Kaefer Aislamientos SA De CV v AMS Drilling Mexico SA de CV [2017] EWHC 2598 (Comm) (19 October 2017)

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England and Wales High Court (Commercial Court) Decisions

You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Kaefer Aislamientos SA De CV v AMS Drilling Mexico SA de CV [2017] EWHC 2598 (Comm) (19 October 2017)
URL: http://www.bailii.org/ew/cases/EWHC/Comm/2017/2598.html
Cite as: [2017] EWHC 2598 (Comm)

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		Neutral Citation Number: [2017] EWHC 2598 (Comm)
		Case No: CL-2016-000414

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

19/10/2017

B e f o r e :

MR PETER MACDONALD EGGERS QC
____________________

Between:

	KAEFER AISLAMIENTOS SA de CV	Claimant
	- and - (1) AMS DRILLING MEXICO SA de CV (2) ATLANTIC MARINE SERVICES BV (3) ATLANTIC TIBURON 1 PTE LIMITED (4) EZION HOLDINGS LIMITED
		Defendants

____________________

Michael Nolan QC (instructed by Clyde & Co LLP) for the Claimant
Nigel Cooper QC (instructed by Stephenson Harwood LLP) for the Third and Fourth Defendants
The First and Second Defendants were not represented

Hearing dates: 13th September 2017
____________________

HTML VERSION OF JUDGMENT APPROVED
____________________

Mr Peter MacDonald Eggers QC:

Introduction

The Claimant has commenced these proceedings claiming sums allegedly due under a contract in respect of work carried out by the Claimant to the accommodation areas of the cantilever jack-up rig Atlantic Tiburon 1 ("the Rig"). Such works included the removal and disposal of various items, the abatement of asbestos, the supply and installation of insulation, and refurbishment. The claim for the unpaid sums is in the amount of US$2,353,794.42. The Claimant also seeks other relief.

The Claimant has instituted these proceedings against four defendants: AMS Drilling Mexico SA de CV ("AMS Mexico"), Atlantic Marine Services BV ("AMS"), Atlantic Tiburon 1 Pte Limited ("AT1") and Ezion Holdings Limited ("Ezion"). The Claim Form and the Particulars of Claim were served on AT1 and Ezion in Singapore in reliance on CPR rules 6.33(2)(b)(v) and 6.33(2A).

The Claimant argues that the Court has jurisdiction pursuant to article 25 of the Brussels I Regulation (Recast) (Regulation (EU) 1215/2012) because the relevant contract contains an English exclusive jurisdiction clause and further contends that the relevant contract was concluded by AMS Mexico and/or AMS on behalf of AT1 and Ezion as undisclosed principals and that, as undisclosed principals, the contract - together with the jurisdiction agreement - was binding on AT1 and Ezion.

AT1 and Ezion challenge the Court's jurisdiction on the ground that neither were a party to the contract under which the claim is made. AMS and AMS Mexico have made no similar application challenging the Court's jurisdiction and did not appear at the hearing of the application made by AT1 and Ezion.

At the hearing, the parties were agreed that the question whether the Court has jurisdiction depends solely on the outcome of the issue whether AT1 and Ezion were a party to the jurisdiction agreement contained in the contract under which the Claimant sues.

The making of the contract with the Claimant

The Claimant maintains that the relevant contract was evidenced by a Purchase Order dated 16th August 2013 ("the Purchase Order"). The Purchase Order identified the Claimant as the "Vendor" and was signed by Mr Jody Baker of AMS. The Purchase Order required invoices to be addressed to AMS Mexico, marked for the attention of the Rig ("Atlantic Tiburon 1"), and required delivery of the services at the Rig's Project Office which was then located at Terminal J Ray McDermott de Mexico, in Puerto Industrial de Altamira, Altamira Tamaulipas, Mexico. It was not suggested that the reference to "Atlantic Tiburon 1" was to AT1, as opposed to the Rig.

The terms of payment under the Purchase Order were that 30% of the price would be paid upfront and 70% would be invoiced against bi-weekly documented progress, which had to be signed by "the AMS project manager". The contract provided that all documents supporting an invoice must be signed by "the AMS project manager".

The Purchase Order provided that by accepting the Purchase Order, the Vendor (the Claimant) agreed that the conditions of business printed on the Purchase Order (described as "Terms & Conditions of Business AMS BV") would apply. Those conditions of business provided inter alia that:

"1. Agreement

1.1 These Terms and Conditions of Business together with this Purchase Order constitute the entire agreement between Atlantic Marine Services BV and its various affiliates and subsidiaries (hereinafter collectively referred to as "the company"[)] and supplier stated in the Purchase Order, (the Seller), for the execution of the work/supply of the goods described in the Purchase Order. Each order by the Company for goods from the Seller shall be deemed to be an offer by the Company to purchase goods/services subject to these Terms & Conditions. Variations or changes to the Purchase Order or these Terms & Conditions shall only be effective if made in writing specifically for such purpose and signed by a duly authorised representative of both parties …

10 Default and Termination …

10.2 In the event that, in the Company's sole opinion, the Seller[']s default shall be deemed not capable of remedy to the Company's satisfaction, the Company shall have the right to terminate the Purchase order in part or whole by notice in writing to the Seller …

11. Suspension

The Company may at any time at its sole option suspend the performance of all or part of the Purchase order by giving written notice to the Seller … The Company will grant no compensation or extension of time for any suspension that might result from an act or default caused by the Seller …

13. Ownership

13.1 Title to the goods shall pass from the Seller to the Company upon the earlier of: (a) delivery by the Seller and receipt of the goods accepted by the Company; (b) payment, either partial or in full; (c) for designs, drawings, technical information and data when prepared by the Seller …

17. Assignment and Subcontracting …

17.4 The Purchase Order/Contract shall enure to the benefit of and be binding upon the successors of the Company and the Seller …

21. Governing Law

These Terms & Conditions and any Purchase Order shall be governed by and construed and interpreted in accordance with the laws of England and Wales and the parties hereto irrevocably submit to the exclusive jurisdiction of the High Court in London for the resolution of any disputes arising in connection with the supply of goods under these Terms & Conditions and the relevant Purchase Order/Contract"

The Claimant relies on clause 21 of the Purchase Order to secure the Court's jurisdiction. ATI and Ezion dispute this contending that they were not parties to the contract evidenced by the Purchase Order.

The background to the Purchase Order

The services which the Claimant agreed to provide by means of the Purchase Order were provided to the Rig. The services were provided against the following background. The background was largely explained in two witness statements by Mr Luis Fernando Pereira Cozzoli ("Mr Pereira"), who is the Deputy Director of the Claimant, and in three witness statements by Mr Cheah Boon Pin ("Mr Cheah"), who is the Group Financial Officer at Ezion and a director of AT1. The Claimant questions the weight to be given to Mr Cheah's witness statements for reasons I discuss below.

The registered owner of the Rig was AT1 and AT1 was a 100% subsidiary of Ezion.

In early 2012, representatives of the parent company of AMS Mexico and AMS, Treatmil Holdings Ltd ("Treatmil") and an associated company Traxiar Ventures Ltd ("Traxiar"), approached Ezion about a transaction by which Ezion would assist in providing rigs for projects with oil majors. Ezion would arrange financing and would purchase a rig through a special purpose vehicle ("SPV"), which in turn would demise charter the rig to AMS or a nominee company. The financing costs were to be reimbursed through the payment of charter hire income paid to the SPV from the earnings made by Treatmil and Traxiar; that income was to be paid into an escrow account.

One opportunity falling within this transaction was a contract with Pemex Exploracion y Production ("PEP") to operate the Rig as a drilling platform in the Gulf of Mexico. According to Mr Cheah, AMS entered into a contract with PEP, under which AMS was required to deliver the Rig to PEP between 30th May 2012 and 31st January 2015. Although this was not disputed by the Claimant, it was observed that the PEP contract had not been disclosed and was not before the Court.

On 29th March 2012, AT1 entered into a contract for the purchase of the Rig. The Bill of Sale for the Rig was executed on 17th April 2012. A Provisional Certificate of Registry was issued by the Republic of the Marshall Islands naming AT1 as the sole owner of the Rig on 24th April 2012.

On 16th March 2012, a bareboat charterparty ("the Bareboat Charterparty") was concluded in respect of the Rig between AT1 as owner and AMS as charterer. The Bareboat Charterparty was on an amended Barecon 2001 form and was signed by Mr Cheah on behalf of AT1 and by Mr Alfred Schwegler on behalf of AMS.

