Neutral Citation Number: [2004] EWHC 1612 (Comm)
Case No: 2003 FOLIO 872
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 20/07/2004

Before :

THE HONOURABLE. MR JUSTICE LANGLEY
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Between :

	(1) ENRON (THRACE) EXPLORATION AND PRODUCTION BV
(2) ECT EUROPE FINANCE INC.	
Claimants	
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	(1) ANN K CLAPP
(2) DAVID S CLAPP
(3) HARVEY R III CLAPP
(4) GUY O III DOVE	

Defendants	

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Mr M. Shankland (instructed by Messrs Weil, Gotshal & Manges) for the Claimants
Mr J. Machell (instructed by Messrs Peters & Peters) for the Defendants

Hearing dates: 10th and 14th June 2004
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Judgment

The Hon. Mr Justice Langley: 
The Applications.
1.	On 10 December 2003 the claimant companies (to which I shall refer as ETEP and ECT and collectively as Enron) entered default judgments against the first 3 defendants for the sum of $US 8,106,543.12 “for debt and interest to date of judgment”. The next day a default judgment for $US 8,110,128.82 on the same basis was entered against the fourth defendant. The difference in the figures is accounted for by interest. It should perhaps be noted that neither ETEP nor ECT is subject to any form of administration or liquidation.
2.	On 8 March 2004 the defendants applied to set aside the default judgments against them. Those are the primary applications to which this judgment relates. The defendants also sought a stay of these proceedings pending a yet to be commenced arbitration by Thrace Basin Natural Gas (Turkiye) Corporation (“TBNG”) against the claimants pursuant to an arbitration clause in a joint venture agreement between them.
3.	On 12 March 2004 the defendants and TBNG as plaintiffs commenced proceedings in the District Court of Harris County in Texas against Enron. Those proceedings were a response to Enron taking steps to enforce the default judgments in New Jersey. ECT has its principal place of business in Houston, Harris County. These Texan proceedings allege that Enron “had conspired together to defraud” the plaintiffs in Houston. Enron responded to the Texan proceedings by seeking an anti-suit injunction in this court against the defendants relying on jurisdiction clauses in the two main contractual agreements which give rise to the present disputes. The defendants’ application for a stay and Enron’s application for an anti-suit injunction are also addressed in this judgment. The two main agreements concerned are:
i)	A charge over shares dated 21 December 2000 made between Enron as chargees and the defendants as chargors to which I shall refer as “The Charge Agreement”. The shares charged were the defendants’ shares in TBNG (a company registered in the British Virgin Islands) but the key obligation in the present context is the covenant of each of the defendants to pay on demand certain “moneys and liabilities” due by TBNG to Enron under the second main agreement shortly described in the next sub-paragraph. It was this obligation on which Enron’s claim and the judgments were based.
ii)	An “Amended and Restated Joint Venture Agreement” dated 20 December 2000 made between TBNG and Enron to which I shall refer as “The JVA 2”. The JVA 2 addressed a joint venture for the potential exploitation of certain hydrocarbon licences owned by TBNG in an area near Tekirdag in the Republic of Turkey.
4.	Although the submissions to which these applications give rise have ranged over many matters and continued over 2 days and will require this judgment to set out the context at some length, I think the real questions and issues are essentially ones of construction of a limited number of clauses in The Charge Agreement and The JVA 2.
The Principles to be Applied
Default Judgment
5.	The defendants’ application to set aside the default judgments is made both as of right under CPR rule 13.2 and on the merits under CPR 13.3.
6.	The basis of the application under rule 13.2 is that time for service of the defence had not, so it is alleged, expired at the time the judgments were entered. The matters relied upon by the defendants are set out in paragraphs 9 and 10 of Mr Harvey Clapp’s first witness statement. Essentially it is there said that the Acknowledgements of Service filed by the defendants were defective for want of an address for service in England but the defendants believed they would be “accepted” until struck out and did not think default judgments could be entered without notice to them. It is suggested that there was in effect a general extension of time for service of a defence unless and until the Acknowledgments of Service were struck out.
7.	Mr Machell (for the Defendants) understandably did not seek to make submissions in support of Mr Clapp’s statement. The defendants took no steps to challenge the jurisdiction of this court (despite expressing an intention to do so) and I can see no reasonable basis on which the matters Mr Clapp relies upon could give rise to any belief or understanding that time for service of defences was extended at all let alone generally. The facts are accurately set out in section 8 of Mr Larizadeh’s 5th witness statement on behalf of the claimants in response. 
