Grizzly Business Ltd v Stena Drilling Ltd & Anor [2014] EWHC 1920 (Comm) (13 June 2014)

Neutral Citation Number: [2014] EWHC 1920 (Comm) Case No: 2012 FOLIO 1319 IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION COMMERCIAL COURT Royal Courts of Justice Rolls Building, 7 Rolls Buildings Fetter Lane, London EC4A 1NL 13/06/2014 B e f o r e : THE HONOURABLE MR. JUSTICE TEARE ____________________ Between: GRIZZLY BUSINESS LIMITED Claimant - and - STENA DRILLING LIMITED STENA DRILLMAX I LIMITED Defendants ____________________ 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 ____________________ HTML VERSION OF JUDGMENT ____________________ Crown Copyright © Mr Justice Teare: 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. 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. 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. 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 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. 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. 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. 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. 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. 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. 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). 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. 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. 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. 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. 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. 2. 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 December): and (ii) a fee calculated at the rate of Euro 500 per hour or pro rata for part of an hour to the nearest 15 minutes for time spent by the Consultant on the Company's business (hereinafter called the "Rate"). It shall be open to the Company and the Consultant Company to agree, in addition to the Rate, other forms of compensation on a case-by-case basis as a success fee in respect of discrete pieces of business. Subject to prior arrangement with the Company, reasonable out of pocket expenses incurred by the Consultant in the provision of the Service shall be reimbursed by the Company for the amount incurred by invoicing the Company and producing all supporting receipts. ……………. 3. The Company shall appoint a Representative (or his nominated delegate or delegates) who shall have the Company's authority to deal with all matters pertaining to the administration of this Agreement. The Company's Representative and the Consultant Company shall agree from time to time the administrative procedures by which the Company or the Related Entities can request the Service and the time-frame within which the Service is to be provided taking into account the Consultant's availability. ………" There was no dispute that the "Company's Representative" was Mr. Welo. The success fee which is the subject of this action arose in relation to the STENA ICEMAX. That drillship was due for delivery from the builders in March 2012 and Stena were naturally anxious to find work for her. Fortunately for Stena, Shell expressed an interest in chartering the STENA ICEMAX in October 2011. That interest was communicated to Mr. Welo and Mr. Olsson by Mr. Froystad. The negotiations between Stena and Shell, Mr. Devine's role in those negotiations and his negotiations with Mr. Welo regarding his success fee. October 2011 At about the time when Shell expressed an interest in the STENA ICEMAX Mr. Welo and Mr. Devine were involved in negotiating a contract for another drillship with Hess. That deal was concluded on or about 6 October 2011. On 20 October 2011 a meeting took place at Shell's offices in The Hague to discuss the STENA ICEMAX. Mr. Olsson and Mr. Welo attended on behalf of Stena. Mr. Sharpe, Mr. van den Broek and Mr. Vos attended on behalf of Shell. A five year charter was discussed for operations in French Guyana. Mr. Olsson was anxious to be able to deploy the STENA ICEMAX in the Arctic if the opportunity arose and so suggested a "swap structure" so that she could be replaced by another conventional Drillmax unit. The proposal was acceptable to Shell in principle. Between 24 and 29 October 2011 Mr. Welo and Mr. Devine exchanged emails concerning Mr. Devine's success fee with regard to the Hess contract. Mr. Welo enquired what the success fee would be for both Drillmax 1 and STENA ICEMAX and Mr. Devine suggested 0.25% for both. Ultimately, a success fee for Drillmax 1 was agreed by telephone on 29 October 2011. On that day Mr. Devine sent an email to Mr. Welo confirming what had been agreed by telephone. The email said as follows: "Tom, Further to our telecom, I confirm our agreement on a success fee for my work on the recent Hess/Drillmax contract as follows:- 1. The fee is agreed at £500k payable in 10 equal monthly instalments of £50k commencing in October 2011. 2. In the event that I earn an agreed success fee in relation to a contract for Icemax before the end of Q1 2012, then the sum of £150k shall be rebated from the fee in 1. above by way of cancellation of the final three monthly instalments. Regards Jim Devine" Mr. Welo replied to that email "OK" on 30 October 2011. Mr. Devine replied "Thanks" and Mr. Welo responded by saying "See you at the next race." It is apparent from the terms of Mr. Devine's email of 29 October that Mr. Welo and Mr. Devine contemplated the possibility that a success fee might be earned by him in relation to the STENA ICEMAX (which was, it seems, "the next race".) However, no such fee had yet been agreed. But both Mr. Welo and Mr. Devine contemplated and expected that one would be agreed in the event that Mr. Devine was involved in the negotiations on the STENA ICEMAX. 2-19 November 2011 On 2 November 2011 Shell sent their proposal to Stena for a 5 year charter of the STENA ICEMAX with a two-tiered rate to be applied depending upon whether the drilling ship was used in normal or Arctic operations. The proposed rate was US$525,000 per day with an Arctic operating rate of 125% of the normal rate. In addition there would be bonus payments dependent upon Key Performance Indicators ("KPIs") of up to US$100,000 per day. Shell also offered a swap option whereby either party could swap the STENA ICEMAX for a replacement unit of equivalent specifications except for the Arctic capability. Mr. Welo forwarded the proposal to Mr. Devine, Mr. Banks (the managing director of Stena Drilling Asia Pacific who assisted Mr. Welo with the negotiation of operational matters and in particular KPIs), Mr. Lumsden (an experienced contracts manager in Stena Drilling Limited) and Mr. Reinertsen (the marketing and contracts manager of Stella Drilling Limited). They formed Mr. Welo's negotiating team. On 3 November 2011, Mr. Devine who was in Sydney, Australia, where he spent the winter, emailed Mr. Welo his preliminary thoughts on the proposal. On 4 November 2011 Mr. Welo sent Shell a holding response drafted by Mr. Devine. He informed Shell that Stena hoped to be able to revert with their detailed comments by the week commencing 14 November 2011. Mr. Welo's team, in particular Mr. Banks and Mr. Devine, worked on Shell's proposal. Mr. Reinertsen made enquiries concerning taxes in French Guiana. On 10 November 2011 Mr. Devine sent a draft response to Mr. Lumsden and on 13 November 2011 a revised draft to Mr. Welo. On 15 November 2011 Mr. Welo returned from leave. On 16 November he called Mr. Devine by telephone and after that call sent an email to Shell saying that Stena would revert with their comments by close of business the next day. On 17 November 2011 Mr. Welo sent Stena's response to Shell. Stena proposed to incorporate their Standard Contracting Terms which provided that the Shell would reimburse Stena's taxes. On 18 November 2011 Shell proposed a meeting in Stena's offices in Aberdeen on 22 November 2011. Stena agreed to such a meeting. On 18 November 2011 Mr. Welo called Mr. Devine and requested him to attend the meeting. On 19 November 2011 Mr. Devine flew from Australia. (He also booked to return from Paris to Australia on 27 and 28 November 2011.) 22-23 November 2011 The meeting took place on Tuesday 22 November 2011. Mr. Devine, Mr. Lumsden and Mr. Reinertsen attended on behalf of Stena. Mr. van den Broek, Mr. Ether and Mr. Rijks attended on behalf of Shell. At 4.32 pm Mr. Welo's PA sent to Mr. Welo and members of his team a draft "status" document, that is, a document which set out to record the effect of the discussions between Stena and Shell at the meeting. It had been drafted by Mr. Devine. The opening page said as follows: "Please find below the status of the various framework items following the meeting in Aberdeen on 22 nd November 2011. Once the outstanding items in the framework are closed out, the intention is for Stena to make a formal offer to Shell which can form the basis of an LOI. Post LOI work will continue on a draft contract with a view to a contract award following after Shell's Board meeting scheduled for 14 th December 2011 if said Board meeting approves an award. Pending award, the DrillMAX ICE will remain available to the market." On 23 November the Stena team, including Mr. Welo, had a meeting in Aberdeen. At 2.14 pm that day Mr. Devine sent to Shell the status document following the meeting on 22 November 2011. The opening page followed the text of the draft. At 5.05 pm Stuart Wyness, Stena's Finance Manager, sent an email to Mr. Lumsden concerning corporation tax in French Guyana (which Shell had indicated on 22 November would be the basic operating area). He said that the tax would amount to about 6% of the daily rate of hire and suggested uplifting the daily rate of hire to cover that tax. Shell had suggested further meetings at their offices in The Hague and Mr. Welo's PA made arrangements on 23 November 2011 for a private jet to fly the Stena party to Rotterdam on 24 November 2011. Mr. Banks, Mr. Lumsden and Mr. Reinertsen were to fly from Aberdeen to Edinburgh where Mr. Devine would be picked up. The jet would then fly to Rotterdam. Mr. Welo was to fly from Aberdeen to Rotterdam early on 25 November 2011, arriving at 8.05 am. Arrangements were also made for a return flight on 25 November 2011 at 4 pm from Rotterdam to Edinburgh carrying Mr. Welo, Mr. Lumsden, Mr. Devine and Mr. Reinertsen. All except Mr. Devine were then to be flown to Aberdeen. Mr. Banks was to fly from Schipol to Paris and on to Brazil. Although Mr. Devine had made arrangements to fly back to Australia from Paris on 27 November he did not, it seems, inform Mr. Welo's PA that he did not need to be flown back to Edinburgh on 25 November. 24-25 November 2011 At 5.41 am on 24 November 2011 Mr. Devine sent an email to Mr. Welo asking whether the daily rate of hire should be uplifted as proposed by Mr. Wyness. At 6.56 am Mr. Welo asked Mr. Devine by email whether the contract with Shell was "tax free". At 7.59 am Mr. Devine replied to the effect that the rate included tax for the basic area of operations, that Shell had indicated that the basic area of operations would be French Guyana and asked "what do you want to do?" On 24 November 2011 the meeting between Stena and Shell took place at The Hague. After the meeting Mr. Welo spoke to Mr. Devine and to Mr. Banks by telephone. Mr. Welo gave evidence that although he had provisionally booked a charter flight to Rotterdam for 25 November 2011 he only decided that he would go after speaking with Mr. Devine and Mr. Banks. He said he formed the view that little real progress had been made on 24 November. It is true that whilst some matters were "closed" (and therefore agreed) others were pending (and therefore not yet agreed). But, however one describes the progress made ("little" as per Mr. Welo or "a lot of ground" as per Mr. Devine ) it seems that Mr. Welo must have formed the view, following his conversations with Mr. Devine and Mr. Banks, that his presence was at least desirable. On 25 November 2011 at 5.06 am Mr. Devine sent to Shell an interim update of the status document following the meeting on 24 November 2011. The opening page was unchanged. It recorded at item 5 that Shell had proposed that the initial geographical area would be French Guyana. Stena's response was noted as: "Noted by Stena. Stena to validate cost base and tax issues and revert. " Other items were also left open. The meeting with Shell continued on 25 November 2011. Before noting what was and what was not discussed at the meeting it is necessary to recount how the return itinerary of Mr. Welo's private jet was altered. At some stage, probably