The Bareboat Charterparty provided for delivery of the Rig on 30th May 2012 or such other date as may be agreed and the charter period was for 977 calendar days, with an extension of 483 days at AMS's option. AMS agreed to pay a mobilisation fee of US$1,450,000 and charter hire at the rate of US$59,400 PDPR for the first 850 days and thereafter at the rate of US$48,400 PDPR.

The Bareboat Charterparty contained the following provisions:

"3. Delivery

(a) The Owners shall before and at the time of delivery exercise due diligence to make the Vessel seaworthy And in every respect ready in hull, machinery and equipment for service under this Charter. The Vessel shall be delivered by the Owners and taken Over by the Charterers [in the Gulf of Mexico] …

(c) The delivery of the Vessel by the Owners and the taking over of the Vessel by the Charterers shall constitute a full performance by the Owners of all the Owners' obligations under this Clause 3, and thereafter the Charterers shall not be entitled to make or assert any claim against the Owners on account of any conditions, representations or warranties expressed or implied with respect to the Vessel but the Owners shall be liable for the cost of but not the time for repairs or renewals occasioned by latent defects in the Vessel, her machinery or appurtenances, existing at the time of delivery under this Charter, provided such defects have manifested themselves within twelve (12) months after delivery …

10. Maintenance and Operation

(a) (i) Maintenance and Repairs - During the Charter Period the Vessel shall be in the full possession and at the absolute disposal for all purposes of the Charterers and under their complete control in every respect. The Charterers shall maintain the Vessel, her machinery, boilers, appurtenances and spare parts in a good state of repair, in efficient operating condition and in accordance with good commercial maintenance practice and … at their own expense they shall at all times keep the Vessel's Class fully up to date with the Classification Society [American Bureau of Shipping] and maintain other necessary certificates in force at all times

(c) The Charterers shall keep the Owners and the mortgagee(s) advised of the intended employment, planned dry-docking and major repairs of the Vessel, as reasonably required …

(e) Changes to the Vessel - Subject to Clause 10(a)(ii), the Charterers shall make no structural changes in the Vessel or changes in the machinery, boilers, appurtenances or spare parts thereof without in each instance first securing the Owners' approval thereof …"

On 12th November 2012, AT1 and AMS agreed Addendum No. 1 which varied the terms of the Bareboat Charterparty, with respect to the date of delivery and the sums to be paid by AMS as charterer. The time for delivery agreed was "On or about 1st March 2013 or such other date as may be agreed". Further, it was agreed that AMS would forthwith pay to AT1 (a) a non-refundable deposit of US$9,350,000 which could be set off against charter hire payable for the first 850 days at the rate of US$11,000 per day and (b) a non-refundable downpayment of US$650,000 as partial payment of the agreed mobilisation fee of US$1,450,000.

On 13th March 2013, Addendum No. 2 was agreed which varied the charter hire payable by AMS.

In his first witness statement dated 30th December 2016, at paragraph 14, Mr Cheah stated that the Rig was delivered under the Bareboat Charterparty to AMS on or about 22nd October 2012, but was never delivered into service under the PEP contract. According to Mr Cheah, PEP was not satisfied with the condition of the Rig and was not prepared to accept it because it did not meet the specifications required by the PEP contract. Mr Michael Nolan QC, acting on behalf of the Claimant, questioned 22nd October 2012 as the date of delivery under the Bareboat Charterparty because Addendum No. 1 which was concluded three weeks later varies the date of delivery to "On or about 1st March 2013 or such other date as may be agreed". If the Rig had already been delivered, it was said, there would have been no need to include this variation.

However, by the date of Addendum No. 2 (13th March 2013), no further reference was made to the delivery date of the Rig under the Bareboat Charterparty.

In his first witness statement, at paragraph 13, Mr Cheah said that hire due under the Bareboat Charterparty was suspended until the Rig had been delivered into service under the contract with PEP. However, as the Claimant observed, there was no written record of such suspension.

In any event, although the date of delivery is uncertain, it appears that the Rig had been delivered to AMS under the Bareboat Charterparty before the date of the Purchase Order of 16th August 2013. I do not understand that the Claimant asserted the contrary. I reach this preliminary view for the following reasons: (a) whereas Addendum No. 1 to the Bareboat Charterparty made provision for delivery, Addendum No. 2 to the Bareboat Charterparty did not, suggesting that delivery had taken place or, possibly, that a date for delivery had been agreed, and (b) the Purchase Order required delivery to take place at the Rig's project office and required invoicing to be addressed to AMS Mexico "Attn. Atlantic Tiburon 1". Further, I note that, in the letter dated 16th October 2013 referred to below, which was sent two months after the date of the Purchase Order, reference appears to have been made to AMS's right of possession of the Rig, which could be the case only if delivery had already taken place.

In his first witness statement, Mr Cheah added "As far as I am aware, the Purchase Order with the underlying contract between [AMS] and the Claimant was made because [AMS Mexico and AMS] were endeavouring to put the Rig into a condition where it was acceptable to PEP and they could comply with their obligations as disponent owners of the Rig under the PEP Contract". In his second witness statement dated 27th January 2017, Mr Cheah further explained, at paragraph 13, that "certain works were necessary to make the rig sea-worthy and operational and should be funded by the financing provided by [Ezion]", and, at paragraph 14, that "Pursuant to the arrangements between [Ezion] on the one hand and Treatmil and Traxiar on the other the project costs financed by [Ezion] were to be used in part for any necessary reactivation and upgrade works".

The Claimant contends that the work undertaken by it to the Rig, in respect of the abatement of asbestos, was necessitated by the International Convention for the Safety of Life at Sea (SOLAS), Ch. II-1 Reg. 3.5 and MSC. 1/Circ 1379, and by the Leasing Requirements of PEP which required compliance with SOLAS 2009 and the MODU Code 2010. Mr Nigel Cooper QC, acting for AT1 and Ezion, takes issue with this, because these codes do not apply to the abatement of asbestos of the Rig, which was built in 1982. SOLAS II-1 Reg. 3-5 provides that "From 1 January 2011, for all ships, new installation of materials which contain asbestos shall be prohibited" and MISC. 1/Circ. 1379 provides that "new installation of materials" means "any new physical installation on board". Therefore, Mr Cooper QC argues, there was no requirement to remove asbestos if it had not been installed after 1st January 2011. A similar argument is made in respect of the MODU Code, which provides (at least in its 2009 version) that it applies to "mobile offshore drilling units as defined in section 1.3, the keels of which are laid or which are at a similar stage of construction on or after 1 January 2012" (section 1.2.1). Whether or not the Claimant or AT1/Ezion is right, Mr Cheah has stated that the Rig was not sea-worthy and was not in a condition acceptable to PEP, but it is not clear to me, as discussed below, whether AT1 or AMS was responsible for this under the Bareboat Charterparty.

In order that the works to render the Rig seaworthy and fit for service should be carried out, again according to Mr Cheah, AT1 entered into two contracts. First, a Master Vessel Repair and Modification Agreement dated 28th September 2012 ("the Modification Agreement") with J Ray McDermott de Mexico SA de CV ("McDermott"). The Rig was then located at McDermott's yard. The Modification Agreement was subsequently re-signed on 13th May 2013. A copy of the re-signed, not the original, agreement was before the Court. Second, a Jack-Up Rig Project Management & Services Agreement dated 31st October 2012 ("the Project Management Agreement") with AMS Singapore. AMS Singapore is said to be a sister company to AMS and AMS Mexico.

By the Modification Agreement, signed by Mr Cheah on behalf of AT1, it was provided that:

"WHEREAS, [AT1] may desire to engage [McDermott] from time to time to perform services and/or provide materials, goods, equipment or other products in connection with such services as more specifically set forth in an Order, as herein defined (the "Work") …

ARTICLE I

SCOPE OF WORK

…

1.2 Control. This Agreement shall control and govern all Work performed and/or goods or equipment provided by [McDermott] or [AT1] under subsequent written Work Orders or Change Orders. No Work will be performed without a Work Order or Change Order … For the purposes of this Agreement "Work Order" shall mean any written order or written instruction form Company and accepted by Contractor giving Contractor an order to perform any Work referenced in Appendix 1 …

ARTICLE XI

WORK BY COMPANY

11.1 Performance of Work Outside of Scope of Work. [AT1], with [McDermott's] prior written consent, shall have the right from time to time to perform, either directly or through one or more specialist contractors work on various tasks on the Vessel that are not a business of [McDermott] … [AT1] shall be responsible for the costs and expenses of all services provided by these specialist contractors.