8.	The relevant test to be applied under CPR rule 13.3 is that the defendants must show “a real prospect of successfully defending the claim”. The issue was whether or not or to what extent the defendants could establish such a prospect.
Stay and Anti-Suit Injunction
9.	There is jurisdiction to stay the present claims pending an arbitration at least provided there are “exceptional and compelling circumstances” to justify doing so: Reichold Norway A.S.A. v Goldman Sachs [2000] 1 WLR 173. The defendants submit that good case management requires the issues to be decided in the first instance in an arbitration between TBNG and Enron.
10.	Enron relies on what it submits is an exclusive jurisdiction clause in The Charge Agreement and an Arbitration Clause in The JVA 2 in support of the anti-suit injunction it seeks. It also submits that there are no, let alone strong, reasons for departing from the general rule that effect should be given to those agreements. The matter came before HHJ Chambers QC on 30th March 2004 when the defendants offered and the court accepted undertakings not to take any further steps in the Texan proceedings until the determination of the present application to set aside the default judgments and that on the hearing of the application the only point the defendants would advance in opposition to an anti-suit injunction would be that the claims in the Texan proceedings fell outside the ambit of the jurisdiction clause in The Charge Agreement.
Background
11.	TBNG had licence rights over certain carbon deposits in Turkey (to which I will refer as “the Tekirdag Assets”). TBNG approached Enron to obtain financial and technical assistance to exploit the Tekirdag Assets. The negotiations which followed were largely conducted between Harvey Clapp (the third defendant) on behalf of TBNG and Nigel Friend on behalf of Enron.
12.	On 4 February 2000 TBNG and ECT entered into a joint venture agreement. This agreement (“JV1”) was replaced by The JVA2 agreed on 20 December 2000. By that date Enron had started to expend monies (“Capex”) on the Tekirdag Assets but had not exercised an option given by JV1 to acquire a 55% interest in the Tekirdag Assets.
The JVA2
13.	The Recitals to the JVA2 included (D) in the following terms:
The Parties … wish to document in this Agreement the manner in which, subject to the terms and conditions contained herein:
(i) the Parties will implement and fund a program for conducting certain exploration activities in connection with certain hydrocarbon licences in the Republic of Turkey;
(ii) Enron is granted an option to acquire an interest in certain of these hydrocarbon licences and related assets in consideration for the payment of a nominal sum; and 
(iii) should Enron choose to exercise such option, Enron and TBNG will finance the appraisal and development of certain of these hydrocarbon licences and related assets as per the terms hereof.
14.	The Definitions in Article 1.1 of the JVA2 included:
“Closing date” means the date on which all the conditions set forth in Section 5.2 hereto have been satisfied or waived …
“ECT Advance” shall be the sum of … $250,000 … provided by ECT to TBNG in accordance with Section 2.5.
“Effective Date” shall (be 4 February 2000).
“Enron Pre-Closing Tekirdag Capex” shall mean all Capex in relation to the Tekirdag Assets, which has been reimbursed or pre-approved by TBNG, paid and reinvoiced to TBNG by Enron … between Effective Date and Closing Date ….
“Final Date” shall mean 30 September 2001.
“Minimum Commitment” shall mean … US$3,000,000 as such amount shall be reduced by the Enron Pre-Closing Tekirdag Capex.
“Secured Liabilities” means all moneys and liabilities (whether actual or contingent) which are now or may at any time hereafter be due, owing or payable to Enron … from or by TBNG under or in connection with Sections 2.5.2 and 5.4.4.
15.	Article 2.5.2 provided:
TBNG shall repay the ECT Advance to ECT … in four monthly instalments of … $62,500 each, commencing on 1 September 2001 and with the final instalment being payable on 1 December 2001 ….
16.	Article 4 provided:
4.1.1. TBNG hereby grants to Enron an irrevocable and exclusive option … to acquire an interest, at its sole discretion, of … 55% of the Tekirdag Assets, in consideration for a commitment to fund all Capex up to the Minimum Commitment.
4.1.2. The Option may be exercised by Enron at any time after the Effective Date of this Agreement and until 30 June 2001 by providing written notice to TBNG of its intention to exercise the Option.
4.2. Upon the exercise by Enron of the Option, the Parties shall immediately take the following steps:
(i) Enron … will form a branch office in Turkey and be registered at the GDPA (the General Directorate of Petroleum Affairs of the Republic of Turkey) as the owner ….
(ii) ….
(iii) ….
17.	Article 5 provided:
5.1. Following the  Closing Date Enron will (i) fund all Capex up to the Minimum Commitment and (ii) fund all Capex in excess of the Minimum Commitment as and when agreed ….
