Robert Gresham Gray v Global Energy Horizons Corporation

JurisdictionEngland & Wales
JudgeLord Justice David Richards,Lord Justice Henderson,Lady Justice Rose
Judgment Date09 December 2020
Neutral Citation[2020] EWCA Civ 1668
CourtCourt of Appeal (Civil Division)
Docket NumberCase No: A3/2019/2793 & 2795
Date09 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

[2015] EWHC 2232 (Ch)

MR JUSTICE ARNOLD

[2019] EWHC 1260 (Ch)

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice David Richards

Lord Justice Henderson

and

Lady Justice Rose

Case No: A3/2019/2793 & 2795

Case No A3/2019/2681

Between:
Robert Gresham Gray
Appellant
and
Global Energy Horizons Corporation
Respondent
Between:
Global Energy Horizons Corporation
Appellant
and
Robert Gresham Gray
Respondent

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

Lady Justice Rose

Lord Justice David Richards, Lord Justice Henderson and

I. INTRODUCTION

1

This is the judgment of the court to which all members have contributed.

2

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.

3

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.

4

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.

5

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.

6

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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