11.2 Access and Cooperation. Any work performed by [AT1] or its contractors in accordance with Article XI shall be scheduled in such a manner as to not unduly interfere with [McDermott's] performance of the Work …"

On 30th November 2012, Intertek issued an analytical report in respect of an asbestos survey carried out on board the Rig and addressed the report to McDermott. On 7th August 2013, by a letter addressed to AMS, the Claimant tendered for the removal of various items from the Rig, the abatement of asbestos and the supply of thermal insulation. In the covering letter, the Claimant referred to the scope of work as including "Use OSHA Level 2 asbestos abatement procedures as modified by applicable Mexican asbestos regulations to remove materials identified as asbestos-containing in the Intertek asbestos survey". This phrase is repeated in the Purchase Order.

On 16th August 2013, AMS issued the Purchase Order referred to above.

Subsequent events

On 16th October 2013, AMS wrote to McDermott in reply to McDermott's letter dated 11th October 2013. In that earlier letter, McDermott apparently stated that it would not perform the Modification Agreement. I have not seen a copy of that earlier letter. In its reply, which was copied to Mr Cheah of AT1, AMS stated that:

"AMS, as the appointed representative of the Asset Owners pursuant to the two Master Vessel Repair and Modification Agreements … relating to the vessels Atlantic Tiburon I and Atlantic Tiburon 3 (the "Vessels"), we acknowledge your letter … Derived from reading your letter, we understand that [McDermott] refuse to reverse their fixed position to abandon, renounce and refuse to perform the [Modification Agreement] and substantially interfered with AMS's right of position [sic: possession] of the Vessels … AMS informs by this means to [McDermott] of the actions which will be taken by AMS in order to minimize the impact of the damages that potentially will be caused to AMS for [McDermott's] position …"

On 17th October 2013, McDermott responded to this letter to AT1 for the attention of Mr Cheah, not to AMS, but the response was copied to AMS, confirming that McDermott had suspended work until all amounts due and payable under the Modification Agreement have been received. In this letter, McDermott first referred to AMS's letter dated 16th October 2013:

"… In the letter, AMS outlines the work on the Projects that they wish to continue to perform. As you are well aware, at this time McDermott has suspended the work on the Projects pursuant to the terms of the current Vessel Repair and Modification Agreements for Atlantic Tiburon I … and McDermott is not willing to allow any work to be performed on the vessels until all amounts due and payable have been received … Please note that McDermott is taking these actions due to [AT1] … (the "Owners") failure to continuously pay amount that are due and payable pursuant to the [Modification Agreement], despite our repeated requests that the Owners do so … The suspension of the work for the Projects is an appropriate and legitimate exercise of McDermott's contractual rights based upon the continued failure by Owners to pay long outstanding invoices approved by AMS on behalf of Owners …"

In October and November 2014, two separate payments of US$100,000 were made to the Claimant in respect of one of their invoices (no. A1598). The payments were made by subsidiaries of Ezion (other than AT1) and were described as being made "on behalf of Atlantic Marine Services BV". Mr Cheah states, in his first witness statement at paragraphs 19 and 34, that the sums paid represented sums due to AMS and/or AMS Singapore and were made at AMS's request. Mr Cheah further states (at paragraph 20) that AT1 and Ezion were willing to assist AMS to deliver the Rig to PEP to generate cash flow from the PEP contract, which was required to pay charter hire under the Bareboat Charterparty.

Mr Pereira, Deputy Director of the Claimant, refers in his first witness statement dated 13th January 2017 to settlement discussions between the Claimant and AT1 and/or Ezion. Mr Cheah also refers to these discussions. These discussions took place from about October 2014 until early 2015. According to Mr Pereira, by these discussions, the Claimant was looking to Ezion for payment of the sums due under the Purchase Order and suggests that this indicates that Ezion or AT1 in effect acknowledged that they were contracting parties to the contract evidenced by the Purchase Order. Mr Cheah disputes this, referring in his second witness statement dated 27th January 2017 to a draft novation agreement which was being negotiated and which contemplated the transfer of AMS's rights and obligations under the Purchase Order contract to AT1.

Undisclosed principal

The Claimant contends that AMS and AMS Mexico contracted with the Claimant on their own behalf and/or on behalf of AT1 and Ezion as undisclosed principals. Mr Cooper QC emphasised that the allegation that AT1 and Ezion were undisclosed principals had not been pleaded by the Claimant in its Particulars of Claim. However, an agency was pleaded and it was made clear, by reason of subsequent statements of position, that the Claimant's case was that AT1 and Ezion were undisclosed principals. The absence of a reference to this specific allegation in the Particulars of Claim is to my mind of no relevance to the issue at hand.

If the Claimant's contention that AT1 and Ezion were undisclosed principals is right, AT1 and Ezion would be bound by the jurisdiction agreement in clause 21 of the Purchase Order. The question is whether AT1 and Ezion were undisclosed principals. AT1 and Ezion dispute that they were undisclosed principals.

In Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199, 207, Lord Lloyd sitting in the Privy Council explained the law concerning undisclosed principals in the following terms:

"For present purposes the law can be summarised shortly. (1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principal's behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against his principal. (5) The terms of the contract may, expressly or by implication, exclude the principal's right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal."

In order for a party to be an undisclosed principal, therefore, it must be established that:

(1) The agent must have contracted with and within the scope of the actual authority of the undisclosed principal.

(2) At the time of the relevant contract, the agent must have intended to contract on the principal's behalf.

(3) There must be nothing in the contract or in the surrounding circumstances which shows that the agent is the true principal and which effectively excludes the making of a contract with an undisclosed principal.

Mr Cooper QC argued, in reliance on the commentary of the editors of Bowstead and Reynolds on Agency (20th ed., 2014), at para. 8-071, that the doctrine of undisclosed principal applies only in two types of case, namely where the principal wishes to be a party to a contract, but does not wish it to be known that he has entered the market, or where the agent has authority but does not disclose the existence of the principal, and the principal either acquiesces in this or makes no inquiry as to the agent's notice. I do not think that the doctrine is necessarily to be limited in this regard if the conditions of the doctrine referred to above are satisfied. In this respect, the editors of Bowstead and Reynolds appear to have been focussing their discussion on whether the principal must have intended the agent to bring him into contractual privity with the third party. The alternative view is that the doctrine may apply where the principal uses the services of an intermediary who works on an "agency basis", even though the principal does not intend to be a party to any contracts made. The editors conclude this discussion by stating that the difference between the two views is "not great".

In determining the application made by AT1 and Ezion contesting the jurisdiction of the Court, I must be satisfied to the relevant degree that AT1 and Ezion are undisclosed principals. In deciding this question, there must be sufficient evidence of the agent's authority granted by the principal (in this case, AMS's or AMS Mexico's authority granted by AT1 and/or Ezion) and of the agent's intention to contract on behalf of the principal.

Mr Cooper QC argued that the terms of the Purchase Order make it clear that AMS and AMS Mexico did not intend to contract as an agent and impliedly excluded the possibility of an undisclosed principal, because AMS Mexico were the "billing party", because the Contract defined who the parties to it were, namely AMS and the Claimant, and because the remainder of the terms and conditions describe the rights and obligations of the parties.

In response, Mr Michael Nolan QC, on behalf of the Claimant, argued that the fact that a principal is an undisclosed principal means that its role is unknown to the third party (in this case, the Claimant) at the time of the contract. Accordingly, the language of the contract would not necessarily betray the existence of such a principal.

I should start by stating that, given the nature of the doctrine of undisclosed principal, I do not consider that because the party or parties to the contract have been identified in the contract and such party or parties do not include the undisclosed principal, that necessarily means the parties to the contract intended to exclude the possibility of intervention by the undisclosed principal. Indeed, soon after Lord Lloyd explained the doctrine, he referred to the judgment of Diplock, LJ in Teheran-Europe Co Ltd v ST Belton (Tractors) Ltd [1968] 2 QB 545, 555, who said:

"… a person may enter into a contract through an agent whom he has actually authorised to enter into the contract on his behalf … Where an agent has such actual authority and enters into a contract with another party intending to do so on behalf of his principal, it matters not whether he discloses to the other party the identity of his principal, or even that he is contracting on behalf of a principal at all, if the other party is willing or leads the agent to believe that he is willing to treat as a party to the contract anyone on whose behalf the agent may have been authorised to contract. In the case of an ordinary commercial contract such willingness of the other party may be assumed by the agent unless either the other party manifests his unwillingness or there are other circumstances which should lead the agent to realise that the other party was not so willing."