before the meeting commenced but possibly after it commenced, Mr. Devine asked Mr. Reinertsen to check whether the private jet could return via Paris. Mr. Reinertsen must have made that enquiry because at 8.48 am GMT Mr. Welo's PA asked "Jetair" to check the feasibility of the private jet returning to Aberdeen via Paris, without landing at Edinburgh. At 8.55 am "Jetair" asked whether passengers were connecting onto a scheduled flight at Charles de Gaulle airport. At 0906 Mr. Welo's PA replied to the effect that Mr. Banks was booked to travel to Brazil and that Mr. Devine would leave the jet at Paris. At 9.56 Jetair confirmed that the change to the flight was feasible but that there would be an increase in cost of £2,233. The reasons why Mr. Devine initiated this enquiry are not wholly clear. Since one aspect of the enquiry was to remove the Edinburgh stop and the flight plan stated that he was the only person getting off at Edinburgh it seems likely that this must have been the occasion when he made known that he did not need a flight to Edinburgh because he was booked to fly from Paris to Australia. But why did he enquire whether the flight could go first to Paris before Aberdeen ? He had made arrangements to travel by train to Paris and there was no urgency about his arrival time in Paris since he was not flying to Australia until 27 November. By contrast Mr. Banks needed to get to Paris for his flight to Brazil (and had made arrangements to fly to Paris from Amsterdam at 1520). Mr. Devine's oral evidence, when cross-examined, was that he recalled that it was felt that it would be useful if Mr. Banks did not have to leave the meeting early. It was suggested to him that this was a lie and that the diversion was for Mr. Devine's purposes. I was not persuaded that it was a lie. It seemed to me that, although Mr. Banks' involvement in the negotiations was with regard to KPIs (which were completed on the morning of 25 November), Mr. Devine might well have considered (as he said he did) that Mr. Banks' technical input might have been helpful on other issues. I consider it more likely than not that Mr. Devine initiated the enquiry about the diversion to Paris because of that consideration. It seems to me unlikely that he would make such an enquiry purely for his own convenience. However, he must have indicated that if the flight were diverted to Paris he would travel on it to Paris because Mr. Welo's PA informed Jetair that Mr. Devine would leave the jet at Paris. Mr. Welo joined the meeting some time after it had commenced, first, because it started at 8 am and his flight did not land until 8.05 am and, second, because he was unable to get from Shell's reception to the meeting. There was, it seems, no receptionist, the mobile telephone signal was weak and he was only able to inform the meeting of his presence "downstairs" by email. Later in the morning (during the meeting) instructions must have been given to divert the flight to Paris, for at 1207 (or 1307 in The Hague) Mr. Welo's PA confirmed that the flight would be from Rotterdam (at 1600) to Paris (Le Bourget), and thence to Aberdeen. A car would take Mr. Banks to Charles de Gaulle and Mr. Devine to central Paris. Mr. Reinertsen was to be taken by car from The Hague to Schipol to catch a scheduled flight (possibly to Vienna). There was a dispute in the evidence as to who gave the instructions to divert the flight. Mr. Devine's recollection was that when Mr. Welo realised that both Mr. Banks and Mr. Devine were travelling to Paris he offered them a lift on his private jet. This was obviously not the genesis of the matter because enquiries as to the feasibility of changing the flight were being made before Mr. Welo arrived at the meeting and had been instigated by Mr. Devine. Mr. Welo's recollection was that he had been presented with a fait accompli engineered by Mr. Devine. He said he found this extraordinary and that he was very angry about it. However, in his letter dated 4 January 2012 to Mr. Devine (see below) he gave this account of the matter: "As John Banks was flying to Brazil from Paris, we agreed to drop you there in the charter plane on [25] November in order that you could take your flight to Australia." It is difficult to reconcile this statement with Mr. Welo's evidence that he was presented with a "fait accompli". It certainly does not support the expressions of surprise and anger in his statement though the evidence of Mr. Reinertsen and Mr. Banks tended to support Mr. Welo's account of surprise and anger. It is unlikely, notwithstanding that Mr. Devine initiated the enquiry as to the feasibility of changing the flight itinerary, that Mr. Devine gave instructions for the flight to be diverted to Paris. He had no authority to do so. One would expect that Mr. Welo gave such instructions but he and Mr. Reinertsen denied that he did. The question of the flight itinerary must have been of little significance compared with the issues being negotiated in the meeting and it is, therefore, perhaps not surprising that the witnesses' recollection of this relatively minor matter may differ and that one or more may be mistaken. I consider it more likely than not that when the question arose to confirm the change to the flight itinerary, which must have been shortly before 1207 (or 1307 in The Hague), Mr. Welo, who accepts that he learnt of Mr. Devine's intention to travel to Paris during the meeting, must have indicated his assent to the change to the flight itinerary. I can now return to meeting itself. The question of tax in French Guyana was not discussed. Mr. Devine gave evidence that he did not raise it because he did not know what Stena's position was and that it was therefore dangerous to discuss it. It is common ground that during the meeting Mr. Reinertsen asked Mr. Devine, discreetly, to raise the question of tax. It is also common ground that this question irritated Mr. Devine. Precisely what was said by Mr. Devine in response (there was conflicting evidence) does not matter. Whilst I do not doubt that Mr. Reinertsen was seeking to be helpful Mr. Devine had good reason not to raise the question. He had sought instructions on the question of tax and had been given none. But it would have been better (in the sense of more professional) had he not showed his irritation with Mr. Reinertsen. There was also evidence from Mr. Reinertsen that at one point in the meeting Mr. Devine became irritated with Mr. Welo. This episode was recalled by Mr. Banks in his oral evidence. Mr. Welo also gave evidence of it but it was not accepted by Mr. Devine. In the light of the evidence of Mr. Reinertsen and Mr. Banks it is more likely than not that the incident in question happened and that Mr. Devine expressed some irritation with Mr. Welo when Mr. Welo intervened in the negotiations (which were being led by Mr. Devine). Whilst Mr. Devine accepted that he and Mr. Welo had had a "healthy and boisterous interchange" over the years it would have been more professional not to have made his irritation apparent in an important negotiation. However, Mr. Devine's response to Mr. Welo was not mentioned specifically in Mr. Welo's letter dated 4 January 2012 (see below), though there was a general complaint about Mr. Devine's approach to "Stena representatives". It seems more likely than not this episode has been exaggerated and was not of any real importance. The swap option was discussed at the meeting. It is referred to in Mr. Devine's status document as having been discussed on both 24 and 25 November and was "closed". There is however a dispute as to whether agreement was reached in principle as to Stena having a gap or weather window in which to effect the swap. Mr. Welo said in his evidence that such an agreement was reached. Mr. Banks also recalled that such an agreement in principle was reached, as did Mr. Reinertsen in his oral evidence. But Mr. Devine did not record such an agreement in his status document and did not accept that such an agreement had been reached. The status document is the only record of what was discussed and agreed. It was prepared by Mr. Devine. He circulated it to the other members of the Stena team and received no objection from any member of the team that he had failed to record an important agreement in principle. That suggests that there was no such agreement in principle. It will be necessary to return to this issue because Mr. Welo said that he raised the omission with Mr. Devine by telephone on 29 November 2011. 26-27 November 2011 On Saturday 26 November 2011, when Mr. Devine was in Paris, he sent an email to Mr. Welo. The subject of the email was "Shell/Drillmax Ice" and the email read simply: "0.5% ?" It is common ground that that was a suggestion that his success fee on the charter with Shell should be 0.5% of revenue. On Sunday 27 November 2011 Mr. Devine sent to Shell the final update on the status document at 1013 am on Sunday 27 November 2011. He said: "As discussed, Stena will now develop a formal offer of the Stena Drillmax Ice to Shell based on the negotiations to date in draft form for your perusal with a view to this forming the basis of a Letter of Intent. We hope to have this draft offer with you by c.o.b. Wednesday 30 November." Shortly afterwards he asked Mr. Lumsden by email to draft an outline offer on which he, Mr. Devine, would be able to work on in Sydney. Mr. Devine flew back to Australia via Dubai on 27 November at 1.25 pm. At 5.28 pm Mr. Welo replied to Mr. Devine's email proposing a success fee of 0.5%: "Of what ?" Mr. Devine replied: "Revenue". At 8.51 pm Mr. Welo replied: "So you are asking for US$ 5 mill ???". Mr. Devine replied saying that he had saved 10 times that in the last week. Mr. Welo responded that then he should have 10 and John (Banks) 7.5. He said he would talk to Dan (Olsson). This discussion was closed at 9.17 pm by Mr. Devine saying: "Fine. I will await to hear from you." (This email exchange must have taken place whilst Mr. Devine was flying from Paris to Dubai.) 28-29 November 2011 On 28 and 29 November Mr. Welo attended an internal Stena meeting (referred to as a Stena Sphere meeting) attended by senior management from the different Stena divisions. He attended with Mr. Reinertsen. The meeting started at 8 am. On 28 November Mr. Lumsden sent a draft offer to Mr. Welo, Mr. Devine, Mr. Banks and Mr. Reinertsen. The draft stated that the offer would remain open until 15 December 2011 and was subject to mutual agreement of terms and conditions and the availability of the unit. It added that receipt of a letter of intent, subject to Shell's board approval by 15 December 2011, would secure the rig. Also on 28 November 2011 Shell replied to Mr. Devine's final update to the status document saying: "Many thanks for capturing the discussion." They returned the document with comments of their own. Mr. Welo gave evidence that he was shown Mr. Devine's final update by Mr. Reinertsen on 28 November. Mr. Devine landed in Sydney at about 1030 pm on 28 November 2011 (Australian time). On 29 November 2011 at 1119 am in Australia (0019 GMT) Mr. Devine emailed Mr. Welo (and the other members of the negotiating team) with his comments on Shell's mark up of the status document. One related to the swap provision. He sought instructions from Mr. Welo on those points. Shortly afterwards he sent to Mr. Welo (not copied to the other members of the team) copies of their email correspondence regarding success fees with regard to projects involving Drillmax vessels in 2007. The success fee for Drillmax 3 had been agreed at 0.25% (reduced to a lump sum of £1m. for early payment). The success fee for Drillmax 1 and 2 earlier in 2007 had been agreed at 0.25% (reduced to a lump sum of US$1.9m. in each case). Just after 1 pm (Australian time) on 29 November Mr. Devine sent a further email to Mr. Welo (copied to other members of the team) regarding three items which had been left open at the meetings of 24 and 25 November. One of those was the question of tax in French Guyana. Mr. Devine said that Shell were assuming that the daily rate of $550,000 included tax but that Stena had received advice that recommended "bumping the rate by 6%". He asked how Mr. Welo wished to proceed. At 7.22 am GMT (or 1822 Australian time) on 29 November Mr. Welo called Mr. Devine by telephone and spoke to him for 23 minutes. They discussed several of the matters arising out of the negotiations with Shell. At 9.17 am GMT (or 2017 Australian time) Mr. Devine emailed Mr. Welo with a draft response to be sent to Shell. One of the matters referred to in the email was the swap. Mr. Devine