Shetty v Al Rushaid Petroleum Investment Company & Ors

In this action, the claimant Mr Shekhar Shetty, claims for sums alleged to be owing to him and for compensation following the termination of his employment with the first defendant, Al Rushaid Petroleum Investment Company (“ARPIC”), a Saudi company, and the second defendant Cleveland Bridge Dorman Long Engineering Limited (“CB”), a Jersey company. Mr Shetty also claimed damages for false imprisonment arising out of his alleged detention against his will at the London offices of CB on 30 September 2009. Following cross-examination, this false imprisonment claim was abandoned. I refer to all these claims together as “the employment claims”.

By counterclaim and additional claim, the defendants, who for this purpose include the third defendant Al Rushaid Parker Drilling Limited (“ARPD”), another Saudi company, make a claim against Mr Shetty and the third and fourth parties, Mr Caplis and Dr Wight. ARPD was formed to carry out a joint venture project between the Al Rushaid Group (of which ARPIC, CB and ARPD are all members) (“the Group”) and Parker Drilling LLC, a Delaware company, (“PD”). Mr Caplis and Dr Wight were involved in the joint venture, although their status within the Group is the subject of dispute. The defendants’ claim is based on the taking of alleged secret commissions on supplies to ARPD by Mr Shetty, Mr Caplis and Dr Wight via a company called TSJ Engineering Consulting Limited (“TSJ”). TSJ was incorporated by Mr Shetty, Mr Caplis and Dr Wight in the British Virgin Islands. These commissions were allegedly paid to TSJ by suppliers of drilling rigs and associated equipment to ARPD (“the suppliers”), and subsequently shared between Mr Shetty, Mr Caplis and Dr Wight. The defendants say that these commissions were secretly made and taken by these three men, in breach of duties which they owed to the defendants under Saudi law. Accordingly, the defendants say that Mr Shetty, Mr Caplis and Dr Wight are liable to them for these wrongful acts. In addition they say that they were justified in terminating Mr Shetty’s employment summarily, thus defeating the employment claims. There is also a Saudi law claim that all three participated in the taking of the commissions relying on the Saudi doctrine of ishtirak.

Messrs Shetty, Caplis and Wight take issue with the defendants’ case in several ways. Mr Caplis and Dr Wight deny that the sums received by TSJ were in respect of commissions, and maintain that they were for genuine work undertaken by TSJ for the suppliers. Mr Shetty’s position is that he does not know the details of what the payments were for, but does not admit that they were commissions on supplies to ARPD. There are also issues concerning the status of Messrs Shetty, Caplis and Wight in relation to the Group, and the content of any duties owed by each of them to companies in the Group under Saudi law. Messrs Shetty, Caplis and Wight also allege that their activities, or some of them, were consented to by the Group.

Mr Justin Fenwick QC and Mr Graham Chapman presented the case for the defendants. Mr Charles Samek QC did so for Mr Shetty. In the midst of all this legal firepower, Mr Caplis and Dr Wight were representing themselves, although Mr Samek did what he could to assist them where their interests coincided with Mr Shetty’s. I have had to bear in mind that there was an inequality of arms, and have done my best to allow for this.

All the defendants are members of the Group. The Group is not a legal entity, but consists of a large number of legal entities of various descriptions throughout the world, all of which are under the control and ultimate ownership of Sheikh Abdullah Al-Rushaid (“Sheikh Abdullah” or “the Sheikh”). The group was founded in Saudi Arabia in 1978, and is now an important provider of equipment and services to the onshore and offshore oil industry in Saudi Arabia. The Group commonly carries on its business through joint ventures with non-Saudi companies. Sheikh Abdullah’s son, Rasheed Al-Rushaid (“Rasheed”) is also involved to some extent in the running of the Group’s affairs.

Al Rushaid Investment Company became Al-Rushaid Petroleum Investment Company by a change of name. For clarity I will refer to this company as ARPIC even in respect of the period before the change of name. ARPIC was the holding company of the Group. Mr Shetty described it as “the Group company”.

ARPD was formed in November 2005 as a vehicle for pursuing a joint venture for the supply of oil drilling equipment and services to Saudi Aramco, the national oil company of Saudi Arabia. The joint venture partner was PD, which is a provider of drilling services to the energy industry. At the outset, the shares in ARPD were held as to 50% by a company in the Group and as to the other 50% by PD. In March 2008, entities within the Group purchased PD’s shares in ARPD, so that thereafter ARPD was wholly owned by the Group. There are disputes both as to the type of Saudi company which ARPD is, and as to who are its directors or, to use the Saudi law term, mudirs.

Al Rushaid Trading Company (“ARTC”) is another company in the Group. It is not a party to the action. It is the trading arm of the Group, distinguished from the holding function of ARPIC and the joint venture companies such as ARPD.

I heard oral evidence first of all from Mr Shetty. I explain below why I am not able to accept all of Mr Shetty’s evidence.

The defendants then called their evidence. Their witnesses were Mohamed Haek, Islam Elgamri, Gerold Ibler, Dariusz Kozlowski and Rasheed.

Mohamed Haek is Vice President of Oilfield Services of ARTC. Mr Haek was the Group’s front man in its dealings with Saudi Aramco. However he was not directly concerned in contracts made by ARPD with companies other than Saudi Aramco. In particular the award of contracts to suppliers was not his responsibility. Mr Elgamri is Vice President of Finance of ARPIC, having risen to that post from internal auditor in 1991. He gave evidence about payments to suppliers for ARPD and summarised the payments made to Messrs Shetty, Caplis and Wight. Mr Ibler is the Chief Financial Officer of ARPIC, having been appointed to that position in September 2009 after Mr Shetty’s employment with the Group was terminated. He was introduced to the Group by Mr Kozlowski.

A point made by each of Messrs Shetty, Caplis and Wight was that the Sheikh was not called as a witness, although it was common ground that the Sheikh was the ultimate authority within the Group, and that a specific claim to authorisation of the activities complained of was part of their defence. This is a significant point, which I will have to bear in mind throughout, but in particular in connection with the issue of authorisation.

Mr Caplis and Dr Wight also gave evidence in their defence. I shall explain below why I have not been able to accept the majority of the evidence of either witness.

Both Mr Shetty and the defendants called expert evidence of Saudi law. Mr Shetty called Mr Andreas Haberbeck. Mr Haberbeck is an English barrister and solicitor. From 1983 to 1986 he was seconded by Clifford Chance to Omar Farouk Msallati Law Office, its associate firm in Saudi Arabia. After a period working for a London firm, in 1991 he joined the Law Office of Dr Mujahid M. Al-Sawwaf of Jeddah. In August 1993 he joined Abbas F. Ghazzawi Law Firm of Jeddah. He has published extensively, amongst other things, on Saudi Arabian maritime and insurance law. He has extensive practical experience of advising clients on commercial matters in Saudi Arabia.

The defendants called Professor Frank Vogel. Professor Vogel is an independent scholar and legal consultant in Islamic law, based in the United States. He has given evidence on Islamic law in a large number of contentious cases in various parts of the world. From July 2012 he has been conducting a four year study, initiated by royal order, of the commercial legal rules and statutes applied in the courts and judicial committees of Saudi Arabia. He has published textbooks and other materials on Islamic law, some of which were put to him in cross-examination. Mr Samek was critical of some of Professor Vogel’s evidence, for example his failure to make clear the essential components of ishtirak in his written evidence. I thought there was some force in Mr Samek’s criticisms of Professor Vogel. However the issues of Saudi law that remain in the case are very limited, and I am able to resolve the case, for the most part, on the basis of propositions of Saudi law with which both experts were in agreement.

It is convenient to tackle the issues in this case by considering Mr Shetty’s role in the Group and the issues surrounding the termination of his employment. Mr Shetty was first employed within the Group in 1982, initially as internal auditor. He was employed by ARPIC. In 1985 he was appointed Group Financial Controller. In 1991 he was appointed Group Treasurer, in charge of all the group’s financial and accounting functions. In 1994 he was appointed Vice President, Finance for the Group. In 2000 he was appointed the Chief Financial officer of ARPIC. He remained in this position until September 2009 when his employment was terminated in circumstances which I explain further below.

Mr Shetty’s employment was rewarded with successive salary increases and with bonuses. For example he was paid a bonus of 100,000 Saudi Reals (“SR”) in 1995 and 1996. In May 1996, contemporaneously with his appointment as Vice President, Investments, he was told that he was granted a bonus of 1% of the profit of ARPIC) excluding the Engineering and Contracting Division. In subsequent years this bonus amounted to some 200,000 SR.

In 2002 it was agreed that Mr Shetty would start work for the Cleveland Group of Companies, the parent company of CB. This meant he would split his time between London and Saudi Arabia, spending more time in the former than the latter. Because of the difference in weekends between the two countries, he worked a seven day week, spending two or three days in Saudi Arabia and four or five in London.

Mr Shetty’s agreement with the Cleveland Group stated that he would act as Director of CB “with those powers and duties commensurate with a director”.

In April 2002 Mr Shetty’s employment with ARPIC was terminated with a final termination payment of 912,713 SR. He was, however immediately re-employed by that company on different terms.

Initially, in the period post 2002, there was no agreement that Mr Shetty would be paid a bonus by ARPIC. However he says, and I accept, that there came a time when it was verbally agreed that he would be paid a bonus by Sheikh Abdullah. He was to be paid a lump sum if the business plan was met. It is clear that for the years 2003 to 2005 he was paid a bonus by ARPIC in round lump sums. Mr Shetty’s evidence about how much he was paid in bonuses was not consistent, but in the end he accepted that a document from the Group’s records showed he was paid, in SR, 150,000 in 2004, 375,000 in 2005 and 400,000 in each of 2006, 2007 and 2008.

