Weatherford Global Products Ltd v Hydropath Holdings Ltd & Ors, Court of Appeal - Technology and Construction Court, August 01, 2014, [2014] EWHC 2725 (TCC)

Issuing Organization:Technology and Construction Court
Actores:Weatherford Global Products Ltd v Hydropath Holdings Ltd & Ors
Resolution Date:August 01, 2014

Case No: HT-12-169

Neutral Citation Number: [2014] EWHC 2725 (TCC)




Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 1st August 2014



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Mark Vanhegan QC and Hugo Cuddigan (instructed by Baker & McKenzie LLP) for the Claimant

Michael Booth QC and Michael Smith (instructed by Nelsons Solicitors Ltd) for the Defendant and Third Party

Benet Brandreth (instructed by Trethowans LLP) for the Fourth to Sixth Parties

Hearing dates: 16-20 June, 23-25 June and 8-9 July 2014

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JUDGMENT Mr Justice Akenhead:

1. This case arises out of the manufacture and supply of a patented product, known as (or which I will call) the ``Clearwell Product'', by Hydropath Holdings Ltd (``Hydropath''), the Defendant, to Weatherford Global Products Ltd (``Weatherford''), the Claimant, pursuant to a number of agreements. The Clearwell Product was essentially an electronic box which was to be clamped or strapped on to oil pipes to prevent scale building up on the inside of the pipes; it was seen as a useful alternative to the use of chemicals flushed through the oil pipes. Essentially, it operates by using electronic waves which induce and apply an electronic field to the liquids within the pipe so that the ions within the liquids form crystals which are carried away rather than the ions attaching as scale to the inside of the pipe.

2. The Clearwell Product was the brainchild of Dr Daniel Stefanini who invented it and patented it in the 1990 to 1994 period. He formed Hydropath and is the majority shareholder. Clearwell International Ltd (``Clearwell''), the Third Party, was incorporated in 2004 to licence the technology. In 2004-5, Martin Clark and Paolo Lauretti, the Fifth and Sixth Parties, helped to introduce Hydropath to Weatherford, part of a multi-billion dollar turnover American group which offered extensive services to the oil industry and to negotiate the three agreements which led to the supply and licensing of and technical support for the Clearwell product. Mr Clark and Mr Lauretti were to be made directors and minority shareholders of Clearwell. They also formed their own company, MSL Oilfield Services Ltd (``MSL''), the Fourth Party, in 2006 and initially Dr Stefanini was a director. Prior to this, the Clearwell Product had not been successfully marketed in the oil industry, at least in anything other than a minor way.

3. The three agreements, the ``Supply Agreement'', the ``Licence Agreement'' and the ``Technical Services Agreement'', were entered into between Hydropath and Weatherford, Clearwell, Hydropath and Weatherford and Clearwell and Weatherford respectively, initially on 10 August 2005 and later by way of revision on 21 December 2006. Over the years, some 500-600 Clearwell Product units were manufactured by Hydropath and supplied to Weatherford and many were installed around the world, albeit mostly in North America. Some $5m has been paid by Weatherford to Hydropath, largely by way of capital payments for the exclusive licence for the Clearwell Product.

4. The parties began to fall out mostly in 2010 and 2011 over the safety and suitability of the Clearwell Product, in particular in relation to its possible propensity to cause sparking on the adjacent pipework. No further products have been bought by Weatherford since late 2009 or early 2010 and indeed many of those installed have been replaced. In early 2011, Mr Clark and Mr Lauretti were dismissed as directors of Clearwell on the grounds that they had not acted appropriately or properly as directors of Clearwell; it is clear that Dr Stefanini believed that they acted against Clearwell's interests and were too close to Weatherford. Since then, a new product, the Clearwell R product, which works in at least a broadly similar way to de-scale pipelines, has been developed by MSL and patents applied for; this is now being manufactured by MSL and deployed by Weatherford.

5. Weatherford started these proceedings on 31 May 2012 in effect for breach of warranty in relation to the capacity of the Clearwell Product to cause sparking in adjacent pipework. This was met by Hydropath challenging all complaints and, with Clearwell as Third Party, counterclaiming against Weatherford for declarations that the Clearwell Product is properly certificated, for some $496,000 for unpaid commissions, for breach of an implied duty of good faith in allegedly raising spurious concerns about safety and for breaching the Licence by using confidential information to develop the Clearwell R Product and for using the Clearwell name. Clearwell claims against Mr Clark and Mr Lauretti for inducing Weatherford to breach the Licence Agreement in connection with the development of the Clearwell R Product and in breach of Companies Act directors' duties assisting Weatherford in competing with Clearwell having safety certification for the Clearwell Product removed.