specifically requested Mr. Welo to "check the swap cost language carefully to make sure it accords with your expectations." The draft response dealt with the costs of the swap, the location at which the STENA ICEMAX would be redelivered and the location at which the swap vessel would go on hire. At 9.21 am GMT (2021 Australian time) Mr. Reinertsen sent to Mr. Devine one email containing the comments of Mr. Welo on the matters arising out of Shell's mark up of the status document, one of which related to the swap, and another email containing the comments of Mr. Welo on the three matters which had been left open, one of which related to tax in French Guyana. At 1020 am GMT (2120 Australian time) Mr. Devine sent to Shell Stena's response on the points they had raised. The reply was based upon (but was not identical to) the draft reply sent earlier to Mr. Welo. At 1024 am GMT (2124 Australian time) Mr. Devine sent an email to Mr. Welo on the tax issue. Mr. Welo's comment had been "tax was not included. Ask Shell if they want to gross up." Mr. Devine replied: "Pretty ballsy on tax. Are you sure ?" Mr. Welo made a telephone call to Mr. Devine at 1030 am GMT (2130 Australian time) which lasted for over 7 minutes. He confirmed his instructions on the tax issue. There was a further call at 1053 am GMT (2153 Australian time) which lasted for only one minute. It is unclear what was said in that call. Mr. Welo gave evidence (in his supplementary witness statement) that in one of his calls with Mr. Devine on the morning of 29 November he instructed Mr. Devine to remove the reference to the LOI on the opening page of the status document. It is common ground that that was done, though there is a dispute as to why it was done. Mr. Welo's case is that he had only seen that wording for the first time on 29 November. Miss Prevezer submitted that it was removed because Mr. Welo must have seen the wording before 29 November but had now decided that there should be a formal offer. Although Mr. Welo does not appear to be a "details" man it is surprising that he did not take on board the role envisaged for a LOI on the opening page of the status document prepared by Mr. Devine after the meeting on 22 November. It was hardly hidden away in the small print. The document must have been studied at the internal Stena meeting on 23 November which Mr. Welo attended. He may have been "up on the board" but it is still surprising that it escaped his attention. Miss Prevezer's submission that Mr. Welo had now decided that there should be an offer (or, as Mr. Welo described it in evidence, a "binding offer") without any intervening LOI from Shell in order to speed up the process is more likely to be correct. At 1149 am GMT (or 2249 Australian time) Mr. Devine reverted to Shell on the matters which had been left open at the negotiations. On the question of tax he said: "Stena confirms that its preliminary advice indicates potential liability for tax in French Guiana of 6% turnover. Stena would wish to gross up its rates to recover this cost." At 3.21 pm GMT on 29 November (or 2.21 am on 30 November in Australia) Shell replied to Mr. Devine's email. Shell said: "Upon review of our email, several requests below are not in line with our discussions last week and unfortunately, the below has now created a position that is well outside our mandate and therefore Shell is no longer able to proceed with the process of committing this rig." Shell then listed its "feedback on the main issues" the first of which related to tax: "6% increase in rates. Basis our discussion on the 20 th October and in our subsequent offer letter dated 2 November, French Guyana has always been tabled as first deployment location. On that basis we offered an initial operating rate of 525,000 USD/day which we subsequently agreed to raise to 550,000 USD/day. The 6% is therefore not acceptable." It was common ground at the trial that, although Shell commented on 3 other matters (including the swap), tax was the principal reason for Shell's stance. It was suggested that the tax point was worth some $70 million. 10 minutes later, at 3.31 pm GMT, Shell sent an email to Mr. Welo and Mr. Olsson in which Shell said that the email sent by Mr. Devine was "an attempt to extract more $$ at the last minute of the negotiation". The email ended as follows: "We remain available in case Stena drilling is willing to reconsider their position but at this point we don't see this as the basis of executing a deal that is in excess of 1 bln USD." Mr. Welo was advised of the first of these emails by Mr. Reinertsen as they sat in a plane at Gothenburg preparing to take off. (Mr. Welo gave evidence that he did not see the second of these emails until after he had arrived at London City Airport). Mr. Welo called Mr. van den Broek of Shell at 3.41 pm GMT and spoke to him for some 6 minutes. He asked whether they could talk together and Mr. Van den Broek replied that they could, "so long as you and I talk." It seems likely that this meant that he wished to negotiate with Mr. Welo. At 4.14 pm GMT Mr. Olsson sent an email to Mr. Welo asking (in Swedish): "What have you done about this ?" On arrival at London City Airport Mr. Welo found a voice mail from Mr. Olsson asking him to call him. He did so at 6.04 pm GMT and they spoke for some 20 minutes. They discussed the second email from Shell (which they regarded as encouraging) and Mr. Welo's conversation with Mr. van den Broek. The conversation ended with Mr. Olsson telling Mr. Welo: "Just do what you can to get it back." During that telephone call, at 6.18 pm GMT, Mr. Reinertsen, using Mr. Welo's iPad, sent a copy of Shell's second email to Mr. Devine. Meanwhile, in Australia, it was early morning on 30 November. Mr. Devine was awake checking on his emails. At 5.25 am in Australia (6.25 pm GMT) Mr. Devine called Mr. Welo and they spoke for over 25 minutes. During this call Mr. Olsson's email to Mr. Welo in Swedish was sent to Mr. Devine (probably by Mr. Reinertsen using Mr. Welo's iPad). Mr. Devine says that he and Mr. Welo agreed a success fee of 0.25%. Mr. Welo says that the subject was not mentioned. I shall return to this telephone call later in this judgment. At this juncture I will summarise the two competing accounts. Mr. Devine's account (in his oral evidence-in chief) was that the call opened with him asking what had gone on to which Mr. Welo replied that he had had a brief discussion with Mr. van den Broek and that they believed that the deal could be got back on track. Mr. Devine said that he and Mr. Welo discussed Shell's issues and concluded that they were essentially commercial and thus were capable of being solved. As an aside Mr. Welo mentioned that he was on his way back from a meeting of the Stena Sphere in Gothenburg and that the potential contract with Shell had been a subject of discussion at that meeting. He said that some of the other managers had an opinion on how Stena Drilling should be handling the negotiation. At that point Mr. Devine raised the subject of his commission. He said that he would settle for 0.25% as had been the case with the previous deals. He referred to the emails he had sent him. Mr. Welo replied "All right". Mr. Devine's account of the conversation in his witness statement was to the same effect but there are some differences. First, he mentioned that he asked Mr. Welo what Mr. Olsson had meant in his email (which had been sent in Swedish). He said he was told it meant something like "What the fuck have you done ?" Since this email was copied to him during the call and was in Swedish it is likely that he did ask this question. Whether the answer was as stated by Mr. Devine in his statement is doubtful because the translation of the message in Swedish is "What have you done about this ?" Whilst one would expect Mr. Welo to give an accurate rather than an inaccurate translation it may be that he gave the answer attributed to him as a means of suggesting Mr. Olsson's disappointment at the turn of events. Second, Mr. Devine described Mr. Welo's comments about the other managers at the Stena Sphere meeting as a "diatribe" and that Mr. Welo expressed himself very strongly about one particular manager. Third, Mr. Devine said that after the discussion about his success fee they returned to a discussion of the outstanding issues and how Stena might respond. It is likely that such matters were discussed for, immediately after this telephone call was ended, Mr. Welo sent an email to Mr. van den Broek. Mr. Welo gave evidence that the text of this email had been dictated to him by Mr. Devine. When cross-examined Mr. Devine initially did not think that he had done so though he was not sure. Later, upon reflection, he considered that he may have done so. Having regard to the text of the email and the type of language often used by Mr. Welo in emails it is more probable than not that Mr. Devine dictated the text of the email to Mr. Welo. In the email Mr. Welo said that it was not his intention to raise last minute issues, that the matters raised were subject to further negotiation and that he remained optimistic that the matter could be concluded in a manner satisfactory to both parties. Mr. Welo's account of the conversation in his oral examination-in-chief was very different. He described the call as uncivilised. He said he opened the conversation by saying "You fucked this up." He said he ranted at Mr. Devine. He told Mr. Devine that he had ignored the discussions on 25 November regarding the question of a gap or window during which the rigs could be swapped. He said that Mr. Devine had not reflected this on 27 November (presumably in his status document sent out that day). He said that he also told Mr. Devine that he had handled the issue of tax badly. He said that he told Mr. Devine that he had spoken to Mr. van den Broek and they might have a dialogue which would get this going again. Mr. Devine proposed a holding email and dictated one. He said that he would discuss the matter with his colleagues in Aberdeen to get the mess solved and make a decent offer. He said there was no mention of a success fee. Mr. Welo's account of the conversation in his witness statement is similar but there are differences. He said that he told Mr. Devine that he had not handled the negotiations well and that that had materially contributed to Shell's decision to pull out. He said that the breakdown in negotiations would not have occurred if, as he had been asked to do by Mr. Reinertsen, he had raised the tax issue on 24 and 25 November. I shall return to this conversation and resolve the conflict of evidence later in this judgment. At 6.59 pm GMT Mr. Welo called Mr. Hultgren to discuss the matter of tax in French Guyana and at 7.02 pm GMT (6.02 am in Australia) Mr. Devine had a further telephone call with Mr. Welo lasting some 16 minutes. It is possible that they discussed tax in Guyana. Shortly afterwards there was a short exchange of emails between Mr. Devine and Mr. Welo concerning tax in French Guyana. 30 November 2011 At 11.05 am on 30 November in Australia (0005 GMT) Mr. Devine sent Mr. Welo his "thoughts" on the matters raised by Shell. On the question of tax he said: "This is simply a commercial negotiation point. We can either drop or counter." On the question of the swap option he said: "More problematic. The second BOP point is easy – It is purely commercial and we can either stick, cave or split. On the swap I think we have to agree to the principal that this should not create additional costs for Shell but they have to agree to flexibility in their programming so as to allow substitution to minimise demurrage to both parties and if that means a gap in their program, then they have to accept that. Otherwise the "swap" becomes so financially penal on Stena as to be virtually valueless. Whilst this might be what Shell are aiming for we should remind them that it is against the spirit of what was discussed between Dan and Peter Sharpe." At 8.09 pm in Australia (9.09 am GMT) Mr. Devine emailed Mr. Welo asking whether there was a plan for a conference call with Shell. Mr. Devine also telephoned Mr. Welo at 9.19 pm in Australia (10.19 am GMT) and spoke to him for some 4 minutes. Mr. Welo then had a 24 minute call with Mr. van den Broek beginning at 1101 am GMT and at 1153 sent an email to him which referred to their call "clarifying outstanding issues" and that they would forward their formal offer the next day. At 1202 GMT (just after 11 pm in Australia) Mr. Devine sent to Mr. Welo (copied to other members of the team) a marked up copy of Mr. Lumsden's draft offer and a copy of Shell's original proposal marked up to reflect the negotiation thus far. Mr. Devine said that he had sought to reflect his understanding of Mr. Welo's latest discussions with Mr. van den Broek but asked him to check in particular the final paragraph of section 13 regarding the swap "to ensure I have captured your intent correctly." That final paragraph read as follows: "All direct third party costs relating to such swap shall be for Stena's account. The swap rig shall be provided with two 15K BOPs, shall be fully certified including no requirement for 5 yearly SPS for the remaining contract period. The swap rig shall be provided at the start of a new well and a concurrent operation with the Stena Drillmax Ice and the swap rig shall not be permitted unless otherwise agreed. The parties agree to use reasonable endeavours to minimise costs of the swap. " The draft offer ended as follows: "This offer is subject to contract and subject to re-confirmation of rates and availability of the Unit at time of contract award and is open for acceptance not later than close of business Aberdeen time on {…..