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1 Thursday, 21 March 2013 2 (10.30 am) 3 Housekeeping 4 MR JUSTICE BURTON: I have read Mr Atherton's witness 5 statement and it does seem to me that large chunks of it 6 are, if not the majority of it, either quotations from 7 other documents or arguments. So it may be you won't 8 take the whole day. 9 MR WOLFSON: I don't know whether your Lordship has actually 10 read the first page of my cross-examination notes but 11 that was precisely the point I was going to make. 12 MR JUSTICE BURTON: Yes. 13 MR WOLFSON: My Lord, I do not intend to cross-examine -- 14 and I say this with all respect to you, Mr Atherton, it 15 is not a criticism, I know how these documents are put 16 together -- 17 MR JUSTICE BURTON: He was drafting out counsel's skeleton 18 arguments probably. 19 MR WOLFSON: Precisely. I don't propose to cross-examine 20 a witness when the witness is commenting on documents 21 which he was not a party to, which he didn't know about 22 at the time and which my learned friend can make 23 submissions on. 24 MR JUSTICE BURTON: Indeed so. I raise it only because it

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1 Thursday, 21 March 2013

2 (10.30 am)

3 Housekeeping

4 MR JUSTICE BURTON: I have read Mr Atherton's witness

5 statement and it does seem to me that large chunks of it

6 are, if not the majority of it, either quotations from

7 other documents or arguments. So it may be you won't

8 take the whole day.

9 MR WOLFSON: I don't know whether your Lordship has actually

10 read the first page of my cross-examination notes but

11 that was precisely the point I was going to make.


13 MR WOLFSON: My Lord, I do not intend to cross-examine --

14 and I say this with all respect to you, Mr Atherton, it

15 is not a criticism, I know how these documents are put

16 together --

17 MR JUSTICE BURTON: He was drafting out counsel's skeleton

18 arguments probably.

19 MR WOLFSON: Precisely. I don't propose to cross-examine

20 a witness when the witness is commenting on documents

21 which he was not a party to, which he didn't know about

22 at the time and which my learned friend can make

23 submissions on.

24 MR JUSTICE BURTON: Indeed so. I raise it only because it

25 seems to me that it may reflect upon the amount of


1 time -- I hadn't read the witness statement before,

2 because it wasn't part of my pre-trial reading and so I

3 only read it last night preparing myself for your

4 onslaught today and I would have thought it wouldn't be

5 very long.

6 That said, see how long it is, but we may still not

7 start Mr Inch. We'll see how it goes.

8 MR WOLFSON: We will see how it goes. I made the point in

9 my opening submissions that this was not a balanced case

10 in that regard.


12 MR WOLFSON: My learned friend has to prove --

13 MR JUSTICE BURTON: You are trying to point out that he is

14 earning his brief fee more than you are, is that it?

15 MR WOLFSON: That is almost invariably the case, my Lord.

16 MR JUSTICE BURTON: Can I ask, one thing, Mr Qureshi, before

17 we seek to put Mr Atherton in the witness box in-chief.

18 It is something that I didn't really understand in

19 opening and still don't understand, and it seems to me

20 I ought to get it in my head before Mr Atherton is

21 called.

22 You are counterclaiming in respect of the money in

23 the escrow and Mr Atherton describes two ways of

24 recovering alleged losses, either interest loss or loss

25 of financial opportunity. But at the moment I don't


1 grasp how it is that you have a counterclaim in respect

2 of -- you say, on some basis or other, but you will no

3 doubt tell me, that the money would have come out of

4 escrow in April 2011, but for something -- and I am not

5 sure what the something is -- and had it done so, I

6 quite understand Mr Atherton then describes what you

7 could or would or might have done with the money since,

8 I think it is 9 April 2011.

9 But I don't understand the cause of action.

10 MR QURESHI: My Lord, so far as the cause of action is

11 concerned, if the pleading hasn't articulated it with

12 the clarity that we believed it had, ultimately the

13 issue is essentially that the purpose for which the

14 escrow arrangement had been entered into and those funds

15 were locked in is a purpose that no longer exists.

16 MR JUSTICE BURTON: Help me. The purpose for which your

17 client voluntarily put the money into the escrow

18 account, and you rely on the fact that they paid it in

19 as showing that they were always willing to be sensible

20 about the tax and everyone else around them was not

21 acting so reasonably, and certainly the Government went

22 back, perhaps, on a deal that everyone thought had been

23 done, et cetera, et cetera.

24 But it was put in voluntarily by your clients to

25 await the outcome of the tax liability and that has


1 still not been resolved, either the Tax Appeal Tribunal

2 because although you lost first time round you are

3 appealing it, or in the arbitration because the

4 jurisdiction has not yet been resolved, never mind the

5 substance. And so surely the money ought to be staying

6 in the escrow account, subject to any order I may be

7 invited by either of you to make, until the outcome of

8 the tax liability is resolved one way or t'other. At

9 the moment I don't see the case for how it could or

10 should have come out on 9 April 2011.

11 MR QURESHI: My Lord, of course our primary position is that

12 there was no liability to tax.

13 MR JUSTICE BURTON: Of course.

14 MR QURESHI: On the --

15 MR JUSTICE BURTON: That is not something they can agree.

16 That is something the Government will have to give in on

17 or you lose on.

18 MR QURESHI: My Lord, it is essentially as follows: Tullow's

19 high point starting --

20 MR JUSTICE BURTON: Sorry, to interrupt. It just seemed to

21 me we ought to try to resolve it before you start.

22 MR QURESHI: Tullow's position is that as of the payment

23 made purportedly pursuant to the Memorandum of

24 Understanding and the letters of 15 March, Heritage's

25 tax liability is discharged. That is Tullow's point.


1 That is Tullow's case; if that is correct, then the

2 purpose of the escrow arrangement no longer exists.

3 MR JUSTICE BURTON: I am sorry, I have not understood what

4 you have said: "As of the payment made pursuant to the

5 ..." and then the [draft] transcript says -- I don't

6 know what that is -- "to the Memorandum of Understanding

7 and the letters of 15 March your tax liability is

8 discharged. That is Tullow's point."

9 Tullow paid it, rightly or wrongly, on the basis

10 that they were being required by the Government under

11 108 which on their analysis means that they must pay it,

12 whether it is payable or not, if it is due. That is

13 their case: section 108 requires the agent to pay it up

14 if it is due but not if it is payable.

15 Then you fight out whether it was in fact due and

16 payable and if you win, the money comes back and if you

17 lose -- ie, back to you or possibly to them -- we have

18 to see, and if you lose, the Government gets it. And

19 that was done voluntarily by your client. That is what

20 it says.

21 Where is the purpose fail?

22 MR QURESHI: My Lord, so far as the establishment of the

23 escrow arrangement in July 2010, we maintain the

24 position that it was clear to Heritage and clear to

25 Tullow that Heritage were to have sole conduct of the


1 tax dispute --


3 MR QURESHI: -- up until the conclusion of that dispute by

4 final determination --


6 MR QURESHI: -- by arbitration or court.


8 MR QURESHI: What Tullow sought to do through the exchange

9 of letters, the Memorandum of Understanding with the

10 Ugandan authorities was to put itself in a position

11 where it now says: "Your liability has been discharged."

12 MR JUSTICE BURTON: No, I don't think so.

13 MR QURESHI: My Lord, that is their case.


15 MR QURESHI: That is their case.

16 MR JUSTICE BURTON: They paid it as agent for you because

17 they were required to. I mean, this is all to be

18 discussed later. They paid it to you because they were

19 required to do so while you, and despite the fact that

20 you had rendered at any rate the 283 non-payable by

21 paying your one-third or they paid it on your behalf and

22 disputing the balance. Leave aside the extra 30 for the

23 moment. That was bound to take some time and the escrow

24 account would remain in place until then.

25 Mr Atherton seems to say that something happened on


1 9 April 2011. I am perhaps --

2 MR QURESHI: Perhaps I could turn to the --

3 MR JUSTICE BURTON: Had the escrow monies been released

4 in April 2011? I am just looking to see, because

5 I couldn't understand why April was lit upon.

6 MR WOLFSON: That is the date we paid the Government,

7 I understand.

8 MR JUSTICE BURTON: The date you paid the Government, I see.

9 MR QURESHI: My learned friend --

10 MR WOLFSON: If I can try to shed some light on it, my Lord,

11 it may tie it up with another point I was going to

12 mention to your Lordship which is that we have put

13 together the note on a constructive way for your

14 Lordship to deal with the Heritage tax point, if I can

15 call it that, and we will hopefully hand that up after

16 the short break this morning.

17 The two points are tied in this respect. As

18 I understand my learned friend's case, it goes something

19 like this -- let us see if I can put it for him:

20 because, Tullow, on your alternative claim in

21 restitution and in fact on the secondary way you put

22 your alternative claim of restitution you, Tullow, are

23 saying that you have discharged our tax liability and,

24 therefore, you have a claim to restitution. Because of

25 that and because the escrow monies -- this is the


1 purpose point -- are there in some way as security for

2 our tax bill. Thanks very much you have discharged our

3 tax bill and now we can have the escrow monies out as

4 well.

5 We have a number of answers to that. But as

6 I understand it, it is a fairly brazen point, but that

7 as I understand it is actually the point being made

8 against us.

9 MR JUSTICE BURTON: So it is an answer to your alternative

10 case. Your primary case, which is what we have been

11 listening to for the last few days, is that you are

12 required by the Government to pay it over

13 notwithstanding that the tax position had been secured,

14 as far as the 288 was concerned, by a dispute, a payment

15 of the one-third and an arbitration or a tribunal as to

16 the balance.


18 MR JUSTICE BURTON: But because you are putting forward an

19 alternative case that you settled their tax liability if

20 all else fails, then they say, "Well, if you settled our

21 tax liability, thank you very much, we should have had

22 the money back". But the trouble is -- I haven't heard

23 Mr Qureshi yet, but the trouble is that on your

24 second -- on that case, if that succeeds, you get it

25 back and you should have had it back on April 7, 2011.


1 MR WOLFSON: All I would say, my Lord, we are not making

2 closing submissions, it does seem a somewhat

3 counterintuitive result that Tullow has both discharged

4 Heritage's tax liability, because this assumes there was

5 a valid tax liability, and we have paid it.


7 MR WOLFSON: And the 283 in the escrow still somehow ends up

8 with them --

9 MR JUSTICE BURTON: And not with you.

10 MR WOLFSON: That would seem to be an odd result.

11 MR JUSTICE BURTON: It is only if your alternative case

12 succeeds we have to worry about this. No doubt

13 Mr Qureshi expects your alternative case to fail, but if

14 it succeeds, then you paid their tax liability, you

15 should get the money back with interest since

16 7 April 2011.

17 MR WOLFSON: Well, without wishing to be perhaps overly

18 pedantic at this stage, if the alternative case succeeds

19 we would have a claim against him in restitution so we

20 would get a judgment. Whether we get the escrow monies

21 out goes to the question of the jurisdiction on the

22 escrow and you know our position on that, which is that

23 actually our primary position is that neither party has

24 it because there is no jurisdiction -- you know the

25 sense I am using that word -- there is no jurisdiction


1 in this court over that contract.

2 MR JUSTICE BURTON: Yes, I follow that. Yes, there it is.

3 But you are relying on 7 April as being the date when

4 they paid your tax liability.

5 MR QURESHI: Our purported tax liability. They made

6 a payment.

7 MR JUSTICE BURTON: I don't know. I think it has to be your

8 tax liability. I mean, it is all basing on alternative

9 cases. It doesn't arise -- only on one of the various

10 cases does this arise that they paid your tax liability,

11 that, if they have paid your tax liability I entirely

12 follow you should have the money back out of the escrow

13 account but they should have it. The circumstance in

14 which you get the money out of the escrow account and

15 have interest or capital or alternative of vast amounts

16 because you could have invested in Nigeria, at the

17 moment seems to me pie in the sky but at least I now

18 understand the position and Mr Atherton can give his

19 evidence.

20 MR QURESHI: My Lord, if the pleading hasn't expressed the

21 position with sufficient clarity, we can seek to --

22 MR JUSTICE BURTON: I hadn't understood it but I now do

23 begin to understand it. Yes?

24 MR QURESHI: My Lord, there are some notes that I am handing

25 up which I believe have been provided to my friend, the


1 notes that your Lordship has requested be prepared on

2 clause 3.1 (Handed).

3 MR JUSTICE BURTON: Thank you very much indeed.

4 MR QURESHI: The first --

5 MR JUSTICE BURTON: These are the same notes as I have had

6 from Mr Wolfson?

7 MR QURESHI: My Lord, yes.

8 MR JUSTICE BURTON: Thank you very much.

9 MR QURESHI: The first one is on the clause 3.1. The second

10 is on 7.6. The third is 106. The fourth is the

11 payments that continue to be made, and the fifth is the

12 comparison between the December 2010 document that

13 Mr Martin signed off on, the 15 March 2011 Memorandum of

14 Understanding.

15 MR JUSTICE BURTON: Good, that is very helpful. Thank you

16 very much.

17 MR WOLFSON: Can I just raise one further point of

18 housekeeping before we start with the witness.

19 Obviously we are somewhat in the dark on this point

20 but your Lordship was very keen that that letter would

21 go to the Arbitrators.


23 MR WOLFSON: Of course we are outside the loop and we are

24 equally keen to know what's going on.

25 MR JUSTICE BURTON: I am very keen to know.


1 MR QURESHI: My Lord, I asked about this yesterday. I asked

2 yesterday afternoon and this morning. We have not had

3 an answer from Messrs Curtis. There are two

4 representatives here in court from Messrs Curtis.

5 MR JUSTICE BURTON: I wonder if I could ask them to find out

6 now for me, please. You are sitting at the back.

7 Hello, good morning to you. You sat here yesterday

8 morning, and I know that you reported back but I would

9 like an answer, please, at the short adjournment. There

10 are two of you. Why don't one of you make a phone call

11 and the other stay and listen to the evidence?

12 I would like to know, please, from Messrs Curtis by

13 11.45 whether the letter has gone and if not why not.

14 Do you want to make a phone call now?

15 THE SOLICITOR: Yes, I want to say I will make the phone

16 call but so far we haven't had instructions about the

17 reply.

18 MR JUSTICE BURTON: Perhaps simultaneously there could be

19 contact made by your solicitors, Mr Wolfson, to the

20 relevant person whoever you are in contact with, if

21 anybody, in Uganda reminding them of the obligation of

22 the Government under the Memorandum of Understanding and

23 that this would be part of their obligation.

24 MR WOLFSON: We will certainly make such phone calls as we

25 can.


1 MR JUSTICE BURTON: Thank you very much.

2 MR WOLFSON: Of course we are dealing with a Government body

3 but we will certainly do whatever we can.

4 MR JUSTICE BURTON: Thank you very much indeed. Are you

5 going to make the call? Thank you. At least I shall

6 need to know what steps have been taken, thank you.

7 Yes, right. On we go.

8 MR QURESHI: My Lord, it is Mr Atherton's turn. Good

9 morning, Mr Atherton. Mr Atherton, there is somebody

10 helping you with the bundles I believe.


12 Examination-in-chief by MR QURESHI

13 MR QURESHI: Mr Atherton, in front of you there will be some

14 bundles with pink spines that are numbered E and you

15 should have a bundle which is on the back of it numbered

16 E1 onwards but the bundle I would like you to turn to is

17 bundle C. It has a yellow spine. If I could ask you to

18 turn to tab 9 of bundle C. Do you see that?

19 A. Yes, I do.

20 Q. It is headed "First witness statement of Paul Richard

21 Atherton." If I could ask you to turn to page C/313 of

22 the bundle, page 86 of 86 of the witness statement, do

23 you see that?

24 A. Yes, I do.

25 Q. Mr Atherton, is that your signature?


1 A. Yes, it is.

2 Q. This is your statement?

3 A. Correct.

4 MR QURESHI: I believe Mr Wolfson will have some questions

5 for you.

6 MR JUSTICE BURTON: Yes, can I ask just one question before

7 that happens. I understand the position on the 288,

8 that you disputed that and of course you knew that the

9 claimants were paying, you had agreed that they would

10 pay the one-third of the debt on your behalf out of your

11 money that they owed you so that you were fully engaged

12 with a dispute about the 283 million both by having paid

13 your one-third and by having entered into arbitration as

14 to the balance.

15 I am unclear about the 30, the next lot, that is the

16 one-third or so of the extra 100 or the 30 per cent of

17 the extra 100. You plainly disputed the 30 in a letter,

18 or the formal notice that you sent in answer to the

19 assessment. But why didn't you pay up the -- it is

20 chicken feed in the context of what we are talking

21 about. Why didn't you pay up the one-third of the 30 so

22 as to trigger, I think it is section 104, but I can't

23 remember which section it is, as you had done or as they

24 had done on your behalf in relation to the 288?

25 A. We had -- it was 283, my Lord.



2 A. And we had objected to that in August.


4 A. I believe August the 18th.


6 A. We then received an assessment on August the 19th for

7 $30 million being the 30 per cent of the $100 million

8 contractual settlement.


10 A. We on advice felt that the case was linked with the

11 $1.35 billion, that we had objected -- we had objected

12 in fact the day before -- that it could not be taxed on

13 a standalone basis, that we would therefore object in

14 due course, which we did, that because the two were

15 linked intrinsically, because the contractual settlement

16 was clearly outside of Uganda and was, as I say, linked

17 to the original sale, that there was no need or no

18 requirement to deposit 30 per cent of $30 million.

19 MR JUSTICE BURTON: Has the Government either in

20 correspondence or in the course of the Tax Tribunal or

21 in the course of the arbitration made the point that you

22 aren't entitled to dispute or haven't successfully

23 disputed because you didn't pay the 30 per cent of the

24 30 million?

25 A. My Lord, yes, I believe the Tax Appeals Tribunal has


1 accepted our objection and it is being heard and has

2 been heard.

3 MR JUSTICE BURTON: Accepted that you made an objection even

4 though you didn't pay the 30 per cent?

5 A. Correct.

6 MR JUSTICE BURTON: So the Government did take the point but

7 weren't successful in front of the Tribunal, is that

8 correct?

9 A. Correct.

10 MR JUSTICE BURTON: We have, of course, the judgment of the

11 Tribunal. I have skim read it. If it is dealt with

12 somewhere in the judgment, I would be grateful to have

13 it drawn to my attention. Thank you.

14 A. Thank you.

15 Cross-examination by MR WOLFSON

16 MR WOLFSON: Just to clarify that point, Mr Atherton, before

17 we get going properly. I think we can probably agree on

18 this: that Heritage's position, vis à vis the Government

19 was, well, since Tullow has actually now put in 313

20 there is enough scope for the other 30 out of that?

21 A. No, my Lord.

22 Q. Okay, we'll come back to it then.

23 A. We are looking at a time of August 19 for the

24 assessment. The period of time whereby we had to object

25 was, I believe, 45 days.


1 MR JUSTICE BURTON: And you did object.

2 A. Which we did.

3 MR JUSTICE BURTON: So strictly speaking you should have

4 paid the 30 per cent in that 45 days.

5 A. But I believe it was considered by the Tribunal well

6 before the payment date of around mid April, so it's

7 unrelated, my Lord, to my knowledge.

8 MR WOLFSON: As I said, Heritage has never taken the

9 position that that 30 million is to be found if

10 necessary in the monies paid by Tullow.

11 A. Heritage's position has always been maintained that the

12 $30 million tax assessment will be -- is being contested

13 and is not payable as we have taken advice. That is --

14 Q. That is not the question I asked.

15 MR JUSTICE BURTON: What you are being asked is whether you

16 ever argued in the alternative, that if you were

17 required to pay one-third of the 30, which would only be

18 10 million, the Government had had the 313 out of Tullow

19 and they should look to that.

20 A. I believe we have never considered it, my Lord.

21 MR WOLFSON: If need be, we'll come back to this point.

22 MR JUSTICE BURTON: Thank you.

23 MR WOLFSON: Let me say now good morning, Mr Atherton. As

24 you were sitting in court when we had the exchange

25 earlier, let me just make clear, so we both know where


1 we are going, that I am not going to ask you questions

2 about documents where you are providing a running

3 commentary in your witness statement on documents which

4 you are not involved in, which you didn't see at the

5 time and where you are saying: it can be shown from X or

6 Y that such-and-such. For the avoidance of doubt and

7 for the record we don't accept your comments but I am

8 not going to cross-examine you on it because my

9 submission will be that that is not helpful evidence for

10 my Lord.

11 Before we look at any documents can we just clear up

12 what documents we have. Do you ever make notes of

13 meetings?

14 A. I periodically do make notes of meetings, my Lord.

15 Q. The more important the meeting, the more likely you

16 would be to take a note of it; is that fair?

17 A. In the main, yes.

18 Q. And I think we can accept that Heritage's disposal of

19 its Ugandan assets was at the very least one of the

20 biggest transactions Heritage has ever entered into?

21 A. The sale of the Ugandan assets was a substantial sale

22 and one of the largest, if not the largest, we have

23 entered into, that's correct.

24 Q. I think we can also agree that you haven't disclosed

25 a single handwritten note in these proceedings?


1 A. I haven't seen all of the information that has been

2 disclosed, been handled by our lawyers. I'm aware that

3 certain meeting minutes were taken, correct.

4 MR JUSTICE BURTON: Any handwritten notes by you?

5 A. Yes, I did -- I see the key meeting where I did take

6 notes, jottings rather than notes potentially, was the

7 key meet I saw was the meetings with Government with the

8 URA which took place at the beginning of June 2010.

9 MR JUSTICE BURTON: Have you disclosed those?

10 A. I believe that's a question for the lawyers. As I say,

11 I have not seen everything.

12 MR JUSTICE BURTON: Have you handed them to the lawyers?

13 A. Yes, I have. But I believe that those meeting minutes

14 and all of the meetings were without prejudice and,

15 therefore, may not have been disclosed.

16 MR QURESHI: My Lord, your Lordship will recall that there

17 is an email from Mr Kiiza passing on the without

18 prejudice, strictly private and confidential letter of

19 McCarthy Tetrault and the minutes of the meeting that

20 Mr Atherton I believe is referring to where the without

21 prejudice offer was made which found its way into

22 Mr Martin's witness statement, the objection had been

23 made and sustained that that was always a without

24 prejudice discussion and it was always meant to be

25 confidential. So what I had said to your Lordship was


1 whilst those documents had found their way into the

2 bundle, in the face of our objection, we maintained the

3 fact that they were with reference to a without

4 prejudice discussion.

5 MR WOLFSON: My question is on a much broader basis,

6 Mr Atherton. It may be -- is your evidence to

7 my Lord that that was the only meeting relevant to the

8 matters we are discussing where you took a note?

9 A. In connection with the sale?

10 Q. No, in connection with the matters we are discussing,

11 together with the sale, your tax liability, discussions

12 with the Government, discussions with Heritage, any

13 briefings to the press, any internal meetings at

14 Heritage, is your evidence that the only meeting at

15 which you took a note was that meeting with the

16 Government for which privilege is being claimed, without

17 prejudice privilege?

18 A. I believe yes.

19 Q. That is the only meeting you took a note, yes, that is

20 your evidence?

21 A. I believe that to be the case, yes.

22 Q. Did Mr Buckingham ever take notes?

23 A. It is a question for Mr Buckingham, but I --

24 MR JUSTICE BURTON: We can't put it to Mr Buckingham, can

25 we?


1 A. -- don't believe he does.

2 MR JUSTICE BURTON: You don't believe he's a notetaker?

3 A. No.

4 MR WOLFSON: What about the other individuals whom Heritage

5 has apparently searched for documents as part of its

6 disclosure individuals? Let me just read out the names.

7 There are only six of them, and you tell me whether

8 these individuals are in the habit of taking notes of

9 meetings.

10 Brian Smith, Brian Westwood, Mitzi Westwood, Dmitri

11 Tsvetkov, Gordon Wittard and Patrick -- and you are

12 going to have to help me with the surname here, Mr

13 Atherton. I am not going to even try, if you can

14 pronounce it for me?

15 A. I think we'll keep it with Patrick.

16 Q. Very wise.

17 A. We do in-house.

18 Q. We can agree on some things, Mr Atherton. So those five

19 individuals and Patrick, are they in the habit of taking

20 notes of meetings?

21 A. I can confirm Mr Smith doesn't take notes. As to Mr and

22 Mrs Westwood, Patrick and Dmitri, I don't believe Dmitri

23 takes notes, Patrick and Mr and Mrs Westwood I can't

24 say. I don't know. I have not seen any notes from

25 those individuals.


1 Q. The reason why I am asking is that we have not had

2 a single handwritten note disclosed by Heritage in these

3 proceedings. There might be a jotting on an occasional

4 document but there is no note of any meeting, no note of

5 internal discussions, nothing of the sort. I am asking

6 whether there were any taken and they have been lost or

7 whether your evidence is that none were ever taken.

8 A. My evidence I have provided is: for certain individuals

9 I don't know. I know people requested. I know that we

10 were sent information from our lawyers about destruction

11 of documents. I'm not aware of any document being

12 destroyed, destructed or withheld.