5.2.Conditions Precedent to Funding Capex.
Unless otherwise waived in writing by Enron and subject to Section 5.3. Enron’s obligation in relation to Capex funding pursuant to Section 5.1 above shall be subject to satisfaction of the following conditions precedent:
(i) exercise by Enron of the Option in accordance with Section 4.1;
….
(iii) satisfactory registration of Enron as a licensee by the GDPA;
(iv) registration of the pipeline permit and the permit for the extension of the pipeline for the holders of the Tekirdag Concessions;
….
(vi) receipt by Enron of (certain legal opinions attesting among other things to the validity of the acts of TBNG).
….
5.3. Notwithstanding Sections 5.1 and 5.2 above, Enron may fund … Capex … prior to Closing Date occurring and any such Enron Pre-Closing Tekirdag Capex shall be repaid in accordance with Section 5.4.
5.4. Closing
5.4.1. If the Closing Date does not occur upon the same date as the date upon which the Option is exercised, then from the date Enron exercises the Option until the Closing Date occurs (or the Final Date, if the Closing Date shall not have occurred by that date) TBNG shall pay itself any and all Capex expenditures required to be made ….
5.4.2. Enron …. shall re-imburse TBNG for all Capex expenditures incurred by TBNG in accordance with Section 5.4.1. ….
5.4.3. ….
5.4.4. It is hereby agreed that the total Enron Pre-Closing Tekirdag Capex amounts will be treated as a loan (the “Loan”) from ECT to TBNG. Subject to Section 5.4.6 and 11.4 the loan shall become payable on demand from Enron … on the earlier of the Final Date, the Closing Date or the date of termination of this Agreement and such loan shall bear interest at the rate of … 25% ….
5.4.5 ….
5.4.6. Forthwith upon Closing Date occurring:
(i) Enron shall pay to TBNG as further consideration for the transfer by TBNG of the Enron Interest in the Tekirdag Assets to Enron, an amount equal to the Loan less … 55% of the Tekirdag Net Revenues … relating to the period from exercise of the Option under Section 4.1 up to and including Closing Date; and
(ii) TBNG shall repay the Loan to ECT.
18.	Article 5.6 made provisions for TBNG to buy out Enron’s 55% share in the event that total funding of less than $10m was provided within 2 years of the Closing Date. Article 6 provided for the appointment of a consultant (David Wilson) on exercise by Enron of the Option. One of the consultant’s obligations was to keep accurate books, accounts and records of “operations under this Agreement … as provided in Annex Two”.
19.	Article 11 provided for “Events of Default” which entitled the non-defaulting party to serve a notice of immediate termination of the Agreement. It also provided that in the event the Closing Date did not occur before the Final Date Enron could serve on TBNG a notice of immediate termination. Article 11.4 provided:
11.4 Reimbursement
In the event either Party serves a Notice of Immediate Termination on the other Party prior to the occurrence of the Closing Date, Enron … shall be entitled to reimbursement of any funds expended by Enron … for the purposes of the Project (including without limitation the Loan and any ECT Advance unpaid) pursuant to the terms of this Agreement and such amounts shall become immediately due and payable by TBNG to Enron … on the date such Notice of Immediate Termination is received by the non-terminating Party.
20.	Article 15.1 provided that:
Unless expressly agreed in writing, no failure on the part of either Party to exercise and no delay on its part in exercising any right or remedy under this Agreement will operate as a waiver thereof ….
21.	Article 17 was an “Entire Agreement” provision. Article 22 provided that the Agreement was governed by English law and that in the absence of an “amicable settlement”:
any dispute or controversy arising between the Parties … with respect to the interpretation, compliance, execution, termination or invalidity of this Agreement shall be submitted to … arbitration … according to the Rules … of the International Chamber of Commerce …. The arbitration shall take place in London, England ….
22.	The Accounting Procedure set out in Annex Two required the Consultant to submit monthly statements containing the “Net revenue available to be distributed to TBNG and Enron” and required him “unless otherwise agreed” to pay out to each party every month the net revenues generated as set out in the statements.
The Second Amendment to The JVA2
23.	The Second Amendment was dated “as of January 23, 2001”. Its purpose was to redefine the amount TBNG would pay back to Enron “forthwith upon the Closing Date occurring”. It amended the definition of “Enron Pre-Closing Tekirdag Capex” to mean:
all Capex in relation to the Tekirdag Assets which has been reimbursed to TBNG by Enron …, pre-approved by TBNG or pre-approved by TBNG and subsequently paid and reinvoiced to TBNG by Enron … between the Effective Date and the Closing Date, including without limitation the Exploration Program Capex and the Authorised TBNG Tekirdag Capex.
