Cadogan Petroleum Holdings Ltd v Global Process Systems LLC

For almost 60 years, students of law have debated the example posed and considered by Denning LJ in Stockloser v Johnson [1954] 1 Q.B. 476, 491:

“…..Suppose a buyer has agreed to buy a necklace by instalments, and the contract provides that, on default in payment of any one instalment, the seller is entitled to rescind the contract and forfeit the instalments already paid. The buyer pays 90 per cent. of the price but fails to pay the last instalment. He is not able to perform the contract because he simply cannot find the money. The seller thereupon rescinds the contract and retakes the necklace and resells it at a higher price. Surely equity will relieve the buyer against forfeiture of the money on such terms as may be just….”

At heart, that is what the present dispute is about – although the court is here concerned not with a necklace but rather two Gas Plants originally constructed by the defendant (“GPS”) in their fabrication yard in Mafraq, Abu Dhabi and intended for shipment to and use in Ukraine. The Gas Plants are currently still situated in Abu Dhabi where they have been - effectively “mothballed” – since 2009, almost 4 years ago. It is common ground that GPS appear to have been pro-active to ensure that the main equipment has been preserved in good condition and that the plants are in good shape.

The Gas Plants are very large structures properly described as “gas stripping plants” each comprising of a number of different inter-connecting components such as separators, heaters, compressors, pipes, tanks and pumps. They utilise what is referred to as the “Joule-Thomson effect” with a capacity of up to 100 mmscf/d each (design capacity was 70 mmscf/d and 650 tonne/d condensates). As built, they were designed for (i) a high pressure reservoir (the richest feed having a methane content of 73.6% and fed to the plant at high pressure (138 barg)); (ii) a low temperature environment (including a comprehensive heating system to permit operation in severe winter conditions in Ukraine which would be largely redundant in hotter climates); (iii) “sweet gas service” with the result that the plants cannot cope with other than trace levels of hydrogen sulphide or “lethal sour service”; (iv) an onshore application; and (v) the preparation of the waste water and condensates for trucking.

The present dispute arises out of a Settlement Agreement dated 15 October 2009 (the "Settlement Agreement"). The background to that agreement is most conveniently summarised in the recitals:

The Settlement Agreement was intended to resolve the three issues set out above, as reflected in Recitals (U) and (W):

The Settlement Agreement comprised four main parts:

The focus of the current dispute is that part of the Settlement Agreement contained in Clauses 11-22 (Clauses 11-20 of which are referred to in Clause 22 as the “sale agreement”) and which provides in material part as follows:

“Purchase and sale of the Gas Plants

11.

Cadogan … agrees to sell and GPS … agrees to buy each of the Gas Plants, completion of such sale and purchase by the passing of property and payment of the agreed price to take place as provided in paragraphs 12 and 17 and 18 or 19 and 20 below (as the case may be).

12.

GPS … will, within 30 days of the date of this Agreement, pay the sum of US$1,000,000 to Cadogan… as part payment of the purchase price for the Gas Plants (being a sum of US$500,000 in respect of each Gas Plant).

13.

Pending passing of property in the Gas Plants to GPS … and payment of the total price:-

Pursuant to Clause 12, GPS duly paid the sum of US$1m within 30 days of signing the Settlement Agreement. As contemplated by Clause 13.1.1, GPS also actively sought to market the Gas Plants. However, despite potential interest from various third parties, attempts to find a buyer foundered and, in the event, no New Supply Contract (as defined) was entered into during the 10 month period referred to in Clause 19 (i.e. by 14 August 2010).

