Robert Gresham Gray v Global Energy Horizons Corporation
| Jurisdiction | England & Wales |
| Judge | Lord Justice David Richards,Lord Justice Henderson,Lady Justice Rose |
| Judgment Date | 09 December 2020 |
| Neutral Citation | [2020] EWCA Civ 1668 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2019/2793 & 2795 |
| Date | 09 December 2020 |
[2020] EWCA Civ 1668
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
MRS JUSTICE ASPLIN
MR JUSTICE ARNOLD
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice David Richards
Lord Justice Henderson
and
Lady Justice Rose
Case No: A3/2019/2793 & 2795
Case No A3/2019/2681
Timothy Dutton QC, Edward Levey QC and Philip Ahlquist (instructed by Enyo Law LLP) for Robert Gray
Andrew de Mestre QC and James Knott (instructed by Eversheds Sutherland) for Global Energy Horizons Corporation
Hearing dates: 22, 23, 24, 25, 26 and 29 June 2020
Approved Judgment
| Para | |
| I. INTRODUCTION | 1 |
| II. THE FACTS IN MORE DETAIL | 23 |
| (a) From the start of the project to June 2007 | 24 |
| (b) The liability phase of the proceedings | 47 |
| (i) The Liability Judgment | 47 |
| (ii) The Vos Order | 60 |
| (c) Picking up the narrative for the Enquiry phase | 63 |
| (i) Mr Gray's share of the Acquisition Strategy SPV | 64 |
| (ii) The Klamath Falls arbitration | 72 |
| (iii) The creation of Petrosound and the events of 2012 and 2013 | 74 |
| (d) The Enquiry Hearing and the Enquiry Judgment | 80 |
| (i) The management fees 2006 – 2009 and the consultancy fee for 2010 | 82 |
| (ii) The sums paid under the Klamath Falls Settlement | 84 |
| (iii) The Russian Business Assets: Chiloquin's 15% holding of shares in Petrosound | 85 |
| (iv) The Russian Business Assets: the VIYM Executives' 15% share of Petrosound | 87 |
| (v) The ROW Business Asset: 51% of Opco | 88 |
| (vi) Valuation of the Business Assets | 90 |
| (vii) Equitable allowance | 91 |
| (e) Asplin J's orders | 92 |
| (f) The Valuation Hearing and the Valuation Judgment | 95 |
| (g) The Valuation Consequentials Rulings and the Arnold Order | 100 |
| (h) Mr Gray's Applications D and E and the hearing of the appeals | 103 |
| (i) The Grounds of Appeal in summary | 105 |
| III. GROUND 1 | 107 |
| (a) Introduction | 107 |
| (b) The scope of the account ordered by Vos J | 112 |
| (c) What are the profits for which a defaulting fiduciary is liable to account? | 123 |
| (d) The Klamath Falls Settlement | 129 |
| (e) Mr Gray's liability to account for asset 1(a): the $3 million derived from the Klamath Falls Settlement | 135 |
| (f) Mr Gray's liability to account for assets 1(d) and (e): the Russian Business Assets | 141 |
| (g) GEHC's preliminary point: should Mr Gray be permitted to argue Ground 1 at all? | 144 |
| (h) Mr Gray's application to amend Ground 1 | 147 |
| (i) Overall conclusion on Ground 1 | 154 |
| IV. GROUND 2 | 155 |
| (a) Introduction | 155 |
| (b) The relevant fees | 159 |
| (c) The judge's conclusions on “causation” | 162 |
| (d) Mr Gray's submissions | 166 |
| (e) Do the fees fall within the scope of the Vos Order? | 169 |
| (f) Mr Gray's other arguments | 174 |
| (g) Conclusion on Ground 2 | 177 |
| V. GROUNDS 3A.1 AND 3A.2 | 178 |
| (a) Ground 3A.1 | 183 |
| (b) Ground 3A.2 | 194 |
| VI. GROUND 4 | 202 |
| VII. GROUND 5 | 207 |
| (a) Introduction | 207 |
| (b) The claim for an equitable allowance as presented to Asplin J | 218 |
| (c) Did Asplin J misdirect herself on the law? | 228 |
| (d) Asplin J's reasons for refusing an equitable allowance | 235 |
| (e) Conclusion on Ground 5 | 240 |
| VIII. GROUNDS 6 AND 9 | 241 |
| (a) Introduction | 241 |
| (i) The Enquiry Judgment | 243 |
| (ii) The detailed grounds | 271 |
| (iii) Asplin J's finding as to the 2010 agreement | 277 |
| (iv) Is it open to Mr Gray to challenge the finding as to the 2010 agreement? | 283 |
| (v) The approach on appeal to challenges to findings of fact | 289 |
| (b) Ground 6.1 | 291 |
| (i) Inherent improbabilities | 292 |
| (ii) Specific challenge: documents alleged to be window-dressing | 298 |
| (c) Ground 6.3 | 313 |
| (i) Introduction | 313 |
| (ii) Adverse inferences | 315 |
| (iii) Adverse inference: payments to Russian Scientists | 318 |
| (iv) Adverse inference: withheld documents | 320 |
| (v) Withheld documents: the confidential fax | 322 |
| (vi) Withheld documents: attachment to the Feasibility Study | 327 |
| (vii) Withheld documents: emails after 2010 | 330 |
| (viii) Withheld documents: conclusion | 332 |
| (ix) Failure to address issues | 334 |
| (x) Failure to address the alleged conspiracy | 335 |
| (xi) Failure to address the email dated 30 April 2012 | 338 |
| (xii) Conclusion on Ground 6.3 | 342 |
| (d) Grounds 6.4 and 9.2 – 9.3 | 343 |
| (i) Introduction | 343 |
