Silver Queen Maritime Ltd v Persia Petroleum Services Plc

The May 2008 contract contains obligations on the part of PPS to pay mobilization and demobilization fees, and day rates during production and standby.

Clauses 1.1 and 1.2 obliged PPS to make payments to Silver Queen, including a fee of 650,197 Euros for mobilization and daily operational fees of about 100,000 (99,536) Euros, for work done and time spent on the project from 15 July 2008. In accordance with clause 2.1 invoices were to be rendered monthly for these fees, and were to be paid by PPS within two weeks of their being rendered.

There is no express term to the effect that payment was dependent upon PPS receiving monies from IOOC. Nor, in my judgment, can any such term be implied.

Clause 25(1) of the May 2008 contract is an “entire agreement” clause. It provides:

“This Contract constitutes the entire agreement between the Parties hereto with respect to the subject matter hereof, and supersedes any understanding, oral or written heretofore entered into or on account of the Parties and may not be changed, amended or otherwise modified except in writing signed by a duly authorized officer of the Parties.”

In his evidence Mr Tabassi accepted that PPS had contractual obligations to Silver Queen which did not depend on what IOOC did. I am satisfied that both parties understood the contractual position, which was that PPS had an obligation to pay the contract sums to Silver Queen if Silver Queen performed as the contact required it to perform. Once the issue of unpaid fees under the May 2008 contract had arisen, and after this had been discussed between the parties at a meeting on 14 December 2008, Seabird’s Chief Operating Officer, Mr Higraff, sent an e-mail to Mr Tabassi on that day, stating:

“… To us it seems that the contract between PPS and Seabird is entirely clear with regards to how compensation is to be calculated, and the invoiced amounts are in our opinion exactly as per the contract. We understand that the longer duration of the survey was not predicted and corresponding cost, hence, not taken into consideration. Our comments are that the longer survey duration is caused by the following factors:

-

Weather, wind currents.

-

Excessive fishing activity in the survey area, combined with poor performance of the provided chase boats.

-

Shooting only in one direction upon clients request to improve near shore coverage. …”

Some evidence was given about the pre-contractual negotiations between the parties. It is clear that, during those negotiations, PPS gave Seabird various presentation materials designed to show that PPS and its subsidiaries and associated companies were successful companies with substantial business. In his witness statement Mr Tabassi (in paragraph 11, as amended) said that Silver Queen knew from the outset that KEPS

“… was just a services company. Mr Mangeroy [Seabird’s Vice-President, Business Development] … asked me while we were negotiating the Contract who our client was and I told him it was the IOOC. The Claimant therefore knew that, although Persia Petroleum was engaging the Claimant, the services were being provided to the IOOC, our client.”

and (in paragraph 14, as amended):

“… during the pre-contract discussions with the Claimant, I explained to Mr Mangeroy and David Hemingway (Operations Manager of the Claimant) what the structure was of our group of companies and gave them a brochure about the group. They would have known from my explanation that the Defendant was just a UK vehicle without assets.”

Mr Richard Jacobs Q.C., who appeared for Silver Queen, submitted that the late changes to those parts of Mr Tabassi’s witness statement, substituting the reference to Mr Mangeroy for the reference to Mr Higraff in the original version, were unfair, having been made only after Silver Queen had decided not to call Mr Mangeroy to give evidence; and that this discredits Mr Tabassi and casts doubt on the reliability of his evidence as to the pre-contractual negotiations. Mr Orlando Fraser, who appeared for PPS, rejected this suggestion, observing that PPS had wanted Mr Mangeroy to give evidence. I accept that the lateness of this change to Mr Tabassi’s witness statement was unfortunate and could have been avoided. Where the responsibility for this lies I cannot be sure, but I am prepared to give Mr Tabassi the benefit of any doubt that may be said to arise for his own credibility. In any event it seems to me that, for the purposes of my consideration of the preliminary issues nothing turns on this point. I accept Mr Jacobs’ submission in closing that for the purposes of the issues before the court the pre-contractual negotiations are, by virtue of the “entire agreement” clause, irrelevant.

Although some evidence has been given about the extent of PPS’s liability under the May 2008 contract, and the degree to which such liability is accepted by PPS, these, I recognize, are matters which are properly the subject of the original proceedings and neither need to be resolved nor ought to be in the determination of the preliminary issues now before me.

The contract between KEPS and IOOC relates to a larger project than the May 2008 contract, embracing onshore as well as offshore exploration. It was only shortly before the trial of the preliminary issues that the contract between KEPS and IOOC, as amended in March 2008, was provided to Seabird. The contract provides for a range of services beyond the marine survey which Seabird was committed to providing under the May 2008 contract. The basis for payment was fundamentally different. It was a lump sum basis, rather than a daily rates basis. The mobilization fee was lower. However, as Mr Jacobs has submitted, that contract and its provisions do not bear on PPS’s liability to Silver Queen, nor do they bear on the preliminary issues which I have to decide. Mr Tabassi acknowledged in cross-examination that the two contracts were not “back-to-back”. In his witness statement (in paragraph 15) Mr Tabassi said:

“… the benefit of working for the IOOC was that the prices they paid for a survey like ours were exceptionally good, and much better than elsewhere, at least at the time KEPS signed its contract with the IOOC. This was, however, significantly earlier than when Persia Petroleum signed for the Contract with the Claimant. Due to sanctions and other reasons, we had to contract with the Claimant at much higher rates than we had contracted with the IOOC.”

As I have said, the work required by the May 2008 contact was performed by Silver Queen between August 2008 and February 2009. The data from the survey have been collected and retained in Abu Dhabi and Dubai. Silver Queen is willing to release the data when it is paid by PPS under the settlement agreement of July 2009 or under the invoices that are the subject of the main proceedings.

As is acknowledged on both sides, the court is not at present concerned with the detail of the complaints made by PPS in the main proceedings, relating to delay in starting the work, slow steaming (or “streaming”), bad weather, and so forth.

Mr Tabassi is recorded as having said at the Kish Island meeting “that PPS does not have funds to cover the outstanding amount agreed of Euro 8.1m, but that they were justified and not disputed…” In cross-examination, when asked whether, although there might be some arguments about disputed elements, there was an undisputed claim approaching or around 8 million Euros, he said that there was until PPS had realized that some offer had been made by Seabird directly to NIOC.

Payment of Silver Queen’s fees was to have been made monthly in advance. However, no payments were made after early October 2008. The last of the payments made was in respect of the day rates for August and September 2008. E-mail correspondence followed. The parties met in December 2008. The amount outstanding, as claimed in the proceedings launched in February 2009, was 9,509,593.74 Euros and 5,252.67 US dollars. Silver Queen continued the work, completed it and exercised a lien on the data.

At the end of 2009 PPS made it plain to Silver Queen that it could not pay what was due under the May 2008 contract unless it, PPS, was paid by IOOC. In his evidence Seabird’s Chief Executive Officer, Mr Isden emphasized that this was what PPS was saying, not what Silver Queen knew to be so. Silver Queen was not aware then of the precise contractual arrangements between IOOC and PPS and KEPS, nor what the position might be under any other contracts which PPS or its subsidiaries or affiliates might have. Seabird’s General Counsel, Mr Holst said in his evidence that shareholders in a company can decide to put more capital into it rather than let it collapse.

Several significant events occurred in December 2008. On 14 December 2008 a meeting between the parties took place in Dubai. On the same day Mr Higraff sent a long e-mail to Mr Tabassi stating among other things that the money PPS owed to Silver Queen at that date, which was said to be approximately 9.5 million US dollars, ought to be paid. It seems that Mr Tabassi did not suggest that Silver Queen’s entitlement to that money depended upon PPS being paid by IOOC. Silver Queen threatened litigation. This was a development which Mr Tabassi described, in an e-mail to Mr Rezazadeh dated 24 December 2008 as “very very dangerous for all group”.

Mr Tabsssi accepted in cross-examination that at this stage he thought that Seabird and IOOC should discuss the matter with each other. On 28 December 2008 IOOC notified KEPS of its intention to terminate the contract between them. KEPS was given 14 days in which to deal with the situation. PPS plainly took this development seriously too. Mr Tabassi acknowledged in cross-examination that he had assumed KEPS was going to have its contract terminated, that the performance bond would be called, and that KEPS would be made bankrupt.

Mr Jacobs submitted, and I accept, that it was obvious that IOOC meant what it said, and that this was understood by Mr Tabassi at the time.

On 4 January 2009 Mr Tabassi spoke to Mr Higraff on the telephone. Evidence about that conversation was given by Mr Higraff and by Mr Tabassi. Both generally and on the detail of what was said in the course of that conversation I found Mr Higraff an entirely straightforward and credible witness. I agree with Mr Jacobs’ submission that Mr Higraff answered every question put to him both fairly and clearly.

Mr Tabassi’s evidence, as a whole, I found less than entirely convincing. He tended, at times, to avoid answering the questions put to him with a direct and relevant response, sometimes, it seemed, because he was keen to justify the position PPS had adopted in the litigation. Mr Jacobs submitted that there are several aspects of Mr Tabassi’s evidence which appear to cast some doubt on his credibility. For example, Mr Jacobs referred to Mr Tabassi’s attempt in paragraph 66 of his witness statement, which in my view was unconvincing, to explain what he had said in his e-mails of 14 and 28 December 2009 to Mr Isden apparently acknowledging Silver Queen’s entitlement to pursue the proceedings; his assertion in paragraph 14 of his witness statement that Silver Queen was told when the May 2008 contract was being agreed, that PPS was “just a UK vehicle without assets”, which seems hard to reconcile with the impression conveyed in the presentation materials provided to Silver Queen; his instructions to Memery Crystal to write to King & Spalding on 16 June 2009, indicating that payment would promptly be made when it would seem that he knew that there was a substantial reason why no such payment would be made, which was that IOOC had very recently, on 14 June 2008, given notice of termination of its contract with KEPS, a matter not revealed in his witness statement; and his reference in his letter of 12 April 2009 to NIOC to a hearing “in London court that will be held on April 20, 2009” despite the fact that he knew no such hearing was to be held. In the light of those matters I accept that it is right to approach Mr Tabassi’s evidence with some caution.

In any event, since I accept Mr Higraff’s evidence as being wholly reliable in every respect, it is his account of the telephone conversation of 4 January 2009 that I prefer where it differs from Mr Tabassi’s. I accept that Mr Higraff recalled the conversation well, partly because, as he remarked, it was unusual. He said that it probably lasted about 15 to 20 minutes.

Mr Higraff was asked whether, in approaching the IOOC Silver Queen was acting not only in its own independent commercial interests but also in PPS’s interests because Silver Queen had a contract with PPS, under which PPS had a liability to Silver Queen, so that, if Silver Queen could get NIOC to pay it, PPS would be relieved of its obligations under the contract. Mr Higraff’s response was this:

“I guess that was the purpose with Tabassi asking me to go and talk to IOOC. Actually, I have wondered a bit why he did that after because it was so unusual, because we are his subcontractor and the normal way to deal with a matter like this would be that the contractor would call the subcontractor saying, “We have to go and see my client. You are important because this has to do with you, you have to come with us. What is a convenient date? That would be the normal way. This was highly unusual but what we felt we did was actually what he told us to do in the conversation. Also, … we didn’t feel we’d been … out of line in any way, because in the meeting on December 14 they had told us that the maximum they thought we could expect to get as compensation for the outstanding 10 million was 4 million. So we had no reason to assume, with that as a background and with the information during the phone call on 4 January, we had no reason to expect that he would object to us negotiating a better deal with IOOC.”

Mr Higraff was then asked:

“As long as you involved them in the end in the settlement?”

And his response was this:

“That was always the case and we had various discussions about that internally, how we had to do that, because it would have to be like triangular, the contract. We would make the agreement first with IOOC, because without IOOC’s consent it would be pointless to discuss with KEPS, PPS. They had made that very clear.”