Meanwhile, in addition to the payment of the sum of US$1m under Clause 12, GPS paid the following sums viz (i) 12 December 2010: US$99,965.24; (ii) 27 December 2010: US$2,499,990.45; (iii) 4 January 2011: US$2,999,990.44. Thus, the total amounts paid by GPS to Cadogan total US$7,499,946.13 (for present purposes, say US$7.5m). However, GPS did not pay the further sums due under sub-clauses 19.2 and 19.3 namely US$5 million in respect of each Gas Plant in February 2011 and May 2011. Nor has it paid any further amounts. It is common ground that as a result of such non-payment, Cadogan was entitled to exercise the right of “rescission” under Clause 22; and, for the avoidance of doubt, it is also common ground that the term “rescission” is not intended to refer to rescission ab initio but rather to contractual termination of the Sale Agreement.

By a notice on 19 July 2011, Cadogan informed GPS of its intention to terminate the Sale Agreement if the outstanding payments were not made within 14 days. By a letter dated 1 August 2011, Cadogan agreed to extend the deadline for payment (and the date on which its notice of termination would take effect) to 9 August 2011. GPS made no further payments and Cadogan notified GPS, by letter dated 10 August 2011, that its termination notice therefore took effect as of 9 August 2011. It is common ground that the Sale Agreement was thereby effectively terminated and property in the Gas Plants has remained throughout with Cadogan.

Following termination and with the acquiescence and indeed encouragement of Cadogan, GPS continued actively to market the Gas Plants and to seek to find a suitable buyer. These efforts (both before and after August 2010) appear from the voluminous documents included in the trial bundles and also the evidence of Mr Prescott who joined GPS in December 2007 as Director of GPS-Singapore and became the group’s Chief Executive Officer in May 2010. However, despite these considerable efforts over more than 3 years, the Gas Plants remain unsold even now – although Mr Prescott’s evidence was that negotiations were still continuing with a number of potential buyers and that he remained optimistic that a sale could be achieved within the relatively near future.

Against that background, the main issues which arose between the parties were as follows:

As to the value of the Gas Plants, the parties served reports from two experts both of whom gave oral evidence and were cross-examined viz. on behalf of Cadogan, Mr Jan Paul van Driel, and, on behalf of GPS, Mr Philip Nutman. However, late in the trial in the course of final submissions, I was informed that the parties had agreed that Cadogan’s claim for damages should be adjourned to give further time to sell the Gas Plants and thereby possibly narrow the issues in that context. Thus, it is unnecessary for me to determine Issue 4 although, as appears below, the value of the Gas Plants is, at least on one view, potentially relevant to Issue 3.

It is convenient to consider these two issues together because both Mr Stanley QC and Mr Bools QC accepted that, in principle, these issues stood or fell together. In summary, such consideration involves the following main points viz

In summary, GPS says that it was a ‘condition’ of the payment of those instalments that were paid that there be no rescission under clause 22 and that sums accrued due and payable but not paid prior to rescission were, as a matter of construction and by virtue of the rescission, no longer due and payable. In particular, Mr Bools QC submitted as follows:

Ultimately, these questions turn on the proper construction of the contract: see, in particular, the most valuable analysis by (the young) Jack Beatson in Discharge For Breach: The Position of Instalments, Deposits and other Payments due before Completion, [1981] 97 LQR 388. On this basis, I am unable to accept Mr Bools QC’s submissions in this context. In particular, as submitted by Mr Stanley QC, it seems to me that Clause 22.2 expressly provides that rescission shall be ‘without prejudice … [to] any rights accrued to either Cadogan… or GPS….under the sale agreement’. At the time of rescission, Cadogan had accrued rights to be paid all the outstanding instalments. In my judgment, to treat them as conditional, as GPS seeks to, runs counter to the plain language of the agreement. When the Sale Agreement was “rescinded”, Cadogan had acquired accrued rights to be paid, but GPS had not yet acquired the right to receive title to the plants. That was the status quo at the time of the rescission, and the parties expressly agreed in effect that rescission should leave matters where they stood. If that is right, and given the parties’ agreement that all sums paid and payable at the date of rescission stand or fall together, it must necessarily follow that Cadogan were and are also entitled to retain the former as well as the latter.

