EGGAR, FORRESTER OFFSHORE LIMITED AND ANOTHER v. HONG KONG UNITED DOCKYARDS LIMITED

1985, C.L. 64

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The plaintiffs ("Eggar Forrester") are international shipping brokers operating out of London. They bring the present proceedings for recovery of commission on behalf of themselves and Energy Drilling Incorporated ("E.D. I"), a Bermudan company owned by Mr Christian Kongsli ("Mr Kongsli"), a Norwegian national, based in Oslo and London, who performs an entrepreneurial role, arranging business deals related to offshore oil-drilling.

2. Nothing turned at the hearing before me on any distinction between the 1st plaintiff and the 2nd plaintiff.

3. The defendant ("H.U.D. ") is a Hong Kong company operating a dockyard in Hong Kong for the building and repair of ships.

4. The commission at issue in the present proceedings is alleged to arise from the conversion by H.U.D. in 1981/82 at their dockyard in Hong Kong of the ore-carrier "Svano" into an oil-rig vessel which was re-named "Energy Searcher".

5. The story begins in or about early October 1980 which was a time when the offshore oil-exploration business was booming worldwide. Jacobs Tenvig Socomet Pte. Ltd. ("J.T. S."), a Singapore-based ship broking house, had a client interested in a two or three year charter of a drillship for oil exploration off the Australian coast. The employee handling that business for J.T.S. was Mr Liverton. Drillships were in short supply at that time. Mr Liverton from Singapore phoned and/or telexed Mr Henley, an employee of Eggar Forrester, in London, to see whether Eggar Forrester might have a client with a drillship suitable for meeting the charter requirements of Mr Liverton's client. Because of the scarcity of drillships then, Eggar Forrester could not come up with anything.

6. Then, Mr Liverton had an idea. If drillships were so difficult to get, why not try to get around the problem by converting an existing vessel into a drillship? That would be far quicker than building a new ship from scratch. Mr Liverton was aware that H.U.D. had converted an ore-carrier called "the Tainaron" into the drillship "Regional Endeavour" in 1975. It was reasoned by Mr Liverton that, if a sistership of the ore-carrier previously converted by H.U.D. could be located, then H.U.D., using its Tainaron plans and know-how, should be able to do a similar conversion quicker than any other shipyard.

7. Through Mr Barnard, an employee with the Swire Group of Companies, which is part-owner of H.U.D., Mr Liverton enquired from H.U.D. whether it would be interested in doing another "Tainaron"-type conversion. That enquiry was made on or about the 9th October 1980. At or about the same time, Mr Liverton explained his idea to Mr Henley. Mr Henley agreed to try to find someone interested in purchasing a vessel for this conversion, and also he agreed to try to find the necessary vessel. The attraction to Eggar Forrester in all this was the commission which might come their way from the purchase of the vessel and its subsequent chartering.

8. Mr Henley approached Mr Kongsli on the subject. With great energy and entrepreneurial skill, Mr Kongsli set about turning Mr Liverton's idea into a practical business proposition. Mr Kongsli's scheme was to buy a ship; buy a drill rig; have the conversion done; and then charter out the converted vessel. Orchestrating the various elements so as to ensure that there was both a hull and a drill rig, as well as employment for the vessel at the end of the conversion, presented formidable difficulties. What made it worthwhile for Mr Kongsli was the prospect of commissions at every turn. He looked for commissions on the purchase of the ship, the purchase of the drill rig, the conversion at the shipyard, and for the chartering at the end.

9. The vehicle to be used by Mr Kongsli for implementing his scheme was his company E.D.I. or its nominee. What he envisioned was that E.D.I. or its nominee would enter into what is known as a "turnkey" contract with the dockyard which carried out the conversion work. Under this "turnkey" concept, the dockyard would not only carry out the conversion work, but it would also buy the hull, drill rig and other necessary equipment, as well as assuming responsibility for all other extras such as the cost of sea trials, insurance, supervision, financing costs and commissions. When quoting for this conversion, the dockyard would also include all the other items I have just referred to in its price.