Mr Higraff was clear in his recollection that the words “out of the picture” were used by Mr Tabassi. I accept that they were. Mr Higraff also remembered Mr Tabassi saying that Seabird was now on its own. Again, I accept that this, or something very like it, was said. Mr Tabassi’s account of the conversation in his witness statement (in paragraph 21) is succinct:

“I spoke to Mr Higraff about the letter [from the IOOC] and during the course of the conversation, said that it might be good if the Claimant spoke directly to the IOOC and not just ourselves as it would show the Claimant was genuinely holding the data pending payment of all its invoices and that the figure we were asking the IOOC to pay was correct and transparent.”

Mr Tabassi’s witness statement continues in this way:

“22.

I was expecting the Claimant would, in response to this suggestion, ask us to arrange a meeting with the IOOC which KEPS/the Defendant would also attend or give us a letter that we could then deliver to the IOOC with a covering letter from ourselves. I expected us to pre-approve any letters they wanted to send and that we would all work together on this.

23.

Although I made this suggestion, the Claimant’s representatives did not come back to on it. I therefore understood they had not spoken to the IOOC or communicated with them directly.

24.

I did not expect them to take any material steps or make any settlement proposals unilaterally. I trusted them to liaise with us and to behave properly because we both had the same interest in getting the money from the IOOC.”

Mr Tabassi accepted in cross-examination that PPS would have been “out of the picture” if NIOC had gone ahead with the threat of bankruptcy. He stated that he had said “it’s better that you talk to NIOC so probably you can do a better deal”.

Considering all of the evidence that was given about the conversation of 4 January 2009, I accept what Mr Higraff had to say about it. I find that the bankruptcy of KEPS was presented to him as something that would soon happen, or was highly likely to; that, since this is what Mr Tabassi thought would happen, it was what he told Mr Higraff; and that, for this reason, Silver Queen was being told by Mr Tabassi that it should seek to resolve matters for itself. There was no need for IOOC to be told by Silver Queen or Seabird that Seabird was holding on to the survey data until its invoices were paid. IOOC knew this, as was plain from the letter of 28 December 2008. I do not accept that, whatever he might have expected, Mr Tabassi asked to be kept informed of the direct discussions he was proposing, nor that he sought to limit the scope and potential outcome of such discussions, nor that he agreed with Mr Higraff that Silver Queen was going to act on behalf of PPS in those discussions. His not asking to be kept informed about the discussions is entirely consistent with his wanting Seabird to resolve matters for itself by dealing directly with the IOOC or the NIOC, or both. Mr Tabassi did not arrange a meeting of all three parties at that stage, nor did he offer to do so. And it is not necessary to speculate about the likelihood of such a suggestion finding favour with IOOC or NIOC.

After the conversation between Mr Tabassi and Mr Higraff, and until discussions about the settlement of the litigation begun in February 2009 got under way in June, there was not a great deal of contact between Silver Queen and PPS. Some e-mail correspondence passed to and from Mr Hemingway, Silver Queen’s Vice-President of Operations, with copies going to Mr Isden and Mr Higraff, in January 2009. Nothing seems to have been communicated in either direction about the progress of any discussions with IOOC or NIOC. This is consistent with PPS having at that stage played no role in trying to resolve the dispute through proactive efforts of its own, or, at least, with Silver Queen having perceived this to be so.

The present proceedings against PPS were begun on 19 February 2009. After the proceedings were launched, two offers were made, in writing, by Silver Queen to IOOC and NIOC, the first on 22 February 2009, after a meeting on the same day, offering a rebate of 2.5 million Euros, the offer to remain open until 22 April 2009; the second on 4 May 2009, offering a rebate of 3.5 million Euros, the offer to remain open until 19 May 2009. Neither offer was accepted.

I accept, as was submitted for Silver Queen, that both offers were made in good faith; that both reflected the pressure Silver Queen was under, having done a large amount of valuable work for which it had not been paid; and that the offers were quite properly made against the background of the conversation between Mr Tabassi and Mr Higraff on 4 January 2009.

I also accept that Silver Queen did not consciously decide not to inform PPS about the meetings that were held with IOOC. Mr Isden acknowledged in his cross-examination that if the overtures to NIOC had come to anything there would have had to be a tripartite agreement involving PPS. But that did not happen. Silver Queen’s efforts with IOOC and NIOC were abortive; no agreement was reached.

It is not entirely clear, on the material before the court, quite what happened between PPS and IOOC and NIOC between January and July 2009. However, the broad picture seems to be this. Throughout June and July, while the settlement of the litigation was being negotiated, PPS had no assurance that any money to fund that settlement would be coming from IOOC and NIOC. Such indications as there were went the other way. By early May it appears that PPS was being accused by IOOC of faking invoices. On 14 June IOOC terminated its contract with KEPS, stating that it would retain the guarantee. On 13 July PPS seems to have attempted to arrange a meeting with IOOC. Four days later, on 17 July, the terms of the settlement with Silver Queen were agreed. There is no evidence to indicate that at this stage IOOC was willing to pay KEPS or PPS anything at all. Such evidence as there is points clearly to PPS being well aware that IOOC had not acceded, let alone committed itself, to funding a settlement at any level. This was not disclosed to Silver Queen. On the contrary, PPS was effectively representing, through Memery Crystal, that it would be able to honour the settlement which the parties by then had come to agree.

In his witness statement Mr Tabassi said that “[late] in the night of 21 July 2009/ early morning of 22 July 2009”, after he had signed the Settlement Deed and before it had been signed for Silver Queen, he learned about Silver Queen’s offers to NIOC from Mr Hamid Rezazadeh, the Managing Director of KEPS, Mr Rezazadeh having been made aware of them during a meeting with Mr Najibi of IOOC at which he was trying to get 8.1 million Euros from IOOC to pay Silver Queen. Mr Rezazadeh’s account of what happened (in paragraphs 6 to 11 of his witness statement) was this:

“5.

…I have worked with Ahmad Tabassi to try to obtain payment from the IOOC since around October 2008.

Mr Tabassi said that he was alarmed by this turn of events, as it was now clear that there was no chance of PPS obtaining the 8.1 million Euros from IOOC to satisfy the settlement sum, and that Silver Queen must have known this all along. He therefore immediately instructed Mr Scott of Memery Crystal to inform Silver Queen that PPS was withdrawing from the settlement agreement.

If it were necessary for me to decide whether or not a meeting between Mr Rezazadeh and Mr Najibi did take place on 21 July 2008 I would be prepared to accept that it did. It is, however, difficult to be sure about precisely what happened at that meeting. Whilst Mr Rezazadeh’s evidence as a whole struck me as being broadly reliable, he was clearly intent upon supporting the position adopted by PPS in the litigation. In any event, it is to be noted that although there was, it seems, no contemporaneous e-mail from Mr Rezazadeh to Mr Tabassi explaining what had happened at his meeting with Mr Najibi and this news was apparently conveyed to Mr Tabassi by Mr Rexazadeh in a conversation they had late on 21 July, Mr Tabassi’s e-mail of 22 July (at 8.04 a.m., Australian time) to Mr Stanton of RPS makes no mention of it, nor gives any hint of a problem. I also note that the minutes of the Kish Island meeting refer to Mr Tabassi not having been “formally” – or, in the translation from Farsi, “officially” – aware of Silver Queen’s offers to IOOC and NIOC, though this, I accept, could be seen as consistent with Mr Tabassi having only learned of the offers, at least in the first instance, indirectly. What is clear, however, is that on the morning of 22 July 2008 (UK time) Mr Tabassi spoke on the telephone to Mr Scott of Memery Crystal and instructed him “to pull out of the settlement”.

On 16 June 2009 Memery Crystal wrote to King & Spalding, “without prejudice save as to costs”, stating

“Our client, like yours, is keen to achieve a commercial resolution of this matter. It is with that in mind that we propose a further stay of three months pending the anticipated payment of Persia Petroleum by the National Iranian Oil Company (“the NIOC”) in relation to the work undertaken by Silverqueen.We understand from our client that it has received an assurance from a senior member of the Parliamentary Energy Committee (which has ultimate oversight of the NIOC) that Persia Petroleum will be put in funds to settle Silverqueen’s outstanding invoices. We understand further that the Parliamentary Energy Committee is keen to avoid further damage to the reputation of the NIOC in connection with this matter and, consequently, it is anticipated that Persia Petroleum will be put in funds within three months, with the best case scenario of receipt of funds within one month. …

… In recognition of the delay experienced by Silverqueen in the receipt of funds, Persia Petroleum is prepared to reduce the amount sought by its counterclaim to a figure of [1,405,822 Euros]. Consequently, when it has been put in funds, Persia Petroleum is ready to pay Silverqueen [8,103.771 Euros] and USD 5,252 in full and final settlement of this matter.

…”.

Mr Tabassi stated (in paragraph 29 of his witness statement) that he would never have offered to settle for the sum of 8.1 million Euros if he had known that Silver Queen had already offered to sell the survey data to NIOC for 6.5 million Euros.

On 18 June King & Spalding replied to Memery Crystal’s letter of 16 June, stating:

“… Notwithstanding its contractual entitlements, our client is prepared to accept a net payment of Euro 8,103,771 and USD 5,252 (“the Settlement Amount”) in full and final settlement of all claims between our clients. The Settlement Amount would be payable as soon as your client has funds available to pay this sum, but in any event no later than three months from the date of this letter (the “Long Stop Date”). Our client … is prepared to agree to this provided all efforts are made to pay the Settlement Amount as soon as possible and provided also that your client is prepared, as a gesture of good faith, to make an interim payment of the Settlement Amount, in the sum of Euro 500,000, within three business days of the date of the settlement’s conclusion.…”

On 23 June 2009 Memery Crystal wrote to King & Spalding, stating:

“We write further to your letter of 18 June 2009. Our client recognises that your client has sought in its offer to achieve a sensible commercial resolution of this matter. Our client remains committed to that goal but is not currently in a position to comply with the terms of the offer and must, regrettably, decline it.

…”.

King & Spalding replied to that letter on 26 June 2009, stating:

“…Your client’s decision to decline our client’s settlement offer, as put forward in our June 18, 2009 letter to you, has forced our client to conclude that … your client is not confident of securing the funds necessary to make payment of the settlement amount proposed in your client’s June 16, 2009 letter to our client within the three month timeframe which your client itself suggested.

… [Our] client has authorised us to make the following final proposal to your client:

•

our client is prepared to extend the long stop date for payment of the Settlement Amount (as defined in our June 18 letter) to five months from the date hereof; and

•

our client will also forego the interim payment of 500,00[0] Euros on signature of a binding settlement agreement requested in our earlier letter.…”.

On 1 July 2009 Memery Crystal responded to King & Spalding’s letter of 26 June 2009, stating:

“…We do not agree with the conclusions you have drawn as to our client’s estimates as to when it will be put in funds to settle the outstanding invoices. In fact, our client considers that considerable progress has been made towards it being put in funds as the managing director of the Iranian Offshore Oil Company …

Our client … genuinely appreciates the sensible and flexible commercial approach that your client has taken to this dispute and wishes to reiterate that it is also proceeding in this manner at all times in this matter and will continue to do so as it seeks to secure prompt payment for Silverqueen. However, our client is still not in a position to accept your client’s current offer of settlement and must, regrettably decline it.

As we have stated in previous correspondence, our client remains committed to a commercial resolution of the matter and continues to push as hard as it is able to achieve payment for Silverqueen. As soon as it is able to do so, it will pay Silverqueen and even, if as is likely, the formal litigation process must be resumed, our client still remains committed to a settlement of this matter.”

On 6 July 2009 Memery Crystal followed its letter of 1 July 2009 with another, stating:

“…As we have stated previously, our client is committed to resolving this dispute in a commercial manner and appreciates that your client appears willing to do the same. Our client is therefore prepared to accept your offer of 26 June, save that our client will pay to your client the Settlement Amount in full no later than seven months from the date of signature of a bunding agreement in terms to be agreed.

We look forward to receiving a draft settlement agreement.”

Mr Tabassi said (in paragraph 31 of his witness statement) that, although he was uncomfortable with the concept of a long-stop date, he eventually accepted the period of seven months because he thought that by then PPS would be in sufficient funds from IOOC or NIOC.