} " Mr. Welo called Mr. Devine at 1223 pm GMT (or 2323 pm in Australia) and they spoke for some 7 minutes. At 1325 pm GMT (or 0025 am in Australia on 1 December) Mr. Welo emailed Mr. Devine saying: "Jim, I will read your draft this afternoon. I am in the office tomorrow and we will discuss OPEX, definition of escalation and geographical areas etc. as I want that fixed so we don't have any future discussions with out friend Gary Ether. We will send our offer in by close of business tomorrow once we have discussed and included this following our discussions." Later that afternoon, at 5.22 pm GMT (4.22 am on 1 December in Australia) Mr. Welo sent a further email to Mr. Devine (and other members of his team) following consideration of Mr. Devine's marked up copies of the draft offer and of Shell's proposal. He said: "OK folks, read all this have comments ready and we sit down at 1500 hrs in office tomorrow and hammer out our faith. Jim the swap language needs some more thought like when the Icemax has finished the well when swap is to take place and replacement is not there. Grace period of 46-60 days ? Back to what Leon said about gap. Do not like wording third party's costs, when I discussed with him we said each parties (Shell's and Stena's) costs. Then of course the cancellation discussion if no Arctic work, effective after 2014 season. I call you tomorrow morning, our time." Mr. Welo sent a further email to Mr. Devine at 5.24 pm GMT saying: "Opex and that must go in now." Mr. Devine replied to that email at 7.33 pm GMT (5.33 am on 1 December in Australia) saying: "My original plan was to take that in the period between LOI and award (with us using validity to ensure award as close as possible after 14 th .) If you want to put it in now, what do we put in ?" A few minutes later he sent a further email to Mr. Welo: "Did you agree a cancellation at Stena's option with Leon ? If not, to introduce it now would be very, very provocative. On cost, in large part Shell's only costs will be from their other contractors. Again, I make this distinction between what goes in the offer and the detailed language in the contract. Tactically, it is probably better to get the LOI from Shell now (and have our name in front of the board) than get bogged down in detail now. I am up if you want to discuss." Mr. Devine sent yet another email to Mr. Welo at 8.02 pm GMT (7.02 am in Australia) in which he again cautioned against "getting bogged down in detail" with a view to getting the LOI in hand from Shell and thereafter working on the actual contract wording with a view to having a binding award as soon as possible after the Shell board meeting on 14 December. At some stage on 30 November 2011 Mr. Froystad spoke by telephone with Mr. van den Broek. The latter expressed the view that the "lawyer" from Stena (whom Mr. Froystad understood to be Mr. Devine) had been "too smart" and had tried a "fast one". He said that Shell had reacted and that he had been ready to "pull the carpet" and stop negotiations. However, he had spoken to Mr. Welo and they were "back on track". He understood that the "lawyer" would not participate in the negotiations in the future. Mr. Froystad discussed with Mr. Welo whether Mr. Welo should go to the Hague to meet Mr. van den Broek. It seems likely that Mr. Froystad advised Mr. Welo of what he had been told by Mr. van den Broek. 1 December 2011 On 1 December at 5.47 am GMT (4.47 pm in Australia) Mr. Welo replied to Mr. Devine's question as to whether he had agreed a cancellation at Stena's option. He said they had not. At 6.32 am GMT (5.32 pm in Australia) Mr. Devine advised Mr. Welo "not to do it now". At 8.43 am GMT (7.43 pm in Australia) Mr. Devine sent to Mr. Welo and the other members of the team his latest version of the draft offer and marked up copy of Shell's proposal. He noted in particular that Stena was liable for tax in French Guyana and that he "had had another go at the swap language." He said in that regard: "Again there is a strong argument to postpone going into great detail until we are revising the draft contract document and Shell are further on the hook. Pease check carefully and amend as you see appropriate, but remember that Shell reacted very badly when we tried to shift any costs on to them. " The added words were: "Shell accept that there may be a gap schedule between the last well drilled by the Stena Drillmax Ice and the commencement of the next well to be drilled by the swap rig." At 8.44 am GMT (7.44 pm in Australia) Mr. Welo replied to Mr. Devine's email in which he had advised against getting bogged down in detail with a view to getting the LOI in hand. He said: "Disagree will call, important to get as much as possible now to avoid later issues." At 0906 am GMT Mr. Welo sent Mr. Devine's latest version of the offer to Mr. Curtis and Mr. Kangisser of the law firm Curtis Davis Garrard asking them for their comments. At 0911 am GMT (8.11 pm in Australia) Mr. Welo called Mr. Devine and spoke to him for some 8 minutes. It is common ground that this was or became an angry telephone call. Mr. Devine's evidence was that they had a disagreement. Mr. Welo said he had been left to deal on his own with Shell, that Mr. Lumsden was ill at home, that Mr. Banks was in Brazil and that Mr. Devine "had fucked off to Australia". Mr. Devine did not take this well and told Mr. Welo that he needed to start reading some of the emails and documents. They then put the phone down on each other. (They never spoke again.) Mr. Welo's evidence was that they had a confrontational and angry discussion. He said that Mr. Devine's LOI proposal and his approach of offering rates subject to re-confirmation and rig availability were completely unworkable. Mr. Welo complained that he had been left to finalise the offer himself and that he was intending to do so. When cross-examined Mr. Devine said (as he had done in his supplementary statement) that it was during this call that Mr. Welo raised for the first time his complaint that the agreement on the gap issue had been omitted from the status document circulated on 27 November. Mr. Devine said that he replied that there had been no such agreement. When cross-examined he also said that Mr. Welo raised for the first time the "availability" point (which I assumed to be the point that pending the award of the contract, STENA ICEMAX would remain available to the market) and Mr. Devine referred him to the first page of the status document which had been there since 22 November. At 1108 am GMT Curtis Davis Garrard said they would prepare a mark-up of the documents sent to them and at 1116 am GMT Mr. Welo thanked them and said Stena would start work in the office at 1500 approximately. That email was copied to Mr. Devine. (It was now 2216 in Australia). Later that day, at 8.21 pm GMT Mr. Welo sent Stena's offer to Shell. Much of it followed Mr. Devine's draft but the final paragraph of Section 13 was different and read as follows: "In such circumstances, Shell shall use best endeavours to accommodate the swap of the replacement drilling unit for the Stena Drillmax Ice within its drilling program so that the swap can be undertake between wells as soon as reasonably practicable on or after the expiry of the 6 month notice period. The swap shall be undertaken at Stena's sole responsibility and cost (including customs duties in French Guiana, but not elsewhere). The revised dayrate payable under the Contract shall commence when the replacement drilling unit is 500 metres from the next drilling location, ready to commence operations. Shell acknowledge that the swap arrangements may involve a gap in the provisions of drilling services but Stena will use best endeavours to minimise the period of such gap." 2 December 2011 – 4 January 2012 On Friday 2 December at 1.01 am GMT (1201 pm in Australia) Mr. Devine asked by email whether the draft offer had gone to Shell. At 6.58 GMT (5.28 pm in Australia) Mr. Welo replied: "Yes". Mr. Devine, at 7.11 am GMT (6.11 pm in Australia) asked to see a copy. Mr. Welo replied at 9.47 am GMT (8.47 pm in Australia): "I thought you decided to leave the project." Mr. Devine replied to that at 1017 am GMT (9.17 pm in Australia): "No Tom, I did not. I remain available to do whatever further you require in respect of this project. I am also available for any further negotiation meetings with Shell that you want me to attend." On 5 December Shell replied to Stena's offer. On 6 December at 1.25 am GMT (or 1225 pm in Australia) Mr. Devine enquired of Mr. Welo whether he expected anything further from him or whether he was to consider his work on the project completed. Mr. Welo replied at 1004 am (9.04 pm in Australia) that he was progressing the project without Mr. Devine's assistance. At 6.32 pm GMT (5.32 am on 7 December in Australia) Mr. Devine sent a copy of his latest exchanges with Mr. Welo to Mr. Olsson for his information. At 3.10 pm GMT on 7 December (2.10 am on 8 December in Australia) Mr. Olsson replied: "Noted !" Negotiations continued between Stena and Shell by email. On 8 December they agreed that the gap between Drillmax ICE and the swap rig was limited to 3 months or as mutually agreed and by 9 December Mr. Welo informed his team: "Hopefully there now.". On 9 December at 7 pm GMT (6 am on Saturday 10 December in Australia) Mr. Devine thanked Mr. Welo for letting him know that he was progressing the project without his assistance. He added: "Please be clear that in the event that Stena are successful in obtaining a contract with Shell which incorporates any of the work which I have already done on the project, I intend to invoice Stena for the agreed success fee of 0.25% of contract revenues." Mr. Welo replied at 7.52 pm GMT (6.52 am in Australia on Saturday 10 December): "No." On Sunday 11 December at 1021 pm GMT (9.21 am on Monday 12 December in Australia) Mr. Devine replied: "Yes Tom. You definitively confirmed in our telephone conversation on 30 November that I would be entitled to a success fee of 0.25% of contract revenues if Stena were successful in obtaining a contract with Shell for the Drillmax Ice. This was after I had reminded you (again) that this was the basis of the success fees which I was paid on each of Drillmax 1, Drillmax 2 and Drillmax 3 projects. This was also the fee basis upon which I offered (at your request) to do work on the Drillmax Ice. My email to you of 25 October refers. For reasons you have chosen not to share with me – and upon which I can only speculate – you have now decided that you do not want me to do any further work on project. That is your prerogative. You are not, however, entitled to unilaterally dis-apply this success fee for work which I have already done on the project, particularly in circumstances where the resolution by agreement with Shell of the vast majority of the commercial and contractual issues involved in the project had already been achieved by that work. So, again, please be clear that in the event Stena are successful in obtaining a contract with Shell which incorporates any of the work which I have already done on the project, I intend to invoice Stena for the agreed fee of 0.25% of contract revenue. Thank you." On 23 December Stena and Shell signed the contract. On 4 January 2012 Mr. Welo sent a letter to Mr. Devine by email in response to his email of 11 December. The letter was signed on behalf of Mr. Welo who was away skiing. He said: "I am certain that I did not agree, either during a telephone conversation on 30 November or