13 Q. Maybe the notes got lost when you moved ship from the

14 Bahamas to Mauritius?

15 A. None of those individuals were based in the Bahamas or

16 Mauritius.

17 MR JUSTICE BURTON: Where were they based?

18 A. The Westwoods and Patrick, the Westwoods were based in

19 Uganda and then they retired and live in South Africa.

20 Patrick is based in Uganda. Gordon Wittard is based in

21 Scotland. Dmitri Tsevetkov was based -- he is no longer

22 with Heritage -- he was based in the London office.

23 Mr Smith was based in Europe.

24 MR JUSTICE BURTON: So there was a Uganda office and when

25 did that close?


1 A. Following the sale we had.

2 MR JUSTICE BURTON: Then you had the ongoing runoff, didn't

3 you, for quite some time?

4 A. Which is still carrying on. Patrick --

5 MR JUSTICE BURTON: So you still have an office in Uganda?

6 A. Yes. Patrick is still based in Uganda.

7 MR JUSTICE BURTON: So those offices have been searched for

8 relevant handwritten documents?

9 A. I believe he's been requested to provide the

10 information, that's correct, and I believe in terms of

11 all the documentation that was in the Heritage office

12 together with the employees will have transferred

13 across. I believe everything was moved across by

14 Tullow.

15 MR JUSTICE BURTON: What has moved across?

16 A. All of the documentation, all the archives, all the

17 information. The computers were transferred and handed

18 across.


20 A. To Tullow.


22 A. In accordance with the SPA.

23 MR JUSTICE BURTON: But you wouldn't hand over handwritten

24 notes, would you?

25 A. I was not involved in the process but I don't believe


1 there was ever an edict that we would not hand over

2 handwritten notes.

3 MR WOLFSON: A handwritten note, for example, discussing

4 internally whether you should move the registration of

5 the companies from the Bahamas to Mauritius, you are not

6 suggesting that those sort of notes would have been

7 handed over to Tullow?

8 A. I don't believe those discussions took place with Mr and

9 Mrs Westwood or with Patrick or with people in the

10 office in Kampala.

11 Q. I am only asking because we haven't had any notes about

12 that either, just to pick an example.

13 A. That was based on discussions over the phone.

14 Q. I see. So you get a couple of chaps on the phone, you

15 have decided to move from the Bahamas to Mauritius, is

16 that basically where we are going?

17 MR QURESHI: My Lord, I am not sure why this particular

18 issue is relevant for the pleaded case.

19 MR WOLFSON: We will see where we are going. Anyway,

20 I think we have your evidence that there were no

21 documents.

22 Let us look at a document, therefore, which we do

23 have, your witness statement. It should be in front of

24 you, bundle C, tab 9. Can we start with paragraph 36,

25 please. I think we can hopefully do this fairly quickly


1 because this is somewhat of a piece of advocacy on your

2 matter.

3 The point, as I understand it, you make in

4 paragraph 36 is that three previous deals had not been

5 taxed by the Ugandan Government and therefore the idea

6 that your sale to ENI, which turned out to be the sale

7 to Tullow, might be taxed came as a shock. I hope that

8 is a fair summary of your position.

9 Let us go in reverse order and look at the

10 transactions which you are talking about. First of all,

11 the transaction in which Tullow acquired Hardman. This

12 was, I think we can agree, a corporate deal, an

13 acquisition of shares in an Australian company and not

14 a Ugandan asset. That is right, isn't it?

15 A. It was the acquisition of an Australian listed company

16 I believe. I'm assuming an Australian company.

17 MR JUSTICE BURTON: Of the shares?

18 A. Of the shares which had a significant portion of its

19 business within Uganda.


21 MR WOLFSON: So your point is that, as I understand it, the

22 Ugandan Government should have levied tax

23 extraterritorially on the sellers of those shares

24 wherever in the world they were. Is that the point you

25 are making.


1 A. The point I'm making is that no tax was levied by the

2 Ugandan Government.

3 Q. Are you inviting the court to infer from that that the

4 Ugandan Government's failure to levy tax

5 extraterritorially meant that it knew that no

6 substantive tax was due? Is that the point you are

7 making?

8 A. I'm not a Uganda tax expert and I'm certainly not an

9 Australian tax expert. All I'm aware of is that Tullow

10 has allocated a significant portion of the

11 consideration, I believe in excess of $400 million, on

12 that transaction to the assets within Uganda and that

13 they were not taxed in Uganda.

14 Q. I don't need to trouble you about that any more. Let us

15 look at the next one, Tullow's acquisition of Energy

16 Africa. This is even more extreme, isn't it, given that

17 the licence holder in Uganda was not actually Energy

18 Africa but a subsidiary of Energy Africa?

19 A. That's correct, an Isle of Man company.

20 Q. So are you making a point here that the Government

21 should have levied tax extraterritorially on the sellers

22 of shares in a company which itself owned shares in

23 a company which held licences in Uganda?

24 A. Again, I'm aware it was a corporate transaction and I'm

25 aware that was no tax was levied or charged by the


1 Ugandan Government, my Lord.

2 Q. Let us look at the last one then, the Government's

3 failure to tax Heritage's disposal to Energy Africa in

4 2001.

5 Now, to get the background facts on this, at

6 paragraph 32 of your statement on the previous page you

7 note that the first drilling successes occurred between

8 2006 and 2009 and, as I understand it from your witness

9 statement, by 2001, which is the date of the

10 transaction, you had just done a seismic survey and you

11 were bringing in Energy Africa to do another survey, is

12 that fair?

13 A. Correct. The consideration for the acquisition of the

14 assets was to fund further monies into the licence by

15 way of a seismic programme.

16 Q. Yes. So when you sold to Energy Africa in 2001 you had

17 forked out a lot of money in costs but the licence

18 hadn't yet increased substantially in value, had it?

19 A. At the time I haven't got a valuation of the licence but

20 we are talking of a few million dollars. We are not

21 talking of billions of dollars, clearly.

22 Q. So we can probably cut this short. I think we are

23 agreeing, Mr Atherton, that in commercial terms, that

24 sale, we are not comparing like with like when we are

25 looking at that sale to looking at the sale from


1 Heritage to ENI which became Heritage to Tullow in 2010?

2 A. My Lord, I would say we are to the extent that it was

3 a disposal of a 50 per cent interest in a licence in

4 Uganda. The consideration was different but the asset

5 was a 50 per cent interest which was sold or

6 transferred.

7 Q. What was Heritage's gain on the sale to Energy Africa in

8 2001?

9 A. I don't know.

10 MR JUSTICE BURTON: Did you make any gain at all?

11 A. Possibly, I would imagine we made a small gain but not

12 a significant gain but I don't have the figure to hand,

13 my Lord.

14 MR WOLFSON: It wasn't in the order of $1.35 billion.

15 MR JUSTICE BURTON: He has agreed that. At the moment he

16 isn't able to recollect whether there was any gain at

17 all.

18 A. It was 11 years ago, my Lord. If there was it would be

19 --

20 MR JUSTICE BURTON: It would be very small, if it was

21 anything at all.

22 A. Absolutely correct.

23 MR WOLFSON: I think we can move on to the next topic,

24 my Lord.

25 Mr Atherton, I am going to give you the references


1 in bundle E. I will also try to give my Lord the core

2 bundle references. The first document is E1/122 which

3 hopefully now should be core 1 and I have it marked as

4 (xi).01.


6 MR WOLFSON: It should be a document, Mr Atherton, headed

7 "Statement of the Parliament of the Republic of Uganda",

8 and you will see it is a statement delivered to the

9 Ugandan Parliament by Minister Onek. If you turn to the

10 last page, so to put it in context for you, you will see

11 that the statement is dated 26 November 2009. That is

12 at point 07. This statement is about Heritage's

13 proposed sale to ENI. Have you looked at this before?

14 A. Yes, I have.

15 Q. I will take you to some paragraphs but if I am going too

16 quickly please tell me and I'll slow down. If you look

17 at paragraph 11, you will see the Minister says that:

18 "ENI was first introduced to the Government as

19 a potential buyer of Heritage's 50 per cent interest in

20 area 1 and 3A during August 2009."

21 Is the Minister correct about that?

22 A. ENI approached us in July 2009. I believe ENI then

23 approached the Government. This document refers

24 to August 2009. There is no reason why I would question

25 that. But not a formal introduction by Heritage -- we


1 were not involved in any meetings with Government with

2 ENI.

3 Q. I don't think the Minister is saying in paragraph 11

4 that you were, the way I read it.


6 MR WOLFSON: You are just saying that to make that clear,

7 are you?

8 A. Correct. It is the way it says "first introduced to

9 Government", it is as though Heritage had introduced I

10 had inferred but we didn't.

11 MR JUSTICE BURTON: It doesn't say that.

12 MR WOLFSON: Paragraph 13, just to put this in context for

13 you, the Government welcomed ENI. Paragraph 14, the

14 proposed price is $1.5 billion to purchase your

15 50 per cent interest, and at paragraph 16 the Minister

16 says in unambiguous terms:

17 "There will be taxation for the sale by Government

18 of Uganda."

19 At paragraph 20 the Minister calls the sale a normal

20 business transaction. You can see that in the third

21 line, Mr Atherton, in paragraph 20, and says that:

22 "The existing legislative framework in the country

23 is sufficient to ensure that this and any similar

24 transaction and undertaking without causing loss to the

25 country."


1 Would you agree that when he refers to avoiding

2 a loss to the country, one of the things he must be

3 talking about is a loss of tax revenues?

4 A. My Lord, I would infer any loss to the country by

5 Heritage selling the assets as we did and, based on our

6 advice, no tax being paid, there is no loss to the

7 country. There is no loss to the extent that on this

8 question -- and I think people infer it as Capital Gains

9 Tax -- the purchase consideration does not become

10 a factor in the ongoing tax computation of the

11 purchaser, so the base costs of what they are acquiring

12 is essentially what have we spent and been agreed in the

13 licence, which is between 100 -- later on we talked of

14 US$182 million.

15 The base cost for Capital Gains Tax in accordance

16 with the Ugandan legislation is not uplifted to the

17 $1.35 billion. It remains at the $180 million which is

18 what we have spent on the licence and there is no loss

19 of revenue to the Ugandan Government if they did not

20 tax -- as I said, there is no precedent of tax -- they

21 did not tax this transaction.

22 Conversely, if they were to impose a Capital Gains

23 Tax, there would be a super profit made.

24 MR JUSTICE BURTON: That is your analysis of paragraph 20.

25 Paragraph 16 is clear, isn't it?


1 A. We had taken advice.

2 MR WOLFSON: Mr Atherton, we are not going to get very far

3 if you don't answer the questions which I am putting to

4 you. The only question I was putting to you was whether

5 paragraph 20, when it talks about loss to the country,

6 did you read that as tax revenues? As I understand it

7 you are saying: no, you didn't. Is that right?

8 A. Correct.

9 Q. I mean, I am grateful for the lecture on Ugandan Capital

10 Gains Tax and we may come to that if we need to.

11 What I am putting to you, Mr Atherton, is a very

12 simple proposition, that the position of the Ugandan

13 Government is that companies which make a large amount

14 of money in Uganda should be paying tax in Uganda; is

15 that your understanding of their position too?

16 A. I think we can make it even a simpler process. We will

17 pay any tax that's legally and lawfully due. We -- the

18 structure, we know we are disputing the tax with the

19 Ugandan Government. Everyone does. It is a fact, and

20 there are two elements. There is a tax element and at

21 this time we were looking at consent. But with the tax,

22 we provided for the tax. It is reserved. It has either

23 been deposited in country or it has been deposited into

24 an escrow account such that we can go through the due

25 processes, the legal processes within country, in


1 accordance with their rules and regulations and we can

2 determine whether tax is payable or not.

3 MR JUSTICE BURTON: That is your general position in this

4 case and you have now stated it and it is very well

5 understood by me and by the court. But let us try at

6 the moment to stick to what you are being asked about,

7 and at the moment the implication of the first part of

8 your statement is, because tax had never been levied

9 before on transactions which you say were similar, you

10 didn't expect to pay tax and that is what you are being

11 asked about; not whether you are liable to pay tax, not

12 whether you are rightly or wrongly disputing tax. That

13 will come later.

14 Try and concentrate on the questions being asked.

15 At the moment all that is being put to you is that when

16 you read this press release you knew that the Ugandan

17 Government would be expecting tax. They might have had

18 a wrong expectation but they were expecting tax to be

19 paid.

20 A. That would be correct, my Lord.


22 MR WOLFSON: So just to be clear, I think we are now,

23 although your internal position may have been that no

24 tax was payable you understood that the Minister's

25 position, honestly held, was that tax would be payable;


1 is that fair?

2 A. As at the November 26, the Minister had stated that he

3 considered that tax would be payable and our view was:

4 you have not seen any documents, not considered this,

5 we'd only announced the sale with an MOU three days

6 before this. We hadn't provided any documentation to

7 them and so we felt this premature, but clearly this

8 refers to taxation.

9 Q. I am asking because in your witness statement in

10 paragraph 60 you characterise this as political

11 posturing by the Minister. What I'm trying to get at is

12 whether you are saying that the Minister was saying

13 something which he didn't believe or something with

14 which you disagreed. You will appreciate that there is

15 a distinction between those two. Which is it?

16 A. We believed that he was incorrect or poorly advised.

17 Q. Would you like to reconsider the phrase "political

18 posturing by the Minister" or are you happy to stick

19 with that in your paragraph 60?

20 A. I'm happy.

21 Q. Having made the clear and unambiguous statement in

22 paragraph 16 of the statement to Parliament that there

23 will be taxation for the sale by the Government of

24 Uganda, you would have appreciated that it would be

25 politically difficult, if not political suicide, for the


1 Minister later to say, "There's a company which has just

2 made $1.35 billion profit in Uganda but it turns out we

3 can't tax it at all"? You must have appreciated that,

4 didn't you?

5 A. No.

6 Q. Mr Atherton, what I am putting to you, so there is no

7 misunderstanding, is that it was perfectly apparent to

8 you from November 2009 at the latest that your sale was

9 going to be assessed to tax in Uganda?

10 MR JUSTICE BURTON: Rightly or wrongly.

11 MR WOLFSON: Yes, rightly or wrongly. I am not saying that

12 the Government's position was correct. That is for

13 another -- we'll come back to that but you understood

14 that the Government's position was that the sale was

15 going to be taxed in Uganda, and you understood that at

16 the latest from November 2009?

17 A. No, that is not correct.

18 Q. Since we are on -- I think your Lordship may have

19 paragraph 60 of the witness statement open?


21 MR WOLFSON: While we are on here, let us just pick up

22 paragraph 61, Mr Atherton, where you describe how -- it

23 reads a bit like a movie -- Heritage received a leaked

24 briefing purporting to be from Minister Onek to the

25 President. I am looking at the last part of your


1 witness statement where you say this:

2 "This briefing was passed to Heritage in rather odd

3 circumstances by two gentlemen who visited HOGL's

4 offices in Uganda on 6 January 2012 claiming to be from

5 the office of the President. They offered the

6 possibility of being able to provide more leaked

7 documents in exchange for payment."

8 Then you say that was unacceptable, so you didn't

9 engage in further communications.

10 Can you shed any further light on this rather

11 tantalising extract as to what actually happened or is

12 that all you are prepared to say about it?

13 A. I think the witness statement summarises it. Two people

14 arrived into our local office in Kampala.

15 MR JUSTICE BURTON: Were you there?

16 A. No, I was not.

17 MR JUSTICE BURTON: So this is hearsay?

18 A. This is based on a discussion with the country manager

19 who was there.

20 MR WOLFSON: I see.

21 A. And they provided the document. They would not leave

22 their names. We tried to trace them to understand who

23 they were. We never saw them again. They never came

24 back to our offices to our knowledge.

25 MR WOLFSON: To --


1 A. It was very strange. Any of our offices. We do not

2 believe they made contact with any Heritage personnel to

3 our knowledge.

4 MR JUSTICE BURTON: At any rate, they gave you some

5 documents which emanated from the Government.

6 A. That's correct.

7 MR JUSTICE BURTON: And they made this statement that you

8 record in paragraph 61.

9 MR WOLFSON: Yes, it is not clear from your witness

10 statement that this was information passed on to you

11 from your chap in Uganda.

12 A. It was passed on by our Ugandan office.

13 Q. But you are certain that Heritage wouldn't have actively

14 sought out this briefing and they came to you

15 unannounced?

16 A. Absolutely. It was very strange. I would point out

17 that through the disclosure documents it has become

18 apparent that Tullow also received the same documents

19 which were considered to be confidential and sensitive

20 according to an email in the core bundle.

21 Q. Mr Atherton, are you the CFO of Heritage?

22 A. Yes, I am.

23 Q. You will know that you are shedding out large sums of

24 dosh to my learned friend who can put your case so your

25 knowledge of what Tullow received, as I understand it,


1 is knowledge which you have got from looking at the

2 documents. If you continue to try to make points like

3 this, it is absolutely fine but I will still ask the

4 questions I am going to ask, okay?

5 Bundle E3/743, core 1/80.001. I hope that that will

6 be an email from Mr Kaplanis to you. Core 80.001, an

7 email from Mr Kaplanis to you on 12 February. He is

8 forwarding a new story from the Dow Jones and if you

9 look through, you will see that they have been told by

10 a Mr Kaujju of the URA that the URA will levy CGT at 30

11 per cent once the deal is finalised.

12 So before we saw the Minister saying it and on

13 12 February 2010 we have the URA itself saying that. So

14 I put to you the same point, that by February 2010 it

15 was obvious that, come what may, Heritage was going to

16 be served with a tax assessment in Uganda.

17 A. My Lord, if I can backtrack one second in terms of

18 the November -- is it the 27th, which was the

19 parliamentary notes which we looked at? I think it

20 was November.

21 MR WOLFSON: Yes, it was, I think it was the 29th but I'm

22 not sure anything turns on that.

23 A. Where they said there would be taxation on this. We

24 hadn't signed the agreement with ENI at that time. If

25 you go to the sale and purchase agreement which is


1 included in the documents, it is clear that one

2 mechanism, one way that the contingent consideration of

3 $150 million would be payable was by the purchaser

4 obtaining very large tax breaks in country for up to or

5 more than 10 years. That is what ENI at the time was in

6 discussion with, and believed they would receive.

7 So back in the day of November it was thought that

8 the purchaser would receive significant tax breaks. We

9 then move forward to February with the URA statement by

10 Peter Kaujju, who is a public and corporate affairs

11 officer. He was often in the press and this is on the

12 12th. If you go to the February 17th, he is in the

13 press again, this time saying: "We're thinking of taxing

14 the transaction", and I am paraphrasing here but it is

15 in the bundle. Shall we go to it? It makes sense

16 rather than me getting it incorrect.

17 Q. Actually can you just answer the question I put to you?

18 It was a very short question and if the answer is "no"

19 we can move on. The question was simply this: was it

20 obvious to you by February 2010 that Heritage was going

21 to be served with a tax assessment in Uganda?

22 A. No.

23 Q. Good. We can move on. As I understand your case, you

24 allege that Tullow assisted, advised and encouraged the

25 Government to tax Heritage. Are you saying, just so I


1 understand where you are coming from, that but for acts

2 of Tullow the Government wouldn't have served the

3 6 July 2010 assessment on Heritage?

4 A. I believe if the ENI transaction had completed and

5 Tullow had not pre-empted the transaction, that we would

6 not have received the 6 July 2010 assessment.

7 Q. Is there anything else which you are relying on in that

8 regard other than the fact that the transaction ended up

9 with Tullow and not ENI as a result of Tullow's exercise

10 of its contractual pre-emption right?

11 A. I think two things. One is that is correct that it was

12 Tullow rather than ENI, and secondly I think the date,

13 if they were to tax or issue an assessment, it would

14 have been significantly earlier than July.

15 MR JUSTICE BURTON: I have been looking for the 17 February

16 and the only thing I can find is at 744 where Mr Kaujju

17 says if it is to do with the transfer of shares there is

18 no tax applied but if it is a sale of assets then they

19 will be taxed. Is that what you had in mind? It

20 doesn't seem to accord with how you remembered it?

21 A. He says on 744, my Lord, in the third paragraph, towards

22 the end:

23 "Mr Kaujju told the Daily Monitor that the full

24 details of the transaction were not yet to be completed.

25 We are still trying to pick up the details, we got


1 a copy of the sales agreement between Tullow and

2 Heritage and it is being studied by a team in URA."

3 MR WOLFSON: Do you want to carry on. Read the next

4 paragraph.

5 A. "Explaining when Capital Gains Tax would apply to

6 a sale, he said: if it's to do with the transfer of

7 shares there is no tax applied, but if a sale of assets

8 then there will be tax."

9 MR JUSTICE BURTON: That is what I quoted to you and that

10 doesn't appear to be the way you remembered it.

11 A. No, I was looking at the paragraph before, my Lord.

12 MR WOLFSON: It is always difficult when you read a bit of

13 a document, Mr Atherton, because the fact is the

14 Heritage/Tullow transaction was an asset sale, not

15 a share sale, wasn't it?

16 A. Pardon? Can you repeat the question, I was reading the

17 document.

18 Q. Yes, the Heritage/Tullow transaction was an asset sale

19 not a share sale, correct?

20 A. Yes, it was an asset sale.

21 Q. When it exercised the right of pre-emption, Tullow was

22 presented, as per the contract, with the same contract

23 that you were otherwise going to enter into with ENI,

24 correct?

25 A. The basis of pre-emption is it is the same but


1 essentially you change the names of the purchaser,

2 my Lord.

3 MR JUSTICE BURTON: Yes. I am not going to stop you, at

4 least I am going to try not to stop you, Mr Atherton,

5 but this is simply indicative of the fact that --

6 Mr Wolfson put it much more colloquially but you have

7 got counsel who will pick up anything that is overlooked

8 and it does seem to me that this is example is one in

9 which you said he said the contrary five days later and

10 in fact when one looks at the document he didn't say the

11 contrary five days later. So in fact it has not got you

12 out of the answer that you were going to make.

13 A. If we can carry on to further paragraphs on this

14 document 744, my Lord?


16 A. Under the one, the penultimate paragraph on initial

17 revenue and if we go to the last sentence:

18 "Miss Sarah Banago, [apologies for my pronunciation]

19 the Assistant Commissioner for Public and Corporate

20 Affairs at URA said she could not comment on the

21 statements but confirmed nothing had yet been finalised.

22 At this point it would be speculation for us to state

23 which taxes qualified ..."

24 MR JUSTICE BURTON: That is in the context of them not

25 knowing whether it was the transfer of shares, in which


1 case there would be no tax, or the sale of assets in

2 which case there would. All I think I am asking is

3 there is nothing in here which would entitle you to say

4 that the Government didn't expect to charge tax if the

5 transaction was a sale of assets?

6 A. We felt at the time that there was some mixed messaging

7 in the press, that it was confusing but clearly there

8 was considerable more weight towards the Government was

9 looking to tax the transaction, correct. Our advice at

10 that time, and still has been --

11 MR JUSTICE BURTON: You see, the reason why Mr Wolfson is

12 asking you these questions is because it seems to be

13 suggested that it was really the claimants who had

14 caused the Government to get you charged tax, and that

15 is part of your pleaded case, as I understand it. At

16 the moment he is exploring the question as to whether,

17 even before the claimants were involved, the Government

18 were saying they were going to be charging for tax so it

19 wasn't the claimants' idea, it was the Government's

20 idea. That I think is what he is on about at the

21 moment.

22 A. Understood.

23 MR JUSTICE BURTON: And that does appear to be the case,

24 doesn't it?

25 A. Sorry to interrupt, my Lord, but there was certainly


1 information in the press to that extent and through

2 press releases, correct.

3 MR WOLFSON: I think you said earlier -- I will try and find

4 it on the transcript, Mr Atherton, so I don't misquote

5 you -- you said:

6 "If the ENI transaction had completed and Tullow had

7 not pre-empted the transaction, we would not have

8 received the 6 July 2010 assessment."

9 You later made the point that the date may have been

10 different. Are you suggesting that if the transaction

11 had gone through with ENI, rather than Tullow, you

12 wouldn't have been assessed by the Government to tax at

13 all?

14 A. I don't know. It is a hypothetical question where

15 something that did not take place. I do not know.

16 Q. Because I think we can agree that the deal, so far as

17 Heritage is concerned, is exactly the same deal. All

18 you are doing is you are selling to X instead of to Y,

19 you change the name on the document, as you say?

20 MR JUSTICE BURTON: He has agreed that.

21 MR WOLFSON: My Lord, I was going to move to another topic.

22 MR JUSTICE BURTON: I have put that in as 80.001A.

23 MR WOLFSON: Yes, my Lord. Would this be a convenient

24 moment, my Lord?

25 MR JUSTICE BURTON: No, we'll carry on.


1 MR WOLFSON: I am sorry. Of course. I am sorry.

2 Can we turn to B1/3, Mr Atherton. B1 should be the

3 SPA and at page 3 -- sorry, when I say page 3, I'm using

4 the B numbers not the document numbers -- you will see

5 that Heritage Oil & Gas Limited is described there as

6 being registered in the Bahamas. You provided a copy of

7 this SPA to the Government shortly after it was

8 executed, didn't you?

