Case No. CL-2019-000290

CE FOXTON Between : ALBION ENERGY LIMITED Claimant and – ENERGY INVESTMENTS GLOBAL BRL Defendant Lord Grabiner QC, Julian Kenny QC and Michal Hain (instructed by Charles Fussell & Co LLP) for the Claimant Guy Morpuss QC of Macfarlanes LLP for the DefendantHearing date: 30 January 2020 Approved Judgment I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic. MR JUSTICE FOXTON Mr Justice Foxton : 1.This hearing involves: i)An application by the Claimant (“Albion”) against the Defendant (“EIGL”) for summary judgment for the final instalment of the purchase price of 20% of the shares in Heritage Oil Limited (“Heritage”) under a sale and purchase agreement dated 31 January 2018 between Albion as seller and EIGL as buyer (“the SpA”). ii)An application by EIGL for a stay of these proceedings under s.9 of the Arbitration Act 1996, alternatively for unconditional leave to defend the proceedings, and for a stay pending the resolution of proceedings to be brought by EIGL in Jersey. 2.Albion was represented before me by Lord Grabiner QC, Julian Kenny QC and Michal Hain, instructed by Charles Fussell & Co LLP, and EIGL by Guy Morpuss QC of Macfarlanes LLP. I am grateful to all counsel for their oral and written submissions. The background 3.Mr Buckingham founded Heritage, an oil production and exploration company incorporated in Jersey. It was listed on the LSE. In 2014, EIGL (a company beneficially owned by Sheikh Hamad, the former prime minister of Qatar) acquired 80% of the share capital of Heritage and took the company private. The other 20% remained owned by Albion, a Guernsey company beneficially owned by Mr Buckingham. 4.On 31 January 2018, Albion agreed to sell its remaining 20% interest in Heritage to EIGL on the terms of the SpA for the sum of $100m. There were six parties to the SpA, which contained other provisions beyond the sale transaction. In addition to Albion and EIGL, Heritage, Mr Buckingham, a company called Albion Resources and a company called Sundance Investments Ltd (“Sundance”) were also parties. 5.The first two instalments under the SpA were paid by EIGL. However, shortly before the final instalment became due on 20 December 2018, Macfarlanes LLP, on behalf of Heritage, wrote to Albion on 14 December 2018 asserting claims against Mr Buckingham. By a second letter of the same date, Macfarlanes LLP wrote to Albion on behalf of EIGL saying that in view of Heritage’s claims against Mr Buckingham, EIGL intended to withhold payment of the outstanding amount payable under the SpA. However, there was no suggestion at this stage that the matters raised in Macfarlanes LLP’s correspondence gave EIGL its own claim against Albion. On 15 December 2018, solicitors acting for Albion pointed out that any claims which Heritage might claim to have could not provide a legitimate reason for EIGL to withhold the final instalment of the purchase price due to Albion. In response, on 17 December 2018, Macfarlanes LLP suggested for the first time that the matters raised were capable of supporting a petition for unfair prejudice which could give EIGL a claim against Albion. 6.Solicitors’ correspondence followed in which EIGL agreed to pay $20m of the outstanding instalment unconditionally, with the remaining $13.3m (“the Escrow Amount”) to be held by Albion’s solicitors on the terms of an escrow agreement dated 22 January 2019 (“the Escrow Agreement”). 7.Albion has now brought proceedings and seeks summary judgment for the outstanding amount of $13.3m. In response EIGL seeks a stay of the proceedings, relying for this purpose on the arbitration clause in the Escrow Agreement. Alternatively, EIGL contends that Albion is not entitled to summary judgment because EIGL has a defence with a realistic prospect of success, namely an equitable set-off arising from EIGL’s claim for relief for unfair prejudice against Albion. EIGL also contends that these proceedings should be stayed under the inherent jurisdiction of the Court pending the determination of EIGL’s unfair prejudice claim in proceedings to be commenced in Jersey. 8.Logically, the issue which falls to be determined first is EIGL’s application for a stay under s.9. If that application succeeds, then the merits of Albion’s claim, and whether there is any defence to it, are matters for the arbitrators, and it would not be desirable for the Court to say anything about them. EIGL’s application for a stay under s.9 of the Arbitration Act 1996 The relevant arbitration and jurisdiction agreements 9.The SpA, under which the various instalments of the price for the 20% interest in Heritage were payable, provided by clause 11.2: “The Parties submit to the exclusive jurisdiction of the courts of England and Wales as regards any claim, dispute or matter (whether contractual or non-contractual) arising out of or in connection with this agreement (including its formation)”. 10.In the circumstances which I have summarised above, in January 2019 Albion, EIGL and Mr Buckingham (but not the other three parties to the SpA) entered into the Escrow Agreement. This referred to the various claims asserted by Heritage and EIGL against Albion and Mr Buckingham, and by Albion against EIGL for the outstanding $13.3m. There were then a series of promises: i)by EIGL to pay the outstanding $13.3m into escrow; ii)by Albion, Mr Buckingham and EIGL not to instruct Charles Fussell & Co LLP to act other than in accordance with the undertaking it was giving as to the terms on which the Escrow Amount was held; iii)by Mr Buckingham to provide certain responses to queries which Heritage and EIGL had raised; iv) by EIGL to provide certain information to Mr Buckingham; v) by EIGL, Albion and Mr Buckingham, if there remained outstanding disputes after 1 March 2019, to use reasonable endeavours promptly to agree an appropriate dispute resolution procedure to resolve them, and not to commence proceedings in relation to the disputed matters prior to 1 April 2019. 