10. As part of Mr Kongsli's scheme, it was contemplated, needless to say, that, in due course, E.D.I. or its nominee would need to put the dockyard in funds for the purchase of the hull, drill rig etc., as well as paying for the conversion. The great advantage to Mr Kongsli/E.D.I. in this "turnkey" arrangement was that it gave rise to a neat "package" which could be presented to banks or prospective investors. Such bankers or prospective investors could immediately see the total amount of money they needed to lay out for a drillship which would have reached the stage where all that needed to be done was turn the key and drive away in the ship ready to drill for oil.

11. From the outset, H.U.D. showed itself as keen to get the contract for the drill ship conversion. The first quotation it gave for doing the conversion work was in the sum of HK$140,000,000. That was a "ball park" figure, meaning a very rough estimate. At that stage, H.U.D. did not know the actual vessel to be converted. Neither had H.U.D. been made aware at that stage of E.D.I. 's wish to proceed on a "turnkey" basis.

12. It was on or about the 17th October 1980 that H.U.D. learned of E.D.I. 's "turnkey" proposal. (See Agreed Bundle C page 24) From that point onwards until the signing of a Letter of Intent ("the Letter of Intent") on the 17th December 1980, H.U.D. manifested its willingness to carry out the conversion for E.D.I. or its nominees on a "turnkey" basis.

13. The evidence as a whole makes it abundantly clear that, as at the 17th December 1980 when H.U.D. signed the Letter of Intent, all the interested parties including Eggar Forrester, Mr Kongsli and E.D.I. contemplated that, over and above the actual conversion work, H.U.D. would undertake responsibility to E.D.I. or its nominee only for such additional items as happened to be specified in the actual "package" in due course to be worked out between H.U.D. and E.D.I. or its nominee. If, for example, H.U.D. and E.D.I. or its nominee were to specify that, say, mud ballast or a particular type of mooring or a particular piece of drilling equipment was to be part of the "package", then H.U.D. would assume responsibility to supply it as part of the "package" E.D.I. or its nominee was buying. There is nothing to suggest that, in principle, broker's commission was to be treated differently from any other extra in the "package". If, in due course, E.D.I. or its nominee did not want to include a particular extra in its "package" - whether, for example, mooring equipment, drilling equipment or brokerage - H.U.D. would undertake no responsibility for that item.

14. The Letter of Intent and the quotation of 28th November 1980 on which it is based, leave no room for doubt that H.U.D. need supply E.D.I. or its nominee only with the actual goods or services to be agreed between E.D.I. or its nominee and H.U.D. as forming their "package". There is not only the whole course of dealing amongst all the interested parties to show that no one ever contemplated H.U.D. would assume responsibility to E.D.I. or its nominee for items not particularized in the "package" agreed between them, but there is also Note 4 (at page 112 of Agreed Bundle C ) of H.U.D. 's quotation, dated 28th November 1980, to put the position virtually beyond argument. That provision reads:-

"4.         Except for the conversion section, provisions given are as indicated by yourselves, your agents or drill package co-ordinators, it is not our intention either to profit or lose from elements other than the conversion section and whilst we feel that certain of these provisions are high, we have not had sufficient time to discuss or negotiate them. "

15. Unless E.D.I. or its nominee agreed to include commission (or mud ballast etc. ) as part of the "package" it was buying, H.U.D. undertook no responsibility in respect of that item.

16. Up until the 4th November 1980, the negotiations on behalf of H.U.D. were conducted by J.T.S. On the evidence before the court, there was no basis on which either Eggar Forrester or E.D.I. could even begin to argue that,at or before 4th November 1980, H.U.D. had agreed to pay them commission. What had happened prior to that date was that Eggar Forrester, acting on behalf of E.D.I. /Mr Kongsli, had located the "Svano", a sistership of the "Tainaron", and made arrangements on behalf of Mr Kongsli/E.D.I. to purchase it for U. S. $ 2.8 m. As the ship was under charter at the time Eggar Forrester located it, Eggar Forrester had to put in a lot of work to get the vessel released from its charter so that E.D.I. /Mr Kongsli could purchase it from its owners for the purpose of the proposed conversion to a drillship. All of Eggar Forrester's efforts in procuring that vessel were carried out for E.D.I. /Mr Kongsli alone, and counsel for the plaintiffs did not seek to argue to the contrary. The reward for Eggar Forrester's efforts was to be the commission it earned on the purchase of the vessel and the commission it hoped to earn from re-chartering after conversion to a drill ship.