I do not consider that there is anything in the nature of the contractual services provided by the Claimant or in the description of the other party as "the company" which necessarily excludes the possibility that the contract was made with an undisclosed principal. There would usually have to be something more, such as an express provision prohibiting the intervention of an undisclosed principal or a contract which concerns the registered title of a named party.

Of course, the circumstances surrounding the making of the contract, rather than the contract itself, may intimate the unwillingness of the third party to contract with an undisclosed principal. Mr Cooper QC relied in this context, and in support of the argument that the Purchase Order excluded the intervention of an undisclosed principal, upon the decision of the Court of Appeal in The United Kingdom Mutual Steamship Assurance Association Ltd v Nevill (1887) 19 QBD 110, where it was held that the association could not sue a part owner of a ship for unpaid premium, where the policy issued by the associated named another part owner of the ship, because to allow the doctrine of undisclosed principal to operate would be to allow an undisclosed member of the association to participate in the association, but this would essentially mean that the association would be constituted by persons who did not consent to associate with undisclosed members. At page 117, Lord Esher, MR explained the position as follows: "If a person could be an undisclosed principal with regard to such a policy, it would really make him an undisclosed member. If he is not a member, the policy cannot be made with him so as to be binding. I do not think there can be such an undisclosed member or partner so far as the other members are concerned. If it were so, then the making of such a policy as this would make the alleged undisclosed principal of the person effecting it an associate with the members of the association without their knowledge and consent". In other words, it was the nature of an association of members that all the members must know and consent to the association with all of the other named members. At page 121, Fry, LJ confirmed this by holding that "the primary object of the members of the association was mutual assurance, i.e., an assurance of the property of or represented by the members with the members and with no one else".

In the present case, I do not consider that the Purchase Order or such circumstances surrounding the contract evidenced by the Purchase Order indicated any desire on the part of the Claimant not to contract with an undisclosed principal.

Accordingly, in order to exercise jurisdiction in respect of the Claimant's claim against AT1 and/or Ezion, the Court must be satisfied, based on the relevant standard of proof, that AT1 and/or Ezion, as the case may be, were parties to the contract with the Claimant evidenced by the Purchase Order as undisclosed principals. This requires the Court to be satisfied that (1) AMS and/or AMS Mexico were actually authorised by AT1 and/or Ezion to conclude the contract evidenced by the Purchase Order with the Claimant, and (2) AMS and/or AMS Mexico intended, at the time of the contract, to contract with the Claimant on behalf of AT1 and/or Ezion as undisclosed principals.

The burden and standard of proof

As the Court's jurisdiction, in this case, must rest on the existence of an English exclusive jurisdiction agreement, the Court must be satisfied that such an agreement between the Claimant and AT1 and/or Ezion existed.

The Claimant who asserts such jurisdiction bears the burden of proving such a jurisdiction agreement to a sufficient degree for the purposes of a hearing which is not a trial and at which all available evidence will not be adduced (VTB Capital plc v Nutritek International Corpn [2013] UKSC 5; [2013] 2 AC 337, paragraphs 90-91).

This issue of the existence of a jurisdiction agreement is being determined at a hearing, other than a trial, where (a) there has been no full disclosure of documents by either of the Claimant or AT1 or Ezion or AMS or AMS Mexico, (b) the alleged agents, AMS and AMS Mexico, have not participated in or given evidence at the hearing, (c) such evidence that has been given by witness statement has not been tested by cross-examination, and (d) the very issue of the existence of the jurisdiction agreement between the Claimant on the one hand and AT1 and Ezion on the other hand is one which would have to be determined at the trial, if the Court has jurisdiction, given that the existence of the contract evidenced by the Purchase Order of which the jurisdiction agreement forms part is a critical element of the Claimant's claim against AT1 and Ezion.

In those circumstances, a standard of proof expected at trial based on the balance of probabilities is plainly inapposite to the hearing of a jurisdiction challenge. A lesser standard based on there being a good arguable case has therefore been imposed. Moreover, any finding made by the Court on the basis of this standard of proof is one made without prejudice to the determination of the substantive issue at trial.

The nature of this standard was explained by Waller, LJ in Canada Trust Co v Stolzenberg (No 2) [1998] 1 WLR 547, at page 555:

"The court in such cases must be concerned not even to appear to express some concluded view as to the merits, eg as to whether the contract existed or not. It is also right to remember that the 'good arguable case' test, although obviously applicable to the ex parte stage, becomes of most significance at the inter partes stage where two arguments are being weighed in the interlocutory context which, as I have stressed, must not become a 'trial'. 'Good arguable case' reflects in that context that one side has a much better argument on the material available. It is the concept which the phrase reflects on which it is important to concentrate, i e of the court being satisfied or as satisfied as it can be having regard to the limitations which an interlocutory process imposes that factors exist which allow the court to take jurisdiction."

On appeal, Lord Steyn expressed approval for Waller, LJ's statement ([2002] 1 AC 1, 13). In Bols Distilleries BV v Superior Yacht Services Ltd [2006] UKPC 45; [2007] 1 WLR 12, Lord Rodger, sitting in the Privy Council, further endorsed this approach, at paragraph 28:

"In practice, what amounts to a "good arguable case" depends on what requires to be shown in any particular situation in order to establish jurisdiction. In the present case, as the case law of the Court of Justice emphasises, in order to establish that the usual rule in article 2(1) is ousted by article 23(1), the claimants must demonstrate "clearly and precisely" that the clause conferring jurisdiction on the court was in fact the subject of consensus between the parties. So, applying the "good arguable case" standard, the claimants must show that they have a much better argument than the defendants that, on the material available at present, the requirements of form in article 23(1) are met and that it can be established, clearly and precisely, that the clause conferring jurisdiction on the court was the subject of consensus between the parties."

In Brownlie v Four Seasons Holdings Inc [2015] EWCA Civ 665; [2016] 1 WLR 1814, the Court of Appeal considered this standard of proof. At paragraphs 17-24, Arden, LJ said:

"[17] When the court is deciding whether it has jurisdiction, it must scrutinise most jealously the factor which gives rise to jurisdiction … [18] The court has jurisdiction if a "good arguable" case is shown that the case falls within one of the cases set out in the CPR (known as "jurisdictional gateways") … At this point, I need to explain what is required to show a "good arguable case". To establish whether a good arguable case has been made out that the claim falls within one or more of the jurisdictional gateways, the court has to apply what has become known as the "Canada Trust gloss" … [21] In my judgment, when applying the Canada Trust gloss, we are entitled to bear in mind that Waller LJ also held that: (1) the test was flexible (at p 555H); (2) the court should not be drawn into deciding issues of fact (at p 555F), and (3) the decision is to be made on the material available (at p 555F). [22] Our conclusion will not be binding at trial … [23] when looking for "the much better argument" the court is concerned with the question of relative plausibility. But there is also an absolute standard to be met. The words used by Waller LJ, namely a "much better argument", mean more than that, on the material available, the case is arguable. There must be some substance to it: since we are deciding a question of jurisdiction, the evidence must achieve an acceptable level of quality and adequacy. However, the standard to be attained is not that of succeeding on a balance of probabilities because there is no trial: see per Flaux J in Erste Group Bank AG, London Branch v JSC "VMZ Red October" [2013] EWHC 2926 (Comm). [24] In any event, the court is not bound to accept a witness statement which is inherently defective, and certainly should not do so if it conflicts with other incontrovertible evidence or is unreliable for some other tangible reason, or, as Christopher Clarke J put it in Cherney v Deripaska (No 2) [2009] 1 All ER (Comm) 333, para 44, "wholly implausible".

In Erdenet Mining Corp v Government of Kazakhstan [2016] EWHC 299 (Comm), at paragraph 13, Cooke, J said in applying Arden, LJ's approach that "There is both a relative element to it and an absolute standard to be met of the minimum level".

I understand that the Court of Appeal's judgment in Four Seasons plc v Brownlie is currently on appeal to the Supreme Court and that, although the appeal has been heard, no judgment has yet been handed down. I also understand that, during the hearing of that appeal, the "better of the argument" test has been challenged. Although the Claimant reserves its position in this regard, it accepts that pending the decision of the Supreme Court, the Court is bound to apply the "better of the argument" test, subject to one qualification discussed below.

