Grizzly Business Ltd v Stena Drilling Ltd & Anor, Court of Appeal - Commercial Court, June 13, 2014, [2014] EWHC 1920 (Comm)

Resolution Date:June 13, 2014
Issuing Organization:Commercial Court
Actores:Grizzly Business Ltd v Stena Drilling Ltd & Anor

Case No: 2012 FOLIO 1319

Neutral Citation Number: [2014] EWHC 1920 (Comm)




Royal Courts of Justice

Rolls Building, 7 Rolls Buildings

Fetter Lane, London EC4A 1NL

Date: 13/06/2014

Before :


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Between :

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Susan Prevezer QC and Alex Barden (instructed by Quinn Emanuel Urquhart & Sullivan LLP) for the Claimant

Andrew Hochhauser QC and Claudia Renton (instructed by Herbert Smith Freehills LLP) for the Defendants

Hearing dates: 30 April, 1, 2, 6, 7 and 8 May 2014

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JudgmentMr Justice Teare:

  1. This case is, in essence, about one short question of fact. That question is whether Mr. James Devine agreed with Mr. Tom Welo during a telephone conversation on 29 November 2011 that Mr. Devine (through his company Grizzly Business Limited) would be entitled, in the event that Stena chartered their drilling vessel to Shell, to a success fee equal to 0.25% of the gross revenue to be earned under the charter.

  2. Mr. Devine gave evidence that in that telephone call he had raised the question of the success fee and said that he would settle for 0.25% as he had done on previous deals and that Mr. Welo replied ``all right''. Mr. Welo gave evidence that the subject of the success fee had not been raised in the telephone call.

  3. Miss Prevezer QC on behalf of the claimant, Grizzly Business Limited, submitted that when one has regard to the context in which the conversation took place the evidence of Mr. Devine is the more plausible and should be accepted. Mr. Hochhauser QC on behalf of the defendants, Stena Drilling Limited and Stena Drillmax I Limited, submitted that the evidence of Mr. Devine is implausible and that the evidence of Mr. Welo should be accepted.

  4. If the court determines this issue in favour of the claimant it is common ground that the sum to which the claimant is entitled (subject to a further argument that on 1 December 2011 the claimant repudiated the agreement) is $2.5m less an agreed deduction of £150,000.

    The witnesses

  5. Mr. Devine had a tendency to give long and confusing answers rather than a simple answer to the question asked. He gave the impression, by setting out the context in which matters arose, that he was seeking to argue the case rather than answer the question asked. Further, on important questions (such as the reason why no confirmatory email had been sent after the relevant telephone call) his explanation both in his written statement and in his oral evidence was not a model of clarity. For these reasons Mr. Devine was not an impressive witness.

  6. Mr. Welo did not suffer from the defect of long and confusing answers. But his evidence did suffer from the defect of reconstruction, rather than recollection. Thus he said that he had a ``crystal clear'' recollection that the subject of Mr. Devine's success fee had not been raised by Mr. Devine in the relevant telephone call on 29 November 2011. But when asked why it was that his recollection was crystal clear he said that Mr. Devine had not sent a confirmatory email after the call. There was also an indication that he was willing for words to be put in his mouth by those advising him. Thus he signed a statement of truth in respect to the defendants' pleading which contained an allegation that Mr. Devine's success fees had to be approved by Mr. Olsson. That allegation was later withdrawn. Also, when asked a question about a passage in his evidence where he said that he had ``remonstrated'' with Mr. Devine he asked what ``remonstrate'' meant, adding that he had a good legal team. I therefore considered that Mr. Welo was also not an impressive witness.

  7. However, the defects in the manner in which Mr. Devine gave his evidence did not persuade me that his evidence that his success fee had been agreed by telephone could not be accepted; for in that respect his evidence was clear and was said to be supported by the surrounding circumstances. Similarly, the defects in the manner in which Mr. Welo gave his evidence did not persuade me that his evidence that the question of a success fee had not even been raised in the telephone call must be rejected. He gave clear and consistent evidence that it had not been raised and his evidence was said to be supported by the surrounding circumstances.

