Stephen Males QC:
Introduction
- This is an application by the first and second defendants to set aside service of these proceedings on them. The only issue is whether there is a sufficiently arguable case that one or both of these defendants is liable to make the payments due under an agreement dated 24 May 2006 ("the Agency Agreement") concluded on its face between the claimant and the third defendant. It is the claimant's case that although the third defendant was apparently named as the party to the Agency Agreement, on its true construction that agreement was made between the claimant on the one hand and one or both of the first and second defendants on the other. Alternatively, the claimant says that the third defendant entered into the Agency Agreement as an agent for, or as the bare nominee of, the first defendant, or is estopped from contending otherwise.
- The claimant, Unaoil Limited ("Unaoil"), is a BVI company which provides services in various oil and gas producing countries, mainly in the Middle East and Africa. Its core business is to provide local services in such countries to overseas (principally western) companies, enabling those companies to meet local content requirements in such countries and assisting them to win valuable contracts. Unaoil's Chief Operating Officer and commercial director at all material times was Mr. Saman Ahsani. Mr. Ahsani's father was the founder and chairman of the Unaoil group of companies.
- The defendants are or have been part of the Ranhill group of companies, the parent company of the group being Ranhill Bhd ("Ranhill"), which was at all material times a publicly quoted Malaysian company providing construction, engineering and infrastructure management services. Ranhill is not a party to this action. The President and Chief Executive Officer of Ranhill was Mr. Hamdan Mohamad. Mr. Nicholas Lough, also known as Sharif Lough, was an executive director of Ranhill.
- The first defendant, Amona Ranhill Consortium Sdn Bhd is a Malaysian company which under its former ownership was previously known as Amona Africa Construction Consortium Sdn Bhd. It took on its present name on 18 January 2006, shortly after the share purchase agreement referred to below. I shall refer to it as "Amona Ranhill". Since 28 August 2006, when Ranhill acquired 60% of its issued share capital, it has been a subsidiary of Ranhill. From that date, but not before, Ranhill appointed four directors to the board of Amona Ranhill, including Mr. Hamdan Mohamad and Mr. Lough.
- The second defendant, Ranhill Engineers & Constructors Sdn Bhd ("Ranhill E&C"), is also a Malaysian company and has at all material times been a 100% subsidiary of Ranhill. Its business consists of acting as a contractor on engineering and construction projects. Its Chief Executive Officer was Mr. Ron Metcalf, who was also one of the four Ranhill directors appointed to the Amona Ranhill board on 28 August 2006.
- The third defendant, Ranhill Middle East FZE ("Ranhill FZE"), is a company incorporated as a 100% subsidiary of Ranhill E&C in the Jebel Ali Free Zone of the United Arab Emirates in order to take advantage of favourable tax treatment there. Its business consisted of procurement of materials and equipment as an agent for other companies in the Ranhill group which were engaged in engineering and construction projects, principally (in the event) in Pakistan, but it made losses in each year of its existence and was dependent on the support of other companies within the group. Mr. Hamdan Mohamad was a director of Ranhill FZE at all material times, while Mr. Metcalf became a director on 22 January 2007. Ranhill FZE became dormant at some point, probably in or about September 2008. It ceased to be a part of the Ranhill group in February 2011.
This application
- All three defendants have been served with these proceedings, but the present application is made by the first and second defendants only. Ranhill FZE has not acknowledged service and has taken no part in this application. It may well be that it has no or no significant assets.
- Permission to serve the Re-Amended Claim Form and Re-Amended Particulars of Claim on the defendants out of the jurisdiction was granted by Blair J on 23 November 2011. The application for permission was made on the ground that the claim was in respect of a contract, namely the Agency Agreement, governed by English law. The basis of the first and second defendants' application to set aside service is that the requirements for service out are not satisfied as against them. Under CPR 6.36 a claimant must show against each proposed defendant that there is a "good arguable case" that one of the jurisdictional gateways at paragraph 3.1 of CPR PD6B is satisfied, that there is a "serious issue to be tried" in respect of each cause of action for which permission is sought, and that England is the proper place in which to bring the claim.
- The first and second defendants accept (or at any rate have not disputed) that the claim is in respect of a contract governed by English law. The Agency Agreement is undoubtedly a contract expressly governed by English law and Unaoil's claim is in respect of that contract, albeit that there is an issue whether the first and second defendants are liable on it. The first and second defendants accept also (or at any rate have not disputed) that the English court is the most suitable forum in which to deal with that claim. Their application is made on the basis that there is no serious issue to be tried on the merits between them and Unaoil. It is common ground between the parties for the purpose of this application (although Mr. Alan Maclean QC for the first and second defendants reserved the right to argue for a more demanding test if this case goes further) that the test of "serious issue to be tried" is the same test as arises on an application for summary judgment, that is to say, whether the claim has a real prospect of success: Cecil v. Bayat [2010] EWHC 641 (Comm) at [16]. Accordingly the test which I must apply is whether Unaoil is able to show any real prospect of success in establishing that one or both of the first and second defendants is liable to make the payments due under the Agency Agreement.
Background
- The circumstances in which this issue arises are as follows. Bearing in mind that the question is whether Unaoil has any real prospect of success, and that factual disputes cannot be resolved on this application, to the extent that there is any dispute about the primary facts I proceed on the basis of the account given by Unaoil. Mr. Ian Croxford QC for Unaoil makes the point that there has been no disclosure of internal documents within the Ranhill group and that there are no witness statements from Mr. Lough or Mr. Metcalf, the Ranhill personnel most closely involved in the conclusion of the Agency Agreement, while Mr. Awaluddin, a Ranhill FZE director and the fourth Ranhill director appointed to the board of Amona Ranhill, who has given a witness statement, says nothing about the role of Amona Ranhill or Ranhill FZE in relation to this contract. Such material, says Mr. Croxford, would show the understanding within the Ranhill group of the capacity in which Ranhill FZE was acting. All that is true, but the burden is on a claimant seeking to persuade the court to exercise jurisdiction over an overseas defendant to demonstrate that there is a serious issue to be tried. That is a relatively low hurdle. A defendant is entitled to challenge the jurisdiction without giving the disclosure which would be necessary for a trial. The extent to which, if at all, it is appropriate to draw inferences from the absence of evidence or documents must depend on the individual circumstances of each case. In the present case I regard it as a matter of very little significance, as Unaoil's case is that it was always agreed and understood between the parties that Amona Ranhill (or possibly Ranhill E&C) would be the true party to the Agency Agreement. Unaoil is able to make that case for itself, without needing to depend on private and uncommunicated internal material within the Ranhill group such as might turn up on disclosure.
The Award Letter
- In late 2005 Amona Ranhill, at that time known as Amona Africa Construction Consortium Sdn Bhd and not part of the Ranhill group, was negotiating with the Libyan authorities for a contract to design and build up to 20,000 units of residential apartments in Tajura, which is in the vicinity of Tripoli in Libya. On 1 December 2005 the Libyan Housing Infrastructure Board made a preliminary and non-binding award to Amona Ranhill in respect of this project, indicating its intention to conclude a formal contract ("the Libyan Housing Contract") in due course. The letter of award indicated a potential contract value equivalent to some US $922 million. It was therefore likely to be an extremely lucrative and attractive project.
The share purchase agreement
- At about the same time Ranhill was negotiating with the owners of Amona Ranhill with a view to acquiring a majority shareholding in the company. Ranhill's interest in doing so lay in the prospect of Amona Ranhill winning the Libyan Housing Contract, which was also referred to by the parties as an "implementation contract".