Adopting this approach, the standard of proof to be achieved by the Claimant at this stage of the proceedings is such that the Court must be satisfied that:

(1) There is a good arguable case that there was a binding jurisdiction agreement, which in this case means that there is a good arguable case that AMS and/or AMS Mexico was authorised and intended to contract with the Claimant on behalf of AT1 and/or Ezion, as the case may be. Alternatively, if the "good arguable case" test is to be equated with the "better of the argument" test, the Claimant's case must be sufficiently arguable in any event. This is the absolute standard to be met. In either case, this means that there must be more than a merely arguable case and the case must have "some substance to it", but need not be one which can be established on the balance of probabilities; and

(2) The Claimant's case that there is a relevant jurisdiction agreement must be one which has a relative plausibility (see also Cherney v Deripaska (No 2) [2008] EWHC 1530 (Comm); [2009] 1 All ER (Comm) 333, para. 44). This has been expressed as requiring the Claimant to have the "better of the argument". This is the relative standard to be met. This means that, on the evidence available, the Claimant's case is more persuasive or convincing than AT1's and/or Ezion's case.

It had been said previously, for example by Waller, LJ, that the Claimant should have "much the better of the argument", but the word "much" has been regarded as adding little of substance to the test, and emphasises the fact that if, in the rare case, there were a dead-heat between the parties' rival cases, the Claimant's assertion of jurisdiction would fail (Erdenet Mining Corp v Government of Kazakhstan [2016] EWHC 299 (Comm), para. 14). Thus, in JSC "Aeroflot Russian Airlines" v Berezovsky [2013] EWCA Civ 784; [2013] 2 Lloyd's Rep 242, Aikens, LJ said (at paragraph 50) that:

There has been debate on whether the qualifier "much" to the phrase "the better of the argument" adds anything (The phrase "much the better of the argument" was first used by Waller LJ in Canada Trust Co v Stolzenberg (No 2) [1998] 1 WLR 547 at page 555 and endorsed by Lord Steyn on appeal to the House of Lords in [2002] AC 1 at page 13). In Briggs and Rees, Civil Jurisdiction and Judgments ("Briggs and Rees") the authors suggest that, at least in the context of Judgment Regulation and revised Lugano convention cases, the use of "much" has now pointed the law in the right direction and should be "allowed to slip from view" (5th Edition, 2009, at para 2.111 page 169). I respectfully agree. The only point of the word is to emphasise the fact that if the two arguments are equal, then the party asserting the article 23 jurisdiction will not succeed. Too much emphasis on the word "much" would simply lead to the error of imposing too high a standard of proof on the party wishing to establish the article 23 jurisdiction. The whole point of the jurisprudence on the standard of proof in jurisdictional disputes is to emphasise that such decisions are made at an early stage in a dispute and that the same or very similar questions on the substantive dispute between the parties (eg on whether the substantive contract itself has been concluded) may have to be decided at the trial. Any conclusion at the jurisdiction stage must not preclude the possibility of a different finding when all the evidence has been collected and considered at trial."

Must the Court always be satisfied as to the relatively plausibility of the Claimant's case?

The standard of proof therefore has a twofold element, rather than a unitary status. The standard does not require proof of a good arguable case which itself is established by reference to who has the better of the argument. Instead, the Claimants must demonstrate a good arguable case (in Arden, LJ's words, the "absolute standard … an acceptable level of quality and adequacy") and, in addition, that it has the better of the argument (again in Arden, LJ's words, "relative plausibility"). If I am wrong about the twofold nature of the standard of proof, then the "better of the argument" test is to be equated with the "good arguable case" test. However, that may create difficulties where the Court is not in a position to determine who has the better of the argument in a particular case. The Court would still be left with the task of determining whether there is sufficient substance to the claimants' case.

Subject to the reservation of its position as regards the requirement of relative plausibility (the better of the argument), the Claimant argues that in this case this requirement does not apply "where there is a conflict of evidence which cannot be resolved without oral evidence and sight of the contemporaneous documents following disclosure". In support of this proposition, the Claimant relies on the decision of Teare, J in Antonio Gramsci Shipping Corp v Recoletos Ltd [2012] EWHC 1887 (Comm); [2012] 2 Lloyd's Rep 365, where he said (at paragraphs 39, 44-45):

"[39] The "Canada Trust gloss" does however advise the court to concentrate on whether the court is "satisfied or as satisfied as it can be having regard to the limitations which an interlocutory process imposes that factors exist which allow the court to take jurisdiction". It seems to me that in a case where there is, in the main, a conflict of evidence which cannot be resolved without appearing to conduct a pre-trial it is particularly important that the court asks itself whether factors exist which allow the court to take jurisdiction … [44] In the result, whilst the claimants are able to adduce evidence from several individuals in support of their case, that evidence is contradicted by Mr Lembergs. That dispute will only be resolved by reference to the contemporaneous documents (which have not yet been produced) and/or by the testing of the evidence on both sides by cross-examination (which will not take place until trial). I am unable to say that either party has the better of the argument on the material presently available. [45] If the "Canada Trust gloss" required the claimants to have the better of the argument at the interlocutory stage in all cases then Mr Lembergs' jurisdictional challenge would succeed. But I am not persuaded that that test must be satisfied in a case where there is a stark dispute between opposing witnesses. To seek to judge who has the better of the argument on such evidence risks a pre-trial at the interlocutory stage. In order to avoid doing so it is preferable, in my judgment, to concentrate on whether factors exist which allow the court to take jurisdiction. That will oblige the court to consider whether the evidence relied upon by the claimant has sufficient strength to allow the court take jurisdiction. Such an approach is, it seems to me, consistent with the "Canada Trust gloss"."

In the process of developing his conclusion, Teare, J referred to two earlier decisions. The first decision is that of Toulson, J in Petroleum Investment Co Ltd v Kantupan Holdings Co Ltd [2002] 1 All ER (Comm) 124, at paragraph 38, in connection with the making of a freezing order. Toulson, J said that the Court need not be satisfied that the evidence on the claimant's side is stronger than the defendant's evidence in order for the claimant to make out a good arguable case, when "the subject matter involves questions of fact on which the evidence is incomplete or contradictory", because that would be in effect to apply the civil standard of proof which is not applicable at the interlocutory stage. By contrast, Toulson, J said that "where the claim depends on the construction of a contractual document on which there is detailed argument at the inter partes stage, a court may well reach a conclusion that one side has a much better argument than the other, although it must remember that the ultimate decision would belong to the court of trial or arbitral tribunal".

The second decision was that of Toulson, LJ in WPP Holdings Italy Srl v Benatti [2007] EWCA Civ 263; [2007] 1 WLR 2316, where his Lordship said (at paragraph 44) that it remained possible for the Court to conclude that "the case for jurisdiction was as good as the case against jurisdiction, and that it was not possible to reach any firmer conclusion without conducting a mini-trial", and that "in those circumstances factors would exist which would allow the court to take jurisdiction". Toulson, LJ prefaced these remarks by stating that "If the court arrives at a clear view that on the material available the argument on one side is better than the argument on the other, that is enough to resolve the issue".

In Antonio Gramsci v Recoletos, Teare, J concluded that the Court could exercise jurisdiction even though "by reason of the conflict of evidence and the limitations imposed by the interlocutory process, I am unable to conclude that the claimants have the better of the argument". On appeal, the Court of Appeal referred to and quoted this part of Teare, J's judgment, but did not comment on it substantively.

Teare, J briefly revisited the limits of the "Canada Trust gloss" in Aspen Underwriting Ltd v Kairos Shipping Ltd [2017] EWHC 1904 (Comm); [2017] 2 Lloyd's Rep 295, where (at paragraph 46) he drew a distinction between the later case where "there is a contrast between the inference which the hull underwriters ask the court to draw and the evidence" of a witness given by a witness statement, and the earlier case where "there was a stark contrast between opposing witnesses". Nevertheless, it is not clear whether Teare, J suggested that the gloss still applies where there is a contrast between the evidence of a witness and the inference drawn from the evidence. In any event, Teare, J concluded on the case before him that "if that circumstance means that the court must consider whether the hull underwriters' case is of sufficient strength to allow the case to take jurisdiction then I do not consider that it is".

