Scottish Court of Session Decisions

"1. For declarator that the pursuers and defenders were in partnership with the objective of (i) developing and operating an industrial scale over the horizon deep water offshore wind farm in the Moray Firth estuary (ii) creating value through the extension of the life of the Beatrice oil field platforms and deferment of the defenders' associated abandonment costs (iii) generating and supplying electricity from wind power, all with a view to profit ('The Beatrice Wind Farm Project').

2. For count and reckoning by the defenders with the pursuers for the whole profits of the Beatrice Wind Farm Project made by the defenders from 21 December 2001 to the date of citation from the use of the pursuers' intellectual assets set out in the Confidentiality Agreement between the parties dated 2 May 2001 and for payment by the defenders to the pursuers of the balance found to be due.

3. Failing an accounting, for payment by the defenders to the pursuers of an overriding royalty of 2% of all gross revenues from the Beatrice Wind Farm Project, reserving to the pursuers the right to bring claims relative to the Beatrice Wind Farm Project arising subsequent to this action and subsisting for the lifetime of the Beatrice Wind Farm Project.

4. Alternatively (a) to find and declare that the defenders have been unjustly enriched and (b) for payment by the defenders to the pursuer (sic)of the sum of TWENTY FIVE MILLION POUNDS (£25,000,000) STERLING with interest thereon at the rate of eight per cent per year from the date of citation to follow hereon until payment."

There is also a Conclusion for expenses.

The pursuers' averments in the Summons

"The proposal was for a joint venture between the pursuers and the defenders to develop a large scale offshore wind farm beyond the horizon (from onshore) in water depths of between 40 and 50 metres in proximity to the Beatrice Oil Field in the Moray Firth capable of generating around 700 megawatts of electricity utilizing wind turbines each capable of generating 5 megawatts of electricity. As at August 2000, siting wind turbines in such depths in hostile environments was unheard of and existing commercial wind turbines were generating only around 1 to 2 megawatts of electricity. The pursuers' proposal involved the conversion of existing oil and gas offshore installations in the Beatrice Field, which were then nearing the end of their useful life, into part of the infrastructure of the wind farm with consequent substantial savings, running into many millions of pounds, in relation to the decommissioning of such installations. Prior to approaching the defenders, the pursuers had thoroughly assessed the proposed development and had concluded that it was both economically and technically viable. The pursuers as part of that assessment had identified the Beatrice Field as an appropriate location for a development of the kind proposed. The information upon which all of these conclusions were based was disclosed in confidence to the defenders. The pursuers, as part of the disclosure of information about the proposal, supplied the defenders with economic and financial models as well as illustrative design sketches and drawings. ... The proposal, including the information relating to it, was not in the public domain. Information about the proposal, including financial models and sketches and drawings relating to it, and the proposal itself were confidential information."

This proposal, submitted in August 2000 was variously referred to in argument as "the proposal" or "the concept".

"In their discussions with the defenders, the pursuers explained why they considered wind turbines producing around 5 megawatts were an achievable proposition. By reason of the work they had done prior to approaching the defenders, the pursuers had concluded that an output of about 5 megawatts for each wind turbine was required to make a large scale wind farm located in deep water an economic proposition. As part of their confidential discussions with the defenders, the pursuers also discussed the use of non-traditional manufacturing materials, such as carbon fibre, for the manufacture of the turbines. The pursuers disclosed that they had looked at the possibility of making use of materials used in the aircraft industry to construct wings and fuselages. The discussions, presentations, and disclosure of information extended over a period of many months with a view to convincing the defenders that the pursuer's (sic) proposed development project was technically feasible and economically viable."

Later in Article 4 they say this:

"As a result of the discussions, presentations and information imparted by the pursuers to the defenders in confidence, the defenders were convinced that the proposed development was viable and represented an opportunity not only for them to avoid decommissioning costs estimated at around £70 million but also to create a highly profitable large scale wind farm in the Moray Firth."

Further on in the same Article they say:

"By obtaining the benefit of the work done by the pursuers in relation to the development of a large scale wind farm in that location, the defenders avoided starting completely from scratch and were able to gain a valuable advantage over such others. The pursuers' work, including their presentations and the information imparted in confidence to the defenders, was sufficient to demonstrate to the defenders that the project had merit and should be taken forward as in fact has happened."