11.Clauses 2.8 and 2.9 involved agreements by all parties that the transfer of funds into the Escrow Account was “entirely without prejudice to the legal rights and position” of those parties, including, in the case of Albion, “the legal rights and position … in respect of any and all claims arising as a result of EIGL’s alleged failure to comply with the terms of the [SpA] and/or any other rights which Albion … may have under the [SpA] or otherwise”. 12.Finally, and most materially for present purposes, clause 6 provided: “Any dispute or difference (whether contractual or non-contractual) arising out of or in connection with this letter (including any question regarding its existence, validity, interpretation performance or termination) shall be referred to and finally settled by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said Rules. The place of arbitration shall be London, England and the language of the arbitral procedure shall be English”. 13.It was Mr Morpuss QC’s submission for EIGL that the arbitration clause in the Escrow Agreement (“the Arbitration Agreement”) had varied and supplanted the High Court jurisdiction clause in the SpA (“the Jurisdiction Agreement”) so far as the claim to the outstanding $13.3m was concerned. The proper approach on a s.9 application14.S.9 of the Arbitration Act 1996 provides for a mandatory stay of legal proceedings in the English court in respect of a matter which the parties have agreed to refer to arbitration: "Stay of legal proceedings. (1) A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter. … (4) On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed." 15.Before ordering a s.9 stay, the Court must be satisfied both that there is an arbitration clause, and that the subject matter of the claim falls within that clause (Al-Naimi (t/a Buildmaster Construction Services) v Islamic Press [2000] CLC 647). There are occasions when the Court is willing to stay proceedings under its case management jurisdiction, in order to allow the arbitration tribunal to consider these matters under its kompetenz kompetenz jurisdiction. However, (in my view rightly) neither party suggested that this was the appropriate course in this case, nor did anyone suggest that this was not an issue which could and should be finally determined by me. The approach to overlapping dispute resolution clauses 16.A number of authorities have considered the position where parties have entered into more than one agreement, and their agreements contain different dispute resolution clauses. Many of those cases are concerned with the position where a suite of documents containing different arbitration or jurisdiction clauses are entered into at or around the same time, to give effect to different aspects of one overall transaction, and the issue arises as to which clause applies to a dispute which, at least on first reading, is fairly capable of falling within more than one of them. 17.I was referred by both parties to the following summary of the law by Hamblen LJ in BNP Paribas v Trattamento Rifiuti Metropolitani SpA [2019] EWCA Civ 768 at [68] as to the proper approach in these circumstances: “In the light of the guidance provided by these authorities, so far as relevant to the present case I would summarise the approach to be as follows: (1)Where the parties' overall contractual arrangements contain two competing jurisdiction clauses, the starting point is that a jurisdiction clause in one contract was probably not intended to capture disputes more naturally seen as arising under a related contract: Trust Risk Group at [48]; Dicey, Morris & Collins at § 12-110. (2)A broad, purposive and commercially-minded approach is to be followed - Trust Risk Group at [48]; Sebastian Holdings at [39] and [50]. (3)Where the jurisdiction clauses are part of a series of agreements they should be interpreted in the light of the transaction as a whole, taking into account the overall scheme of the agreements and reading sentences and phrases in the context of that overall scheme: see UBS v Nordbank [2009] at [83]; Trust Risk Group at [47]; Sebastian Holdings at [40]. (4)It is recognised that sensible business people are unlikely to intend that similar claims should be the subject of inconsistent jurisdiction clauses: UBS v Nordbank at [84], [95]; Sebastian Holdings at [40]; Savona at [1]. (5)The starting presumption will therefore be that competing jurisdiction clauses are to be interpreted on the basis that each deals exclusively with its own subject matter and they are not overlapping, provided the language and surrounding circumstances so allow: Monde Petroleum at [35]-[36]; Savona at [1]. (6)The language and surrounding circumstances may, however, make it clear that a dispute falls within the ambit of both clauses. In that event the result may be that either clause can apply rather than one clause to the exclusion of the other – Savona at [4] and [31].” 