- On 9 January 2006 Ranhill entered into an agreement with Amona Ranhill's parent company, Amona Arabia Engineering Consultancy Sdn Bhd, to purchase 60% of the issued share capital of Amona Ranhill. Completion of the purchase was conditional upon the execution of the Libyan Housing Contract. It was contemplated that once completion took place Ranhill would appoint directors to the board of Amona Ranhill, but until that happened the company remained under the management and control of its existing board of directors.
Negotiations with Unaoil
- In early 2006 Ranhill was seeking to improve the prospects of Amona Ranhill securing the Libyan Housing Contract and, to that end, entered into negotiations with Unaoil, which was known to be well connected in Libya and was able to arrange meetings with an influential business man with close links to a member of the Gadaffi family and with senior politicians within the Libyan government whose approval would be needed for any major project. Those negotiations took place principally between Mr. Ahsani on behalf of Unaoil and Mr. Hamdan Mohamad, Mr. Lough and Mr. Metcalf on behalf of the Ranhill group, with Mr. Lough taking the leading part for Ranhill. Mr. Gareth Norman, an employee of Ranhill, was also involved in the drafting process once the negotiations progressed to that stage. None of the Ranhill individuals involved in the negotiations were directors or employees of Amona Ranhill, which at this stage was still independent from the Ranhill group, although it was contemplated that if all went well it would become a part of the group. With the exception of Mr. Hamdan Mohamad, whose role in the negotiations appears to have been limited to the initial contact, nor were any of them directors, officers or employees of Ranhill FZE.
- As explained by Mr. Ahsani in his evidence, Mr. Hamdan Mohamad, Mr. Lough and Mr. Metcalf were viewed as "directors in waiting" of Amona Ranhill, but the question which Ranhill company or companies they were acting for in the negotiations with Unaoil was not specifically addressed:
"I am told by my father and I believe that Mr. Hamdan assured my father repeatedly, that Mr. Lough was, in effect, his right-hand man, and that we might speak to him freely at any time. Mr. Lough himself explained he was focussed on Libya given historic ties to the country through his own father. Put shortly, Mr. Lough was Ranhill's 'Mr. Libya' and there was no doubt that he was and/or was held out to be the most senior representative of Ranhill and its group companies with which we were regularly dealing. In similar fashion to Mr. Metcalf, Mr. Lough did not seek to delineate whether, at any particular time, he might be acting for one or other of the companies within the Ranhill group; as with Mr. Metcalf (and indeed Messrs Hamdan and Norman), Mr. Lough simply represented Ranhill in Libya."
- Similarly, referring to an early contact between Mr. John Bardsley, the managing director of a Unaoil subsidiary, and Mr. Metcalf, Mr. Ahsani stated:
"I am told by John Bardsley and I believe that he understood Mr. Metcalf to be an executive director, specifically the Chief Executive Officer of Ranhill E&C within the Ranhill group of companies and that Mr. Metcalf said nothing to disabuse him of that notion nor in their discussions was there any attempt by Mr. Metcalf to identify himself as acting for one particular Ranhill company or another. … I understand from Mr. Bardsley and I believe Mr. Metcalf appeared to be and held himself out in discussions as being a director of companies within the Ranhill group. He thus simply represented Ranhill."
- Accordingly Unaoil was negotiating a potential agency agreement with very senior representatives of the Ranhill group, but (at least initially) without express identification of the particular counterparty with which it would conclude such an agreement.
- A time came, however, when the parties began to negotiate the detailed terms of their proposed agreement. It appears that the first formal draft contract was prepared by the Ranhill side in early May 2006. It identified Ranhill FZE as the Ranhill group company which would enter into the agreement with Unaoil and that remained the position throughout the parties' negotiations. According to Mr. Ahsani's evidence:
"... Nick Lough explained at various times, in meetings I was present at and in phone calls I was engaged on that if an implementation contract was ultimately awarded to Amona Ranhill, then Ranhill's preference would be to route payment of the commission due to Unaoil through a special Ranhill payment vehicle, namely [Ranhill FZE]. ... He explained to me at this time that the deployment of such a company as a special payment vehicle would assist Ranhill in avoiding payment of a substantial tax liability in Malaysia."
- Some of the detail of the negotiations is considered further below.
The Agency Agreement
- The Agency Agreement was finally concluded on 24 May 2006. It was described as being made between Ranhill FZE (referred to as "the Principal") and Unaoil. It was signed by Mr. Lough on behalf of the "Principal" and contained the following recitals:
"Whereas
- Amona Ranhill Consortium Sdn Bhd (formerly known as Amona Africa Construction Consortium Sdn Bhd) ... (the "Contractor") is currently negotiating with the Libyan Government (the Client) for the award of a contract for the Design, Construct [sic] and Handover of 20,000 Units of Residential Apartments, Including Consultancy Services for the Master planning and Design of Facilities Buildings, Common and Local Infrastructure Works and Services (the "Contract") at a Contract price to be derived by multiplying the gross floor area of work constructed by the Contractor by 348 Libyan Dinars per square metre ("Initial Contract Value").
- The Principal will be awarded part of the Contract works by the Contractor after award of the Contract to the Contractor.
- Unaoil has the proven capability and experience in advising on and securing such contracts for its clients and is willing to provide services to secure the award of the Contract to the Contractor.
- The Principal wishes to engage Unaoil to secure the award of the Contract to the Contractor."
- I make five observations on these recitals. First, although by this stage, 24 May 2006, Amona Ranhill had changed its name, the share purchase agreement had not yet been completed. As Mr. Ahsani's evidence explains, Unaoil was aware that this was so, as it knew that completion of the share purchase agreement was conditional on the award of the Libyan Housing Contract to Amona Ranhill. Accordingly Unaoil was not misled into thinking that Amona Ranhill was already part of the Ranhill group.
- Second, the recitals drew a clear distinction, as did the agreement as a whole, between Ranhill FZE and Amona Ranhill, which were referred to respectively as the Principal and the Contractor.
- Third, it was clear that it was the Principal, Ranhill FZE, which was to engage the services of Unaoil.
- Fourth, however, those services were to be provided for the benefit of the Contractor, Amona Ranhill, and (subject perhaps to the next point) not for the benefit of Ranhill FZE.
- Fifth, the recitals contemplated that after award of the contract to Amona Ranhill, Amona Ranhill would in turn award part of the contract works to Ranhill FZE. If that were to happen, it could represent a benefit for Ranhill FZE, although this would have been a role unlike anything which Ranhill FZE had previously undertaken and which it would be unable to undertake without the support of other companies within the group. However, it is not suggested that Amona Ranhill undertook any obligation to award part of the works to Ranhill FZE and in fact it did not happen.
- The services to be provided by Unaoil were set out in Article I of the Agency Agreement, which was headed "Scope of the Services" and included the following:
"The services to be provided by Unaoil under the Agreement ("the Services") are as follows:
1. To secure the award of the Contract to the Contractor and assist in negotiations with the Client to reach acceptable terms and conditions for the Contractor. Unaoil will also assist in arranging for the Client to award the Contractor a variation under the Contract for the Engineering Procurement and Construction of all Facilities Buildings, Common and Local Infrastructure Works and Services associated with the Contract scope of works, hereinafter defined as the 'Variation Orders.'
2. Generally to provide advice, data and information in respect of the various tasks and activities of the elements of marketing.
3. Said Services will also include the provision of advice, data and information in respect of local conditions and existing laws, regulations and customs applicable to the Contract in so far as the same are material to the Contract and the existence of the same are as might be reasonably be [sic] expected to be known by Unaoil. ...