The pursuers aver that the defenders brought in consultants. After a detailed consideration of "the work done by the pursuers and the information imparted in confidence by the pursuers to the defenders", and aided by the services of Mr Alan Mathewson (whose services were provided by the pursuers to the defenders for this purpose under a Master Consultancy Agreement), those consultants confirmed the viability of the proposal. The consultants had been given "material provided in confidence by the pursuers including presentational material, financial models and data compiled and studies carried out by or on behalf of the pursuers in order to demonstrate the commercial viability of the proposed project." The averments continue in a similar vein. As I shall indicate, it is averred that the defenders used this confidential information for their own purposes in pursuing a similar project to that suggested by the pursuers.

"The Agreement accordingly prevented the defenders from disclosing to any third party (i) the concept that the pursuers had formulated in early/mid 2000 relating to their forward looking vision that 5MW+ wind turbines would be designed and tested and that these were of the appropriate minimum size required to make offshore "over the horizon" wind farms economically viable; (ii) all work and research undertaken by the pursuers up to the date of signature of the said agreement to develop the said concept including without prejudice to the foregoing the contents of the said August 2000 presentation and the said presentation made in February 2001 to Paul Blakely the defenders' managing director; (iii) the Plan that the pursuers had worked on covering both the offshore environment and the on-shore situation which plan envisaged a three stage process, namely, Stage 1 - the construction and installation of a single demonstrator turbine, Stage 2 - the construction and installation of one or more turbines up to 100 MW to use the existing cable capacity between Beatrice and the on-shore electrical grid, and Stage 3 - to construct an additional 400MW-600MW capacity turbine and cable connect via the Peterhead power station to use their stranded gas generation facilities in trading sympathy with the wind power; (iv) the contents of all presentations by the pursuers to the defenders made between August 2000 and March 2001 in which the pursuers further detailed the plan; (v) the pursuers' invention of an offshore structure and is installation method to support large offshore wind turbine generators. All of the foregoing information was disclosed [i.e. by the pursuers to the defenders]. As recently as 2005, the defenders [or this should possibly be "pursuers"] were disclosing information concerning the anchoring of turbines, covered by the terms of the said confidentiality agreement."

It is to be noted that the information described as confidential extends far beyond the concept put to the defenders in August 2000. It includes, for example, material "to be made available" to the defenders after the Confidentiality Agreement.

"Whilst Talisman Energy and its partner, Pine Energy, a small renewable energy company, has the necessary offshore experience to construct and operate a project of this nature, the company is seeking one or more joint venture partners. The value of creating a partnership would be to bring in UK energy market participants who can add specific industry experience and offer a direct route to market for the plant's output."

The reference to the pursuers as the defenders' "partner" was, it is said in Article 15, inserted into the draft on the express instruction of the defenders' then Vice President (Europe) and Managing Director (UK). The pursuers go on to make the following averment:

"This deliberate alteration to the prospectus ..., prior to its circulation to selected third parties in confidence, was an acknowledgement and recognition of the fact that the pursuers and the defenders had, by not later than 21 December 2001 when the prospectus in its final form was issued, formed a joint venture partnership in relation to the development project at the Beatrice Field and were, the feasibility of the development having been confirmed, seeking to attract major energy companies to join them in their joint venture."

Such recognition and acknowledgement "was consistent with the nature of the discussions which took place about equity sharing at the said meeting on 6 August 2001 and with the sole basis upon which the pursuers had been prepared from August 2000 onwards to disclose their confidential information to the defenders and to permit the defenders to make use of their presentational material." In Article 16 they aver that in January 2002, delegates at a presentation were told by the defenders that the pursuers, in addition to being the defenders' partner, were part of "the offshore wind farm study team" together with the defenders and others, including the defenders' solicitors and consultants. They then aver that the object of the partnership was the promotion and construction of a deep water wind farm in the Beatrice Field with a view to sharing the profits thereof. It is explained, still in Article 16, that during the discussions which preceded the issue of the prospectus, they and the defenders

"had agreed that further partners would be attracted and that, in due course, a standard Oil & Gas Industry Joint Venture Agreement would be formalised once all the partners had been selected. It was agreed between [them] that, for the defenders to continue with the project, a large electricity partner and joint venture was required in order to demonstrate the credibility and wisdom of the project. The pursuers during such discussions reached agreement and understanding with the most senior officer of the defenders to the objective of formalising a Joint Venture Agreement amongst the partners with the partnership's members being expanded from the two initial partners, the pursuers and defenders, to include at least one large electricity company whereupon the partners would execute a Joint Venture Agreement. Pursuant to the aforesaid agreement, the Partnership Prospectus was issued on behalf of the partnership to attract such a company. Scottish and Southern Energy, a major energy supply company, has since agreed to participate in the project."

