Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2011] CSOH 118
A220/11	OPINION OF LORD DRUMMOND YOUNG in the cause KIVUWATT LIMITED Pursuer; against DANE ASSOCIATES LIMITED Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: Sandison, Q.C.; Brodies LLP

Defender: Dean of Faculty, Delibegović-Broome; Semple Fraser LLP

7 July 2011

[1] The pursuer is a company incorporated in Rwanda. It is a subsidiary of ContourGlobal L.P., a multinational business based in the United States which develops and operates power generation facilities in markets in sub-Saharan Africa, South America and Eastern Europe. On 2 March 2009 it entered into a Concession Agreement with the Government of Rwanda whereby it was licensed to build, own and operate a power plant and gas production plant at Lake Kivu, on the border between Rwanda and the Democratic Republic of the Congo. Lake Kivu contains substantial quantities of methane dissolved in the water, and it is possible to extract the methane and to use it for the production of electricity. The extraction of methane reduces the risk of a natural, sudden and catastrophic release of the methane into the surrounding environment, an event which is known to have happened historically and which would have disastrous consequences for the surrounding area. At the same time as entering into the Concession Agreement with the Rwandan Government, the pursuer entered into a Power Purchase Agreement with Electrogaz, the Rwandan national power generation, transmission and distribution company, for the sale of the energy generated by the power plant. In order to proceed with the project at Lake Kivu, the pursuer avers that it requires to borrow capital. It further avers that the African Development Bank (referred to as "ADB") has approved in principle a loan of US $25m as part of an overall facility of approximately US $90m. The latter sum includes a loan from a Dutch bank, Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden (referred to as "FMO").

[2] The defender, which is a company incorporated in Scotland, had earlier entered into agreements with the Government of Rwanda regarding the extraction and processing of methane from Lake Kivu and the use of the gas for electricity generation. Under those agreements, concluded in 2005, the defender and a further company, Kibuye Power 1 Ltd (referred to as "KP1"), were given rights to extract and use methane gas from two agreed sites in Lake Kivu for the purpose of generating electricity and to sell such electricity to Electrogaz. KP1 was incorporated in Rwanda; 70% of the shares were owned by the defenders and 30% by the Government of Rwanda. The defender contends that the Government of Rwanda failed to provide agreed funding for the project, in material breach of its agreements with the defender and KP1, and that in consequence KP1 was unable to fulfil its own obligations. As a result of that, the defender claims, the Government of Rwanda had an interim administrator (a court-appointed manager of a company who supersedes the management of the directors) appointed to KP1. That occurred in 2007. In this way, the defender claims, the Government of Rwanda was able to take over the management of the project, and thus achieved the effects of nationalization without actually acquiring the defenders' shareholding in the company. Thus the government was able to negotiate better terms with another party. The defender further claims that the interim administrator has failed to respond to requests for information, which has prevented the defender from making proper returns under the Companies Acts.

[3] Following the appointment of the interim administrator, the defender entered into negotiations, which produced no result. In 2010, following the breakdown of the negotiations, it applied to the International Chamber of Commerce for arbitration in the International Court of Arbitration in Paris. The proceedings in the ICA are still at an early stage. Nevertheless, the request for arbitration is available, and sets out the defender's case in some detail. The relief sought comprises reimbursement of expenses incurred by the defender in connection with its project at Lake Kivu, payment of compensation for breach of contract and an order prohibiting the government of Rwanda and the administrator of KP1, among others, from taking any further steps in developing the concession given to the defender and the pilot plant set up by the defender until the conclusion of the arbitration. I was informed that, following the lodging of the request for arbitration, it had been amended to seek an order for implement of the contractual arrangements between the defender and the Government of Rwanda. The request for arbitration makes reference to steps taken by the Rwandan government from 2009 onwards to initiate a further methane gas extraction project at Lake Kivu. It is reasonably clear that this is a reference to the pursuer's project at Lake Kivu. The present defender states in the request for arbitration that the Rwandan government's execution of agreements with the pursuer constituted a violation of its obligations towards the defender, including the defender's concession rights. It is further alleged that KP1 was now effectively being treated by the government of Rwanda as entirely its own company, and that the government of Rwanda had accepted an international award for the technology developed by the defender as if that technology had been developed entirely by the government acting through KP1. Counsel for the defender made it clear that the defender regards the actions of the Rwandan government in relation to the technology currently used for methane gas extraction as an attempt to appropriate the defender's intellectual property rights in the relevant technology and to make use of those rights in developing a project with the present pursuer. In relation to those intellectual property rights, copies of patent applications relating to the extraction of methane gas from lake water are lodged in process.