9 A. Yes.

10 Q. And you knew in mid February 2010, because that is

11 apparent from the press release we were looking at

12 a moment ago, that this was the document which the

13 Government was looking at, the URA was looking at, to

14 decide whether you were liable to pay tax in Uganda; is

15 that correct?

16 A. I would assume that to be correct.

17 Q. In the document we were just looking at a moment ago --

18 you may still have it in front of you -- do you still

19 have E3, that press release, or has it gone back? You

20 see what Mr Kaujju said, just to remind you, is "We are

21 still studying the agreement". That agreement is the

22 SPA, isn't it?

23 A. I would assume that, yes. I have no reason to dispute

24 that.

25 Q. If you can just keep that open then, let us go back to


1 B1 for a moment then, page 21, clause 4.1. These are

2 warranties and indemnities which are provided. In your

3 own time, would you have a look, please, at subparagraph

4 (a)(i) of clause 4.1. (Pause). Have you read that?

5 A. Yes.

6 Q. The seller is Heritage, isn't it?

7 A. Heritage Oil & Gas, correct.

8 Q. And you warrant that that is a company duly organised

9 and validly existing under the laws of the jurisdiction

10 of the Bahamas.

11 Could you now turn to page 39 of the bundle,

12 clause 5.1.

13 "Until closing each party shall notify the other

14 party promptly after such party becomes actually aware

15 [interesting use of "actually"] there is any warranty

16 given by it in this agreement is untrue, inaccurate or

17 misleading in any respect or will be untrue, inaccurate

18 or misleading in any respect as of the closing date."

19 When was the closing date?

20 A. 26 July, 2010.

21 Q. So you accept, I think, that you had an express

22 contractual obligation to inform Tullow if Heritage

23 is -- I am using "Heritage" for HOGL -- if HOGL's

24 domicile changed, correct?

25 A. There is a requirement here based on 5.1 to provide


1 information to them, yes.

2 Q. Is that a "yes"?

3 A. Yes.

4 Q. We know that Heritage had re-domiciled itself from the

5 Bahamas to Mauritius on 15 March 2010, correct?

6 A. By continuation, correct.

7 Q. Mauritius has a double taxation treaty with Uganda, does

8 it not?

9 A. Yes, it does.

10 Q. Would you turn to bundle E4/934. The core bundle is

11 core 1/104.002. I am sorry the writing is small. But

12 there are emails in even smaller writing. You will see

13 the bottom email is from Daniel O'Neill. You will see,

14 Mr Atherton, he is a senior legal adviser at Tullow and

15 he is sending this email to Robert Brant. He is at

16 McCarthy Tetrault, isn't he?

17 A. Correct.

18 Q. They are your lawyers?

19 A. Correct.

20 Q. When I say "your lawyers", I don't just mean in this

21 litigation but they generally act for Heritage, is that

22 fair?

23 A. That's correct.

24 Q. Geoff Peters, who is he?

25 A. Again, he was at the time working with McCarthy's so he


1 was our lawyer.

2 Q. Graham Martin my Lord has seen over some days and Peter

3 Sloan is another Tullow man.

4 Just read it to yourself, Mr Atherton, if you would.

5 So you will see that he says that the escrow bank, which

6 is Standard Chartered, is carrying out KYC -- Know Your

7 Customer -- checks and in the course of those

8 investigations it has been discovered that Heritage has

9 just been re-domiciled to Mauritius and basically he

10 asks you to explain what's going on and whether the

11 Government has been told.

12 Mr Brant replies at the top of the page:

13 "Dan, that change has been in the works for a while

14 for internal Heritage group purposes but has only just

15 now become effective. The warranty at article 4.1(a)(i)

16 is no longer correct because the company is now

17 registered in Mauritius but the change should have no

18 bearing on the sale. Heritage will be corresponding

19 with the Ugandan Government in due course."

20 There is then an email which is copied to you at

21 bundle E3/804. I am afraid there is no core bundle

22 reference for this one. Bundle E3/804. I am afraid you

23 now have gone down a notch in the print size.


25 MR WOLFSON: And you see it attaches a revised draft of the


1 escrow agreement. There are a number of changes. If

2 you just turn through 806, 807 and thereafter, a number

3 of changes are made but there is no change to the point

4 on page 806 setting out Heritage Oil & Gas' registered

5 office at the Bahamas. You see that, do you, yes?

6 A. I am just reading it.

7 MR JUSTICE BURTON: It is at the top of the page.

8 A. Yes.

9 MR WOLFSON: So is the position this: despite the fact that

10 you were under a contractual obligation to tell Tullow

11 when any warranty became untrue, you did not do so,

12 correct?

13 A. I believe just at 1 April there were still some various

14 corporate matters required in Mauritius. The date of

15 the continuation was 15 March, so a couple of weeks

16 before, and I believe there was a licence we had to

17 obtain which we obtained at the beginning of April.

18 MR JUSTICE BURTON: Beginning of February.

19 A. No, April.

20 MR JUSTICE BURTON: I see. 12 April says the company is now

21 registered in Mauritius, so by 12 April it was all in

22 place?

23 A. That's correct, my Lord.

24 MR JUSTICE BURTON: So you are being asked about why you

25 didn't notify the --


1 A. And that was because there was various documents and

2 licences we had to obtain which we hadn't obtained at

3 this date. I think we obtained them right at the

4 beginning of April, my Lord.

5 MR WOLFSON: Are you suggesting that you looked at this

6 warranty and thought: "Well, because we haven't obtained

7 the licences we don't have to tell them about the change

8 of domicile"? Is that what you are saying?

9 A. I'm saying there is various documentation which was

10 going through and in due course would have been provided

11 by the warranty.

12 Q. And you hadn't told the Government either, had you?

13 A. No, we hadn't.

14 Q. Despite the fact that you knew that the URA was

15 considering your tax liability on the basis of the old

16 Bahamas domicile rather than the new Mauritian domicile?

17 A. We were aware of the URA were looking at the documents

18 based on the February press report. I believe the

19 Government was aware in -- I don't know the date the

20 Government was made aware. I believe it was May.


22 A. May. I don't have a specific date. We didn't --

23 MR JUSTICE BURTON: Was there a document to say that?

24 A. I'm not aware of a document, but I'm sure counsel will

25 provide it.


1 MR WOLFSON: We may come to this, my Lord. Mr Atherton,

2 what I am putting to you is that looking at these

3 documents, the conclusion would appear to be, but tell

4 me if I am wrong, that Heritage must have told its

5 lawyers to conceal the fact of Heritage's re-domicile

6 from the Government?

7 A. No.

8 Q. Do you have any other explanation for why your lawyers

9 would not have made the amendment to the domicile point?

10 Is that just an error on their part?

11 A. As I said, there was various documentation still going

12 through. It may have been an error. There was never

13 any discussion about withholding the information from

14 Tullow. In terms of Government, we didn't tell

15 Government until later. With hindsight we should have

16 told them earlier, absolutely we should have done. We

17 didn't. They were aware of it in May and we should have

18 informed Government much earlier.

19 Q. The fact is, Mr Atherton, what was going on was you were

20 moving from the Bahamas to Mauritius, I assume not for

21 the weather but because Mauritius is one of the few

22 countries which has a double tax treaty with Uganda;

23 that is the truth, isn't it?

24 A. We went to Mauritius for a number of reasons.

25 MR JUSTICE BURTON: Was that reason included in them?


1 A. We say it is corporate planning which would include

2 fiscal reasons, yes. Heritage Oil & Gas has other

3 licences, has other interests in other countries and we

4 were looking at planning for those other countries as

5 well, not specifically Uganda.

6 MR JUSTICE BURTON: You said that this was one of the

7 largest -- I think you actually accepted the largest

8 transaction --

9 A. That's correct. It is public record.

10 MR JUSTICE BURTON: -- Heritage had done and moving to

11 Mauritius was part of the tax planning and you are being

12 asked whether -- just let us get this straight what the

13 question is -- Mauritius was one of the few countries

14 which had a double tax treaty with Uganda and that was

15 why you went there?

16 A. It was a factor. It was one of the reasons in our

17 planning.

18 MR JUSTICE BURTON: What were the other factors?

19 A. It was better regulated. The time zone was working

20 better in terms of our jurisdictions in terms of where

21 we were based. They are much more efficient and banking

22 is better and we felt overall that the level of service

23 we were provided in Mauritius was much better than we

24 were being provided in the Bahamas.

25 MR WOLFSON: When you say "being provided", these are by


1 service companies, effectively?

2 A. By financial -- by third party agents and professional

3 bodies.

4 Q. How many Heritage employees work in Mauritius?

5 A. Directly employed by Heritage?

6 Q. Yes.

7 A. Zero.

8 Q. Right.

9 A. That would be the same in terms of jurisdictions

10 throughout the world. Many, many companies --

11 Q. Absolutely.

12 A. -- will use directors' positions. Isle of Man, many

13 other places. Many, many international companies have

14 a similar tax status as we do.

15 Q. Mr Atherton, I am only asking these questions because,

16 first, the re-domicile is not mentioned anywhere in your

17 witness statement, correct? We can read it.

18 A. I think it is.

19 Q. Okay. You haven't given any disclosure in these

20 proceedings evidencing the reasoning or rationale for

21 moving to Mauritius, correct?

22 A. That's correct, but I do refer to it in my witness

23 statement. I am sure I do.

24 Q. If you want, we'll go through what you say but I think

25 we can probably move on after a couple more questions.


1 MR JUSTICE BURTON: Over the short adjournment, the five

2 minute break, you can have a quick flip through and see

3 if you can find it.

4 MR WOLFSON: Mr Atherton, I think we actually can agree on

5 this.

6 MR QURESHI: It is paragraph 6, my Lord, right at the

7 outset.

8 MR JUSTICE BURTON: You have found it already.

9 MR QURESHI: It is paragraph 6, right at the outset.

10 MR WOLFSON: I am very happy to go to paragraph 6 because

11 there all is revealed. Let us see what we are told in

12 paragraph 6.

13 MR QURESHI: I am not promising all will be revealed. I'm

14 not sure what my friend has in mind.

15 MR WOLFSON: What we are told in paragraph 6 is:

16 "On 15 March HOGL was registered by continuation as

17 a private company limited by shares in the Republic of

18 Mauritius."

19 The point I was trying to explore with you,

20 Mr Atherton, and I think we can probably end here before

21 the break because I think we now agree, is that when we

22 read in documents that the move was made for internal

23 Heritage group purposes, I think you are accepting that

24 one of those purposes was the perceived tax advantages

25 relating to your potential tax liability to the URA from


1 this deal, correct?

2 A. One of the reasons for going, as I explained, was there

3 was a double taxation agreement but there were other

4 reasons as well.

5 MR WOLFSON: My Lord, I am going to go to a slightly

6 different topic. That may be a convenient moment,

7 my Lord.

8 MR JUSTICE BURTON: Yes. I hope we are going to have

9 a report when we come back, which will be before five to

10 12, from Curtis & Co. Thank you.

11 (11.45 am)

12 (A short break)

13 (11.55 am)

14 MR WOLFSON: My Lord, we will provide a new folder.

15 MR JUSTICE BURTON: We are doing well at the moment,

16 thank you very much. Any news from Curtis & Co?

17 THE SOLICITOR: My Lord, I telephoned the partner in charge

18 of his clients here in London and he explained to me,

19 my Lord, he has been in touch with the Government of

20 Uganda but they have not had any instructions as to what

21 (inaudible) and he was involved in the GOU and they

22 might get some correspondence by next week but they

23 haven't yet, but they have been in touch with them.

24 MR JUSTICE BURTON: They have been in touch with their

25 client?



2 MR WOLFSON: My Lord, we will chivvy the Government as well

3 so far as we can. We are obviously not a party.

4 MR JUSTICE BURTON: Thank you very much. You are going to

5 tell me at some stage your constructive suggestion.

6 I don't know whether it is one you have discussed yet

7 with Mr Qureshi.

8 MR WOLFSON: No, it isn't yet but we thought we would put it

9 in a note so there is no ambiguity as to what we are

10 proposing. We hope it will be agreeable because it is

11 really trying to find a way forward and hold the fort.

12 I think it is being printed so I'm sorry it is running

13 a little bit late. That is the substantive Ugandan tax

14 point.


16 MR WOLFSON: Mr Atherton, before the short break we were

17 talking about Mauritius. In addition to many other

18 delights of Mauritius, I think we can agree that one of

19 the advantages of Mauritius is in fact it has no Capital

20 Gains Tax at all, is that right?

21 A. I believe it's similar to the Bahamas in that respect,

22 that depending on your business licence it can have no

23 Capital Gains Tax.

24 MR JUSTICE BURTON: The Bahamas doesn't have a double tax

25 treaty with Uganda.


1 A. I don't believe it does, my Lord.

2 MR JUSTICE BURTON: So if the double tax treaty operates and

3 Uganda has Capital Gains Tax but Mauritius doesn't, that

4 means that you don't have to pay Capital Gains Tax; is

5 that right?

6 A. My Lord, I'm not an expert in Ugandan tax, I am afraid.

7 MR JUSTICE BURTON: There we are, thank you.

8 MR WOLFSON: And I think you agreed, Mr Atherton, that one

9 of the purposes -- and I say one -- one of the purposes

10 of the move to Mauritius was to take advantage of the

11 fiscal rules applicable in Mauritius.

12 A. Correct, in terms of we went to Mauritius.

13 Q. Mr Atherton, could you look, please, at bundle E24/6503.

14 My Lord, it is now in the core. It is in core 3. It is

15 a document which is now noted as 984.020.004.

16 Just to show you what it is, Mr Atherton, while you

17 are turning it up, if you look at 6500, this is the tax

18 bill Tribunal ruling in Uganda. Do you have that, 6500?

19 A. Yes, I have.

20 Q. Good. You were a witness for Heritage in those

21 proceedings, weren't you?

22 A. That's correct.

23 Q. I think you were the only witness for Heritage in those

24 proceedings, as you are here, correct?

25 A. That is correct.


1 Q. And to be fair to you, the Tribunal found you to be

2 "composed" and said that your evidence was "reliable".

3 That is not a question. That is a compliment. The

4 question is: if you would look at 6503, the penultimate

5 paragraph, where you tell the TAT, who accept this

6 evidence:

7 "The change in registration was based on corporate

8 planning. It was not purposely done to take advantage

9 of the benefit Mauritius could offer in light of the

10 transaction with Tullow."

11 I am afraid what I have to put to you, Mr Atherton,

12 is that evidence which you gave to the TAT, and which

13 the TAT accepted because it found you to be a composed

14 witness, was in fact untrue?

15 A. This is I think the findings from the TAT? I have only

16 looked at one page just now.

17 Q. No, it isn't, Mr Atherton.

18 A. It is the ruling, sorry.

19 Q. Sorry, it is the ruling but here what we are doing is

20 they are repeating your evidence and, as I said, they

21 found you to be a reliable witness. If you just go

22 back, for example, let us turn the pages through. 6500

23 is the start. At 6501, they set out the issues and then

24 halfway down:

25 "The applicant called one witness, Mr Paul Richard


1 Atherton."

2 That is you, isn't it?

3 A. That's correct.

4 Q. And you gave your evidence by way of a video conference,

5 correct?

6 A. Yes.

7 Q. So there is no dispute that you were talking about it?

8 A. No, that's me.

9 Q. Then throughout the rest of that page and the next

10 page 6502 --

11 MR JUSTICE BURTON: We don't need to go back that far. The

12 paragraph in question says that: "Mr Atherton told the

13 Tribunal ..."

14 MR WOLFSON: Absolutely. The point I am making, my Lord, is

15 that it is in a whole section which is setting out your

16 evidence, and what you told the TAT was untrue, wasn't

17 it?

18 A. No, my Lord. What I told the TAT that it was in

19 connection with corporate planning and that there were

20 better time zones is what I told the TAT.

21 MR JUSTICE BURTON: That is also not what you told me. What

22 is being put to me is that this evidence, without

23 characterising adjectives, is different from what you

24 have told me today.

25 A. Based on the ruling I accept that, my Lord, but I did


1 not tell the TAT and I did not specifically say it was

2 not purposely done to take advantage of the benefits

3 Mauritius could offer. That's correct.

4 MR JUSTICE BURTON: So they have inaccurately recorded your

5 evidence.

6 A. That's correct, my Lord.

7 MR WOLFSON: Where were you when the video conference was

8 given?

9 A. I was in London.

10 Q. Was it recorded?

11 A. I don't know, my Lord. I don't know.

12 Q. To your knowledge, does Heritage have a recording of

13 your evidence?

14 A. I don't know, my Lord. No, I'm not aware of a recording

15 but I don't know. I'm not sure what facilities there

16 were. It was a video conference. Whether it was --

17 MR JUSTICE BURTON: There will probably be a transcript of

18 it, won't there?

19 A. I don't know, my Lord.

20 MR JUSTICE BURTON: So this statement is not what you said,

21 that is right? You did not say the change in

22 registration was based on corporate planning? You did

23 say that?

24 A. I did say that.

25 MR JUSTICE BURTON: You did not say:


1 "It was not purposely done to take advantage of the

2 benefit Mauritius could offer in light of the

3 transaction with Tullow."

4 You did not say that?

5 A. I didn't say it.

6 MR JUSTICE BURTON: Because it is a very important sentence,

7 isn't it, and they obviously thought you said that and

8 relied on it.

9 MR WOLFSON: You did say the rest of the previous bit of the

10 paragraph so you did say it was registered by

11 continuation?

12 A. That's correct.

13 Q. I'm not asking whether it is correct as a fact but you

14 did say it to the Tribunal. They have recorded your

15 evidence correctly in that first sentence?

16 A. Yes.

17 Q. Right, and the second sentence. You told them?

18 A. Yes.

19 Q. And the third sentence?

20 A. No.

21 Q. The third sentence is a change in registration?

22 MR JUSTICE BURTON: That is right, isn't it, the change in

23 registration?

24 A. Sorry, I read that as the second. Yes, that's correct.

25 MR JUSTICE BURTON: The first three sentences accurately


1 record what you said. The fourth sentence does not

2 accurately what you said. You did not say anything of

3 the kind.

4 A. Correct.

5 MR WOLFSON: I am not going to go through the whole thing

6 but let us just look at the next sentence.

7 You did testify that during the time the applicant

8 was in Uganda the respondents -- that is the URA -- had

9 never requested it to file any tax returns; you told

10 them that?

11 A. Yes, I presume that's the case.

12 Q. And the next sentence?

13 A. I presume so. We did not submit any tax returns. I

14 can't remember whether I said they were aware of it

15 because they had nothing on their record. I can't say.

16 Q. My Lord, I am not going to go through the whole of that

17 document.


19 MR WOLFSON: Mr Atherton, the parent.

20 MR JUSTICE BURTON: Was it on oath this statement to the Tax

21 Tribunal?

22 A. Pardon?

23 MR JUSTICE BURTON: Was it on oath the statement to the Tax

24 Tribunal?

25 A. I think it was, my Lord. I think it was but I can't


1 remember for sure.

2 MR WOLFSON: My Lord, I think that is actually recorded. If

3 your Lordship looks at 6501, Mr Mott reminds me, that it

4 does say right at the outset.

5 A. Yes, it does say oath.

6 MR WOLFSON: So it does look like you swore to tell the

7 truth: "Mr Atherton gave his testimony on oath." Bottom

8 on 6501, my Lord.

9 MR JUSTICE BURTON: Yes, "testimony on oath". Thank you.

10 MR WOLFSON: Then just so your Lordship has a reference:

11 "The witness was composed and the Tribunal finds his

12 evidence reliable".

13 MR JUSTICE BURTON: Yes, I have that.

14 MR WOLFSON: My Lord, I was going to move on to a slightly

15 different point. Mr Atherton, I think we can agree that

16 the parent of HOGL Heritage Oil Plc, that is not

17 domiciled in Mauritius, that is domiciled in Jersey,

18 that is right?

19 A. The ultimate parent company is Heritage Oil PL and it is

20 domiciled in Jersey, correct.

21 Q. And that is where Mr Buckingham lives as well?

22 A. Mr Buckingham lives in Jersey, correct.

23 Q. I think actually at one point the Daily Telegraph called

24 him the richest man in Jersey but I'm not going to put

25 that to you. The Daily Telegraph called Lord Sumption


1 the cleverest man in Britain but I don't know whether

2 that gives the paper any more probative value on any

3 other statement. All this is way above my pay grade.

4 Mr Atherton, can I just try and put this into some

5 sort of context. We are talking here of $400 million of

6 potential tax liability, aren't we?

7 A. The assessment was for $404 million, correct.

8 Q. Today's market cap of Heritage Oil Plc is about,

9 allowing for pound/dollar, about $700 million, is that

10 about right?

11 A. I would say closer to $800 million.

12 Q. My understanding is that it is £548 million. I am not

13 quite sure where the pound/dollar is at the moment.

14 Shall we say 750?

15 A. Actually I would probably say it is probably closer to

16 above 800, but between $750 million and $850 million,

17 my Lord .

18 Q. So in the context of Heritage the potential tax

19 liability of $400 million is a huge amount of money, is

20 it not?

21 A. $400 million is a considerable sum but it has been

22 reserved. It has been parked to one side with

23 a question mark subject to assessment and determination

24 of the dispute, so it is not a factor in our share

25 price.


1 Q. Mr Atherton, I am now going to turn to a different topic

2 which is your engagement with the Government with regard

3 to your potential tax liability. The first document

4 I would like you to look at is in bundle E4/927. This

5 is core 1/102. I am afraid it is not a great copy,

6 Mr Atherton. I hope you can read it.

7 Let us start from the top. It is from URA. It is

8 addressed to Heritage in Jersey care of Heritage in

9 Kampala.

10 "Taxes on disposal of licence in trusts in

11 exploration areas 1 and 3A. We refer to the sale and

12 purchase agreement (SPA) between Heritage Oil & Gas and

13 Tullow". It gives the date. "Tullow has exercised its

14 pre-emptive rights and purchase Heritage licence

15 interest". Refers to section 17.2 of the Income Tax

16 Act. Then says it gives rise to income sourced in

17 Uganda under 79G and 79S of the Income Tax Act and sets

18 out the taxes which applied.

19 Where you get to, the nub of it is on the second

20 page: they are asking you to pay $404,925,000 in tax,

21 yes?

22 A. That's correct.

23 Q. And the assessment is on the next page at 99. Your

24 response to this demand and this assessment at this

25 stage was to say that no tax was due because the


1 transaction had not completed. That is correct, isn't

2 it? And the assessments were premature, correct?

3 A. One of my colleagues replied, my Lord, in a matter of

4 days after that saying this is totally premature. We

5 haven't sold anything. It is subject to consent. If

6 there is to be tax it will be taxed at a later date --

7 in fact.

8 Q. It is 940?

9 A. Correct.

10 MR JUSTICE BURTON: So you agree with that?

11 A. No, we didn't. We said it was premature and it should

12 be --

13 MR JUSTICE BURTON: No, but you agree with Mr Wolfson. I am

14 only trying to save time, that's all.

15 A. Okay.

16 MR JUSTICE BURTON: All you needed to say was "yes", yes?

17 MR WOLFSON: I hope I am right in this question as well and

18 we can agree, that what this letter doesn't say, the

19 letter we are now looking at at 940, 108 in the core, is

20 something on the lines of: look, in any event, no tax is

21 ever going to be payable on this transaction because

22 none of the $1.35 billion we have made is Ugandan

23 sourced income. The letter doesn't make that point,

24 does it?

25 A. At this stage it just says it was premature.


1 Q. It also doesn't say to the URA, "Look, chaps, we have

2 just re-domiciled to the Mauritius so you had better

3 look at the Mauritius/Ugandan double taxation treaty

4 before you serve any more assessments", it doesn't take

5 that point either, does it?

6 A. That's correct, and I said earlier on the transcript

7 that we didn't tell the Ugandan Government.

8 Q. And so --

9 A. And with hindsight I would have told them or we would

10 have told them earlier.

11 Q. Sorry, I interrupted.

12 MR JUSTICE BURTON: Counsel is suggesting that this was an

13 opportunity to tell them.

14 A. Which we did not.

15 MR WOLFSON: Because what I am putting to you, Mr Atherton,

16 is that the internal Heritage position at this stage

17 was: let's get consent from the Government for the

18 farmdown, let the transaction complete, we are going to

19 leave the country and the URS can try to find us if they

20 can. That was Heritage's position, wasn't it?

21 A. Absolutely not, my Lord.

22 Q. Let us look at page 1000 in the same volume, core 115.

23 I am afraid it is another poor copy, Mr Atherton. This

24 is the URA's response to your letter, the date is

25 22 April. You receive it on the 23rd and on page 1001


1 the URA says:

2 "On the basis of the above information, we without

3 prejudice withdraw the assessment attached to our letter

4 [that is the one we have just seen] pending assignment

5 approval by the Minister of Energy. We take this

6 opportunity to notify you of the fact that tax will be

7 due and payable on approval of the transaction by The

8 Ministry of Energy and Mineral Development."

9 So it was clear to you, was it not, that as and when

10 the Government did provide its consent the URA is going

11 to serve another identical assessment, correct?