In response, Mr Bools QC submitted that the words relied upon by Mr Stanley QC in Clause 22.2 of the Sale Agreement merely state the effect of the common law i.e. a contract which is terminated for breach ceases to have any effect prospectively but incurred rights and obligations persist. However, Mr Bools QC submitted that (i) this begs the question as to what rights were accrued to Cadogan prior to its termination of the Sale Agreement; (ii) any right which Cadogan acquired to retain (or to obtain) the pre-payments was conditional on the completion of the sale i.e. the transfer of property; (iii) if any accrued right of Cadogan to retain (or to obtain) the pre-payments was conditional then, even though that right accrued to Cadogan prior to termination, it is only entitled to retain (or to obtain) the payments if the condition subsequent is satisfied; but (iv) that became impossible on the termination of the Sale Agreement.

Although this argument was advanced most persuasively by Mr Bools QC, I am unable to accept it. In particular, I do not consider that Clause 22.2 can properly be ignored or side-lined on the basis that it does no more than set out the common-law position. On the contrary, it seems to me that as a matter of construction, the wording of Clause 22.2 was included to make plain that Cadogan’s accrued rights were to be unaffected by the exercise of the right of termination; and that such accrued rights must necessarily include the right to recover the outstanding payments and, given the parties’ agreement, also to retain amounts already paid – although I accept that such right might nevertheless be overridden by the grant of relief from forfeiture on equitable grounds which I consider further below.

This conclusion is, in my view, supported by the fact that Clause 22 expressly provides that in the event of termination, Clause 13 shall cease to apply. So the draftsman was well able to and did address the important question of the consequences of contractual termination on existing obligations which formed part of the Sale Agreement. I fully recognise that this argument cannot be taken too far because Clause 13 is concerned generally with the rights and obligations of the parties pending passing of property and is therefore not limited to accrued rights existing at the date of termination. However, the basic point remains. In addition, it is noteworthy that, unlike Clause 13, the parties did not agree to disapply Clause 21 after rescission which is, at the very least, consistent with the views expressed above.

In my judgment, this conclusion is also supported by commercial considerations given, in particular, the terms of the Recitals and the general structure of the Sale Agreement which formed part of the overall Settlement Agreement. Contrary to Mr Bools QC’s submissions, it does not seem to me that such matters can properly be ignored. Further, it seems to me plain from the alternative scenarios addressed by Clauses 17 and 19 of the Sale Agreement that the parties obviously contemplated and expressly provided (in Clause 19) for the possibility that the Gas Plants might remain unsold after the stipulated 10 month period. Having regard to all of the foregoing, it seems to me uncommercial in the extreme that Cadogan’s accrued rights to the monies paid and outstanding immediately prior to rescission should in effect self-destruct and be replaced with a claim in damages when the right to rescind is exercised. I do not consider that this point is answered by Mr Bools QC’s response i.e. that Cadogan only has itself to blame for such self-destruction because, if it wished, Cadogan could have held back from exercising the right of rescission, kept the Sale Agreement alive and, in due course, sued for the full price and/or specific performance. In my view, any suggested unconscionability that might arise by the exercise of the right of rescission and the possibility of Cadogan retaining the sums paid and obtaining recovery of the payments outstanding at the date of rescission as well as keeping title to the Gas Plants can be addressed adequately by granting relief against forfeiture in such terms as might be just.

Thus, it is my conclusion that as a matter of construction, Cadogan is prima facie entitled to retain the sum paid of (say) US$7.5m and to recover the further payments outstanding at the date of rescission i.e. US$20m.

In summary, it was GPS’s case that this conclusion was in effect defeated because there was here a total failure of consideration.