5. Unaoil shall work exclusively with the Principal in securing the award of the Contract to the Contractor."
- Thus, as contemplated by the recitals, Unaoil's services were to be provided for the benefit of Amona Ranhill. Moreover, although they included, and were primarily concerned with, the initial award of the Libyan Housing Contract to Amona Ranhill, they were to continue after the contract was awarded and would include assistance in the performance of the contract.
- Payment to Unaoil was dealt with in Article II, headed "Compensation". It provided:
"As full compensation for the Services, Principal will compensate Unaoil in the following amounts and manner:
1. Following the execution of the Contract between the Contractor and the Client (or a binding Letter of Award pending execution of such formal Contract) Unaoil shall become fully entitled to receive payment for the Services by way of the fees as detailed hereafter. For the avoidance of doubt, the execution of the Contract, or Letter of Award, is herein defined as the execution of a fully negotiated Contract with terms and conditions acceptable to the Contractor. ...
2. The currency of the fees shall be in US Dollars.
3. At the times specified in sub article II.4 the Principal will pay Unaoil a commission payment of 1.25% ... of the Initial Contract Value, and a further commission payment of 3.5% ... on the value of the Variation Orders, for the avoidance of doubt the provision of services and infrastructure are not part of the original Contract. ..."
- The article went on, in paragraph 4, to require payment by the Principal of the commission of 1.25% in instalments, in each case triggered by "the Contractor's receipt" of payments made by "the Client" under "the Contract". It continued:
"6. Payment of the amount of the fees due to Unaoil under this Agreement will be made by the Principal, or one of its affiliates, by direct wire transfer into a bank account nominated by Unaoil for the purpose and details of which shall be expressly provided by Unaoil in its concerned invoices for the Services."
- Thus, while the Agency Agreement was clear that it was "the Principal" which would incur the liability to make payments of commissions to Unaoil, it contemplated that those payments would be made from funds paid by the Libyan client to Amona Ranhill, and that the payments might actually be made not by the Principal itself but by one of its affiliates. This is in fact what happened. To the limited extent that payments were made under the Agency Agreement, they were made by Amona Ranhill and not by Ranhill FZE.
- Article IV contained a number of "General Conditions" including the following:
"5. This Agreement may not be assigned by either party, without the prior written consent of the other party which shall not unreasonably be withheld or delayed.
6. Unaoil shall not take any instructions from or have any communication with the Contractor without the express approval of the Principal.
7. The scope of this Agreement is limited to the Contract. Notwithstanding anything herein contained, the Principal shall have the right to pursue other contracts and businesses with the Client and any other parties in Libya or elsewhere without any involvement of, or liability to, Unaoil for any reason whatsoever. Such freedom to pursue other contracts and businesses shall also apply to Unaoil. However, both parties hereby state that it is their intention to develop their relationship and shared interests such that Unaoil eventually becomes the agent and representative of the Principal in Libya. For the avoidance of doubt the above-mentioned intention to develop the relationship between the parties is solely an intention and is not binding on either party for any reason whatsoever. ..."
- Article IV.6 is a something of a puzzle. Unaoil had at all times dealt with representatives of the Ranhill group generally, without distinguishing between individuals representing particular companies, and it must have been contemplated that it would in practice continue to do so. It seems most unlikely that the parties intended all future communications to be with Ranhill FZE in Jebel Ali rather than with those who were actually seeking to obtain, and would in due course be performing, the Libyan Housing Contract. Nor was there ever any attempt by the parties to channel their communications through Ranhill FZE which in any case had only a handful of employees. It may be that in including this clause the parties were concerned with the situation as it existed and would exist prior to the award of the contract, when Amona Ranhill (the "Contractor") was not yet part of the Ranhill group, although the clause is not in terms so limited and, on its face, appears to prohibit (in the absence of express approval, which was never formally sought) precisely the kind of contact which the parties must have contemplated would continue.
- Article IV.7 contemplated that the parties would develop their relationship further to encompass other business in Libya.
- Article VI of the Agency Agreement, headed "Relationship of parties", provided:
"This Agreement shall not be interpreted or construed to create an association, joint venture, or partnership between the parties (or for the avoidance of doubt between the parties and the Contractor) or to impose any partnership obligation or liability upon either party (or the Contractor). Neither party shall have any right, power or authority to enter into any agreement or undertaking for, or act on behalf of, or to act as albeit an agent or representative of, or to otherwise bind, the other party (or the Contractor)."
- The Agency Agreement was expressly governed by the laws of England and provided for arbitration in London in accordance with the ICC Rules. However, neither of the first or second defendants responded to Unaoil's invitation to agree that an ICC tribunal could determine all disputes between the parties, including which party was liable under the Agency Agreement, and accordingly Unaoil commenced these court proceedings. The appropriateness of this course has not been challenged.
The first and second supplementary agreements
- The payment provisions of the Agency Agreement were subsequently varied by two supplementary agreements, dated 1 August 2006 and 10 August 2006 (respectively "the first and second supplementary agreements"). These were also expressed to be between Ranhill FZE, referred to as "the Principal", and Unaoil, and were both signed by Mr. Lough on behalf of the Principal. While they modified the payment terms, they retained the existing structure, that is to say that payments of commission would be made by the Principal within specified periods after receipt by the Contractor of payments under the Libyan Housing Contract.
The "side letter" dated 18 August 2006
- On 18 August 2006 a letter was produced on Ranhill FZE notepaper, signed on behalf of Ranhill FZE by Mr. Lough, and addressed "To whom it may concern". Making some immaterial typographical corrections, it read as follows (emphasis added):
"This is to confirm that Ranhill Berhad is the owner of 60% in the equity of Amona Africa Construction Consortium Sdn Bhd and is fully authorised to deal in all matters concerning the contract for design, construction and handover of 20,000 units of residential apartments with potential of a further 12,000 units for the Great Socialist Republic of Libya.
Ranhill Berhad, through its authority to deal in all matters on behalf of Amona Africa Construction Consortium Sdn Bhd, has in turn authorised its subsidiary Ranhill Middle East FZE to enter contracts with Unaoil Group and its subsidiary Unacomm Limited as its authorised agent to deal in certain matters in respect of the abovementioned contract. Unaoil Group has been engaged by Ranhill Middle East FZE, among other duties, to use its good offices to enter into all necessary contracts to assist Ranhill Berhad through its subsidiary Amona Africa Construction Consortium Sdn Bhd in the award of the abovementioned contract.
RANHILL MIDDLE EAST FZE
Sharif Lough"
- There is a dispute as to the purpose for which this letter was produced. The first and second defendants say that it was produced so that it could be shown to Libyan politicians in order to satisfy them that Amona Ranhill had the backing of a company of greater substance and thus to assist in securing the Libyan Housing Contract. Unaoil, through Mr. Ahsani's evidence, says that it was never intended for this purpose and was not in fact shown to any Libyan politicians, but that it was:
"written solely as a 'side letter' and for the benefit of Unaoil Limited, in response to our continuing requests that Amona Ranhill provide us with additional comfort that we would be paid in the event an implementation contract were secured".
- There is also a dispute as to the meaning of this "side letter", including in particular the effect of the words which I have underlined, with which I deal at [83] to [94] below.
The Libyan Housing Contract and completion of the share purchase agreement
- Four days later, on 22 August 2006, the Libyan Housing Contract was concluded. Although further details remained to be determined, this was sufficient to trigger completion of the share purchase agreement, which took place on 28 August 2006, at which time Ranhill acquired 60% of the equity of Amona Ranhill and Mr. Hamdan Mohamad, Mr. Lough, Mr. Metcalf and Mr. Awaluddin were appointed as directors of Amona Ranhill.