[4] The foregoing contention was based on a number of documents, and I should refer to some of these briefly at this stage. First, on 7 February 2011 an article in an English language newspaper produced in Rwanda, the National, indicated that ADB had approved a loan of $25,000,000 to the pursuer's project. The project was described as involving gas extraction using a floating barge located in Lake Kivu. The article stated:

"The KivuWatt project is based on the Government's pilot project (KP1)... which established the existence of commercial quantities of gas concentrations in the lower resource zone in Lake Kivu. KP1 also confirmed the viability of gas extraction and treatment using a floating barge".

I was informed that, on the basis of that article, which included a photograph of the barge, the defender considered that the KivuWatt project would make use of the same technology as the defender's earlier project, involving KP1. In particular, the barge shown in the photograph was KP1's barge. (Of course, it is not clear that this was the barge that was to be used by the pursuer, but the article does indicate some sort of connection between the KP1 pilot project and the KivuWatt project). Secondly, in April 2006 a Report on Lake Stability was produced by an expert committee for the benefit of those lending to the defender's methane extraction project. This states (at page 16) that the gas extraction project was based on a 40-year-old idea from a brewery of using a bubbling pipe for extracting water from the lake. The report continues "But the key gas processing concept was developed by Dane Associates Limited". It then goes on to state that a pilot plant would be installed and tested during 2006 and, if feasible, would be converted into a production platform. Thereafter the plan was to continue installing new gas extraction plants offshore and associated power generation facilities onshore as the demand for power developed. There followed a description of the consequences of the extraction technology developed by Dane Associates. That seems a clear indication that the defender did develop technology for the purposes of the project, with consequential intellectual property rights.

[5] Thirdly, reference was made to a Technical Evaluation Report, dated April 2006, produced by COWI, a Danish firm of engineers; this related to the project put forward by the defender through KP1. Fourthly, a letter dated 14 October 2005 from IFC, a subsidiary of Standard Bank, to the defender referred (at paragraph 9) to environmental assessments that had been carried out for the purposes of the defender's project. I was informed by counsel for the defender that environmental assessments were fundamental to the development of their project, and would be relevant to any gas extraction project. Fifthly, on 6 May 2010 the Rwandan Ministry of Infrastructure issued a Request for Proposals for a methane gas concession tender. This related to the further development of the methane reserves in Lake Kivu. It indicated in the section headed Initial Briefing Memorandum, that the Government of Rwanda had financed the design and construction of a pilot plant gas extraction and power generation facility, that an independent monitoring group had been recruited to evaluate the activities in Lake Kivu in order to assure that the lake's stability, and that a Danish company, COWI, had been retained to support the final design and implementation of the project. I was informed by counsel for the defender that the pilot plant had been constructed by KP1, and that the independent monitoring group and COWI were those that had been involved in the defender's project, carried out through KP1. On this basis, counsel submitted, the defender was justified in believing that technology that it had developed was being used in subsequent projects for the extraction of methane from Lake Kivu, including the pursuer's project. The Initial Briefing Memorandum in fact went on to refer to the pursuer's project. On the basis of the whole of the foregoing information, counsel for the defender submitted that the defender was justified in believing that subsequent methane extraction projects infringed its contractual rights, through KP1, with the Rwandan government and infringed its intellectual property rights.

[6] On 23 March 2011 an Israeli firm of lawyers, Gideon Fisher & Co, acting in behalf of the defender, wrote to FMO in connection with methane extraction at Lake Kivu; so far as material, the letter was in the following terms:

"Re: Warning notice to desist from involvement in

Methane Gas Projects in Lake Kivu, Rwanda

At the request of our client, Dane Associates Ltd. ("Dane"), we write to you in the following connection:

1. Our client was surprised to learn recently of your Bank's involvement in the KivuWatt Project, given the unresolved disputes between the Government of Rwanda and our client, and the possible impact of these disputes on the KivuWatt Project. Dane has asked us to point out that KivuWatt and its parent company in New York, Contour Global, were put on notice some 2 years ago as to the existence of these disputes and their nature....