By way of introduction to this part of his argument, Mr Bools QC noted that Stable J. decided Dies on the basis of the parties’ contractual intention and the fact that the payments made were not deposits or earnests to guarantee performance; and that although the learned Judge was invited to decide the case on the basis that the payments were recoverable because consideration had wholly failed, he declined to do so. Nevertheless, Mr Bools QC drew my attention to the analysis by Burrows, The Law of Restitution (3^rd Ed 2011), pp.354-5 where it is argued most persuasively that Stable J. did so because, as the case predated the House of Lords’ decision in Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd [1943] A.C. 32, he was bound to follow Chandler v. Webster [1904] 1 K.B. 493 which required a contract to have been void ab initio for a claim for money had and received to succeed on the basis of a total failure of consideration; but that following Fibrosa, which decided that a claim for restitution of a part payment of a purchase price could be brought even if the sale contract was not void, but (in that case) frustrated, it follows that the buyer’s right to reclaim such pre-payments is equally explicable in unjust enrichment terms as it is as a matter of contractual construction. Prof. Burrows may well be right; but it remains to consider the merits of GPS’s case in the present context.

Mr Bools QC also submitted that a total failure of consideration arises when the promised performance wholly fails, even if that failure of performance results from a breach by the reclaiming party, relying upon the decision of the Court of Appeal Rover International Ltd v. Cannon Film Sales Ltd [1989] 1 W.L.R. 912. For present purposes, I am prepared to assume (but do not decide) that this is or at least may be so.

In any event, Mr Stanley QC submitted that in order to give rise to any cause of action for restitution, the consideration must have wholly failed: see Mitchell et al, Goff and Jones on the Law of Unjust Enrichment (8th ed, 2011) para 12-16; Giedo van Der Garde BV v Force India Formula One Team Ltd [2010] EWHC 2373 (QB) [359]; Stocznia Gdanska [1998] 1 WLR 574 at 588D-E; and that the consideration here had not wholly failed. In particular, he submitted that it was not right to say that the pre-payments were simply consideration for the transfer of title to the Gas Plants; that, on the contrary, they were part and parcel of an overall settlement agreement; and that even within that part of the agreement dealing with sale, GPS had already enjoyed rights (notably the right to attempt to find a third party buyer for the Gas Plants).

In response, Mr Bools QC relied upon a passage in Rover International Ltd v. Cannon Film Sales Ltd [1989] 1 W.L.R. 912 at p923B-D:

“When referring to the provision of consideration in this context, in the same way as in the context of a failure of consideration discussed earlier in the Rover appeal, one is not referring to the original promise to perform the contract. The question is whether there was any consideration in the nature of part performance for which the instalment was payable.” (emphasis added)

In addition, Mr Bools QC relied upon a passage in Goff and Jones on the Law of Unjust Enrichment, para 12-24: “…although the claimant might have received some benefit, if that benefit does not form part of what was understood to be given for the payment, the claim for total failure of basis remains intact: Comptoir d’Achat et de Vente du Boerenbond Belge S/A v Luis de Ridder Limitada (The Julia) [1949] A.C. 293…”. Thus, Mr Bools QC submitted that Cadogan’s plea that consideration has not failed is doomed.

Again, purely for the sake of argument, I am prepared to assume (without deciding the point) that this is a case where it might be said that there was here a failure of consideration in the nature of part performance for which the particular instalments were payable. Nevertheless, as submitted by Mr Stanley QC, in a contractual case, if a contract provides that one party can obtain or retain a benefit even if a contractual provision for termination is exercised, there has been no relevant failure of consideration: see Goff and Jones on the Law of Unjust Enrichment, para 12-19. Further, in any event, where the contract has explicitly provided for the circumstances in which benefits will be or will not be returned, its provisions govern: see Goff and Jones on the Law of Unjust Enrichment, para 3-28. Here, for the reasons given above, it is my conclusion that the contract expressly governed the matter and provided that accrued rights should not be affected by rescission under clause 22. Accordingly, if I am right with regard to the proper construction of the Sale Agreement, there is no room for the actual or putative restitutionary claim on which GPS relies. Indeed, on the basis that the premise is correct, I did not understand that Mr Bools QC suggested any different conclusion.