In June 2008 Mr Shetty was promoted to Executive Vice President and Chief financial officer of the Group. He was to spend, as a result, more time in the Middle East.

There is no doubt that in the period 2005 to 2008 Mr Shetty was in a position of enormous power and responsibility within the Group. He knew the Sheikh well and was the Sheikh’s most trusted advisor - effectively his right hand man. It was clear to me from the documentary and other evidence, and from seeing Mr Shetty in the witness box, that he had a very close grip on everything which was going on in the Group. That is not to say that he had executive responsibility for every decision. However his position within the Group, his close relationship with the Sheikh and his comprehensive knowledge of the worldwide activities of the Group placed him in a unique position to influence and shape the decision making process. As one witness put it in response to my question:

“Q. … are you saying [Mr Shetty] had overall responsibility or were you saying he was simply involved in the decision-making process?

A. My Lord he was [neither]. He was not responsible because the responsibility would be Mr Rasheed or Sheikh Abdullah and he was not just taking part in discussion and I think everybody in Al-Rushaid group knows that during Mr Shetty’s employment, if he was convinced of something, he would find a way to convince the family to do it, so it is not one or the other…”.

Mr Shetty also accepted that, because of his position within the Group, if he saw something which might affect the financial position of the Group and its profitability, he considered it was his duty to do something about it.

In March 2005 it is clear that the relationship between Mr Shetty and Sheikh Abdullah had become strained. Mr Shetty wrote a lengthy letter to the Sheikh dated March 29 2005 in which he complained, in summary, that he had not been adequately rewarded for his efforts for the Group. He asked that the Group should recognise his contributions by paying him percentages on various projects and investments. A subsequent letter dated June 2 2005 was in a similar, combative tone. It contained, however, an offer by Mr Shetty to walk away from the Group if the Sheikh was tired of him.

It is clear that around this time Mr Shetty was looking for alternative employment outside the Group. These attempts to obtain other employment were continuing in the middle of 2006. However in January 2007 the Sheikh made Mr Shetty a number of promises of contingent remuneration in connection with the sale of a group company called Whessoe. These promises appear to have appeased Mr Shetty, and his attempts to leave the Group ceased at around this time. By this time, however, the activities of TSJ had been under way for some time. They were commenced, as I shall explain, at a time when Mr Shetty was not satisfied with his position in the Group, the degree of recognition he was receiving and his remuneration.

On the evening of Friday 11 September 2009 Rasheed telephoned Mr Shetty at home in Saudi Arabia and told him, in effect, that his employment with Al-Rushaid was at an end, but that the Group wanted him to continue to work with Cleveland Bridge. He was asked to come to the office in Saudi Arabia on Sunday 13^th September, which he duly did. He found that his office had been disturbed and his computer disconnected. Mr Shetty said, both on the telephone on Friday and at the subsequent meeting on Sunday, that he did not consider that it was tenable for him to continue to work for CB. On 15^th September he was handed a letter signed by the Sheikh informing him that his employment with ARPIC was at an end. On the following day he wrote to Issam El Gambri saying that he had resigned from CB and all directorships of CB.

On 26 September Mr Shetty signed, on ARPIC headed paper, a document entitled Final Settlement Statement. This was in respect of the period of over seven years’ service since the previous settlement. The document records the current terms of Mr Shetty’s employment, and says that he receives a “monthly bonus” of 33,333 SR, which represents an annual payment of 400,000 SR. In the calculation of the final payment, there is an entry for “bonus” against which a zero is recorded. The calculation contained sums in respect of “salary”, “notice pay” and “termination award” in a total of 615,968 SR. The document bears Mr Shetty’s signature, but no signature on behalf of ARPIC. Above Mr Shetty’s signature are the words:

“I hereby confirm that I have received all my salaries, holiday pay and termination award in full and final settlement of all my dues from Al Rushaid Invistment (sic) Company, and I have no claim whatever against the Company or any other individuals or Associated Co.”

There is a dispute as to the meaning of these words, which for convenience I will call “the release”. In addition, Mr Shetty says that he added in manuscript words to the effect that, notwithstanding the release, he was entitled to a bonus (“the bonus reservation”). There are factual issues (to which I will have to return) as to whether Mr Shetty was entitled to any bonus payment, whether it is true that he added the bonus reservation and, if it is not true, whether the release has the effect of extinguishing his claim to any bonus.

Having signed this document, Mr Shetty came to London on the night of 26/27 September. He met Rasheed and Dr Gerold Ibler, the new Chief Financial Officer, at the London office of CB on Sunday 27 September. He found his office had been disturbed, just as his office in Saudi Arabia had been. On Monday 28 September Mr Shetty met with Dr Ibler and Rasheed and with the managing director of Whessoe, Jon Dale. Mr Shetty went again to the office on Tuesday 29 September where he was told that on the following day, September 30, he should spend time with Dr Ibler. On the morning of September 30 Mr Shetty was telephoned by Dr Ibler at 9.30 and asked if he could come at 10.00 instead of the previously arranged 10.30.

Mr Shetty’s account in his witness statement of the meeting on September 30 was as follows. When he came to the London office there was a large and powerful gentleman, later discovered to be Mr Wayne Black, waiting outside the first floor internal door. When he left the elevator he was ushered through that door. He asked where everyone was and was told that they had been sent home so that the meeting could take place. He was ushered into a conference room where there was another man, who he learned was Mr Richey, a US attorney. They produced a letter at that point from Dr Ibler which said that he was introducing these gentlemen “by this letter and in person”. The letter asked Mr Shetty to co-operate fully with the two men.

It is at this meeting that Mr Shetty initially maintained in the account given in the pleadings that he had been falsely imprisoned. Mr Shetty’s account was that he was locked into this conference room and did not have the key. That version of events subsequently changed, when it appeared that the conference room did not have a lock. He then maintained that it was the internal door to the office, through which one would have to pass on leaving the elevator, which was locked and to which he did not have a key. But he accepted in cross-examination that he probably did have the key, because it was on his key ring which he must have had with him, not least to lock his own house when leaving.

This meeting has become the focal point of a variety of factual disputes. Dr Ibler says that he was present for the start of the meeting, whereas Mr Shetty says he was not. Dr Ibler says that Mr Kozlowski, was there, whereas Mr Shetty says he was not. Various Al-Rushaid witnesses say that by the date of this meeting they had already uncovered evidence of the wrongdoing which is complained of in this action, such as the setting up of the corporate vehicle TSJ and its consultancy agreement with Shandong Kerui, whereas it was suggested to them that this was not discovered until some time later.

Despite the fact that the false imprisonment claim has been abandoned, it is necessary to dwell a little further on the account which Mr Shetty gave of the meeting. I have to say, with regret, that the account which he gave in his witness statement was, in my judgment, a false story which he invented in order to place the defendants in a bad light. Whilst the defendants’ approach to his dismissal was undoubtedly heavy-handed, there was at no time any attempt to prevent him from leaving. Moreover he was given access to a lawyer of his own as soon as he requested it. No door which would have prevented Mr Shetty from leaving, was ever locked as he claimed. Moreover there were other aspects of his account which were plainly false, as I shall explain.

Mr Shetty went on to say that in the course of the afternoon he was permitted to make a telephone call to Rasheed from his office. He says that he left Rasheed a voicemail saying that threats had been made to his (Mr Shetty’s) family and asked Rasheed how he would feel if such threats had been made to him, as he has a family too. This aspect of the account was also untrue. A recording of the voicemail survived. There was no discussion of threats to Mr Shetty’s family. Instead, the recording shows that Mr Shetty was making some form of threat of exposure against Rasheed and the Group. I reject Mr Shetty’s evidence that his family was threatened if he did not co-operate. This, too, was invented to place the defendants in a bad light.

These matters reflect badly on the totality of the evidence which Mr Shetty gave, and his reliability as a witness. It has led me to disbelieve other surprising aspects of his evidence where they are not corroborated by other, more reliable evidence.

I should mention only two further aspects of the evidence in relation to this meeting. I reject Mr Shetty’s case that Dr Ibler and Mr Kozlowski were not present, as they claimed they were. It is plain that it was intended that Dr Ibler should be there. His presence is consistent with the contents of the letter handed to Mr Shetty (“in person”), and the fact that it was Dr Ibler who telephoned to rearrange the timing of the meeting. Moreover, and in any event, I prefer Dr Ibler’s evidence to Mr Shetty’s on this point. I also accept that Mr Kozlowski was present. Mr Samek made an attack on Mr Koszlowski’s credibility, because Mr Kozlowski failed to mention the existence of a dispute which he has (or perhaps had) with Mr Ibler over Mr Ibler’s introduction to the Group. Whilst it would have been better if Mr Kozlowski had mentioned this dispute, I did not think it detracted from the cogency of the factual evidence he gave. Although based in the US, other material showed he was in London at the material time. It is true that Mr Kozlowski’s presence was not mentioned by any witness until very late. Whatever the explanation for his late appearance in the proceedings, Mr Kozlowski was able to give detailed evidence about what happened at the meeting which I accept.