24.	Article 5.4.6(i) was amended to read:
Enron shall pay to TBNG as further consideration for the transfer by TBNG of the Enron Interest in the Tekirdag Assets to Enron, an amount equal to the Loan less (a) any amount of the Loan which, as at the Closing Date, has not been or is not in the process of being registered as capital in the books of TBNG and GDPA … and (b) … 55% of the Tekirdag Net Revenues … relating to the period from (and including) 1 February 2001 up to and including the Closing Date.
The Charge Agreement .
25.	The defendants were together described as “the Chargors” and Enron as “the Chargees”. Recital (A) referred to The JVA2 and the fact that by its terms “TBNG has to make certain payments to the Chargees”. “Secured Liabilities” was defined to mean:
all moneys and liabilities (whether actual or contingent) which are now or may at any time hereafter be due, owing or payable to any of the Chargees from or by TBNG under or in connection with (a) sections 2.5.2 and 5.4.4. of (the JVA2) and (b) this deed, together with all legal and other costs, charges and expenses which any of the Chargees may incur in enforcing or obtaining, or attempting to enforce or obtain, payment of any such moneys and liabilities.
26.	Clause 2.1 provided a “Covenant to Pay”:
Each Chargor jointly and severally covenants with the Chargees that it will on demand pay and discharge the Secured Liabilities at the time or times when due and in the currency or currencies in which the Secured Liabilities are expressed to be payable in the manner provided for in the (JVA2) or, as the case may be, this deed.
27.	Clause 17 provided
17.2 This deed and the Charges constitute original, independent and absolute securities (and not secondary or collateral securities) for the Secured Liabilities. 
28.	Clause 19 provided that the liability of the Chargors for the Secured Liabilities shall not be prejudiced or affected by:
 (e) the existence of any claim, set-off or other right which any Chargor may have at any time against the Chargees or any other person or (f) the making or absence of any demand for payment of the Secured Liabilities on any other person.
29.	Clause 29 provided for “Law and Jurisdiction”.
29.1 English Law.
This deed shall be governed by English Law.
29.2. Jurisdiction.
(a) For the exclusive benefit of the Chargees, the Chargors irrevocably agree that the courts of England are to have  jurisdiction to settle any disputes which may arise out of or in connection with this deed and that accordingly any suit, action or proceedings … arising out of or in connection with this Agreement may be brought in such courts.
(b) Each Chargor irrevocably waives and agrees not to raise any objection which it may have now or hereafter to the laying of the venue of any proceedings in any such court as is referred to in this Clause 29.2 and any claim that any such proceedings have been brought in an inconvenient or inappropriate forum and further irrevocably agrees that a judgment in any proceedings brought in the English courts shall be conclusive and binding upon such Chargor and may be enforced in the courts of any other jurisdiction.”
Exercise of Enron’s Option
30.	On 23 January 2001, the day the Second Amendment to the JVA2 was dated, Enron exercised the option to acquire a 55% interest in the Tekirdag Assets granted by Article 4 of The JVA2. Closing did not take place then.
Net Revenues.
31.	Enron was not in my judgment entitled to be paid its 55% share of the revenue from the Tekirdag Assets before Closing Date. That is, I think, the plain inference from Article 5.4.6(i) of The JVA2 (both originally and as amended) which in effect required an accounting when Closing occurred in which Enron would then be credited with its share from the date of exercise of the Option to the Closing Date.
32.	Towards the end of April 2001 it was, however, agreed between Harvey Clapp and Mr Friend that TBNG would advance to Enron 55% of the net revenues by allowing Enron to use the money to fund Capex. Enron had by then decided not to invest any further moneys in the project save for a sum of $350,000 in respect of a pipeline.
“Closing”
33.	On 9 May 2001 Harvey Clapp sent an e-mail to Mr Friend saying:
“After reviewing the (JVA2), I think we do not need any additional documents or certificates or opinions to Close. It seems all we need to do is figure out:
1. The amount of the Loan as of 1 July 2001;
2. The dollars of the Loan that have not been registered by TBNG with GDPA, and, 
3. 55% of the net profits relating to the period February 1 to July 1 2001 ….
You will wire us 1 minus (2 plus 3) and we will immediately wire back 1 minus 2 ….”