2. As you are no doubt aware, Dane entered into a set of exclusive contracts with the Government of Rwanda and a long-term, commercial relationship, interaction, mutual engagement and collaboration concerning professional work and projects in Lake Kivu, Rwanda. These projects include the extraction and exploitation of gas from the lake; transportation and usage of the extracted gas for the purpose of electricity generation; and operation and maintenance of the gas production facilities and power stations (hereinafter collectively: "the Dane Project").

3. The Government, by its various acts and omissions, committed several fundamental breaches of the contract signed with our client, including its arbitrary and unlawful termination of the contracts and of the Dane Project.

4. Since summarily ejecting our client from the Dane Project and effectively expropriating our client's rights without compensation, the Government has continued to violate its contractual and other obligations by making illicit use of patented technology developed by and on behalf of the Dane in connection with the Dane Project. Our clients have reason to believe that this patented technology, in whole or in part, is being used in the development of the Kivu Watt Project, in which your Bank is currently one of the principal lenders.

5. We attach for your attention... a copy of a newspaper article that appeared recently in the New Times, an English-language newspaper published in Rwanda, in connection with the KivuWatt Methane Gas Project.

6. We have noted from the attached newspaper article that the KivuWatt Project is based on the KP1 Pilot Plant. This Pilot Plant was designed and built by Dane, acting through [KP1], the Rwandan Project Company... owned 70% by Dane and 30% by the Government. Dane continues to be the beneficial owner of 70% of the equity share capital of KP1.

7. In recent months, the Government has been attempting to sell the Pilot Plant to third parties, despite its lack of any legal right to do so. Our client reserves its rights to take such legal action as may be deemed necessary against any third parties involved in the expropriation of its property and other rights.

8. You will recall that he Pilot Plant was initially financed by funds provided by FMO in December 2005. Following the unilateral and unlawful termination of the Dane Project by the Government, and the failure of the terms of the Grant Agreement with your bank to materialize, your Bank submitted a demand to the project company, KP1, to repay the amount of the Grant....

9. The aforementioned breaches of contract by the Government, our client's unlawful expulsion from the Dane Project and expropriation of our client's property, are now the subject of major litigation between the parties.

10. After a long and fruitless attempts at reaching an amicable settlement of disputes, we recently filed on behalf of our client a detailed Request for Arbitration with the International Court of Arbitration attached to the International Chamber of Commerce as in Paris, in accordance with the arbitration agreement signed by the Government with our client....

11. Within the aforementioned proceedings, our client challenges the Government's rights in the Dane Project and, inter alia, the Government's rights to enter into any agreement relating to the Project with any other entity, and the matters referred to in this letter will form part of these proceedings.

12. In light of the above, you are respectfully advised to consider your further participation in the KivuWatt Project, as well as in any other Lake Kivu Methane Gas Extraction Projects, or in any other project for investment connected directly or indirectly with KP1 or with any of its assets, so long as the disputes concerning the Dane Project remain unresolved.

13. We hereby notify you that our client reserves its right to initiate legal proceedings against any third party whose acts or omissions contribute to the encroachment of our client's rights in the Dane Project and/or increase our client's damages resulting from the illegitimate alienation of its property.

14. You are respectfully requested to bring this letter to the urgent attention of your Bank's board of directors and credit committee, as well as such other organs of the bank as may be relevant in light of the seriousness of the situation outlined above.

15. Nothing stated in this letter, or not stated herein, shall prevent our client from raising any additional or different claims and/or arguments, and all our client's rights are hereby reserved".

The pursuer further avers that Gideon Fisher had previously written to the African Development Bank (referred to as "ADB"), apparently about the pursuer's project.