King & Spalding wrote to Memery Crystal on 9 July 2009, stating:

“ … [in] the interests of concluding a commercial settlement of this matter, our client is prepared to agree to the requested payment period provided, and this is non-negotiable, such period runs from the date of our client’s revised offer of June 26, 2009 and that our client is then immediately put in funds by your client as soon as your client receives any material infusion of funds itself.

We attach a draft Settlement Deed for your approval. …”

Discussion between the parties as to the detailed terms of the settlement agreement continued. An amended version of the draft deed was sent by Memery Crystal to King & Spalding on 13 July 2009. Terms were eventually agreed, modified wording as to the timing of payment having been suggested by King & Spalding in an e-mail to Memery Crystal dated 15 July 2009. Mr Scott of Memery Crystal responded to Mr Wilson of King & Spalding on 17 July 2009, accepting the amended wording. King & Spalding responded by e-mail on the same day, attaching the revised draft of the Settlement Deed. The last outstanding issue between the parties was thus resolved.

Mr Wilson of King & Spalding, who was not called to give evidence at the trial, stated in paragraph 12 of his second witness statement, in a passage adduced in evidence during Mr Fraser’s cross-examination of Mr Isden:

“It was agreed by telephone conversation between myself and Mr Scott that his client would execute the settlement deed and he would then forward the executed copy of the deed to me by e-mail for signature by my client”.

The Settlement Deed was signed by Mr Tabassi and Mr Cusack, PPS’s Company Secretary, on 20 July 2009. It was sent to Mr Scott by e-mail at 8.28 a.m. (UK time) on 21 July and subsequently by courier under cover of a letter of that date. The Settlement Deed, signed by Mr Tabassi and Mr Cusack, was sent by Mr Scott as an attachment to an e-mail to Mr Wilson of King & Spalding, which went at 5.01 p.m. on 21 July. The e-mail stated:

“Dear Sirs

Please find attached PPS’ signed copy of the Settlement Agreement.

We look forward to receiving a completed Agreement with your clients’ signatures on it as soon as possible.

Further to your voicemail, we will prepare the Tomlin Order for circulation.

Yours faithfully

Memery Crystal LLP”.

Having received Mr Tabassi’s telephone call early on the morning of 22 July 2009 Mr Scott sent an e-mail to King & Spalding at 8.15 a.m., in which he stated:

“Dear Sirs

We have been informed by our client this morning of their discovery at a meeting with the IOOC yesterday that [Silver Queen] has had direct contact with the IOOC twice. We understand that in its first letter to the IOOC [Silver Queen] offered to settle this matter for [7.5 million Euros]. We understand further that in its second letter to the IOOC [Silver Queen] offered to settle for in the region of [6.5 million Euros].

In the circumstances, these actions will make it materially more difficult, if not impossible, to achieve payment of the Settlement Amount by the IOOC. As a result of this non-disclosure and the considerable problems it will cause, our client withdraws immediately from the exchange of the settlement agreement and requires that you return its settlement agreement sent by e-mail yesterday immediately.

Yours faithfully

Memery Crystal”

The next communication in the sequence of e-mails between the solicitors was Mr Wilson’s to Mr Scott, sent at 4.04 p.m. on 22 July, attaching the Settlement Deed, which now bore the signatures of Mr Isden (witnessed by Mr Holst) and Ms. Georgiades for Silver Queen. Mr Wilson’s e-mail stated, simply:

“Dear Sirs

Please find attached the executed Settlement Agreement.

Mr Scott’s immediate response, in an e-mail to Mr Wilson sent at 4.07 p.m. was this:

“Dear Sirs

We refer to our e-mail of this morning withdrawing our settlement agreement circulated by way of exchange yesterday.

On 29 July 2009 King & Spalding sent a letter to Memery Crystal, stating:

“We refer to your e-mail communications of July 22, 2009 in which you state that your client “withdraws immediately from the exchange of the settlement agreement” and “withdraw[s] our settlement agreement circulated by way of exchange yesterday”.

It is our view – and that of our client – that notwithstanding the above referenced communications, a binding settlement agreement between our clients was concluded. Our client expects your client to honour its commitments under this agreement. …”

Memery Crystal responded in a letter dated 10 August 2009, stating:

“… [We] do not, for the record, accept that any concluded agreement was reached, or if it was, that it was enforceable.

As regards there being no concluded agreement, in particular we believe that our client withdrew his consent to the agreement prior to your client applying his signature to the same, and thus no concluded agreement was reached. …

As regards the enforceability of the agreement, clause 5.2 of the settlement agreement expressly enables our client to set aside the agreement for fraudulent misrepresentation.

Although we regret having to point this out, deliberately omitting to inform our client of the detail of your client’s contacts with the IOOC in circumstances where your client would have known how material they would have been to our client’s consideration of the terms of the settlement agreement, would constitute a fraudulent misrepresentation for the purposes of clause 5.2…”

In the form in which it was sent by Memery Crystal to King & Spalding on 21 July 2009 and in the form in which it was sent back to Memery Crystal on 22 July, the Settlement Deed was left undated save for “DATED [ ]July 2009” appearing on its front page and “THIS DEED is made on the [ ] day of July 2009” on page 2.

The Settlement Deed provides for the settlement of the litigation between the parties on the basis that PPS is to pay Silver Queen the sums of 8,103,771 Euros and 5,252 US dollars (“the Settlement Amount”) by the specified date (clause 2.1) and Silver Queen is to deliver to PPS the “Acquisition Deliverables” (as defined in Exhibit A1 “Scope of Work Job Description”) within two business days of the date on which the Settlement Date has been paid to Silver Queen in full (clause 2.2).

Clause 3.1 of the Settlement Deed provides

“With effect from the date of this Deed:

Clause 4.4 provides:

“Each signatory to this Deed warrants that he/she is duly authorised to execute this Deed on behalf of the relevant Party such that the obligations assumed in this Deed will constitute the valid and binding obligations of that Party under English law.”

Clause 5 of the Settlement Deed, under the heading “Entire Agreement” provides:

“5.1

This Deed shall constitute the entire agreement between the Parties in relation to the subject matter hereof and all other terms are expressly excluded. The Parties acknowledge that in entering into this Deed they are not relying upon any statement or representation made by or on behalf of any other Party, whether or not in writing, at any time prior to the execution of this Deed, which is not expressly set out in this Deed.

5.2

The Parties expressly agree that they will not have any right of action in relation to any statement or representations made by or on behalf of any other Party in the course of any negotiations which preceded the execution of this Deed, unless such statements or representations were made fraudulently.”

On page 8 of the Settlement Deed these words appear above the signatures for either party:

“Executed and delivered as a DEED”.

Mr Scott gave evidence which, as one would expect, was fair-minded and plainly intended to assist the court. He did not hold himself out as an expert in the law relating to deeds. Nevertheless, he provided the court with his understanding of the nature and significance of the transaction which had occurred in the present case. This is not to say, however, that that understanding was correct.

Mr Scott said in his second witness statement (in paragraph 13) that his “own intention and expectation, from the outset”, as PPS’s solicitor, was this:

“that a binding concluded settlement would only come into effect when both sides had agreed the wording of and then executed the written Settlement Agreement. Execution could take the form of both parties signing the same Settlement Agreement, with the agreement becoming binding on signature of the second party; or else both parties signing separate counterparts, with the agreement becoming binding upon exchange of signed counterparts, and then dating of them by the solicitors.”

Mr Scott stated (in paragraph 14 of his second witness statement) that he had not made this explicit in his letter of 6 July 2009 to King & Spalding as he “did not feel there was any need”. He said that in all the settlements with which he had dealt this was “standard practice”.

Amplifying his explanation of what he had been doing when dealing with the Settlement Deed, Mr Scott said this (in paragraphs 19 and 20 of his witness statement):

“19.

I did not intend to make a binding contract on behalf of my client [on 17 July 2009], and do not believe that I did so. I was simply asking for a revised version of the draft Settlement Agreement so that I could then check the new wording and the final version of the document and, if happy with it, send it to my client for execution.

Mr Scott explained (in paragraphs 25 to 28 of his witness statement) what he had believed he was doing when he sent the Settlement Deed, signed by Mr Tabassi and Mr Cusack, to King & Spalding by e-mail on 21 July 2009. His explanation was this:

“25.

At no point either before or upon sending this email did I consider that a binding contract had been entered into between the Claimant and the Defendant. What I meant by “completed Agreement” was the Claimant’s signed counterpart. I was expecting to receive that and I was then expecting to agree with King & Spalding that both sides could date the counterparts and a binding Settlement Agreement would then come into effect. It was my intention when sending this email and to the best of my knowledge, that of the Defendant, that the Settlement agreement would become binding only when all parties had signed, exchanged and dated the Settlement Agreement in the normal way.

26.

I understand that it is Silver Queen’s case that by signing and forwarding our counterpart as a deed, my client was thereby bound by all the obligations of the Settlement Deed. I understand that it is also Silver Queen’s case that, if my client’s obligation was conditional on Silver Queen also executing the Settlement Agreement, then pending fulfilment of that condition, my client was not entitled to withdraw from the Settlement Agreement. I do not believe this to be right.

27.

Firstly, legal settlements are never made by one party sending a signed copy of a settlement deed to another. If the parties have agreed to draw up a settlement deed, it is self evident that their intention is that a binding contract will only come into effect when the settlement agreement has been executed by both parties and any further formalities (such as dating the settlement agreement where it is executed by separate counterparts) have been complied with. That certainly was my intention in the present case.

28.

It therefore follows that, if the parties were not bound by the settlement when I sent a copy to King & Spalding of my client’s signed copy, my client was fully entitled to withdraw from the settlement at any time before a binding contract was made.”

When he was cross-examined Mr Scott acknowledged that he had no professional experience of conveyancing. He said that in his handling of the Settlement Deed in the present case, he was proceeding on the basis of an exchange of documents and a subsequent dating. He accepted that the word “exchange” did not appear anywhere in the e-mail he sent to King & Spalding on 21 July 2009, but he insisted that that is what he had in mind. He said that he “had in mind that the Settlement Deed would be signed on counterparts and then there would be an exchange because of where people were geographically located.” He accepted that the clause of the Settlement Deed that refers to counterparts, clause 4.5, states that the document “may” be executed in counterparts, and therefore that it did not have to be executed in that way. He accepted that the Settlement Deed does not in its own terms require exchange. And he accepted that the document states that when it is executed and delivered it is “an original”. He said he was not familiar with the concept of a deed being given in escrow. He confirmed, however, that Mr Tabassi and his colleague had executed the Settlement Deed; that he (Mr Scott) was PPS’s agent, and that he was acting in accordance with his instructions as he understood them by giving the Settlement Deed, signed and executed, to other side.

Mr Tabassi said in his witness statement (in paragraphs 36 and 37):

“36.

Having been involved in various contractual and legal matters, my understanding was that the Settlement Agreement would only be a legally binding agreement when both we and the Claimant had executed it. I assumed and expected that both we and the Claimant had executed it. I assumed and expected that both we and the Claimant would sign the same version of the Settlement Agreement and that it would then become a binding agreement. I did not expect nor intend a binding contract to come into existence by simply sending this signed Settlement Agreement to the Claimant.

Mr Holst is a lawyer trained in Norway, a member of the Norwegian Bar and has practised as an attorney for more than 20 years. His evidence I found to be entirely straightforward and responsible.

In cross-examination, Mr Holst expressed his view that once agreement was reached between the parties on 17 July 2009 they became legally bound. He appeared to believe this understanding was entirely consistent with what was said in his e-mail of 20 July 2009 to Mr Isden and others, in which he had stated:

“...Please be advised of the attached agreement out with PPS for signature. Assuming it will be signed by them, we will sign, the proceedings with the Court in London will end, and the terms of the deed will govern.…”

That e-mail, said Mr Holst, was saying in effect that, as soon as the settlement agreement had been signed by all involved, Silver Queen would stop its case in the High Court in London, and not that it was necessary for the document to be signed by everybody for it to constitute a binding agreement. He made it clear, however, that he had not at the time had any knowledge of the rules concerning deeds in English law, or, in particular, the concept of being bound from the moment one has signed the document, if one has delivered it. When asked what was Seabird’s normal way of concluding agreements, he indicated that, although this was not the only way of doing it, mostly it was done by “signed contracts”. As to the absence of a specific date on the Settlement Deed, and the words “With effect from the date of this Deed” in clause 3.1 of the Settlement Deed, Mr Holst pointed out that the relevant e-mails showed when the document was signed by either party. There was a full record of the dates.