17. A peculiar feature of the relationship between Eggar Forrester and E.D.I. /Mr Kongsli was that E.D.I. /Mr Kongsli was to have a share of the commission earned on this purchase and rechartering. Such a commission is known as an "address" commission. For the sake of doing business with E.D.I. /Mr Kongsli, Eggar Forrester was prepared to share its commission with E.D.I. /Mr Kongsli in this way.

18. Besides arranging for the purchase of the “Svano", Eggar Forrester had also generally been busy on behalf of Mr Kongsli/E.D.I. in helping them with the venture of arranging a "turnkey package" in respect of this vessel. As at the date I am speaking of, namely 4th November 1980, all of Eggar Forrester's efforts had been directed solely to assisting E.D.I. /Mr Kongsli.

19. On 4th November 1980, J.T.S. ceased to play an active role in the drillship conversion project. J.T.S. felt there was nothing further it could usefully do at that stage. By a telex dated 4th November 1980 to Eggar Forrester, copied to H. U. D., Mr Liverton of J.T.S. announced that J.T.S. would be taking no further part for the time being and went on to say, "The subject of commission was raised and it was agreed that my request for 1% be noted and be negotiated at appropriate time". That request by J.T.S. to be considered for commission avails Eggar Forrester and E.D.I. /Mr Kongsli nothing. J.T.S. had been working on H.U.D. 's behalf at arm's length from Eggar Forrester and E.D.I. /Mr Kongsli in the ship conversion negotiations. The reference by Mr Liverton to commission in that telex was obviously addressed to H.U.D. which it had introduced to a potential ship conversion contract.

20. At the same time as J.T.S. dropped out of the picture, Ship Repairs and Ship Builders Limited ("S.R.S. "), H.U.D. 's London agents for ship repair and ship building services, took over from J.T.S. to look after H.U.D. 's interests in the negotiations with E.D.I. /Mr Kongsli. How S.R.S. were to intervene on H.U.D. 's behalf can be seen from the telex of 4th November 1980, already referred to. The relevant passage reads:-

"AA)         Ian Morrison of S.R.S. should become "coordinator" in London, as majority of interested parties based in U.K. This will save time and money and avoid possible misunderstandings. "

21. A series of meetings occurred in Eggar Forrester's London office on the 6th, 12th, 18th and 19th of November 1980, at which representatives of Eggar Forrester, E. D. I., H.U.D. and the suppliers of the drill pack were present. Those meetings were for the purpose of thrashing out technical details of how the "Svano" might be converted into a drillship by H.U.D. No doubt, both Eggar Forrester and E.D.I. /Mr Kongsli put in a lot of efforts at those meetings, but that was solely for their own benefit. They were totally at arm's length from H.U.D. at that stage. True, Eggar Forrester were the only brokers involved at that stage, J.T.S. having '. withdrawn. This was pointed out to me on Eggar Forrester's behalf as if it might have some significance in entitling Eggar Forrester to commission from H.U.D. I think I was being invited to proceed on the basis that every party to a ship conversion contract should have a broker to whom it is liable for commission. Such a proposition obviously does not stand up to examination. Any benefit conferred on H.U.D. by Eggar Forrester, E.D.I. or Mr Kongsli at any of those meetings was purely incidental to the benefit that Eggar Forrester's clients, E.D.I. and Mr Kongsli, were seeking for themselves. Eggar Forrester were at the meetings to promote the interests of E.D.I. /Mr Kongsli, not the interests of H.U.D.

22. At that stage, Eggar Forrester's incentive was the commissions it hoped to earn on the purchase of the "Svano" and it's rechartering after conversion, E.D.I. /Mr Kongsli's incentive was the "address commission" recovered from Eggar Forrester plus such other commissions as they had been able to secure on, for example, the drill package.

23. It was suggested on behalf of Eggar Forrester that after J.T.S. dropped out of the picture Eggar Forrester then. acted as "lead broker" or assumed a "middle broking role". Those expressions are, in my view, no more than jargon which serve to confuse, rather than shed useful light on the issue of whether H.U.D. is liable to pay the plaintiffs commission. The court has to concern itself with what actually happened.