6. During the trial, Hydropath and Clearwell abandoned the counterclaims for unpaid commissions and for breach of any good faith obligations and also very substantially reduced its complaints in relation to the use of confidential information and other breaches. The case has been bedevilled by a number of problems, not least of which have been:

(a) As seems to be increasingly common, a very large number of contemporaneous documents have been placed before the Court of which a small fraction have proved to be relevant and have needed to be deployed. Out of the 15,000 such pages of documentation, at most about 1,000 are relevant. This is a waste of the parties' money and time and also involves a waste of judicial and other court staff time. There was no core bundle, other than that which I prepared from documents referred to by Counsel at the trial (about 350 pages).

(b) There were reams of witness statements from the Hydropath/ Clearwell parties, the majority of which were not relevant and not admissible. Examples are the 206 page (602 paragraph) first statement of Dr Stefanini, much of which comprises his thoughts on documents and events about which he knew nothing contemporaneously; all he needed to say was, in this regard, to the extent that it was relevant, that he did not know that X, Y or Z was doing or saying this that or the other. Dr Rodrigues' first statement (83 pages and 202 paragraphs) to a wholly unacceptable extent contained comment about matters on which he had no actual knowledge and quasi-expert opinion, all of which was not readily admissible. There is much to be said for the Commercial Court practice of limiting such statements to 30 pages, save with the Court's permission. I have no doubt that both Dr Stefanini's and Dr Rodrigues' first statements could have been kept to 30 pages of relevant and admissible evidence.

(c) Written ``skeleton'' opening and closing submissions were unnecessarily long. The Claimant's written openings ran to 108 pages (plus annexes), although their closing was helpfully shorter; the Defendant's opening was reasonable in length but its closing was repetitive and unnecessarily discursive (113 pages). The 4th to 6th Parties' openings (in two parts) were not short, running to 67 pages but the closing was nearly 100 pages which repeated largely verbatim the whole opening (including on matters which were no longer in issue) but added an additional 40 pages' worth of further comment. There needs to be an understanding that judges have to read this material and, if it is unnecessarily long, it is more difficult to focus on what each party actually believes are the truly material matters. Counsel must appreciate the need for conciseness in this exercise.

(d) There seemed to be a belief that the judge was a specialist electronics and electrical engineer who would understand, without any explanation, precisely how the technology worked, how the alleged deficiencies came about, how the various suggested fixes might work, how the experiments were to be understood and how the final device engineered by MSL worked. Lawyers and experts need to explain if necessary in words of one syllable all these various matters.

The Agreements

7. The parties entered into agreements, initially on 10 August 2005, which were similar in form to the agreements which ultimately dictate the issues in this case. They concentrated on the ``Initial Period'' which was the first year. They were effectively varied in December 2006 after a further series of discussions. I will now refer to the December 2006 versions of the agreements.

8. The Supply Agreement described Hydropath as the ``Supplier'' and Weatherford as the ``Customer'' and contained a preamble entitled ``Background'':

``(A) [Clearwell] and [Weatherford] have entered into a Licence Agreement of even date in which inter alia Clearwell has granted [Weatherford] certain exclusive rights over [Hydropath's] intellectual property rights relating to certain technology which includes the right to manufacture certain Products...

(B) Notwithstanding that [Weatherford] has the right to manufacture itself under the Licence Agreement, [Weatherford] wishes [Hydropath] to supply, and [Hydropath] agrees to supply, the Products to [Weatherford], all on the terms and conditions set out herein.''

``Products'' included the Clearwell Product and there were no other products of relevance supplied by Hydropath. ``Specifications'' were defined in Clause 1 as meaning ``the specifications set out in Part 1 of the Schedule''.

9. Relevant terms included:

``2.1 During the continuance of this Agreement, [Hydropath] agrees to supply to [Weatherford]... and [Weatherford] agrees to purchase...from [Hydropath] such products as may be ordered by [Weatherford]...all on the terms and conditions of this Agreement.

2.2 For the avoidance of doubt, once [Weatherford]...

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