[7] The pursuer was informed by FMO about the letter, and immediately thereafter proceedings were raised for interdict and interim interdict. The interdict sought is in the following terms:

"For interdict against the defender, directly or indirectly, and whether through agents, employees or others, from representing, other than in proceedings pending before any court or tribunal, (i) that it is entitled to oust the pursuer from its participation with the Government of Rwanda and Electrogaz in the project for the development and operation of a power plant and a gas production plant at Lake Kivu, Rwanda, or (ii) that the pursuer and those who may assist it financially with that project have committed or participated in, or will commit or participate in, a legal wrong against the defender, and for such interdict ad interim".

The averments in the summons are summarized above. The pursuer states that, objectively read, the letter amounted (a) to a claim that the defender enjoyed proprietary rights in, or the exploitation of which was necessary for the completion of the pursuer's project at Lake Kivu, which rights the defender intended to vindicate; (b) to a claim that the Government of Rwanda had no right to enter into the arrangements concerning the pursuer's project that it had entered into with the pursuer; and (c) to a threat that the defender would sue the pursuer and/or FMO, relying on the foregoing rights, if the pursuer were to continue with its project with the financial assistance of FMO.

[8] Two grounds of action are relied on by the pursuer. First, it is averred that the letters sent on behalf of the defender to FMO and ADB represented an attempt by the defender to cause loss to the pursuer by unlawful means. In sending the letters the defender intended to influence FMO and ADB to cause economic harm to the pursuer by withdrawing from their respective negotiations and agreement in principle to advance funds to the pursuer to enable it satisfactorily and thus profitably to carry out the pursuer's project at Lake Kivu. The means by which the defender intended to influence FMO and ADB was, it is averred, by misrepresenting to those parties the basis of the defender's claims against the Government of Rwanda in such a way as to suggest that the defender was entitled, and intended, to oust the pursuer from its participation in the project at Lake Kivu. The defender further intended to suggest that it would raise legal action against the pursuer and those assisting it financially with the project, on the basis that those providing such assistance had committed or participated in a legal wrong against the defender. All of that occurred, it is said, when the defender in fact knew that it had no such entitlement and no such intention, and no proper basis for any such action.

[9] Secondly, the pursuer avers that the letters sent on behalf of the defender to FMO and ADB represented an attempt verbally to injure the pursuer. The relevant correspondence contained misrepresentations as to the defender's rights and intentions, namely those set out in relation to the case based on causing loss by unlawful means. Those misrepresentations, it is said, were made maliciously, in the sense that they were made on behalf of the defender without belief on its part in their truth, and with the intention of pecuniarily injuring the pursuer by causing the withdrawal of prospective funders from its project. They were calculated to have that effect.

[10] The pursuer obtained interim interdict on an ex parte basis, and the defender subsequently enrolled a motion for recall of that interdict. On behalf of the defender it was submitted first that the pursuer had not made out a prima facie case and, secondly, that in any event the balance of convenience favoured recall of the interdict. I will deal with each of these matters in turn. Before that, however, it is appropriate to make certain comments on the letter sent by the defender to FMO and ADB and its relationship to the conclusions of the summons.

[11] The letter relates to what is described as "the Dane Project". This is defined in clause 2 of the letter as referring to a set of exclusive contracts entered into by the defender and the Government of Rwanda and a long-term commercial relationship concerning professional work on projects in Lake Kivu. These are said to involve the extraction and the exploitation of gas from the lake, the use of the gas for the generation of electricity, and operation and maintenance of the gas production facilities and power stations. It is accordingly clear that the subject matter of the letter is the contractual relationship that the defender entered into with the Rwandan government. It is not claimed that the defender has any monopoly on gas extraction from the lake, or that the defender can do anything more than enforce its rights under its own contracts and intellectual property. It is then alleged, in clause 3, that the government had committed a number of fundamental breaches of the contract with the defender, including the termination of the Dane Project. In clause 4 it is stated that the government had effectively expropriated the defender's rights without compensation and had made illicit use of patented technology developed by the defender in connection with the Dane Project; the defender had reason to believe that the patented technology was being used in the KivuWatt Project. It is thus apparent that the defender's concern was to assert the contractual and intellectual property rights that it claimed to have through its involvement in the Dane Project.