12 A. It was clear that the URA was looking to assess the

13 taxation on the transaction, that's correct.

14 Q. Mr Atherton, I am sorry to be a bore but that really

15 wasn't the question I put. I asked you:

16 "It was clear to you, was it not, that as and when

17 the Government did provide its consent the URA is going

18 to serve another identical assessment, correct?"

19 A. Whether it would be identical I don't know, my Lord, but

20 it was clear that they were looking to issue an

21 assessment, correct; that's what I said.

22 Q. The price wasn't going to change, was it, Mr Atherton?

23 A. We hadn't had -- at this time we hadn't had any

24 discussions with Government in terms of --

25 Q. The price you were getting for selling the assets,


1 Mr Atherton, wasn't going to change, was it?

2 A. There was some contingent consideration so it was

3 possible of course.

4 Q. Are you talking about the 150?

5 A. That's correct, or it could be zero, it could be between

6 zero and $150 million.

7 Q. Putting that to one side. The price Tullow was paying

8 was the price you had agreed with the URA, yes?

9 A. And with Tullow, correct.

10 Q. Could you now turn to page 999. It is 118.001 in the

11 core. You have to turn the bundle round perhaps. It is

12 an email from Mr Martin, you are aware of who he is, to

13 Mr Brant who we have seen at McCarthy Tetrault, copied

14 to Mr Sloan and yourself, subject Uganda. If you just

15 read it to yourself.

16 You see:

17 "I understand Aidan [that is Mr Heavey] CEO of

18 Tullow was speaking to Tony [that is Mr Anthony

19 Buckingham, is it not?] that Heritage have yet to fully

20 engage with the URA on the tax issue."

21 That was an accurate statement, was it not?

22 A. We had engaged with Government. We hadn't engaged -- we

23 had engaged with the URA through the letter

24 correspondence. We hadn't engaged in person.

25 Q. Can you turn, please, to page 968, core 111. If you


1 just read that email to yourself. Mr Brant first, the

2 bottom email. (Pause)

3 So Mr Martin has passed on the details of a meeting

4 he had had on Friday with the Government. He is saying

5 that Heritage tax issues don't need to be resolved fully

6 before completion but you have to engage with the

7 Government. Sorry, that is Mr Brant. Mr Martin is

8 replying, clarifying that he doesn't think Heritage will

9 get an easy ride and that "Heritage will need to be

10 conciliatory and constructive". I am now looking, you

11 see, at the top email. Mr Martin says:

12 "Thanks Rob, your note has captured our conversation

13 well. Now reading it starkly...(Reading to the

14 words)... from GOU on the tax issue. I don't think that

15 will be the case. Who can tell what might happen after

16 serious engagement between Heritage and the tax

17 authorities."

18 Just pausing there. I think it is fair to say that

19 there hadn't been serious engagement by this stage, had

20 there?

21 A. Yes, there had, my Lord.

22 MR JUSTICE BURTON: I don't understand. When you say "there

23 had been", what's the serious engagement which you say

24 there had been?

25 A. This was with Government and it the meeting that


1 Graham's referring to here which took place on Friday,

2 16 April.

3 MR JUSTICE BURTON: What was the serious engagement?

4 A. Which was a meeting where Heritage and Tullow was

5 requested by Government to meet, which we did, and we

6 were represented by our country manager, Brian Westwood,

7 and by one of our local lawyers, independent lawyers

8 from a company called K&K based in Kampala. We didn't

9 have time to send anyone else because the invite had

10 only come the afternoon before on the 15th and there the

11 engagement was, there were three things required in

12 order to complete this transaction. And those three

13 things, from memory, were: they were looking to split

14 the $1.35 billion consideration between the licences,

15 which we didn't understand why but that was provided in

16 due course. There was a question mark over the time --

17 at the time there was an error in one of the or the

18 production sharing contracts saying that Heritage was

19 Isle of Man registered which was a pure typographic

20 error and had been rectified in a following addendum

21 many years later, or a couple of years later sorry, many

22 years before is what I meant to say. And then there

23 were some reporting deficiencies in terms of what we

24 should be reporting to Government on either a monthly or

25 a quarterly basis which had never been flagged before.


1 Those were the three things which were required in order

2 to move the transaction forward.

3 There was then a discussion on taxation with URA but

4 that was not linked to the consent with Government.

5 MR WOLFSON: So that meeting was a serious engagement which

6 you are saying you had with the Government; is that

7 right?

8 A. That is a request for a meeting which both Heritage and

9 Tullow attended on that Friday.

10 Q. I think it is fair to say that Mr Martin certainly

11 doesn't regard that as having been a serious engagement,

12 from looking at his email. That is plainly his view.

13 You would disagree?

14 A. I believe the invitation to the meeting was from the

15 Permanent Secretary, Fred Kaliisa, requesting that both

16 Heritage and Tullow turn up. I believe the meeting was

17 such there were two parts to the meeting.

18 Q. I am sorry to interrupt but is this an answer to the

19 question I have asked?

20 A. It is if you let me finish. In that there were two

21 parts to the meeting. The first was which Heritage was

22 invited to with Tullow which was in connection with the

23 Heritage disposal to Tullow, and then I believe the

24 second part, which we did not attend, was then looking

25 at the Tullow farmdown to Total and CNOOC. So I believe


1 it was an important meeting.

2 Q. Where is it mentioned in your witness statement?

3 A. I didn't refer to it in my witness statement.

4 Q. Sorry, I didn't get that.

5 A. I haven't. I do not refer to the meeting on the 16th in

6 my witness statement.

7 Q. I see, but this is the important meeting with your

8 serious engagement with the Government?

9 A. No, the most important meeting and the serious

10 engagement was later which was with the URA. This was

11 in answer to a question which was: did we engage with

12 Government and I said yes, we did. The most important

13 meeting --

14 Q. No, that wasn't the question, Mr Atherton. The question

15 was whether there was serious engagement with the

16 Government. Your position, as I understand it --

17 I think we have your evidence -- is that there was

18 a serious engagement, the meeting of 16 April. You have

19 given your evidence as to what took place. I have put

20 to you it is not in your witness statement and you have

21 agreed; is that correct?

22 A. I do not refer to a meeting of the 16th in my witness

23 statement, that's correct.

24 MR JUSTICE BURTON: Mr Brant is referring to that meeting.

25 A. Yes, which Mr Brant --


1 MR JUSTICE BURTON: In the email.

2 A. -- didn't attend. As I say, we have local

3 representation in Uganda from a company called K&K.

4 MR JUSTICE BURTON: Mr Brant refers to it and Mr Martin

5 characterises it as not yet serious engagement, but you

6 say it did constitute serious engagement.

7 A. With Government we hadn't engaged seriously in person

8 with the URA. We had engaged with Government.

9 MR WOLFSON: So you are drawing a distinction, as

10 I understand it, based on Mr Martin's reference to tax

11 authority. This is the point you are making?

12 A. The tax authority is the URA but in the meeting with

13 Government, as I said there were four issues raised,

14 discussed and three were specifically linked to the

15 consent of the transaction and taxation was not.

16 MR JUSTICE BURTON: So then you don't disagree with

17 Mr Martin's characterisation that there hadn't yet been

18 serious engagement between you and the tax authority?

19 A. That's correct. There had been the written

20 correspondence, having received the assessment earlier

21 in April which we had replied to.

22 MR JUSTICE BURTON: And you'd rejected it for the reasons we

23 have seen?

24 A. Correct.

25 MR WOLFSON: Mr Martin goes on to say:


1 "We sense that if that discussion is approached

2 [that is the discussion between the Heritage and the tax

3 authorities] in a conciliatory and constructive manner

4 then a way through the consent issue may be found."

5 Heritage did not in fact adopt a conciliatory and

6 constructive approach, did it?

7 A. The meeting minute that we have from our local lawyer --

8 Q. I am not talking about the lawyer. We are at

9 cross-purposes, Mr Atherton. Mr Martin is looking to

10 the future and he is saying that when you engage with

11 the tax authorities, which you accept you haven't yet

12 done, in any meaningful way, you should adopt

13 a conciliatory and constructive manner. And what I am

14 putting to you is that when Heritage did come to engage

15 so far as it did with the tax authorities you did not

16 approach that engagement in a conciliatory and

17 constructive manner; is that correct or not?

18 A. No, it is not correct. We had a series of meetings with

19 them.

20 Q. What I am putting to you, so we are absolutely clear, is

21 that in a strategy -- no doubt driven by Mr Buckingham

22 who is renowned for many things but being conciliatory

23 is not one of them -- you played and absolutely hard

24 ball tactical game with the URA?

25 A. That is not the case at all. The meeting -- from that


1 same meeting that Graham's referring to in his email is

2 that there's three key areas which we have to resolve.

3 Q. I'm not talking about that meeting.

4 MR JUSTICE BURTON: Don't let us go back on that. That

5 wasn't the meeting with the tax authorities. That was,

6 as you yourself have pointed out, a preliminary meeting

7 with the Government. You hadn't engaged with the tax

8 authorities by then except sending them the letter, and

9 it is now being put to you that after this you didn't

10 engage with the tax authorities in a conciliatory and

11 constructive manner.

12 A. And I said we did.

13 MR JUSTICE BURTON: We will come to it. All I'm pointing

14 out is that it is no help to me going back on this

15 meeting which wasn't an engagement with the tax

16 authorities.

17 MR WOLFSON: Mr Atherton, if you could look, please, at

18 page 1005 in E4. I am afraid, my Lord, this is not in

19 the core. You will see this is a letter from

20 Mr Kabagambe-Kaliisa -- the person we have heard of as

21 Fred, without being disrespectful -- to Heritage and he

22 has clarifying the status as to which Heritage company

23 is signatory to the PSA and holds the licence and which

24 entity has contracted with Tullow, and he wants to

25 separate out the consideration on the two blocks.


1 You will see that on the penultimate paragraph on

2 the first page he says:

3 "I wish to encourage and advise Heritage to engage

4 in detailed discussions with the tax authorities in

5 order to ease the approval process."

6 I think we are agreeing so far there hadn't been

7 those detailed discussions with the tax authorities,

8 correct?

9 A. That's correct, they took place in May, my Lord. This

10 was April.

11 Q. If we turn forward to page 1047 you will see, I hope, an

12 email from the same gentleman to Heritage, chasing up

13 his request. A couple of weeks have gone by. He hasn't

14 had an answer. So it was the case that Heritage had

15 ignored that letter which I have just shown you; you

16 hadn't answered it, had you?

17 A. The letter, if I remember, if you can give me the

18 reference again, it was 26 April?

19 Q. Yes.

20 A. And then this is a follow-up on May 2 so I don't think

21 it is a couple of weeks, my Lord. We replied on 5 May.

22 The reason we didn't reply earlier was we were in

23 correspondence, I believe, from memory, with Tullow

24 because we couldn't understand why they wanted to split

25 the consideration between the two blocks and so we felt


1 obligated, which we did, to go back to Tullow and say:

2 is there any reason, any concerns, any thoughts why they

3 require this information? And in terms of the written

4 consideration how is it best determined and have you got

5 any advice.

6 Q. I don't think it is controversial, Mr Atherton. All

7 I am trying to get really is a chronology. You hadn't

8 gone back, for example, to the Government, to Fred and

9 said, "We just need to talk to Tullow. We need to sort

10 a few things out. We'll get back to you." You hadn't

11 gone back at all but you did reply on 5 May; is that

12 correct?

13 A. I know we replied in writing on 5 May. Whether there

14 was anything on the telephone I don't know.

15 Q. Can we have a look at 1051. This is also not in the

16 core, my Lord. You wouldn't have seen this email at the

17 time, Mr Atherton because this is an internal Tullow

18 email. It reports a conversation between Mr Demetriou

19 of Tullow and Mr Westwood of Heritage. I think you said

20 earlier Mr Westwood, was he the man on the ground in

21 Uganda, if I can put it in those terms?

22 A. He was the country manager.

23 Q. If you have a look at the first sentence, verbatim

24 extract:

25 "Tony will never agree to the 400 million Capital


1 Gains Tax but would consider a significant reduction as

2 the only basis for negotiation once you have paid us of

3 course. If necessary Heritage would much rather wait

4 until contract or when we have exhausted the stipulated

5 contractual timeframe, cancel all existing contracts,

6 drill the ten wells and watch the share price and

7 reserves go up, after all we know there's shedloads of

8 oil there."

9 What we get from that is two things, is it not:

10 First of all, Mr Buckingham had no intention of paying

11 $400 million in tax, correct?

12 A. That's not correct at all. That is not correct. As we

13 demonstrated we put $404 million reserved to one side

14 where can it be disputed, where it can be resolved.

15 MR JUSTICE BURTON: Where did you put the 404?

16 A. We deposited $121 million in Kampala and we have

17 $283 million in an escrow in London. That is $404

18 million.

19 MR JUSTICE BURTON: This is May 4 2010.

20 A. We hadn't done it on May 4th. I accept that.

21 MR WOLFSON: So where Mr O'Hanlon is reporting

22 a conversation between Mr Demetriou and Mr Westwood

23 where Mr Westwood has plainly said, and it is put in

24 quotes, "Tony will never agree to 400 million Capital

25 Gains Tax in May" Mr Westwood has it wrong; is that


1 right.

2 A. We had legal advice. We had legal advice that there is

3 no tax payable in Uganda.

4 Q. The second point we get from this document is that

5 Mr Buckingham's position is that he is only going to

6 negotiate on the tax after he has received the full SPA

7 consideration from Tullow, correct?

8 A. My -- as I said earlier, we saw this as two issues. One

9 was the completion and consent and the other was

10 a taxation issue. We had always seen them as two

11 issues, and in terms of the assessment we received

12 in June clearly it was premature. You have to complete

13 the transaction in order then to determine whether it is

14 taxable.

15 Q. In the real world once Tullow has paid Heritage the

16 consideration under the SPA Heritage will have disposed

17 of its Ugandan assets, would have left the country and

18 effectively the URA wouldn't be able to collect its tax.

19 That is the strategy, isn't it, Mr Atherton?

20 A. I think if we look at the real world we have

21 $121 million in Kampala. We have an escrow. We have

22 maintained people in country. We've got relationships

23 in country. We have people, with this Patrick in

24 Kampala, and we have continued to provide transitional

25 services to Tullow in the last more than two years.


1 That's the reality.

2 Q. As I understand the position put forward in this email

3 the proposition is, Heritage's position is: that we'll

4 negotiate about the tax, and for these purposes I accept

5 your position for the purposes of this argument, the

6 argument you are putting to me that Heritage is not in

7 fact liable to tax, but the position that is being put

8 forward is that the transaction should complete, the

9 money should be paid and then we'll have a discussion

10 with the Government or the URA about the tax

11 consequences; is that right? Do I have that right now?

12 A. We were of the opinion that we'd split the two and that

13 it would be taxable. The question of taxation would be

14 after the event.

15 Q. After what event?

16 A. Of the completion.

17 Q. Money is paid on completion, isn't it?

18 A. Correct.

19 Q. So you have completion, Tullow pay up and then you have

20 the negotiation about the tax, correct?

21 A. Based on what's in this email but this is two people in

22 Kampala. The reality is we met with URA in May, later

23 in this month.

24 Q. Was this a strategy which you agreed with that the

25 transaction should complete, Tullow should pay and then


1 you would negotiate about the tax?

2 A. We were considering a number of things at this stage.

3 We felt that and if tax was payable it would be

4 post-completion but clearly, as demonstrated by the

5 series of meetings we had later that month and into June

6 we engaged with the URA prior to completion, but we saw

7 them as two events.

8 Q. It was plain to you, wasn't it, that from the

9 Government's perspective who had to give consent to the

10 deal, didn't they, I think we can agree on that?

11 A. Yes.

12 Q. It was plain to you that the Government was going to

13 make its consent conditional on payment of tax, wasn't

14 it?

15 A. No, it was clear that taxation had been -- we had

16 received an assessment and they were going to assess the

17 completion monies but I wouldn't say it was clear they

18 were linked in any way. We just had the meeting with

19 the Government on the 16th where it clearly was not

20 linked.

21 Q. So let us see if I have understood. Your evidence is

22 that there were two issues. From the Government's

23 perspective then there were two issues: There's

24 completion of the deal and there is payment of tax, and

25 your understanding was that the Government's position


1 was not that the payment of tax was a pre-condition to

2 its consent to the deal?

3 A. Correct.

4 Q. Can you look at paragraph 116 of your witness statement,

5 please. We are in April 2010, so that is before the

6 emails I am showing you. You say this, it is only a one

7 sentence paragraph:

8 "It was plain to HOGL..."

9 And as you say at the beginning of your witness

10 statement you are the only person with knowledge of all

11 the companies as to what's going on so when it says HOGL

12 it must mean you, musn't it?

13 A. Mmm.

14 Q. "... that the Government fully intended to make payment

15 of tax a precondition to granting its consent to the

16 transaction."

17 Why are you giving evidence now which is just flatly

18 contradictory to what you have said in your statement?

19 A. I said at the time I would say that was in May 2010 it

20 became apparent is what I would say which is why we

21 engaged with URA in May 2010 at this stage.

22 Q. It is not in your witness statement in May, is it? It

23 is under the April heading?

24 A. I may be out by a couple of days.

25 Q. Mr Atherton, you are making it up as you go along.


1 A. I object to that statement. It's incorrect.

2 Q. Can you turn, please, to bundle E4/1053. There is no

3 core, my Lord. I am sorry, Mr Atherton, this is another

4 one of our very small typed documents. I think you

5 might need a magnifying glass. I'm not casting any

6 aspersions, but if you would like one.

7 Can you just help me with this, Mr Atherton, this is

8 a note from Laura Hughes of Tullow -- bottom of the

9 page -- who is a senior commercial adviser to Tullow's

10 Ugandan operating company. She is reporting on

11 a meeting she has had with Patrick. I think that's

12 Patrick with the unpronounceable surname, your finance

13 manager. If you read the first sentence he has told her

14 that under the sale agreement with ENI it was agreed

15 that there would be no CGT. Let me direct you to the

16 relevant bit:

17 She says:

18 "Some feedback with the meeting with the Patrick.

19 Under the agreements with ENI it was agreed that there

20 would be no CGT. Therefore this is a new issue for

21 Tullow transaction which materially impacts on the

22 transaction. Did not know with whom that arrangement

23 had been made. Heritage are considering their position

24 and arguments in relation to CGT with their lawyers and

25 not yet sure how they'll respond but Patrick would not


1 share with me their arguments."

2 Who in the Government had reached the agreement with

3 the Government that there would be no CGT on the sale

4 agreement assuming it went through with ENI?

5 A. It was our understanding, our discussion with ENI that

6 they were going to get significant tax breaks. Hence

7 the linking to the consideration, the contingent

8 consideration to tax breaks. They are set out in the

9 sale and purchase agreement and there was an

10 understanding, we felt, that there would not be any

11 taxation.

12 MR JUSTICE BURTON: You got this from ENI not from the

13 Government?

14 A. That's correct.

15 MR WOLFSON: Just so I understand. Do the contingent tax

16 breaks go to the taxation Heritage would have to pay or

17 the consideration Heritage receives under the deal? Is

18 this the 150 million point?

19 A. The 150 million is linked on tax breaks that ENI would

20 receive. It is not linked to a tax break.

21 Q. So if ENI received those particular tax breaks, it would

22 have to make the additional payment to Heritage but if

23 it didn't receive the tax breaks, it wouldn't have to

24 make that additional payment. I am simplifying; that is

25 right?


1 A. Correct, there was a sliding scale of however many

2 years.

3 Q. But that is only on the 150 million, isn't it? So from

4 Heritage's perspective, all that would mean is that you

5 wouldn't have to pay CGT on that amount because you

6 wouldn't have received it from ENI, correct?

7 A. No, the contingent consideration was based on a sliding

8 scale of them getting significant tax breaks. It was

9 not specific to them.

10 MR JUSTICE BURTON: That is what is being put to you.

11 A. That is not correct.

12 MR JUSTICE BURTON: It doesn't impact upon the basic

13 consideration.

14 A. No, but it was our understanding from ENI that that

15 would not be the case.


17 A. It was our understanding that there would not be any CGT

18 on the transaction.

19 MR JUSTICE BURTON: But you didn't get that from ENI and you

20 didn't get that from the Government.

21 A. No, from the discussions with ENI it was our

22 understanding, not with Government, but with ENI that

23 there wouldn't be any tax. For them they would have

24 a non-taxable and then it wouldn't be taxed. Whether

25 that is correct or wrong or incorrect I can't say.


1 MR JUSTICE BURTON: It says here it was agreed that there

2 would be no --

3 A. I would say Patrick is our finance manager in Kampala.

4 He was not involved in any of the ENI discussions and so

5 I don't know what was in his precise mind set at this

6 point of time.

7 MR JUSTICE BURTON: He was wrong.

8 A. He was never briefed to -- I don't know who Laura Hughes

9 is to be honest. He was never an integral part of the

10 negotiations either with ENI or the sales process with

11 Tullow.

12 MR WOLFSON: I'm not a tax lawyer, Mr Atherton, as you have

13 probably worked out by now. So can I just get this

14 straight. Heritage is receiving consideration from the

15 deal from whoever the purchaser is, whether it is ENI or

16 Tullow, correct?

17 A. Correct.

18 Q. There is a base consideration of, let us use round

19 numbers $1.35 billion and there is an extra possible

20 consideration of $150 million, correct?

21 A. Correct.

22 Q. And Heritage will or will not receive that $150 million

23 depending on whether ENI get or don't get the tax breaks

24 on this with this sliding scale being in operation,

25 correct?


1 A. There was another mechanism as well for the contingent

2 consideration but that was one of the mechanisms, yes.

3 Q. So far as the $1.35 billion is concerned Heritage are

4 going to get that come what may, correct?

5 A. Pardon, can you repeat?

6 Q. Heritage are going to get that come what may, correct?

7 That doesn't depend on any tax breaks ENI get, whether

8 you get the 1.35 billion?

9 A. That's correct.

10 Q. And you are going to get that regardless of whether your

11 purchaser is ENI or Tullow?

12 A. That's correct.

13 Q. What I am struggling with is how Mr Westwood has plainly

14 come to the position that if the transaction goes

15 through with ENI rather than Tullow your understanding

16 was that you wouldn't have to pay CGT at all even on the

17 1.35?

18 A. 2.2, it was Patrick.

19 Q. Sorry, you are right.

20 A. Who, as I said, wasn't intrinsically linked.

21 MR JUSTICE BURTON: Is he just wrong about this?

22 A. I think -- is what he is saying here.

23 MR JUSTICE BURTON: So there wasn't any agreement with the

24 Government, there wasn't any agreement or discussion

25 with ENI about whether CGT would be payable on the 1.35.


1 A. Correct, he's wrong. As I said, I don't know what was

2 in his mind-set at the time.

3 MR JUSTICE BURTON: So he's wrong, but there wasn't any.

4 A. Correct.


6 MR WOLFSON: Can we turn to page 1166, please, Mr Atherton.

7 Again, this is not in the core bundle.

8 MR JUSTICE BURTON: I am sorry, I just want to go back to

9 what you said:

10 "It was our understanding [you said] from ENI

11 that" --

12 The question, my question was:

13 "It doesn't impact upon the basic consideration?

14 "Answer: No, but it was our understanding from ENI

15 that that would not be the case. It was our

16 understanding there would not be any CGT on the

17 transaction. And it was from the discussions with ENI."

18 I think you have now said that's not the case. That may

19 be what Patrick thought but in fact he was wrong.

20 A. He was wrong. And from my side there was an

21 understanding, there was one discussion with ENI where

22 we felt that there would be no CGT for us and no --

23 I know they are two subjects which are not linked -- and

24 no taxation that would have a significant tax holiday.

25 But later on -- there's no agreement, there really was


1 no agreement.

2 MR JUSTICE BURTON: Not an agreement but I don't know where

3 you are getting this from. You are saying that you

4 personally had a discussion with ENI?

5 A. Correct, yes.

6 MR JUSTICE BURTON: Which led you to believe not only that

7 the additional 150 would be affected if they got some

8 tax breaks but on some basis or other there would be no

9 CGT on the 1.35.

10 A. No taxation for us as well. That was based on one

11 conversation.

12 MR JUSTICE BURTON: When was this?

13 A. This was during the autumn of 2009.

14 MR JUSTICE BURTON: So Patrick wasn't wrong?

15 A. But Patrick would never have been briefed. Patrick

16 hadn't worked for us at that stage.

17 MR JUSTICE BURTON: So it is a coincidence?

18 A. It is.

19 MR JUSTICE BURTON: Because Patrick is under this mistaken

20 belief --

21 A. Correct.

22 MR JUSTICE BURTON: -- that there nevertheless was some

23 discussion or other between you?

24 A. Yes.

25 MR JUSTICE BURTON: And someone from ENI?


1 A. Correct.


3 A. One of the team -- they had a large, a significant

4 number -- from their London office. I can't remember

5 specifically. I really don't remember.