As I have mentioned, Mr Samek sought to establish that Dr Ibler and Rasheed had not been truthful about how much was known or suspected about the activities of Mr Shetty and Mr Caplis and Dr Wight in connection with TSJ at the dates of his dismissal. It is clear that Rasheed and Dr Ibler did not know the details of what had been occurring. These came to light later as the pleadings and other documents in the case make clear. The existence of TSJ was not one of the points that was put to Mr Shetty at the meeting on 30^th September. On balance I think that Dr Ibler and Rasheed were incorrect that they had discovered the significance of TSJ by 30^th September, although it was discovered very shortly after. I am satisfied that they were not deliberately seeking to mislead the court.

I have identified the various disputes surrounding the effect of the final settlement statement on Mr Shetty’s employment claims above. The first is whether Mr Shetty had a contractual entitlement to a bonus of 400,000 SR. I think Mr Shetty’s evidence, confirmed as it is by the entry against “bonus” on the final settlement statement, indicates that Mr Shetty was entitled, at least if the matter was governed by English law, to a bonus. Nobody from the Group, was called to rebut this evidence about the agreement for a bonus. I also infer that the condition that the business plan target, which was a condition of the bonus, had been met. Again, no Al Rushaid witness sought to counter Mr Shetty’s implicit assertion that it had.

I do not accept that the version of the final settlement statement which Mr Shetty signed had the words to which he refers, reserving his entitlement to a bonus, endorsed upon it. The original signed version of the document bearing his signature was produced, and has no such endorsement on it. Mr Shetty suggested that he signed another version, but I do not accept his evidence. Mr Samek suggested that there were oddities about the document, hinting obliquely that it was a forgery, but I reject those suggestions. For example he drew attention to differences between this document and earlier versions used for Mr Shetty and Mr Caplis. In my judgment the form is different from earlier versions of final settlement statements because it is not a physical pro-forma, but produced on a computer. There is nothing in any of these points.

There remains an issue as to whether Mr Shetty would be entitled to his bonus on these facts as a matter of Saudi law. The first question is whether the effect of the release is, as a matter of interpretation, to release the claim to a bonus as opposed to his claims to “salaries, holiday pay and termination award” which are specifically mentioned. In my judgment the language used in the release as a whole means that all claims connected with Mr Shetty’s employment by ARPIC are released. The sums were accepted in full and final settlement of all monies due from ARPIC, without exception. Absent the express reservation, which Mr Shetty alleged was made (but was not), the bonus claim was released.

Mr Samek submitted that there was no evidence that, under Saudi law, the effect of the release was to defeat the claim to the bonus. He relies on the principle that foreign law must be pleaded and proved by the party relying on it. The problem with this submission from Mr Shetty’s perspective is that there is equally no evidence that as a matter of Saudi law Mr Shetty’s bonus would, as a matter of Saudi law, be recoverable. It was for Mr Shetty to establish that the oral agreement to pay a bonus subject to a condition based on the business plan would be enforced by a Saudi court. In my judgment he has not done so. On the other hand if one approaches the matter from the perspective that, prima facie, contractual statements and releases or compromises are to be regarded as enforceable under Saudi law, then the right to the bonus exists, but the release ought to be treated as effective to extinguish that claim. On either approach, therefore, the claim for the bonus fails.

The release is also wide enough to cover any claim Mr Shetty might otherwise have had against CB, as CB is in my judgment an associated company of ARPIC within the terms of the release. Moreover the claim against CB fails on the independent ground that Mr Shetty resigned from CB. He was not dismissed.

I now turn to consider the position within the Group of Mr Caplis and Dr Wight.

Mr Caplis was recruited to the Group in 1999 as recorded in a letter dated 11 September 1999 following a meeting between them in Nice. The letter, on ARTC notepaper, offered Mr Caplis the position of Vice President on terms which included a basic salary of 20,000 SR per month, an annual bonus of 3% of annual pay or 1% of the profits of the Trading Company, whichever was greater. The letter also provided for accommodation to be provided in Saudi Arabia in a furnished villa, medical expenses and travel insurance and for 30 days holiday entitlement. The terms of the letter were signed as “Agreed and Accepted” by Mr Caplis. Substantially the same terms were recorded in a “New employee form”, signed by Sheikh Abdullah. The date of joining was specified as January 1 2000.

In March 2000 ARPIC issued a document signed by Sheikh Abdullah announcing senior management changes to the Group as from January 1 2000. Mr Caplis was announced as having been appointed Vice President and General Manager. He was to be “responsible for the entire Trading Company and Services”.

Between 2002 and 2005 Mr Caplis referred to himself as Vice President of ARTC both in dealings within the Group and with third parties. However, in August 2006 ARPIC issued a letter, addressed to “whomsoever it may concern”, confirming that Mr Caplis was employed under contract by ARPIC (not ARTC) and had been working for the company for 6 years and that he had an indefinite contract of employment.

On March 26 2007 Mr Caplis signed a “Final Settlement statement” recording the end of a period of service of 7 years and 3 months with ARTC. Thereafter it is common ground that he was engaged as a consultant, pursuant to a consultancy agreement dated 31^st March 2007. The consultancy agreement names the Group as one party, defining itself as a diversified group of companies. Under this agreement Mr Caplis was to be paid US$ 60,000 per year. By clause 8, Mr Caplis was not to act as principal or agent of the Group, except as provided by the agreement.

It was Mr Caplis’ case that he was at all material times a consultant, and never an employee or director. The defendants accept that he was a consultant from 31 March 2007, but maintain that he was employed before that date.

In my judgment it is plain that Mr Caplis was an employee until he became a consultant on 31^st March 2007. His relationship with the Group had all the usual incidents of employment, the salary and leave arrangements being the most notable. Given that his case was throughout that he was not an employee, Mr Caplis did not really engage with the question of which company he was employed by. However, it seems plain that he was employed by ARTC rather than any other company in the Group. It is common ground that it is not permissible under Saudi law for a foreign worker to have more than one employment. If Mr Caplis was an employee, as I have held him to be, he was an employee of ARTC.

Mr Caplis’ resignation as a director of ARPD is recorded in a Board Minute dated 15 May 2007. It seems most probable that his resignation as a director took effect at the end of March 2007, at the time of the settlement.

Mr Caplis’ unsustainable denial that he was an employee, which he maintained in evidence, was an indication of his approach to his evidence generally. I was struck by the fact that on occasions he appeared to have heard for the first time in the witness box some of Dr Wight’s explanations of what work was done in return for the payments to TSJ. I would have expected him to have known, or at least to have informed himself about these matters beforehand. He and Dr Wight were, after all, close business partners. I inferred that he was simply supporting Dr Wight in whatever explanation Dr Wight chose to give, knowing that the true explanation for the payments was different. I have therefore had to treat all his evidence, insofar as I can rely on it at all, with a very great degree of caution.

Dr Wight qualified as a mechanical engineer in 1968 and began work in the oil and gas industry in 1979. He was first introduced to the Group in 2001 and was asked to act as a consultant to the Group to assist them in finding a suitable drilling partner. This project did not proceed because of contractual problems between the Group and Saudi Aramco. There was, however, a second period when he was connected with the Group between May 2004 and November 2008 (when his services were terminated). During this second period, Dr Wight operated from the offices of ARTC in Saudi Arabia. Dr Wight maintains that during this period he was an external consultant and technical advisor, and not an employee.

There is less by way of documentary evidence about Dr Wight’s status within the Group than in the case of Mr Caplis. It appears that Dr Wight originally obtained his residency in Saudi Arabia on the basis of sponsorship or employment by a company called Ensco Saudi Arabia.

The defendants rely on a curriculum vitae prepared by Dr Wight in which he says that his employer from 2005 onwards was “Al Rushaid” and in which he described himself as “Manager Onshore Offshore Projects” reporting to the Senior Vice President. His job description was “to create a new onshore offshore drilling and construction company and integrate into the existing group”.

It appears that by July of 2005 Dr Wight was signing documents on behalf of ARTC. For example on 17^th July 2005 he sought a quote from a supplier of drilling camp sites on behalf of ARTC. On 27^th November 2005 he sent two emails to further suppliers signing himself “For and on behalf of Al Rushaid”. In one of these emails he used the phrase “We at Al-Rushaid…”.

In November 2005 Sheikh Abdullah wrote to Dr Wight to tell him his salary had been increased to 22,500 SR ($6,000 per month). All other terms of his contract were to remain unchanged.

Dr Wight submitted expense claim forms. For example one such form is dated November 12 2005. He signed this form in the space above the words “Employee signature”. The form appears to be a generic form for the Group.

The documents which provided the authority for the expenditure on the rigs and other equipment were signed by Dr Wight. For example on 29 January 2006 he signed authorities as “Manager - Al-Rushaid” for sums in excess of $16 million for the purchase of rigs from Shandong Kerui. Each of those authorities was also signed by Sheikh Abdullah. Dr Wight also signed authorities for expenditure with National Oilwell Norway AS on the same day for over $1.6 million, again as “Manager - Al-Rushaid”, again also signed by Sheikh Abdullah. He also signed an authority, again as “Manager - Al Rushaid” in favour of National Oilwell Varco for in excess of $6 million on 23 February 2006. On 9^th August 2006 he felt able to sign such an authorisation on behalf of ARPIC in favour of JB Consulting Limited. It is fair to say that his signature, albeit undated, also appears in the space reserved for a signature from Parker Drilling in one of these documents.