[12] In clause 7 of the letter it is stated that the Rwandan government had been attempting to sell the Pilot Plant designed and built by the defender to third parties, despite its lack of any legal right to do so. That too amounts to an assertion that the defender has rights in the Pilot Plant which it intends to assert. In clauses 10 and 11 reference is made to the request for arbitration with the ICA, but it is pointed out that these proceedings are designed to challenge the Rwandan government's rights in the Dane Project and its rights to enter into any agreement relating to "the Project" with any other entity. The reference to "the Project" in clause 11 must, I think, refer to the Dane Project; that is the "Project" that is expressly referred to earlier in clause 11, and the letter as a whole indicates that it is the defender's intention to challenge the government's dealings in relation to the Dane Project. Indeed, as a matter of common sense, it is obvious that the defender would not have any right to mount a challenge against the government of Rwanda except on the basis of the contractual and proprietary rights that arose out of the Dane Project. Consequently I am of opinion that clause 11 cannot be construed as containing any threat to challenge the right of the government of Rwanda to enter into the KivuWatt Project except to the extent that it might infringe rights arising under the Dane Project.

[13] Clause 12 advises the recipient to consider further participation in the KivuWatt Project or any other methane gas extraction project in Lake Kivu so long as the disputes concerning the Dane Project remained unresolved. This is backed up by the threat in clause 13, that the defender reserved its right to initiate legal proceedings against any third party whose acts or omissions contributed to the encroachment of its rights in the Dane Project. When the letter is considered as a whole, to the extent that action is threatened it can be said that the defender indicated its intention to claim its contractual and proprietary rights in the Dane Project.

[14] The interdict sought is against the defender's representing, other than in proceedings before a court or tribunal, first that it is entitled to oust the pursuer from its participation in the KivuWatt Project and secondly that the pursuer and those providing the pursuer with financial assistance will commit a legal wrong against the defender. The interdict is thus directed towards representations concerning the KivuWatt project. It follows that the fundamental premise underlying the action is that the defender's representations regarding its rights in the Dane Project amount to misrepresentations or threats in relation to the KivuWatt Project. It seems to me to be reasonably clear that certain of the statements made in the letter do have a bearing on the KivuWatt Project. In particular, paragraph 4 indicated a belief that the defender's patented technology was being used in the development of the KivuWatt Project, and paragraphs 6 and 7 referred to the KP1 Pilot Plant, built by the defender and KP1 for the purposes of the Dane Project. Paragraph 12 advised the recipient of the letter to consider further participation in the KivuWatt Project as long as the defender's disputes concerning the Dane Project remain unresolved. Nevertheless, all of those statements are aimed at protecting the defender's rights arising out of the Dane Project, whether such rights are contractual or relate to the defender's interest in KP1 or are based on intellectual property. In my opinion the fundamental problem confronting the pursuer's claim for interdict is that all that the defender is doing is pointing out first that it has unresolved claims arising out of the Dane Project and secondly that it reserves the right to make appropriate claims against any person who infringes its existing legal rights. Provided that those assertions are made in good faith, I consider that they cannot be said either to amount to a misrepresentation intended to cause loss to the pursuer by unlawful means or to an attempt to injure the pursuer verbally.

Prima facie case

[15] The first ground of action is described in the pleadings as an attempt by the defender to cause loss to the pursuer by unlawful means. The requirements of this delict are discussed at length in OBG Ltd v Allan, [2008] 1 AC 1, at paragraphs [45]-[63]. It has its origins in the delict, or tort, of intimidation: paragraphs [6]-[8]. The critical question is what should count as unlawful means. Its rationale was described by Lord Lindley in Quinn v Leathem, [1901] AC 495, at 534-535, as follows:

"[A] person's liberty or right to deal with others is nugatory, unless they are at liberty to deal with him if they choose to do so. Any interference with their liberty to deal with him affects him. If such interference is justifiable in point of law, he has no redress. Again, if such interference is wrongful, the only person who can sue in respect of it is, as a rule, the person immediately affected by it; another who suffers by it has usually no redress; the damage to him is too remote, and it would be obviously practically impossible and highly inconvenient to give legal redress to all who suffer from such wrongs. But if the interference is wrongful and is intended to damage a third person, and he is damaged in fact -- in other words, if he is wrongfully and intentionally struck at through others, and is thereby damnified -- the whole aspect of the case is changed: the wrong done to others reaches him, his rights are infringed although indirectly, and damage to him is not remote or unforeseen, but is the direct consequence of what has been done".