6 MR WOLFSON: Is this linked to what you were telling my

7 Lord earlier this morning? I was asking you about the

8 involvement of Tullow and you made a point about the

9 assessment notice would have been a different date but

10 you also made another point that you were saying so to

11 speak: it was because the sale went through to Tullow

12 and not to ENI that the Ugandan Government levied CGT

13 because our understanding was that if it had gone

14 through to ENI, we wouldn't have been levied with a CGT

15 assessment even on the 1.35. That is the same point as

16 we are on now.

17 MR JUSTICE BURTON: I think he has gone back on that and his

18 eventual answer was that it is all hypothetical.

19 A. Quite.

20 MR WOLFSON: You must have been flabbergasted, Mr Atherton.

21 How do you begin to understand a statement put to you by

22 ENI on the lines of, "Well, if the deal goes through

23 with us, you, Heritage, won't have to pay CGT on the

24 1.35"?

25 A. No, we have legal advice. There is no --


1 Q. In which case you wouldn't have to pay it whoever the

2 purchase was with. You are making the point that your

3 understanding was that if it went through with ENI,

4 there was some additional upside for you.

5 A. I think the transaction -- first of all, we have always

6 disputed this tax. We are going through the same

7 process point, and I think in terms of ENI, if we were

8 to look at the sale and purchase agreement, which was

9 identical with Tullow, that there was a possibility that

10 the 150, we would receive the $150 million.

11 Q. I am not talking about the 150 million, as you very well

12 know, Mr Atherton.

13 A. No.

14 Q. Heritage was quite annoyed, wasn't it, that Tullow

15 exercised its pre-emption rights?

16 A. Tullow had pre-emption rights, of course, we understood

17 that.

18 Q. That wasn't the question. Heritage was quite annoyed,

19 wasn't it, that Tullow had exercised its pre-emption

20 rights, correct?

21 A. Up to the time of pre-emption, which was 17 January, we

22 felt ENI had done a lot of work, had been received very

23 favourably by the Government and within the SPA, the

24 sale and purchase agreement, there was -- the deferred

25 consideration, the contingent consideration was linked


1 to a number of factors on tax, both upstream and

2 downstream, including the building of a refinery.

3 Tullow pre-empted, they had the right to pre-empt. We

4 felt that if Tullow pre-empted, that meant that the

5 transaction in terms of consent would take longer

6 because the Government had already made it very clear

7 that they did not want a monopoly, ie one company owning

8 all three licences in the Albert Basin and therefore

9 Tullow clearly would have to -- which they were running

10 a process but they would have to farm down to some other

11 larger companies. So we felt that would take time and

12 also Tullow had made it known, it was public knowledge,

13 that they didn't want to build a refinery, and so it

14 would mean that certain of the tax breaks clearly would

15 not be coming to Tullow.

16 We were also aware of Tullow having made promises to

17 Government before, which they had reneged on, and

18 therefore there would be potential concerns and delays

19 to the transaction.

20 Q. Are you going to address my question at some point?

21 A. If you can repeat your question?

22 MR JUSTICE BURTON: I think the answer is "yes", isn't it?

23 MR WOLFSON: Is it? I wasn't quite sure.

24 MR JUSTICE BURTON: You were angry that Tullow was going to

25 take over the pre-emption rights?


1 A. They had the right to. They had pre-emption rights. It

2 was in our documentation. We knew that.

3 MR JUSTICE BURTON: Sorry, not angry, quite annoyed?

4 MR WOLFSON: "Quite annoyed", I think I said.

5 A. I think legally they had the right to do it.

6 MR JUSTICE BURTON: You have said that several times.

7 A. They had the choice.

8 MR JUSTICE BURTON: What is the answer to the question:

9 Heritage was quite annoyed that it was Tullow rather

10 than ENI who were going to take over the deal?

11 A. At the time we would have preferred ENI to provide the

12 interests than Tullow for commercial reasons.

13 MR WOLFSON: And that has nothing to do with your apparent

14 understanding, at least at one stage, that if ENI were

15 the purchaser and Tullow were not, then as a result of

16 some mechanism which I don't quite understand, Heritage

17 wouldn't have to pay Capital Gains Tax even on the 1.35?

18 That wasn't part of your thinking at all, was it?

19 A. We had an internal view at that time, with advice, was

20 there is no taxation on this agreement anyway.

21 MR JUSTICE BURTON: Whoever, whoever it was?

22 A. Yes, it made no difference.

23 MR JUSTICE BURTON: Whether it was ENI or Tullow, right.

24 Thank you. Is that right? You nodded.

25 A. Correct, yes.


1 MR WOLFSON: Mr Atherton, if you could look at page 1166.

2 It is not in the core bundle, my Lord.

3 A. Is that E5?

4 Q. Yes, it is E5. Sorry, I should have said we were going

5 to a different bundle. E5. You will see at the bottom

6 of the page, Mr Atherton, a Bloomberg report which is

7 set out:

8 "The URA is demanding $404 million from Heritage Oil

9 as income tax and Capital Gains Tax. Heritage Oil is

10 selling block."

11 And you will see at the top of the page Mr Inch's

12 reply. You know Mr Inch is a tax chap at Tullow. He

13 refers to a trading statement put out by Heritage. You

14 see in the second line of his email:

15 "Trading statement today by Heritage says they are

16 expecting 1 billion net cash after special dividend (see

17 below). This is consistent with the December comment

18 and doesn't suggest any current intention to pay

19 a significant amount of tax."

20 Now, the December comments are where you were saying

21 "We are not paying any tax at all", and it is correct,

22 isn't it, that you told your shareholders

23 in December 2009 that you didn't intend to pay any

24 significant amount of tax and you are now repeating that

25 statement in May 2010, correct?


1 A. Correct.

2 Q. Despite the fact -- you are repeating it despite the

3 fact that in the interim the Ugandan Government has

4 stated publicly that Heritage will be assessed to tax,

5 correct?

6 A. I don't -- they have stated in the press, correct.

7 Q. And despite the fact that by this stage the URA has

8 actually served an assessment on Heritage, correct?

9 A. Which has been withdrawn.

10 Q. Fair enough. But they have served an assessment,

11 correct?

12 MR JUSTICE BURTON: Withdrawn on the basis that you told

13 them it was premature.

14 A. Correct.

15 MR WOLFSON: And also withdrawn on the basis that they told

16 you that as soon as the deal goes through you are going

17 to get another one, we agreed on that, yes?

18 A. We agreed that there would be another assessment.

19 Q. And despite the fact, I think we also agreed, that by

20 this stage you hadn't engaged with the URA to get any

21 comfort that it would be able to negotiate a lower

22 figure than the 404 million sought by the Revenue

23 authority, correct?

24 A. Correct. This was based on the independent advice we

25 had taken that there was no taxation on the transaction.


1 That is how we made the statement back in December and

2 how we reiterated it in May.

3 Q. To your shareholders? These statements, just to be

4 clear, these statements are made to your shareholders?

5 Well, the trade trading statement is made to the market?

6 A. The trading statement, yes. This is a Bloomberg.

7 Q. If you could turn to 1174, please -- it is not in the

8 core, my Lord -- summarised as a meeting, you will see

9 with Mr Kabagambe-Kaliisa, Fred. It says there will be

10 a full meeting at 9 am on the following day, the 20 May.

11 If you just look at the second bullet point, it says

12 there that:

13 "A letter will be addressed to Heritage and copied

14 to Tullow approving the Heritage sale to Tullow, based

15 on (or other such wording less than conditional) the CGT

16 issue being resolved and it will state an actual dollar

17 amount."

18 And you will see that further down the page after

19 those bullets, Fred says:

20 "It will be for the full amount [that is the 404]

21 and if Heritage has a problem with it they can go

22 through the tax appeals procedure like anybody else. He

23 did say that these letters should be sent out tomorrow

24 but it may be only Friday by the time they are ready."

25 You will see if you look at the last substantive


1 paragraph that, so far as certainly Fred is concerned,

2 he doesn't see the tax issue as a negotiation.

3 MR JUSTICE BURTON: Where's that?

4 MR WOLFSON: It is the first line of the last substantive

5 paragraph:

6 "Whilst surely Fred ..."

7 MR JUSTICE BURTON: Yes, thank you.

8 MR WOLFSON: The position of the Ugandan Government, is it

9 not, is that Heritage is a taxpayer like anybody else,

10 it will be served assessments like anybody else and if

11 it wants to object to them it has the appeals process

12 like any other taxpayer, correct?

13 A. Correct.

14 Q. There is no sense here that Heritage is being treated by

15 the Ugandan Government differently than any other

16 taxpayer, is there?

17 A. No.

18 Q. And so far as I understand your position, there may not

19 be an issue here between us, you are not complaining

20 that so far as the Ugandan Government is concerned, that

21 they have treated you differently to anybody else and

22 sort of picked on you in some way?

23 A. The only thing I would say is we always believed

24 consent -- or prior to we had perceived consent and

25 taxation were two issues and consent to the transaction


1 and then we pay -- we dispute or would negotiate in

2 accordance with Ugandan law.

3 Q. When you say "We always believed it was two issues",

4 that is your perspective, but you knew -- we looked at

5 this earlier -- you knew that the Government did regard

6 them as linked?

7 A. In May, correct, at this time which is why we then

8 entered into discussions with the URA at the end of this

9 month.

10 Q. Just to go off on a slight tangent for a moment, if you

11 could turn through to page 1186, core 1/136, my Lord,

12 this is an internal Tullow email on 20 May. It is

13 Mr Glover and Dan O'Neill. You will see that at the

14 bottom of the page --

15 MR JUSTICE BURTON: Can I just ask this, I am sorry, before

16 we leave 1174: there was to be a formal meeting

17 tomorrow, on 20 May, with Tullow and Heritage present,

18 yes? That took place, did it?

19 A. I was not involved. I --

20 MR JUSTICE BURTON: You were not involved.

21 A. Certainly not with me but I was not in country.

22 MR JUSTICE BURTON: But somebody on behalf of Heritage took

23 part, did they?

24 A. I'm not sure. I don't know, my Lord. It may have done.

25 I don't know.


1 MR JUSTICE BURTON: Did you at that stage know that there

2 was going to be a letter addressed to Heritage which was

3 to be copied to you, approving the Heritage sale to

4 Tullow based on the CGT issue being resolved and stating

5 an actual dollar amount?

6 A. No, my Lord. This is an internal email from Tullow,

7 obviously. We were not ...

8 MR WOLFSON: Mr Atherton, you may be able to assist

9 my Lord a little further if we look at core bundle 1/137

10 or stay in the same bundle at 1190.

11 My Lord, this is just in response to the point your

12 Lordship just made. This is 21 May and you will see at

13 point 2 Mr O'Hanlon reports:

14 "Heritage CGT."

15 A. There was a meeting.

16 Q. You don't deal with it in your witness statement again,

17 Mr Atherton. But "Yesterday's depressing meeting ...",

18 Onek, Minister of State, Fred, B Smith, B Westwood --

19 they are Heritage?

20 A. They are Heritage. It is clear there was a meeting on

21 the 20th.

22 Q. "... revealed no significant engagement between Heritage

23 and the URA had taken place to date actually broke the

24 logjam. Heritage openly admitted they have not been

25 proactive on this issue and must now change tack. Onek


1 was actually perfect on the day showing his fangs and

2 stating categorically: the deal will not be approved

3 until the tax issue is resolved."

4 Yes? So that was a meeting, and the Government

5 stance is absolutely unambiguous, isn't it?

6 A. I think it is clear from -- if this is correct, which

7 there is no reason to dispute, that there was a meeting

8 on 20 May and the Government was linking the consent to

9 the taxation and making it clear that Heritage has to

10 meet with the URA.

11 Q. Yes, and I think you are accepting that still by this

12 stage there had been no significant engagement between

13 Heritage and the URA?

14 A. Correct, but it followed very shortly.

15 Q. Unless your Lordship had a further issue on that meeting

16 I was going to move on.

17 If we can go back, Mr Atherton, to 1186, this is the

18 internal email exchange. You will see at the bottom of

19 the page Brian Glover emails Dan, who is one of the

20 Tullow legal team, I think:

21 "Dan, would you know what the legal arguments ..."

22 It is almost like a Haiku. I'm not sure those full

23 stops are meant to be there.

24 "Dan, would you know what the legal arguments

25 Heritage would use to say they would not pay tax? Best


1 regards, Brian."

2 Actually I think that might be a Haiku. That might

3 not be accidental, and the answer is:

4 "Brian, my understanding is they are arguing that

5 the rights under the PSA and exploration licence are not

6 assets under Ugandan law and therefore do not attract

7 CGT. Have not looked at the point. Doesn't strike me

8 as a strong argument. Apparently they have dug up

9 a local tax lawyer who supports their cause."

10 I am not asking you to be absolutely clear,

11 Mr Atherton, as to the content of the advice which you

12 got. I am just asking you whether you can confirm that

13 the local tax lawyer was Mr Akunobera or was he somebody

14 else?

15 A. Somebody else.

16 Q. Can you give me the name of the person who it was?

17 A. We had been taking --

18 MR QURESHI: My Lord, I am not sure whether that is covered

19 by the scope of privilege, the name of the tax lawyer.

20 MR JUSTICE BURTON: How is it? Your witness has said

21 several times in the witness box: "We were given legal

22 advice that we would not be liable to pay tax." I would

23 have thought it would have been a clear waiver of any

24 privilege if there was any.

25 MR WOLFSON: I am not even asking about the content.


1 MR QURESHI: My Lord, if he can answer, he can answer.

2 A. We had taken advice from a number of places. In Uganda

3 specifically there were two. We had sought advice from

4 K&K, who are our legal representatives for a number of

5 years.

6 MR WOLFSON: And we see reference to them later, don't we?

7 A. And also a former Commissioner General of the URA who

8 had been an adviser to the oil companies, including

9 Heritage, for a number of years.

10 Q. Do you recall the gentleman's name?

11 A. It was a lady.

12 Q. Forgive me for assuming.

13 A. Annebritt.

14 Q. Is that B-R-I-T-T?

15 A. Yes, and the surname was Asslund, Annebritt Asslund, who

16 was a former Commissioner General of the URA.

17 Q. Thank you. Can we turn to E7, Mr Atherton, and it is

18 page 1647. This is core 1/205.05. These are minutes of

19 a meeting you had with the Government.

20 At 1651, if we turn through to core 205.09, you can

21 see that your position was that you were putting forward

22 an offer of $36 million tax, and I get that because --

23 sorry, I think I have given the wrong -- yes:

24 "Based on the above considerations the tax due on

25 the considerations [(iv)] was $36 million if a tax rate


1 of 30 per cent was to be applied."

2 So your offer to the Government, as I understand it,

3 was that on a net profit of about $1.2 billion you were

4 offering 36 million, is that correct?

5 A. I think it is important to say these meeting minutes

6 were all without prejudice. That is clear from looking

7 at 5.2.

8 Q. Yes, well, be that it as it may, no doubt your counsel

9 will take a point if he wants to, my question was as to

10 what the minutes say, which is, is it correct that on

11 a profit of about $1.2 billion earned in Uganda your

12 position was that you would pay $36 million in tax, is

13 that right?

14 A. Just in terms of this, it is a series of meetings. I

15 think we had six meetings over this time period with the

16 URA and with Government and I believe these are the

17 minutes that Lawrence Kiiza had provided to Tullow. He

18 chaired the meeting and --

19 Q. Were there sandwiches served, Mr Atherton? Because so

20 far I'm hearing a lot about the meeting and I'm still

21 waiting for an answer to my question.

22 MR JUSTICE BURTON: I think it is right. You have counsel

23 here to protect you. No one has risen to object so

24 please let us answer the question.

25 A. So we had a series of meetings during which we, together


1 with our tax advisers, we brought in Robert Nearing and

2 you will see his name is on the front cover of the

3 minutes. We had gone through the arguments of why this

4 was not taxable, the sale was not taxable in Ugandan

5 under 79G and 79S. During these meetings Government was

6 at a different opinion and it was felt that in order to

7 move forward, and by which time we had, as in my witness

8 statement had linked consent with taxation that we

9 suggested a settlement and I'd suggested a payment of

10 $36 million.

11 They, the URA and Government, had then determined

12 how can we justify $36 million? And that's why there

13 was a formulaic approach taken to justify the 36 million

14 which became based on sort of certain activity within

15 Government.

16 So there was an offer to settle without prejudice

17 for US$36 million, correct.

18 MR WOLFSON: Earlier today I put to you the proposition that

19 Heritage's approach in these negotiations was to play

20 hard ball and you said that wasn't the case. What I am

21 putting to you is that when you have earned $1.2 billion

22 in a country and you are sitting down with the Revenue

23 authority who has previously served you with an

24 assessment of $404 million has withdrawn it as premature

25 but has made it clear it is going to reserve them in the


1 same sum to offer them 36 million is about as hard ball

2 as you can get; isn't that right?

3 A. I would disagree. We have arguments why it is not

4 taxable under 79G and under 79S. Then within the

5 various documents and agreements we have with Government

6 we have something called a stabilisation clause whereby

7 if the tax rate changes adversely it cannot be applied.

8 And that was the situation where it was very clear in

9 Uganda that the sale of an asset was tax free.

10 Q. Did you mention the stabilisation clause in this

11 meeting? I don't see that referred to.

12 A. Yes, we did.

13 Q. One thing that is referred to is on the next page,

14 Mr Atherton, where we see that you relied on your move

15 to Mauritius and the double tax treaty as reducing your

16 maximum tax exposure from 404 million to 120 million and

17 in fact saying that the effective underlying rate was

18 zero. In the third line:

19 "Noted that the underlying tax rate would be zero."

20 That is a jolly good tax rate to me.

21 A. I think if you look at clause 6 it does say, and it is

22 important because this was added at our request, that

23 each party put forward lots of additional arguments and

24 rebuttals.

25 Q. Not contained in the minutes.


1 A. Correct, so there was a lot more --

2 Q. Fine so you are back on the stabilisation point. I'm on

3 the Mauritian point. You were telling the Government at

4 this meeting that you had moved to Mauritius, there was

5 a double taxation treaty which you've accepted was at

6 least part of the reason you moved there and you were

7 telling the Government two things: first of all, it is

8 not 404, it is 120 at tops. And in fact, the underlying

9 tax rate is zero. That was your position, wasn't it?

10 A. And the Government was aware that we had moved to

11 Mauritius at this time.

12 MR JUSTICE BURTON: Yes, by then they were aware?

13 A. Yes, they were.

14 MR JUSTICE BURTON: But the point being put to you is that

15 your negotiating position made it plain if you couldn't

16 reach agreement that was to be your final stance: tax

17 nought.

18 A. Our view was that it was nought.

19 MR JUSTICE BURTON: Because of the Mauritius double taxation

20 treaty.

21 A. Because of 79G, 79S and stabilisation.

22 MR JUSTICE BURTON: They had answered 79G. We got that

23 at -- whether that was right or not we don't know. We

24 are not dealing with that. 79G, they have put forward

25 an answer. 79S, they have put forward an answer.


1 A. Correct.

2 MR JUSTICE BURTON: But this one is a US cavalry point, is

3 it not? They are coming up with heavy artillery in the

4 background. This one's your final long stop.

5 A. The discussion about Mauritius was in fact a very short

6 part of the meeting in fact.


8 MR WOLFSON: My Lord, Mr Buckingham tends to operate with

9 heavy artillery in the background. My Lord, that may be

10 a convenient moment.

11 MR JUSTICE BURTON: Yes, certainly.

12 MR WOLFSON: But we are making good progress. I am

13 confident that we'll be able to finish with this witness

14 today as I anticipated.

15 MR JUSTICE BURTON: Good. If we finish a bit early it will

16 suit me because I have three cases to prepare for

17 tomorrow. So we won't start Mr Inch come what may.

18 MR WOLFSON: Just to say that we have written, while I have

19 been on my feet, to my learned friend's solicitors

20 asking for any transcript which that exists of

21 Mr Atherton's TAT testimony. We have sought a response

22 by 2 o'clock. Obviously we appreciate we may not get

23 a document by 2 o'clock but at least would like

24 confirmation if there is a transcript or not.

25 MR QURESHI: It would have been nicer if that request had


1 been made earlier but if fine we will look for it of

2 course.

3 MR JUSTICE BURTON: There we are. It arose out of answers

4 this morning.

5 MR WOLFSON: These things happen.


7 (1.00 pm)

8 (Luncheon Adjournment)

9 (2.05 pm)

10 MR QURESHI: My Lord, before my learned friend continues the

11 exercise he's engaged in, he is absolutely right,

12 a letter was sent by Messrs Ashurst to McCarthy Tetrault

13 demanding a copy of whatever was recorded by way of

14 a transcript of the hearing before the Tax Appeal

15 Tribunal.

16 MR JUSTICE BURTON: Requesting, I hope, rather than

17 demanding.

18 MR QURESHI: My Lord, it looked more like a demand with

19 a deadline but in any event it doesn't matter. We have

20 met it. I would like to provide your Lordship with

21 a copy of a document and I will explain its provenance.

22 A copy has been provided to my learned friend and I have

23 extra copies for anyone else who would like a copy.


25 MR QURESHI: Your Lordship will see this is a document of


1 26 pages, the last page has three names, no pp's.


3 MR QURESHI: Your Lordship will see that it is dated

4 26 July, it seems. That is the date that it refers to,

5 and my understanding from Messrs McCarthy Tetrault is as

6 follows.

7 This is a summary produced by the Tax Appeal

8 Tribunal, point one.

9 Point two, no transcript was produced, verbatim or

10 otherwise, by anybody.

11 Point 3, this was received in late 2011 by the

12 Ugandan lawyers, just prior to or contemporaneous to the

13 receipt of the decision which your Lordship finds in

14 bundle E24.

15 Point 4, whilst the decision is disseminated and is

16 available publicly, this relates to the proceedings

17 which were themselves in private, in camera,

18 confidential.


20 MR QURESHI: And therefore it is in that context that this

21 document came into existence and it is in that context

22 that, my Lord, I provide a copy to your Lordship and to

23 my friend.

24 MR JUSTICE BURTON: Thank you very much. Good. Yes,

25 Mr Wolfson?


1 MR WOLFSON: Mr Atherton, could you have a look at page 4 of

2 this document, please.

3 A. Can I have a copy, please? I don't have a copy.

4 MR QURESHI: Sorry, I wasn't sure my learned friend was

5 going to refer to it.

6 MR WOLFSON: We might as well since you have provided it.

7 Do you have it, Mr Atherton?

8 A. I am just going there, one second.

9 Q. If you just turn to 24 at the bottom, that is how you

10 will find 24. The question by the first hole-punch:

11 "HOGL was registered in Mauritius in March 2010 and

12 registered in the Bahamas in 1992. What were

13 considerations for the change in registration from

14 Bahamas to Mauritius?

15 "Answer: The change of registration was based on

16 corporate planning. We found Mauritius more applicable

17 to our group. Mauritius has a better time zone than the

18 Bahamas.

19 "Question: Why did these changes happen

20 in March 2010 and not August 2010?

21 "Answer: We continuously reviewed our group

22 structure and felt it was applicable to do so.

23 "Question: We would like to put it to you that the

24 change in registration in March 2010 was purposely done

25 to take advantage of the benefit Mauritius could offer


1 in light of the sale transaction to Tullow Uganda

2 Limited.

3 "Answer: It is not correct, that is your opinion."

4 You told my Lord this morning that the sentence in

5 the judgment of the TAT did not accurately reflect the

6 evidence you gave to the TAT. Would you now accept that

7 that statement you gave to my Lord this morning was

8 itself incorrect?

9 A. I would say that I didn't say: I said I had not said it.

10 That was a correct statement. I didn't say it.

11 I didn't remember saying it. Sorry, that is correct.

12 There was a question which referred to "purposely done"

13 and my view is we did it for a number of reasons, which

14 incorporated --

15 MR JUSTICE BURTON: A number of purposes, one of which was

16 to take advantage of the tax position?

17 A. That's correct.

18 MR JUSTICE BURTON: Then you could have said that, couldn't

19 you, to the Tax Tribunal: "That was only one of our

20 purposes"?

21 A. Correct.

22 MR WOLFSON: But you actually said, "It is not correct".

23 When you said, "It is not correct", that was false?

24 A. That, it says, "was purposely done for a number of

25 reasons", and I have not read this document, but it says


1 Tullow, you -- this is a minor point -- we knew we were

2 selling to Tullow, of course. I'm not sure if that was

3 the entity we sold to. I don't know, I haven't read the

4 document. So it may be defined. I don't know.

5 MR WOLFSON: Mr Atherton, could you have a look at

6 page 1610, please, core 1/203.001. It is E7/1610. You

7 will see this is the bottom email. It is an internal

8 Tullow email so you wouldn't have seen it at the time

9 obviously. You will see, it is a short email, Mr Glover

10 reports to Mr Martin:

11 "Government position hardening."

12 This is 15 June.

13 "They [the Government] believe Heritage playing

14 games and are aware Tony Buckingham misled shareholders

15 by saying no taxation, no tax to be paid. They [that is

16 the Government] would accept about $120 million and the

17 rest arbitration but require the latter [that is the

18 rest] to be in a safe place. They will not move from

19 this. They expect further meetings tomorrow ... further

20 news. FKK text below. We think HOGL is playing games

21 and we [that is Tullow] can't be in there."