18.The present case concerns the interrelationship between the dispute resolution clause in an agreement documenting a transaction, and the effect on that clause of the parties deciding at some later point in time to conclude a further agreement with a different dispute resolution clause. In this context, it might be suggested that the approach identified by Hamblen LJ applies with less force. The passage from Dicey, Morris & Collins on the Conflict of Laws (15th) at ¶12-110 which Hamblen LJ cited (and the fact pattern he was considering) concerned the position “where a complex financial or other commercial transaction is put in place by means of a number of inter-linked contracts”. Nonetheless where, as here, it is not suggested that the agreement which was later in time superseded the earlier agreement for all purposes, such that the parties must have contemplated the agreements subsisting together, the approach identified in the Trattamento case remains a helpful guide as to the parties’ likely intentions. I note in this regard that the Court of Appeal decision in Satyam Computer Services Ltd v Upaid [2008] EWCA Civ 487, which was concerned with successive agreements rather than a single transaction embodied in multiple agreements, was cited by the Court of Appeal when considering essentially simultaneous inconsistent dispute resolution clauses in UBS AG v HSH Nordbank AG [2009] EWCA Civ 585 at [83] and Deutsche Bank AG v Sebastian Holdings Inc [2010] EWCA Civ 998 at [42]. 19.Finally, it may be apparent from the nature of the agreement in which a particular dispute resolution provision is located that it is intended to have a narrower scope and is principally concerned with disputes of a particular kind. I note that the Court of Appeal in UBS AG rejected the contention that the English jurisdiction clause in the Kiel notes extended to the parties’ overarching dispute because it was a “`boilerplate’ bond issue jurisdiction clause … primarily intended to deal with technical banking disputes” ([89]). The scope of a dispute resolution provision in an escrow agreement which is in different terms to that contained within the associated principal contract has been considered in at least two cases. In PT Thiess Contractors Indonesia v PT Kaltim Prima Coal [2011] EWHC 1842 (Comm), Blair J considered a case in which the parties had entered into a “Cash Distribution Agreement” (which he found was essentially an escrow agreement: [42]) containing an English jurisdiction clause, alongside an Operating Agreement for Mining Services which provided for arbitration. He noted at [41] that “there is nothing unusual about submitting a contractual dispute to arbitration whilst referring matters relating to security to the jurisdiction of one or more courts”, noting “this is frequently a feature of international transactions, and the choice of jurisdiction in the security agreement may have to do with factors independent of the principal agreement”. At [43] he concluded: “In my view, the claim in the English action is a claim under the CDA concerned with a procedure whereby the sums in dispute are to be set aside until the dispute is determined. It raises a discrete claim, related to, but distinct from, the underlying dispute arising under the OAMS which is the subject of the arbitration. There is no reason why the parties cannot be taken to have intended that these claims are to be the subject of different jurisdiction clauses.”. 20.In his judgment, Blair J referred to the decision of Andrew Ang J in the Singapore High Court in Transocean Offshore International Ventures Ltd v Burgundy Global Exploration Corp [2012] 2 SLR 821. That case involved a principal agreement (an offshore drilling contract) which provided for arbitration, and an escrow agreement which provided for the jurisdiction of the Singapore High Court. Andrew Ang J rejected the contention that proceedings brought under the escrow agreement fell within the arbitration clause, so as to require the court to stay the proceedings under s.6 of the Singapore International Arbitration Act. He also referred to the different types of dispute which might arise under the principal contract and the escrow agreement, noting that the latter were likely to be “relatively straightforward and nontechnical in nature” and for that reason the parties were likely to have deliberately chosen a dispute resolution provision for the escrow agreement which could ensure more speedy relief (at [21]). 21.While those were both cases in which the court jurisdiction clause appeared in the security document, and the arbitration clause in the principal agreement setting out the parties’ primary obligations (as opposed to this case where the location of the two types of dispute resolution clause is reversed), they reflect the fact that the parties may frequently choose a different dispute resolution provision for an agreement which sets out the primary obligations of their relationships, and an agreement intended to operate by way of a security, without intending that the dispute resolution provision in the security agreement extend to disputes arising under the principal agreement. Analysis and conclusion 22.On the facts of this case, I am quite satisfied that the claim which Albion now brings – which is essentially concerned with establishing its entitlement to be paid the outstanding instalment of the purchase price, and not with the operation of the Escrow Agreement so as to realise the benefits of the security provided for that liability if established – does not fall within the Arbitration Agreement. I refer to the claim which Albion “now brings” because as originally formulated, Albion’s Particulars of Claim sought relief in the form of “a declaration that Albion is entitled to payment of the Escrow Monies”. However, to avoid any debate as to whether that relief fell within the ICC arbitration clause, Albion has confirmed that it does not pursue that claim at this stage. It is accordingly not necessary for me to determine whether that claim for declaratory relief would have been stayed. 23.I have reached the conclusion that EIGL is not entitled to a stay under s.9 of the Arbitration Act 1996 for the following reasons. 