For these reasons, I reject Mr Bools QC’s argument based upon total failure of consideration.

In essence, Mr Bools QC submitted that if the pre-payments by GPS under the Sale Agreement are non-refundable as a matter of construction, then GPS prima facie forfeits those payments as a result of its breach in not paying the full price; and that, if that is the case, then the implied forfeiture of the pre-payments provided for by the Sale Agreement is unenforceable as a penalty. In support of that submission, Mr Bools QC relied on a passage in Treitel, The Law of Contract , 13^th Ed 2011 (ed Peel) §20-149:

“A deposit is distinguishable from a penalty on the grounds that it is payable before, and not after breach. But the function of the two devices is similar: the only difference between “a guarantee that the contract shall be performed” and “a payment of money stipulated as in terrorem of the offending party” lies in the emotive force of the words used. The law as to penalties can therefore apply to deposits. In the Workers Trust case, for example, a contract for the sale of land provided for the payment by the purchaser of a deposit of 25 per cent of the price and for forfeiture of that deposit in the event of the purchaser’s default. After the purchaser had paid the deposit and then failed to complete on the due day, the vendor terminated the contract and purported to forfeit the deposit; but the Privy Council held that the deposit was not a reasonable pre-estimate of the loss which the vendor was likely to suffer in consequence of the default, that the deposit was therefore penal, and that it must be paid back to the purchaser. On the other hand, where the deposit is reasonable in relation to the loss likely to be suffered, it can be forfeited, particularly if the loss is such that it cannot be accurately assessed in advance.”

In addition, Mr Bools QC relied upon a further passage in Treitel at paragraph 20-150, with regard to what he stated was the well-established exception to these principles viz. that a deposit of 10% in respect of a sale of land is regarded as reasonable and not subject to striking down as a penalty, even if it is not in the circumstances a reasonable pre-estimate of loss. All of the points made in these passages are, submitted Mr Bools QC, supported by the observations of the Privy Council in the authority cited, Workers Trust & Merchant Bank Ltd v. Dojap Investments Ltd [1993] A.C. 573, in particular the following passages in the speech of Lord Browne-Wilkinson:

“……In general, a contractual provision which requires one party in the event of his breach of the contract to pay or forfeit a sum of money to the other party is unlawful as being a penalty, unless such a provision can be justified as being a payment of liquidated damages being a genuine pre-estimate of the loss which the innocent party will incur by reason of the breach…….Ancient law has established that the forfeiture of such a deposit [ie a customary deposit of 10%]... does not fall within the general rule and can be validly forfeited even though the amount of the deposit bears no reference to the anticipated loss to the vendor flowing from the breach of contract…..” [p578E-F]

“…..In the view of their Lordships these passages[i.e. those previously cited from Stockloser v. Johnson [1954] 1 Q.B. 476 and Linggi Plantations Ltd v. Jagetheesan [1972] 1 M.L.J 89] accurately reflect the law. It is not possible for the parties to attach the incidents of a deposit to the payment of a sum of money unless such sum is reasonable as earnest money…...” [p579B-G]

“…..In the view of their Lordships, since the 25 per cent. deposit was not a true deposit by way of earnest, the provision for its forfeiture was a plain penalty. There is clear authority that in a case of a sum paid by one party to another under a contract as security for the performance of that contract, a provision for its forfeiture in the event of non-performance is a penalty from which the court will give relief by ordering repayment of the sum so paid, less any damage actually proven to have been suffered as a result of non-completion: Commissioner of Public Works v. Hills….” [p582D-E]

Thus, Mr Bools QC submitted as follows:

Again, although these arguments were advanced by Mr Bools QC most persuasively, I am unable to accept them broadly for the reasons advanced by Mr Stanley QC. In particular, as Mr Stanley QC submitted, the essence of a penalty is that it is a provision with the predominant purpose of deterring breaches of contract; and therefore the penalty principle applies only to provisions which take effect on breach. The rule does not apply to sums which become payable on events other than breach: McGhee et al (eds), Snell’s Equity (32nd ed, 2010) at 13-002; Export Credits Guarantee v Universal Oil Products Co [1983] 1 Lloyd’s Rep 448, 458 per Slade LJ; approved by the House of Lords [1983] 1 WLR 399.

