's interest in the Buzzard Field or of any offer by Nexen or allow the Claimant to respond to such offer. JPMorgan subsequently advised the Claimant that Mr Booth had said that Nexen became interested in purchasing the Defendant's interest in the Buzzard Field on or around the 19th October 2004. This would mean that Nexen formulated the bid by its subsidiary from start-to-finish in approximately ten days. On the 1st December 2004 the sale to Nexen Energy was completed. On the 2nd December 2004, the Defendant (now a subsidiary of Nexen) was renamed Nexen Petroleum UK Limited.

10

The Claimant's representative Mr Tsuruta had discussions with Mr Ferguson on the 5th November 2004 in an attempt to establish why EnCana Corp had decided to sell its UK business to Nexen, why EnCana Corp had failed to comply with the Protocol and how Nexen had been able to complete the deal so quickly. Mr Ferguson said that Nexen had originally negotiated to purchase the assets of the Defendant other than its interest in the Buzzard Field, but had then made an unsolicited offer for the Defendant together with all its assets at a much better price than the Claimant had offered and that there had been no point in referring that offer to the Claimant because the Claimant had made plain that its previous offer was its final offer.

11

Between the 5th November 2004 and the 26th November 2004 Herbert Smith, solicitors acting on behalf of the Claimant, corresponded with EnCana Corp's solicitors, Freshfields. The primary purpose of the correspondence was to attempt to understand how EnCana Corp completed the transaction with Nexen so quickly, and why EnCana Corp failed to notify the Claimant about Nexen's offer. EnCana Corp failed to provide details satisfactory to the Claimant of how Nexen's bid came about. EnCana Corp and Nexen regard the information sought as confidential. The Claimant commenced these proceedings on the 14 th January 2005.

12

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