The Supplementary Agreements
- Subsequently there were further amendments to the Agency Agreement. On 7 December 2006 a Supplementary Agreement ("the third supplementary agreement") was entered into in order to summarise "the key modifications and clarifications to the previous agreements signed on 24 May 2006 and 10 August 2006 between Ranhill Middle East FZE ('Rahill' [sic]) and Unaoil Limited ('Unaoil')". It was agreed in clause 1 that:
"The scope of the agreements cover all current and future housing units awarded to Ranhill or any of its subsidiaries, affiliates or related parties. For the avoidance of doubt, at the date of signing of this agreement, 40,000 units have been awarded to Ranhill and its related parties."
- Mr. Croxford points out that the contracts in question had not been awarded to "Ranhill" (i.e. in this context, Ranhill FZE), but to Amona Ranhill. However, the clause does not say that any contracts had been awarded to Ranhill FZE, but only to Ranhill FZE and related parties. On any view Amona Ranhill was a related party. There is therefore nothing in this clause inconsistent with the first and second defendants' case.
- Clause 2 goes on to specify the fee due from "Ranhill" (i.e. Ranhill FZE) to Unaoil, and in relation to a proposed project at Benghazi states that:
"Ranhill agrees to submit its bid to Unaoil prior to formal submission to the Client so that Unaoil has the ability to introduce possible increases in scope or price."
- Mr. Croxford makes the valid point that the parties would have contemplated a bid by Amona Ranhill and not by Ranhill FZE.
- Clause 3 of the agreement was struck through in manuscript, and the striking through was initialled by the parties. But for the striking through, it would have read:
"Ranhill accepts for and on behalf of its Group and parent company, Ranhill Berhad, that all and any obligations incumbent upon itself will be fully met and adhered to regardless of the legal entity(ies) from its Group that may enact or complete the work mentioned above."
- The agreement was signed "for and on behalf of Ranhill" (i.e. Ranhill FZE) by Mr. Lough and Mr. Metcalf.
- The final Supplementary Agreement ("the fourth supplementary agreement") was dated 22 January 2007, and its purpose was said to be to clarify "the position of Ranhill Middle East FZE ('Ranhill') and Unaoil Limited ('Unaoil') with regard to the Supplementary Agreement signed on 7 December 2006". Once again it was concerned with the fee which would be due "from Ranhill to Unaoil", but there are two features of this agreement which are said by Unaoil to be significant. The first is that it referred to residential units "completed by the JV of Ranhill and the UDHC", the latter being a reference to the Libyan Urban Development Housing Corporation. It is said, correctly, that there was no joint venture between Ranhill FZE and the UDHC, the only contract with the Libyans having been concluded by Amona Ranhill. Second, the agreement was signed "for and on behalf of Ranhill" by Mr. Metcalf, who was described as "CEO". In fact, Mr. Metcalf was never the CEO of Ranhill FZE, though as it happens he did become a director of the company on 22 January 2007, the date of this supplementary agreement, but he was the CEO of Ranhill E&C. It is primarily because of Mr. Metcalf's signature on this agreement as CEO that Unaoil advances its alternative case that Ranhill E&C was a party to the Agency Agreement as amended, although Mr. Croxford made clear that the primary case was that Amona Ranhill was the true party.
The Consultancy Agreement
- Finally, a year later, on 8 February 2008, a Consultancy Agreement was concluded, which was also stated to be made between Ranhill FZE and Unaoil. This agreement would have superseded all previous agreements between the parties. However, it was common ground that it was subject to a condition precedent which was not fulfilled, and therefore never became effective.
Performance of the Libyan Housing Contract and payments received by Amona Ranhill
- As anticipated, the Libyan Housing Contract proved extremely lucrative for Amona Ranhill. As well as the initial contract, which in the event was for 10,000 units at Tajura, it appears that extensions of that contract were subsequently awarded, as well as additional contracts relating to earthworks and central gas heating facilities at Tajura, and a further contract obtained with the assistance of Unaoil for a new town with 20,000 housing units at West Benghazi. Indeed, it appears that Amona Ranhill had over committed itself in Libya and was able to negotiate a reduction in scope, which included receipt of a termination payment in respect of the proposed Benghazi works. According to Ranhill's annual reports, Amona Ranhill has been paid the equivalent of at least US $160.77 million for the work done by it in Libya and in termination fees. It might therefore have been expected that one or other of the Ranhill companies would make provision in its accounts for its liability to pay Unaoil's commission, but this was not done. Mr. Croxford attached some significance to the absence of any such provision in Ranhill FZE's accounts, but as there was no provision in Amona Ranhill's or Ranhill E&C's accounts either, this does not take matters very far.
Unaoil's commission
- Unaoil has pressed for payment of the commission due to it, but so far has been been paid only the equivalent of US $4.33 million, that payment (part of which was apparently disguised as a payment for office equipment) having been made by Amona Ranhill. Unaoil calculates that it is entitled to a payment of commission totalling at least US $38,949,182, while as recently as 13 August 2010 Mr. Lough sent an e-mail which appears to acknowledge that the total commission due to Unaoil (although it is not clear whether this included the US$4.33 million already paid) was some US $42.5 million. For present purposes the precise figure does not matter, but it is striking that there has, so far at any rate, never been any denial by any of the Ranhill companies that substantial sums are due to Unaoil under the Agency Agreement for the services which it provided in enabling Amona Ranhill to earn these very considerable amounts. However, with the exception of US $4.33 million, nothing has been paid. Nor have the first and second defendants provided any explanation why the commission due to Unaoil has not been paid. They take their stand on the ground that the only party liable in law under the Agency Agreement is Ranhill FZE, but provide no explanation why Ranhill FZE has not been put in funds out of the monies received by Amona Ranhill to enable it to discharge its obligations to Unaoil under the Agency Agreement.
Unaoil's case against the first and second defendants
- The basis on which Unaoil seeks to hold the first and second defendants liable to pay the amounts due under the Agency Agreement is pleaded in paragraphs 26 and 27 of the Particulars of Claim as follows:
"26. Upon the true construction of those documents, the Agency Agreement was made between Unaoil on the one hand and Amona-Ranhill, and/or in the alternative Ranhill E&C on the other.
27. Further and in the alternative, at no material time did [Ranhill FZE] have any material business or economic substance but instead was a party to the Agency agreement and each variation thereof acting as an agent for its principal, namely Amona-Ranhill, or in the further alternative acted as a bare nominee for Amona-Ranhill."
- The documents referred to in paragraph 26 are the Agency Agreement itself, together with the four supplementary agreements dated 1 August 2006, 10 August 2006, 7 December 2006 and 22 January 2007.
- Thus the case is put in three ways. First, Amona Ranhill, alternatively Ranhill E&C, is said to have been a party to the Agency Agreement and each variation thereof as a matter of the true construction of the agreement or agreements in question. This is the only case pleaded against Ranhill E&C, although it became clear in argument that the case against Ranhill E&C is even more limited, depending as it does on Mr. Metcalf's signature of the fourth supplementary agreement.
- Second, it is said that Ranhill FZE entered into the Agency Agreement and each variation thereof as an agent for Amona Ranhill, which was therefore the true party to the agreement.