A document dated 27^th June 2006 on ARTC notepaper records Dr Wight as being employed under a contract by ARTC. It also states that he has been working for the company for 5 years and that his contract was an indefinite contract of employment. A subsequent document dated September 2007 signed by the Sheikh records that Dr Wight is appointed as General Manager for ARPIC, reporting directly to the Sheikh. A further document dated June 15 2008 addressed to the Consul General at the British Embassy in Riyadh on ARPIC notepaper says that Dr Wight is “employed directly by our company as the Engineering Director for our group.”

Dr Wight ran two email accounts through this period. One was an al-rushaid.com address, the other was a private aol.com address.

On balance, I do not think that any of this material points sufficiently clearly to the existence of the relationship of employer and employee between Dr Wight and any member company of the Group. The fact that Dr Wight occasionally described himself in terms appropriate to an employee, or that companies in the Group did the same, is not sufficient, in my judgment, to make him one. On the other hand, I think that it is clear that Dr Wight was appointed ARPD’s agent for the purposes of procuring the equipment for the joint venture. A person in the role of an external technical consultant would not be in a position to take the steps and sign the documents which I have summarised above.

Dr Wight gave evidence at the trial. I found him to be an unreliable witness: there were times when he was clearly making up his evidence in the witness box. Something of the flavour of this can be gained from the following passage of his cross-examination:

“Q. So how much of your time did you say you spent on the Shandong Kerui project for which you charged 1.6 million?

A. Probably me personal maybe one – total one month.

Q. One month?

A. Not in any one stretch.

Q. No, a total of 30 or 20 days of your time?

A. Yes.

Q. Did you have any expenses?

A. Yes.

Q. What sort of expenses?

A. I would have – I did not have any hotel expenses because they would pay for them, I did not have any food expenses, I would have some perhaps an air fare.

Q. No subcontractors?

A. There would be some sub-contractors.

Q. Where did they carry out the work?

A. In China.

Q. Did you pay them?

A. Yes.

Q. Cash in hand again?

A. Yes

Q. How many subcontractors in China?

A. Maybe two or three.

Q. How much did it cost?

A. This would cost maybe $200,000.”

This was the first mention of this significant item of expenditure. The fact of the expenditure, if true, was highly relevant, as it would show that the monies paid to TSJ were for valuable consideration, and not mere illicit commission. Dr Wight also gave evidence about the work allegedly carried out for NOV. I shall come to the details in due course. But, as I have said, it was clear that his close associate Mr Caplis heard about some aspects of this account, such as the fact that the work was suggested to have been carried out in Saudi Arabia and by Al Rushaid employees, for the first time when Dr Wight gave his evidence in the witness box. This was because Dr Wight was articulating it for the first time. I concluded that much of this evidence was untrue, as Dr Wight knew and as Mr Caplis appreciated.

The issues concerning the duties owed by Messrs Shetty, Caplis and Wight to companies in the Group are accepted on all sides to be governed by Saudi law.

Saudi Arabia is governed by Islamic law, or Shari’a. The basic sources of Shari’a are the Qur’an and the Sunna. The principles of Shari’a were developed between the 7^th and 10^th centuries. There has been no codification of the rules of Shari’a and there is no system of judicial precedent. Muslim scholars have, however, devised guidelines on the interpretation of Shari’a which are treated as authoritative by the courts. There are a number of schools of Islamic law. Among the Muslim sect of the Sunnis, the Islamic Law schools of the Hanafis, Malikis, Shafi’is and Hanbalis have survived.

Traditionally Saudi Arabia has adhered to the Hanbali school of Islamic law. Amongst the texts written by the scholars of this school, the work Al-Mughni is amongst the most authoritative.

The Saudi state also enacts Regulations. The state may only do so provided the provisions of the Regulation do not conflict with Shari’a.

In addition to the issues concerning the status of Mr Shetty, Mr Caplis and Dr Wight in the Group, which I have addressed above, it is necessary to resolve some further preliminary issues which divided the parties. These are, firstly, the question of the type of company which ARPD is, and, secondly, who were its directors or mudirs.

Both experts on Saudi law agreed in a Joint Memorandum, arrived at on the second day of the trial, that in order to determine what type of entity ARPD was, one would have to examine the Articles of Association. However the case had been opened (on the first day of the trial) by Mr Samek for Mr Shetty, without disagreement from Messrs Wight or Caplis, that it was common ground that ARPD was a limited liability company or LLC. In the course of the evidence of Professor Vogel (on day 9 of the trial) he was asked whether he knew what sort of entity ARPD was. He replied that he did not know, without looking at the Articles of Association. The Articles of Association of ARPD made a very late appearance at the trial. I allowed them to be admitted. They make it clear that ARPD was an LLC, and I so hold.

The defendants allege that Mr Shetty and Mr Caplis were at all material times directors or mudirs of ARPD and that they owed ARPD the duties which a mudir owes to a company under Saudi law. The experts agree that it is material to look at the Articles of Association as part of the exercise of determining who the directors or mudirs of a company are. Article 167 of the Saudi Companies Regulation provides, in part:

“The company shall be managed by one or more directors [mudirs] appointed from among the shareholders or otherwise. The shareholders shall appoint the directors in the articles of association or pursuant to a separate contract for a limited or unlimited term, for or without consideration.”

Thus the view of Mr Haberbeck was that it was necessary to look at the constitutional documents of the company, the commercial registration certificate and all amendments thereto over the relevant period. In cross-examination he accepted that mudirs could be appointed by a valid resolution of the shareholders if the articles permitted that. He went on to explain that the appointment would not be accepted outside the company if the appointment of the mudir was not registered in the commercial register. However he accepted that the duties owed by a mudir would be owed to the company notwithstanding non-registration.

Professor Vogel said that the crucial consideration in determining whether a person is a mudir is to consult the articles of association as to the method by which the company will be managed and then any document appointing a director/manager that both conforms to the provisions of the articles of association and represents the agreement of all the partners.

I did not understand either expert to suggest that, to be valid, an appointment of a mudir by a shareholders’ contract separate from the articles of association (as expressly allowed in Article 167) could only be valid if the articles expressly provided for that method. My understanding was such an appointment would be valid unless the method was excluded by the articles. Accordingly the relevant Saudi law for present purposes is that the validity of an appointment of a mudir as against the company is to be tested by asking, firstly, whether (a) there is an agreement between the shareholders appointing that person a mudir and (b) whether the appointment method is in accordance with (in the sense of not being contrary to) the articles of association.

The shareholders agreement was made between Al Rushaid Company for Oil and Gas Drilling (ARCDOG) and Parker Drilling Company Limited (Nevada). That agreement provides as follows:

At a meeting of the shareholders of ARPD held on Sunday 29th January at 11.30 am attended by the Sheikh on behalf of the Group and Mike Woodman on behalf of PD, the Sheikh was appointed Chairman of the Board. Six directors were also appointed. These included the Sheikh, Mr Shetty and Mr Caplis representing ARPIC and Mr Woodman and two others representing PD. Mike Woodman was appointed General Manager of ARPD.

It stands admitted on the pleadings on behalf of Mr Shetty that he was appointed a director of ARPD on 29 January 2006, but it is said that his directorship was not formalised pursuant to Article 167 of the Companies Regulation. Taking a charitable view of this reservation, it put ARPD to proof of the fact that the appointment of Mr Shetty was in the articles of association or pursuant to a separate contract. Nothing else appears to be required by Article 167.

Having first made the distinction between a director in a UK company and a director in a Saudi company, Mr Shetty initially accepted during cross examination (on day 2 of the trial) that he was a director of the Saudi joint venture companies, which includes ARPD. He sought to draw a distinction between being nominated and being appointed as a director, pointing out that forms had not been filled in, and saying that “the only person who is responsible is the person who is in the commercial registration of the company, known as the mudir.” Nevertheless he eventually accepted that in the case of ARPD, which was a limited liability company, everything which was necessary to appoint him as a director had been done.

There is nothing in the articles of association to prevent the appointment of directors in the manner in which it was undertaken at the meeting on 29 January 2006. I conclude that both Mr Shetty and Mr Caplis were validly appointed directors or mudirs of ARPD on that date.

Mr Shetty was a mudir of ARPD, which is an LLC. In Saudi law a mudir of an LLC may not take secret commissions. If he does so, and the taking of the secret commission causes the company a loss, he is liable to compensate the company for that loss. Such a duty arises pursuant to Article 168 of the Saudi Companies Regulation. Given the agreement of the Saudi law experts to these propositions, it is not necessary to examine them further.

Mr Caplis was also a mudir of ARPD. He therefore owed the same duty to ARPD as Mr Shetty, that is not to take secret commissions which cause the company loss.

Dr Wight was neither a mudir nor an employee of ARPD. The defendants’ case on the duties owed by him is based on what in Saudi law is called the duty of amaana. Such a duty isowed by an amin (agent or trusted person). This duty is said to arise as an incident of his appointment as a matter of Shari’a. The defendants allege that Dr Wight owed the duty of amaana in relation to the procurement of equipment and incurring of expenditure on the ARPD joint venture.

As Professor Vogel explained, the agent is of course bound by any specific instructions his principal has issued, so that, if the agent breaches them, he commits ta’addi and is liable for any damage that results. This proposition is supported by a passage in al-Mughni,

“… if the agent diverges [from the instructions of] his principal, and buys other than what he was ordered to buy, sells what he was not permitted to sell, or buys what was not specified to him, he is under daman for whatever the owner loses or for anything destroyed. This is because he departed from the condition of amana and became of the status of usurper.”