24. By a telex dated 21st November 1980 (Bundle C page 94), Eggar Forrester, acting on behalf of E. D. I., formally invited H.U.D. to give a "turnkey" quotation for the fully completed drillship. Instead of asking merely for a global figure to cover the whole project, Eggar Forrester requested that the prices of the various elements should be itemized.

25. When Mr Robinson, the Managing Director of Eggar Forrester, which was acting for E.D.I. /Mr Kongsli, met Mr Morrison of S.R.S., who was acting for H.U.D., for lunch on the 24th November 1980, Mr Robinson indicated that the figure to be included in H.U.D. 's quotation in respect of commission was U. S. $1,000,000. It is clear that all involved at the time knew that that U.S. $1,000,000 for commission was to be shared amongst Eggar Forrester, E.D.I. (and probably J.T.S. ). That U.S. $1,000,000 for commission was duly included as an extra under the description "brokerage fees" in the telexed quotation made by H.U.D. on the 28th November 1980 (Agreed Bundle C page 108).

26. At the time of Mr Robinson's lunch with Mr Morrison on 24th November 1980, it is abundantly clear that Eggar Forrester was acting solely on behalf of E.D.I. /Mr Kongsli, and in no way represented H.U.D. Up till then, Eggar Forrester had treated H.U.D. in an unambiguously arm's length way. However, at that lunch on the 24th November 1980, there was a subtle shift in Eggar Forrester stance from having been in an arm's length relationship with H.U.D. Eggar Forrester now sought to give H.U.D. the impression that it was really on H.U.D. 's side and wanted to get the conversion contract for H.U.D.

27. One reason Mr Robinson on behalf of Eggar Forrester inclined to show favour to H.U.D. was his good personal relations with the Swine family which, in part, own H.U.D. I do not know to what extent, if any, for Robinson's friendship with the Swine family influenced his dealings with H.U.D. At that stage, his first and only duty was to E.D.I. / Mr Kongsli for whom Eggar Forrester were acting.

28. A, no doubt, far more potent influence on Mr Robinson in his dealings with Mr Morrison at that lunch was the spectre of a situation in which H.U.D. might carry out the conversion of the "Svano" for a party other than E.D.I. or its nominee. Then, Egger Forrester might finish up out in the cold with nothing. In an endeavour to guard against that contingency, Mr Robinson suggested that Eggar Forrester should have the exclusive right to represent H.U.D. in selling the conversion idea in the event of E.D.I. or its nominee failing to come up with the necessary cash to bring the conversion to fruition. Eggar Forrester were not being disloyal to E.D.I. /Mr Kongsli in suggesting this to H.U.D. Egger Forrester made it clear to H.U.D. that commissions payable in this contingent situation would still be shared with E.D.I. /Mr Kongsli. This would not have been on account of any altruism on Eggar Forrester's part, but E.D.I. /Mr Kongsli's co-operation would still be necessary for practical reasons such as, for example, their owning options or, the "Svano" and on the drill pack. Mr Kongsli was indispensable to the project.

29. Trying to create a situation where Eggar Forrester would get commission in the event of the conversion. being done for an owner other than E.D.I. or its nominee became a principal concern of Mr Robinson. Mr Morrison's telex of 25th November 1980 (at page 99A of Bundle C) describes Mr Robinson pursuing that quest. How Mr Robinson persevered with this theme will be seen in due course when reference is made to a meeting in London on 9th December 1980 at Eggar Forrester's office between Mr Robinson and Mr Hall, the Managing Director of H.U.D.

30. As I have already indicated, H.U.D. duly gave its quotation on 28th November 1980, showing brokerage fees of U. S. $ 1,000,000 as an extra.

31. The form and context of that quotation makes it clear, in my view, that H.U.D. were merely offering that if E.D.I. or its nominee were prepared to enter into a contract with H.U.D. under which E.D.I. or its nominee agreed to pay for any of the items in the quotation, ranging from the hull (2A) to insurance (1B) or brokerage fees (5C), then H.U.D. would undertake to pay the third parties for those services or goods. Conversely, if E.D.I. or its nominee, in due course, chose, when contracting with. H. U. D., to omit any item included in the quotation, then, obviously, H.U.D. would not have to pay out for it. For example, if the item "Cranes" at U. S. $554,098 were omitted from the contract, despite appearing in the quotation as 3B, then H.U.D. would have no obligation to third parties to pay for it. Nor, of course, would E.D.I. or its nominee, in such circumstances, have any entitlement to insist that such item should be supplied. By parity of reasoning, the same applies to brokerage fees.