Here, the obligation to pay the instalments was not triggered by breach in any way. It preceded and was quite independent of any breach. Accordingly, in my judgment, it is not capable of being a penalty. GPS’s true complaint is not and cannot be that the obligation to pay that sum was imposed to deter breach, but that no right was given to obtain absolution from compliance with the accrued obligation to pay it when the contract was rescinded. The absence of such a right is not capable of converting a sum due in debt for reasons unrelated to any breach into a sum payable to deter breach.

I recognise that some at least of the passages cited above from Workers Trust suggest that the penalty principle is not as limited as I have stated and potentially applies even to a contractual provision requiring payment of a sum of money not dependent on any breach but which (after it becomes payable and/or is paid) is subsequently liable to forfeiture by reason of some later breach i.e. typically a “deposit”. The difficulty is specifically addressed by the editors of Chitty on Contracts, 32^nd Edition, Vol 1, para 26-193 where, after quoting from the speech of Lord Browne-Wilkinson in Workers Trust at p578, it is stated: “However, the rules applied in that case differ from the penalty rules; and modern English courts do not appear to apply the penalty rules to deposits or clauses providing for forfeiture of sums paid.” I agree. In particular, it is, in my view, important to read the passages in the speech of Lord Browne-Wilkinson in the context of the particular facts of that case and the specific relief sought viz. specific performance alternatively relief against forfeiture: see, for example, [1993] AC 573, 578A. The terms of the order made (see p583B-D) are also of interest. Moreover, although there is no doubt that the penalty principle and the court’s power to grant relief against forfeiture are often closely aligned, they are distinct and operate very differently. In particular, whether or not a contractual provision is liable to be struck down as a penalty is to be determined as a matter of construction viewed as at the date of the contract. By contrast, the court’s power to grant relief against forfeiture depends upon the exercise of the court’s equitable jurisdiction having regard to the conditions existing when that relief is sought.

For these reasons, I remain of the view that the penalty principle has no application to the obligations on GPS to make the prepayments.

I should mention that Mr Stanley QC advanced a further alternative argument. In particular, he submitted that even if the penalty principle potentially applied, nevertheless the pre-payments here were not a penalty. In particular, he submitted that the classic approach to that question, as set out in Dunlop Pneumatic Tyre Co v New Garage Motor Co Ltd [1915] AC 79, and re-stated in modern terms in Murray v Leisureplay plc [2005] EWCA Civ 963, requires one to ask (the burden being upon the party seeking to set the clause aside) whether the provision was (objectively) ‘in terrorem’ or, in modern terms, whether it was objectively intended to have a deterrent or a compensatory function. On this basis, Mr Stanley QC submitted that GPS’s argument assumes that the parties must have contemplated that the Gas Plants had a substantial value, so that payment of the sum due would be practically bound to exceed Cadogan’s loss. However, Mr Stanley QC submitted that that begs the question. In particular, he submitted that the obligation to pay instalments arose only after GPS had marketed the Gas Plants for at least 10 months and failed to secure a buyer for them; that the plants were not required for Cadogan’s own purposes; that Cadogan was in a worse position to market the plants than GPS was; that it would incur expenses in doing so; that the value was very uncertain; that in those circumstances payment of the outstanding instalments in full was likely to be justifiable; and that within the ‘generous margin’ allowed to parties before a provision is treated as penal (see Murray v Leisureplay plc [2005] EWCA Civ 963, at [43] (Arden LJ) and [114] (Buxton LJ)), the provisions in question cannot be regarded as penal rather than compensatory. There is, in my view, much force in these submissions. However, it is unnecessary to express any concluded view on this point because, for the reasons stated above, it is my view that the penalty principle has no application to the relevant prepayments in this case.