- Third, it is said that Ranhill FZE acted as a bare nominee for Amona Ranhill. In argument Mr. Croxford explained that what was meant by this plea was that the agreement purporting to be with Ranhill FZE was not the genuine agreement between the parties, but was in that respect a sham, in accordance with the principle described by Diplock LJ in Snook v London & West Riding Investments Ltd [1967] 2 QB 786 at 802.
- A fourth way of putting the case, not yet pleaded, but which Mr. Croxford told me would if necessary be pleaded in any Reply, is that the 18 August 2006 side letter gave rise to an estoppel by convention or by representation to the effect that Ranhill FZE entered into the Agency Agreement and subsequent amendments as Amona Ranhill's agent.
The first and second defendants' case
- In summary, the first and second defendants say that the Agency Agreement was executed by Unaoil and Ranhill FZE, who are collectively referred to in the agreement as the "parties", and that neither Amona Ranhill nor Ranhill E&C was a party to the agreement. They say that to construe the Agency Agreement as having been made with Amona Ranhill and/or Ranhill E&C would be inconsistent with its terms. They say further that any suggestion that Ranhill FZE acted as agent for (or as a bare nominee of) Amona Ranhill in concluding the Agency Agreement is inconsistent with the express terms of the agreement, is contradicted by the negotiations leading up to it which show that Ranhill FZE was acting as a principal and not as an agent, and is contrary to Mr. Ahsani's own evidence. Further, they say that the 18 August 2006 side letter does not contain any statement that Ranhill FZE was acting as an agent for Amona Ranhill. Finally, they say that Ranhill FZE did not have authority, whether actual or apparent, to enter into the Agency Agreement on behalf of Amona Ranhill. Thus, whichever way Unaoil puts its case, the first and second defendants say that it is bound to fail and that there is therefore no serious issue to be tried.
Relevance of background, negotiations and subsequent conduct
- When considering the various ways in which Unaoil puts its case, it is necessary to keep in mind which aspects of the evidence are relevant to the various submissions. Thus in considering the construction of the Agency Agreement, the question is what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean, this being a matter to be determined objectively and without regard to the subjective intentions of the parties, and excluding evidence of what was said or done during the course of negotiating the agreement for the purpose of drawing inferences about what the contract meant: Chartbrook Ltd v. Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101 at [14] and [42]. Although these principles were stated in the context of determining the meaning of the words used by the parties, they are equally applicable when it comes to ascertaining, as a matter of construction, the identity of the parties to the contract. The question is whether, on the face of the document, albeit considered by reference to the contractual background, the contract in question is one which purports to have been concluded by one party rather than another.
- Further, identification of the true party to the Agency Agreement dated 24 May 2006 must be determined at the time when the contract was concluded. Subsequent conduct is irrelevant to construction of the contract. It follows that the 18 August 2006 side letter is irrelevant so far as construction of the Agency Agreement is concerned, as are the four supplementary agreements. If on its true construction, the true party to the Agency Agreement was Ranhill FZE and not Amona Ranhill, at most those post-contractual documents could in theory constitute evidence of an intention to vary the parties' contractual relationship by substituting Amona Ranhill (or possibly Ranhill E&C) for Ranhill FZE.
- However, when considering Unaoil's alternative case that although the contract purports to be with Ranhill FZE, in fact Ranhill FZE entered into the Agency Agreement as the agent or as the bare nominee of Amona Ranhill, different considerations apply. Here it is necessary for Unaoil to show a serious issue to be tried that the parties had a common intention that, despite the apparent identification of Ranhill FZE as the only contracting party, in truth Amona Ranhill would be Unaoil's counterparty and would undertake all the obligations of the "Principal" under the Agency Agreement. For this purpose it is legitimate to refer to the parties' negotiations, just as occurred in the The Astyanax [1985] 2 Lloyd's Rep 109, where the issue was whether a Mr. Panagiotis, described in a voyage charterparty as "disponent owner", had in reality entered into the charterparty as an agent for the registered owners. Kerr LJ said (at 113 rhc and 114 rhc, emphasis added):
"We therefore conclude that the course of the negotiations in the present case shows perfectly clearly that the understanding and intention of both parties was that Mr. Panagiotis would conclude a head time charter with the registered owners and that it was on this basis that he would appear in the sub-voyage charter with the charterers as 'disponent owner'. … The description of Mr. Panagiotis as 'disponent owner' was admittedly in itself neutral. But the surrounding circumstances and the course of the negotiations clearly show that the intention was that he would conclude a time charter with the registered owners and that it was on this basis that he was described in the sub-voyage charter as 'disponent owner'. This was inconsistent with his contracting in the capacity of a mere agent on behalf of the registered owners, with the result that they cannot contend that they were in fact his undisclosed principals."
- Similarly, when considering the capacity in which Ranhill FZE entered into the Agency Agreement, subsequent conduct may potentially be relevant, at least to the extent that it casts light on the parties' intentions at the time when they concluded the contract. Moreover, it is at least theoretically possible that the parties could have intended that Ranhill FZE would be the sole principal at the time when the Agency Agreement was concluded, at which time Amona Ranhill was not yet part of the Ranhill group, but could subsequently have intended to make a change in the identity of the contracting party (or strictly a change in the capacity in which Ranhill FZE was acting). However, if this were intended, it is to be expected that the parties would make the position clear.
Construction
- I deal first with the construction of the Agency Agreement dated 24 May 2006 at the time when it was concluded. I have already drawn attention to the principal features of the agreement, at [20] to [35] above. Although there was some dispute about this on the evidence, I proceed on the basis that, as contended by Unaoil, Ranhill FZE was a company which had not traded on its own account and had no history of concluding contracts as a principal, and that it was without economic substance, having made losses in each year in which it had operated, so as to be entirely dependent on support from other companies within the group for its continued operations. I assume further, although it is not clear that the evidence on behalf of Unaoil goes quite this far, that these matters were known to Unaoil at the time.
- In contending that, as a matter of construction, the true principal to the Agency Agreement was Amona Ranhill, Mr. Croxford relied in particular on the following matters. First, he pointed out that the recitals declare that the purpose of Unaoil's appointment was to secure the award of a contract to Amona Ranhill as "the Contractor". Second, he relied on the second recital, stating that Ranhill FZE would be awarded part of the Contract works by Amona Ranhill. Third, Article II.4 provides for payments to Unaoil to be triggered by Amona Ranhill's receipt of payments under the Libyan Housing Contract and (in practice) Unaoil's commission would have to be funded from those payments. Fourth, Article II.6 provides that payment of fees due to Unaoil would be made by Ranhill FZE or one of its affiliates. The result of all this, submitted Mr. Croxford, was that the Agency Agreement was unworkable without the full agreement and cooperation of Amona Ranhill. Moreover, the agreement was signed on behalf of the "Principal" by Mr. Lough, who was not a director or officer of Ranhill FZE.
- While all this is true, it does not lead to the conclusion that the true principal to the agreement was Amona Ranhill. It is in my judgment impossible to construe the Agency Agreement as a contract between Unaoil and Amona Ranhill. The agreement identifies Ranhill FZE as the "Principal" and distinguishes repeatedly between Ranhill FZE as the "Principal" and Amona Ranhill as the "Contractor". The fact that Ranhill FZE may not have undertaken other contractual obligations as a principal and that it was not a company of substance does not mean that it was incapable of contracting as a principal on this occasion. Reading the Agency Agreement in the light of the contractual background, and disregarding any evidence of pre-contractual negotiations or subsequent conduct, Ranhill FZE plainly did conclude this contract as Unaoil's sole counterparty. That left Unaoil in the potentially uncomfortable position that it was dependent on other members of the Ranhill group being prepared to fund Ranhill FZE's performance of its obligations, but that cannot detract from the clear and unambiguous meaning of the Agency Agreement.