In OBG Ltd v Allan Lord Hoffmann concluded on the basis of that passage that the essence of the delict was "(a) a wrongful interference with the actions of a third party in which the claimant has an economic interest and (b) an intention thereby to cause loss to the claimant" (paragraph [47]). Acts against the third party count as unlawful means only if they are actionable by that third party, unless the only reason that they are not actionable is because the third party has suffered no loss.: ibid at [49]. The intention of the supposed wrongdoer must be to cause loss: ibid at [62]. An intention to cause loss can exist even though the ultimate end is to enrich the supposed wrongdoer, but the wrongdoer is not liable for loss which is neither a desired end nor a means of attaining it but merely a foreseeable consequence of his actions: ibid.

[16] Counsel for the pursuer submitted that the foregoing requirements were satisfied. The letter contained a misrepresentation of the defender's legal rights, made to potential lenders to the KivuWatt Project. That amounted to unlawful means, in the form of dolus. It was not necessary that any loss should be suffered by FMO; it was enough that FMO would have a cause of action if it did suffer a loss. That requirement, it was submitted, was satisfied. The pursuer had an economic interest in the lenders, in that it hoped to obtain funds from them for the Project. The intention to cause loss to the claimant, the pursuer, must be the end goal of the defender's activity, and that requirement too, it was submitted, was satisfied: the defender intended to cause the funders to withdraw from their negotiations with the pursuer, thereby causing loss to the pursuer. It was irrelevant that the defender's ultimate aim was not to cause loss to the pursuer but to bring pressure on the Rwandan government to complete the Dane Project.

[17] For the defender it was submitted that the statements made in the letter to FMO were accurate, or at least were made in good faith in order to preserve the defender's rights arising out of the Dane Project. The letter did not state that participation in the KivuWatt Project was a legal wrong; the only wrong that it referred to was anything that transgressed the defender's own legal rights. The defender was entitled to take steps to protect its rights, and doing so in good faith could not amount to unlawful means.

[18] The second ground of action is verbal injury. It was a matter of agreement that the essential ingredients of this delict are set out in the Stair Memorial Encyclopaedia, volume 15, at paragraph 560, in a passage based on the opinion of Lord Hunter in Argyllshire Weavers Ltd v A Macaulay (Tweeds) Ltd, 1965 SLT 21. First, the disparaging remarks must be false. Secondly, they must be made with intent to cause loss to the pursuer; an alternative formulation is that the false assertion was made maliciously. Malice is not presumed. Thirdly, the remarks must have caused the pursuer loss, and it is not sufficient to establish merely that they are capable of causing loss. In this connection, section 3 of the Defamation Act 1952 provides that it is not necessary for the pursuer to aver and prove special damage if the words on which the action is founded are calculated to cause pecuniary damage to the pursuer.

[19] Counsel for the pursuer accepted that if the statements made by the defender were not false there could be no action based on verbal injury, and indeed no action based on causing loss by unlawful means. He submitted, however, that the letter sent by Gideon Fisher & Co on behalf of the defender on 23 March 2011 can be read as containing false statements. For the defender, counsel submitted that there was no false statement, because the allegations made in the letter related to the Dane Project and were accurate in what they said about that project and the defender's intention to assert its rights arising out of the project. Counsel further submitted that the requirement of malice was not satisfied; the letter was sent to protect the defender's interest in the Dane Project, and not with a view to causing loss to the pursuer.

[20] The pursuer's case is that the statements made by the defender in the letter of 23 March 2011 are untrue. For the most part, however, those statements relate to the claims that the defender has following the termination of the Dane Project. Those claims are subject to arbitration, and until the conclusion of the proceedings before the ICA it is impossible to reach any definitive view on the validity of the claims. For this reason, in applying the tests applicable to the delict of causing loss by unlawful means and verbal injury in the present circumstances, I am of opinion that the critical question is not so much whether the defender's allegations made in the letter are true or not but rather whether they are made in good faith. If a person has raised judicial or arbitral proceedings, he must in my view be entitled to inform third parties who may be affected by those proceedings about them. In some cases this may involve the threat of further proceedings against that third party. I can see nothing objectionable in such a course provided that the allegations are made in good faith; that is to say, the person making the allegations must believe that there is a reasonable case to be made. Thus the critical question is in my view whether the statements made by the defender in the letter of 23 March were made in good faith.