32. Looking at the position on the 2nd December 1980, one still sees Eggar Forrester and E.D.I. /Mr Kongsli acting at arm's length from H.G.D. At that date, Eggar, Forrester and Mr Kongsli were negotiating to place the conversion with a shipyard other than H.U.D. (see Bundle C page 119), a situation hardly consistent with Eggar Forrester representing H.U.D.

33. Already, reference has been made to a meeting on the 9th December 1980 between Mr Robinson and Mr Hall at which commission was discussed. In his evidence before me, Mr Robinson conceded, in effect, that nothing had been agreed between Eggar Forrester and H.U.D. as to any payment of commission by H.U.D. to Eggar Forrester (and E.D.I. /Mr Kongsli) at that stage:-

"At that stage - 9th December - nothing re commission, there was no firm position as far as I was concerned, but we had established a line of communication with the shipyard. My memory hazy of that time but I did have a discussion with Hall who noted he agreed to cover for commission and that is what I recall. "

34. Nothing occurred at that meeting which in any way advances the claim to commission which Eggar Forrester and E.D.I. now make against H.U.D. Mr Robinson limited himself to pursuing the theme of what commission Eggar Forrester and E.D.I. /Mr Kongsli could hope for in the event of H.U.D. converting the "Svano" for an owner other than E.D.I. or its nominee. Mr Robinson had only a vague recollection of the conversation and I accept Mr Hall's version of it. That version was that if H.U.D. were to carry out the conversion for a party other than E.D.I. or its nominee, then H.U.D. would pay some commission to Eggar Forrester for sharing with E.D.I. and another, provided that, either Eggar Forrester introduced the new customer, or, if H.U.D. found its own customer, then at least Eggar Forrester procured the "Svano" for the new customer. Mr Robinson wanted Mr Hall to agree to a specific figure of $450,000 for that commission, but Mr Hall refused to agree any specific figure.

35. Shortly after that conversation, Mr Hall made a brief note of it for H.U.D. 's internal purposes. That note reads:

"Robinson asked if we would cover him for U. S. $419,000 commission if we worked on "Svano' for our other customers. This was to cover Eggar Forrester, Energy Drilling and an unnamed third party. I agreed in principle to cover Eggar Forrester, but specifically refused this amount or to name any amount. "

That note was a brief aide-memoire of the conversation, and I accept Mr Hall's enlargement of what was said. I think probably the figure mentioned by Mr Robinson was U. S. $450,000, and there is a slip in that note when it refers to U. S. $419,000.

36. I am satisfied that conversation between Mr Robinson and Mr Hall related solely to the contingency about the "Svano" being converted for a party other than E.D.I. or its nominee. There was nothing about that conversation to suggest that H.U.D. was undertaking to pay Eggar Forrester and/or E.D.I. commission in any event.

37. At this point, some comment is necessary on the slightly self-pitying note sounded by Eggar Forrester and E.D.I. /Mr Kongsli in relation to how hard it would be on them if, after all the work they had put in, the conversion were to be carried out for someone other than E.D.I. or its nominee. Two points can be made on that. One is that Eggar Forrester and E.D.I. were acting out of purely self interest in pursuing business which might or might not materialize. All along Eggar Forrester and E.D.I. must have known that the deal might fall through, and they would get nothing. On the other hand, if the deal or parts of it held together, they would get the appropriate commissions to which they were entitled. For example, if the purchase of the "Svano" went through (as it did), they would get commission on that. The second point which needs making is that Eggar Forrester did little, if any, more than one would expect of a broker in any purchase and re-chartering venture. Needless to say, Eggar Forrester could look forward to its commissions on the purchase and the re-chartering in the usual way. Mr Kongsli was the man who put in an extraordinary amount of work, but, of course, he was also hoping to reap an extraordinary number of commissions. Whatever Eggar Forrester or E.D.I. / Mr Kongsli did was for their own benefit; any benefit to H.U.D. was incidental.