In Brownlie v Four Seasons Inc [2015] EWCA Civ 665; [2016] 1 WLR 1814, Arden, LJ referred to Teare, J's judgment in Antonio Gramsci v Recoletos and then said (as quoted above):

"In my judgment, when applying the Canada Trust gloss, we are entitled to bear in mind that Waller LJ also held that: (1) the test was flexible (at p 555H); (2) the court should not be drawn into deciding issues of fact (at p 555F), and (3) the decision is to be made on the material available (at p 555F). Our conclusion will not be binding at trial … In any event, the court is not bound to accept a witness statement which is inherently defective, and certainly should not do so if it conflicts with other incontrovertible evidence or is unreliable for some other tangible reason, or … "wholly implausible"."

In Erdenet Mining Corp v Government of Kazakhstan [2016] EWHC 299 (Comm), at paragraphs 10 and 16, Cooke, J appeared to question whether there was an exception as allowed by Teare, J in Antonio Gramsci v Recoletos, because in the absence of the relatively plausibility requirement, it is not clear what criteria the Court should apply to determine the jurisdiction challenge. The answer to that question, it seems to me, is that the claimant must have a good arguable case. Indeed, at paragraph 30 of his judgment, this was the test which Cooke, J appeared to apply.

Based on these authorities, it seems to me that the twofold test based on the good arguable case (or a sufficiently arguable case) and relative plausibility governs the issues of fact and construction to be determined as part of an application challenging the Court's jurisdiction. However, where the state of the evidence is such that it is not possible to determine which side has the better of the argument at this stage of the proceedings, bearing in mind that it is not a trial requiring proof on the balance of probabilities, the Court need not be satisfied of the requirement of relative plausibility in order to exercise jurisdiction. In that event, a good arguable case, or a sufficiently arguable case, without more, may be enough to allow the Court to exercise jurisdiction.

The Claimant's case for jurisdiction

In support of its case that AT1 and Ezion were parties to the English jurisdiction agreement in the Purchase Order, i.e. that they were undisclosed principals to a contract concluded on their behalf by AMS and/or AMS Mexico, the Claimant relies on the following factors, individually and cumulatively.

First, the Rig was owned by ATI and ATI was the wholly owned subsidiary of Ezion. Mr Cheah in his first witness statement, at paragraph 20, refers to both AT1 and Ezion as "asset owners". Indeed, I also note that in its letter dated 16th October 2013, AMS referred to itself "as the appointed representative of the Asset Owners". The Claimant argues that the work carried out by the Claimant would have been for the long-term benefit of AT1 and Ezion as the owner of the Rig. However, this consideration does not take account of the fact that AMS as the bareboat charterer was also interested in the long-term condition of the Rig and its suitability for the PEP contract, as to which AMS (or an associated company) was the principal. Nevertheless, the Claimant contends that the performance of the PEP contract was dependent on the Bareboat Charterparty and its performance would have benefited AT1 and Ezion in that the income earned from the PEP contract would be used to pay hire under the Bareboat Charterparty. This same benefit could have been achieved if AMS entered into the contract with the Claimant on its own behalf and not on behalf of AT1 or Ezion.

Second, the work under the Purchase Order was carried out at the same time and in the same place as work that was commissioned by AT1 which was necessary to make the vessel fit for the PEP contract. Indeed, Mr Pereira states, at paragraph 27 of his second witness statement dated 29th August 2017, that such works "constituted around 50% of the total works taking place on the Rig at that time". As mentioned above, in his second witness statement dated 27th January 2017, Mr Cheah explained that "certain works were necessary to make the rig sea-worthy and operational and should be funded by the financing provided by [Ezion]", and, at paragraph 14, that "Pursuant to the arrangements between [Ezion] on the one hand and Treatmil and Traxiar on the other the project costs financed by [Ezion] were to be used in part for any necessary reactivation and upgrade works". For this purpose, AT1 - not Ezion - entered into the Modification Agreement with McDermott and the Project Management Agreement with AMS Singapore apparently before the asbestos was discovered. The Claimant also argues that the Project Management Agreement with AMS Singapore related to all reactivation works. The Claimant states that the purpose of the Purchase Order works and the Modification Agreement works is the same, namely to render the Rig fit for service under the PEP contract (as Mr Cheah appears to acknowledge). AT1's and Ezion's riposte to this consideration is that as AT1 was prepared to contract as a principal under the Modification Agreement and the Project Management Agreement, if its intention had been to contract as a principal with respect to the Purchase Order, it would have done so. Further, I note that the Project Management Agreement was not concluded with AMS, but AMS Singapore, a different company from although, as I understand it, related to AMS.

Third, the work carried out by the Claimant was to deal, in part, with the abatement of asbestos which had been discovered by a survey commissioned by McDermott and performed by Intertek. However, the reasons for this survey being commissioned by McDermott are not entirely clear. Certainly, there is no suggestion that the Claimant, which was aware of the Intertek survey, addressed its tender for the work to McDermott or ATI.

Fourth, it was consistent with the scheme of the Modification Agreement with McDermott that the work performed by the Claimant should be carried out by an independent contractor engaged by AT1. Article XI.1 of the Modification Agreement provided that "[AT1], with [McDermott's] prior written consent, shall have the right from time to time to perform, either directly or through one or more specialist contractors work on various tasks on the Vessel that are not a business of [McDermott] …". I would agree that the Claimant's case is consistent with this provision of the Modification Agreement, assuming that McDermott has provided its prior written consent. That said, it does not necessarily follow that AMS or AMS Mexico was acting as an agent for AT1.

Fifth, the work carried out by the Claimant was work which AT1 was obliged to carry out under the terms of the Bareboat Charterparty and which AMS was not obliged to carry out under the Bareboat Charterparty. Even though I am not satisfied that the Rig was delivered on 22nd October 2012, it seems that the vessel had been delivered under the Bareboat Charterparty by the date of the Purchase Order. Up until the date of delivery, AT1 was obliged by clause 3 of the Bareboat Charterparty to exercise due diligence to make the Rig seaworthy and fit and ready for service under the Bareboat Charterparty. Moreover, it seems that AT1 was aware of the presence of asbestos by reason of the Intertek survey. On the other hand, if delivery was effected and accepted, by clause 3(c), such delivery constituted "a full performance by the Owners of all the Owners' obligations under this Clause 3 and thereafter the Charterers shall not be entitled to make or assert any claim against the Owners on account of any conditions, representations or warranties expressed or implied with respect to the Vessel". Thereafter, AT1's obligations were arguably limited to latent defects existing at the time of delivery under the Bareboat Charterparty. That said, as discussed above, it is not clear on the evidence that the abatement of such asbestos was necessary to render the Rig seaworthy and fit for service under the Bareboat Charterparty.

Sixth, by its letter dated 16th October 2013, soon after the date of the Purchase Order, AMS described itself "as the appointed representative of the Asset Owners". It is significant to note that this letter continued to state that AMS was the appointed representative "pursuant to the two Master Vessel Repair and Modification Agreements … relating to the vessels Atlantic Tiburon I and Atlantic Tiburon 3 ("the Vessels")". However, it is not evident that the work performed under the Purchase Order was carried out pursuant to the Modification Agreement. Further, in this letter, AMS states that McDermott's decision to suspend the Modification Agreement interfered with AMS's "right of position [sic] of the Vessels", which appears to refer to the AMS's right of possession, meaning that delivery had taken place under the Bareboat Charterparty. The letter goes on to say that AMS will take action "in order to minimize the impact of the damages that potentially will be caused to AMS". In saying this, AMS is not referring to any prejudice affecting the position of AT1.

This exchange of correspondence on 16th and 17th October 2013 is plainly only part of a longer exchange. Nevertheless, although the correspondence refers to work being carried out under the Modification Agreement and also refers to AT1's failure to pay invoices issued by McDermott in respect of work under the Modification Agreement, it is not clear to me that the work carried out under the Purchase Order was work carried out under the Modification Agreement. It may have been, but it may not have been. The same is true in respect of the Project Management Agreement.

In addition, the Claimant refers to the fact that two or three websites refer to AMS as "the Rig's manager". I place little reliance on the websites, given the obvious lack of information as to the source of such statements. In any event, it says nothing about AMS's role in concluding the contract evidenced by the Purchase Order.