34.	By this date Enron’s interest in the Assets had been approved by the GDPA. The definition of “Closing Date” in The JVA2 requires all the conditions in Article 5.2 to be “satisfied or waived” before there is a Closing Date. Condition (iii) in Article 5.2 had therefore been fulfilled. On the evidence, however, conditions (iv) and (vi) had not been and never were fulfilled. 
35.	Mr Clapp’s e-mail was plainly a reference to the mutual payment obligations which would arise on Closing provided for in Article 5.4.6(i) of The JVA2 as amended. Mr Clapp said in his second witness statement that it was his belief that “Closing” required only the approval and the making of these payments. Mr Friend’s response to the e-mail was “seems simple on paper!” and that he would call Mr Clapp “to discuss” the use of the 55% net revenues to complete one of the drilling sites. A debate about the figures ensued. July 1 came and went. In early August Mr Clapp was informed by Mr Friend that Enron would not provide any further funding and would look to liquidate its interest.
36.	A further e-mail from Mr Clapp to Mr Friend and others dated 4 September included the suggestion “that we suspend efforts to Close as of August 2 and plan a Closing October or November 1”. The “Final Date” under The JVA2 was 30 September 2001 giving Enron the right to terminate the JVA2 under Article 11.
37.	Efforts continued to be made in September to calculate the figures for the mutual payments which would be due upon Closing. On 17 September Enron produced an “Information Memorandum” for the possible sale of its interest in the Tekirdag Assets. This Memorandum referred to “Closing” under The JVA2 in terms which make clear that it had not occurred but “was expected to occur 1 November 2001”. It was in November 2001 that a number of companies in the Enron group went into Chapter 11.
38.	In October the discussion on figures continued on the clear basis that Closing had not occurred; indeed as is apparent from an e-mail from Mr Clapp dated 16 October a member (“Sophie”) of Enron’s legal department had expressly made the point to Mr Clapp that “the adjustments to the Loan only apply if there is a Closing”. That was, in my judgment, and as is not really in issue, a correct construction of The JVA2. It does not mean, of course, that it was not sensible to seek to work out in advance what payments would then have to be made under Article 5.4.6. The debate about those figures continued. It escalated to the extent that Mr Clapp contended that there was no obligation to re-pay the loan unless Enron transferred back to TBNG the 55% interest but Enron maintained it had the right to sell the interest and to repayment. There was also a substantial gap between the parties’ positions as to the amount which TBNG would be obliged to re-pay “if the transaction is not Closed”.
Termination
39.	On 11 January 2002 TBNG sent a formal “Notice of Immediate Termination” of The JVA2 to Enron pursuant to Article 11. The Notice stated that “among the grounds for Termination” were:
“The Closing Date has not occurred.
The Final Date was September 30, 2001.
Several Events of Default under Section 11.1 have occurred …”
40.	The Events of Default included alleged failures by Enron to “close the transaction” as well as various alleged specific breaches and an alleged inability of Enron to pay its debts.
41.	The Notice concluded by stating:
“TBNG will tender the requisite amount of the loan … if and when [Enron] files an application with GDPA in form and substance acceptable to TBNG to transfer back legal title to the 55% of three concessions now in legal limbo”.
Demand for repayment by TBNG
42.	On 23 January 2003 Enron formally demanded from TBNG repayment of the Loan (together with interest) under Article 5.4.4 of The JVA2. A point was taken by the defendants that this demand was invalid because it did not (as it did not) state what sum was payable. But Article 5.4.4 does not require the demand to do so, and Clause 19(f) of The Charge Agreement provides that the liability under that Agreement is not to be affected by the absence of a demand. Mr Machell realistically did not pursue the point. Enron also served on 27 January 2003 a Notice of Immediate Termination of The JVA2 under Article 11 on the basis that the Closing Date had not occurred prior to the Final Date. It did so because of possible doubts about the validity of the Notice sent by TBNG.
Claim under The Charge Agreement
43.	On 3 September 2003 Enron demanded from the defendants payment of “The Secured Liabilities” under clauses 2.1 and 1.1 of The Charge Agreement. The Claim Form was issued a month later. It asserted that “Closing” under The JVA2 never occurred.