22 Would you accept that that is an accurate reflection

23 of the Government's position by mid 2010, that they

24 thought that Heritage was playing games? They were

25 requiring 120 deposit and the rest secured pending an


1 arbitration, is that accurate?

2 A. No.

3 Q. That is not an accurate reflection of the Government's

4 position at the time?

5 A. I don't believe it's an accurate representation of the

6 position from our perspective, that is Heritage.

7 Q. Could you turn, please, to page 1614. This is core

8 223.001. This is an email from you, Mr Atherton, to

9 Mr Martin. You will see that email starts off at the

10 email at the bottom from him to you, then you reply and

11 he replies.

12 You will see from the top email that there had been

13 discussions between Mr Heavey and Mr Buckingham and

14 Mr Buckingham's position was that they would cancel the

15 SPA transaction and do an alternative transaction where

16 they would sell shares, is that correct? That was

17 Heritage's position at the time?

18 A. I'm not sure. It may have been a discussion between

19 Tony Buckingham and Aidan Heavey. I'm not sure of the

20 details of that discussion in any detail at all.

21 Q. The reason I put it that way is that if one looks at

22 a document -- keep bundle E7 with you if you would, and

23 just take up E5 for a moment just so I can explain why

24 I'm putting this. If you look at the fourth bullet?

25 A. Sorry, which reference?


1 Q. 1173.

2 MR JUSTICE BURTON: E5, what page?

3 MR WOLFSON: 1173.

4 MR JUSTICE BURTON: Is it in the core bundle?

5 MR WOLFSON: Yes, it is, my Lord, now. It is 133.001. This

6 is May 19th, the fourth bullet:

7 "He [Brian Westwood] said there was no corporate

8 deal in place with ENI in case this deal with us

9 unravels but there is a corporate deal ready with

10 another Middle Eastern buyer for Heritage."

11 So what I'm putting to you is that Heritage was

12 playing hard ball and saying to the Government: "Look,

13 if you don't reach agreement with us on tax, on our

14 numbers, we'll just cancel the SPA, because it won't

15 close, we'll sell to another buyer, maybe this unnamed

16 Middle Eastern buyer, and we'll do it on a share sale

17 and not an asset sale so you won't be receiving any

18 taxation at all."

19 That was Heritage's position, was it not?

20 A. I'm not aware of any Middle Eastern buyer interested in

21 the assets or corporate for the acquisition of the

22 Heritage Uganda deal. I don't know where Mr Westwood,

23 this statement came from. I'm not sure what was in his

24 mindset at the time.

25 Q. There are only two executive directors of Heritage,


1 aren't there?

2 A. Yes.

3 Q. There is you, and you don't know anything about it, and

4 there is Mr Buckingham who owns about 30 per cent of the

5 company, is that correct?

6 A. That's correct.

7 Q. Do you think Mr Westwood would be likely to be making

8 this up or is it more likely that he had had

9 a conversation with either you or Mr Buckingham?

10 A. I don't know. I don't know what --

11 MR JUSTICE BURTON: What is Mr Westwood like? This is the

12 second thing apparently he has done off the top of his

13 own bat without any kind of justification that we have

14 heard of today. Is he an incompetent person?

15 A. No.

16 MR JUSTICE BURTON: So do you think he made this up or do

17 you think he must have got it from either you or

18 Mr Buckingham or from his own knowledge of the existence

19 of this alleged third party purchaser?

20 A. All I can say is I'm not aware of a Middle Eastern buyer

21 for the Heritage Uganda assets.


23 MR WOLFSON: I think you can probably put E5 away. We just

24 took that out to look at that document. Let us go back

25 to E7, where we were, and if we move on to 1727, please.


1 My Lord, this is in the core at 206. This is an email

2 from Mr Buckingham to a number of people who we can see,

3 I won't read out. Mr Westwood happens to be copied, as

4 are you, as are some chaps from Tullow:

5 "Dear Members of the Committee ..."

6 He is writing to the Ugandan committee dealing with

7 the tax issue, isn't he?

8 A. Correct, from the Ugandan side, yes.

9 Q. First paragraph:

10 "... the meeting didn't happen. Briefly on

11 Heritage's current position [this is 5 July]: sale and

12 purchase agreement terminated at midnight on 17 July.

13 Heritage will withdraw from the agreement at that time."

14 That is pretty unambiguous, isn't it?

15 A. Correct.

16 Q. "I am growing extremely concerned by the

17 ever-increasings delays we have experienced. No

18 response to numerous call. Consequently, as set out

19 above, Heritage plans to terminate the SPA and intends

20 to continue as operator of and retain our working

21 interests in the exploration areas. We will seek an

22 extension."

23 So what Mr Buckingham is telling the Government and

24 Tullow is that if they don't consent to the transaction

25 then Heritage will remain as operator and of course in


1 that regard it will be able, if it wants -- if it

2 wants -- to do a deal with somebody else as well.

3 That's what he's saying, isn't he?

4 A. The transaction had a long stop date where either party

5 could pull out of the transaction after I think 180 days

6 or essentially six months. That period was coming to

7 a head. It was a case of trying to put some pressure on

8 and also us feeling that consent may not be granted.

9 One of the licences, which was Block 3A, has a tenure

10 until 8 September 2010 and we had to make a decision.

11 We were either going to complete the transaction or if

12 not we had to go back to Government, we had to continue

13 on and we had to arrange for an extension of the

14 Block 3A licence.

15 Q. So the answer to my question was "yes", is that right?

16 A. Could you repeat the question, please?

17 Q. Yes. What Mr Buckingham was telling the Government and

18 Tullow is that if they don't consent to the transaction

19 Heritage will remain as operator.

20 Let us pause there. Is that correct?

21 A. Telling the Government -- it is the Government consent

22 rather than Tullow consent but what we were saying at

23 that point in time is that we were looking, if the

24 consent was not granted, to pull out of the transaction.

25 Q. And the Government didn't want Heritage to remain as


1 operator, did they?

2 A. There had been no discussion of whether they wanted

3 Heritage to remain or not.

4 Q. Are you honestly saying that you don't know that the

5 Government's position was that it did not want Heritage

6 to remain as operator?

7 A. It was not discussed. We were selling the assets. We

8 would never have a conversation with Government to say:

9 "Do you want us to remain as operator?" We were selling

10 the assets, we were leaving, so why would we remain as

11 operator?

12 MR JUSTICE BURTON: You wouldn't remain as operator, of

13 course. If you didn't sell the assets that would be the

14 only situation in which you would remain as an operator.

15 A. Correct.

16 MR JUSTICE BURTON: What is being put to you is that you

17 knew that the Government did not want you to remain as

18 an operator, and therefore were pleased for you to sell

19 the assets.

20 A. When we announced the ENI transaction, correct, the

21 Government was delighted. We had thanks from the

22 Ministry of Energy and from the President.

23 MR JUSTICE BURTON: You have rather latched on to my second

24 point which was only seeking to summarise what

25 Mr Wolfson said. Did you know that the Government did


1 not want you to continue as an operator?

2 A. No, we had no information to that.

3 MR JUSTICE BURTON: If you have a case to put, Mr Wolfson

4 you must put it.

5 MR WOLFSON: Absolutely. We will come to this as we go

6 through.


8 MR WOLFSON: Now, we have reached July 2010 and we saw the

9 document on 15 June -- let me just summarise, I hope

10 fairly -- which said that the Government's position was

11 that it would accept a deposit of 30 per cent, there

12 would be an arbitration over the balance but the balance

13 had to be in a safe place. We saw that, the email

14 recording the Government's position. You were caviling

15 as to whether you agreed that was the Government's

16 position or not but you know the email I'm talking

17 about?

18 A. That was an internal email within Tullow.

19 Q. Yes.

20 A. We on the 16th have made a proposal in a meeting to the

21 members of this committee that had been set up between

22 URA and Government who we had met at the beginning

23 of June, whereby we said that we would place

24 30 per cent, at that time $180 million in Kampala and

25 then we would give some form of guarantee for the delta,


1 for the balance, in order that that be sufficient that

2 we can now consent or Government would consent to the

3 transaction.

4 Q. We are on the same page, Mr Atherton. Indeed, the page

5 I was going to take you to was I think the page you are

6 talking about which is 1643, core 205.01. It is

7 a letter from your lawyers McCarthy Tetrault, and if you

8 look through the first page and a half or so there is

9 a meeting on 16 June where you make a proposal, and

10 I hope I summarise it fairly, you are going to deposit

11 108 million, you see this on the second page, and

12 resolve the rest in arbitration. Where is the reference

13 here to securing the balance in some way?

14 A. That must have followed. There was a follow-up

15 correspondence shortly thereafter.

16 Q. This was an iterative process?

17 A. I accept that.

18 Q. So I think it is fair to say that on 16 June we have the

19 108 and the arbitration but we don't yet have the

20 security.

21 A. That's correct.

22 Q. If you could now turn through to page 1736, which

23 I think now is core 2 -- your Lordship may have put it

24 in the core as 210.001. I am not sure it is in my core

25 at the moment.


1 MR JUSTICE BURTON: It isn't in my core.

2 MR WOLFSON: It is 1736.

3 MR JUSTICE BURTON: It may be somewhere.

4 MR WOLFSON: It is in E7/1736, but it may not have gone into

5 the core. We weren't sure whether your Lordship had

6 actually put this in. It is the letter from the

7 Ministry of Energy to McCarthy Tetrault. E7/1736.

8 We saw you had made the offer of 108 and

9 arbitration. This is the Minister's response. I think

10 we can summarise it by just looking at the point 7 on

11 the second page, 1737. His response is:

12 "If the GOU is to go for arbitration it will be on

13 terms that 30 per cent is deposited and then the balance

14 is secured by an on demand bank guarantee."

15 So this, I think, is where we have the security. It

16 is not your proposal to the Government; it is the

17 Government's demand in response to your initial

18 proposal.

19 We haven't seen in either your proposal or the

20 Government's response any scope or position for Tullow

21 to be acting as withholding agent, have we?

22 A. Correct, no.

23 Q. Could you now turn, please, to page 1742. I am not sure

24 this is in the core. This is in B. Your Lordship

25 may -- you keep that one, Mr Atherton. Your Lordship


1 will have this in B1/4. We think it might be core

2 210.003. But it may be my bundle hasn't been updated

3 for the last core updates yet.

4 This is the formal letter giving conditional

5 consent, 6 July, do you have it?

6 A. Yes.

7 MR JUSTICE BURTON: Is that in B?

8 MR WOLFSON: Yes, it is B, tab 4, my Lord.

9 You will see at paragraph 2:

10 "For the avoidance of doubt this approval shall not

11 become effective unless Heritage Oil & Gas Limited has

12 paid the taxes or demonstrated to the satisfaction of

13 the Government of Uganda that taxes shall be paid

14 immediately upon demand."

15 Again, there is no scope there for Heritage to be

16 acting as a withholding agent, is there?

17 A. Tullow to be acting.

18 Q. Sorry, you are absolutely right -- Tullow to be acting

19 as a withholding agent?

20 A. Not based on this letter.

21 Q. No. 1841, back in E7, just following this through.

22 This is an email from Mr Martin to Mr Buckingham copied

23 to you. You will see from the first paragraph that

24 Mr Buckingham has been talking to Mr Heavey and

25 Mr Martin is sending Tullow's proposal for removing the


1 conditionality of the Government's demand. If you cast

2 your eyes down the numbered paragraphs --

3 MR JUSTICE BURTON: Sorry, which page is this?

4 MR WOLFSON: 1841, my Lord.

5 MR JUSTICE BURTON: Just before we go on, I have been

6 struggling a little, that is why I have been a little

7 behind, with something you said about core 223.001,

8 which is E/1614 and you were quoting -- in your question

9 you said this:

10 "This is an email from you, Mr Atherton, to

11 Mr Martin. You will see that in the email it starts off

12 with the email at the bottom from him to you and then

13 reply and he replies.

14 "You will see from the top email that there had been

15 discussions between Mr Heavey and Mr Buckingham and

16 Mr Buckingham's position was that they would cancel the

17 SPA transaction and do an alternative transaction where

18 they would sell shares, is that correct? That was

19 Heritage's position at time?"

20 Are you simply deriving that from the use of the

21 words "none of these corporate ideas"?

22 MR WOLFSON: Yes, my Lord, in conjunction with the other

23 documents I put to the witness which showed what the

24 corporate ideas were and discussed.

25 MR JUSTICE BURTON: That was the Middle Eastern buyer?


1 MR WOLFSON: That was why we had the slight detour in E5.

2 MR JUSTICE BURTON: That was your interpretation?

3 MR WOLFSON: Yes, based on that other document, my Lord.


5 MR WOLFSON: We were looking at 1841 in E7. If you just

6 glance down those numbered paragraphs, can I summarise

7 it: in commercial terms, Heritage is agreeing to pay

8 a deposit, arbitrate the tax issue and put up a bank

9 guarantee for the rest? Is that a fair summary?

10 A. And point 5. That's correct, and point 5 says that we

11 would run the tax dispute, which was in connection with

12 a point earlier in the correspondence whereby there was

13 an email that set out that Tullow would act as agent and

14 would be the sole responsibility for the tax resolution.

15 Q. Let me just turn then back because we are going, so to

16 speak forward in time but back in the bundle the way

17 these emails printout. If you go back to 1840 you will

18 see that Mr Buckingham says yes, that he'd like to --

19 the bottom of the page. It is actually you on

20 instructions:

21 "Dear Aidan and Graham, Tony has asked me to send

22 the following. Thanks very much, greatly appreciated,

23 it is acceptable. We would like a further $25 million

24 in settlement of the contingent amount."

25 And as we follow that up, Tullow basically say no


1 and I don't think that proposal then goes any further.

2 That is where the parties end up on that issue?

3 A. Correct, events have moved ahead.

4 Q. So at this stage everybody is clear about the basic

5 structure: there is a deposit, an arbitration and a bank

6 guarantee, but it is no part of this structure that

7 Tullow will be acting as a statutory or withholding

8 agent for Heritage, is it?

9 A. Correct because that idea had been mooted and we had

10 rejected it.

11 MR JUSTICE BURTON: Where was it mooted?

12 MR WOLFSON: We'll come to this.

13 MR JUSTICE BURTON: 1840 and 1841, are they in the core?

14 MR WOLFSON: Not at the moment but would your Lordship wish

15 to put them in?

16 MR JUSTICE BURTON: Yes, I will do. Don't worry, if they

17 are not already in, I'll put them in. 223.002,

18 I suppose, and 003.

19 MR WOLFSON: I am being told they are the same emails as at

20 211 and 212. They are. They are in at 211. I have

21 missed that reference, forgive me. They are in already

22 at 211 and 212.

23 MR JUSTICE BURTON: Thank you very much.

24 MR WOLFSON: In E7, can we just turn back to 1749. This is

25 not in this core, my Lord. 1749. It is one of these


1 very small typographical. You will see the bottom email

2 is from Tony Buckingham to Aidan Heavey:

3 "We both agree our attempt to encourage Government

4 to consent has become a drawn out process. We need to

5 concentrate our minds. The best way is for us to

6 jointly pay the tax demand the Government wish to place

7 on our transaction ...(Reading to the words)... stand

8 by. If Tullow puts up 100, then Heritage will put up

9 the remaining 260. If between us we can close out the

10 tax demand then surely the Government has no possible

11 reason to withhold consent."

12 So this is a different structure that is being put

13 forward by Mr Buckingham, isn't it? This is a structure

14 which is saying: "Look, let's just put up the whole

15 shebang and we will argue about it later. You put in

16 100, we'll put up 260", correct?

17 A. This is on 2 July so it is slightly earlier.

18 Q. Absolutely.

19 A. And it is a case of: it is a commercial transaction, let

20 us see if we can get consent, how can we get consent?

21 Q. I am not criticising it. I'm just making sure we are on

22 the same page as to what it is and I think we are.

23 Then Mr Heavey, there has obviously been a call,

24 says --

25 MR JUSTICE BURTON: Is it 360 or 380?


1 A. 360.

2 MR WOLFSON: 360.

3 MR JUSTICE BURTON: Was it not 380?

4 A. It became 404.

5 MR WOLFSON: It moved up. It was originally 360. They are

6 talking about putting the whole lot up.


8 MR WOLFSON: "What about the following?"

9 Says Mr Heavey.

10 "You agree with arbitration for the 360. [That is

11 the whole amount] You pay 108 deposit. You agree with

12 the URA that 260 goes in escrow."

13 That is where that appears to start from:

14 "We'll put in 100,000 of the 260,000 in escrow ..."

15 A. 100 million.

16 MR WOLFSON: Sorry, 100 million:

17 "... 100 million of the 260 million in escrow. We

18 will act as your agent to sort out tax and any reduction

19 will first come out of our 100 million in escrow. The

20 clause in the SPA will be seen as the reason we did

21 this. We can then pay you $1.09 billion."

22 The point I am putting to you, which I think you

23 said earlier, is that when in this email Mr Heavey is

24 talking about "We'll act as your agent" that is so to

25 speak to negotiate with the Government on the underlying


1 tax position of Heritage which is something you didn't

2 want because you wanted to negotiate your underlying tax

3 position, correct?

4 A. Commercially, correct.

5 Q. So in a later answer just now, you indicated that at

6 some earlier stage there was discussion that Heritage

7 was acting as what you might call a statutory agent,

8 a 106 or a 108 agent -- sorry, Tullow would be acting as

9 a 106 or a 108 agent?

10 A. No, I just said they would be acting as an agent and

11 I referred to this, I didn't refer to any statutory --

12 MR JUSTICE BURTON: When you say it was mooted and rejected,

13 you were referring to them acting as your negotiating

14 agent?

15 A. Correct.

16 MR JUSTICE BURTON: You were not referring to the statutory

17 agent?

18 A. No.

19 MR JUSTICE BURTON: Good, thank you.

20 MR WOLFSON: Could you have a look at paragraph 143 of your

21 witness statement, please, just to be absolutely clear.

22 When you say in this paragraph, "Although it didn't

23 stand out to me at the time, Mr Heavey's 6 July 2010

24 email in fact also contained the first suggestion that

25 Tullow had intentions to act as some sort of agent on


1 behalf of HOGL", that is not intended to cause any

2 confusion with statutory 106 or 108 agents, is it?

3 A. No.

4 Q. Good.

5 A. I was trying to say here that they wanted to get

6 involved in our tax and negotiating or resolving our

7 tax.

8 Q. Going back to the chronology, we can pick it up, please,

9 Mr Atherton, at 1861.

10 MR JUSTICE BURTON: Sorry, it was the first suggestion but

11 it was also the last suggestion. It was never raised

12 again, was it?

13 A. By Tullow to us?


15 A. I don't believe it did, no, my Lord.

16 MR WOLFSON: It is --

17 MR JUSTICE BURTON: That I think is where counsel must have

18 got this from. There is an implication there that this

19 is the first suggestion that TUL had intentions to act

20 as something along the lines of a statutory agent, but

21 in fact it was a different thing, you said no and that

22 was the end of it.

23 MR WOLFSON: It is a negotiating.

24 MR JUSTICE BURTON: I am going to cross out the word "first"

25 in your witness statement. Yes?


1 MR WOLFSON: Can we have a look at 1861, please. Just

2 picking up the chronology, you are now coming back

3 through your lawyers. This is core, my Lord, 212.005.

4 It is a letter from McCarthy Tetrault, 12 July. Your

5 solicitors are coming back offering to put up a bank

6 guarantee to cover the balance of the disputed tax,

7 correct?

8 A. Correct.

9 Q. And if you turn through, please, to 1878, by 13 July

10 Heritage had sent a draft bank guarantee from a tier one

11 international bank.

12 You see that from the last sentence of the first

13 paragraph of Mr Buckingham's email, yes?

14 A. Correct. We provided two. I think on this day we

15 provided I think a guarantee from Barclays in draft and

16 I think we followed that up within a day or so with

17 Standard Bank as well so I think we provided two.

18 Q. And they are, or at least were -- I should perhaps say

19 are, in case we start a run -- they are tier one

20 international banks.

21 Can we go to E8, please, 1901, core 213.

22 MR JUSTICE BURTON: 1878, to which you referred, is that in

23 the core?

24 MR WOLFSON: No, it isn't at the moment, my Lord.

25 MR JUSTICE BURTON: You didn't take me to it. Do you want


1 to go to it or ...?

2 MR WOLFSON: The witness agreed that -- I was really just

3 getting the chronology that by this stage the draft bank

4 guarantees had been produced.

5 MR JUSTICE BURTON: We don't need to look at it?

6 MR WOLFSON: No, I just wanted to make sure that my

7 understanding of what was going on from the documents

8 was correct and Mr Atherton has confirmed that it is.

9 We are now, my Lord, looking at E8 at 1901, which is

10 core 213. This letter responds to the letter we have

11 just seen. I think it is fair to say, isn't it,

12 Mr Atherton, this essentially accepts Heritage's letter

13 and sets out the formal conditions required to satisfy

14 the Government which we can see numbered? So it is

15 absolutely clear, isn't it, that by this stage, 16 July

16 2010, we have seen no suggestion in any of this so far

17 that the Government is going to appoint Tullow as

18 a statutory agent for Heritage in respect of its tax

19 liability?

20 A. Correct.

21 Q. So presumably you would agree with me that Tullow,

22 therefore, did not procure the 27 July 2010 notice which

23 was served on it?

24 A. I am unable to comment for certain because I don't know

25 what discussions had been taking place between Tullow


1 and the Government.

2 Q. That is fine. Let us leave that there. And you can't

3 give any direct evidence about the second agency notice

4 either, I presume?

5 A. We received the second notice.

6 Q. Sorry, about whether Tullow procured it. That is

7 something beyond your knowledge, whether it did or it

8 didn't?

9 A. Correct.

10 Q. Mr Atherton, could you turn, please, to paragraph 151 of

11 your witness statement. You there quote an internal

12 Tullow email. As I said at the outset, I'm not

13 generally going to go to these documents, but you make

14 the point here that there is an internal email of the

15 same date painting a rather different picture and you

16 have underlined the words: "We must help the GOU get the

17 final piece of the jigsaw completed."

18 Before making this witness statement, I presume you

19 read the document referred to in its entirety?

20 A. Which document?

21 Q. The one you refer to in paragraph 151.

22 A. I will have done but if I can look at it now, I think

23 that's only fair.

24 Q. Did you look at it in its entirety before you made the

25 statement?


1 A. Yes.

2 Q. Good. It is at E9/2264.

3 MR JUSTICE BURTON: These ideas that you have incorporated

4 in your statement by reference to the documents, they

5 are all your ideas?

6 A. Yes.

7 MR WOLFSON: Can I understand how that works, Mr Atherton.

8 You were provided with a full set of the disclosure from

9 Tullow, were you, and you went through it and said to

10 yourself: just a minute, if you read this and then look

11 at that and put 2 and 2 together, then you make 4 or 5,

12 as the case may be? Is that the process?

13 A. I was provided with considerable files of data. Whether

14 it was the complete disclosure I have --

15 MR JUSTICE BURTON: They probably gave you a selection of

16 documents.

17 A. I don't know if it was a selection or a full set. It

18 was an inordinate number of documents.

19 MR JUSTICE BURTON: You wouldn't have had all this lot.

20 A. I had a lot of files to go through. It probably was

21 a selection. I guess it was.

22 MR WOLFSON: This may or may not be an attractive

23 suggestion, Mr Atherton, but maybe you have a career at

24 the Commercial Bar yet ahead of you.

25 At 2264 is a document I think you are referring to


1 and could you just have a look at that document. You

2 obviously read it carefully before you made your witness

3 statement. (Pause).

4 A. Carry on.

5 Q. Would you agree that what actually is going on in this

6 email is Mr Heavey is actively encouraging his team to

7 ensure that Heritage are happy with the way the

8 transaction is closed?

9 A. What had happened, if we go back to actually what was

10 happening on the ground --

11 Q. Would you answer my question first and then feel free to

12 put it into context.

13 A. Would you repeat your question, please?

14 Q. Yes. Do you agree in this email that Mr Heavey is

15 actively encouraging his team to ensure that Heritage

16 are happy with the way the transaction is closed?

17 A. Mr Heavey is actively encouraging completion of the

18 transaction so he can farmdown to Total and CNOOC.

19 Q. There is no suggestion in this that there is any sort of

20 conspiracy, not least because he says in terms: "We

21 should try to make sure GOU and Heritage part company on

22 at least civil terms"?

23 A. Correct. What was happening at this stage was, if you

24 go back to the previous documents which were looking at

25 the situation here would evolve through to place money


1 on deposit, an arbitration agreement and a bank

2 guarantee from a tier 1 bank for the remainder, and that

3 was around about -- between the 12th and around about

4 the 16th and 17th July.