at any other time, to pay you a success fee of 0.25% of revenues on this transaction. The issue of your remuneration was still open at the end of November (you will recall that you actually proposed twice this level of remuneration, ie 0.5% of revenues, in your email to me of 27 November !) and your conduct of the negotiations with Shell to that point was such that it was already very unlikely that we would continue with your services, let alone agree a lump sum fee of approximately US$2.5 million for the same." In any event, we consider that you have forfeited any right to a success fee by the manner in which you conducted the negotiations with Shell and your failure to follow my instructions. I would like in this regard to point out the following:- (a) Following an initial meeting with Shell in Aberdeen on 22 November, a second meeting was arranged with them in The Hague on 24 and 25 November. During the first day of those meetings, which I did not attend, you proposed that the parties should sign a letter of intent by mid-December and a contract only by January 2012. This was directly contrary to my instructions, which were that in light of the delivery of the Vessel from Samsung in March 2012, Stena wished, if at all possible, to conclude the contract and make this effective before Christmas, not in January. (b) In light of this, and other feedback I had received from Stena representatives, I decided to attend the second day of the meetings and asked you to arrange for this to commence at 9am in order that I could participate from the outset. I was therefore extremely dismayed to discover on my arrival from Aberdeen that the meeting had been scheduled to commence at 8am and that no notice of my intended participation had been given to Shell. In consequence, I was obliged to wait for more than 45 minutes in Shell's reception area before I was accredited and admitted to the meeting. (c) Your conduct during the meeting I attended was extraordinary. You displayed throughout an extremely aggressive approach both towards Shell and to the Stena representatives present, even at one point telling Eirik to "fuck off" when he asked you to raise with Shell a critically important tax issue. Notwithstanding my instructions, your approach seemed to be that this and other important issues should be left for negotiation in January, rather than resolved there and then. (d) It was clear to me that Shell were extremely uncomfortable with your general approach and there was a clear indication from Shell that there was too much "posturing" and not enough progress being made. (e) To my further surprise you indicated at the end of The Hague meetings that you were returning to Australia and gave me no indication as to when you would return. As John Banks was flying to Brazil from Paris, we agreed to drop you there in the charter plane on 26 November in order that you could take your flight to Australia. (f) Thereafter, on 27 November, you emailed to Shell a table of comments on the contractual issues discussed during The Hague meetings. However, to my amazement, you did not consult with me or any of the other Stena representatives before sending this table of comments and the same was seriously deficient – it failed (in particular) to address a key outstanding issue discussed in The Hague, namely the need for a "gap" in the drilling services to be provided to Shell in the event that Stena wished to swap the ICEMAX with another non-ice class unit during the period of her operations in French Guiana. You subsequently told me that this issue could be addressed at a later stage in the negotiations, which I told you was completely unacceptable from Stena's perspective. (g) In light of (i) the tactical approach you adopted in the meetings in The Hague, in particular as regards the time scale for the conclusion of the contract (ii) your behaviour at those meetings and Shell's extremely negative reaction to the same (iii) your failure to consult with myself and other Stena colleagues on key issues and/or to reflect our position in your correspondence with Shell and (iv) your decision to return to Australia at a critical point of the negotiations, it was clear to me you were neither willing to follow my instructions nor capable of effectively progressing this transaction for Stena. (h) I therefore terminated your engagement, as I was entitled to do in light of these circumstances, by my email of 6 December stating that we were progressing the project without your assistance. Mr. Devine responded to Mr. Welo at 1228 pm GMT on 4 January (2328 pm in Australia) "completely disagreeing with your narrative of events." The circumstances surrounding the alleged success fee agreement Two matters can be said to support Mr. Devine's evidence that his success fee was agreed by telephone. The first is that it was to be expected that he would raise the subject of his success fee on his return to Australia. The second is that within a short time of being told that his services were no longer required he referred to the telephone call of 30 November 2011 (in Australia) and said he would invoice Stena for the agreed fee of 0.25% in the event that Stena were successful in obtaining a contract with Shell. But there were also two matters which were said to support Mr. Welo's evidence that no success fee was agreed. The first is that the immediate context of the telephone call in question was such that it was most unlikely that Mr. Devine would raise the subject of his success fee, let alone that Mr. Welo would agree to pay a success fee. The second is that the alleged agreement was not confirmed in writing immediately after the telephone call. It is necessary to consider each of these points. The expectation that Mr. Devine would raise the subject of his success fee after his return to Australia. A number of matters suggested that it was to be expected that Mr. Devine would raise the subject of his success fee after his return to Australia. First, on all previous occasions when Mr. Devine had assisted Stena in fixing a drillship or other unit on a charter he had agreed a handsome success fee with Mr. Welo. Second, when the possibility of fixing the STENA ICEMAX arose in October 2011, Mr. Welo asked Mr. Devine by email what his success fee would be. Third, the agreement for a success fee in relation to Drillmax 1 on 29 October 2011 contemplated that Mr. Devine might earn a success fee in relation to the STENA ICEMAX. Fourth, Mr. Devine suggested a success fee of 0.5% in his email dated 26 November. Fifth, on 29 November Mr. Devine emailed Mr. Welo copies of emails regarding previous success fees with regard to fixtures of three Drillmax units at 0.25%. It is likely that such emails were sent to prepare Mr. Welo for a further discussion of Mr. Devine's success fee. In the light of these matters it was to be expected that Mr. Devine would again raise the subject of his success fee shortly after his return to Australia from Europe where he had been assisting Stena in the negotiations with Shell since 2 November. At this point it is convenient to mention Miss Prevezer's submission that the evidence justified a finding that there had been agreement in principle to a success fee. Although Mr. Welo was persuaded to agree with this suggestion I did not consider the submission justified. It is likely that Mr. Welo and Mr. Devine expected that a success fee would be agreed but no such fee had in fact been agreed in respect of the STENA ICEMAX. In any event such an agreement would not be enforceable in the absence of an agreement as to quantum. Miss Prevezer said that there was an implied term that the fee was a reasonable fee and that 0.25% was a reasonable fee. But there was no market evidence touching on what was a reasonable success fee for the services of the type provided by Mr. Devine. The immediate context of the telephone call It was submitted by Mr. Hochhauser on behalf of Stena that the immediate context in which the telephone conversation in question took place was such that it was "incredible" that Mr. Welo would have been minded to agree a success fee of 0.25%. He submitted that the deal was "in tatters". In this regard Mr. Hochhauser relied upon the emails sent by Shell at 1521 and 1531 on 29 November GMT in response to Stena's email sent by Mr. Devine at 1149 am that day which had required Shell to bear the burden of Stena's corporate taxes in French Guyana by paying an enhanced daily rate. In addition he relied upon the evidence of Mr. Welo that when Mr. Devine rang him on 29 November 2011 at 6.25 pm GMT he, Mr. Welo, was angry with Mr. Devine, that he opened the conversation by telling him that he had "fucked this up" and that he criticized him for ignoring the discussions concerning the gap or window on 25 November and for his handling of the tax issue. Mr. Hochhauser submitted that this telephone call was therefore the most unlikely context in which Mr. Devine might think it appropriate to raise the question of his success fee and equally the most unlikely circumstance in which Mr. Welo would be disposed to agree a success fee. It is therefore necessary to consider, first, the effect of Shell's emails and, second, whether Mr. Welo was angry with Mr. Devine in the relevant telephone call; for Mr. Devine gave evidence that Mr. Welo was not angry with him in that call. Shell's email to Mr. Devine said in terms that Shell was no longer able to proceed with committing to the rig. Mr. Welo said that Shell had "walked away" from the deal. However, Shell's email to Mr. Welo and Mr. Olsson said that Shell remained available in case Stena was willing to reconsider their position. It may be said that Shell had "walked away" from a deal which required them to pay a higher daily rate than that which they had agreed to pay and thereby bear the burden of Stena's corporate tax in French Guyana. But Shell stated in terms that they remained available in the event that Stena reconsidered their position. In my judgment, whilst Shell had "walked away" from the deal which Stena had proposed in Mr. Devine's email, Shell had not "walked away" from the negotiating table. They required Stena to reconsider and if they did so Shell were willing to negotiate. Shell's response was firm and uncompromising and effectively called Stena's bluff. But they remained willing to negotiate a deal if Stena relented on their latest proposal. In fact, Stena did relent on the issue of tax (the offer sent to Shell on 1 December provided for Stena to be liable for tax in French Guyana) and Shell continued to negotiate and conclude the deal. The stance adopted by Shell on 29 November in response to Mr. Devine's email proved to be a successful negotiating tactic. Mr. Welo may have been taken by surprise by Shell's response and his hopes that Shell would agree to pay an extra 6% may have been "in tatters" but he correctly appreciated that the deal could be saved and he did what was necessary to do so. In my judgment, the terms of Shell's two emails, taken together, do not suggest that the telephone call in question was an unlikely time to raise the subject of Mr. Devine's success fee. On the contrary, the circumstances were such that it could be said that Mr. Welo clearly needed Mr. Devine's assistance and Mr. Welo accepted in cross-examination that he needed the services of Mr. Devine, amongst others, at that time. In fact Mr. Devine continued to give his assistance on 30 November and 1 December. He had considerable input into the drafting of the offer which was sent to Shell on 1 December. With regard to the telephone call Mr. Welo said that he was very angry with Mr. Devine because he had not reflected Shell's agreement in principle on 25 November to the effect that there should be a gap or weather window in which the swap was to be effected. The only record of what was agreed at the meeting with Shell on 25 November is Mr. Devine's status document and that does not record any such agreement. It is true that Mr. Welo's evidence is supported by Mr. Banks (and by Mr. Reinertsen in his oral evidence, though not in his written statement) but none of those who were present at the meeting (Mr. Welo, Mr. Lumsden, Mr. Banks and Mr. Reinertsen) and who were sent a copy of the status document replied to Mr. Devine saying that he had omitted an agreement reached in principle. The better evidence must be the near contemporaneous record prepared by Mr. Devine. Further, when Mr. Devine sent his "thoughts" to Mr. Welo some 6 hours after the telephone conversation in question he referred to the swap and suggested that Shell "have to agree to flexibility