Quantum of the Claim
44.	Paragraph 3.2 of the Particulars of Claim reads:
“Between 29 February 2000 and 5 October 2001 … (Enron) … made payments totalling US $5,236,588.75 under or in connection with the “Loan” and the “ECT Advance”
45.	A Schedule of these payments was attached. The quantum of the claim has been further explained in the fifth witness statement of Mr Larizadeh. The amount of the “ECT Advance” is unarguably £250,000. The total amounts relied upon are set out in a schedule which totals $5,243,176.57. That total itself is made up of 4 components. “RTV Exp paid to Jersey” and “Ankara” represent respectively payments made by TBNG but reimbursed to TBNG by Enron and payments made by Enron and reinvoiced to TBNG both of which therefore fall within the definition of “Enron Pre-Closing Tekirdag Capex” in the Second Amendment to The JVA2. These two payments total $3,992,587.13. “Penspen” in a total of $679,032.57 and “Madison/Schlumberger” in a total of $571,556.87 represent direct payments made by Enron to suppliers which have not been reinvoiced to TBNG. The total of these two components is $1, 250,589.44. There is no evidence that these were payments “pre-approved” by TBNG and so no evidence that they fall within the definition.
46.	Mr Larizadeh also referred in his statement to the amounts the defendants claimed had been advanced to Enron by TBNG by way of the 55% share of the gas revenues. Mr Clapp estimated the sum to be $1.7m. Mr Larizadeh said Enron had been unable to confirm or deny the figure but maintained it did not matter on the basis that the Charge Agreement precluded any set-off and (wrongly in my judgment, see paragraphs 31 and 32) that Enron was in any event entitled to the revenues whether or not Closing had occurred.
47.	Immediately prior to the hearing Enron served a certificate dated 8 June 2004 which Enron sought to rely upon as satisfying Clause 24 of the Charge Agreement.
48.	Clause 24 provides that:
For all purposes, including any proceedings, a copy of a certificate signed by an officer of the Chargees as to the amount of any indebtedness comprised in the Secured Liabilities or as to any applicable rate of interest shall, in the absence of manifest error, be conclusive evidence against the Chargor as to the amount or rate thereof.
49.	The Certificate certified an amount of US $8,110,128.82 as due on 11 December 2003 said to consist of a principal amount of $5,236,588.75 and the balance as interest.
Judgment in Default
50.	Permission to serve the claim form out of the jurisdiction was granted on 8 October. Service took place in October and early November. The “defective” Acknowledgements of Service were filed on 7 and 21 November. Judgments in default were entered on 10 and 11 December. The default judgments were “docketed” in New Jersey on 23 February 2004. They had been served on the defendants in late December and early January.
51.	Despite expressing an intention to do so in early January the application to set aside the judgments (and for a stay) was only made on 8 March 2004. The proceedings in Texas were issued on 12 March. TBNG and the defendants were Plaintiffs in the Texan proceedings. There can be little doubt that the application to set aside the judgment and the Texas proceedings were inspired by the steps taken to enforce the judgments in New Jersey. Unsurprisingly in these circumstances Enron points to the delay in making the application as itself a reason why it should be refused, albeit I do not think the delay has been such as to justify that conclusion as a proportionate one if the defendants have indeed shown a real prospect of defending the claim at least in a substantial amount.
The defendant’s evidence.
52.	Mr Clapp in his first witness statement raised two matters of substance (apart from quantum issues). First he contended that Closing had taken place because no one was suggesting any of the conditions precedent remained unfulfilled and the only debate was about the amounts due. Second, he maintained that nothing was due unless and until Enron re-transferred the 55% interest because it was “ commercial nonsense” to suggest that Enron could fail to “close” and still retain the interest.
The “Defences”
53.	Mr Machell’s submissions as they were developed were in effect three-fold:
i)	The Closing date had occurred on or before 30 September 2001. If that were so there was no dispute that a good defence would have been shown.
ii)	If the Closing Date had not occurred there was no liability to repay the loan “unless and until Enron had irrevocably confirmed that it is not entitled to the 55% interest”.
iii)	TBNG was entitled to set-off $1.7m of gas revenues and the quantum of the loan was overstated.
Construction Issues
The Obligation.
54.	I have already commented on a number of points of construction of The JVA2 and The Charge Agreement. Whilst much of the argument was directed to whether or not any set-off was permissible under The Charge Agreement at least for the purposes of the present application the starting point must be the obligation Enron seeks to enforce. The claim is brought to enforce the “Covenant to Pay” in Clause 2.1 of the Charge Agreement. That Clause requires payment of the “Secured Liabilities” as defined in Clause 1.1. That definition directs attention to the moneys and liabilities due from TBNG to Enron under or in connection with Articles 2.5.2 and 5.4.4 of The JVA2. Article 2.5.2 of The JVA  relates to the ECT Advance of $250,000. That had to be fully repaid by 1 December 2001. It was not and The Charge Agreement plainly bites.