- Moreover, Mr. Lough undoubtedly purported to sign on behalf of Ranhill FZE. Either he had authority to do so or he did not. If he did, which is overwhelmingly likely in view of Mr. Ahsani's own evidence that the negotiations were being conducted at a very senior level within the Ranhill group and that his father was assured by Mr. Hamdan Mohamad (who was a director of Ranhill FZE) that Mr. Lough was his "right-hand man" and effectively the Ranhill group's "Mr. Libya" (see [15] above), any point about his signature disappears. If Mr. Lough did not have authority, then the contract was not authorised by Ranhill FZE, which would give rise to its own remedies. But the fact that Mr. Lough was not a director of Ranhill FZE or (if it was the case) that he did not have authority to sign for Ranhill FZE cannot mean that he was in fact signing or purporting to sign on behalf of Amona Ranhill. In any event, at the date of the Agency Agreement, it was known that Mr. Lough was not a director of Amona Ranhill either, and that Amona Ranhill was not yet part of the Ranhill group, which makes any inference (whether as a matter of construction or otherwise) that he was signing on behalf of Amona Ranhill very difficult.
- The only possible reason for some hesitation about this conclusion as a matter of construction is Article IV.6, as to which see [32] above. However, in my judgment, despite the puzzling nature of this clause, the factors pointing to Ranhill FZE as the party to the Agency Agreement are overwhelming.
- If, as I conclude, Unaoil is unable to show any real prospect of success in establishing as a matter of construction that Amona Ranhill was the true party to the Agency Agreement at the date when it was concluded in May 2006, the question arises whether the parties' subsequent supplementary agreements raise a triable issue that they intended to vary this arrangement. In my judgment they do not. The first and second supplementary agreements do not materially change the position and were concluded at a time when Amona Ranhill was still not yet part of the Ranhill group. By the time when the third and fourth supplementary agreements were concluded, Amona Ranhill had become part of the group and the Ranhill directors had been appointed, but these further agreements were, as they say on their face, intended to supplement and clarify the existing agreement, with nothing to suggest that they were intended to effect a change in the identity of the Ranhill party with which Unaoil was to contract. That would have been a substantial change and, if it had been intended, it is to be expected that the parties would have make the position clear. In particular, I do not regard the reference in the third supplementary agreement to a bid being submitted by Ranhill FZE or the reference in the fourth supplementary agreement to a joint venture between Ranhill FZE and the Libyan UDHC as raising a triable issue that such a change was intended. These references are much more consistent with loose drafting as a result of the reality that although Ranhill FZE was and would remain Unaoil's contracting party, it was Amona Ranhill which was contracting with the Libyans.
- That being so, it is unnecessary to consider in the context of construction whether or to what extent it is legitimate to take account of the clause which was deleted from the third supplementary agreement (see [45] above), or what if any inference to draw from the fact of the deletion (cf. the authorities on deleted words discussed in Lewison, The Interpretation of Contracts, 4th edition (2009) at paragraph 3.04, concluding with the judgment of Christopher Clarke J in Mopani Copper Mines Plc v. Millennium Underwriting Ltd [2008] EWHC 1331 (Comm), [2008] 2 All ER (Comm) 976).
- Finally on construction, in my judgment the argument that Ranhill E&C was intended to become the contracting party by virtue of Mr Metcalf's signature of the fourth supplementary agreement and his description as CEO is hopeless. His signature follows immediately below the words "For and our behalf of Ranhill", "Ranhill" being a reference to Ranhill FZE, which make very clear the identity of the party on whose behalf he was signing this supplementary agreement. As with Mr. Lough (see [65] above), Mr. Metcalf was either authorised to sign on behalf of Ranhill FZE or he was not, but on no view did he purport to sign on behalf of Ranhill E&C.
Agency
- I turn next to the question whether, notwithstanding the true construction of the Agency Agreement, it was understood and agreed between the parties that Ranhill FZE was acting as an agent for Amona Ranhill so that Amona Ranhill was the true principal liable under the agreement to make the payments due to Unaoil. This is not a case where it is said that Amona Ranhill was an undisclosed principal, that is to say a principal of whose existence the counterparty was unaware. On the contrary Unaoil's case is that the parties agreed that although on its face the agreement purported to be with Ranhill FZE, Ranhill FZE was acting as an agent for Amona Ranhill. It seems to me that in these circumstances there is very little difference if any between Unaoil's first alternative case (that Ranhill FZE was acting as an agent) and its second alternative case (that Ranhill FZE was acting as a bare nominee, so that the agreement was in that respect a sham). Nevertheless I consider them separately.
- There are immediately three major difficulties for Unaoil in advancing an agency case. First, all of the factors which demonstrate as a matter of construction that Ranhill FZE contracted as a principal apply with equal force to the alternative submission that it was acting as an agent. Put shortly, I agree with Mr. Maclean's submission that the terms of the Agency Agreement are inconsistent with Ranhill FZE having acted as an agent. Second, it is not suggested by Mr. Ahsani in his evidence that any Ranhill representative ever made any express statement to the effect that Ranhill FZE was acting merely as an agent for Amona Ranhill. The closest to any such suggestion is the side letter dated 18 August 2006, which I consider below, although that letter comes some three months after the conclusion of the Agency Agreement. Subject to that letter, however, the matters relied on by Unaoil are essentially matters of inference. In such circumstances a compelling case is needed to rebut what is otherwise the obvious conclusion that the parties intended the Agency Agreement to record their agreement (including the identity of the contracting parties) accurately. Third, as the parties were well aware, at the time of the Agency Agreement, Amona Ranhill was not a part of the Ranhill group, and it is therefore difficult to see how Ranhill FZE could have had any implied or apparent authority to act on its behalf, while there is no evidence (nor any allegation) of any express authority.
Mr. Ahsani's evidence
- In seeking to make good its case of agency, Unaoil relies on the evidence of Mr. Ahsani. I have already referred, at [15] to [18] above, to Mr. Ahsani's evidence about the parties' initial negotiations, in which he explains that nothing was said initially to identify the Ranhill company for which Mr. Lough and other Ranhill representatives were acting, and to his evidence that Mr. Lough explained orally that the contract with Unaoil would be in the name of Ranhill FZE because of the tax advantages that this would provide. Mr. Ahsani added that he was familiar with the concept of tax advantages from the use of UAE "free zone" companies and that the proposed use of Ranhill FZE came as no surprise. However, Mr. Ahsani admitted frankly that he had reservations about this:
"Over our months of dealing a warm relationship developed between Unaoil and the Ranhill representatives. However, we did have reservations regarding Mr. Lough's wish to use [Ranhill FZE] as a local procurement and sourcing agency given we understood that company lacked any real substance or presence, and in particular that [Ranhill FZE] be named as Unaoil's counterparty on the face of the proposed Agency Agreement. We drew some but only a limited degree of comfort from Mr. Lough's assurance that a part of the works in Libya would be channelled through [Ranhill FZE] in the event Amona Ranhill succeeded in winning an implementation contract with the assistance of Unaoil.
More important was the fact that it was made quite clear to us throughout the negotiations that the company for whom we would be working was Amona Ranhill. Our brief was to promote the company's name in Libya in an effort to secure for it an implementation contract. In negotiating our prospective entitlement to commission, we never negotiated with [Ranhill FZE]; our client was always Amona Ranhill. We understood that [Ranhill FZE] was simply intended by Ranhill as a tax efficient vehicle through which to route payment of any commission which might later accrue if our efforts on behalf of our client proved successful. It was in that context that we understood the rejection of our suggestions that Amona Ranhill be named as our principal in the Agency Agreement."