Mr Isden, who is not a lawyer, was cross-examined at length about his understanding of the legal effect of what transpired in the final stages of the settlement negotiations. Mr Isden emphasized that in his view a binding agreement had been reached. Summarizing his understanding of the position, Mr Isden said that an agreement was reached between the parties’ respective legal advisers, that the agreement needed to be reduced into formal wording and that:

“… it was then put into writing, the agreement was in place, it was signed on the first part by the company that owes us money and I accept that to be a binding agreement. …”

In cross-examination it was suggested to Mr Isden who was asked about the contention he appeared to be putting forward to the effect that a binding agreement had already come into existence on 17 July 2009 when the last amendment to the draft deed had been agreed between the solicitors was at odds with Mr Holst’s understanding of the situation expressed by his e-mail of 20 July. This may or may not be so. My view, however, is that there is not necessarily a conflict there. It was also suggested to Mr Isden that he had only said this in order to advance Silver Queen’s case now. Mr Isden refuted that suggestion. And I accept that he should be entirely acquitted of what Mr Fraser described in closing as “post-facto wishful thinking designed to improve Silver Queen’s position at this trial”. I believe he was doing his honest best to make sense of the situation in his layman’s view of it.

Although the allegations of fraudulent misrepresentation originally levelled at Mr Isden and Mr Holst were ultimately withdrawn, it remains necessary to consider the evidence that was given about the attitude they adopted in course of the settlement negotiations. This evidence remains relevant to the contentions of non-disclosure which have been maintained on behalf of PPS. What was, in effect, put to both Mr Isden and Mr Holst in cross-examination was that both of them were conscious of the fact (assuming it was a fact) that PPS was unaware of the Silver Queen’s meetings with IOOC and NIOC and the offers that had been made, and knew that PPS would therefore have made a lower offer had it been aware of what Silver Queen had been prepared to accept at, or after, those meetings.

In my view, both Mr Isden and Mr Holst gave their evidence in an entirely truthful fashion, without exaggeration or unnecessary economy in their recollection. Both were, therefore, witnesses upon whose evidence the court can rely. I accept without any reservation what they each had to say in their evidence about what they did and what they had in their minds during the settlement negotiations.

Mr Isden’s evidence relating to those negotiations was clear. He did not believe he was making any representations to the other side as to IOOC’s, or NIOC’s, willingness to pay. He observed that PPS were represented by solicitors, and that these solicitors were themselves stating, on behalf of PPS as their client, when the sum of money agreed in the negotiations (8.1 million Euros) would be paid. It was being clearly indicated that that sum would be paid to Silver Queen. The main question exercising both parties was not whether it was going to be paid, but when.

Similarly, Mr Holst gave what was, I believe, an unvarnished account of the part he played in this process. Like Mr Isden he did not believe he was making any representations to PPS at all.

In his witness statement Mr Holst said:

“4.

… [As General Counsel] of SeaBird I was responsible for instructing the Claimant’s solicitors King & Spalding International LLP in all matters regarding these proceedings including the settlement negotiation conducted through the parties’ solicitors in June and July 2009. So far as the Defendant’s allegations of fraudulent misrepresentations are intended to apply to myself, I say as follows.

5.

The Defendant’s allegations relate to three letters and an e-mail from King & Spalding to Memery Crystal which are stated to contain certain implied representations, I did not understand that the Claimant was making any such representations as alleged by the Defendant in these communications. Further, it was not my intention that any such implied representation, or any implied representation at all, should be made in King & Spalding’s correspondence with Memery Crystal. I also completely reject any allegation that I personally or the Claimant acted in any way fraudulently or dishonestly. It is my belief that the Claimant acted honestly and properly throughout the commercial settlement negotiations conducted between the parties’ solicitors.”

Mr Holst denied that, in the light of the two offers of rebate made by Seabird to IOOC and NIOC in February and May 2009, he must have known that IOOC and NIOC would not, after then, have paid more than the lower figure, 6.5 million Euros, inherent in those offers. He said that what Seabird did know was that IOOC and NIOC had not accepted those offers. He accepted that it could be said that IOOC were not likely to pay more. He had been aware that PPS had said that it would not be able to pay Seabird. But he said that money could have come from other sources.

Mr Holst was cross-examined about the correspondence which passed between Memery Crystal and King & Spalding in June and July 2009.

As to King & Spalding’s letter of 18 June 2009, which he acknowledged he had approved, Mr Holst said that he had not made any connection between the level of the offer of settlement which came from PPS and the two offers that Seabird had made, in February and May 2009, to IOOC and NIOC. He said he did not discuss the difference with Mr Isden. He had been surprised by the offer of 8.1 million Euros because he had thought PPS would come in lower. But this offer indicated, he said, that PPS had read Seabird’s arguments in the main proceedings, which a settlement would have stopped. He said he did not think Seabird should tell PPS about the offers that had been made to IOOC and NIOC. He did not deliberately decide not to do that.

Mr Holst did not accept that King & Spalding’s letter of 26 June 2009, which he confirmed he had approved, contained a misleading statement. He said he did not know that PPS would not be able to pay 8.1 million Euros. He rejected the suggestion that Seabird was, by implication in this letter, telling PPS that Seabird knew of no reason why NIOC should not pay PPS the sum being agreed in the settlement.

By the time that King & Spalding wrote to Memery Crystal on 9 July 2009 attaching a draft deed for the formal settlement of the dispute, said Mr Holst, he did not know that a commercial solution to the dispute would be unlikely. He was he said “pretty certain” that at this stage he did not have a discussion with Mr Isden about the offer Seabird had made to IOOC and NIOC having been lower than PPS’s. At any rate he denied having had this in mind and taking the decision not to tell PPS. This, he said, did not cross his mind. He had no intention of trying to make PPS believe that there was no problem involved in NIOC paying 8.1 million Euros.

Mr Holst said that the e-mail of 22 July 2009 from Memery Crystal by which PPS purportedly withdrew from the settlement agreement came as a “big surprise” to him. He said that at that time he did not know where Silver Queen stood legally.

Neither Mr Isden nor Mr Holst believed that they were under any duty to disclose to PPS what had happened earlier in the year in the discussions with IOOC and NIOC, or the fact that Silver Queen had at that stage made offers to IOOC and NIOC materially lower than the sum which had now been put forward by PPS to settle the litigation.

The parties met at the Dariush Hotel on Kish Island on 25 August 2009. The meeting was attended by, among others, Mr Isden, Mr Ursin-Holm and Mr Higraff for Seabird, by Mr Tabassi for PPS and Mr Rezazadeh for KEPS, and by Mr Najibi for IOOC.

The agreed minutes of that meeting state:

“[Mr Isden] … stated that [Seabird] wishes to resolve the issue.…

… [Mr Tabassi] emphasized that NIOC wants to resolve the dispute; there is no dispute over data. The data has been acquired and the only issue is payment.

[Mr Tabassi] emphasized that PPS does not have funds to cover the outstanding amount agreed of Euro 8.1m, but that they were justified and not disputed. PPS problem with payment resulted from its own pricing models towards [IOOC]. PPS is now in a position of middleman to resolve payment between IOOC and [Seabird].

[Mr Higraff] stated that two visits had been made to IOOC to offer rebates of Euro 2.5m and Euro 3.5m, but [Seabird] received no formal response over these offers. [Mr Isden] stated that cash flow during these slower times was the basis for the rebates, based on a quick settlement being reached. Both these offers were consequently made with precise expiry time limits and both have since expired.

[Mr Tabassi] indicated that he was not formally aware of the figures stated. [Mr Tabassi] indicated that this was a substantial discount. [Mr Tabassi] stated that if IOOC had accepted either of those figures, they would have already finalized this issue. [Mr Tabassi] indicated that PPS would have contributed if funds were available.

[Mr Isden] stated that he understood the situation. PPS could not pay the invoices. PPS suggested direct negotiations with IOOC. [Mr Isden] stated that the negotiated settlement of Euro 8.1m, as agreed between lawyers was legally binding but now listening to today’s discussion, understood this was not possible for PPS without IOOC. [Seabird] was not privy to discussions between IOOC and PPS on whether this figure was achievable.

[Mr Tabassi] stated that settlement documents were sent to IOOC. [Mr Tabassi] stated that a negative response to the settlement figure of Euro 8.1m was the basis for generating discussions leading to this meeting. [Mr Tabassi] could not comment on the figure IOOC would be prepared to settle on the issue.

…

[Mr Tabassi] stated that it was necessary to set an amount to lobby NIOC.

[Mr Isden] indicated understanding that [Seabird] will not receive the full amount.

[Mr Tabassi] agreed that Euro 6.75m was not achievable. [Mr Tabassi] stated that if [Seabird] can provide a settlement figure, PPS will lobby NIOC.

[Mr Isden] iterated that there would be no profit from this project for [Seabird] or PPS. [Mr Isden] understood that the final amount will be less than Euro 6.75m. [Mr Isden] indicated that the final figure would need to be supportable, as befits a public listed company.

[Mr Isden] reiterated that the original rebates were to achieve quick settlement for cash flow. [Mr Isden] indicated that this is still the case. [Mr Isden] indicated that [Seabird] will provide a settlement figure.

[Mr Tabassi] will begin lobbying NIOC immediately.

[Mr Isden] requested that the timeframe for any new offer should be in days/weeks, not months. [Mr Isden] stated that if [Seabird] makes a quick settlement offer, it needs to be finalized quickly as well.

…

[Mr Isden] stated that he would provide a final settlement figure today. [Mr Isden] stated that [Seabird] was not prepared to provide the data to PPS or IOOC until further payment had been made.

[Mr Isden] stated that the final settlement figure acceptable to [Seabird] is Euro 5.2m. [Mr Isden] stressed that this is on the basis of a fast resolution (i.e. cash by 30 September). [Mr Isden] stated that he could not support a lower figure based on corporate governance principle. [Mr Isden] stated that this represents a 49% discount to the original claim, and in formal reporting terms would show a 51% recovery and 49% loss. If this amount is not acceptable, then [Seabird] will revert to pursuing the binding higher claim. [Mr Isden] stated that the consequences, unfortunately, may be 2 companies (PPS & KEPS) going out of business and the loss of 1,200+ jobs in Iran.

[Mr Tabassi] stated that he would lobby this figure with NIOC. [Mr Tabassi] stated that he would make all reasonable endeavours to cover any shortfall, if within the reach of PPS.…”.

Mr Isden had a clear understanding of what happened on Kish Island and its significance. In his witness statement he said:

“30.

During this meeting, as recorded in the agreed minutes, I noted my understanding that the negotiated settlement of Euro 8.1 million was legally binding. I said, however, that SeaBird/Silverqueen would be prepared to settle its claim against PPS for the sum of [5.2 million Euros] if this sum was paid in full by September 30, 2009. This proposal was entirely conditional on prompt payment of this amount by the stipulated date. …

31.

I did not consider that the Kish Island discussions resulted in any binding agreement. Rather the discussions resulted in a proposal from PPS which depended on agreement from NIOC/IOOC – which was not forthcoming – before any formal agreement could be concluded. In any case, as shown in the agreed minutes, the proposal which was discussed was that SeaBird/Silverqueen would receive the [5.2 million Euros] payment by September 30, 2009. … No such payment was ever received. Again the only reason that we … had been prepared to consider agreeing to accept such a substantial discount on the amount contractually due to us from PPS was because of our desire for a quick settlement of this matter in order to ease the cash flow problems that PPS’s failure to make the due payment under the Contract with Silverqueen had caused to Seabird/Silverqueen.

32.