24.First, I agree with Blair J and Andrew Ang J that there is nothing particularly surprising in parties stipulating for different dispute resolution provisions in principal and security agreements, given the different purposes of those agreements, and the more limited scope of the latter. I consider it inherently more likely that the Arbitration Agreement in the Escrow Agreement was intended to address the security and other ancillary obligations created by that agreement, rather than to displace (at least so far as the outstanding instalment is concerned) the parties’ agreed choice of jurisdiction under the SpA for the purposes of determining whether EIGL is in fact under any liability to Albion. 25.Mr Morpuss QC submitted that it would be “absurd” if Albion was required to establish its entitlement to the amount due in one forum but might be forced to resort to another forum for the purpose of realising the security provided for that obligation. However, that is the position whenever the principal and security agreements in a transaction contain different dispute resolution provisions which, as Blair J noted, they frequently do and for good reasons. Further, while the amount paid into the Escrow Account is clearly the most obvious means of enforcing any judgment which Albion might obtain, it is far from Albion’s only option. In particular, Albion has security for the outstanding instalment in the form of a charge over 20% of the shares in Heritage. Further, in the event of a dispute, it was inherently likely that Albion might become entitled to recover a sum in excess of the Escrow Amount once interest and costs were taken into account. For these reasons, it would be wrong to approach the identification of the agreed forum for the determination of Albion’s debt claim under the SpA solely from the perspective of enforcement against the Escrow Amount. 26.Second, the language of the Arbitration Agreement – in particular its reference to “any dispute or difference …. arising out of or in connection with this letter (including any question regarding its existence, validity, interpretation, performance or termination)”, suggests that the focus of the clause is obligations created by the Escrow Agreement (“this letter”) rather than disputes as to the interpretation, performance or termination of the SpA. When the parties were contracting against a background in which the outstanding balance was due under the SpA and subject to the Jurisdiction Agreement, it is unlikely that they would have used a clause which took “this letter” as the fulcrum of the Arbitration Agreement if that agreement had been intended to extend to claims under the SpA. 27.Third, I agree with Lord Grabiner QC that clause 2.9, which provides that the payment into escrow is “without prejudice to… any other rights which Albion … may have under the SpA” tells against the suggestion that clause 6 of the Escrow Agreement is intended to remove Albion’s right under the SpA to take proceedings in the High Court. While I accept Mr Morpuss QC’s submission that it would be possible to construe this provision as applying only to non-ancillary obligations (and therefore as not extending to the choice of forum), it can nonetheless be said that clause 2.9 points away from any suggestion that the parties intended provisions in the Escrow Agreement to supplant potentially inconsistent provisions in the SpA. This is particulary the case given the width of the language used to preserve Albion’s prior entitlements – not simply “in respect of any and all claims arising as a result of EIGL’s alleged failure to comply with the terms of the [SpA]” but also “any other rights which Albion … may have under the [SpA] or otherwise”. 28.Fourth, the Escrow Agreement concerns only three of the six parties to the SpA. This factor itself suggests that the parties can only have intended the Arbitration Agreement to have a localised effect, in order to avoid the commercially unattractive position where claims between some of the parties to the SpA were subject to High Court jurisdiction, and other related claims under the SpA were subject to ICC arbitration. Adopting Hamblen LJ’s language in Trattamento, this is an outcome which sensible businesspeople are unlikely to have intended. 29.Finally, although this is a point which merits very limited weight, I also accept Lord Grabiner QC’s submission that if cause 6 of the Escrow Agreement was intended to provide a new agreed and exclusive mechanism for resolving all of the disputes, it is perhaps surprising that clause 2.7 provides that the parties are to “use reasonable endeavours promptly to agree an appropriate dispute resolution process to resolve the dispute”. 30.EIGL’s application for a stay having been rejected, it is necessary to turn to Albion’s application for summary judgment. The test for summary judgment 31. There was no dispute before me as to the appropriate test on a summary judgment application. A frequently quoted summary of the applicable principles is that of Lewison J in Easyair Limited v Opal Telecom Limited [2015] EWHC 399 (Ch) at [15]: i)The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 1 All ER 91. ii)A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]. iii)In reaching its conclusion the court must not conduct a "mini- trial": Swain v Hillman. iv)This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]. v)However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550. vi)Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63. vii)On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. viii)If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725. EIGL’s factual complaints in more detail32.EIGL’s claim arises from a series of payments made by Heritage which were the subject of an audit of Heritage’s business undertaken by Alvarez & Marsal (“Alvarez”). 