Heritage Oil And Gas Ltd & Anor v Tullow Uganda Ltd
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
- LORD JUSTICE RIMER
- LADY JUSTICE GLOSTER
Areas of Law
- Contract Law
- Commercial Law
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
AI Generated Summary
The appeal dealt with the obligation of Heritage to indemnify Tullow for tax payments under their SPA. The court ruled that notifying under Article 7.5(a) was not a condition precedent to indemnity, and clause 3.1(a) of the Supplemental Agreement did not prevail over the SPA's provisions. It also adjusted the indemnity amount in a Second Agency Notice due to discrepancies. Lady Justice Gloster and Lord Justice Rimer concurred with the decision.
Lord Justice Beatson :
I. Introduction
This appeal concerns a right to indemnity in a Sale and Purchase Agreement (“the SPA”) dated 26 January 2010 between the first appellant, Heritage Oil and Gas Ltd (“Heritage”), now a Mauritian company, and the respondent, Tullow Uganda Ltd (“Tullow”), varied by a Supplemental Agreement dated 26 July 2010 (“the Supplemental Agreement”). Heritage agreed to sell its rights in two petroleum exploration areas in Uganda to Tullow. The question for decision is whether Article 7.2 of the SPA entitled Tullow to be indemnified by Heritage for a payment of US$313,447,500 it made to the Government of Uganda (“the Government”) on 7 April 2011 in respect of what the Government contended was Heritage’s tax liability from the transaction.
Article 7.2 of the SPA gives Tullow a right to an indemnity in respect of capital gains tax imposed on Heritage but charged to Tullow by the Government. Article 7.5(a) requires the “indemnified party” to give notice of the tax claim to the indemnifying party within 20 business days. Article 7.5(b) requires the indemnified party to take such action as the indemnifying party may reasonably request to dispute and defend the tax claim, including providing to the indemnifying party such records and information as are reasonably relevant and are reasonably requested by the indemnifying party. Article 7.6, however, provides that the indemnified party is not required to take any action requested unless it is properly indemnified against losses and costs, or where, in the indemnified party’s reasonable opinion, the action is likely to affect adversely either its future liability or its business or financial interests. These provisions are set out in paragraph 4 of the Appendix to this judgment, which contains the material parts of the SPA and other contractual documents. The other contractual documents summarised are the Supplemental Agreement and the Memorandum of Understanding between the Uganda Revenue Authority and Tullow entered into on 15 March 2011.
Heritage pleaded nine defences to Tullow’s claim for indemnity. These fall into four broad categories which can be summarised as follows. First, the mechanism under which Tullow was made liable to make the payment to the Government was not within Article 7.2 because it was an “execution remedy”. Secondly, in any event Tullow had not satisfied the notice requirement in Article 7.5(a) of the SPA, which Heritage maintained was a condition precedent to the