Hess Corp v Stena Drillmax III Ltd. & Anor [2011] EWHC 1340 (Comm) (27 May 2011)

Hess Corp v Stena Drillmax III Ltd. & Anor [2011] EWHC 1340 (Comm) (27 May 2011)

The contract requires that, both at the Commencement Date and in subsequent invoices, the operating cost element must be recalculated to reflect actual costs and prevailing exchange rates, with sterling costs converted to dollars at the Financial Times rate immediately prior to the invoice date, resulting in an adjusted Operating Rate. The Operating Rate is not fixed as at the contract date but must be updated as per the contract's adjustment mechanisms.

Citation
[2011] EWHC 1340 (Comm)
Parties
Claimant: Hess Corporation; Defendant: Stena Drillmax III Ltd; Defendant: Stena Carron (Hungary) KFT
Jurisdiction
England and Wales
Judgment Date
27 May 2011
Procedural Posture
Commercial Contract Dispute / Judgment on Preliminary Issues
Outcome
Judgment for the Claimant (Hess Corporation) on the preliminary issues.
Legal Topics
Interpretation of Contract Terms, Currency Conversion in Contracts, Adjustment of Operating Rates, Remuneration Clauses, Day Rate Adjustments
Contract Law Commercial Law Interpretation of Contract Terms Currency Conversion in Contracts Adjustment of Operating Rates Remuneration Clauses Day Rate Adjustments

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Parties

Hess Corporation

Claimant

Stena Drillmax III Ltd

Defendant

Stena Carron (Hungary) KFT

Defendant

Procedural Posture

Commercial Contract Dispute / Judgment on Preliminary Issues

Legal Issues

  1. 1 Whether the operating cost element and thus the Operating Rate under the contract should be recalculated at each invoice to reflect current exchange rates and actual costs, or whether only the variations should be separately invoiced as a Day Rate Adjustment.
  2. 2 Whether the applicable exchange rate for converting sterling costs to dollars is fixed at the contract date or should be determined by the Financial Times rate at the date of invoice.
  3. 3 Whether the contract requires verification or correction of the operating cost element at the Commencement Date and subsequent quarterly adjustments.

Ratio Decidendi

The contract requires that, both at the Commencement Date and in subsequent invoices, the operating cost element must be recalculated to reflect actual costs and prevailing exchange rates, with sterling costs converted to dollars at the Financial Times rate immediately prior to the invoice date, resulting in an adjusted Operating Rate. The Operating Rate is not fixed as at the contract date but must be updated as per the contract's adjustment mechanisms.

Court Disposition

Judgment for the Claimant (Hess Corporation) on the preliminary issues.

Orders

  • The operating cost element and thus the Operating Rate must be recalculated at each invoice to reflect actual costs and prevailing exchange rates as per Clause 13.3.5.
  • Sterling costs must be converted to dollars at the Financial Times rate immediately prior to the invoice date.