After the Kish Island meeting, I continued to exchange e-mails with Dr Tabassi concerning his communications with NIOC/IOOC. However, to date, these exchanges have not resulted in any tangible progress towards payment of the outstanding sums owed to Silverqueen under the Contract…”

Mr Tabassi’s version of this part of the history in his written evidence was very different. In his witness statement he said:

“58.

I believe we made an agreement in the meeting with the Claimant that was then formalised in the written Minutes which we agreed … I believe that we and the Claimant intended this to be a legally effective contract, hence the detailed negotiation of the Minutes and all parties signing up to them. I certainly believed this was a binding legal contract.

59.

The agreement was that I would work to get the sum of [5.2 million Euros] from the IOOC and we would pay this amount over on receipt of the payment from the IOOC. The Claimant would then release the remaining data it had been holding onto.

60.

At the end of the meeting, we all shook hands and said we hoped that was an end to the legal proceedings. I took this as meaning we had a deal and my understanding was that the new agreement replaced any earlier deal, including the alleged 21 July 2009 Agreement (if valid) and would be in full and final settlement of the disputes between us.

61.

Following the meeting, I immediately took steps to obtain the payment of [5.2 million Euros] from the IOOC. …

…

64.

Although the minutes referred to a date of 30 September 2009 for payment, the date passed and both we and the Claimant continued to work towards obtaining the sum of [5.2 million Euros]. Although we agreed a date of 30 September 2009, and I did everything I could to press for payment by that date, my understanding was that this was because the Claimant needed to put some sort of a deadline in the agreement, rather than it being seen as a deal-breaker. My feeling was that, if we passed the 30 September 2009 deadline, the deal was still on. It was the only option for all parties as we didn’t have the money ourselves to pay.

65.

After we and the Claimant signed the Minutes of the Kish Island meeting, there was a long delay when we sent the Minutes to the IOOC. … I reported to Tim Isden that it was going to be a long process. I reported regularly to him after that date. The 30 September 2009 date passed and there was no suggestion at that time that the deal was off by Tim Isden or anyone else at the Claimant. Out of courtesy, I did email him on 29 September 2009 … to extend the 30 September 2009 date to 31 October 2009 but this date passed and after, that, Tim Isden continued to chase me for updates on receiving the [5.2 million Euros] and I therefore took it that the agreement made on Kish Island still stood…”

When he was cross-examined about the outcome of the Kish Island meeting. Mr Tabassi said that it was his understanding that Seabird gave up its right to claim on the original invoices and its right to claim under the July 2009 settlement in return for his promise to lobby IOOC. Later in his cross-examination, however, these exchanges occurred:

“Mr Jacobs: Mr Tabassi, you and SeaBird were agreed that if the money wasn’t paid by 30 September, SeaBird could revert to its original claims?

A.

We have signed that. I have signed that memo.

Q. And you agree that that was part of the deal wasn’t it?

A. I agreed on the basis of what we agreed to push NIOC.”

and

“Q. … The position is clear, isn’t it, Mr Tabassi? Mr Isden was saying: if you pay by 30 September, that is one thing, but if you don’t pay, then we are reverting to our original claim, correct?

A.

Yes, correct.

Q. And you agreed to that?

A. I agreed to that.”

and

“Q. Are you saying, Mr Tabassi, that SeaBird is not entitled to pursue its original claim, as a result of the Kish Island meeting?

A.

I don’t say that. …”

Mr Tabassi certainly did seek, and was granted, extensions to the 30 September 2009 deadline, as is plain from e-mail correspondence that took place in September and October 2009. In the end, and understandably enough, Mr Isden’s patience was exhausted. This excited no complaint from Mr Tabassi.

In his e-mail of 14 December 2009 to Mr Isden, Mr Tabassi indicated that he was aware that the litigation had been “resurrected” and went on to say:

“I quite understand your position and it is 100% your right to do what you have instructed your lawyer to do. However, my concern is that should NIOC be informed of the consequence, I am afraid that they may stop the process. …”

And on 28 December 2009 he sent another e-mail to Mr Isden, stating:

“As I mentioned in my previous e-mail I understand position and I have no complaint about letter of your lawyer. I just wanted to make sure NIOC is not aware of it. On that regards thank you for reassuring me that it would not happen…”

In paragraph 66 of his witness statement Mr Tabassi sought to explain those statements in the e-mail correspondence in this way:

“In December 2009, Silver Queen’s solicitors informed us that they were seeking to re-commence the old proceedings. I emailed Tim Isden on 14 December 2009 at 05.09 to explain why I thought this was a bad idea, in terms of trying to extract the funds from the IOOC. I also stated that it was “100%” his right to instruct his lawyers to resurrect the proceedings. I meant that it was it was entirely up to him what he chose to do. I was not referring to any particular legal rights I thought he/Silver Queen had in this particular situation, just his general right to do whatever he wished.”

In the context of all that had gone before, and in the light of Mr Tabassi’s evidence in cross-examination, I cannot regard that explanation as cogent. Mr Jacobs questioned Mr Tabassi about his e-mail of `4 December 2009. This part of the cross-examination went as follows:

“Q. … In other words, what you were saying is that Mr Isden was fully entitled to restart the proceedings on the original claim and in relation to the disputed settlement agreement, correct?

A.

That is saying too many words, but yes, I said he is entitled to instruct whatever he has instructed his lawyer.

Q. Yes, and you didn’t say to him, “Mr Isden, you are not entitled to do this because we have come to an agreement at Kish Island whereby you have given up all your rights in return for my promise for [sic] lobby”?

A. Definitely, because I am not a lawyer, I didn’t select the right words. No, I didn’t.

Q. You knew full well, didn’t you, throughout, that if the money wasn’t paid on time, SeaBird had given up none of its rights, correct?

A. Correct.

…”

A little later this exchange took place:

“Q. You understood at the time that it was not necessarily the end of the legal proceedings. You hoped it would end, but that depended on whether you paid, correct?

A.

If we paid, yes, that is the end of the proceedings.

Q. And if you didn’t pay, then the legal proceedings carried on?

A. That is his opinion and his right to do that.

Q. And your understanding at the time?

A.

That’s right.”

Having regard to those responses of Mr Tabassi under cross-examination, I consider that at the Kish Island meeting he was indeed conscious of the situation PPS would be facing – that is to say the likely resumption of active litigation – if the agreed figure of 5.2 million Euros was not paid by PPS to Seabird by 30 September 2009. I do not think there can be any sensible doubt about that.

Since the Kish Island meeting PPS has on a number of occasions reported to Silver Queen on its efforts to get money for the settlement from IOOC. Those efforts have, so far, been to no avail.

For Silver Queen, Mr Jacobs submitted that there clearly was a concluded settlement in July 2009. PPS executed and delivered the Settlement Deed, in which it agreed to pay the settlement sum, and is therefore bound by the agreement. There was no statement, either in the Settlement Deed or in the covering e-mail, to indicate that the PPS’s agreement was conditional. By virtue of clause 4.5 of the Settlement Deed, the counterpart executed and delivered by PPS was “an original” and a binding contract in itself. Even if the Settlement Deed was not unconditionally delivered by PPS, it would have been, in law, an escrow, its only condition being that it would then be signed and returned to PPS by Silver Queen. It is, Mr Jacobs submitted, clearly established that where a deed is delivered as an escrow subject to the fulfilment of a condition, the party that has delivered the deed cannot unilaterally withdraw it while the condition remains unfulfilled. Therefore, having executed and delivered the Settlement Deed on 21 July 2009, PPS was not entitled to withdraw on 22 July 2009 pending fulfilment of any condition on which it had been delivered. Silver Queen’s signing and returning the Settlement Deed to PPS served to fulfil any such condition. The absence of a complete date on the Settlement Deed does not affect the status of the document. A date is not essential to the validity of a deed, which takes effect on the date of its delivery.

For PPS Mr Fraser submitted that the essential question was whether PPS effectively withdrew its agreement to the settlement by the e-mail sent by Memery Crystal at 8.15 a.m. on 22 July 2009 before the Settlement Deed became binding. He submitted that the conveyancing authorities are of less assistance in the determination of whether a binding agreement was reached or not in respect of a settlement of a normal commercial dispute. The context here, Mr Fraser submitted, was a transaction in which the parties were advised by lawyers, drafts were circulated, and arrangements were made for execution. In such a context the normal presumption is that the parties will not be bound until both of them sign the agreement. It is the intention of the parties which determines when an agreement becomes binding. Therefore, it is necessary for the court to consider, on the evidence before it, what was the intention of the parties. Mr Fraser submitted that the evidence before the court in the present case shows that there was no intention on the part of either PPS or Silver Queen that either party would be unable to withdraw before the other party signed. Mr Fraser’s basic submission was that the Settlement Deed was not, in the legal sense, delivered. PPS clearly did not intend to be bound upon the signing of the Settlement Deed, nor could Silver Queen have thought otherwise. Without that intention the Settlement Deed was never delivered. Therefore, PPS never became legally bound by it. PPS withdrew in time. There was no binding document when it did. The Settlement Deed is null and void. Alternatively, if the Settlement Deed was delivered in escrow, one of the conditions of the escrow was that it would be dated; that condition has not been satisfied, and it is now too late for it to be satisfied.

The principles of law applying to deeds are well established.

There are three ways in which a deed, once it has been signed, can be delivered. The analysis set out in the judgment of Nourse LJ in Longman v Viscount Chelsea [1989] 58 P&CR 189, at p 195, identifies the three categories:

“A writing cannot become a deed unless it is signed, sealed and delivered as a deed. Having reached that stage, it is correctly described as having been “executed” as a deed. Having been signed and sealed, it may be delivered in one of three ways. First, it may be delivered as an unconditional deed, being irrevocable and taking immediate effect. Secondly, it may be delivered as an escrow, being irrevocable but not taking effect unless and until the condition or conditions of the escrow are fulfilled. Thirdly, it may be handed to an agent of the maker with instructions to deal with it in a certain way in a certain event, being revocable and of no effect unless and until it is so dealt with, whereupon it is delivered and takes effect; as to this method, see Governors and Guardians of the Foundling Hospital v Crane; and Windsor Refrigerator Co. Ltd. v Branch Nominees Ltd., per Cross J. …”.

Nourse LJ went on (at pp 196-197) to consider the principles applicable to deeds both in circumstances where the negotiations had not been “subject to contract” (as in Beesly v Hallwood Estates [1961] Ch 105) and in circumstances where they had (as in Vincent v Premo Enterprises (Voucher Sales) [1969] 2 Q.B. 609 and D’Silva v Lister House Development [1971] Ch.17). Nourse LJ referred (at p 197) to the judgment of Cross J. in the Windsor Refrigerator case (p 98):

“A deed whether executed by a corporation or by an individual does not necessarily bind the grantor as soon as it is sealed. It only becomes binding when it has been “delivered” by the grantor as his deed, i.e. when the grantor has indicated by words or conduct that he intends the deed which he has executed to be binding on him.”

In Beesly v Hallwood Estates Harman LJ (at p 116) posed the question which the court had to consider in that case in this way:

“… [What] is an escrow? Can a body or an individual having executed a document under seal as an escrow subject to a condition resile before the condition is accepted?...”

Having acknowledged that if there had been no delivery the matter would be wholly different, Harman LJ went on (ibid and p 117) to refer to the description of an escrow in Norton upon Deeds, and to Lord Cranworth’s speech in Xenos v Wickham [1911] 2 K.B. 367, at p 379:

“The maker [of a deed] may so deliver it as to suspend or qualify its binding effect. He may declare that it shall have no effect until a certain time has arrived, or till some condition has been performed, but when the time has arrived, or the condition has been performed, the delivery becomes absolute, and the maker of the deed is absolutely bound by it, whether he has parted with possession or not. Until the specified time has arrived, or the condition has been performed, the instrument is not a deed: it is a mere escrow.”

Harman LJ then cited the following statement in Norton:

“Whether the document was delivered as an escrow or as a deed is a question of what the parties intended, and that intention may appear either from their statements or the circumstances” – that is to say, the question is one of fact, and it has been so decided in this case.”