In considering this part of the case, I propose to assume that Cadogan is, as a matter of construction, entitled to retain the sum of (say) US$7.5m and to recover in debt the further sum of US$20m, those two sums totalling (say) US$27.5m. Ignoring all questions of interest etc., this would leave a balance outstanding of (say) US$10m (i.e. US$37.5m – US$27.5m) which Cadogan would have been entitled to receive by way of the contract price. It is in these circumstances that it is necessary to consider whether or not GPS is entitled to relief against forfeiture.

As stated in Snell’s Equity, 32^nd Edition, para 13-015, it is likely to be very difficult to establish a case for relief against forfeiture in a commercial context involving a freely negotiated contract; and there is a strong view that the form of any such relief should generally be limited to giving the contract-breaker more time in which to pay the sum he had failed to pay on time. This depends in part on the debate between Denning LJ and Romer LJ in Stockloser v Johnson. In the event, it is unnecessary to resolve that debate because Mr Stanley QC accepted that in the circumstances of the present case and given Cadogan’s rescission pursuant to Clause 22, the court did have jurisdiction to grant relief against forfeiture and that such jurisdiction went beyond simply giving GPS more time to pay; and I am prepared to proceed on that basis.

However, this gave rise to an important dispute between the parties. In particular, the questions arose: “What forfeiture ?” and “What relief ?” Mr Bools QC answered these questions by saying that Cadogan were, in effect, seeking to forfeit the sum of US$27.5m; and that the court should grant relief against such forfeiture pending the sale of the Gas Plants by ordering the return of the sum of US$7.5m to GPS and refusing to allow Cadogan to recover the further sum of US$20m in debt.

In my judgment, that is not the correct approach. As stated above, I am content to proceed on the basis that the court has jurisdiction to grant relief against forfeiture. However, that jurisdiction rests on equitable principles and, as stated by Denning LJ in Stockloser v Johnson, such relief will be granted “…on such terms as may be just….”. Here, it seems to me that it would be contrary to justice to adopt the course urged by Mr Bools QC in particular because (i) the premise upon which I am proceeding is that Cadogan are prima facie entitled to the sum of US$27.5m; (ii) unlike the example of the necklace in Stockloser v Johnson and notwithstanding the efforts made over more than 3 years, the Gas Plants in the present case have not been sold; and (iii) the present value of the Gas Plants and the price that might be achieved in any sale whether by private sale or auction is uncertain. I accept that the position might have been otherwise if the Gas Plants had previously been sold to a third party at a price “out of all proportion” to the damage suffered by Cadogan; or if I had concluded that the Gas Plants had a certain value which was similarly “out of all proportion” to such damage. But that is not so i.e. the Gas Plants have not yet been sold; and the parties have now expressly agreed (no doubt for their own respective good reasons) that I should not determine their value.

In such circumstances, it seems to me that any demands of equity and justice are fully satisfied by maintaining the contractual scheme i.e. upholding Cadogan’s rights to retain the sum paid of (say) US$7.5m and to recover the further sum of US$20m in debt and ordering that any further net sums that might be recovered by way of sale of the Gas Plants up to a maximum of US$10m (plus any interest to which Cadogan would be entitled) be paid to Cadogan with the balance (if any) paid into court or otherwise secured pending further order (or agreement) as to the proper disposal of such monies. In addition, I will grant both parties liberty to apply to vary such order in the light of any change of circumstances that may arise in the future. As already stated, I will also adjourn Cadogan’s claim for damages, again with liberty to apply.

Counsel are accordingly requested to agree a draft order to reflect the terms of this Judgment for my approval. I will, of course, deal with any remaining outstanding issues.