- I make five comments on this evidence. First, it was clearly Mr. Ahsani's understanding that the Agency Agreement was intended to appear, on its face, as a contract with Ranhill FZE. For what it is worth, which may not be very much as construction is a matter to be determined without regard to the subjective intentions of the parties, that supports the conclusion which I have already reached as to the true construction of the agreement.
- Second, it was clearly explained that the use of Ranhill FZE as Unaoil's counterparty was for tax purposes. That being so, it must have been obvious that, in order to be effective, the use of Ranhill FZE in this way would have to be genuine. If the true principal was really Amona Ranhill, a Malaysian company, any tax advantage would be nullified.
- Third, Mr. Ahsani acknowledges that he had reservations about accepting Ranhill FZE as Unaoil's counterparty, despite the warm relationship which had been built up with the Ranhill representatives. There would have been no need for such reservations if it had really been agreed and understood that Ranhill FZE was acting as an agent and that Amona Ranhill was the true principal. Those reservations were to some extent alleviated by the matters to which he refers, but clearly were not extinguished.
- Fourth, the "assurance" to which Mr. Ahsani refers which was given by Mr. Lough was not that Amona Ranhill was to be the true principal to the Agency Agreement, but merely that part of the works in Libya would be channelled through Ranhill FZE, thereby putting it in a position where it would be better able to perform its payment obligations to Unaoil. That tends to confirm that the agreement was indeed intended to be with Ranhill FZE.
- Fifth, and most significant of all, Unaoil specifically requested that Amona Ranhill be named as the principal in the Agency Agreement, but that request was rejected. It seems to me that in the absence of any case that there was an express agreement that Ranhill FZE was contracting as a mere agent, the express rejection of this suggestion makes it impossible to conclude that there was any implied agreement or understanding to this effect. Far from being implicit, the point was expressly raised and rejected.
- Mr. Ahsani's candour is to be commended, but in the result I accept Mr. Maclean's submission that the suggestion that Ranhill FZE acted as agent for Amona Ranhill in concluding the Agency Agreement is contrary to Mr. Ahsani's own evidence.
Pre-contractual negotiations
- That conclusion is reinforced by examination of the parties' pre-contractual negotiations. I draw attention to two matters. First, at a fairly early stage Unaoil inserted a proposed clause into the draft agreement which would have read as follows:
"The terms of this Agreement shall apply to and be borne by the parties subsidiaries, affiliates and partnerships, including but not limited to Amona Consolidated Holdings Sdn Bhd, Amona Africa Construction Consortium Sdn Bhd and Global Energy Technical Resources Pte Ltd."
- This was an attempt to extend liability for performance of the proposed agreement to all companies in the Ranhill and Unaoil groups. However, the clause was deleted by the Ranhill negotiators and did not reappear.
- Second, on 24 May 2006, the date when the Agency Agreement was concluded, Mr. Bardsley of Unaoil sent a draft side letter to the proposed agreement to Mr. Lough, which would have read as follows:
"Subject: Subsidiary
Dear Mr. A. Ahsani,
With reference to the above-mentioned subject we hereby confirm Ranhill Middle East FZE licence registration no: (05396) is a fully owned subsidiary of Ranhill??????????????????. Furthermore we commit as a minimum to maintain the Ranhill Middle East FZE as a fully operational company throughout the Libyan Housing Project contract duration.
For and on behalf of Ranhill Middle East FZE
Signed: Authorised signatory"
- It appears that Mr. Lough would have been willing for a letter in these terms to be provided, although in the event this did not happen and the Agency Agreement was concluded without such a letter. However, the request for a letter in these terms further demonstrates an acceptance on the part of Unaoil that its counterparty was to be Ranhill FZE. There would otherwise have been no need for any such letter giving comfort as to the position of Ranhill FZE.
The 18 August 2006 side letter
- I turn next to the 18 August 2006 side letter, the terms of which I have set out at [37] above, in order to determine what light this letter casts on the parties' understanding of the capacity in which Ranhill FZE had entered into the Agency Agreement, or their intentions as to how this was henceforth to be regarded.
- I have already referred, at [38] above, to Mr. Ahsani's evidence that the letter was written "in response to our continuing requests that Amona Ranhill provide us with additional comfort that we would be paid in the event an implementation contract were secured". Thus Unaoil continued to recognise, after the Agency Agreement was concluded, that Ranhill FZE was its counterparty, albeit that it was not comfortable with that situation.
- As already indicated, there is a dispute as to the meaning of the "side letter", in particular as to whether the words which I have underlined at [37] above refer to Unaoil as the authorised agent of Ranhill FZE in relation to the (proposed) Libyan Housing Contract (as the first and second defendants contend) or to Ranhill FZE as the authorised agent or sub-agent of Amona Ranhill (as Unaoil contends). The first and second defendants say that this reference to "its authorised agent" refers to Unaoil's authority to act as Ranhill FZE's agent to assist in securing "the abovementioned contract", i.e. the Libyan Housing Contract, and that the letter says nothing to suggest that Ranhill FZE entered into the Agency Agreement as agent for Amona Ranhill. Unaoil says that the reference is to Ranhill FZE as the authorised (sub) agent of Amona Ranhill and that in any event the letter contains an unambiguous statement that Ranhill had authority to act on behalf of Amona Ranhill, and that Ranhill, acting for Amona Ranhill, had authorised Ranhill FZE to enter into contracts with Unaoil for the purpose of securing the Libyan Housing Contract for Amona Ranhill.
- In this regard it seems to me that the following matters are relevant.
- First, the letter is clearly written (or purports to be written) by Ranhill FZE. It is on Ranhill FZE's notepaper and Mr. Lough's signature is (or purports to be) on behalf of Ranhill FZE. (I say that it "purports" to be so because Mr Croxford for Unaoil made the point that Mr. Lough was not a director or officer of Ranhill FZE and submitted that there was no evidence that he was authorised to act on behalf of RME FZE: I have dealt with the same submission, made in the context of the various agreements, at [65] above). That makes it unlikely that the letter was intended to be an assurance given on behalf of Amona Ranhill.
- Second, the letter is addressed "To whom it may concern", which seems strange if it was specifically intended to provide comfort to Unaoil.
- Third, the first paragraph, dealing with the position of Ranhill as the owner of 60% of the equity of Amona Ranhill (albeit that completion had not yet taken place) and making the point that Ranhill was authorised to deal with matters concerning the proposed Libyan Housing Contract, seems pointless if the purpose of the letter was to provide an assurance to Unaoil that Amona Ranhill was the true principal to the Agency Agreement.
- Fourth, the letter makes clear that it is Ranhill FZE which has entered into a contractual relationship with Unaoil ("[Ranhill] has authorised its subsidiary Ranhill Middle East FZE to enter contracts with Unaoil Group" … "Unaoil has been engaged by Ranhill Middle East FZE").
- Fifth, while the letter refers to Ranhill having "authorised" Ranhill FZE to contract with Unaoil, this does not necessarily mean that Ranhill (or Amona Ranhill) was intended to be the true principal to the contract entered into with Unaoil. The language is equally consistent with Ranhill having given instructions or permission to Ranhill FZE to conclude a contract with Unaoil as a principal, and in context, in my judgment, this makes better sense.