Recalling the judgment of Farwell LJ in Governors and Guardians of the Foundling Hospital v Crane [1911] 2 KB 367 (at p 379), Harman LJ gave this answer to the question facing the court (at p 117):

“In other words, if you do deliver a document as an escrow it is your act and deed and is not recallable by you. If, of course, the condition be never performed, it never becomes binding, and I suppose there must come a time, if there be unreasonable delay in the performance of the condition, when, in these days at any rate where equitable principles govern the actions of the court, the person or firm that has executed the escrow would be released from its obligation. …”

(see also the judgment of Lord Evershed MR (at pp 120-121)).

An example of the third category of case to which Nourse LJ referred in Longman v Viscount Chelsea is to be seen in the Foundling Hospital case. In that case the assignee of the lease of a dwelling-house, Mr Hoe, had signed and sealed but left undated a document purporting to be an assignment of the lease and delivered the document to his solicitors on terms which they described in a letter to him in this way:

“…We acknowledge that you have to-day executed the assignment of your lease to Mrs Brown as an escrow and that we are to retain it on your behalf until you send us instructions to complete the deed. In the event of your dying before the deed is completed, we understand that we are to consider the deed as having been completed before your death and to take what steps are necessary to vest the lease in Mrs Brown should she wish it. In the event of Mrs Brown dying before the assignment is completed you will of course send us further instructions as to what is to be done with the premises.”

Vaughan Williams LJ observed (at p 373):

“Two suggestions have been made about the deed, the effect of which we have now to consider. One is that the deed in question was what is called in law an escrow, that is a writing which is to take no immediate effect, but is only to come into operation upon the happening of some condition. The other suggestion is that there was no escrow, in fact that there was no delivery at all of this deed; that it was physically delivered by being handed over, after it had in form been executed by signing, sealing, and delivery, but handed over only to be kept by the agents, the solicitors, for Mr Hoe, and to be dealt with as Mr Hoe should direct. In that case there would be no delivery, and Mr Hoe was in a position to say the next day to his solicitors “Give me that paper, which I executed by signing, sealing, and handing to you, back again; I propose to put it into the fire,” and no one would have been able to say one word against his power to do that. I may at once say that I have come to the conclusion that this deed was not an escrow, but that it was, after the formal execution had been gone through, handed to Messrs. Hopgoods & Dowson, the solicitors, as custodians of something that they were to hold absolutely at the will of Mr Hoe.”

and went on (at p 375) to say this:

“Apart from the signing and sealing of the writing by Mrs Brown, I think that the letters of Mr Hopgood of September 8 and 9 make it clear that the intention of Mr Hoe was that Mr Hopgood should hold the document as his agent, and that he (Mr Hoe) should have the power to instruct Mr Hopgood to deal with the executed writing as he should think fit. This seems inconsistent with the document being an escrow. ...”.

Farwell LJ said this (at p 377):

“… There are two sorts of delivery, and only two known to the law, one absolute, and the other conditional, that is an escrow to be the deed of the party when, and if, certain conditions are performed. If the deed operated as a complete delivery, cadit quaestio; if it did not, then it must be either an escrow or a nullity. The mode in which it in fact operated is a question of intention, primarily of the grantor, and secondly of the grantee; nothing passes out of the grantor against his intention, and no one can be compelled to accept an assignment of any property, onerous or otherwise, without his consent. Now an escrow or script is not a deed at all; it is a document delivered upon a condition on the performance of which it will become a deed, and will take effect as from the delivery, but until such performance it conveys no estate at all. …”

I do not consider the present case can be said to belong to the category exemplified by the facts in the Foundling Hospital case. The objective evidence here does not support the concept of a document (the Settlement Deed) being provided by the maker (PPS) to its agent (Memery Crystal) to deal with it in a certain way, being revocable and of no effect unless and until it was dealt with in that way.

Nor is this one of those cases in which the document has not passed from one party to the other, where the conclusion on the question of whether the document was or was not intended to be a deed might be more difficult (cf. Beesly v Hallwood Estates, Kingston v Ambrian Investment Co. Ltd.[1975] 1WLR 161, and Longman v Viscount Chelsea).

Mr Fraser placed reliance on what was said by Sir Andrew Morritt, the Chancellor, in paragraph [45] of his judgment in Whitehead Mann Ltd v Cheverney Consulting Ltd [2006] EWCA Civ 1303:

“Obviously each case depends on its own facts but in my view where, as here, solicitors are involved on both sides, formal written agreements are to be produced and arrangements made for their execution the normal inference will be that the parties are not bound unless and until both of them sign the agreement. …”

What happened in this case was, in my judgment, quite simple. The Settlement Deed, once it had been signed by Mr Tabassi and Mr Cusack for PPS, was sent to Memery Crystal for them to send on to King & Spalding. It was not to be held back pending any further instructions being received by Memery Crystal from PPS. It was not to be held back for exchange. This was not an undelivered deed, or a nullity. It was clearly intended to be a deed, binding on PPS, for whom it had been duly signed. It reflected the outcome of the settlement negotiations, which had ended with the last outstanding issue being resolved a few days before. There is no evidence of PPS wanting more time to consider whether it was content with that outcome, nor of its wanting to reserve the right, for that or any other reason, to revoke the Settlement Deed once it had gone to Silver Queen (cf. the judgment of Donovan LJ in Beesly v Hallwood Estates (at p 119)).

In my view the relevant facts place the Settlement Deed firmly in the second of the three categories identified by Nourse LJ in Longman v Viscount Chelsea. This was an escrow. In other words, the Settlement Deed, when sent by Memery Crystal, in accordance with their instructions, to King & Spalding on 21 July 2009 was in the class of document described by Farwell LJ in the Foundling Hospital case (at p 377) as one which is “delivered upon a condition on the performance of which it will become a deed, and will take effect as from the delivery”. The conditions, and the only conditions, upon which the Settlement Deed was delivered were those set in the e-mail sent at 5.01 p.m. on 21 July 2009 by Memery Crystal to King & Spalding to which it was attached, namely, first, that it was to be signed for Silver Queen, and secondly, that it was then to be sent back to Memery Crystal. Those conditions had both been discharged when King & Spalding’s e-mail of 4.04 p.m. on 22 July 2009 was sent to Memery Crystal, whereupon the Settlement Deed took effect as a deed. Thus the escrow conditions were promptly discharged, and there is no room in the present case for any argument that their performance was unreasonably delayed (see Harman LJ’s caveat in Beesly v Hallwood Estates (at p 118)). Being irrevocable from the time of its delivery as an escrow, the Settlement Deed could not be recalled by PPS pending its taking effect. Thus PPS’s purported withdrawal “from the exchange of the settlement agreement” in Memery Crystal’s e-mail of 8.15 a.m. on 22 July 2009 was not, and could not be, an effective revocation of it.

Mr Fraser pointed to the proviso “unless a contrary intention is proved”, in section 46(2) of the Companies Act 2006, to the presumption that, for the purposes of section 1(2)(b) of the law of Property (Miscellaneous Provisions) Act 1989, a document duly executed by a company and delivered as a deed is delivered upon its being executed. But this only begs the question: “How is a contrary intention to be proved?”

In the course of the trial a good deal of evidence was given about the subjective intentions or beliefs held at various times by several of those who took part in the negotiation of the settlement. It is, however, the objective intention of the parties which must be discerned. The question of whether and when a legally binding arrangement has been made in any particular case is for the court to decide. It is not a matter for expert evidence, or for subjective opinion. In Governor and Company of the Bank of Scotland v Henry Butcher & Co EWCA [2003] Civ.67, the proposition was advanced by counsel for the appellant, apparently relying on what Farwell LJ had said in the Foundling Hospital case (at p 377), that the question of whether a document had been delivered as a deed or in escrow depended on the intentions of the grantor. That argument was rejected. In the first place, as Munby J pointed out (in paragraph 63), that is not what Farwell LJ said. Munby J went on (in paragraph 64) to say this:

“The intention of the grantor may be of the greatest importance – may indeed be determinative – in a case, such as Beesly v Hallwood Estates Ltd [1961] Ch 105 or D’Silva v Lister House Development Ltd [1971] Ch 17, where it is being said that the grantor has delivered a document as a deed even though it has not been sent to the other side at all and indeed has never left his custody. But different considerations must apply where, as in the present case, the executed document is sent to the other party. In my judgment, a person who has executed a document containing on its face, as the guarantee did in the present case, a clear statement that is has been “executed and delivered as a deed”, and who then sends that document to the other party without any expressed indication that the document is being delivered otherwise than as a deed, simply cannot set up some private mental reservation or uncommunicated intention as the basis of a contention that the document was in fact delivered not as the deed it purported to be but merely in escrow.”

In my judgment, that principle applies to the present case. Here there was no express indication or stipulation on the part of PPS, or on its behalf, that the Settlement Deed when sent to the other side on 21 July 2009 was other than what it purported to be, namely a document which had been executed and delivered as a deed by PPS and which, in accordance with Memery Crystal’s e-mail to which it was attached, required only to be signed for Silver Queen and returned to Memery Crystal. Such intentions or qualifications about the status and effect of the document as may have been, or may now be privately entertained by Mr Scott, or by Mr Tabassi, are nothing to the point. The evidence which has been given about such intentions or qualifications cannot assist PPS.

I cannot see how the general principle referred to in Whitehead Mann could be said to displace the analysis which I consider to be the right one on the facts of the present case.

There is no objective evidence before the court to support the notion that there was, at any stage, a mutual understanding between the parties that the settlement agreement would be dealt with by means of an exchange. I reject Mr Fraser’s submission that there would only have been a binding agreement when the solicitors for either side had come together and dated the Settlement Deed. Mr Scott did not say in his evidence that he and Mr Wilson ever agreed to do that. Nor did he say that there was ever any agreement that the Settlement Deed would only become binding when that was done. He did not even say that the idea of this being done was ever put to the other side. I accept, as Mr Jacobs submitted, that the best evidence of what Mr Scott had in mind when he sent the Settlement Deed to King & Spalding on 21 July 2009 was what he actually said in his e-mail, simply asking for the document to be signed and sent back to him as soon as possible. This was, I believe, entirely consistent with Mr Wilson’s evidence in paragraph 12 of his second witness statement, that it had previously been agreed between him and Mr Scott in a telephone conversation that PPS would execute the Settlement Deed and then forward the executed document to him for signature by Silver Queen.

Even Mr Tabassi’s evidence, at the conclusion of his cross-examination, and in re-examination, did not in the end appear to contradict the concept of the Settlement Deed having been delivered as an escrow to Silver Queen, nor did it seem consistent with the concept of an “exchange” as described by Mr Scott in his evidence. Mr Tabassi at first accepted that he had intended to be bound by the Settlement Deed when he signed it, and then seemed to suggest that he had intended to be bound once it had been signed for both parties. The second of these two propositions seems essentially consistent with the submission made for Silver Queen, and my own conclusion, that the Settlement Deed was delivered as an escrow.

But even If I am wrong in that understanding of what Mr Tabassi sought to convey as having been his state of mind when he signed the Settlement Deed, I see no basis for any different conclusion from the one I have reached, on the objective evidence before me, as to the status of that document when it travelled from one party to the other. Once sent to King & Spalding, having been signed for PPS, it was, in my judgment, irrevocable.

I see no force in Mr Fraser’s submission to the effect that the Settlement Deed was, and is, invalid for the lack of a precise date upon it. It is true that the precise date in July 2009 was not inserted. However, the absence of a date does not of itself invalidate a deed. Chitty on Contracts (30^th edition) states the general position in this way (in paragraph 1-103):

“A date is not essential to the validity of a deed. A deed takes effect on the date of its delivery.”

and the position in respect of the delivery of a deed as an escrow thus:

“… Such delivery need not be accompanied by express words; if from all the facts attending the transaction it can reasonably be inferred that the writing was delivered so as not to take effect as a deed until certain conditions could be satisfied, it will operate as an escrow. …”

It is to be noted that no point about the absence of the precise date was taken by PPS, or by Memery Crystal, at the time of the return of the Settlement Deed to them by King & Spalding. If it ever became necessary to do so, in the event of dispute arising as to when exactly in July 2009 the release obligations in clause 3.1 came into effect, reference could readily be made to the date on which the Settlement Deed became finally binding, namely 22 July 2009. In Beesly v Hallwood Estates no dates had been inserted into the relevant document, there having been no exchange. It was nevertheless held that there was a binding agreement. The same is so here. I do not accept that the dating of the document, by either Silver Queen, was a condition of the escrow. Even now, however, though in my judgment it is not necessary as a matter of law, the date could be inserted without injustice to either party (see the judgment of Lord Denning MR in Kingston v Ambrian Investment Co.(at p 167), referring to the decision in Vincent v Premo Enterprises).