55.	Clause 5.4.4 directs attention to the “Enron Pre-Closing Tekirdag Capex” as re-defined in The Second Amendment to the JVA2. That is less easy to apply but I think it plainly includes the $3.992,587.13 referred to in paragraph 45 but not, or at least not beyond realistic argument on the evidence before the court, the sum of $1,250,589.44 also referred to in that paragraph for the reasons there stated.
Set-off.
56.	In support of his submission that The Charge Agreement precluded set-offs Mr Shankland, for Enron, relied on Clauses 17 and 19 of The Charge Agreement. But the difficulty, at least on the present applications, is that the defendants’ case on the revenues is not that they have a set-off (to which Clause 19 is directed) but that the amount of the loan due from TBNG to Enron falls to be reduced by a set-off available to TBNG. There is no clause which expressly excludes set-offs by TBNG and the covenant bites on the amounts “due” from TBNG under The JVA2. It is trite law that the general rule is that where the principal debtor has a right of set-off giving him a defence to the debt the subject of the guarantee the surety is entitled to raise it as a defence to the creditor’s claim: Andrews and Millet, Law of Guarantees, Third Edition at page 360. I do not feel sufficiently confident that Mr Shankland’s submission is right to justify a conclusion that it is not open to the defendants realistically to claim to have a defence in the amount of the revenues of which the best, however inadequate, evidence remains the figure of $1.7m (paragraph 46).
Closure and the Option.
57.	The JVA2 expressly envisaged the possibility of a time gap between exercise of Enron’s Option and Closure for example in Article 5.4.1. It also envisaged the possibility that the Option would be exercised but Closing would not occur. The Conditions Precedent to Funding in Article 5.2 were also conditions precedent to there being a “Closing date” as defined in Article 1.1. The terms of Article 5 also address such a possibility. But there is no express provision addressing the status of the 55% interest should the Option be exercised but Closing not occur.
58.	The consideration for the Option was expressed in the Recitals to be “a nominal sum” and in Article 4.1.1. to be “a commitment to fund all Capex” up to $3m. The obligation to fund Capex (in, I think, contrast to the commitment to do so) depended on fulfilment of the Conditions Precedent. That, however, does not strike me as so odd to be “commercial nonsense” once it is seen, (as I think to be the case, despite Mr Shankland’s submissions,) that ownership of the 55% upon exercise of the Option carries with it no right to the revenues from the Assets unless and until there is, if there is, Closure: see paragraph 31. I think it was in recognition of the express terms of The JVA2 that Mr Machell no longer contended on behalf of the Defendants that by way of construction or an implied term Enron’s right to payment was in some way conditional upon the re-transfer of the 55% to TBNG. He does contend that there remains an obligation to re-transfer if payment is made but recognises that cannot be the subject of a set-off. He also put forward an estoppel argument.
59.	Mr Machell also had to recognise that the conditions precedent had not been fulfilled. The defendants’ submissions became therefore that Enron was to be estopped from contending that they had not been fulfilled or had waived their fulfilment and so that Closure had occurred. It was also contended that Enron was estopped from contending that the Secured Liabilities were to be repaid without re-transfer or an undertaking to re-transfer the 55%.
Estoppel, Waiver and Closure.
60.	In my judgment the defendants’ submissions are unsustainable. Both parties acted throughout on the basis Closure had not occurred. TBNG’s Notice of Immediate Termination was predicated on that being the case. Whether or not the parties thought it was necessary first to agree on the payments to be made upon Closure under Article 5.4.6 of The JVA2 there is nothing to suggest that Enron at any time addressed its mind to fulfilment of the Conditions Precedent let alone represented to TBNG that they were fulfilled or of no concern. The best the defendants can advance is the want of a reply to the statement in the 9 May e-mail (paragraph 33) about there being no need for any additional documents. But silence can rarely make a case of estoppel or waiver and cannot in my judgment do so in circumstances in which both parties for their own commercial reasons were at all times expressly acknowledging that Closure, if there was to be Closure, was for the future. The JVA2 expressly required any waiver to be in writing: Articles 5.2 and 15.1. Whilst it is accepted that such provisions may themselves be waived in exceptional circumstances I do not think a debate about what payment would be due upon Closure is inconsistent with a need for the conditions precedent to be fulfilled let alone with the need for any waiver of them to be evidenced by writing. It is at most equivocal and equally consistent with an intention to address the conditions if and when the debate was resolved.
Estoppel and the 55%.