5 We never received any comments, even though we

6 tried, and we asked Government. We had a team on the

7 ground, not me, at that time meeting with Government and

8 they provided no comments on the guarantee. We provided

9 an arbitration agreement to them on the 12th. They

10 provided one back to us on the 16th, which was the

11 letter we have just been through which was initialled

12 but they were not prepared to sign it. Having sent it,

13 then they determined they would not sign the arbitration

14 agreement. Then we heard in this week now, because we

15 are now following into the next week, from Tullow that

16 actually the way forward is not a bank guarantee, the

17 way forward is through an escrow arrangement. And

18 that's the situation we had on the ground. And that

19 resulted in I think a change to the escrow arrangement

20 shortly in this week.

21 Q. Would you accept as a summary -- we can trudge through

22 the documents if necessary, but would you accept as

23 a summary that Tullow's position at this time was that

24 it wanted Heritage's tax position determined by the

25 Government/URA, but that any such determination had to


1 happen in accordance with Ugandan law and respecting

2 Heritage's rights?

3 A. That was our intention without question, and in terms of

4 looking at Tullow, it was a case of: how can we now

5 complete this transaction? We know there is a question

6 mark over the tax. What is a mechanism that we can put

7 together which will be acceptable in order that the

8 transaction can be completed, the funds placed to one

9 side and then we can carry on, so they can then complete

10 their farmdown to CNOOC and Total?

11 Q. That is your understanding of what Tullow's position was

12 at the time?

13 A. That is my understanding of Heritage's position. I

14 can't say --

15 MR JUSTICE BURTON: I thought you said that was your

16 position of Tullow. "And in terms of looking at

17 Tullow", I thought that was what you were describing.

18 A. In terms of Tullow it is difficult for me to speak of

19 Tullow because I'm not Tullow, of course.

20 MR JUSTICE BURTON: But that's what you thought their

21 position was?

22 A. But they wanted to get to a completion situation, yes.

23 MR WOLFSON: In which case, Mr Atherton, I think we can move

24 on to the next topic. Can I ask you some questions

25 about article 7.5(b) and clause 3.1A but don't worry, we


1 are not going to have a legal disposition about what the

2 clauses mean.

3 Let us stick to facts. Your position is you didn't

4 receive a copy of the first agency notice, is that

5 right?

6 A. The one of the 27th, no, we never received it.

7 Q. I'm calling that one -- 27 July is the first one and

8 2 December is the second one.

9 A. We received it in March 2011 from Tullow. That is the

10 only time we received it.

11 Q. The only time you received it was March 2011, right. So

12 actually, the way it worked out was that you got them

13 backwards then, didn't you, because you got the second

14 one first?

15 A. Correct.

16 Q. Although I mean, as you have seen, on its face it says

17 it was copied to but your evidence is you didn't get it

18 and in fact more than that, you actually got the second

19 one first, you got the first one in March 2011, yes?

20 A. Correct. And we received the second one on the day or

21 the following day in December.

22 Q. Yes. When you had received the second one it must have

23 been obvious to you that Tullow had been previously

24 served with an agency notice for 283 million, no?

25 A. No.


1 Q. Well, the second one referred to the 30 million of the

2 extra 100 million paid, correct?

3 A. Correct, can we go to a reference for it?

4 Q. I don't think we need one for the moment. It is fairly

5 simple I think. There is a potential extra

6 consideration of up to 150 million, isn't it, there on

7 the deal?

8 A. Correct.

9 Q. And that was resolved between you, that you'd fix it

10 at 100 million, correct?

11 A. And that was part of the supplemental agreement, yes.

12 Q. And you get the second agency notice asking you for

13 30 million, being 30 per cent of that 100, correct?

14 A. Correct.

15 Q. Wasn't it blindingly obvious to you that if the URA were

16 sending out notices for 30 million, they must have sent

17 out a notice for 30 per cent of the larger sum. That

18 didn't occur to you, did it?

19 A. No, we didn't receive it. They directly sent -- they

20 sent the agency notices direct to Heritage, so one would

21 assume if they set up that mechanism, they would have

22 sent any other agency notices direct to Heritage. It

23 was not part of the evidence.

24 Q. You had objected to the second assessment, the

25 assessment for the 100 million is 19 August. You had


1 objected to that on 1 October. I will take you to the

2 documents if we need to.

3 A. If that's the date. If it was the 1 October, fine.

4 I'll take that as read.

5 Q. And that objection had been rejected on 1 December and

6 the notice is issued on the 2nd?

7 A. Okay.

8 Q. You had actually objected to the first assessment as

9 well, hadn't you? You had objected to that on

10 12 November?

11 A. We had objected. We objected on 18 August, I thought,

12 to the July 6th assessment. That is when we objected,

13 I think, was 18 August.

14 Q. Yes. There is a document which -- unbelievably there

15 are actually some documents which have been disclosed by

16 my learned friend's clients which have not found their

17 way into the trial bundles. As I said on the first day,

18 all of mine were asked to be put in. This is

19 a disclosed document and let me just hand you a copy.

20 (Handed)

21 MR QURESHI: My Lord, I am not sure if my learned friend is

22 making a complaint about deficiency of disclosure.

23 MR WOLFSON: No, no, on the contrary. Any complaint is mine

24 for missing the document and not putting it in the trial

25 bundle. It was a properly disclosed document.


1 It is an email. Your Lordship may wish to mark this

2 as something like E16/4497A, for reasons which I will

3 explain. It is an email dated 1 November 2010 from

4 Brian Smith of Heritage to Tony Buckingham and it is

5 copied to you.

6 Subject: "Tullow on the rack." Attachment: "URA

7 serves agency notice on Tullow over tax.ea.1/71110.pdf.


9 The text of the email:

10 "Everyone, this article in East African this morning

11 confirms what I have been hearing out of Kampala."

12 When we look at the attachment -- do you have it?

13 A. No.

14 Q. It still hasn't been provided. I think you are probably

15 the most important person in court to have it and you

16 haven't got one yet. Sorry, my Lord, the second most

17 important person in court. Some things, my Lord, go

18 without saying but I should have said it.

19 Let us start again. You will see it is an email

20 from Mr Smith. He works for Heritage, yes?

21 A. Correct.

22 Q. To Mr Buckingham and yourself and somebody called

23 Tania Clark. "Tullow on the rack", he attaches a pdf.

24 Let us look at what he says:

25 "Everyone, this article in East African ..."


1 And that is a newspaper, isn't it?

2 A. Yes.

3 Q. "... this morning [1 November] confirms what I have been

4 hearing out of Kampala."

5 When we look at the attachment:

6 "URA serves agency notice on Tullow over tax.

7 283 million dispute. All firm's sources refute reports

8 they have agreed to pay."

9 And let us have a look at the news article. The

10 news article which is attached to the body of this

11 email, I think it is actually in the bundles already, it

12 is at E16.

13 MR JUSTICE BURTON: Never mind whether it is in already.

14 The significance is it that it has been read by

15 Mr Smith.

16 A. Yes. Passed on by Mr Smith to Heritage.

17 MR WOLFSON: It is clear from this article that Tullow is

18 stating publicly that it has been served with an agency

19 notice for $283 million, isn't it?

20 A. Tullow stating it publicly wouldn't be an RNS

21 announcement to the market. I don't think this is

22 a public statement by Tullow, personally.

23 MR JUSTICE BURTON: The fact is that it is sent by Mr Smith

24 to you.

25 A. And with hindsight, we would have followed it up. I


1 don't believe -- I don't remember any follow-up. I

2 don't remember we asked our lawyers to establish what is

3 an agency notice and to look at the Taxes Act. With

4 hindsight, now I would say this is fairly accurate, but

5 at the time the penny did not drop.

6 MR WOLFSON: Come off it, Mr Atherton. I mean, come off it.

7 You gave evidence a moment ago the first you knew about

8 a $283 million agency notice was March 2011 and that is

9 just wrong, isn't it, and you knew it was wrong?

10 A. Absolutely I object to that. No, it's not.

11 Q. Not only is it inconceivable that the URA would serve

12 you with a notice for a paltry 30 million and ignore the

13 elephant in the corner of 283 but you were first told on

14 1 November that there had been an agency notice, and

15 secondly, it is clear that Mr Smith had actually been

16 hearing this for some time in Kampala?

17 A. I think the rumours -- rumours, we don't act on rumours.

18 We did not act on this.

19 Q. What sources is Mr Smith referring to then?

20 A. I don't know. He was not in Kampala. I don't know

21 where his information was from. We did not rely on it.

22 We did not follow it up.

23 Q. You didn't sort of think: "Just a minute, that's a bit

24 interesting that our partner has been served with an

25 agency notice for $283 million", it didn't trigger any


1 bells or ...?

2 A. No.

3 MR JUSTICE BURTON: The 283 million is plainly your tax,

4 isn't it?

5 A. It is the figure, correct.

6 MR JUSTICE BURTON: I mean, but the figure is obvious. So

7 this says they have been served an agency notice in

8 respect of your tax requiring them to pay.

9 A. Correct, that is what he says. We did not follow it up.

10 MR JUSTICE BURTON: You didn't follow it up.

11 A. No, we didn't. The penny did not -- now looking back,

12 of course. But no, at that time ...

13 MR WOLFSON: Do you mean now looking back or now that I have

14 shown you this document?

15 A. I had seen this document before in the disclosure

16 documents.

17 Q. You had seen --

18 A. In the bundles.

19 Q. When you say "the document", you mean the newspaper

20 report, don't you?

21 A. Yes.

22 Q. Do you want to have a look at paragraph 198 of your

23 witness statement, please. Just picking it up from the

24 second sentence:

25 "A subsequent newspaper article on 1 December 2010


1 in the East African ..."

2 A. Yes, which is this one.

3 Q. Yes, absolutely. That is the point I am putting to you:

4 "... reported that Tullow had said that Minister

5 D'Ujanga's comment related to an agency notice which had

6 been served on Tullow by the URA. Although we didn't

7 appreciate this at the time I now assume this was

8 a reference to the first agency notice."

9 What you don't say is that you actually specifically

10 email this report and told by Mr Smith emailing you that

11 it coincided with what he had been hearing in Kampala as

12 well. You don't say that in your witness statement, do

13 you?

14 A. I stand by my witness statement. It was the first we

15 had heard of it and we didn't rely on it, we didn't act

16 on it and with hindsight, looking back on it, of course

17 we'd have done more but we did not.

18 Q. So there is no misunderstanding I am putting the case to

19 you that you and Heritage knew full well about the first

20 agency notice from your sources in Kampala and by the

21 latest you knew about it, at the latest you knew about

22 it by 1 November 2010. You understand that is the case

23 I'm putting to you?

24 A. I understand that is the case and it's incorrect.

25 Q. As I understand it, you say that clause 3.1A of the


1 supplemental agreement gave Heritage an unconditional

2 right to dictate Tullow's response to the second notice.

3 Have I understood your case correctly?

4 A. 3.1A of the supplemental agreement, which is what we are

5 referring to, gave us the sole rights to negotiate our

6 tax position and tax dispute with the Government and

7 I haven't got the document and I'm not a lawyer, of

8 course.

9 Q. I just want to make sure that what I am dealing with is

10 what you say should have happened from your commercial

11 perspective.

12 Let us just have a look at it -- well, the quickest

13 way might actually be to go to A. Don't worry, I'm not

14 going to go through legal points with you, Mr Atherton.

15 A. Good.


17 MR WOLFSON: Bundle A, my Lord, just so we understand the

18 point. It is tab 3. This is a formal legal document,

19 Mr Atherton, which is called the Re-amended Defence and

20 Counterclaim. There is a statement of truth by your

21 solicitors but obviously they will have checked with

22 somebody at Heritage. Just pick it up at

23 paragraph 53.1.

24 What I am looking at is the answer you have just

25 given my Lord is that your understanding is that 31.A


1 meant you could negotiate about your, Heritage's, tax

2 liability to the Government. What I am putting to you

3 is whether you are complaining that Tullow negotiated

4 about the notices served on it with the Government and

5 whether you are saying that that was also a breach of

6 3.1A so far as you understood the deal that had been

7 done between the parties. You understand the

8 distinction I'm drawing?

9 A. If I'm right, so my understanding, I'd like to go to

10 clause 3.1A, but does clause 3.1A allow Tullow to be

11 involved in our tax dispute? One question. The second

12 question: does it allow Tullow to be involved in an

13 agency notice? Is that correct?

14 Q. What I am trying to get at is whether your position is

15 that Tullow acted wrongfully in some way by dealing with

16 the Government about the agency notice as distinct from

17 dealing with the Government about Heritage's own tax

18 position. That is the distinction I am drawing.

19 A. Are they not linked?

20 Q. You don't see any difference between the two?

21 A. I see that if there is a tax dispute then clause 3.1A

22 gave us the sole rights to negotiate and act in that

23 dispute.

24 Q. And that dispute, you are referring to the question

25 whether you actually owe the Ugandan Government any tax


1 at all; is that right?

2 A. That's correct.

3 Q. So let us look at the facts as to what actually happened

4 because, as I say, I am not going to debate legal points

5 with you. If you could turn to bundle E19/5277, it is

6 in core bundle 3 at 846. This is a letter from the law

7 firm I think you mentioned in an earlier answer,

8 Mr Atherton, Kiwanuka & Karugire?

9 A. Yes.

10 Q. It is dated 29 December 2010. We can read the letter.

11 My question is: am I right in assuming that you did not

12 give them instructions as to -- I will rephrase the

13 question.

14 Can I take it that this letter fairly reflects their

15 view as to the position under Ugandan law so far as you

16 are concerned?

17 MR QURESHI: Again, is the witness supposed to answer

18 a question about Ugandan law?


20 MR JUSTICE BURTON: He was being asked about his belief at

21 that stage, but can you reformulate the question,

22 please, Mr Wolfson?

23 MR WOLFSON: Yes, my Lord. I am just wondering whether

24 I can take it even quicker than that. Let us approach

25 it this way, Mr Atherton. Can we agree that this letter


1 does not require or even ask Tullow to do anything about

2 the notice which has been served on it, the second

3 agency notice?

4 A. This was a letter written in connection with the second

5 agency notice, correct.

6 Q. Do you want to answer the first bit? This letter does

7 not require or even ask Tullow to do anything about the

8 notice which has been served on it?

9 A. It goes through the facts as they saw it.

10 Q. Yes. It doesn't require Tullow to challenge the notice,

11 does it?

12 A. No, but it says that:

13 "Our client shall not recognise any amounts remitted

14 to the URA pursuant to the invalid third party agency

15 notice."

16 Q. It doesn't require Tullow to refuse to pay under it?

17 A. This letter does not specific -- it says it's invalid

18 and it states that it does not recognise any amounts

19 which would be remitted.

20 MR QURESHI: Do you want to look at the paragraph above?

21 MR WOLFSON: Yes. That is precisely the paragraph I am

22 coming to, thank you.

23 What it does, in the paragraph that your counsel has

24 helpfully drawn your attention to on the second page,

25 what it does it says:


1 "Look, Tullow, there's clause 3.7 of the sale and

2 purchase agreement where there's no set-off."

3 What this letter is saying to Tullow is: "You have

4 to pay us in full under the SPA and how you deal with

5 the agency notice is frankly up to you."

6 That is what this letter is saying, isn't it?

7 A. It is saying the third party agency notice is invalid.

8 Q. You were perfectly happy for Tullow to pay under the

9 notice provided you got your money under the SPA that is

10 the case, isn't it?

11 A. No, we are calling the third party agency notice

12 invalid.

13 Q. You didn't think that whether Tullow paid or didn't pay

14 under the notice would have any prejudicial impact on

15 whether your dispute with the Government on your tax

16 liability proceeded or not?

17 A. That is not the case. It is not the case. We saw this

18 as an agency notice, it was invalid. We sent it to

19 them. We sent it to the URA and we were saying that we

20 don't believe it is valid.

21 MR JUSTICE BURTON: That I think is what counsel is putting

22 to you.


24 MR JUSTICE BURTON: You thought it was invalid and therefore

25 it had no effect on your dispute?


1 A. But by them being involved they have got involved in our

2 dispute. It is clear on the supplemental.

3 MR JUSTICE BURTON: "Involved" is a bit of a broad use of

4 wording.

5 A. I'm sorry.

6 MR JUSTICE BURTON: I think it is sufficient really, and

7 a matter of argument now, you did not instruct your

8 lawyers to tell them that they must take any step in

9 relation to this notice, and if they didn't take any

10 such step or if they took contrary steps they would be

11 acting in breach of clause 3.7.

12 A. I think we -- their answer was -- this is getting in

13 into a legal debate, I am afraid, which I am afraid I'm

14 not a qualified lawyer. I'm not a lawyer at all. We

15 just asked our lawyers to send back a lawyer disputing

16 the agency notice and they classified it as invalid.

17 MR WOLFSON: Your position was that if Tullow didn't pay you

18 the sums due under the SPA then you wouldn't release the

19 Standard Bank guarantee, correct?

20 A. The Standard Chartered Bank guarantee.

21 Q. Yes, the Standard Chartered Bank guarantee. That was

22 your position?

23 A. That was later on. There was no discussion about the

24 Standard Chartered Bank guarantee at this time at all.

25 Q. I'm not saying at this time. That became your position,


1 didn't it, that: if you don't pay up under the SPA you

2 are not going to get the guarantee released, correct?

3 A. Well, there was a settlement agreement on 14 March 2011,

4 or there or thereabouts, where the working capital was

5 agreed and Tullow said: "If we are going to pay off

6 the -- if we are going to make the supplemental working

7 capital we need the bank guarantee to drop away", and we

8 accepted that.

9 Q. Were you in court when I showed my Lord the document,

10 the letter from you, where you refused to release the

11 bank guarantee unless Tullow pays up both under the SPA

12 and also under the other agreement?

13 A. We had in the agreement it was --

14 Q. The question so far was: were you in court?

15 A. I was in court.

16 Q. Good. Can we agree that the guarantee was a guarantee

17 for obligations under the SPA and not for the other

18 agreement; is that correct?

19 A. I believe that to be correct.

20 Q. And your position was that you were again playing hard

21 ball and saying that we won't release the guarantee

22 unless you pay both under the SPA and under the other

23 agreement, correct?

24 A. No, the situation was they owe us some money, TSAs

25 monies were outstanding for a few months and we will


1 agree everything in a settlement agreement and part of

2 that settlement agreement is to pay off the working

3 capital, pay off around $300,000 which was owed on the

4 transitional services, I think it was $13.6 million

5 owing on the working capital. We bundled them together,

6 so they'd pay them on the same date and also on that

7 same date we would terminate the guarantee or hand the

8 guarantee back. I'm not sure of the correct legalese.

9 MR JUSTICE BURTON: Perhaps you should show him the letter.


11 MR JUSTICE BURTON: Bundling them together is I think what

12 Mr Wolfson is actually putting to you.

13 A. We put them together.

14 MR JUSTICE BURTON: Even though the guarantee did not cover

15 the transitional services or whatever they were

16 called --

17 A. Correct.

18 MR JUSTICE BURTON: -- unless you were paid both for

19 transitional services and the working capital you would

20 not release the guarantee.

21 A. It wasn't a long debate. It was agreed between the two

22 parties we would put the two amounts together which were

23 outstanding at that date.

24 MR JUSTICE BURTON: And unless you paid them both even

25 though the transitional services were not covered by the


1 guarantee you would not release the guarantee: answer

2 yes.

3 A. Yes, and it was commercial. It wasn't a hard line

4 negotiation which seems to be alluded to.

5 MR JUSTICE BURTON: It was a hard line position.

6 A. It was just a case of what's owed at that time under the

7 TSA and under the working capital and we'll put those in

8 a letter and then we'll cancel the guarantee.

9 MR WOLFSON: It is just another example, is it not,

10 Mr Atherton, of Heritage playing hard ball in

11 a negotiation?

12 A. It was no hard ball negotiations. It was a case of

13 commercially what's outstanding at the time and we'll

14 put it in an agreement.

15 Q. Because the one thing you know when you deal with

16 Heritage is if Heritage has any way of exercising

17 leverage over you they will take that and more. That is

18 what we have seen throughout this story so far, isn't

19 it, the way you dealt with the URA, the way you dealt

20 with the Ugandan Government, the way you dealt with

21 Tullow?

22 A. We have a transitional services agreement which is still

23 ongoing today. So by taking what you are saying we

24 wouldn't have done anything under it. We carried on.

25 We're good for our word. We carried on providing, as we


1 do today, providing services to Tullow in Uganda under

2 the transitional services agreement. I take that back.

3 I object.

4 Q. Your objection I am sure is noted.

5 Can we go to another topic, Mr Atherton, and for

6 these few questions let us ignore for the moment whether

7 or not the liability is payable. Can we agree that

8 Heritage at the moment has a liability to tax in Uganda,

9 putting aside the question whether that liability is

10 actually payable. Do you accept that?

11 A. There is an assessment, a dispute ongoing, yes.

12 Q. Because the current position is that two assessments

13 have been served on Heritage. They haven't been set

14 aside and in fact they have been confirmed by the Tax

15 Appeal Tribunal. That is the current state of play?

16 A. And we have appealed.

17 Q. Absolutely.

18 A. And we are going through arbitration. That is the

19 current state of play.

20 Q. Exactly and to be absolutely fair to you that is right:

21 you have appealed in Uganda and there is the

22 international UNCITRAL arbitration going on as well that

23 we have heard about?

24 A. Correct.

25 Q. Let us factor now Tullow's payment back in. Let us


1 factor in Tullow's payment. We were discussing earlier

2 what the position was. Are you suggesting that Tullow's

3 payment has discharged Heritage's tax liability in

4 Uganda?

5 A. No, the disputes, assessments are still ongoing.

6 Q. If Heritage is found to have a substantive tax liability

7 in Uganda, so your appeal to the Ugandan tribunal fails,

8 the Ugandan appeal court fails?

9 A. The High Court. I think it is the High Court.

10 Q. In those circumstances Tullow would have discharged your

11 liability by its payment. That is your position, isn't

12 it?

13 A. My -- we have the arbitration agreement that we have got

14 that if the arbitration panel proceeds and determines it

15 is taxable or not taxable then the monies would be paid

16 or not paid and they would be paid if we lose, they'll

17 be paid to the Ugandan Government and if we win then

18 monies will come to Heritage.

19 MR JUSTICE BURTON: The appeal to the Tax Tribunal, has that

20 been stayed pending the arbitration decision or could

21 you be faced with both of them?

22 A. It has gone to the High Court in Uganda. It was not

23 stayed. We tried to --

24 MR JUSTICE BURTON: It takes ages.

25 MR QURESHI: My Lord, I can explain why.



2 MR QURESHI: There was an application made for a stay and

3 the Tax Appeal Tribunal said it didn't have the

4 jurisdiction to stay its own proceedings and the High

5 Court judge determined that the jurisdiction to stay

6 relating to arbitration proceedings didn't extend to

7 a tribunal, so the High Court judge in Uganda concluded

8 that there was no jurisdiction to stay the Tax Appeal

9 Tribunal proceedings in favour of an arbitration.

10 MR JUSTICE BURTON: What about the appeal to the High Court,

11 that is regarded as a tribunal hearing then is it?

12 MR QURESHI: My Lord, there is a statutory mechanism for the

13 decision of the -- because the Tax Appeal Tribunal

14 decision couldn't be suspended they carried on. The

15 High Court wouldn't grant a stay. They reached the

16 decision that your Lordship has seen and that now has to

17 go through a statutory mechanism.

18 MR JUSTICE BURTON: I understand that, but the High Court

19 could be asked for a stay of the appeal. They refused

20 a stay of the Tribunal hearing.


22 MR JUSTICE BURTON: That went through and your side lost.


24 MR JUSTICE BURTON: They are appealing. Is there or is

25 there not a stay of the High Court appeal pending the


1 arbitration decision?

2 MR QURESHI: No, my Lord, it's --

3 MR JUSTICE BURTON: Just a slow business. You could find

4 yourself, assuming that the arbitration decision comes

5 out quite soon and accepts jurisdiction, of course if it

6 doesn't accept jurisdiction the only place you have is

7 the Ugandan court, but if it does, then you could find

8 that you are fighting on both fronts, and possibly with

9 inconsistent decisions.


11 MR WOLFSON: That would be another nice element.

12 MR QURESHI: We have the New York Convention.

13 MR WOLFSON: Good luck.

14 So I think I have understood, your position at the

15 moment is that because all this is going on in Uganda

16 and the arbitration no payment by Tullow has discharged

17 any liability as yet?

18 A. Correct.

19 Q. Can we have a look at bundle E22/6217. This is not in

20 the core, my Lord.


22 MR WOLFSON: E22/6217. This is a letter written by your

23 solicitors McCarthy Tetrault. In paragraph 4 they say

24 this:

25 "The purpose for which the escrow amount was


1 retained rather than immediately paid to Heritage,

2 namely potential payment to the Government in discharge

3 of alleged tax liability, has now come to an end. As

4 noted above, you stated you have made payment to the URA

5 and that such payment has discharged Heritage's alleged

6 tax liabilities. Consequently, [in other words, on that

7 basis] please execute the enclosed transfer instruction

8 directing the escrow agent to pay $283 million to us."

9 So what you or your solicitors were doing in that

10 letter was first of all, saying that Tullow had

11 discharged your tax liability and more than that,

12 actually relying on that discharge as the basis on which

13 the escrow amount shall be paid out to you?