In submissions made by Mr Samek on behalf of Mr Shetty but adopted, as I understood it, by Dr Wight, it was submitted that the duty of amaana only extended to property entrusted to an amin. Thus, although it was accepted that if property is entrusted to an amin to sell, there was a duty to obtain the best price, there was no corresponding duty to buy at the lowest price where the amin was given instructions to purchase. This was the view of the law advanced by Mr Haberbeck.

Professor Vogel’s view was that the duty owed by the amin was not so constrained. He expressed the view that a judge applying Islamic law to regulate any relationship that endows one party with a responsibility, or a position of responsibility or trust, toward the property or interests of another would owe a duty to act in the best interests of his principal. He reached this view from a consideration of principles of construction applied to written agency agreements, and rules against self-dealing by agents.

It is not necessary for me to decide whether the duty is as wide as expressed by Professor Vogel. It seems to me that the evidence of both experts supports the view that a person entrusted with the task of purchasing property on behalf of a principal owes a duty to act in the best interests of his principal and is under daman for whatever the principal loses by reason of his failure to do so. The duty is not absolute, but extends to acting reasonably in the interests of the principal.

There was some debate in the course of the cross-examination of Mr Haberbeck as to a distinction between an agency properly so called, where the agent has the ability to buy and sell on behalf of the principal, and a contract under which the person engaged is required to recommend a contract for his principal to enter into directly. Mr Haberbeck described this latter case as a contract for hire and the person engaged as a hireling. In the end, however, this made no difference, because he accepted that whether the person is an employee, an agent or under a contract of hire, if he deliberately does his job in a way which causes harm to his employer and gives benefit to him, then he is liable to the principal for the loss which he causes.

In about November 2005 a number of contracts were entered into between a company within the Group and Saudi Aramco for the supply of equipment and services relating to the drilling of onshore exploratory wells and/or the drilling and completion of wells at various sites in Saudi Arabia. On the incorporation of ARPD later that month, the contracts were pursued through the joint venture company, ARPD. The performance of ARPD’s obligations under these contracts required it to purchase six drilling rigs. The contract for the purchase of these rigs was ultimately placed with the Chinese manufacturer Shandong Kerui, initially in respect of four rigs.

On 23 November 2005 Dr Wight was invited to China to discuss the possibility of purchasing the rigs from Shandong Kerui, implying that he had been in touch with them beforehand.

On 29 January 2006 a meeting of the board of directors of ARPD took place. It was resolved at the meeting that the purchase orders be issued to Shandong immediately in respect of the four rigs. Also on 29 January 2006, Dr Wight signed the authority for expenditure on behalf of ARPIC and ARPD of US$ 4,217,000 per rig.

In late February 2006 ARPD entered into a contract with Shandong under which it agreed to purchase four land drilling rigs at a price of US$ 4,217,000 per rig.

By 2005 Mr Shetty had known Mr Caplis for many years. They were on friendly terms and in regular communication in person, by telephone and email. Mr Caplis had, for some years, been in business partnership with Dr Wight. Although Mr Shetty was not on such close terms with Dr Wight, he was aware of Mr Caplis’ and Dr Wight’s business connections with each other and had met Dr Wight on a few occasions.

Some time in September of 2005 Mr Shetty says that there was a conversation in Sheikh Abdullah’s office in Al Khobar, Saudi Arabia between the Sheikh, Mr Shetty and Mr Caplis. The meeting was in the evening. Mr Caplis outlined a proposal for Al Rushaid to get involved in the Iranian oil and gas business because Mr Caplis had an excellent relationship with the Iranians which he had had for 30 years. Mr Shetty explained that there were two fundamental problems with Mr Caplis’ proposal. The first was the close political connection between Saudi Arabia and the United States, who had imposed sanctions on Iran. The second was that the Group were involved in joint ventures with a number of United States companies, and reliance on American support was the backbone of ARPIC’s business. According to Mr Shetty, the Sheikh said that he did not want to get involved, but that he was content for Mr Caplis to do so, provided he did so in his own time and without involving Al Rushaid at all.

This conversation was relied on as in some way authorising the activities which are the subject of the defendants’ claims. Much criticism was heaped on the defendants for not calling the Sheikh to answer these allegations. In my judgment this conversation, even taken at its highest, does not begin to amount to an authorisation for Messrs Shetty, Caplis and Wight to become involved in the taking of commissions on procurement of supplies for ARPD. At most it may indicate an acceptance that Mr Caplis might be involved in business ventures in Iran which did not involve the Group at all.

After the meeting, Mr Caplis explained to Mr Shetty his connection with Dr Wight. Mr Caplis explained that he had the sales experience and Dr Wight had the technical expertise. However the only area they could not understand was bank financing. It was in this area that Dr Wight and Mr Caplis sought Mr Shetty’s help.

Mr Shetty said that he agreed at a meeting in London to be involved with the venture which became TSJ, but on the basis that any business they did together would be outside the territorial waters of Saudi Arabia. Mr Shetty was subsequently involved in preparing a business plan for offshore rigs for an Iranian company called Sazman. Although Mr Shetty did a lot of work on this project, it led nowhere and no fees were earned by TSJ. Mr Shetty says that after this he had nothing to do with the business of TSJ.

I do not accept that Mr Shetty introduced any requirement that the work undertaken by TSJ be outside the territorial waters of Saudi Arabia. I do, however, accept that after the Sazman project, Mr Shetty was not actively involved in anything actually done by TSJ. Nevertheless, as will appear, I am satisfied that he was kept well informed of its business arrangements and cash flow. He was a powerful ally for Dr Wight and Mr Caplis to have in the business which they planned to carry on.

On about 11^th January 2006, Mr Shetty and Mr Caplis had a meeting with Pierre Chambaz, an employee of Pictet & Cie, a private bank in Geneva (“Pictet”). At the meeting instructions were given to incorporate a company whose directors and shareholders were to be Mr Shetty, Mr Caplis, and Dr Wight. The company was to be called TSJ Engineering Consulting Limited. Mr Shetty says that the name TSJ was chosen to represent Technical Services Jersey, because he had originally thought that the company would be incorporated in Jersey. The defendants suggest that the name was chosen to represent the first names of the participants: Tom, Shekhar and Jim. I have no doubt that the name was chosen to represent the first names of the three participants. There was no connection with Jersey, and Technical Services Jersey Engineering Consulting would have been unnecessarily repetitive. Mr Shetty suggested in an email to M Chambaz that the name should be TSJ Engineering Consulting Co Ltd, adding “please add the co to make it appear OK”.

On 26^th February 2006 Messrs Shetty, Caplis and Wight signed the application to open the account, at a meeting in Dubai. Any two out of the three of them were authorised signatories for the account. Each of them gave their address as a PO Box in Dubai, UAE. Mr Shetty explained that Dubai was chosen because the idea was for the business to be undertaken outside Saudi Arabia, and because Dubai was a good place to meet. I cannot accept that evidence. Dubai was not a sensible place for these individuals to meet when all three were working some of the time in Saudi Arabia. There was no reason why the bank could not have been given the true addresses of the three, and why meetings could not have taken place at a more convenient location.

It is clear to me that the setting up of TSJ was done secretly by Messrs Shetty, Caplis and Wight in a way which was designed to ensure that it did not come to the attention of the Sheikh. No good reason was given for the choice of Dubai, or as to why they did not use their own addresses.

The instructions to the bank were to send the bank statements to Mr Shetty at the PO Box in Dubai. According to Mr Shetty, forwarding instructions were left so that the bank statements were forwarded to him in London. He claimed however that the bank statements were not forwarded to him, sometimes for as long as six months.

Over the course of 2006, 2007 and 2008 large sums of money were paid into TSJ’s bank account with Pictet. The total sums paid into this account over the period exceeded $6 million. The sums paid in were then split three ways by payment out to Mr Shetty, Mr Caplis and Dr Wight. Mr Shetty claims that he did not know the amount of money which went into the TSJ account or from there into his own account until July 2008. When he discovered in 2008 that he had received over $1.8 million he said that it came as a complete surprise to him.

Mr Shetty’s evidence about how this account was operated was confused and the answers he gave in cross-examination were conflicting and evasive. He maintained originally that there was some sort of standing instruction to the bank to pay the money out to the three men in equal shares above a certain minimum balance. This, of course, would not have required personal intervention by him or anyone else. When it was pointed out that sums were from time to time placed on deposit and that there was no immediate payment out, he said that this was dependent on the minimum period of deposit. He eventually agreed that in fact when money was paid out to the three it must have been on the express instructions of two of them, in accordance with the mandate. However he said that on no occasion was he one of the two.

I hold that Mr Shetty was well aware of the movements of money in and out of the accounts at Pictet and that he was aware by telephoning the bank or receiving the statements or by communications from Mr Caplis (it matters not which), of the money going into and the balances in the account on a regular basis. It was not characteristic of Mr Shetty to be as unconcerned about financial matters as he suggested he was. He suggested otherwise because he knew that if he was aware of the payments at the time that they were made it would not be credible to suggest, as he did, that he had no idea what the payments were for. Instead he suggested that it was not until 2008 that he enquired into the nature of the work that had been done by TSJ. In fact he was in regular contact with Mr Caplis, who accepted he was telling Mr Shetty that moneys had been earned and were on the way to the account. I hold that he was also told about what Mr Caplis and Dr Wight were doing. Mr Shetty maintained that it was not until 2009 or 2010 that he even learned who the payments had come from, when a list was sent to him by his solicitors. This is further evidence which I cannot accept.

Pictet duly incorporated a company in the British Virgin Islands in that name on 2^nd February 2006. A bank account was opened in the name of TSJ at Pictet. Each of Mr Shetty, Mr Caplis and Dr Wight also opened personal accounts at that bank.