Seventh, the work undertaken under the Purchase Order was for the benefit of AT1 and Ezion in that they both stood to benefit from payments made by PEP. For the reasons explained in connection with the first factor advanced by the Claimant, this argument ignores the benefit to AMS of payments to be made by PEP insofar as AMS was the bareboat charterer and, if relevant, the benefit to Treatmil and Traxiar of payments to be made by PEP.

Eighth, the settlement discussions referred to above were carried out between the Claimant and representatives of AT1. I do not regard this as an influential consideration, because there could be a number of reasons why such discussions did not involve AMS directly. In any event, as AT1 and Ezion point out, as part of these discussions, a draft novation agreement was mooted, which provided for AT1 taking over AMS's contractual position under the Purchase Order. The Claimant responds to this argument that this would presuppose that the Claimant was aware that AT1 was an undisclosed principal, which need not be the case. Nevertheless, I do not consider that the existence of these discussions impels me to prefer the Claimant's case.

Ninth, the two payments of US$100,000 made to the Claimant in October and November 2014 were made by subsidiaries of Ezion. In his first witness statement, Mr Cheah states that the payments were made at the request of AMS and, in addition, that they represented sums owed by those subsidiaries to AMS or AMS Singapore. The Claimant questions this evidence being entirely heresay. I note that the payments are recorded as having been made "on behalf of Atlantic Marine Services BV". There was clearly a commercial relationship between AMS on the one hand and Ezion on the other hand. That said, it does not follow that the contract evidenced by the Purchase Order was made on behalf Ezion (or AT1) by reason of these payments.

Is there an English exclusive jurisdiction agreement?

Having regard to each of these factors, I do not consider that there is any direct evidence that I have seen to indicate that AT1 and/or Ezion in fact authorised AMS or AMS Mexico to contract on behalf of AT1 and/or Ezion with the Claimant or that AMS or AMS Mexico intended to contract on behalf of AT1 and/or Ezion, such as to render AT1 and/or Ezion as undisclosed principals to the Purchase Order contract.

If I were to conclude that AMS or AMS Mexico contracted with the Claimant as agents for AT1 or Ezion, it would have to be based on an inference drawn from the evidence before the Court. As far as a possible inference is concerned, there is nothing to suggest that the Purchase Order was concluded by AMS Mexico, as opposed to AMS. I will therefore focus on AMS as the possible agent acting on behalf of AT1 and, separately, Ezion.

As far as AT1 is concerned, I have come to the conclusion that, although there is a good arguable case (or a sufficiently arguable case) that AT1 is an undisclosed principal to the contract evidenced by the Purchase Order, AT1 has the better of the argument that it was not an undisclosed principal.

I consider that there is a good arguable case (or a sufficiently arguable case) that AT1 was a party to the Purchase Order contract as an undisclosed principal for the following reasons:

(1) The Rig was owned by AT1. The fact that the Purchase Order works would improve the condition of the Rig means that the Purchase Order contract might well have benefited AT1.

(2) At the time of the Purchase Order, other works were being carried out to the Rig under the Modification Agreement between AT1 and McDermott and the Project Management Agreement between AT1 and AMS Singapore. The carrying out of the work under the Purchase Order may have been carried out under the Modification Agreement with McDermott and may have been consistent with the asbestos survey commissioned by McDermott, although it is not clear from the terms of that agreement. Similarly, the work under the Purchase Order contract may have been carried out under the auspices of the Project Management Agreement with AMS Singapore, although it is not clear from the terms of that agreement that the Project Management Agreement related to the Purchase Order. It seems clear that the purpose of the works under the Purchase Order and the Modification Agreement was to render the Rig fit for service under the PEP contract.

(3) In its letter dated 16th October 2013, AMS refers to itself as "the appointed representative of the Asset Owners". Although Mr Cheah refers to AT1 and Ezion as the "asset owners" (paragraph 20 of his first witness statement), I suspect that this is intended to refer to AT1, but not Ezion, given that the other contracts involving the Rig - namely the Bareboat Charterparty, the Modification Agreement (which is referred to in the letter) and the Project Management Agreement - all involve AT1, and not Ezion, as a contracting party.

(4) The Claimant's work under the Purchase Order contract may have been necessary to enable AT1 to perform its obligations under the Bareboat Charterparty to render the Rig seaworthy and fit for charter service. However, I am not in a position to say whether or not AT1 was so obliged. On the one hand, it may be that at least some of the works undertaken by the Claimant (i.e. the removal of asbestos) was required to render the vessel seaworthy and fit for service. On the other hand, if the Rig had been delivered under the Bareboat Chareterparty, unless the unseaworthy or unfit nature of the Rig's condition was latent at the time of delivery, by clause 3(c) of the Bareboat Charterparty, the delivery of the Rig to AMS constituted a discharge of AT1's obligations.

(5) The fact that there were settlement discussions between the Claimant and Ezion in connection with the payment of Claimant's unpaid invoices adds little, in my view, to answering the question to be decided. The payments made by subsidiaries of Ezion on behalf of AMS to the Claimant also add little. Nevertheless, they add to the veneer of the arguability of the Claimants' case.

I therefore consider that the Claimant has a good arguable case (or a sufficiently arguable case) that it contracted on behalf of ATI. By this I mean that such a case is consistent with the evidence and may be inferred from that evidence. Indeed, such an inference may prove to be justified at trial. The Claimant's case in this respect has substance and is more than fanciful. Indeed, if this had been an application for summary judgment dismissing the Claimant's claim against AT1, I would have dismissed that application because the Claimant would have a real prospect of succeeding in this allegation.

However, notwithstanding the arguability of the case that AT1 was an undisclosed principal, I think, on the evidence available, that AT1 has the better of the argument that it was not, i.e. AT1's case that it was not an undisclosed principal is more plausible than the Claimant's case that AT1 was an undisclosed principal, for the following reasons:

(1) Even though the Rig was owned by AT1, by reason of the Bareboat Charterparty, AMS was the bareboat charterer and concluded the Bareboat Charterparty in order to advance its own interests in connection with the PEP project. Whether or not AMS was responsible, under the Bareboat Charterparty, to undertake the Purchase Order works, the works were required to enable the Rig to satisfy the PEP requirements. This would have been for the benefit of AMS.

(2) Although AT1 was a party to the Modification Agreement and the Project Management Agreement, there is no evidence that the Purchase Order works were carried out under those Agreements. Indeed, if AT1 was prepared to be identified as a party to those agreements, it is striking that it was not identified as a party to the Purchase Order contract. Furthermore, the relevant authority for the undertaking of the Purchase Order works may have been derived from the Project Management Agreement, but AMS (nor AMS Mexico for that matter) was not the Project Manager appointed under that agreement: instead, AMS Singapore was the Project Manager. In addition, as Mr Cooper QC pointed out, the Project Management Agreement makes no reference to the removal of asbestos (being one of the items of work required under the Purchase Order).

(3) The letter dated 16th October 2013 from AMS to McDermott, in which it describes itself as AT1's "appointed representative", is consistent with AMS having contracted with the Claimant on behalf of AT1. However, there are two matters which lead to the conclusion that AT1 has the better of the argument that this does not relate to the Purchase Order. First, there is no obvious or explicit connection between this letter and the Purchase Order. Second, AMS refers in the letter to McDermott's actions damaging AMS's interests, not AT1's interests ("AMS informs by this means to [McDermott] of the actions which will be taken by AMS in order to minimize the impact of the damages that potentially will be caused to AMS …"). In addition, it is not clear to me how AMS became the "appointed representative", given that the Project Management Agreement was concluded between AT1 and AMS Singapore, not AMS.

(4) It is equally plausible, based on the limited materials available, that AMS or AT1 would be responsible for such works under the Bareboat Charterparty. In many respects, I regarded this as the high point of the Claimant's case in that if AT1 was obliged by the Bareboat Charterparty to ensure that asbestos was removed in order to render the Rig seaworthy and fit for service, there might be said to be a compelling reason for concluding that the contract with the Claimant - which was in part concerned with the abatement of asbestos - was concluded on behalf of AT1 (though not Ezion). There is a lack of evidence that the Purchase Order works were required to discharge AT1's obligations under the Bareboat Charterparty. Accordingly, I am not in a position to determine whether AT1 is responsible under the Bareboat Charterparty and I am not able to say whether or not AMS or AT1 has the better of the argument in this respect. However, even assuming that AT1 - not AMS - was responsible under the Bareboat Charterparty to ensure that the Rig was asbestos-free, I do not consider that this means that the Claimant has the better of the argument that AMS was authorised by AT1 and intended to contract with the Claimant on behalf of AT1. First, it does not follow that the Purchase Order was agreed on behalf of AT1. It is possible that AMS, as the bareboat charterer, undertook the work on its own behalf and would claim recompense from AT1 as the owner. There is no direct evidence that the Purchase Order contract was made on behalf of AT1. Second, it is not obvious that the works other than the removal of asbestos performed under the Purchase Order contract were required to render the Rig seaworthy and fit for service and therefore to have been within AT1's responsibility under the Bareboat Charterparty.