38. The final negotiations leading up to the Letter of Intent took place in Hong Kong on the 16th and 17th December 1980 between Mr Kongsli for E.D.I. and its nominee, and Mr Hall for H.U.D. Mr Robinson flew out to Hong Kong for the occasion, but took no part in the negotiations. He was not there to protect the interests of H.U.D., but to look to the interests of Eggar Forrester itself (and also of Hr Kongsli/E.D.I. ) on the commissions arising from the purchase of the "Svano" and the ultimate re-chartering.

39. In the course of those negotiations between Mr Kongsli and Mr Hall, they agreed that the figure for brokerage fees under Item 5C of H.U.D. 's quotation of the 28th November 1980 should be reduced from $1,000,000 to $450,000 on H.U.D. 's insistence.

40. If H.U.D. was not agreeing to be liable to the brokers in any event for their commission, rather than merely collecting the money from E.D.I. or its nominee for passing on to the brokers, why would H.U.D. take the trouble of getting the commission reduced? The answer to that is plain on the evidence as a whole. H.U.D. would only get the conversion work if a viable "package" with a reasonable price tag was on offer. H.U.D. wanted to see the price of everything (except its own conversion work) kept to a minimum in the "package", so that the final price tag would be attractive to a potential purchaser.

41. How the precise figure of U.S. $450,000 for brokerage fees was arrived at formed the subject of some controversy during the trial. According to Mr Kongsli, he made it clear to Mr Hall that the figure was worked out on the basis of 2% of the hull conversion cost which was $22.5 m. Mr Hall disputed that he was made aware that the brokerage fee was calculated on the basis of a percentage of the hull conversion. Where there was a conflict between the evidence of Mr Kongsli and Mr Hall, I preferred the evidence of Mr Hall. It might well be that, in his own mind, Mr Kongsli did a calculation basing the brokerage fees on 2% of the hull conversion cost, but I do not think he made his method of calculation explicit to Mr Hall.

42. In any event, ever if Mr Kongsli had told Mr Hall that he was working out the brokerage fees on the basis of 2% of the hull conversion cost, I frankly do not see how that advances the plaintiffs' case about H.U.D. undertaking liability to them to pay commission.

43. Much attention was devoted at the trial to some enigmatic jottings by Mr Morrison on a telex dated 24th November 1980 (Bundle C page 98). Those jottings, insofar as legible, read:-

"Energy Drilling asked if commission $1,000,000 for cover all brokers commission ex S.R.S. Lump sum price this week. Negotiable. "Svano” purchased, fuel, supervision. ...... "

and

"$1,000,000 commission. 2% commission only on conversion costs. Energy Drilling. 2% Eggar Forrester and Singapore (meaning J.T.S. ) Energy Drilling. "

Mr Morrison was not available for cross-examination on what those jottings meant but, even if he had been, I very much doubt whether they would have had any material bearing on the case.

44. I think the percentage correlation between $450,000 and $22.5 m. is no more than a red herring, and the plaintiffs are clutching at straws.

45. Before agreeing with Mr Hall that the figure to be shown for brokerage fees in the Letter of Intent should be $450,000, Mr Kongsli consulted with Mr Robinson - a neutral circumstance in my view.

46. The Letter of Intent (Bundle C pages 159 to 161) was duly signed on the 17th December by Mr Kongsli on behalf of E.D.I. or its nominee and Mr Hall on behalf of H. U. D., with Mr Robinson in attendance as an observer. As in H.U.D. 's quotation of the 28th November 1980, brokerage fees in the Letter of intent were shown as an extra.

47. From the way in which the case was presented on both sides, it was common ground the agreement, if any, between the parties, for the payment of commission, came into existence either on the signing of that Letter of Intent or earlier. What happened subsequent to the 17th December 1980 is of interest only (1) as evidence reflecting on what was agreed at or before the 17th December 1980 and (2) to show whether the event occurred on which the plaintiffs are entitled to claim the commission they say is due to them. What then was the event on which the plaintiffs were to become entitled to commission, and did that event occur? That is really the crucial question in this case.

48. The way things turned out, Mr Robinson need never have worried himself about the contingency of H.U.D. converting the "Svano" for someone other than E.D.I. or its nominee. Under a contract dated 1st October 1981, H.U.D. did the conversion for Pacific Supplier Inc. (P.S.I. ) which I find, was E.D.I. 's nominee.

49. At one stage in the case, there was an issue about whether P.S.I. was E.D.I. 's nominee, as the plaintiffs contended, but counsel for the defence sensibly allowed that issue to fade. It would be unproductive of me to go through the history of the shareholding in P.S.I. Suffice it to say that, from owning all the shares in P.S.I., E.D.I. whittled down its holding to 5%, and P.S.I. was clearly E.D.I. 's nominee for the purposes of the Letter of Intent.

50. The contract signed on the 1st October 1980 between E.D.I. 's nominee, P.S.I. and H.U.D. -for the conversion of the "Svano" included no reference to brokerage. That contract was based on H.U.D. 's quotation of the 31st August 1981 (Bundle C pages 296 to 314). That quotation, for the sum of U. S. $29,450,000, was made by reference to Addendum No. 3 (dated 26th May 1981) to the Letter of Intent. Addendum No. 3 showed a dockyard conversion cost of U. S. $23,100,000 plus other costs, one of which was brokerage in the sum $450,000. The quotation of 31st August 1981 explained in detail the basis on which the conversion cost had been increased from $23.1 m. in Addendum No. 3 to $29.45 m. in the quotation of 31st August 1981. A perusal of the quotation dated 31st August 1981, particularly paragraph 12, makes it clear that the item of commission previously included in Addendum No. 3 has now been omitted.

51. P.S.I., through their major shareholder, Offshore Oil N.L. (Australia Ltd.), ("Offshore oil") were well aware at all material times that commission was one of the items which could be included in a "package" for the conversion of the "Svano". The documents before the court consistently show that Offshore Oil had considerable reservations about including commissions for E.D.I. in the project costs. (See e.g. Bundle C pages 283, 292, 323).

52. I did not accept Mr Kongsli's evidence (contradicted by Mr Hall) that, at a meeting in Hong Kong in or about September 1981, Mr Hall, in effect, assured Mr Kongsli that H.U.D. would ensure that commission was collected from P.S.I. and paid to the brokers. I am satisfied Mr Hall did not give any such assurance anywhere at any time.

53. P.S.I. saw fit not to include any element for commission in the contract dated 1st October 1981, which was based on H.U.D. 's quotation of 31st August 1981. H.U.D., which would have been no better off, nor any worse off, for including $450,000 in its quotation for passing on to Eggar Forrester for the benefit of, inter alia, E. D. I., did not require this item to be included in the contract of 1st October 1981. On behalf of the plaintiffs it is suggested that Offshore Oil would, if pressed by H. U. D., have seen to it that P.S.I. made provision for U. S. $450,000 as commission for the plaintiffs in the contract of 1st October 1981. In my view, the evidence, on balance, suggests quite the opposite.

54. The plaintiffs say, in effect, that, with the signing of the contract dated 1st October 1981 between P.S.I. and H.U.D., the event has occurred which earns them their commission. In my view, the signing of the contract of the 1st October 1981 in the form it took does not entitle the plaintiffs to claim any commission from H.U.D. The background of the case leaves me in no doubt that the only circumstance in which the plaintiffs could claim commission from H.U.D. would be if H.U.D. had entered into a contract with P.S.I. where the contract included an item for commission in the way the contract price was calculated. Considering the background of this case, and in particular how the "package" concept was developed, I am satisfied that it was never in the contemplation of any of the parties that H.U.D. would have to pay commissions to the plaintiffs unless that commission was included as an item in the "package" sold by H.U.D. to E.D.I. or its nominee (i.e. P.S.I. ).

55. Counsel for the plaintiffs urges me to avoid an academic-type exercise of looking for offer and acceptance, but instead urges I should concentrate on "the fact of agreement", remembering that the court is dealing with businessmen. Moreover, he submitted that the court should apply objective standards in determining the meaning of documents and conversations, rather than being guided by what witnesses said they meant. I agree with all of that, so have approached the case accordingly.

56. On the facts as a whole, as I have outlined them, I am unable to discern anything in the nature of an express agreement by H.U.D. to pay the plaintiffs any commission in the circumstances which have occurred. The next question is whether there might be some form of implied agreement. Here, the "officious bystander" gets pressed into service. If that rather unloveable figure had been hovering around, listening in on all the conversations and reading all the documents, is it likely that he would have said, "Oh yes, of course, if E.D.I. 's nominee, P. S. I., signs a contract for the conversion without including $450,000 for commission in the calculation of the price, then H.U.D. still has to pay that $450,000 to Eggar Forrester for the benefit of Eggar Forrester, E.D.I. etc. ?" I do not think for one moment that the "officious bystander's would come to that conclusion. In any event, the officious bystander only has a role to play when it is necessary to imply a term for the purpose of giving business efficacy to an agreement. A term is not implied merely because the courts think it might be reasonable to imply a term (See, e.g. Vogel v Kohnstamm Ltd ⁽¹⁾. The "officious bystander" would point to the fact that no problem need ever arise and full business efficacy is achieved if E.D.I. keeps the conversion contract for itself, or at least appoints a nominee which will do E.D.I. ’s bidding.

57. For the avoidance of any misunderstanding, I wish it to go on record that this judgment is in no way concerned with any dispute as to commission between Eggar Forrester and E.D.I. /Mr Kongsli. No such issue was before the court, so the court has simply not had cause to address its mind to it.

58. It was suggested on behalf of Eggar Forrester that H.U.D. was, somehow, under an obligation to it to include $150,000 for Eggar Forrester's commission in the conversion contract signed with P.S.I. Breach of that obligation is alleged to entitle Eggar Forrester to U. S. $150,000 damages. If I might say so, that claim on Eggar Forrester's behalf is somewhat in the nature of a plank in the storm, and I fail to see any basis on which H.U.D. is under an obligation to Eggar Forrester in the way suggested. Certainly, there is no express agreement by H.U.D. to pay U. S. $150,000 to Eggar Forrester,and an arrangement whereby H.U.D. only has to make onward payment to third parties of sums included in a "package" for the benefit of such third parties is by no means characterised by a lack of business efficacy, in my view.

59. Another basis on which the plaintiffs attempted to formulate their claim was trade usage or custom. The only positive evidence on this was from Mr Robinson. While generally I regarded Mr Robinson as an honest witness, I could not see my way to attaching any weight to what he said about alleged customs or usages. Although he is no longer employed by Eggar Forrester, his approach to this case was obviously partisan, and he lacked the detachment necessary for an expert witness to gain credibility on matters which relate to opinion and experience. He was put in an invidious position, giving evidence both on the general issue, and on the aspect of custom or usage. Any court is bound to look askance at the expert testimony of a witness who purports to describe a custom and then goes on to say that his company has a claim falling precisely within that custom.

60. In any event, Mr Robinson's evidence on trade custom and usage was somewhat vague, and I found the hearsay statement of Mr Jerry Koh Joo Meng, the Assistant General Manager (Commercial) of the Sembawang Shipyard Ltd., more convincing. His evidence was to the effect that ship conversions are comparatively rare, "one-off" jobs, and there is no custom of the trade for. paying brokerage commissions in such circumstances.

61. To establish trade custom or usage, the plaintiffs must show it is notorious, certain and reasonable. I am not satisfied that the plaintiffs have even proved a custom or usage which is notorious, certain and reasonable to pay brokerage generally on conversions, and I think the alleged custom or usage is even less notorious, certain and reasonable when the conversion has its origin in a letter of intent contemplating a "package" under a "turnkey" project. I would have thought the situation between the parties so rare that there would simply not have been the opportunity for customs and usages to develop.

62. The only case drawn to my attention on the issue of liability was F.W. Chambers & Co. Ltd. v Ardrossan Dry Dock & Shipbuilding Company Ltd.⁽²⁾ That was concerned with whether, on its own peculiar facts, brokers were the effective cause of business being introduced to a shipyard - an issue which did not arise in the case before me.

63. Padded out with pleadings together with voluminous further and better particulars, and with a sprinkling of trade jargon such as "middle-broking role", or "lead-broker", and legal jargon like "estoppel", the plaintiffs' claim at first sight might appear to have a measure of plausibility, but, on closer scrutiny, the true position is that the plaintiffs are trying to make bricks without straw. The plaintiffs' claim fails in its entirety, and I give judgment for H.U.D.

(1) [1973] 1 Q.B. 133, 144

(2) 28 L1. L.R. 255