Mr Elgamri analysed the payments made to the suppliers and to TSJ in his witness statement. There was no challenge to this evidence. The suppliers to whom payments were made by ARPD, and who made payments to TSJ were Shandong Kerui, National Oilwell Varco, Byrne, Good Vantage, Honstand, JB Consulting and Texas International.

Before turning to the individual payments, I should deal with a point made by Mr Shetty, Mr Caplis and Dr Wight, that the structure of the decision making process in ARPD, would not allow unauthorised commissions to be taken. Thus it was suggested that, in the light of the overall authority of the Sheikh, and the decision making structure within ARPD which involved the joint venture partner, PD, there was no scope for the taking of secret commissions or influencing the destination of contracts.

I accept that the scope for influencing the destination of contracts was restricted, but it was nevertheless possible. Crucially it was possible for Messrs Caplis and Wight to represent to potential suppliers that the contracts were under their control and to demand recompense for ensuring that orders were placed with them. It is true that Saudi Aramco had some nominated suppliers, one of which was NOV. But the evidence as to what this meant was far from clear. In the end I was not satisfied that it was not open to ARPD to go elsewhere. More importantly both Dr Wight and Mr Caplis were in a position to tell suppliers that payment was necessary for the contract to be secure. Moreover the evidence, as I shall explain, that NOV were paying a secret commission is particularly clear.

I should mention one further point arising out of the evidence. It was the evidence of both Mr Caplis and Dr Wight that they were free to carry on, and did carry on, other business while employed by (or in the case of Dr Wight, acting as consultant for) Al Rushaid. Not all this business was with suppliers to ARPD. Yet Mr Caplis and Dr Wight were totally unable to explain the criterion which they applied to decide whether the payments should go through TSJ. The truth is that the agreement between Mr Shetty, Mr Caplis and Dr Wight was that payments from suppliers to ARPD should go through TSJ, but other business ventures between Mr Caplis and Dr Wight which did not involve ARPD would be dealt with without TSJ involvement. That fact helps to explain why Mr Shetty was involved. It would not have made sense to award him a one third share in Mr Caplis’ and Dr Wight’s other activities.

Sometime in December 2005 Dr Wight visited Shandong Kerui on ARPD’s behalf. Contemporaneously with the ARPD Board meeting of 29January 2006 authorising the expenditure on the Shandong Kerui rigs, Messrs Shetty, Caplis and Wright were circulating between each other a draft consultancy agreement to be entered into between TSJ and Shandong Kerui. The draft was dated 25^th January 2006 and provided for TSJ “to provide consultancy services aiming at putting Kerui in a position to develop a competitive and comprehensive offer on various projects in the Gulf States, specifically Kingdom of Saudi Arabia, Bahrain, Kuwait, Qatar, UAE and Oman.” TSJ was to provide assistance in, amongst other things, establishing Kerui companies in the territory, business briefings on local knowledge, business practices, background on potential clients, introductions at high level, recommendations on negotiating strategies to ensure the purchase order is finalised and placed with Kerui and recommendations and assistance in ensuring that all payments are received by Kerui as per the purchase order.

In return for these services TSJ was to be compensated by a success fee of 5% of the value of the contract within seven days of receipt of payments by Kerui from the customer.

The executed copy of the agreement is dated 25^th June 2006 and differs in some respects from the draft. Thus the consultancy is now defined to exclude projects in Saudi Arabia. The success fee is now said to be “a minimum of 2.5%” of the value of the contract. Payments are however still linked to the receipt of funds by Kerui. The agreement is signed by Dr Wight on behalf of TSJ.

Between March 2006 and January 2007 ARPD made payments of about US$ 16.8 million to Shandong Kerui. Between July 2006 and February 2007 TSJ invoiced Shandong Kerui for US$ 1.6 million by means of six invoices, the first for US$ 350,000 and the remaining five invoices for US$ 250,000. The payments to TSJ represent about 10% of the amount of the payments from ARPD to Shandong Kerui. This is not consistent with the 5% in the draft consultancy agreement. It is, I suppose, not inconsistent with the “minimum 2.5%” in the executed agreement, but that agreement excluded Saudi Arabia.

The payments by ARPD to Shandong Kerui included four payments of US$ 2,108,500, all of which were shortly followed within about two weeks by an invoice from TSJ for US$ 250,000. Dr Wight was questioned about who decided to issue these invoices. His evidence was that he telephoned Mr Jang of Shandong Kerui and Mr Jang would agree or disagree. There then followed this exchange:

“Q. In fact what you said to him was, “You have just been paid some money from ARPD, can I have some please?

A. No, because I would not be aware of when payments were made to Shandong Kerui or anyone else.”

Dr Wight’s evidence that he was ignorant of when Shandong Kerui were paid was untrue. He had carefully signed and witnessed payment certificates in their favour. In other cases the documents had been signed by Mr Caplis, his partner. He was cross-examined as follows:

Q. So in each case at least where you had witnessed such a document you knew that the payment was going to be made?

A. Of course, yes

Q. So it would be entirely wrong to say you were ignorant of when payments were going to be made?

A.

If you take it to the English letter, yes, you are probably right.”

Dr Wight’s and Mr Caplis’ case was that the payments were not made pursuant to the consultancy agreement or in respect of the ARPD contract. The payments were instead made pursuant to a separate verbal agreement, made some time in the middle of 2006, that TSJ would provide services to enable Shandong Kerui to westernise its business, for example by establishing proper QA/QC procedures, a marketing strategy, a health and safety plan, an equipment engineering package, a rig design package and assisting producing engineering drawings.

There were no documents which even vaguely corroborated the making of this westernisation agreement. This is particularly pertinent, because the evidence of both Mr Caplis and Dr Wight was that the work done for Shandong Kerui under this westernisation agreement had as one of its principal purposes the creation of documents, manuals and the like, for the use of Shandong Kerui. I do not accept their suggestion that, because these documents were the intellectual property of Kerui, they could not be expected to have or obtain copies, particularly as this explanation was inconsistent with Mr Caplis’ later evidence that they had access to the majority of the documentation within their system and they were reproduced, at least to some extent, for a further project.

Dr Wight’s account of the work was that it was mostly carried out in China, in the premises of Shandong Kerui and by Shandong Kerui employees. As I have pointed out already, he said that he also employed two or three sub-contractors for the sum of about US$ 200,000. I reject all that evidence. Mr Caplis endeavoured to support this account but did so entirely unconvincingly.

Shandong Kerui provided a three line “certificate”, unsupported by any witness statement, saying that their group had paid no funds or commissions to any company including TSJ for contracts obtained from Saudi Arabia or Saudi Arabian registered companies. I am not able to place any weight on this document. Quite apart from the fact that no witness was called to speak to it, it begs the question as to what the payment of US$ 1.6 million which it is common ground was paid to TSJ was actually for. It provides no support whatsoever for Dr Wight’s evidence as to the westernisation agreement, or the work said to have been done in pursuance of it, which it could have done if it were true. The certificate amounts to no more than a bare and unconvincing, self-interested denial.

I have no doubt that the true position is that the payments were made as secret commission for the award of the contracts by ARPD. I accept that the payments were made pursuant to a separate verbal agreement reached between Dr Wight on behalf of TSJ and Shandong, prior to the executed consultancy agreement. The payments were not, however, for westernisation of Shandong, but a success fee for securing the ARPD contract for Shandong. Firstly, if the payment of US$ 1.6 million was to be a fixed payment for westernisation agreed at about the same time as the consultancy agreement was executed, it would have made no sense not to incorporate that agreement into the written document. That agreement already dealt with overlapping or closely related matters. The truth is that the executed agreement dealt with contracts to be entered into after June 2006. Secondly, both the draft and signed consultancy agreements show that Shandong Kerui and TSJ were happy to contemplate a relationship under which TSJ secured them contracts in return for a share of the contract value. The draft agreement expressly included Saudi Arabia and had nothing to exclude ARPD. Thirdly, the absence of any documentation to support any of the westernisation work allegedly done, or the subcontracts allegedly entered into for US$ 200,000 is telling. Mr Caplis and Dr Wight, though unrepresented at the trial, have been fully aware throughout the proceedings of the need to support their accounts by proper disclosure. It is not credible that, if work on this scale had been carried out, there would be no surviving record of it. Fourthly, as I have said, I formed the very clear impression that the detail of this aspect of Dr Wight’s evidence was invented by him in the witness box. His account involves the bizarre suggestion that the majority of the work for which Shandong Kerui paid was carried out by Kerui’s own employees. Finally there is the timing of the payments to TSJ, and the relationship of that timing to the payments to Shandong Kerui. Dr Wight decided when to send the invoices by reference to the timing of these payments, about which he was fully informed. His evidence that he was unaware of the payments was untrue.

National Oilwell Varco LP is a Delaware limited partnership. NOV Norway is a Norwegian company, related to National Oilwell Varco. Both are suppliers of equipment to the oil industry. There is no need to distinguish between them and I refer to them both as NOV. Between February 2006 and February 2007 ARPD made payments to these two companies of approximately US$ 14.8 million. Between July 2007 and July 2008 TSJ was paid sums in excess of US$ 1.5 million by NOV. The defendants’ case is that these sums were secret commissions paid to TSJ on the supplies to ARPD.