  8. The burden lies on the claimant to prove on the balance of probabilities that Mr. Devine and Mr. Welo agreed a success fee of 0.25% in the telephone call in question (that which took place between 1825 and 1850 GMT on 29 November 2011, or between 5.25 and 5.50 am on 30 November in Australia). It is therefore necessary to consider whether, having regard to the context in which that call took place, to the surrounding circumstances and to the contemporaneous documents, it is more likely than not that Mr. Devine's account of the call is correct. The context and circumstances in which the call took place, together with the contemporaneous documents, were therefore examined at the trial in considerable detail, notwithstanding that the essential dispute is whether a few words were spoken in a telephone call.

  9. The defendants called three other witnesses. Mr. Reinertsen was a colleague of Mr. Welo. He gave his answers concisely and clearly. Mr. Banks was another colleague of Mr. Welo and also gave his answers concisely and clearly. In that regard both were impressive witnesses. However, they were giving evidence of events which occurred over two and half years ago and it is possible that in those circumstances some of their answers were mistaken. It was therefore necessary to consider whether their evidence accorded with the probabilities. Allegations were made that they had conspired with Mr. Welo to give untrue evidence. I do not consider that such allegations were made good.

  10. Mr. Froystad was the managing director of a Norwegian broker who was instrumental in bringing Stena and Shell together. He gave his evidence concisely and clearly and was conspicuously fair. But his evidence was not of great significance and little of it was in dispute. On the one significant point in his evidence (Shell's view of Mr. Devine during the negotiations between Shell and Stena) his evidence was supported by a note written shortly after the events in question.

    The relationship between Mr. Devine and Mr. Welo.

  11. Mr. Devine qualified as a solicitor in Scotland in 1982 and worked in private practice before moving in-house. In 1989 he joined Stena Offshore Limited as the Legal Director. In 1995 Stena Offshore Limited merged with a French competitor Coflexip SA and Mr. Devine became the General Counsel of the merged company. However, he left that company in 1996 and then acted as a consultant to various clients in the offshore contracting sector, including Stena Drilling Limited, the first defendant. He provided his services via two companies, Grizzly Business Limited (a Scots company) and Crossbay Ventures Limited (a BVI company).

  12. Mr. Welo began his working life as a research engineer but then moved into the offshore industry. He was appointed the Managing Director of Stena Drilling Limited in 1995 and remains in that position. Stena Drilling is an English registered company within the Stena group, a Swedish industrial and transportation conglomerate. The group has interests in shipping, property, finance, recycling, environmental services and, of relevance in the present case, offshore drilling. The group is owned by the Olsson family. Mr. Dan Olsson is the CEO of one of the holding companies, Stena AB.

  13. Stena's drilling fleet consists of 2 semi-submersible units, 7 mobile offshore drilling units and 4 drilling ships. Daily rates in excess of US$500,000 can be commanded by the drillships. One of the drillships is the STENA ICEMAX, said to be the first drillship specifically designed to undertake deepwater drilling operations in water depths of up to 10,000 feet and in Arctic conditions. It is highly sophisticated and had a build cost (in 2010 and 2011) in excess of US$1 billion.

  14. Mr. Welo has an experienced team of colleagues, primarily based in Aberdeen. But in addition he uses the services of external advisors, one of whom was Mr. Devine. Mr. Welo engaged Mr. Devine to act as Stena's lead negotiator, subject to Mr. Welo's overall direction, on a number of important drilling contract negotiations. Mr. Welo considered that their relationship, though sometimes ``fiery'', was generally very productive and friendly.

  15. The relationship was certainly beneficial to Mr. Devine. He earned a ``success fee'' for his involvement in the successful negotiation of several charters or service contracts. They ranged from £100,000 to US$1.9 million. Each success fee was negotiated between Mr. Welo and Mr. Devine.

  16. From 1 May 2009 Mr. Devine had the benefit of a consulting agreement with Stena Drillmax I Limited, the second defendant. The terms of that agreement, so far as material, were as follows:

    ``1. The Consultant Company [Grizzly Business] agrees to provide the services of the Consultant [Mr. Devine] to provide consultancy and advisory services to the Company [Stena Drillmax I Limited] and its associated companies on a non-exclusive basis with respect to all matters relating to or affecting the operations and business of the Company or such of its associated companies or entities (``Related Entities'') as may be reasonably requested by the Company from time to time in accordance with Clause 3(2) below (hereinafter called the ``Service'') and the Company agrees to pay the Consultant Company at the Rate set out as aftermentioned.

  17. In consideration of the Service to be rendered by the Consultant Company, the Company shall pay the Consultant Company:

    (i) an annual retention fee of GBP 150,000 per calendar year (1 January to 31...

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