in their programming so as to allow substitution to minimise demurrage to both parties and if that means a gap in their program, then they have to accept that." Mr. Devine added that if Shell did not agree to a gap that would be "against the spirit of what was discussed between Dan and Peter Sharpe." (That must have been a reference back to the discussions on 20 October when the principle of the swap was first discussed.) Thus Mr. Devine's "thoughts" do not suggest that he had been reminded in forceful terms by Mr. Welo that Shell had already agreed in principle to a gap. On the contrary, they suggest that Shell was yet to agree to the principle of a gap. However, his "thoughts" do indicate that the question of a gap was mentioned in the telephone call. But it is unlikely that Mr. Welo complained in forceful terms that an agreement in principle had been reached and had not been recorded by Mr. Devine because (i) the better evidence is that no such agreement had been reached and (ii) such an agreement is inconsistent with Mr. Devine's email sent shortly after their conversation. In a later email sent at 1202 GMT on 30 November Mr. Devine asked Mr. Welo to check the final paragraph of section 13 of the draft offer which dealt with the swap "to ensure that I have captured your intent correctly". Again, this suggests that there must have been some discussion about the swap but not that Mr. Welo had reminded Mr. Devine that Shell had already agreed the principle of a gap or weather window. The final sentence simply read: "The parties agree to use reasonable endeavours to minimise costs of the swap." At 5.22 pm GMT on 30 December, after Mr. Welo had read the documents sent by Mr. Devine, he emailed Mr. Devine saying: "Jim the swap language needs some more thought like when the Icemax has finished the well when swap is to take place and the replacement is not there. Grace period of 46-60 days ?" Once again, this language does not suggest that Shell had already agreed a grace period in principle. Also, there is no suggestion in this email that Mr. Welo had already reminded Mr. Devine that an agreement in principle had already been reached and there is no suggestion of a complaint that he had still not recorded it. At 8.43 GMT on 1 December Mr. Devine gave the matter "more thought" as requested by Mr. Welo and added to the text of the draft offer: "Shell accept that there may be a gap schedule between the last well drilled by the Stena Drillmax Ice and the commencement of the next well to be drilled by the swap rig." It is likely, given all of the foregoing, that this was the product of Mr. Devine's further thought rather than of having been forcefully told on 29 November that this had already been agreed. If he had been forcefully reminded of the suggested agreement in principle on 29 November he would surely have set it out in his "thoughts" email of 30 November and in his first draft of the offer. For these reasons, based upon a consideration of the contemporaneous documents and the resulting probabilities, I have concluded, on the balance of probabilities, that Mr. Welo was not angry with Mr. Devine during the telephone call of 29 November on account of his not having recorded an agreement in principle by Shell to a gap or weather window. Mr. Devine said in cross-examination (as he had done in his supplementary statement) that Mr. Welo had raised the subject in the angry telephone call of 1 December. Precisely what was discussed about the gap or window in this call was not explored further in Mr. Devine's evidence and no submissions were made about this in closing. For the reasons already given it is unlikely that Mr Welo complained that Mr. Devine had failed to record that Shell had agreed in principle to a gap or window. In my judgment it is likely that Mr. Welo was angry that the question of a gap, which was clearly of importance to Stena, had not been settled and that he had to encourage Mr. Devine to cover it appropriately in the draft offer rather then leave it to later, which might offend Shell. The need for a gap was an "outstanding issue" (the phrase used in Mr. Welo's letter dated 4 January 2012) which had not been addressed by Mr. Devine. It is to be noted that Mr. Welo did not say in terms in his letter dated 4 January 2012 that Shell had agreed in principle to a gap or window and that Mr. Devine had failed to record such agreement. I have therefore concluded, on the balance of probabilities, that Mr. Welo was mistaken in his recollection as to what was discussed in the telephone call on 29 November. Mr. Welo also said that in that telephone call he was angry with Mr. Devine on the subject of tax. Miss Prevezer stressed that there was no contemporaneous email in which Mr. Welo expressed anger with Mr. Devine on account of the tax issue. This is true but I gained the impression that Mr. Welo typically did not use email as a means of expressing anger or annoyance with those who worked for him. Rather, if he wished to express such feelings, it seemed to me more likely that he would so in person or on the telephone. His email messages tended to be short and concise, dealing with questions or issues which required answers. Nevertheless I consider it unlikely that Mr. Welo expressed anger with Mr. Devine on account of the tax issue. That is because Mr. Devine had asked him for instructions on the tax issue before the meeting on 24 November and had received no instructions from Mr. Welo. When, subsequently, he gave his instructions to Mr. Devine on 29 November Mr. Devine questioned them ("pretty ballsy on tax. Are you sure ?") but Mr. Welo confirmed his instructions by telephone. In those circumstances it seems to me unlikely that Mr. Welo would have expressed anger with Mr. Devine on account of the tax issue. Indeed, Mr. Welo accepted in cross-examination that Stena's position on tax was his responsibility. I have no doubt that the tax issue was discussed in the telephone call (for it was the principal cause of Shell's robust response) but it is improbable that Mr. Welo expressed anger with Mr. Devine on that account in circumstances where it was Mr. Welo who had instructed Mr. Devine to take the line on tax that he did, notwithstanding Mr. Devine's comment that such line was "ballsy". I have considered whether Mr. Welo was angry with Mr. Devine because the tax issue had not been raised on 24 or 25 November and because the issue ought to have been better managed by Mr. Devine, his lead negotiator. Mr. Welo said in his evidence that Mr. Devine had had "no strategy". This is possible but in circumstances where Mr. Devine had clearly raised the tax issue with Mr. Welo and had sought instructions on that issue from Mr. Welo it seems to me unlikely that Mr. Welo (notwithstanding his reputation as "a man with a big personality", not "shy of saying what was on his mind") would have thought it appropriate, in the circumstances, to be angry with Mr. Devine with regard to the subject of tax. I have therefore concluded that in the telephone call with Mr. Devine he did not express any anger with Mr. Devine on account of the tax issue. If he had done so, one would have expected some defence from Mr. Devine of his position in his email at 1105 GMT on 30 November when dealing with the question of tax. But there was none. I consider that Mr. Welo's recollection that he had criticized Mr. Devine on account of the tax issue is mistaken. Having rejected Mr. Welo's evidence as to the angry content of the conversation I am unable to accept Mr. Hochhauser's submission that this particular call was one in which it was unlikely that the subject of the success fee would be brought up or that Mr. Welo would agree to a fee based upon 0.25% of revenues. From Mr. Devine's point of view there was no particular reason why he should not raise the subject of his success fee (the problem over tax had not been created by him) and for the reasons already given it was to be expected that he would raise the subject. In circumstances where Shell had to be mollified Mr. Welo needed the services of Mr. Devine, albeit as an adviser rather than at the negotiating table. Indeed, Mr. Welo accepted in cross-examination that he needed Mr. Devine at that point, though not only him. In those circumstances, and bearing in mind the expectation that Mr. Devine would get a success fee and the assistance Mr. Devine had already given, it is likely, rather than unlikely, that Mr. Welo would have been minded to agree a success fee with Mr. Devine. Mr. Devine's mention of the agreement by email Mr. Welo told Mr. Devine on 6 December that he was progressing the negotiations without Mr. Devine's assistance. (I do not consider, notwithstanding the several points put in cross-examination to Mr. Devine, that Mr. Welo made this clear before 6 December, either in their last conversation on 1 December or thereafter. Mr. Welo did not say in his witness statement that he did so. He merely said that telling Mr. Devine on 1 December that he had been left to finalise the offer himself meant ("ie") that he was to proceed without Mr. Devine. In his letter dated 4 January 2012 he said that he terminated the engagement on 6 December 2011, not at any earlier stage.) Mr. Devine forwarded the email correspondence to Mr. Olsson on 6 December (7 December in Australia). After receiving a reply which was at best neutral on 7 December (8 December in Australia) he informed Mr. Welo on 9 December (10 December in Australia) that, in the event Stena obtained a contract with Shell, he would invoice Stena for the agreed success fee of 0.25% of contract revenues. After Mr. Welo replied "No" on 9 December (10 December in Australia) Mr. Devine referred in terms to the alleged agreement reached on 30 November (Australian time) on 11 December (12 December in Australia). The fact that Mr. Devine relied upon the alleged agreement as to his success fee shortly after Mr. Welo informed him that the negotiations with Shell were continuing without him is some further support for his case. However, Mr. Hochhauser submitted that the absence of an email confirming the alleged agreement immediately after the telephone call in question indicated that no such agreement had taken place, especially in circumstances where it was Mr. Devine's "invariable practice to confirm oral agreements for his success fees in writing". In considering this submission it is first necessary to summarise Mr. Devine's previous practice. Before the STENA ICEMAX there were 10 previous deals pursuant to which Mr. Devine earned a success fee. Documents were available in relation to some of them but not all: i) STENA TAY. On 4 October 2005 Mr. Welo confirmed in an email to Mr. Devine that Mr. Olsson had agreed that Crossbay should receive a success fee of USD 1 million. I was not referred to any confirmation by Mr. Devine of the success fee which he had agreed with Mr. Welo. ii) Drillmax I. On 3 April 2006 Mr. Welo confirmed in an email to Mr. Devine that the success fee for his work was "as we discussed." On 21 April 2006 Mr. Devine replied, confirming the intended billing dates for three sums totalling USD1.5 million and the $/£ exchange rate. iii) STENA DON. On 2 August 2006 Mr. Devine confirmed in an email to Mr. Welo, referring to "our discussion earlier today", that the success fee was agreed to have been fully earned notwithstanding deferred payment terms, namely, USD 500,000 payable in two instalments of USD 250,000 immediately and "within" 30 June 2007. iv) Drillmax 2. In the same email of 2 August 2006 Mr. Devine confirmed that the success fee in relation to Drillmax 2 was agreed to have been fully earned notwithstanding deferred payment terms, namely, USD 1.5m., payable USD500,000 immediately and four subsequent payments of USD 250,000 each, payable at 31 December 2006, 30 June 2007, 31 December 2007 and the earlier of delivery of Drillmax 2 or 30 June 2008. Crossbay was to have the option of invoicing for these amounts in sterling at a rate of exchange of 1.84. v) There appear to have been further discussions about the success fee for Drillmax 1 and 2. On 9 March 2007 Mr. Devine sent a further email which referred to "our various discussions". He said that Mr. Welo had agreed in principle that Crossbay should be entitled to a success based upon 0.25% of the contract revenues and that it had been agreed to "translate" that into a lump sum of USD1.9 m. for each contract payable as to 50% upon contract execution and 50% upon delivery of the vessel. vi) Drillmax 3. On 9 October 2007 Mr. Devine emailed Mr. Welo "as per our conversation today". He confirmed their agreement