| (ii) Mr Gray's preliminary submissions | 346 |
| (iii) The principal grounds | 348 |
| (iv) Ladd v Marshall | 350 |
| (v) Could Mr Gray have obtained the evidence with reasonable diligence? | 353 |
| (vi) Would the documents probably have had an important influence on the result of the case? | 362 |
| (vii) Documents relevant to the rejection of Professor Abramov's evidence | 365 |
| (viii) Documents relevant to viability | 374 |
| (ix) Documents relevant to value | 380 |
| (x) Documents relevant to the 2010 agreement | 387 |
| (xi) Alleged breach of duty to disclose documents | 395 |
| (xii) Rosenblatt's knowledge of the documents | 404 |
| (xiii) Abuse of process | 417 |
| (xiv) Was there any breach of duty? | 432 |
| (e) Ground 9.4 | 436 |
| (f) Conclusions on Grounds 6 and 9 | 439 |
| IX. GROUNDS 7, 8 and 9.5: THE ORDERS RELATING TO THE BUSINESS ASSETS | 440 |
| (a) Ground 7.1: the interest in the VIYM Executives' 15% in Petrosound | 442 |
| (b) Grounds 7.2, 8 and 9.5: the ROW Business Asset | 448 |
| X. GEHC'S APPEAL | 465 |
| XI. SUMMARY, OUTSTANDING GROUNDS OF APPEAL AND | 476 |
| CONCLUDING OBSERVATIONS | |
| (a) Summary of conclusions on the Grounds of Appeal | 476 |
| (b) The outstanding grounds of appeal | 487 |
| (c) Concluding observations | 490 |
Lord Justice David Richards, Lord Justice Henderson and
I. INTRODUCTION
This is the judgment of the court to which all members have contributed.
These appeals follow nine years of litigation, involving three trials and several very substantial interlocutory applications. Global Energy Horizons Corporation (‘GEHC’) issued proceedings in December 2010, claiming that the Appellant, Robert Gray, had, in breach of his fiduciary duties, received profits and benefits for which he was accountable to it. Following a 12-day trial on liability, Vos J held that Mr Gray owed fiduciary duties to GEHC and that he had placed himself in a position of conflict between his duties to GEHC and his personal interests, such that he was accountable for profits and benefits that he had already received and might receive in the future. There has been no appeal against the order of Vos J. He directed Mr Gray to give an account, pursuant to which Mr Gray swore three affidavits in which he denied the receipt of any profits or benefits.
GEHC challenged Mr Gray's account, which was the subject of a 21-day trial before Asplin J in 2015. Mr Gray was ordered to account for sums amounting to US$3 million and to some £1.67 million and for interests in businesses exploiting technology for use in the oil industry in the Russian Federation and in the rest of the world. She was unable on the evidence before her to determine the value of those interests and she directed a further hearing for that purpose. A 5-day valuation hearing took place before Arnold J in 2019. Arnold J found that these interests had no value. GEHC does not appeal against that finding.
The hearing of the appeals before us took six full days. The great majority of the issues arose on Mr Gray's appeal against Asplin J's order, for which permission was granted by Arnold J. The issues included extensive challenges to the judge's findings of fact and involved applications by Mr Gray to adduce new evidence. GEHC appealed against some parts of Arnold J's order.
These proceedings arise out of a project between two former friends and business partners, Brian de Clare and Mr Gray. GEHC was set up by Mr de Clare in order to exploit what he saw as a promising business venture, based on a new ultrasound technology which was said to increase oil production from depleting oil wells reaching the end of their life. Mr Gray joined the team at GEHC in 2004 and he and Mr de Clare worked together for a time, agreeing that they would benefit equally from any income generated by the business. They worked in particular on trying to get access to the relevant technology which was held by a company called Klamath Falls Inc (‘Klamath Falls’) and on seeking funding to invest in testing the technology with the aim ultimately of setting up a special purpose vehicle (‘SPV’) to acquire late life oil wells and using the technology to improve their production rates.
In December 2005 Mr Gray, a former banker specialising in oil and gas assets, was invited by Pieter Heerema, a billionaire entrepreneur, to take on the management of a substantial fund to invest in upstream oil and gas opportunities. Mr Heerema owns the Heerema group, whose business includes the fabrication, transportation and installation of offshore oil and gas production facilities. The companies through which the Heerema group became involved in ultrasound technology investments...
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