There are then, in Article 17, averments of discussions in August 2001 about the profit share which the pursuers could expect from the development. It is not averred that agreement was reached - indeed it is accepted that it was not. It is accepted also that no agreement was reached as to what, if any, investment of capital would be required from the pursuers as their contribution to the business of the partnership. But it is said that the defenders "were content to proceed in partnership with the pursuers from at least 21 December 2001 onwards without that matter being finalised." They were "willing to contribute capital to the project as the defenders well understood." There are further averments about this in Article 19. At a meeting on 16 November 2001 the defenders said that they required the pursuers to contribute funds if they wished to participate as an equity holder. Again, there is no averment of any agreement having been reached. Nonetheless, in Article 20 it is said: "On about 21 December 2001, in the said Partnership Prospectus, it was confirmed by the defenders that they and the pursuers were partners in a joint venture to develop the wind farm project." There are averments in Article 21 about further disagreements thereafter concerning the percentage which the pursuers might be offered.

"Following detailed consideration of all matters pertaining to the project, including technical and financial means, Talisman has decided to advance the project using technology devised by other persons. You will also recall from the meeting we had in Talisman House on 6 August 2001 and your subsequent letter of 28 March 2002 that we fundamentally failed to agree the basis upon which Pine Energy become involved in the project. Against the above background, I regret to advise you that Talisman will not require the services of Pine Energy when advancing the project".

There followed exchanges between the parties, ending with the defenders refusing to correspond further. The pursuers aver that the defenders have proceeded to develop the Beatrice Offshore Wind Farm Project together with Scottish and Southern Energy PLC and other partners. They say that in or about July 2006 the first deep water offshore wind turbine was floated out.

The defenders' submissions

The pursuers' submissions

"has moved to a position where, in principle, an enrichment at another's expense is unjustified and should be reversed if its retention is supported by no legal ground. The underlying principles are the same in the various spheres, with repetition, restitution and recompense being only the remedies with which an enrichment, once found to be unjustified, may be reversed. The remedies may be combined to achieve this end."

"This deliberate alteration to the prospectus ..., prior to its circulation to selected third parties in confidence, was an acknowledgement and recognition of the fact that the pursuers and the defenders had, by not later than 21 December 2001 when the prospectus in its final form was issued, formed a joint venture partnership ..." (emphasis added)

I cannot agree, nor do I consider that this document can possibly bear the weight placed upon it. This is a prospectus inviting others to come into the project and form a partnership with the defenders and the pursuers. In this context it is impossible, in my view, to regard that statement as more than an indication of the entities issuing the prospectus with whom the others are being invited to enter into partnership. It does not, to my mind, carry any connotation that the pursuers were already in partnership with the defenders. It might, as Mr Peoples argued, be interesting to ask the defenders' then Vice President (Europe) and Managing Director (UK) why he inserted this description of the pursuers into the prospectus. But I do not think that his answer, whatever it was, could advance the enquiry. Partnership is a legal status with legal implications. There are certain features which are usually to be found in a partnership. None are present here. There was no firm name, no partnership premises, no partnership employees and no partnership bank account. Nor is there any averment that steps were being taken to establish any of these. There were no partnership accounts or tax returns. None of these is fatal to the contention that there was a partnership, but the lack of any of such things points strongly against the likelihood of there being one. In the quoted passage I have underlined the words "by not later than 21 December 2001". As is apparent from this, there is no averment as to when the partnership was formed. I have referred to the Consultancy Agreement under which the pursuers agreed with the defenders that they would provide the defenders with the services of a consultant. As Mr Peoples accepted in argument, this agreement is inconsistent with there having been a partnership in existence at the time. Although it was signed in January 2002, it is dated November 2001 and for present purposes I am prepared to accept, since it is the construction most favourable to the pursuers' argument, that the services provided under this agreement were finished by early to mid-December 2001. Accordingly, the partnership, if it existed, must have come into being then at the earliest. This is inconsistent with the averment in Article 16 that the agreement to issue the prospectus was to "expand" the members of the partnership. If that is correct, one looks in vain for any averment of a meeting or discussion after early December 2001 at which the partnership was agreed to be implemented. So there is no averment of any facts from which the court could possibly infer that the pursuers and the defenders were partners.

Disposal