For the reasons I have given I conclude that a concluded settlement agreement was reached by the parties in July 2009.

Mr Jacobs submitted that the general position is that parties negotiating for a contract do not owe duties of disclosure to each other. A settlement agreement of the kind with which the present case is concerned is not in the exceptional category of contracts ulberrimae fidei, and even in the case of such a contract the relevant duty to disclose does not continue once litigation has begun. Where parties enter into settlement discussions with a view to compromising a claim, they do not have to disclose material facts to each other. There is good reason for this. If either side had to disclose to the other, during the negotiation of a settlement, what its weaknesses were such negotiations would be impossible. In the present case, despite this having been suggested (though not pleaded) by PPS, there was no fiduciary relationship between PPS and Silver Queen, such as to give rise to a duty to disclose during the settlement negotiations. The only contract or relationship between Silver Queen and PPS was the May 2008 contract, which was a contract for services and did not give rise to a fiduciary relationship. The conversation that took place between Mr Higraff and Mr Tabassi on 4 January 2009, whichever account of it is accepted, did not create such a relationship; it merely served to prompt Seabird to meet IOOC and discuss matters directly with it in February and April 2009. But, even if the conversation did somehow create a fiduciary relationship, this on its own would not have been enough. PPS would have needed to be able to show that the relationship was one that imposed a duty to disclose in the context of discussions aimed at settling subsequent litigation. No such relationship ever existed, and certainly none subsisted when the parties started, through solicitors, to discuss settlement. By then, the survey undertaken by Silver Queen had long been completed (in February 2009). PPS had defaulted on its obligation to pay Silver Queen’s fees. Litigation had been begun. Neither side owed the other a duty of disclosure. It followed that any attempt by PPS now to undo the settlement could only be founded on an allegation of fraudulent misrepresentation.

Mr Fraser submitted that the essential question here was whether Silver Queen was under a legal duty to disclose to PPS the fact of its offers to IOOC before it signed the Settlement Deed on 21 July 2009. If Silver Queen was under such a duty, it is common ground that Silver Queen did not say anything, and thus was in breach of its duty and rendered the settlement agreement liable to being avoided. In the circumstances there was no need for PPS to prove that any non-disclosure by Silver Queen was deliberate. There were two bases on which PPS put its case that Silver Queen was under a relevant duty to disclose. First, Mr Fraser submitted, Silver Queen had been acting not merely in its own interests in its dealings with IOOC between February and May 2009; it had been acting in the interests of PPS as well, and therefore, in this limited context only, was in a fiduciary relationship with PPS. It followed, Mr Fraser submitted, that, before entering into the settlement agreement with PPS, Silver Queen had to disclose all material facts about its dealings with IOOC, not least because Silver Queen was to profit from the agreement. In these circumstances the fact that Silver Queen had offered the IOOC a rebate on the unpaid invoices was clearly a material fact, of which PPS should have been made aware, and its non-disclosure demonstrably profited Silver Queen when it ultimately obtained settlement at a higher level from PPS. Silver Queen, as a fiduciary, ought not to have profited in that way. Secondly, Mr Fraser submitted, although there is no prima facie duty on parties negotiating a settlement, a party is sometimes placed under such a duty because of the unusual circumstances of the negotiations. Such a duty arose in the circumstances of the present case, in which, at PPS’s invitation, Silver Queen engaged directly in discussions with PPS’s client, IOOC, the company which, as Silver Queen knew very well, was going to fund any settlement of Silver Queen’s dispute with PPS. In that situation, Mr Fraser submitted, Silver Queen must have been under a duty to disclose to PPS the facts of the rebates it offered to IOOC, because the level of those rebates would obviously have made it unlikely that IOOC would fund the settlement eventually agreed between Silver Queen and PPS. Furthermore, Mr Fraser submitted, as the Settlement Deed contained a release for Silver Queen, the argument that there existed here a legal duty of disclosure was stronger still.

I accept Mr Jacobs’ submissions on this issue.

In my judgment, the idea that the negotiation of agreements to settle hostile litigation generally gives rise to a duty of disclosure is misconceived. The existence of such a duty would not be consistent with the general position that parties negotiating for a contract do not owe duties of disclosure to each other. An agreement to settle litigation is not, or at least normally is not, a contract uberrimae fidei. In the present case it certainly was not.

I cannot see how it could be concluded on the facts of the present case that, before entering into the settlement agreement in July 2009, Silver Queen was under a legal duty, either as a fiduciary or because of any particular circumstances in the negotiation of that settlement, to disclose to PPS the fact of the offers it had made to IOOC and NIOC in February and May 2009.

Neither any fiduciary relationship between the parties nor any agency arose under the May 2008 contract. Nor, in my judgment, was any fiduciary relationship created during the telephone conversation between Mr Tabassi and Mr Higraff on 4 January 2009. This view is, I believe, consistent with the principles apparent in the judgment of Millett LJ in Bristol and West Building Society v Mothew [1998] Ch. 1 (at p 18):

“… A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary. As Dr Finn pointed out in his classic work Fiduciary Obligations …, he is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary.

(In this survey I have left out of account the situation where the fiduciary deals with his principal. In such a case he must prove affirmatively that the transaction is fair and that in the course of the negotiations he made full disclosure of all facts material to the transaction. Even inadvertent failure to disclose will entitle the principal to rescind the transaction. …)”.

As Fletcher Moulton LJ remarked in Coomber v Coomber [1911] 1 Ch. 723,

“… Fiduciary relations are of many different types; they extend from the relation of myself to an errand boy who is bound to bring me back my change up to the most intimate and confidential relations which can possibly exist between one party and another when one is wholly in the hands of the other because of his infinite trust in him. …”.

The first difficulty which Mr Fraser’s argument has to confront, and which, in my judgment, it does not overcome, is that Silver Queen was not at any stage asked or required by PPS to act on its behalf in dealing with IOOC and NIOC, and Silver Queen for its part never volunteered to perform such a role. None of the contemporaneous correspondence hints at the existence of anything that could sensibly be described as a fiduciary relationship. And, in my judgment, one cannot construe such a relationship from the circumstances.

I do not accept Mr Fraser’s submission that the several considerations to which he referred in closing, either individually or taken together, pointed to the existence of a fiduciary relationship and duty: the fact that, by the end of December 2008, IOOC and NIOC – PPS’s “sensitive Iranian Government clients” as Mr Fraser put it – had themselves evidently lost patience with PPS and KEPS, and that Silver Queen knew this; the fact that Silver Queen was well aware, as the correspondence in the settlement negotiations made plain, that PPS depended, or was highly likely to depend, on money coming to it from IOOC and NIOC if it was going to discharge its liability to Silver Queen under the May 2008 contract; the fact that Silver Queen was contending in the litigation it began against PPS in February 2009 that PPS was liable to it for unpaid invoices amounting to approximately 10 million Euros; the fact that PPS, having itself failed to get IOOC and NIOC to discharge its (PPS’s) liability to Silver Queen, invited Silver Queen to try to do so and thus relieve PPS of its indebtedness; the fact that Mr Tabassi’s invitation, was, as Mr Higraff acknowledged, a very unusual one, which, Mr Tabassi said showed the trust on the part of PPS; the fact that the rebates offered by Silver Queen to IOOC and NIOC made it unlikely, if not impossible, that more than 6.5 million Euros would ever be paid by them; and the fact that Silver Queen agreed to settle its claim against PPS at a level, 8.1 million Euros, to which PPS would never have agreed had it known of the rebates that had been offered to IOOC and NIOC.

In my judgment, none of those circumstances served to set up a relationship of the kind described by Millett LJ in Bristol West v Mothew. Indeed, the evidence points to a quite different conclusion, which is that in Mr Tabsssi’s conversation with Mr Higraff on 4 January 2009 it was clearly indicated to Silver Queen by PPS that Silver Queen was now, or was soon to be, on its own in its efforts to get paid for the work it had done. Silver Queen did not at that stage, or at any time after it, undertake to act for or on behalf of PPS in attempting to get IOOC or NIOC to pay for the work and the data it held. No authority so to act was placed in Silver Queen. No duty of loyalty to PPS was created. And no such duty was owed. By this time, it should be remembered, PPS had itself defaulted on its own contractual obligation to pay Silver Queen. The fact that PPS was going to have to rely on IOOC or NIOC to resolve its liability to Silver Queen did not signify that when Silver Queen, at PPS’s invitation, dealt directly with IOOC and NIOC, it was therefore acting as PPS’s fiduciary. Nor did that situation change if, later in January 2009, as Mr Fraser has argued, it became apparent to Silver Queen that PPS had resumed an active part in seeking to bring about some kind of settlement of the whole dispute.

Even if I am wrong in that conclusion and a fiduciary duty did come into existence in January 2009, I cannot see how that duty could have survived the launching of the present proceedings. The parties then found themselves engaged in the hostilities of active litigation. No duty of loyalty exists in that context. And no duty of loyalty arose when the parties set about resolving their differences in that litigation through negotiation. There was then, in my judgment, no fiduciary obligation resting with Silver Queen, and no concomitant duty to disclose beyond the procedural requirement to do so within the context of the litigation itself. As Lord Hobhouse of Woodborough said in Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd [2003] 1 A.C. 469 (at pp 504 – 505),

“75 When a writ is issued the rights of the parties are crystallised. The function of the litigation is to ascertain what those rights are and grant the appropriate remedy…. It cannot be disputed that there are important changes in the parties’ relationship that come about when the litigation starts. There is no longer a community of interest. The parties are in dispute and their interests are opposed. Their relationship and rights are now governed by the rules of procedure and the orders which the court makes on the application of one or the other party. The battle lines have been drawn and new remedies are available to the parties. …

…

77 I am therefore strongly of the view that once the parties are in litigation it is the procedural rules which govern the extent of the disclosure which should govern in the litigation. …”

I see no reason to think that that general principle does not apply in the present case. In my judgment, therefore, even if Silver Queen was subject to a fiduciary obligation to PPS in the period between Mr Tabassi’s conversation with Mr Higraff on 4 January 2009 and the start of the present proceedings on 18 February 2009, that duty did not subsist during the period between 22 February and 19 May 2009 when Silver Queen was actively pursuing a settlement with IOOC and NIOC or, subsequently, in June and July 2009, when it was actively pursuing a settlement with PPS.

This leaves only the suggestion that a duty of disclosure arises from the unusual facts of the negotiations in the present case. I do not believe that it does.

In the first place, as Mr Fraser has accepted, there is normally no duty of disclosure during a negotiation. Spencer Bower’s “Actionable Non-Disclosure” (2^nd edition) states (in paragraph 9.04)

“Compromises and settlements of disputed claims … stand on a very different footing from releases and waivers, the duty of disclosure, in the cases of compromises and settlements, being much less.”

Cartwright’s “Misrepresenatation, Mistake and Non-Disclosure” (2^nd edition) expresses the principle rather more firmly (in paragraph 17.26):

“Parties negotiating a contractual compromise of a disputed claim do not in general owe each other duties to disclose information relating to the claim. The courts’ policy in favour of settlement of disputes by the parties has led them to be reluctant to interfere.”

(see Turner v Green [1895] 2 Ch. 205 and BCCI v Ali [1999] ICR 1068, per Lightman J at paragraph [11] and [2000] ICR 1410, per Sir Richard Scott, Vice-Chancellor, at paragraph [32]).