- Sixth, although the passages just quoted refer to the Agency Agreement, they do not expressly identify it, as might be expected if the purpose of the letter was to provide an assurance that Amona Ranhill was the true principal to the Agency Agreement.
- Looking at the letter overall, it is on any view a very convoluted way of saying that Amona Ranhill was the true principal to, and liable to make the payments due under, the Agency Agreement. If that had been intended, much simpler words could and would have been used. In my judgment, the letter has the meaning for which the first and second defendants contend. However, even if that is wrong, and the underlined words do refer to Ranhill FZE having been authorised to enter into the Agency Agreement, the letter falls far short of an unambiguous statement that Amona Ranhill was the true principal to and liable to make the payments due under the agreement.
- I consider, therefore, that the 18 August 2006 side letter provides no reason to reconsider my conclusion as to the capacity in which Ranhill FZE was acting when it entered into the Agency Agreement three months beforehand, and that it provides no evidence of any intention by the parties to change that capacity for the future.
Subsequent events
- Unaoil made further unsuccessful attempts to strengthen its position after the issue of the 18 August 2006 side letter. As noted at [45] above, it attempted to include a clause in the third supplementary agreement to the effect that Ranhill FZE would accept "on behalf of its Group and parent company" that Ranhill FZE's obligations would be "fully met and adhered to regardless of the legal entity(ies) from its Group that may enact or complete the work", a clause which was only necessary on the basis that Ranhill FZE was its contractual counterparty, but that clause was deleted from the final version of the agreement. Subsequently it attempted to include a clause in similar terms to the wording of the 18 August 2006 side letter in the Consultancy Agreement, at the same time voicing its frustration about the terms of its existing agreements with the comment that:
"Again, we are in effect agreeing to an inferior contract (particularly as regards payment terms) and in turn need assurances that we will be paid, regardless of the status of Ranhill ME FZE."
- All this shows a continuing discomfort on the part of Unaoil about having Ranhill FZE as its counterparty which is inconsistent with any agreement or understanding that the true principal to the Agency Agreement was Amona Ranhill, a suggestion which, moreover, does not appear to have been made at any stage before issue of the present action.
Bare nominee
- To the extent that Unaoil's case that Ranhill FZE acted as a bare nominee for Amona Ranhill raises different considerations from its case on agency, the relevant requirements were set out by Diplock LJ in Snook v London & West Riding Investments Ltd [1967] 2 QB 786 at 802 (emphasis added):
"As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a 'sham', it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the 'sham' which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co v. Maclure (1882) 21 Ch.D 309 and Stoneleigh Finance Ltd v. Phillips [1965] 2 QB 537), that for acts or documents to be a 'sham', with whatever legal consequences follow from this, all the parties thereto must have a common intention that the actual documents are not to create the legal rights and obligations which they give the appearance of creating. No unexpressed intentions of a 'shammer' affect the rights of a party whom he deceived. There is an express finding in this case that the defendants were not parties to the alleged 'sham'. So this contention fails."
- On the basis of the findings which I have already made, the parties in this case did not have a common intention at any stage that the Agency Agreement was not to create the legal rights and obligations which it gave the appearance of creating, that is to say a contract between Unaoil and Ranhill FZE.
- The Snook principle was applied by the Court of Appeal in The Astyanax [1985] 2 Lloyd's Rep 109, referred to at [60] above, where Kerr LJ pointed out at 115 lhc that:
"It would be artificial commercially, and unjust, to accept the plaintiffs' contention that Mr. Panagiotis was 'a mere nominee'. He was inserted into the transaction as an intended genuine principal for a clear commercial purpose which was shared by all the parties concerned, and in our view it is not open to the registered owners to content the contrary in the face of the evidence."
- So too in the present case it was made clear that Ranhill FZE was inserted into the transaction for a commercial purpose, namely the legitimate avoidance of Malaysian tax, and even if that was not a purpose shared between the Ranhill group and Unaoil, it was a purpose in which Unaoil acquiesced. In order for that insertion of Ranhill to achieve its stated purpose it was obviously essential that Ranhill FZE should be a genuine principal to the Agency Agreement.
- Mr. Croxford relied also on the decision of the House of Lords in A.G. Securities v. Vaughan 1990] 1 AC 417, a case concerned with whether an agreement which purported to be a licence to occupy residential property was in truth a tenancy subject to the Rent Acts. The speeches make clear that a document which purports to be a licence will nevertheless create a tenancy if the rights and obligations enjoyed and imposed satisfy the legal requirements of a tenancy. In order to determine whether the contractual document is a genuine document giving effect to the parties' true intentions, or is merely "dressed up" in an endeavour to clothe the agreement with a legal character which it would not otherwise have possessed, the court must consider not only the terms of the contract but the surrounding circumstances including the course of negotiations and the nature and extent of the actual mode of occupation of the accommodation after the conclusion of the contract: see Lord Templeman at 458D-H, Lord Oliver at 469C-G and Lord Jauncey at 475D-F and 476H-477A.
- Although the context in the present case is different, in particular because there is no equivalent of the rule stated by Lord Templeman that "Parties cannot contract out of the Rent Acts; if they were able to do so the Acts would be a dead letter ...", I accept that in applying the Snook principle it is relevant to have regard to all the circumstances, including the way in which the parties conducted themselves after the conclusion of the contract. However, for the reasons I have given, there is no evidence in this case that the parties intended to, or did in fact, treat the Agency Agreement as a sham which was in truth intended to be a contract between Unaoil and Amona Ranhill.
Estoppel
- Unaoil's final argument is that Amona Ranhill is estopped from denying that Ranhill FZE entered into the Agency Agreement and subsequent amendments as its agent as a result of the 18 August 2006 side letter. However, as I have already held at [93] above, that letter does not contain an unambiguous statement that Amona Ranhill was the true principal to and liable to make the payments due under the Agency Agreement. Accordingly the plea of estoppel is bound to fail.
Authority
- The conclusions which I have reached so far mean that it is unnecessary to consider in any detail the first and second defendants' final submission that Ranhill FZE had no authority to enter into the Agency Agreement or the various supplementary agreements as their agent. However, if I had concluded that Unaoil had established a serious issue to be tried whether Ranhill FZE had purported to contract on behalf of Amona Ranhill, I would have held that there was at least a real prospect of success that Unaoil would be able to establish that any initial lack of authority in relation to the Agency Agreement (which was concluded before Amona Ranhill became part of the Ranhill group) was cured by subsequent ratification thereafter, in particular as a result of the third and fourth supplementary agreements. As it is, however, this point does not arise.
Conclusion
- I conclude, therefore, that Unaoil does not have a real prospect of success in showing that either Amona Ranhill or Ranhill E&C is liable to pay the sums due under the Agency Agreement. The only party liable thereon is Ranhill FZE. There is therefore no serious issue to be tried. Accordingly service of these proceedings on Amona Ranhill and Ranhill E&C must be set aside.
- I have considerable sympathy with the position in which Unaoil finds itself. Essentially what has happened in this case is that Unaoil concluded a contract with Ranhill FZE, a company with no assets and no means of its own to perform the obligations which it was undertaking. It did so having tried and failed to secure a contractual commitment from other more substantial companies within the Ranhill group, and with some discomfort about accepting that position, but nevertheless trusting that the Ranhill group, a substantial and apparently respectable Malaysian group of companies, would behave honourably by making available the funds to pay Unaoil the sums which it would earn by providing its services. Those services played their part in enabling the Ranhill group to earn many millions of dollars, but Unaoil's expectation that Ranhill would behave honourably has been disappointed.