On January 16 2006 NOV provided to Dr Wight a revised quote for six items of equipment for each of the first four rigs. The quote is expressed to exclude “field installation and commissioning which are subject to standard rates”. On 23 February 2006 ARPD issued a purchase order to NOV for items of equipment for the first four rigs. The total sum quoted on the purchase order was US$ 6,355,396, which corresponded to the quoted sum. The purchase order number was ARPD 06-07. On 30 March 2007 TSJ issued an invoice to NOV for US$ 508,431.68. The invoice was for “Engineering services and consulting fees with reference to ARPD 0607”. It was marked for the attention of Tom Hand. The TSJ invoice was for exactly 8% of the value of the purchase order.

On April 24 2007 Dr Wight emailed Tom Hand at NOV attaching a copy of the 30 March invoice. The subject line of the email is “invoice for comms on first PO”. When it was suggested to him that “comms” meant commissions, Dr Wight indicated that it was an unfortunate choice of word.

On October 8 2007 a Limited Representation Agreement was entered into between NOV and TSJ. The agreement provided that TSJ was NOV’s representative for the exclusive purpose of assisting NOV with the sale of oilfield equipment to Al Rushaid. The agreement was retrospective in effect, because the sale of the products to the customer had already taken place. By Clause 7 NOV agreed to pay a commission for the representative’s assistance in connection with these sales. The commissions were fixed sums set out in a schedule. The first six items in the schedule correspond to the first six items in the purchase order. The total of the commissions, US$ 508,431, is as I have said, exactly 8% of the value of the first purchase order.

On 30^th October 2007 Dr Wight emailed Tom Hand to tell him that the signed agreement had been left for him at reception. Dr Wight said that this was not the same agreement, but he was wholly unspecific as to what it was.

Dr Wight denied any knowledge of this agreement which was signed on October 8 2007 by Mr Hand on behalf of NOV and by Mr Alec Cowan on behalf of TSJ. Dr Wight did know Mr Cowan, but was unable to offer an explanation of how Mr Cowan’s signature came to be on the document.

The way in which the commission system worked is illustrated by some email correspondence between Dr Wight (and his son Neil who assisted him) and Mr Moore of NOV. Some time before August 2006 NOV had provided some prices for rig CCTV cameras. By August 14 Dr Wight had told his son Neil that the cameras were definitely wanted. He promised to get a new purchase order (from ARPD) out for signing, and provided the purchase order number ARPD 06-021. He asked “Can I just check that the prices mentioned had 8% included as per the other items etc?”

In February 2007 the subject of CCTV systems for the fifth and sixth rigs was raised between Dr Wight and Mr Moore of NOV. On 28 February he emailed Dr Wight saying “Attached is the CCTV upgrade quote. It does not have the 8% adder included. Do I need to revise it with the 8% (I have not forwarded it to anyone else).” Dr Wight replied “As per the other items ordered etc, if you could add the 8% and resend that would be great”.

On at least one occasion Dr Wight insisted that quotations from NOV only be sent to himself so that he could distribute them to the appropriate people. So, for example, when Bill Murray of ARPD asked NOV to provide a quote for a mud pump in January 2007, and asked for the quote to be sent to both Dr Wight and himself, Dr Wight countermanded this and insisted that the quote only be sent to him. It is clear that he did this to ensure that others within ARPD did not learn about the “8% adder” arrangements.

There followed correspondence in which TSJ were chasing payment of “the 8%” and which makes it clear that the payment on the 8% was contingent on NOV having been paid the sums due on the equipment supplied. The correspondence does not tie the payment of the sums to any work done by TSJ.

Despite the above, Mr Caplis and Dr Wight denied that the sums paid to TSJ were commissions on the sale of equipment to ARPD. Dr Wight maintained that the sums were paid for work done by TSJ to integrate NOV equipment into the Chinese rigs which ARPD had purchased. He maintained that the 8% was added to NOV’s quotations as a contingency, requested by ARPD, in case NOV personnel had to be involved in the integration work. It was his evidence that he then worked for NOV to supply this integration work, and was entitled to invoice them for the equivalent sum. He said that NOV were a designated supplier, and did not need to pay commissions to obtain the contract. The work was, according to Dr Wight, carried out by 10-15 sub-contractors who were paid cash in hand. These contractors were working for ARPD, but worked for TSJ in their time off. The cost of this sub-contracting had been some $600,000.

I have no hesitation in rejecting this fanciful account of what the 8% paid by NOV was for. There are no documents to support the suggestion that TSJ was working for NOV, or to support the extensive sub-contracting exercise in Saudi Arabia. Mr Caplis gave inconsistent evidence about where the work was done, saying at one point that all or some of it was done in China.

Further, the account given by Dr Wight is inconsistent with the documents. Dr Wight was not telling the truth when he claimed to be unaware of the Limited Representation Agreement. One of TSJ’s invoices, issued on 8th October 2007, the same day as the Limited Representation Agreement was signed, expressly refers to the Limited Representation Agreement. The Limited Representation Agreement makes it clear that the 8% is a commission for making the sale, and has nothing to do with work done for NOV. Moreover the email subject line “Invoice for comms” is plainly, in context, a reference to commissions. There was a faint suggestion from Mr Samek, seeking to assist Dr Wight, that he might have been referring to “commissioning”. But Dr Wight had the opportunity of providing an explanation, and did not provide this one, or indeed any other, beyond suggesting that the choice of word was unfortunate.

Moreover Dr Wight’s suggestion that he was doing NOV’s work of integration with the rigs which they had included in their prices is really hopeless. If NOV were including some form of contingency charge in their quotations they would have said so expressly in the quotation, rather than silently inflating the price. Moreover the quotations were inconsistent with any form of commissioning or installation, because they expressly said that commissioning was excluded.

Yet further, Dr Wight’s suggestion that he paid US$ 600,000 out of his own pocket to sub-contractors is not credible. If he had done so he would never have agreed to split the proceeds from NOV evenly as he did. Unless there was to be some accounting exercise, he would end up making a loss on the NOV work once the proceeds had been split three ways. He suggested that he was going to account with Mr Caplis, but he had not done so. It is true that the 8% was charged on the uplifted price (the original quote plus the “adder”). But this is not consistent with either side’s case. TSJ ought to have charged 8/108 of the invoice price on either version of the facts.

I conclude that the sums paid by NOV to TSJ were all secret commissions. I hold further that the prices which ARPD paid for the equipment purchased from NOV were all increased by the amount of the commission to allow for its payment.

Byrne Modular Buildings FZCO (“Byrne”) was a UAE company and a supplier of rig camps to the oilfield industry. On 7 August 2006 ARPD placed a purchase order on Byrne for four drilling and accommodation camps in the sum of US$ 6,168,848. The order was signed by Mr Caplis and Dr Wight. The payment terms were 25% “advance payment” and the balance pro-rata on completion. Over the period August 2006 to March 2007 TSJ invoiced Byrne for approximately US$ 250,000. The invoices were in respect of “provision of consulting and business development services fees”. These sums were duly paid by Byrne into TSJ’s account between September 2006 and April 2007. A further sum of US$ 191,284 was paid into TSJ’s account on 17 January 2008 for which there is no corresponding invoice.

In August 2006 TSJ and Byrne entered into a consultancy agreement, signed by Mr Caplis for TSJ and Mr Patrick Byrne for Byrne. Mr Caplis negotiated this agreement. Under the consultancy agreement TSJ were appointed “consultant for the sale of Rig Camps and associated equipment for land drilling operations in Saudi Arabia”. TSJ were to be paid “a success fee equivalent to 5% of the total sales value, if and when Byrne receive the Purchase Order contact [semble “contract”] for all such equipment from Saudi Arabia”. Payment was to be within 7 days of receipt of payment by Byrne.

On the face of it, such an agreement would earn TSJ a commission on the sale of rig camps by Byrne to ARPD. But both Dr Wight and Mr Caplis said that the payments from Byrne reflected the fact that they had arranged a joint venture between Byrne and a Chinese company called Good Vantage (see below), and appeared to contend that this had nothing to do with ARPD.

The consultancy agreement makes no reference to any joint venture between Good Vantage and Byrne. It applies to all Byrne’s sales to Saudi Arabia, not just to those which are the result of any co-operation between Byrne and Good Vantage.

Byrne’s principal invoices to be found in the bundles are as set out in the following table. In the table I have applied the 5% commission to each invoiced sum and compared it with TSJ’s invoice:

The figures highlighted in bold show a precise relationship between a figure calculated as 5% of the Byrne invoices and the payments to TSJ. Moreover the payments are all made shortly after the corresponding invoice. As this analysis of the invoices was not put to any witness, I invited comments from all parties after the end of the trial. I received nothing substantive from Mr Shetty or the defendants. Mr Caplis and Dr Wight pointed out that the first four dated Byrne invoices relate to the first four camps, and should have all been for the same amount. The last two dated invoices relate to the fifth and sixth rigs, and allow for the fact that 25% was paid with order. There is however no corresponding invoice for the 25% payable with the order which they point out should be US$ 959,016.50. So the picture for the fifth and sixth rigs should be:

There is therefore no exact match, on the fifth and sixth rigs, between 5% of the Byrne invoice and the TSJ payment in January 2008, although the figures are within 0.25% of each other. It is also fair to point out, as do Dr Wight and Mr Caplis, that there was a further payment of US$ 8325 on 8December 2006, which does not correspond, so far as I can see, to any Byrne invoice. Even allowing for these points, the correlation is overwhelmingly suggestive that TSJ’s invoices and the corresponding payments to them were in respect of a 5% commission on the sale of the Byrne rig camps to ARPD. These are, again, secret commissions. They are not payments in respect of independent work done by TSJ or tied to co-operation between Byrne and Good Vantage .