(5) As there is no direct evidence of the authority and intention required to establish a party as an undisclosed principal, and in particular no direct evidence relating to the authority granted by AT1 to AMS or relating to AMS's intention at the time of the Purchase Order contract, taken together with the other matters referred to above, AT1 must have the better of the argument in this respect.

(6) The settlement discussions with Ezion and the payments at the behest of Ezion in 2014-2015 add little to the questions I am asked to consider. However, to the extent that they are relevant, the fact that the settlement discussions contemplated a draft novation agreement whereby the rights and obligations under the Purchase Order contract were to be transferred to AT1 is a factor in favour of AT1 not having been a party to the Purchase Order contract in the first instance.

As far as Ezion is concerned, I consider that there is no good arguable case that Ezion was an undisclosed principal to the Purchase Order contract and, it follows, Ezion has the better of the argument in this respect, for the following reasons:

(1) The Rig was not owned by Ezion. Although Ezion was the parent of AT1, the fact that Ezion was not prepared to own the Rig directly or to enter into the Bareboat Charterparty with AMS, renders it implausible that Ezion authorised AMS to contract with the Claimant. Although Ezion may have benefited from the Purchase Order, it does not mean that AMS was necessarily authorised or intended to contract on Ezion's behalf.

(2) Ezion was not a party to the Modification Agreement and/or the Project Management Agreement.

(3) Even if the Purchase Order works were necessary to discharge the obligations of AT1, as owner, under the Bareboat Charterparty, no similar consideration applies to the position of Ezion, who was not a party to the Bareboat Charterparty.

(4) There is no direct evidence that AMS was authorised by Ezion and intended to contract on behalf of Ezion.

In these circumstances, based on the evidence currently before the Court, I conclude that:

(1) There is no good arguable case that AMS Mexico contracted as an agent for AT1 or Ezion.

(2) There is no good arguable case that the contract evidenced by the Purchase Order was concluded by AMS on behalf of Ezion.

(3) There is a good arguable case (or a sufficiently arguable case) that the contract evidenced by the Purchase Order was concluded by AMS on behalf of AT1.

(4) Nevertheless, based on the materials before me, I consider that AT1 has the better of the argument that AT1 did not contract as an undisclosed principal.

The question now arises whether I should ignore the absence of relative plausibility on the part of the Claimant's case against AT1 in determining AT1's challenge to the Court's jurisdiction. Subject to the point reserved by the Claimant, I do not consider that this case is one where I should disregard the requirement of relative plausibility, because I am not in a position where I cannot conclude whether the Claimant or AT1 has the better of the argument based on the evidence before me. If the matter rested entirely on the question who was responsible under the Bareboat Charterparty - AMS or AT1 - to carry out the Purchase Order works, the position may have been different, because I am not in a position to draw any conclusions in this regard. However, the other factors referred to above and taken cumulatively allow me to conclude that AT1 has the better of the argument.

In these circumstances, therefore, I accede to Ezion's application challenging the Court's jurisdiction, and further, bearing in mind the strictures of the "Canada Trust gloss", I accede to AT1's application challenging the Court's jurisdiction. As regards AT1, I think this is an odd state of affairs, given that I consider that the Claimant has a good arguable case (or a sufficiently arguable case), but as I consider that the requirement of relative plausibility applies, I do not think I can come to another conclusion.

I have come to this conclusion based largely on the documentary evidence before me.

If I also take into account Mr Cheah's evidence (at paragraphs 16, 29 and 33 of his first witness statement) that AT1 did not authorise the making of the contract evidenced by the Purchase Order by AMS on its behalf, this supports my conclusion that AT1 has the better of the argument that it did not contract as an undisclosed principal.

The weight to be given to Mr Cheah's evidence

The Claimant challenged the creditworthiness of Mr Cheah's evidence on a number of grounds, namely (1) the source of the hearsay evidence in Mr Cheah's evidence was not identified, (2) the account was in a number of respects implausible, and (3) AT1 and Ezion have not shown their full hand.

It is true to say that each of Mr Cheah's three witness statements began with the assertion that the facts relating to AT1 and Ezion were provided by AT1 and Ezion but they do not identify any particular individual from which the evidence was obtained. The Claimant asserts that this falls foul of the requirement in CPR PD 32, para. 18(2) which requires a deponent to identify which parts of his or her statement is drawn from the deponent's own knowledge or from information or belief and the source of such information and belief. The failure to identify individual sources of information was said by Tugendhat, J in Brownlie v Four Seasons Holdings Inc [2014] EWHC 273 (QB), at paragraphs 29-34, to affect the weight to be attributed to such evidence. The Claimant makes a fair criticism of this aspect of Mr Cheah's evidence. Nevertheless, Mr Cheah is also giving evidence as a director of AT1 and Group Financial Officer at Ezion and as a signatory of the Bareboat Charterparty, the Modification Agreement and the Project Management Agreement. Further, Mr Cheah's evidence can be taken to reflect his state of knowledge. In other words, where he states that AT1 or Ezion did not authorise the making of the contract evidenced by the Purchase Order, he is plainly stating this as far as he is aware as a director of AT1 and an officer of Ezion. Indeed, on occasion, he says as much (see for example paragraph 14 of his first witness statement).

The second ground of challenge by the Claimant upon Mr Cheah's witness statement is the implausibility of his statement that AT1 and Ezion were not aware of the Purchase Order and/or the work involving the removal of the asbestos until the end of 2014. This may or may not be a fair criticism. I do not know. However, even if AT1 or Ezion were aware of the Purchase Order or the removal of asbestos before the end of 2014, that adds little to determining whether or not the relevant contract was concluded on their behalf. I have not relied on this statement as to AT1's knowledge of the existence of the Purchase Order in determining the application before the Court.

The Claimant also refers to the questionable evidence that the Rig had been delivered under the Bareboat Charterparty on 22nd October 2012. For reasons discussed above, I am sceptical that the Rig was delivered as early as this date, but as I consider that there is evidence that the Rig was delivered during the early part of 2013, I do not think that this consideration carries much weight. Similarly, the question whether or not hire payments under the Bareboat Charterparty were suspended is also to my mind of little relevance.

Finally, the Claimant relies on the fact that AT1 and Ezion - and Mr Cheah - have chosen not to reveal the full picture concerning the relationship between them and AMS or AMS Mexico. That is true and there are certainly a number of unanswered questions relating to the commercial relationship between these entities. However, this is a consideration which affects many interlocutory applications, especially those at an early stage of the proceedings, such as a challenge to jurisdiction. This question may have a bearing on the standard of proof to be expected in dealing with an assertion of jurisdiction, but I do not necessarily regard it as affecting the credit of Mr Cheah. Mr Nolan QC relied on the decision of the Court of Appeal in Brownlie v Four Seasons Holdings Inc [2015] EWCA Civ 665; [2016] 1 WLR 1814, at paragraph 58. In that case, Arden, LJ said that it was not incumbent on the defendant to specify or particularise his or her case which may be put on trial and can put the claimant to proof, but where the defendant says nothing, the Court need not take into account what points may be made at trial by the defendant. In the present case, AT1 and Ezion have not said nothing and have explained their position by the three witness statements of Mr Cheah and the documents exhibited thereto. Although questions may arise about the documents not disclosed, the burden remains on the claimant to establish jurisdiction. In any event, I regarded Mr Cheah's evidence as reinforcing, rather than informing, the conclusion I had reached on the documents.

Conclusion

For the reasons explained above, I allow AT1's and Ezion's application challenging the Court's jurisdiction. The Court has no jurisdiction to try the claim brought by the Claimant against AT1 and Ezion.

I will hear from counsel as to the appropriate orders to be made by the Court.

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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Kaefer Aislamientos SA De CV v AMS Drilling Mexico SA de CV [2017] EWHC 2598 (Comm) (19 October 2017) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2017/2598.html Cite as: [2017] EWHC 2598 (Comm)