that the success fee was earned at contract signature on 22 September 2007, that the success fee was 0.25% of contract revenues and was reduced to a lump sum of £1m. for early payment and that the fee was payable in 5 consecutive equal monthly instalments of £200,000 commencing on 1 November 2007. vii) STENA DON. On 28 January 2010 Mr. Devine emailed Mr. Welo recording "our agreement earlier today" of a success fee of £350,000 payable in 8 monthly instalments commencing 1 April 2010. viii) Drillmax 1. On 29 October 2011 Mr. Devine emailed Mr. Welo confirming their agreement on a success fee which recorded the amount and the monthly instalments. The text of this email has already been quoted in this judgment. The following conclusions can be drawn from this evidence. From 2006 it was Mr. Devine's practice to confirm the dates when sums were payable and the amount of such payments. In the early but not the later contracts he also confirmed the date when the fee was deemed earned and the exchange rate which he could use. With regard to the amended success fees for Drillmax 1 and 2 in 2007 and the success fee for Drillmax 3 in 2007 the fees were based upon 0.25% of revenues but were "translated" or "reduced" to a fixed figure. There does not appear to have been a practice of confirming an agreement for a success fee based upon a percentage of revenues where that fee had not yet been translated or reduced into a fixed figure which was payable on certain dates in certain amounts. Mr. Devine's evidence elaborated upon his previous practice and endeavoured to explain why, with regard to the alleged agreement in relation to the STENA ICEMAX, he did not send an email confirmation immediately after the telephone call. The material passages in his witness statement were these: 34. Tom Welo and I had a telephone conversation about this on 29 October 2011 and we agreed that I would receive a success fee of £500,000 payable in 10 equal monthly instalments from October 2011 for Hess but that the final 3 instalments of this would not be payable if I earned a success fee in relation to the Drillmax Ice before April 2012. I confirmed this agreement to Tom Welo in the email at page 28 of JD1. As a matter of practice, I had historically tried to do this whenever possible, because I wanted to capture the time that the deal was done and, more importantly, to evidence that the money was already earned, which was key for my tax treatment as a non-UK resident. However, this practice (of confirming by email) became redundant as a requirement for me once I had resumed UK tax residency in 2009. 88. I didn't confirm the 0.25% agreement in an email with Tom Welo after our discussion. However, at this time I completely trusted him and there was no reason for me to think that he would renege on our agreement; he never had done so before. Moreover, I had been paid a success fee on every single occasion before, and I think I was more focused on getting the deal with Shell back on track, so I went straight back to work on the documents. As discussed above the concept of my recording the fee as having been "earned", which had previously driven my practice of recording fee arrangements after the contract had been successfully concluded so as to capture that point in time for tax purposes, was no longer applicable now that I was back in the UK tax net. In any event, and consistent with this approach, at this point the fee for the Shell deal had been agreed, but of course, had not been yet earned because the negotiations with Shell were still on foot. 100………. As mentioned above, when I had been non-UK tax resident, I had historically been in the practice of confirming success fees in an email upon contract award, because the date that they were earned was important for my tax planning. I therefore looked though my emails to check whether there was a confirmatory email. There wasn't but that didn't surprise me as I had only ever sent these to evidence when the success fee was "earned" for tax purposes and this was no longer an issue for me as I was permanently resident in the UK at this point. This evidence was not easy to follow. First, Mr. Devine said that his practice of confirming his oral agreements was redundant after he had resumed UK tax residency in 2009. Yet in relation to STENA DON and Drillmax 1 in 2010 and 2011 he sent email confirmations. Second, his place of residence did not appear to have any relevance to the tax treatment of success fees earned by his company. By contrast his place of residence would be of relevance to the tax treatment of salary paid to him by his company. Mr. Devine was asked about these difficulties in his cross-examination. Although there was no longer a requirement for written confirmation of the date when the success fee was earned after he had resumed UK tax residency in 2009 he accepted that he had nevertheless continued the practice of confirming the date when fees were earned. With regard to the relevance of his place of residence he explained that there was a "back to back" agreement between himself and his company which rendered his place of residence relevant to the payment of the success fee. How this worked was not articulated but the existence of such an agreement was confirmed by an email dated 26 March 2007 concerning Crossbay Ventures Limited. What remained to be explained was why in the past, and as recently as October 2011, he confirmed oral agreements by email and yet he did not do so with regard to the alleged success fee for the STENA ICEMAX. His explanation was that, in previous deals where he had agreed a success fee based on a percentage of revenues and that fee had been "reduced" or "translated" into a sum of money and agreement had been reached as to the dates when the sum would be paid in instalments, he confirmed the agreement by email. He said that it was necessary for tax reasons to record when the sums in question were earned. He did that and continued the practice after the requirement for such a record had become redundant. With regard to the STENA ICEMAX he had only agreed the success fee as 0.25% of revenue and had not translated or reduced it into a sum of money payable on certain dates. He therefore did not send an email confirming the agreement. He identified two earlier cases where an email confirming an agreement had not been sent until agreement was reached on the actual figure and dates when instalments were payable. This was a somewhat convoluted explanation and took, it seemed to me, some time to emerge. Mr. Hochhauser submitted that it was implausible. However, it appeared to be consistent with his past practice. There does not appear to have been a previous practice of confirming an oral agreement to pay a particular percentage of revenues as a success fee. By contrast there was a past practice of confirming the sum of money payable and the dates when it was payable. His failure to record the agreement in relation to the STENA ICEMAX, where the percentage of revenues had not been reduced to a fixed sum payable on certain dates by instalments, does not therefore appear to have been inconsistent with his past practice. As a solicitor Mr. Devine no doubt understood the importance of confirming oral agreements in writing. For that reason one would have expected him to confirm the alleged agreement on the STENA ICEMAX immediately after the telephone call in question. However, he said that he trusted Mr. Welo. The question for the Court is whether Mr. Devine's explanation for his failure immediately to confirm the alleged oral agreement can be accepted as likely to be true. I was surprised during the trial that on such an important question Mr. Devine's evidence was not clear and I doubted whether his explanation could be accepted. However, upon reflection I have concluded that his explanation can be accepted. First, his explanation was consistent with his previous practice. Second, his reliance on a "back to back" agreement to explain the relevance of his place of residency was supported by an email referring to such an agreement. Third, Mr. Devine and Mr. Welo had had a long business relationship which, having regard to the size of success fees earned by Mr. Devine and agreed to be paid by Mr. Welo, must have involved a considerable measure of trust on both sides. That context supported Mr. Devine's evidence that he trusted Mr. Welo and so did not send an email confirming the oral agreement. I have therefore concluded that it cannot fairly be inferred from the absence of an email confirming the alleged oral agreement immediately after the telephone call that there had been no such agreement. There was also much discussion in the evidence concerning the reasons why Mr. Devine did not in fact invoice Stena for his success fee. His reason for not doing so in December 2011 was that the ICEMAX had not yet been constructed and delivered. This had not prevented him sending invoices in relation to earlier deals before construction and delivery of the vessel in question but in those cases instalment dates had been expressly agreed. Once ICEMAX had been constructed and delivered in April 2012 he did not invoice for his success fee but he said, in re-examination, that that was because of Stena's letter dated 4 January 2012. It is true that after receipt of that letter Mr. Devine reiterated his intention to invoice Stena for his success fee but I do not consider that one can reasonably infer from Mr. Devine's failure to invoice Stena for the success fee in April 2012 that the reason for that failure was that no success fee had been agreed. By that stage battle lines had been drawn. Other matters I have considered the points made by Mr. Hochhauser in his closing submissions. Many have necessarily been dealt with in this judgment already. He submitted that the court should ask itself: "Why would Tom Welo be willing to agree this figure [0.25%] then, at a time when the success of the deal was in jeopardy, when he had not been willing to do so at the outset of the negotiations ?" A success figure of 0.25% (or any other figure) was not agreed between 24 and 29 October. But at that stage Stena had not yet received Shell's proposal and Mr. Devine had done no work on the STENA ICEMAX project. The position on 29 November was different. By that time Mr. Devine had been involved in the negotiations since 2 November and Mr. Devine was one of the persons whose assistance Mr. Welo accepted that he needed to secure the contract with Shell after Shell had sent their emails on 29 November. In circumstances where it was to be expected that a success fee would be agreed and where Mr. Welo had been willing to accept 0.25% in (some) earlier contracts it seems to me more likely than not that he would be willing to agree to 0.25% on 29 November. Mr. Hochhauser asked: "If he [Mr. Devine] was going to raise it [the subject of his commission] that day, why not during [the first three calls], rather than in a call when there was widespread concern that the deal might not proceed to a successful conclusion ?" The first three calls took place at 7.22, 1030 and 1053 GMT on 29 November (early to late evening in Australia). The subject of the success fee could have been raised in those calls but I am not persuaded that that makes it unlikely that the subject was raised in the fourth call (6.25 pm GMT on 29 November, early morning on 30 November in Australia). It was to be expected that Mr. Devine would raise the subject at some stage. Mr. Hochhauser submitted that Mr. Welo was "certainly not in a frame of mind to discuss success fees, as a deal with Shell was not on the table at that point in time. Further, if such a matter had been raised at this time, it is hardly credible that it would have been met with anything other than anger and derision, and indeed dismay at the fact that this was all Mr. Devine was concerned about at such a precarious stage". I am not able to accept this submission. Shell was still willing to negotiate with Stena if Stena relented on the tax issue. Since Mr. Welo accepted that Mr. Devine was one of the people whose assistance he needed it is likely that he would have been in a frame of mind to discuss Mr. Devine's success fee. In the light of my findings that Mr. Welo was not angry with Mr. Devine with regard to the gap and tax issues and Mr. Welo's acceptance that he needed Mr. Devine's assistance it is unlikely that the subject of the success fee would have been greeted with anger, derision or dismay. Mr. Hochhauser submitted that Mr. Devine's account of the telephone call defied belief. Having considered all of the evidence