On 28 January 2007 Mr Caplis and Dr Wight signed the ARPD purchase order for the supply of a drilling rig and associated equipment by Good Vantage at a total cost of US$ 6,372,000. Payment terms were 50% within 5 days of signing, and a further 45% and 5% after rig up and release respectively. On 22 January 2007 TSJ invoiced Good Vantage for US$ 1m. The invoice was in respect of “multiple consulting engineering and business development services fees”. The sum was paid to TSJ’s account in February.

In fact it appears that 50% of the purchase price was paid before the purchase order was issued, namely on 30 January 2006.

Dr Wight’s account was that this payment of US$ 1 million was because he supported Good Vantage in their attempts to obtain exclusivity in Sudan and other countries in West Africa. He said the fee was calculated as market value. The account given by both Mr Caplis and Dr Wight in a joint document, which they both confirmed as part of their evidence in chief, was that TSJ were supplying westernisation and other services to Good Vantage.

I have no doubt that the US$ 1 million fee was a flat fee commission on the sale of the rig to ARPD. As with all Dr Wight’s other explanations the one he gave in respect of this payment lacks any documentary support. The timing of the payment is what one would expect if it were a flat fee commission on the sale, which is what it was.

On 3 November 2006 ARPD issued a purchase order to Honstand Enterprises Limited, a company in Hong Kong, in respect of a drilling rig for a price of US$ 6,876,275. The purchase order was signed by Mr Caplis and Dr Wight. 50% of this sum was paid on 28^th November 2006, again with 45% and 5 % due later.

On 22 November 2006 TSJ issued an invoice, again for US$ 1 million, to Honstand. The invoice was again in respect of “multiple consulting engineering and business development services”.

Dr Wight’s account of this payment was that it was made in advance of any agreement or any project taking place. The idea was that they would do the same as they did for Kerui.

Again, I reject Dr Wight’s evidence about this payment. Just as with Good Vantage, this was a flat fee payment by way of commission for the sale of the rig to ARPD.

On 2^nd February 2006 ARPD issued a purchase order, signed by Mr Caplis and Dr Wight for a telescopic crane to be bought from JB Consulting Limited. The purchase order was in the sum of £1,163,800. Further purchase orders were issued in April 2006 (for diesel engines) in the sum of £1,760,000; in May 2006 (for couplings) in the sum of £35,872; in July 2006 (for baseframes) in the sum of £639,091; in September 2006 (for a crane) in the sum of 319,383 Euros; in November 2006 (for more diesel engines) in the sum of £3,405,600 and in October 2007 (for another crane) in the sum of 388,355 Euros.

TSJ issued invoices to JB Consulting “for the provision of consulting and engineering design services fees as per the agreement”. These were dated 27 April 2006 for £116,000; 27 July for £147,500; 27 January 2007 for £154,800. On 24 August 2008 TSJ issued an invoice for “Engineering Services and Consulting Fees for the following: CAT 3516B diesel engines reconfiguration” in the sum of US$ 124,500.

The explanation of Mr Caplis and Dr Wight for these payments was that they were in respect of engineering work carried out on the 16 Caterpillar engines purchased from JB Consulting. This was pursuant to a verbal agreement entered into with JB. They gave details in their joint statement of the work done to convert the engines.

Not without some hesitation, I conclude that it is not established that these payments were in respect of secret commissions. Dr Wight’s account is supported by at least one of the invoices, and the account of what was done has detail which is absent in the other cases.

The Texas International payment differs from the others because it was paid into Dr Wight’s individual account at Pictet. ARPD paid sums of money to Texas in 2006, but the payment to Dr Wight was not until 2008. There is no TSJ invoice. Dr Wight said this was a “roll-on” payment from his long relationship with Texas. I accept that explanation.

It is sufficient to consider the position of ARPD, as there was no evidence that Saudi law would permit recovery of loss sustained by any company other than ARPD. Thus, for example, there was no evidence to suggest that Saudi law recognised the concept of reflected loss. Each of Mr Shetty and Mr Caplis owed duties (in the case of Dr Wight up to 31^st March 2007) not to accept secret commissions if by doing so they caused ARPD loss. Dr Wight owed a similar duty not to act in the course of his agency for ARPD in the procurement of property in such a way as to harm ARPD.

In my judgment it is plain that the receipt by Mr Shetty, Mr Caplis and Dr Wight of the secret commissions paid by Shandong Kerui, NOV, Byrne, Good Vantage and Honstand amounted to a breach of the duties which they owed to ARPD, enabling ARPD to recover any loss which they had incurred as a result of those receipts.

I need to bear in mind the position of Mr Caplis, who ceased to be a director of ARPD at the end of March 2007. All the payments to TSJ in respect of Shandong Kerui, Honstand and Good Vantage were made before that date. However the last two payments from Byrne (amounting to US$ 246,874) were made after he ceased to be a director. Similarly, all the payments by NOV to TSJ were made after the end of March 2007. It was not established that post resignation receipts were prohibited under Saudi law.

I should deal with one other argument advanced by Mr Samek on the basis of Saudi law. Saudi law provides that in respect of tort or crime it is only the last actor who is liable. On this basis Mr Samek submitted that Mr Shetty was not liable, because he cannot be said to have been the last actor in respect of procuring the receipt of the commissions. I do not think this is the result which follows from the last actor principle. The liability is incurred by the receipt of the commission. In each case the participants in TSJ received their commissions into their accounts, and were the last actors in respect of those receipts. Each of the defendants is liable for any loss caused by the receipt of his commissions.

Shari’a has a doctrine knows as “gharar” meaning risk or uncertainty. Future activity is deemed “gharar” because it is uncertain to anyone except God. Accordingly, damages can normally be recovered under Saudi law for losses which are actual and direct. Saudi law does not permit recovery for damages that are ascertainable only by means involving speculation, future contingencies, or uncertainties.

If a director or agent asks a supplier to increase the amount charged to the customer to allow for the payment of a secret commission to the director or agent, there is no doubt that the customer sustains a direct loss which Saudi law recognises.

It is possible, however, for a secret commission to be paid by a supplier to a director or agent in circumstances where the price to be paid to the customer is fixed, and the commission does not come out of the price paid by the customer to the supplier. In such circumstances it is conceivable that the receipt of the commission does not cause the customer a direct loss. English law would find other ways of awarding the customer damages, or otherwise causing the agent to disgorge the commission. But I accept that such alternative routes to recovery would either be forbidden as gharar or not be available under Saudi law.

There is no doubt that in the case of NOV, the secret commissions caused NOV’s prices to be inflated by an equivalent amount, causing ARPD a direct loss in that amount. The question is whether the sums received in respect of Shandong Kerui, Byrne, Good Vantage and Honstand are established to have had an equivalent influence on the price charged.

Viewing the evidence as a whole, it is clear to me that the modus operandi of Dr Wight and Mr Caplis was to make it clear to each of the suppliers that a commission would be payable on a successful sale and that this was added to the price quoted to ARPD. This has been clearly shown where the relevant documents have come to light, in the case of NOV. It is a reasonable conclusion to draw on the evidence in relation to the other contracts.

Mr Samek submitted that even this degree of inference was impermissible gharar. I do not accept that submission. I believe that a Saudi judge would conclude that each of the secret commissions has caused ARPD a corresponding actual and direct loss.

A summary table of the losses incurred in respect of each supplier is as follows:

Dr Wight and Mr Shetty are each liable for one third of this sum, being the proportion received by them, namely US$ 1,859,682. Mr Caplis is liable for one third of US$ 3.6 million, or US$1.2 million being his share of the sum of the Shandong Kerui, Good Vantage and Honstand payments. In addition he is liable for one third of the payments made to Byrne before March 31 2007, that is to say one third of US$ 198,798 or US$ 66,266. Accordingly the liability of Mr Caplis is US$ 1,266,266.

Mr Fenwick advanced an alternative claim based on the remedies available under English law, based on constructive trust and liability to account. In the light of the conclusions I have reached, it is not necessary to consider this alternative claim.

I allowed a very late amendment to introduce a claim based on a Saudi law conspiracy. The amendment was allowed on the express basis that no facts would be relied on beyond those already pleaded in support of the English law unlawful means conspiracy. The question of whether such a cause of action existed in Saudi law was the subject of dispute. Professor Vogel’s evidence drew heavily on the concept of “ishtirak” or participation in Saudi criminal law. He did not make it clear in his written evidence whether recovery under a civil cause of action for conspiracy was possible, independently of a criminal prosecution. In the course of cross-examination he accepted that, in order for a right of civil recovery to exist, there must be participation in acts which under Saudi law amount to a crime.

I do not think it would be fair to Messrs Shetty, Caplis and Wight to find themselves answering, as a result of the last minute amendment of the pleadings, an allegation that each of them has been involved in a conspiracy to commit acts which amount to a crime under Saudi law. Accordingly I propose to dismiss the allegations of conspiracy pleaded against each of Mr Shetty, Mr Caplis and Dr Wight.

For the reasons I have given in the first part of the judgment (the release against all claims, and resignation from CB) Mr Shetty’s employment claims all fail. The counterclaim and the additional claim succeed. Each of Mr Shetty and Dr Wight is liable to ARPD in the sum of US$ 1,859,682. The liability of Mr Caplis is US$ 1,266,266. I will hear counsel and the unrepresented parties as to the form of relief in consequence on my findings, if it cannot be agreed.