Secondly, I agree with Mr Jacobs in his submission that either a duty to disclose exists in such a situation or it does not, and does not depend on the facts which are not disclosed. Here the contention is that the circumstances of PPS’s invitation to Silver Queen to treat directly with IOOC were, as Mr Higraff acknowledged in cross-examination, highly unusual. As Mr Fraser put it in closing, it may not be at all usual for one party to be put into private discussions with a second party’s funder by that second party, and then enter negotiations with the second party armed with the knowledge that the funder will not pay more than a certain amount to fund the second party’s settlement with the first. In my judgment, however, it does not follow that in such a case, where hostile litigation is in progress and one party knows that the other is ignorant of the real limits upon his own source of funds, there arises an “unusual circumstances” obligation on the first party to tell the second what he knows. The proposition seems to run counter to the basic principle that parties to hostile litigation are entitled not to disclose, during settlement negotiations, information relating to the claim.

For the reasons I have given I conclude that the agreement reached between the parties in July 2009 cannot be rescinded for non-disclosure.

As I have already indicated, PPS has abandoned this part of its case on the preliminary issues. In my judgment it was right to do so. Its argument on fraud was never well founded.

Mr Jacobs submitted that once it is accepted that the settlement agreement is binding, and cannot be set aside either for non-disclosure or for fraudulent misrepresentation, there is no basis upon which the court could refuse to enforce it. PPS’s attempt to invoke the concept of “unconscionability” goes no further than the allegation of non-disclosure and falls with it. The present case comes nowhere near the kind of circumstances in which courts will interfere with “unconscionable bargains”. First, the bargain was not oppressive to PPS, but, on the contrary, a compromise to a larger liability facing PPS in an action to which it had no defence. Secondly, PPS was not suffering from any type of recognized bargaining weakness. PPS was active and experienced in the international oil industry, dealing with governments and other corporations involved in the same industry, and, at least in the present case, advised by English solicitors. Thirdly, Silver Queen acted commercially, not unconscionably. Having sought in vain to find a solution through direct discussions with the IOOC, it pressed ahead with its claim against PPS, was offered 8.1 million Euros by PPS to settle the claim, and entered into a settlement for that sum. In any event, the argument on “unconscionability” seems to be directed at Silver Queen’s claim for declaratory relief, an equitable remedy. Such relief is not necessary, appropriate though it would be. Silver Queen simply needs judgment for the unpaid settlement sum.

Mr Fraser submitted that if the court did not find that there was either any legal duty of disclosure binding Silver Queen or any fraudulent misrepresentation, but did find that Silver Queen deliberately withheld from PPS during the settlement negotiations the information about its offers to IOOC and NIOC, it could and should mark its disapproval of such unconscionable conduct by refusing to enforce the terms of the Settlement Deed itself. Mr Fraser relied on the observations of Lord Hoffmann in BCCI v Ali [2002] 1 AC 251, at paragraphs 69-70 (on p 279) to the effect that some remedy must be available in this kind of situation.

I accept Mr Jacobs’ submissions on this issue.

In my judgment, this is not a case in which the established principles relating to unconscionable transactions come into play at all. Silver Queen is not seeking specific performance. It is seeking to recover a debt arising from a contractual obligation to pay for work done. Even if specific performance were being sought, such an action would not remove Silver Queen’s right at law to be awarded damages for breach of the relevant obligation (see Spry’s “The Principles of Equitable Remedies” (7^th edition), Chapter 3). Unless the transaction can be set aside for non-disclosure, or misrepresentation, or on the basis of principles relating to unconscionable transactions, which in my view it cannot, the agreement itself stands and the rights granted under it cannot merely be ignored, even if the court were to decline to grant equitable relief.

Mr Fraser acknowledged that this issue only arises if the court, having not found any legal duty of disclosure, or any fraudulent misrepresentation (for which he no longer contends), were nevertheless to find that Silver Queen deliberately or carelessly withheld information about its offers from PPS during the settlement negotiations, which it ought to have disclosed. I do not accept that Mr Fraser’s proposition gains strength from the commentary in Chapter XII (entitled “Special Cases: Cases in which a Duty of Disclosure is Imposed by Circumstances”) of Spencer Bower’s work, or from the dicta of Lord Hoffmann in his speech in BCCI v Ali [2002] 1 A.C. 251 (at p 279) as to what might have been the position in that case if the parties had agreed a release of all present and future claims but one party actually knew that the other was unaware of a claim available to him which was thus being released. Lord Bingham (with whose speech Lord Browne-Wilkinson agreed) left this point open, and so too did Lord Clyde. As Mr Jacobs submitted, the present case is not about a release, or a situation in which one party is said to be aware that the other is releasing a claim he knows nothing about.

Assuming that the court does have a residual discretion to refuse to give effect to PPS’s obligation to pay the amount of money in the concluded settlement agreement, I cannot accept that that discretion ought to be exercised in PPS’s favour.

In the first place, I do not accept, on the evidence I have heard, that Silver Queen did deliberately or recklessly withhold information which it ought to have shared with PPS. There was no sharp practice nor anything at all reprehensible – or unconscionable – in the conduct of Mr Isden and Mr Holst. I accept that it never occurred to either of them that they were under a duty to tell PPS about the unsuccessful negotiations with IOOC and NIOC.

Secondly, those negotiations were conducted by Silver Queen, at Mr Tabassi’s suggestion, in good faith.

Thirdly, as I have already held, Silver Queen was not, at any stage, under a duty of disclosure in respect of its negotiations with IOOC and NIOC. Besides, on the facts of the present case, however unusual the situation may have been, it would surely have been obvious to PPS that direct discussions between Silver Queen and IOOC might very well take place after Mr Tabassi had suggested that they should. There was nothing to prevent PPS from asking IOOC whether this had happened, and if so, what its attitude would be to funding a settlement at the level PPS was minded to put to Silver Queen. If PPS did not do this I cannot see how it can complain now about Silver Queen having said nothing of the discussions it had with IOOC.

Fourthly, throughout its subsequent negotiations with PPS Silver Queen was assured that the settlement money would promptly be paid.

And fifthly, it should not be forgotten that in the background to all of this was the default of PPS on its contractual obligation to pay Silver Queen for the work it had done.

For the reasons I have given, this, in my judgment, is not a case in which the court should decline to enforce the Settlement Deed for unconscionable conduct.

Mr Jacobs submitted that at the Kish Island meeting Silver Queen made it very clear that payment would have to be made by 30 September 2009. If it was not, Silver Queen would “revert to pursuing the binding higher claim”. In the correspondence which followed no real progress was made. Seabird’s entitlement to the sum discussed at the Kish Island meeting was not disputed. The correspondence reveals nothing by way of support for PPS’s pleaded case that IOOC was refusing to pay because of alleged delays in the performance of the survey work by Silver Queen. Payment was not made by 30 September 2009, or later. When Silver Queen decided in December 2009 to resume the litigation, PPS did not dispute its right to do so. Nor did it do so after that, until shortly before the case-management conference in June 2010.

Mr Fraser submitted that the court had to consider two questions: (i) whether there was a legally binding agreement reached on Kish Island on 25 August 2009, and (ii) if so, what the terms of that agreement were. There was no doubt that Silver Queen and PPS went to Kish Island intending to reach a binding agreement to settle all disputes between them, including the dispute over the validity of the settlement agreement. And, as the agreed record of the meeting shows, an agreement was reached. From the minutes it can be inferred that Silver Queen would accept 5.2 million Euros in full and final settlement of its invoices; that Silver Queen would hand over the survey data upon payment; that PPS would press NIOC to release the money and would pay Silver Queen 5.2 million Euros when it received that sum from NIOC; that the agreement was reached in full and final settlement of all disputes in the proceedings, including the dispute as to the validity of the Settlement Deed, which, if valid, it rescinded and replaced. Silver Queen’s contention that there was no binding agreement is unrealistic in these circumstances. And its alternative contention, that any such agreement was in any event conditional upon payment being received by 30 September 2009 had been rejected by Mr Tabassi and by Mr Rezazadeh who were both present at the meeting. Mr Fraser acknowledged that this date was an important aspiration for Silver Queen, but not a condition to the coming into effect of any agreement. That it was not a condition is shown by the fact that the parties had continued to act under the agreement of 25 August 2009 long after the supposed deadline of 30 September 2009 had passed. Mr Fraser submitted that the net effect of the agreement of 25 August 2009 had been to change Silver Queen’s independent right of action against PPS into a new right to compel it to try to procure the settlement sum of 5.2 million Euros from NIOC. This change served a sensible commercial purpose in a situation in which, as Mr Isden had acknowledged at the meeting, PPS could not pay the invoices and its value to Silver Queen lay in its ability to influence NIOC’s behaviour.

Again, I accept Mr Jacobs’ submissions.

I do not accept that any concluded agreement, superseding that contained in the Settlement Deed, came into existence at or after the meeting on Kish Island. In my judgment, that idea is unreal. It may be true, as Mr Isden acknowledged, that Silver Queen attended the meeting hoping and intending to reach what he referred to as “an amicable agreement”, including on the dispute over the settlement agreement itself. That does not mean, however, that the outcome of the meeting, in so far as it represented a consensus between the parties about the way forward, was a legally enforceable arrangement which stood in place of the Settlement Deed. In my view, that is not what happened. The evidence does not point to the conclusion that it did. In fact, it points decisively the other way.

As Mr Isden said, the signing of the agreed minutes by either side did not generate an executed and binding agreement, but merely an agreed record of what had been said at the meeting. The difference is important. The most that emerged from the meeting was an understanding between the parties that PPS would pay Silver Queen 5.2 million Euros and that when that payment was made Silver Queen would release the survey data to PPS.

The crucial consideration, however, was time. Silver Queen made it abundantly clear that the timing of the payment of the 5.2 million Euros was not to be left at large. A deadline was specified. That deadline was 30 September 2009. This was consistent with the approach of Silver Queen from the outset, namely to secure a settlement of its dispute with PPS which was both fair and fast.

Mr Fraser’s submission, that the deadline of 30 September was merely an aspiration of Silver Queen and not an essential element of the understanding reached between the parties, and thus a necessary condition of any agreement coming into effect, is not correct. The submission presupposes that there was a concluded agreement, which in my judgment there was not. It also suggests that Silver Queen, despite having referred in the meeting its intention to revert, if it had to, to “pursuing the binding higher claim”, was prepared to relinquish that “binding higher claim” in return for an open-ended promise to “lobby NIOC” even if that lobbying yielded nothing: a change in the parties’ positions vis-à-vis each other which was said by Mr Fraser to have served “a sensible commercial purpose”. Not only is that a surprising proposition on its face; it is not what the agreed minutes of the meeting say. And it is also difficult to reconcile with Mr Tabassi’s evidence in cross-examination to which I have referred to in paragraph 103 above.

The fact that PPS continued to pursue NIOC for payment after the 30 September deadline passed is entirely consistent with there having been no binding agreement concluded at Kish Island and Silver Queen having done exactly what it promised it would do if it was not paid 5.2 million Euros by PPS by that date – which was to revert to the “binding higher claim.”

Either way, in my judgment, PPS is left facing that binding claim in the form of the Settlement Deed. If, contrary to my conclusion, a binding agreement was reached at Kish Island, that agreement was a conditional one, the condition was not fulfilled, and the previous, binding arrangement in the Settlement Deed was still in place. If no binding agreement came into existence on Kish Island the Settlement Deed remained in operation throughout.

I therefore reject Mr Fraser’s submission that the net effect of what occurred at the meeting on Kish Island on 25 August 2009 was a change to Silver Queen’s independent right of action against PPS into a new right to compel it to make efforts to procure 5.2 million Euros as a revised settlement sum from NIOC.

For those reasons I conclude that no further settlement was reached in August 2009 which had the effect that Silver Queen could not pursue its claim under the July 2009 settlement.

For the reasons I have given I have determined all of the live preliminary issues in favour of Silver Queen. I shall hear counsel on the appropriate form of an order to reflect this outcome, and, if necessary, on the consequences of this judgment for the proceedings as a whole.