33.First, there are payments to three Nigerian suppliers, Lamic Nigeria, Professor Damachi and Zomay Marine, which total $17.5m, for consultancy services. In addition to these payments, all made after EIGL had acquired 80% of Heritage, payments totalling $13.25m had been made prior to EIGL’s investment. Alvarez stated that there was weak documentation supporting these payments and lack of transparency as to their use and their size, giving rise to “heightened corruption related risk”. 34.Second, payments of $7m made to MENA Danismanlik Ltd, a Turkish company, in connection with Heritage’s efforts to enter into the Libyan market, which Alvarez concluded posed “a potential high risk” with “no direct oversight as to how the monies were actually spent”. 35.Third, expenses of $866,258 incurred by Mr Buckingham between July 2014 and June 2017 which were charged to Heritage, and which were said to involve or include payments on personal luxury items or services. Alvarez concluded that the required support, justification and explanation for these expenses had not been provided and that the payments were not “consistent with a best practice approach”. 36.Finally, between July 2014 and July 2016, costs of £10m were incurred by Heritage in relation to a Gulfstream jet used principally by Mr Buckingham, of which some £2,766,977 had not been allocated to any specific project nor charged back to Mr Buckingham. 37.EIGL’s position in relation to these expenses, as set out in Mr Morpuss QC’s skeleton, is that “it does not know for certain that the claims are well-founded” and “that is why it wishes to have them investigated by way of its unfair prejudice position in Jersey”. Mr Morpuss QC confirmed at the hearing that he was satisfied that he is in a position to plead that these payments were improper payments which implicated Mr Buckingham and Mr Atherton, an individual who acted in an executive role in the management of Heritage until his resignation in December 2017. In these circumstances, I will proceed on the basis that there is a serious issue to be tried to this effect, while noting that Mr Morpuss QC’s characterisation of the payments is hotly disputed. I will refer to these payments as “the Disputed Payments”. 38.If the various complaints prove to be well-founded, the party who had made the payments, suffered the immediate loss, and who would ordinarily be entitled to bring a claim, would be Heritage. In this regard, it is noticeable that when these matters were first articulated by Macfarlanes LLP, they were presented as claims by Heritage. The suggestion that these matters gave EIGL a claim (on the basis of unfair prejudice) only surfaced after Albion had taken the point that any claims which Heritage might have did not relieve EIGL of its payment obligations under the SpA. In these circumstances, it will be necessary to consider with some care the route by which EIGL now says that the payments made provide it with a claim against Albion, and provide the basis for an equitable set-off against Albion’s otherwise undisputed debt claim. 39.Before doing so, however, I should first address two threshold objections taken by Lord Grabiner QC: i) that any claim which EIGL might have has been settled and waived under the terms of the SpA; ii) that the SpA precludes a right of set-off. Has EIGL waived or settled any claim it might have against Albion? Introduction 40.This issue arises as a result of the terms of clauses 7 and 8 of the SpA. Before introducing those clauses, it is first necessary to set out a little more background. As noted above, in 2014 EIGL acquire an 80% interest in Heritage. In anticipation of that acquisition, two agreements were entered into which were designed to address Mr Buckingham’s involvement in Heritage going forward: i)A Shareholders Agreement dated 29 April 2014 between Albion and EIGL, which dealt with the relationship between the two shareholders, including on such matters as the appointment of directors and the conduct of business. ii)An Advisory Agreement between Heritage, Mr Buckingham and Mr Buckingham’s company Sundance, which was agreed in principle in April 2014 but not signed until July 2014, under which Sundance agreed to provide the services of Mr Buckingham to Heritage. Under clause 5.7, Heritage agreed to make the company jet available to Mr Buckingham “for the purposes of providing the services” and under clause 8.1, there was an entitlement on Sundance’s part to be reimbursed “any reasonable travelling and accommodation expenses …. and reasonable entertaining expenses which are reasonably and properly incurred by or on behalf of [Sundance] or [Mr Buckingham]”. 41.When EIGL agreed to buy Albion’s remaining 20% stake in Heritage, clauses 7.1 and 7.2 of the SpA addressed the position of the Shareholders Agreement and the Advisory Agreement respectively, in materially identical terms. Under the heading “Terminations”, clause 7.1 provided: “In consideration of their mutual terminations, the Seller and the Buyer irrevocably and unconditionally agree for all purposes that with effect from and conditional on Completion: 7.1.1the Shareholders’ Agreement shall be hereby terminated and have no further effect. 7.1.2each party to the Shareholders’ Agreement shall be irrevocably and unconditionally discharged and released from all and any obligations (past present and future) arising under or resulting from the Shareholders’ Agreement; and 7.1.3any rights that each party to the Shareholders’ Agreement may have or has against any other such party thereunder (including any rights in respect of antecedent breaches) shall hereby be waived for all purposes and no such party shall be entitled to make any claim against any other such party or parties under or in relation to the Shareholders Agreement or its termination”. 42.Clause 8 of the SpA provided: “Settlement of claims 8.1In consideration of their mutual settlements, each of the Seller, Albion Resources, the Advisor and the Consultant hereby releases and forever discharges each of the Buyer and the Company in respect of the Seller Released Claims. 8.2In consideration of their mutual settlements, each of the Buyer and the Company hereby releases and forever discharges the Seller, Albion Resources, the Advisor and the Consultant in respect of the Buyer Released Claims”. 43.So far, so good. However, difficulties arise from the definition of Buyer Released Claims. Both the definitions of Buyer Released Claims and Seller Released Claims apply to “any Claim for breach of the Shareholders’ Agreement, the Advisory Agreement, the Main Counterindemnity Agreement, the Supplemental Agreement or otherwise arising between the Parties in connection with the Company and its business”, and do so “whether or not notified and/or in existence at the date of this Agreement”. However, immediately after the words “in connection with the Company and its business”, the definition of Buyer Released Claims provides: “other than any Claim which relates to any matter reported by Alvarez and Marsal Disputes and Investigations LLP in relation to their audit of the business and affairs of the Company currently in progress on behalf of the Seller (pursuant to clause 8.3 of the Shareholders’ Agreement)”. 44.By way of yet further background: i)Clause 8.3 of the Shareholders Agreement allowed any party “from time to time” to require an audit or review of the company. ii)In 2017, Alvarez was commissioned to undertake such a review. That review had not reached its endpoint in January 2018, with the result that the carve-out from the definition of Buyer Released Claims was included in the SpA. iii)It is common ground that the factual basis of EIGL’s alleged equitable set-off “relates to any matter reported by Alvarez and Marsal Disputes and Investigations LLP in relation to their audit of the business and affairs of the Company”. iv)However, an issue arises as to whether the carve-out qualifies the terms of clauses 7.1 and 7.2 of the SpA. The parties’ arguments in summary 45.Lord Grabiner QC’s argument for Albion is as follows: i)The release of liability for past breaches in clauses 7.1 and 7.2 is unqualified. ii)The qualification made to clause 8.2 of the definition of Buyer Released Claims must therefore be interpreted as limited to such claims as may have existed before the Shareholders Agreement and Advisory Agreement were entered into. iii)In support of this latter argument, Lord Grabiner QC submitted that clauses 7 and 8 of the SpA had distinct subject-matters, such that there is nothing surprising in the settlement of claims in clause 8 being qualified, without this impacting on the scope of the release offered by clause 7. 46.Mr Morpuss QC submitted that: i)The releases in clause 7 had to be read subject to the qualification to the definition of Buyer Released Claims. ii)Clauses 7 and 8 were addressing different aspects of the same subject-matter, with clause 7 principally aimed at the release of obligations going forward, and clause 8 with the settlement of past claims. iii)(With rather less enthusiasm) if he was wrong on this point, then a claim for relief under statutory unfair prejudice provisions did not fall within clause 7 in any event. Analysis and conclusion 47.While the SpA is not particularly happily drafted in this respect, I am satisfied that Mr Morpuss QC’s submissions are to be preferred on this issue. 48.First, it is clear that clauses 7 and 8 substantially overlap. In particular the definitions of Buyer Released Claims and Seller Released Claims specifically refer to both the Shareholders Agreement and the Advisory Agreement, and the release of claims effected by clause 8 achieves exactly the same outcome as the release of “rights in respect of antecedent breaches” in clauses 7.1.3 and 7.2.3. Unless, therefore, the carve-out from the definition of Buyer Released Claims does not apply to the Shareholders Agreement and the Advisory Agreement, there is a clear conflict between the two provisions. 49.Lord Grabiner QC put forward an ingenious argument that the carve-out only applied to the words “or otherwise arising between the Parties in connection with the Company and its business” in the definition of Buyer Released Claims, and not to “any claim for breach of the Shareholders’ Agreement, the Advisory Agreement, the Main Counter Indemnity Agreement, the Supplemental Counter-Indemnity Agreement”. However, that argument is not persuasive: i)ii)While Lord Grabiner QC can point to clause 7 as a possible reason for the carve-out out not applying to the Shareholders and Advisory Agreements, no explanation has been offered as to why the carve-out did not apply to the other agreements which appear in the definition, which is the effect of Lord Grabiner QC’s construction. iii)In circumstances in which the carve-out specifically identified clause 8.3 of the Shareholders Agreement as the basis on which the Alvarez audit was being conducted, it is improbable that the parties did not intend the carve-out to apply to the release of claims under the Shareholders Agreement. 50.Second, I do not believe that the conflict can be resolved by treating the carve-out as an attempt to preserve pre-Shareholders Agreement and Advisory Agreement claims:i)This is not the natural reading of the definition of Buyer Released Claims, for the reasons set out above. ii)It was known to all parties that the Alvarez audit was being conducted under the Shareholders Agreement and had yet to be completed. It ought also to have been appreciated by all parties that EIGL’s principal interest was likely to concern the period after it invested in Heritage in June 2014, rather than the preceding period. In these circumstances, the suggestion that the parties were only seeking to preserve any claims which might be revealed by that audit to the extent they had arisen before and independently of the Shareholders Agreement or the Advisory Agreement is highly improbable. iii)It is clear from the appendices to the draft Alvarez report of 22 November 2017 and the body of the final report of 26 February 2018 that prior to the conclusion of the SpA, Alvarez had held two meetings with Heritage on 20 October 2017 and 15 November 2017 in connection with its review, made enquiries about Mr Buckingham’s expenses in respect of a period from 2014 to 2017 and had exchanges with Heritage on the subject of Mr Buckingham’s credit card expenditure and his use of the company jet. The fact that Mr Buckingham appears to have been aware (at least to some degree) of the chronological scope of the Alvarez investigation further tells against the suggestion that the carve-out was intended only to preserve pre-April or July 2014 claims. 51.In these circumstances, there is an obvious inconsistency between the scope of the release for breaches of the Shareholders Agreement and Advisory Agreement apparently offered by clauses 7.1.3 and 7.2.3, and the express carve-out of the settlement provisions for breaches of the same agreements so far as concerns the Alvarez investigation in clause 8. I am satisfied that the more specific consideration given to the issue in the carve-out should prevail over the more general provisions in clause 7. I agree with Mr Morpuss QC that clause 7 appears to have had its principal focus on terminating the primary obligations of the Shareholders and Advisory Agreements going forward, albeit (in the manner characteristic of the “saturation bombing” approach to the drafting of general provisions which Hoffmann LJ identified in Arbuthnott v Fagan [1995] CLC 1396, 1404) the language used, if considered alone, would have a wider collateral impact. 52.If I had not accepted Mr Morpuss QC’s submissions as to the effect of the carve-out from the definition of Buyer Released Claims, I would not have accepted his alternative submission that the particular legal route which EIGL proposes to use to seek relief – a petition for unfair prejudice – would fall outside the releases in clause 7 even if claims in respect of the same matters brought under the Shareholders Agreement and Advisory Agreement would not. The language of the waivers in clause 7.1 is relatively broad (“all and any obligations … arising under or resulting from” the relevant Agreement and a statement that no party is entitled to make a claim “under or in relation to the Shareholders’ Agreement”). Where the facts relied upon as a basis for the unfair prejudice petition could also have been relied upon to allege a breach of one or both agreements, the requisite nexus with the Shareholders or Advisory Agreement is satisfied. I reject as uncommercial, and contrary to the obvious intention of the parties in effecting what is, after all, a mutual release of this kind, the suggestion that whether claims were released or not would depend on the specific cause of action or legal provision relied upon, and the ingenuity of the pleader in being able to formulate a claim without mentioning either Agreement. Is the right of set-off excluded by the SpA? 53.I can deal with this issue very briefly. Lord Grabiner QC faintly contended that clause 3.2 of the SpA, by which Albion “irrevocably undertakes to pay each instalment … in cash by way of electronic transfer of immediately available funds” was sufficient to exclude the right of equitable set-off. However, it is well-established that this right can only be excluded by clear language. Even a promise to pay an amount “without any deduction” has been held insufficiently clear to effect this exclusion (Connaught Restaurants Ltd v. Indoor Leisure Ltd [1994] 1 WLR 592). The language of clause 3.2 does not come close to achieving this effect. 54.There is a further potential issue as to whether EIGL can establish an equitable set-off in this case, namely whether such a set-off can arise from a claim to relief which the defendant claims it can obtain from the future exercise of a statutory discretion, given that, at the date the set-off is asserted, the claimant cannot be said to be under any liability to the defendant, and any such liability is contingent on a court subsequently choosing to exercise a broad statutory discretion in a particular way. There are cases which suggest that contingent claims cannot generally be relied upon to establish a defence of equitable set-off. For example in Manzanilla Ltd v Corton Property and Investments Ltd [1996] EWCA Civ 942, an appeal against a decision of Mr Anthony Grabiner QC sitting as a deputy High Court judge in the Chancery Division, Millett LJ observed that “a debt which is not yet payable or which is still contingent is not available for set-off at law or in equity”. 55.However, an application for future relief pursuant to a statutory discretion on the basis of facts existing at the date the set-off is asserted may be said to raise different considerations. An issue with some similarities to that question - whether an existing factual basis for obtaining future discretionary relief constituted an “obligation incurred” for the purpose of rule 13.12(1)(b) of the Insolvency Rules 1986 – was considered by the Supreme Court in In re Nortel GmbH [2013] UKSC 52. Lord Neuberger PSC (with whom Lord Mance, Lord Clarke and Lord Toulson JJSC joined) held at [77] that “at least normally, in order for a company to have incurred a relevant “obligation” under rule 13.12(1)(b), it must have taken, or been subjected to, some step or combination of steps which (a) had some legal effect (such as putting it under some legal duty or into some legal relationship), and which (b) resulted in it being vulnerable to the specific liability in question, such that there would be a real prospect of that liability being incurred”. The Supreme Court overruled previous cases, which had held that the prospective liability of a bankrupt to a future discretionary costs order in legal proceedings in which the bankrupt was involved on the date of bankruptcy did not arise from obligations which had arisen before the issue of the bankruptcy proceedings. Lord Neuberger PSC held at [89]: “In my view, by becoming a party to legal proceedings in this jurisdiction, a person is brought within a system governed by rules of court, which carry with them the potential for being rendered legally liable for costs, subject of course to the discretion of the court. An order for costs made against a company in liquidation, made in proceedings begun before it went into liquidation, is therefore provable as a contingent liability under rule 13.12(1)(b), as the liability for those costs will have arisen by reason of the obligation which the company incurred when it became party to the proceedings”. 56.This is a difficult issue, and one on which I did not receive argument. In these circumstances, I will proceed on the basis that a claim for the future exercise of discretionary relief based on existing facts which, once exercised, would place the claimant under a monetary obligation to the defendant is capable of being relied upon as an equitable set-off. The question, therefore, is whether EIGL has shown that it has a realistic prospect of obtaining such relief. EIGL’S alleged equitable set-off EIGL’s case in summary 57.EIGL did not prepare a draft pleading explaining the basis on which it contended it had a claim against Albion. However, EIGL’s claim appeared to involve the following steps: i)The Disputed Payments involved mismanagement of Heritage “on behalf of Albion” and Albion’s “failure to disclose what had occurred”. ii)The mismanagement gave rise to unfair prejudice so far as EIGL is concerned, because EIGL has suffered prejudice which cannot be remedied notwithstanding the fact that, since June 2014, it has held 80% of Heritage’s share capital and appointed four of its five directors. That prejudice is said to result from the fact that EIGL would have paid less for the 20% of Heritage it acquired in January 2018 had it been aware of the Disputed Payments. iii)The range of relief available in response to a petition for unfair prejudice is very broad and includes a power to order Albion to compensate EIGL for its losses, and there is a realistic prospect of such an order being made. iv)It is seriously arguable that the amount of such compensation in this case equals or exceeds the amount of Albion’s claim. v)The unfair prejudice claim is sufficiently closely connected with Albion’s claim to meet the test of equitable set-off. 58.Before considering these steps in turn, it is necessary to say something about the unfair prejudice jurisdiction invoked by EIGL. Relief for unfair prejudice 59.The claim for unfair prejudice relied upon by EIGL is one which is available under the Companies (Jersey) Law 1991. Article 141 of the 1991 Law provides that a member of a company may apply to the court for an order under Article 143: “on the ground that the company’s affairs are being or have been conducted in a manner which is unfairly prejudicial to the interest of its members generally or of some part of its members (including at least the member)”. 60.Article 143 provides that if the court is satisfied that the application is well-founded, “it may make such order as it thinks fit for giving relief in respect of the matters complained of”. Without prejudice to the generality of that power, Article 143(2) gives illustrations of the orders the court may make. These included powers to: “(c) authorise civil proceedings to be brought in the name and on behalf of the company by such person or persons and on such terms as the court may direct; and (d) provide for the purchase of the rights of any members of the company by other members or the company itself and, in the case of a purchase by the company itself, the reduction of the company’s capital accounts accordingly”. 61.As the parties acknowledged, the terms of Articles 141 and 143 are substantially identical to those of ss.994 and 996 Companies Act 2006, and neither party suggested that there was any material difference between Jersey and English law so far as the issue was concerned. The Disputed Payments involved mismanagement of Heritage “on behalf of Albion” and Albion’s “failure to disclose what had occurred” 62.As I have explained above, I am willing to assume for the purposes of this application that the Disputed Payments involved breaches of duty by those involved in authorising or receiving them. I am also willing to assume that Mr Buckingham (in his position as a consultant to Heritage under the Advisory Agreement), and Mr Atherton, were in a position to exercise significant influence over Heritage’s management. While these matters are hotly disputed, they are issues of fact which are not susceptible to summary determination. 63.The issue of why the conduct of Mr Buckingham and/or Mr Atherton, if established, would give rise to a claim against Albion as the 20% shareholder in Heritage received little attention at the hearing. Mr Buckingham was the beneficial owner of Albion, and Mr Atherton was the director Albion had nominated to the Heritage board. However, it was not suggested that Mr Atherton’s position on the board was used to effect the Disputed Payments. 64.The issue of attribution of wrongdoing in the unfair prejudice context was considered by Sales J in F & C Alternative Investments (Holdings) Ltd v Barthelemy and another