Summary

Construction of a contract, for the provision of a floating production storage and offtake facility, in relation to payments made during the time when the facility was taken off-field for repair.

Facts

Appeal by the claimant from the judgment of Thomas J dismissing their claim in respect of five specimen invoices. The defendant ('AHL') had interests in various North Sea oil fields and contracted in 1994 with a sister company of the claimant, Bluewater Offshore Production Systems Ltd ('BOPS') that BOPS would provide AHL with a Floating Production, Storage and Offtake Facility ('FPSO'), a converted tanker. In April 1998, AHL and the claimant, to which BOPS had assigned its rights to payment, executed a document entitled "Heads of Agreement", which purported to take effect between AHL and BOPS and amended the terms of the original agreement. The Heads of Agreement was drafted by engineers and never formalised. In April 1999 there was a serious incident on the FPSO and it had to be taken away for repairs. The claimant invoiced AHL for the period during which the FPSO was away from the field; it contended that it was entitled to be paid whilst the FPSO was away from the field under the Heads of Agreement. AHL denied that the claimant was entitled to the payments claimed. The issues of construction raised were as follows. (i) The effect of clause 8.3 of the original agreement, which provided for "any tests, trials, repairs or inspections" other than those requested by AHL to be at the cost of BOPS. (ii) Whether the Heads of Agreement was subject to clause 8.3. AHL contended that clause 8.3 continued to apply after the execution of the Heads of Agreement and therefore no operating rate or facilities fee would be payable for the period that the FPSO was absent from the field during the period of the repairs, tests and inspections. They argued that the Heads of Agreement merely varied Appendix II (Schedule of Rates and Prices) to the original agreement. (iii) There was also a variation to the original contract in respect of extra works carried out so that the FPSO could be used for AHL's Fergus Field. The claimant appealed from the Thomas J's decision on issue (ii) and issue (iii). The claimant's case had two limbs. One was limited to the Fergus Field, and affected only two of the five invoices. It depended on the terms of variation 9 executed in July and September 1996. The other was general and potentially affected all five invoices. It derived from the terms of the Heads of Agreement. Each limb involved the submission that the parties agreed, for the purposes of variation 9 or the Heads of Agreement, to abrogate and supersede the provisions of clause 8.3 of the original agreement.

Held

(1) Clause 3.3 and clause 3.4 of variation 9 did not override clause 8.3 of the original agreement. Their relevant purpose and effect was to amend and replace provisions for payment otherwise contained in Appendix II of the original agreement. (2) The proper construction of the Heads of Agreement was clear. There was no abiguity and therefore no question of construction against AHL. (3) The judge reached the right conclusions in relation to both variation 9 and the Heads of Agreement. Clause 8.3 applied and therefore no facilities fees or operating rate were payable to the claimant.

Appeal dismissed.