[21] At the present stage it does not appear possible to reach any final conclusion on this matter; that would require the leading and assessment of evidence about the precise relationship between the defender's Dane Project and the pursuer's KivuWatt project. Nevertheless, certain important matters do appear reasonably clear. In the first place, the critical letter is plainly designed to assert the defender's rights arising out of the Dane Project. In my opinion it only threatens the KivuWatt project to the extent that there is any infringement of the contractual or intellectual property rights enjoyed by the defender, or conceivably KP1, as a result of the development of the Dane Project. In the second place, the defender has some basis for believing that the rights that it acquired, directly or indirectly, in the Dane Project are being used for the purposes of other gas extraction projects at Lake Kivu; the documentation summarized in paragraphs [4] and [5] above appears to me to point to such a conclusion. In the third place, the defender has raised proceedings against the government of Rwanda for infringement of its legal rights arising under the Dane Project. If those proceedings are well founded, obtaining adequate redress might involve a remedy against other parties who have benefited from the defender's work on the Dane Project.

[22] The foregoing considerations tend to favour the defender's position. Against that, it can be said that the letter of 23 March 2011 is designed to deter investors from taking part in the KivuWatt project; that is clear from the heading to the letter and from the clear warnings in paragraphs 12-14. From those features it might be inferred that the purpose of the letter was merely to make threats in order to deter investors, in the hope that this would persuade the Rwandan government to reach some sort of settlement with the defender. If that were established, it might be difficult to hold that the defender was in good faith.

[23] In the foregoing circumstances, I am of opinion that it is impossible to hold conclusively at this stage that the statements in the letter of 23 March 2011 were made in good faith, although a number of important factors do point in that direction. Because of this, I must conclude that the pursuer has made out a prima facie case, although I should record that it does not appear to me to be especially strong in all the circumstances described above.

Balance of convenience

[24] It is accordingly necessary to consider the balance of convenience. In this respect, three factors are in my opinion critical. In the first place, the pursuer's case does not appear particularly strong, in view of the factors that tend to suggest that the defender was in good faith in instructing the letter of 23 March 2011. In the second place, decisively, I am of opinion that the validity and strength of the defender's contentions can readily be tested in the course of any due diligence exercise performed by potential investors. The defender's letter was sent to major investment banks, and it is plainly inconceivable that they would commit large sums of money to a project without a thorough investigation, including consideration of the processes that were to be used and the entitlement of those carrying out the project to such matters as the necessary intellectual property rights. In the present case, the documentation made it clear that when the Dane Project was proceeding very elaborate investigations were carried out on the behalf of investors, and it is impossible to believe that similar investigations would not be made by those considering an investment in the KivuWatt Project. Investigations of that nature would reveal whether the pursuer was entitled to use the processes involved, and whether there were any other claims that might affect the project.

[25] In the third place, counsel for the pursuer submitted that the letter was calculated to produce serious harm to the KivuWatt Project. The pursuer had invested $25,000,000 in the project, and was about to double that sum. Without further investment from banks, it would not be able to complete the project. That may well be correct, but if the pursuer has evidence that the KivuWatt Project does not infringe the defender's rights in the Dane Project, including the defender's intellectual property rights, I think it was unlikely that an investor would be deterred. If, for example, it can be established that the technology used by the pursuer has been the subject of independent development, I think it was unlikely that any serious investor would be deterred by the allegations on the subject that are made in the letter. Thus it is within the pursuer's power to refute the allegations in the letter if it has the evidence to do so. It must also be borne in mind that the defender has an interest in protecting its own rights, and in my view the letter of 23 March 2011 is calculated to achieve that end.

[26] In the foregoing circumstances I am of opinion that the balance of convenience favours the defender. I have accordingly recalled the interim interdict.