I disagree. Conclusion The conversation on 29 November between Mr. Devine and Mr. Welo was not angry and uncivilised. There was no cause for it to be. But Mr. Welo must have expressed his concern at Shell's response to Mr. Devine's email asking Shell to underwrite Stena's corporate tax in French Guyana. There must have been an urgent discussion about the prospects of getting the deal back on track following Mr. Welo's brief telephone call with Mr. van den Broek. That would have been Mr. Welo's prime concern and Mr. Devine must have spent some time dictating a holding response to Shell which Mr. Welo must have tapped onto his iPad during the call so that he could send it to Shell. In circumstances where Mr. Welo had spent 28 and 29 November in the Stena Sphere meeting it is likely that he made some reference to that meeting. Having regard to the importance of the contract to Stena it is likely that the proposed contract with Shell was discussed at the meeting and it is possible that such discussion was mentioned by Mr. Welo to Mr. Devine. But there is no evidence that other Stena managers sought to interfere with or criticise Mr. Welo's conduct of the negotiations with Shell and it is unlikely that they did so. It is therefore unlikely that Mr. Welo indulged in a "diatribe" against fellow Stena managers. That would appear to be an exaggeration on Mr. Devine's part. Mr. Devine gave clear evidence that he brought up the subject of his success fee, that he referred to the emails he had sent Mr. Welo regarding his success fee on earlier deals, that he would accept 0.25% and that Mr. Welo replied "all right". Mr. Welo said the subject of a success fee was not discussed. The principal issue in this case is whether Mr. Devine's evidence is more likely than not to be true. Mr. Devine was not an impressive witness for the reasons I have already summarised. Further, his recollection of the telephone call in question on 29 November was also defective. He had no recollection, until prompted, of having dictated Mr. Welo's response to Shell and his recollection of what Mr. Welo told him about the other Stena managers at the Stena Sphere meeting was exaggerated. Mr. Welo was also not impressive as a witness and his evidence that he was angry with Mr. Devine in that telephone call on account of the gap and tax issues was mistaken. He probably confused the telephone call with that on 1 December in which he and Mr. Devine were angry with each other. However, Mr. Devine gave clear and consistent evidence that in the telephone call of 29 November he and Mr. Welo agreed a success fee of 0.25%. That evidence was supported by a number of matters. First, it was to be expected that on his return to Australia Mr. Devine would raise the subject of his success fee. Second, the telephone conversation took place at a time when Shell had called Stena's bluff (with regard to the tax issue) and Mr. Welo, as he accepted, needed the services of Mr. Devine. Mr. Welo expected to have to pay a success fee and so it is more likely than not that he would have been willing to agree a success fee. Third, 0.25% was a percentage fee which had been agreed on other occasions. Fourth, Mr. Devine made reference to the agreed fee shortly after Mr. Welo had made clear that he had dispensed with Mr. Devine's services. By contrast, the matters relied upon as supporting Mr. Welo's evidence were not established. First, Shell had not walked away from the negotiating table. Shell's email to Mr. Welo and Mr. Olsson and Mr. Welo's conversation with Mr. van den Broek showed that Shell was willing to negotiate if Stena relented, essentially on the tax issue. Second, Mr. Welo was not angry in that telephone call on account of the gap and tax issues. It was therefore not established that he was unlikely to have been in the frame of mind to agree a success fee with Mr. Devine. Third, it had not been Mr. Devine's invariable practice to confirm by email agreements to pay a success fee equal to a particular percentage of revenues. His failure to do so on this occasion was not, therefore, an indication that he made no such agreement. I have concluded that it is more likely than not that Mr. Devine's evidence that he and Mr. Welo agreed a success fee of 0.25% is true. The explanation for Mr. Welo's evidence that there was no such agreement is, in my judgment, that he was mistaken, having persuaded himself that there had been no such agreement. I do not accept Miss Prevezer's submission that he gave evidence which he knew to be untrue. He was convinced that he had been angry with Mr. Devine in the relevant telephone call and had therefore concluded that he could not have agreed to a success fee in that call. But it is likely that he confused the telephone call with the later call on 1 December in which he was angry. Further, he had persuaded himself that the absence of a confirmatory email supported his case. Mr. Hochhauser submitted that Mr. Welo would have remembered agreeing to pay Mr. Devine, in effect, $2.5m. if he had done so. However, if Mr. Welo persuaded himself that he had not done so, as I consider he did, that explains why he had no recollection of having made such an agreement. Subsidiary issues There was no dispute that if, as alleged by Mr. Devine and as I have found, he and Mr. Welo agreed a success fee of 0.25% of revenues such agreement was enforceable. However, it was Stena's contention that Mr. Devine repudiated the success fee agreement by his conduct after their telephone conversation on 29 November and in particular by preparing a draft offer which was expressly subject to re-confirmation of the daily hire rates. It is clear that on 1 December Mr. Welo and Mr. Devine disagreed as to the amount of detail to be put into to the offer to Shell. Mr. Devine was willing to postpone the detail until drafting the contract and to concentrate on getting Shell's LOI whilst Mr. Welo wished, as he said in his email sent at 8.44 am GMT on 1 December, to "get as much as possible now to avoid later issues". Mr. Welo said that in their angry telephone call on 1 December he told Mr. Devine that his LOI proposal and his approach of offering rates subject to re-confirmation and rig availability was completely unworkable. There was a genuine disagreement of approach on 1 December. However, I am unable to accept the suggestion that Mr. Devine's advice as to the draft offer to be put to Shell amounted to a repudiation of the success fee agreement. He favoured an approach which produced an LOI from Shell whereafter the detail could be dealt with in drafting the contract. Mr. Welo, who had earlier requested the removal of the reference to an LOI in the offer, was obviously anxious, in the light of what had happened when Stena had sought to increase the hire rates by 6%, that no more surprises should be sprung on Shell. Mr. Devine's advice to leave the detail until drafting the contract and the reference in the draft offer to the rates being subject to re-confirmation at the time of contract was clearly, in Mr. Welo's opinion, unwise (and Mr. Devine accepted in cross-examination that had that wording gone to Shell it would have been controversial and may have been seen as another attempt to get more money). But Mr. Devine was giving his advice as to how the negotiations should be approached. Mr. Welo was free to reject that advice and he did so (at least in part). Moreover, Mr. Welo accepted much of Mr. Devine's draft offer. The offer which went to Shell was largely based upon Mr. Devine's draft though the elements with which Mr. Welo disagreed were removed. Mr. Devine was seeking to perform, and was performing, his contractual duty. I do not consider that it can fairly be said that Mr. Devine repudiated any implied term not to conduct himself in a manner which was likely to destroy the relation of confidence and trust between himself and Stena or that he repudiated any implied term to cooperate with a view to ensuring that Stena's objective of securing a contract with Shell at the earliest opportunity, notwithstanding that there were elements of his advice with which Mr. Welo disagreed and did not accept. It is true that Mr. Welo proceeded without Mr. Devine after 1 December but at this time it was likely that Mr. Welo had been advised by Mr. Froystad that Shell did not want Mr. Devine involved. On 1 December, just before he telephoned Mr. Devine, he sent the draft offer to Curtis Davis Garrard asking them for their comments. He said in his call to Mr. Devine that he had been left to deal on his own with Shell (Mr. Lumsden was ill, Mr. Banks was in Brazil and Mr. Devine in Australia) but, as I have already said, Mr. Welo did not terminate their relationship in this telephone call. When asked by Mr. Devine on 2 December for a copy of the offer which had gone to Shell he did not say that he had lost confidence and trust in him such that he could no longer use him. He replied that he thought Mr. Devine had decided to leave the project, which was not true and suggests that Mr. Welo was struggling to explain why he was no longer involving Mr. Devine. On 24 January 2012 Mr. Welo told Mr. Olsson that "fee or no fee, he had to leave otherwise there would have been no Contract". It is likely that that was a reference to Shell's unwillingness to deal with Mr. Devine rather than to Mr. Devine's advice between 29 November and 1 December and that it meant that whether or not Mr. Devine was entitled to a fee he had to leave the project. I therefore reject the submission that Mr. Devine repudiated his obligations under the success fee agreement. The final subsidiary point is whether the party liable to pay the agreed success fee is the first or second defendant. Miss Prevezer submitted that the first defendant, Stena Drilling Limited, is liable because the agreement had been made by Mr. Welo who was managing director of Stena Drilling Limited, which company received the services and paid Mr. Devine's invoices. Mr. Hochhauser submitted that the second defendant, Stena Drillmax I Limited, is liable because the consultancy agreement dated 1 May 2009 was with Stena Drillmax I Limited and because Mr. Welo, when agreeing the success fee, had been acting as that company's representative. In resolving this issue it is necessary to consider on behalf of which company Mr. Welo was acting when he agreed the success fee with Mr. Devine. The consultancy agreement did not provide for the payment of a success fee but expressly stated that it shall be open to the "the Company", Stena Drillmax I Limited, and "the Consultant Company", Grizzly Business Limited, to agree a success fee in addition to the agreed daily rate. Thus the consultancy agreement, to which Mr. Devine was party, contemplated that Stena Drillmax I Limited might agree a success fee with Grizzly Business Limited. The reason why Stena Drillmax I Limited, a Bermudan company, was party to the consultancy agreement, rather than Stena Drilling Limited, an English company, was that Mr. Devine did not wish to charge VAT and therefore requested that his contracting party was an overseas company. Stena Drillmax I Limited was such a company and was therefore a suitable contracting party. If Mr. Devine did not wish to charge VAT on his hourly consultancy rates, he probably did not wish to charge VAT on his success fee either. In that context not only the objective observer but also Mr. Devine and Mr. Welo would reasonably have understood that Mr. Welo, when agreeing the success fee in respect of STENA ICEMAX, was acting on behalf of Stena Drillmax I Limited. Miss Prevezer submitted that the success fee agreement was separate from the consultancy agreement and that in circumstances where Stena Drilling Limited was the operator of STENA ICEMAX and therefore received the benefit of Mr. Devine's services, where that company paid the invoices and where Mr. Welo was managing director of Stena Drilling Limited Mr. Welo must have been acting on behalf of Stena Drilling Limited when he agreed the success fee. The factual basis of this submission is sound but is incomplete because it ignores the terms of the consultancy agreement between Stena Drillmax I Limited, Grizzly Business Limited and Mr. Devine which clearly envisage that a success fee, when agreed, would be payable by "the Company", Stena Drillmax I Limited. On this issue I must therefore find in favour of Stena. The result of the case Mr. Devine and Mr. Welo agreed a success fee of 0.25%. Mr. Devine did not repudiate that agreement. Stena Drillmax I Limited is liable to pay the success fee. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII