Bluewater Operations (UK) Ltd v Amerada Hess Ltd

Whether a later contractual instrument supersedes an existing provision depends on its particular purpose, scope and terms. General references to restructuring a contract, or provisions dealing with related subject matter, do not suffice. Where an agreement distinguishes between downtime while an FPSO remains on site and removal from the field, a later variation dealing with payment during shutdown does not override the removal provision without a clear indication. A non-legal and incomplete remuneration scheme may leave difficult inter-relationships unresolved. That difficulty does not itself establish that an existing clause was abrogated.

Bluewater Operations (UK) Ltd claimed fee and operating payments for the period during which an FPSO was removed from its North Sea field for dry-docking and repairs following a serious incident. The claim relied on variation no 9, relating to additional works for the Fergus field, and on April 1998 Heads of Agreement concerning a revised remuneration and incentive structure.

Thomas J dismissed the claim under CPR Part 24. The appeal concerned whether either instrument superseded clause 8.3 of the original agreement, which dealt with payment during removal of the FPSO from the field until its reinstatement.

Lord Justice Mance delivered the judgment of the court. Lord Justices Tuckey and Roch agreed.

1. Appeal dismissed. The construction of both variation no 9 and the Heads of Agreement was clear. Neither instrument overrode clause 8.3 of the original agreement.
2. Variation no 9. Clauses 3.3 and 3.4 concerned the remuneration provisions in Appendix II. They removed the additional-work rates from the operational-performance adjustment mechanism and made those rates payable despite shutdown associated with the additional works. They contained no clear indication that clause 8.3, a separate provision in the main agreement dealing with removal from the field, was being altered.
3. The original agreement treated downtime while the FPSO remained on site as distinct from removal from the field. The schemes were intended to be mutually exclusive, with pro-rating available to prevent double counting. Other provisions dealing with force majeure, suspension by the company and legislative changes reinforced that contractual structure.
4. Heads of Agreement. The document was a non-legal, rough-and-ready scheme directed principally to revised remuneration for production and downtime on site. Its silence concerning clause 8.3, the different periods used in its downtime provisions, and its failure to address the long periods normally associated with removal from the field indicated that it did not abrogate clause 8.3. Difficulties in reconciling the instruments did not require that conclusion.
5. The appeal was dismissed. The respondent received the costs of the appeal, subject to detailed assessment under the community legal aid scheme, with £25,000 payable on account. Leave to appeal was refused.

• Court of Appeal (Civil Division): The appeal was dismissed, with costs awarded to the respondent and leave to appeal refused.
• High Court of Justice, Queen’s Bench Division, Commercial Court: Thomas J dismissed the claim under CPR Part 24 on 30 November 1999.