61.	The defendants’ case on estoppel to deny Enron’s claim until it re-transfers the 55% is in my judgment equally unsustainable. As Mr Machell acknowledges, The JVA2 does not provide to that effect either expressly or by implication. There is a total lack of evidence on which the defendant can rely to establish the estoppel they advance: indeed to the contrary (paragraph 38). Mr Machell’s argument was founded on the submission that “at no time during the discussions and correspondence between Mr Clapp and Mr Friend did Mr Friend assert that [Enron] was entitled to repayment of the loan and to retain the 55% interest”. Even if that were so it could not found an estoppel by representation or by convention.
Quantum.
62.	As I have already indicated I do think the defendants have established a real prospect of a defence to the quantum of Enron’s claim in two respects. First as regards the revenues paid to Enron in the amount of $1.7m (paragraph 46) and second as regards the sum of $1.250, 589.44 included in the claim (paragraph 45). I do not think this conclusion is affected by the last minute production of the Officer’s Certificate (paragraphs 47-49). The defendants have had no opportunity to investigate the certificate; it is not relied upon in the particulars of claim and I think it can realistically be argued that the certificate cannot override a conclusion, if it be concluded at a trial, that some of the items in it are not “Secured Liabilities” within the definition in The Charge Agreement or that sums are not “due” from TBNG because TBNG has a set-off. 
63.	Nor do I think Enron can, in the context of the present issue, rely on Article 11.4 of The JVA2 as a provision entitling them to moneys expended on the project which do not fall within the definition of “Enron Pre-Closing Tekirdag Capex”. The definition of “Secured Liabilities” in The Charge Agreement refers only to Articles 2.5.2 and 5.4.4 of The JVA2 and the reference in Article 5.4.4 itself to Article 11.4 in my judgment does not, or at least gives rise to a realistic argument that it does not, have the effect of adding liabilities which may arise under Article 11.4 to the Secured Liabilities on which the Covenant to pay in The Charge Agreement bites. Nor, I might add, has the contrary been pleaded.
CONCLUSION
64.	It follows that in my judgment the defendants have failed to establish that they have a realistic prospect of successfully defending Enron’s claim save on issues of quantum. Those issues leave a substantial sum due to Enron to which Enron have established they have no such prospect. In terms of principal the sum to which no defence has been shown is the sum of $3.992,587.13 (paragraph 45) less the sum of $1.7m (paragraph 46). To that extent (together with interest as appropriate) the default judgments should not be set aside and I will expect the parties to prepare a suitable order to reflect the terms of this judgment when it is formally handed down.
STAY/ANTI-SUIT INJUNCTION
65.	Mr Machell’s submissions in support of a stay were conditional on the court setting aside the judgment. I have set it aside only in part. The consequence will presumably be that the claim will continue for such other sums as Enron claim to be due to it. The Charge Agreement is not only governed by English law but contains an elective exclusive English jurisdiction clause in favour of Enron. The obligations it creates are also agreed to be “original” and “independent”: clause 17. They are not in any way conditional on establishment of TBNG’s liability to Enron. No arbitration has ever been commenced between TBNG and Enron (indeed TBNG and the defendants chose to commence proceedings in Texas) and neither can be compelled to resolve any claim they may seek to bring against the other by any means other than the arbitration provided for in Article 22 of The JVA2. Equally the defendants cannot be compelled to arbitrate the present disputes, albeit it is said they are “content to abide the outcome” of an arbitration should there be one.
66.	To grant a stay would be to deprive Enron of the rights for which it has contracted with the defendants, both as regards jurisdiction and the primary nature of the obligations undertaken by the defendants. It would also do so in favour of an arbitration which neither TBNG nor Enron have hitherto shown any wish to pursue. I shall therefore not grant a stay.
67.	The claims by TBNG and the defendants in the Texas proceedings are not easy to analyse. But the defendants have done nothing to advance the matter since it was before HHJ Chambers QC in March (paragraph 10). The wording of clause 29.2 of The Charge Agreement (paragraph 29) is wide. It is, as regards the defendants, an exclusive jurisdiction clause in favour of this jurisdiction. It extends to disputes which “arise out of or in connection with” the Agreement. The wording of Article 17 of The JVA2 (paragraph 21) is also wide. No reason at all has been advanced by the defendants why effect should not be given to these provisions nor for the commencement of the Texas proceedings. However obscurely presented, it is quite apparent that it is these Agreements which form the basis of the claims sought to be advanced in the Texas courts.
68.	In my judgment Enron is entitled to the anti-suit injunction it seeks substantially in the terms of the undertakings given on 30 March. Again, however, if they cannot be agreed, I will hear the parties on the terms of the Order to be made when this judgment is formally handed down.