14 A. The escrow was set up for the Government to ensure that

15 there was sufficient funds. I think this letter states

16 that the Government now has its money, it can carry on

17 and it will carry on the dispute with Heritage but the

18 fact that it needs the money to be held and locked up in

19 escrow there is no longer a requirement from the

20 Government's side to do that because the Government has

21 received the $283 million. But we have still got the

22 dispute. We have still got the assessments outstanding,

23 correct, absolutely.

24 Q. Isn't your position in this letter that Tullow's payment

25 has in fact discharged the liability and you are relying


1 on that as the reason to pay out the 283?

2 A. The reason to pay out the 283 is the Government has

3 received the funds so its comfortable which is why.

4 Q. It doesn't say that, does it?

5 A. -- Government demanded the escrow arrangement. I'm

6 saying this is my understanding of it.

7 Q. Was this letter written on your instructions?

8 A. I'm sure McCarthys would have written a letter on behalf

9 of Heritage's instructions, yes. What I believe is that

10 the money's in escrow, what the letter is trying to say,

11 the money's in escrow, there is no longer a requirement

12 to remain and retain them in escrow. They can come to

13 the company. The company will carry on the disputes and

14 if it loses it will pay the funds.

15 Q. So if you lost, then you'd pay up to the Ugandan

16 Government?

17 A. We have always maintained we'd pay any.

18 Q. And the fact that you have taken the $283 million out of

19 escrow in the meantime was just sort of machinery, was

20 it?

21 A. It would mean we would have access to it but we've

22 always said we would pay any taxable fee legally

23 imposed.

24 Q. Come off it, Mr Atherton. What this letter is doing is

25 saying: you have paid out the tax liability, pay out the


1 $283 million to us and as sure as eggs is eggs,

2 Mr Atherton, if the Ugandan Government won, then they

3 would have to chase Heritage round the world to try and

4 find $283 million, wouldn't they?

5 A. No.

6 Q. This was nothing more than an attempt to try and get the

7 money out of escrow on the basis, which you were

8 asserting but which is contrary to your position, that

9 Tullow's payment had in fact discharged Heritage's tax

10 liability?

11 A. It is a letter saying there is no longer a requirement

12 for the escrow account.

13 MR JUSTICE BURTON: But as long as your dispute was going on

14 there needed to be security in case you lost, didn't

15 there?

16 A. From the Government of Ugandan's side security, they had

17 money so the requirement for security which was the

18 escrow funds has gone. The question -- so I would say

19 on that basis, no. We have always maintained we'd pay

20 the funds. We've always paid our debts.

21 MR JUSTICE BURTON: But you don't say Tullow paid it on your

22 behalf, do you?

23 A. No.

24 MR JUSTICE BURTON: So it wasn't security that you'd

25 provided.


1 A. It was -- we provided the security, the 283. It's our

2 funds.


4 A. The 283 originally was our funding.

5 MR JUSTICE BURTON: Yes, but not if you got it out of the

6 escrow account. You would now have it and the 313 that

7 the Government would be retaining would have been

8 Tullow's money. Hardly security for your liability.

9 A. True.

10 MR JUSTICE BURTON: Anyway, that is what you thought you

11 were entitled to. It is suggested that it is

12 inconsistent. I think this is probably a legal argument

13 rather than anything else.

14 MR WOLFSON: Yes. Certainly there is a legal element to it,

15 my Lord. Let me move on to another point. I think we

16 have probably dealt with that.

17 MR JUSTICE BURTON: Anyway you have helped my question

18 earlier. This is where we get the 7 April claim.

19 MR WOLFSON: Precisely. That is the point we were

20 ventilating earlier this morning, my Lord.

21 MR JUSTICE BURTON: It was. Thank you very much.

22 MR QURESHI: Just for the sake of completeness, my Lord, if

23 it be said that it is McCarthys who came up with

24 the discharged liability language your Lordship will

25 find Tullow stating that position in their claim letter


1 of 17 March 2011, paragraph 4, bundle E20.

2 MR JUSTICE BURTON: Do I have this in the core bundle?

3 MR QURESHI: I don't believe, so, my Lord.


5 MR QURESHI: E20/5652. It is probably just as well to see

6 it.

7 MR WOLFSON: Core 973, my Lord.

8 MR QURESHI: It is paragraph 4, my Lord of the Tullow

9 letter. Does your Lordship see it?


11 MR QURESHI: That is where the language comes from.


13 MR WOLFSON: No doubt we will have an interesting debate

14 about this next week, something to look forward to, with

15 the Ugandan law experts.

16 Mr Atherton, and, my Lord, I was going to turn to

17 a few questions on Heritage's counterclaim which I am

18 going to take fairly briefly.

19 MR JUSTICE BURTON: This is all dependent upon this letter;

20 is that right?

21 MR WOLFSON: I am not sure all the counterclaim is dependent

22 on that letter. Insofar as the counterclaim is that

23 they have lost the use of the escrow asset then it must

24 be dependent on that. There are the other bits and

25 pieces of -- the breach of clause 3.1A is a complete


1 defence. I will take the counterclaim points fairly

2 briefly but I think that might be a moment for the

3 shorthand writers.

4 MR JUSTICE BURTON: That sounds a very good idea. How much

5 longer do you think you have?

6 MR WOLFSON: I would try to get through in about 10 or 15

7 minutes I would hope.

8 MR JUSTICE BURTON: Yes, we will take a break. Where should

9 I put the 15 April letter?

10 MR WOLFSON: The 15 April 2011, is your letter talking about

11 where in the core bundles?


13 MR WOLFSON: Can we have a look at that over the short break

14 and we'll give you your Lordship a suggested page

15 reference.

16 MR JUSTICE BURTON: Yes, thank you very much.

17 (3.20 pm)

18 (A short break)

19 (3.30 pm)

20 MR WOLFSON: Your Lordship may wish to insert the 15 April

21 letter in the core to be 984.06A and B we suggest that

22 is where it is best put. 984.006A and B. It would come

23 before a document headed "Chief executive's review"

24 which is 984.007.

25 MR JUSTICE BURTON: I see, lots of 984s.


1 MR WOLFSON: Yes, there are a lot of 984s, there are a whole

2 load of additions, at .007 is the start of a new

3 document.

4 MR JUSTICE BURTON: I can see that you, Mr Wolfson share my

5 preferences for As and Bs whereas the solicitors prefer

6 the 00006. Yes, thank you.

7 MR WOLFSON: My Lord, yes.

8 MR JUSTICE BURTON: So 984.006A and B.

9 MR WOLFSON: Yes, my Lord. Mr Buckingham is 007.

10 MR JUSTICE BURTON: So it seems, yes.

11 MR WOLFSON: There are some things you just can't resist,

12 my Lord.


14 MR WOLFSON: Mr Atherton, I am going to try and take this

15 fairly briefly because there are a number of legal

16 points which I am not going to debate with you. Just so

17 I understand, the gist of the counterclaim so far as the

18 escrow monies are concerned, can I try and summarise it

19 this way, is that if Tullow had paid out the

20 $283 million in escrow to you in April 2011, then

21 Heritage would have had all of this money sitting in

22 a bank account in November 2012 and so when you took out

23 your bridging loan you could have taken out a bridging

24 loan £283 million less than the loan you actually took

25 out?


1 A. The bridging loan was taken out on 29 June rather

2 than November.

3 Q. Was it, right.

4 A. Correct.

5 Q. Is that right? Let me have a look.

6 A. There was -- the funds -- the finance of the loan -- the

7 loan was actually drawn in November but all the finance

8 was put in place on 29 June 2012 and there were fees

9 payable at a discounted rate and then it was drawndown.

10 Q. I see, so drawndown wasn't until November but the banks

11 had made a commitment to fund in June?

12 A. Correct.

13 Q. But presumably if somebody had gifted you another

14 $283 million between June and November, you wouldn't

15 have drawn down that 283 million, would you?

16 A. We had already entered into the arrangements at that

17 time.

18 Q. You would have paid the commitment fee for it but you

19 wouldn't pay interest because you wouldn't have drawn it

20 down?

21 A. There was a reduced rate of interest because they had

22 locked up the cash. So we were paying interest on the

23 facility which was undrawn for the period from 29 June

24 until beginning of November.

25 Q. Yes, but if before November you had been gifted


1 $283 million by the Heritage fairy grandmother --

2 MR JUSTICE BURTON: November 11 or November 12.

3 MR WOLFSON: November 12, my Lord.

4 MR JUSTICE BURTON: The money would have come through

5 in April 11.

6 MR WOLFSON: So the counterclaim is put on the hypothesis

7 that for a year and a half the money is going to be

8 sitting around earning interest, and what I think the

9 witness is saying is: "Oh no, it is not a year and

10 a half, it is a year and a couple of months."

11 A. Correct.

12 Q. My Lord, it is not just earning interest, it is that

13 then they would have had, as I understand it --

14 Mr Atherton, I think we are agreeing on this point --

15 the way the counterclaim is put is not just the interest

16 differential between what you can earn on the money and

17 what you get on the escrow account, it is also the fact

18 that you would have had to borrow $283 million less by

19 way of the bridging loan.

20 MR JUSTICE BURTON: Yes, but to start off with there's the

21 differential of interest until June 2012?

22 A. Correct.

23 MR JUSTICE BURTON: Then in June 2012, is that when it is or

24 is it November?

25 A. The facility was put in place, we had to pay fees with


1 effect from June and we had a reduced rate of interest

2 but we did have interest on the facility, correct, from

3 29 June.

4 MR JUSTICE BURTON: So from June 2012, instead of borrowing

5 this money, you would have saved the --

6 A. Commitment fee.

7 MR JUSTICE BURTON: -- the cost of borrowing?

8 A. And the cost of borrowing, correct.

9 MR JUSTICE BURTON: Where does that get you? I don't mean

10 in terms of actual physical quantification, I just want

11 to understand the principle of it.

12 So June let us say there is a difference, you

13 establish -- I don't know whether Mr Wolfson is going to

14 contest this or not -- that you could have got a better

15 rate than you got in the escrow account. Let us assume

16 it is an extra 1 per cent from April to June 2012. As

17 from June 2012, just help me what would have happened.

18 A. So from June we are saying that we would have not had to

19 borrow. We borrowed $715 million. We would have

20 reduced that amount of borrowing or facility by

21 $283 million, which would have saved a commitment fee on

22 the 283 of 2.65 per cent, which is what we paid as

23 a commitment fee to the banks. There were two banks

24 involved. And we were paying an interest rate to the

25 banks which we would have saved by not borrowing


1 $283 million.

2 MR JUSTICE BURTON: Then of course you wouldn't have

3 received the interest that you did receive on the escrow

4 accounts, so that has to be subtracted?

5 A. Correct, yes. That's absolutely right.

6 MR WOLFSON: And to be fair, that is the way the calculation

7 is put. It is a differential.

8 MR JUSTICE BURTON: Yes, thank you.

9 MR WOLFSON: In paragraph 262 of your witness statement you

10 say that from about September 2010, Heritage began

11 actively to consider the acquisition of a major interest

12 in OML30, a significant producing oil field in Nigeria.

13 The point I am going to put to you, Mr Atherton, is

14 that that is nothing more than a backdating of your

15 interest in this particular acquisition to explain why,

16 if you had got the money in April 2011, you wouldn't

17 have used it for anything else but you would have had it

18 hanging around in your bank account for at least a year

19 and two months.

20 A. And that's not correct. If I can just step back. The

21 acquisition we referred to is a licence called OML30, it

22 is a 45 per cent interest and it was sold by Shell,

23 Total and ENI, who ran a process which commenced

24 in September 2010. It is public. There are a number of

25 parties that attended a data room and the process


1 dragged on and on and did not complete. We signed

2 a sale and purchase agreement on 29 June 2012, some

3 considerable time after the process had commenced, and

4 then we completed the transaction in November 2012,

5 which is two years after the process had commenced.

6 Q. Would there have been any documents within Heritage,

7 therefore, in September 2010 to evidence Heritage's

8 interest in this proposed oil field transaction?

9 A. Without question there would.

10 Q. Sorry.

11 A. Yes.

12 Q. Without question? I am only asking because we haven't

13 received a single document.

14 MR JUSTICE BURTON: This is a very substantial counterclaim

15 to put forward without any documents if that is right.

16 A. It is a public process. If you were to look at OML30,

17 Shell's disposal of four assets in Nigeria, it will have

18 been discussed in some --

19 MR JUSTICE BURTON: You did go in it for it, did you, in

20 November 2012?

21 A. Absolutely.

22 MR JUSTICE BURTON: What counsel is asking about is any

23 documents which show that as from September 2010 you

24 were internally discussing taking part.

25 A. Yes, there will be.


1 MR WOLFSON: Mr Atherton, please don't get me wrong. If

2 documents are produced, then we will obviously read them

3 and look at them, but at the moment we are faced with

4 a counterclaim for tens of millions of dollars, frankly

5 on the strength of a say-so. There is not a single

6 document produced in support of the assertion that it

7 was under active consideration from September 2010.

8 MR JUSTICE BURTON: And I suppose also that you were

9 thinking about how you were going to finance it, what

10 the possible sources of funds were and that you didn't

11 have enough funds without borrowing.

12 A. Quite.

13 MR WOLFSON: Because what we do know is that in August 2010,

14 less than a month after you received the sale

15 consideration on 26 July 2010, that money wasn't held

16 for future projects, but in fact it was divvied out to

17 shareholders, wasn't it? There was a special dividend

18 of 100p?

19 A. Correct.

20 Q. Mr Buckingham said in a document, and I don't think we

21 need to go to it, that from investor feedback the

22 dividend was well received. It was a popular thing to

23 do, wasn't it?

24 A. We had announced to the market when we entered into the

25 ENI transaction, there was a circular we had to issue to


1 the market which is in December 2009 and that's when we

2 discussed this one-off special dividend of up to 100

3 pence.

4 MR JUSTICE BURTON: How much did that cost you?

5 A. $490 million.

6 MR JUSTICE BURTON: That is more, of course, than the

7 308 million that we are talking about.

8 A. 313 million, my Lord.

9 MR JUSTICE BURTON: 313 million that we are talking about,

10 and what counsel is asking you is whether that couldn't

11 have been used for the holdback for the Nigerian

12 project.

13 A. The decision in terms of the dividend was December 2009

14 when we did two things. We issued a circular to our

15 shareholders where we referred to a special one-off

16 dividend, and also we had to enter into a change to

17 a bond. We had a bond outstanding at that time and that

18 had what's classified as a dividend stopper covenant so

19 we couldn't pay a dividend and we had to amend the bond

20 rights in December 2009 which we did.

21 MR WOLFSON: Mr Atherton, can we just be a bit realistic

22 about this. The way Heritage works, which is a company

23 owned 30 per cent by one individual, is that when you

24 have a huge amount of cash lying around you divvy it out

25 to the shareholders. That's what you did. That is the


1 point I am putting to you. That is what you did with

2 the sale consideration. The point I am putting to you

3 is that if you had received another large cash receipt,

4 such as the 283 million in April 2011, you would have at

5 least used part if not all of it to pay a larger

6 dividend for that year, correct?

7 A. Not correct. We had made one dividend payment in

8 20 years, my Lord, and we called it a one-off special

9 dividend.

10 Q. So your case is that you would have left 283 million

11 lying around in a bank account, untouched,

12 between April 2011 and at best June 2012?

13 A. We would have maintained it within corporate resources,

14 correct.

15 Q. The final short point I want to take you to, and let us

16 see if we can just really shortcut this because I'm not

17 sure there is actually very much between us, it is this

18 business about the sum for withholding tax and can I

19 just put it to you this way. Let us do it by reference

20 to one document, E16/4301. It is not in the core,

21 my Lord.

22 MR JUSTICE BURTON: Just while you are looking for this,

23 there were two matters you said you were going to come

24 back to. I know you have come back to one of them, the

25 question of agency.



2 MR JUSTICE BURTON: But there was another one. Your junior

3 has probably picked it up. You said you would be coming

4 to this later. I can't remember whether you have or

5 haven't done.

6 MR WOLFSON: I certainly hope I have.

7 MR JUSTICE BURTON: I am sure you have but you said to me,

8 it was earlier this morning, just some time this morning

9 when I asked a question, you said you would come to it.

10 MR WOLFSON: We will do a search on the transcript, my Lord,

11 yes.

12 MR JUSTICE BURTON: Yes, thank you very much.

13 MR WOLFSON: If we look at E16/4301 --

14 MR JUSTICE BURTON: It was before the agency point. You

15 said you'd deal with that later and you did. So it was

16 another point before that. So probably "come back to"

17 or something like that might pick it up on the search.

18 Yes?

19 MR WOLFSON: Mr Atherton, let us just have a look at this

20 chain from Reshma Shah's email at the bottom of the

21 page:

22 "Hi Richard, two payments really, [talking about the

23 withholding here]. Transition service agreement, 719

24 ... closing statements ..."

25 And then:


1 "On the WHT [withholding tax] assessments, the URA

2 position on 2003 to 2009 is that $20.5 million is still

3 due. Heritage's position is that $8 million is due."

4 And the point I was putting to you is that on the

5 assumption that the URA was right -- on the assumption

6 that the URA was right -- Tullow's share is half, isn't

7 it?

8 A. Correct.

9 Q. And therefore would be, what, $10.25 million dollars?

10 We can do the maths.

11 A. Correct.

12 MR JUSTICE BURTON: You are losing me really. Half of what?

13 MR WOLFSON: $20.5 million, my Lord.

14 MR JUSTICE BURTON: Where does the 20.5 arise?

15 MR WOLFSON: The very last line of the page, my Lord, 4381.


17 MR WOLFSON: My Lord, this may seem a bit cryptic but it

18 goes to there is a small issue between the parties on

19 some tables and I'm not sure there is any real dispute

20 between us on the maths actually.


22 MR WOLFSON: My Lord, there was only one other document

23 although we are looking at that reference. Mr Atherton,

24 you recall earlier today we were having a debate as to

25 his Lordship asked you whether Heritage ... (Documents


1 handed).

2 We were talking about the 30 million and whether you

3 had actually ever paid up the 30 million and I was

4 putting to you that Heritage's position had been that

5 the Government had had the 30 million as being part of

6 the monies which Tullow had paid the Government and you

7 were saying that so far as you were aware that was not

8 a point which Heritage had ever advanced. Do you recall

9 that debate this morning?

10 A. Carry on. No, not yet. I am not disputing we didn't

11 have the conversation but I can't remember it precisely

12 word for word.

13 MR JUSTICE BURTON: You said that this morning. You said

14 that wasn't a case that Heritage had ever advanced,

15 namely that you didn't need to produce the 30 per cent

16 of the --

17 A. The 30, yes, sorry, that's correct, we had already

18 objected.

19 MR JUSTICE BURTON: -- because it had been paid by Tullow.

20 A. No, and the objection was before and everything was

21 resolved with the TAT to my knowledge before, correct.

22 MR JUSTICE BURTON: We are ad idem about it. Something is

23 going to be put to you in that context.

24 A. Okay.

25 MR WOLFSON: Have you been provided with this document?


1 A. This one here, yes, the TAT.

2 Q. We saw earlier a record of the proceedings and my

3 learned friend explained what it was and this is the one

4 of the -- this is the sort of supplemental hearing, the

5 procedural hearing.

6 MR QURESHI: My Lord, I also explained that these were

7 confidential proceedings.

8 MR WOLFSON: Having put in one, I think I'll put in the

9 other. If we look at the first page, Mr Atherton, you

10 see it says "Proceedings", Mr Kiwanuka -- he's your

11 advocate, attorney, isn't he?

12 A. One of them, yes.

13 Q. "This matter is coming up to respond on the preliminary

14 objection raised by the respondent ..."

15 And if we just turn through, on the second page you

16 see in the first paragraph what the objection is,

17 halfway through that first paragraph:

18 "At the start of the hearing an objection was raised

19 on the ground that the applicant [that is Heritage] had

20 not paid 30 per cent of the taxes in dispute, whichever

21 was greater."

22 This was a point your Lordship was raising.


24 MR WOLFSON: Which is why I'm putting it in, my Lord.

25 MR JUSTICE BURTON: Thank you.


1 MR WOLFSON: This is his submissions. At the bottom of

2 page 1, the Tribunal says you can proceed. He's not

3 recorded so to speak as starting again, but obviously

4 is. And then he says at the bottom of page 2:

5 "There are four points we are going to traverse in

6 our submission."

7 Look at number 2:

8 "As a question of fact that URA has received

9 $30 million and as such it cannot demand payment of

10 30 per cent."

11 Mr Atherton, that's why I was putting to you that

12 indeed Heritage has been taking the position that

13 although it didn't put its own hand in its pocket for

14 the 30, as it didn't put its own hand in its pocket for

15 the 283, it is relying now on Tullow's payment to the

16 Government to satisfy its requirement to put up the

17 30 per cent. Do you see that now?

18 A. I'm just reading the document.

19 MR JUSTICE BURTON: Well, there it is. Did you remember

20 that?

21 A. I did not remember it, my Lord. No, I did not. I was

22 aware of the date, I was not aware of this. I had

23 forgotten this, I think is --

24 MR JUSTICE BURTON: I don't know whether you were in court.

25 You weren't there on that day?


1 A. No, I wasn't there, I did not attend.

2 MR JUSTICE BURTON: There you are. Those representing you

3 made that point.

4 A. Yes.

5 MR JUSTICE BURTON: Of course they also made the point that

6 you made, namely that there had been a preliminary

7 objection. The point that was being made against you,

8 it seems, was it is not enough to make a preliminary

9 objection, you have to pay the 30 per cent, and it seems

10 that your people were saying what Mr Wolfson suggested

11 they were saying. Yes.

12 MR WOLFSON: Mr Atherton, thank you very much.

13 MR JUSTICE BURTON: Sorry, can I go back to E/4301. You

14 said it doesn't look as though you are in issue, but I

15 am not sure what the issue was.

16 MR WOLFSON: This is the withholding tax point, my Lord.

17 There is a statement in Mr Atherton's witness statement

18 at 248.

19 MR JUSTICE BURTON: Can we get that?



22 MR WOLFSON: This is the withholding tax and he notes in his

23 review of the documents, he picks up what we have said

24 in our response to requests for further information and

25 your Lordship sees that that in italics is a quote:


1 "As at 2 December 2010, the obligation in respect of

2 withholding tax was ..." about $10.25 million, and he

3 says:

4 "As at 2 December 2010, Tullow had already paid

5 various sums in settlement and the liability was

6 identified as being [and that is a Ugandan shillings

7 amount] and this was paid out."

8 And the only point of the cross-examination was to

9 explain where that 10.25 comes from. Whether that was

10 the sum which was subsequently paid or subsequently due

11 is something we can debate if necessary in closing, but

12 I wanted to make it clear, and I think we have agreed at

13 least where that figure of 10.25 comes from, albeit that

14 there may be a later process by which that figure was

15 revised. I don't think on that point there is anything

16 between us.

17 A. If I can add a little bit of colour, not a huge amount.

18 There is a spreadsheet which is scheduled at 2180 but

19 the withholding tax, all of the oil companies, if I can

20 summarise that, in Uganda were having a debate with the

21 Ugandan Government about the level of withholding tax.

22 It had been going on for many, many, many years and we

23 recognised $8 million. This is "we" being Heritage and

24 Tullow 50/50. We are all in agreement, and the Ugandan

25 Government was at a much larger, much higher figure,


1 principally because of interest. They hadn't responded.

2 The Government hadn't responded over a number of years

3 and then they started accruing interest.

4 We had already cash calls, se we already had in the

5 bank account a significant portion of the withholding

6 tax monies, and I think it resulted in a payment towards

7 the end of 2010 from Tullow to Heritage which was then

8 remitted to the Ugandan Government of I think it was

9 US$4.43 million.

10 MR WOLFSON: It is a lower figure. My Lord, it is not in

11 dispute that the figure actually paid was a lower figure

12 and actually on this point, it is nice to end on a point

13 of agreement, I don't think on this point there is

14 actually anything between us.

15 MR JUSTICE BURTON: It is not going to arise.

16 A. I think it was an accounting debate which went on in the

17 last quarter of 2010. We all agreed on it.

18 MR JUSTICE BURTON: I can't really grasp the relevance of it

19 to any issues in this case.

20 MR WOLFSON: It may not be and I hope after that exchange

21 actually this point will go away.

22 MR JUSTICE BURTON: Yes, is there any relevance in the

23 losses point, in deductible expenses?

24 MR WOLFSON: My Lord, I think the way we are dealing with

25 that is -- this is a point where --


1 MR JUSTICE BURTON: This is where we may be discussing the

2 --

3 MR WOLFSON: We had the learned juniors discussing this as

4 to how we are doing the --

5 MR JUSTICE BURTON: -- substantive tax point.

6 MR WOLFSON: There is a substantive tax point. I think

7 there is also a point where Heritage say, "We have

8 various losses" and I think at the moment the position

9 has been that: tell us what they are. And it is not

10 something I think which either side is asking your

11 Lordship to rule on.

12 MR JUSTICE BURTON: It is only if I have to decide what the

13 tax is that this becomes relevant, is that right?

14 MR WOLFSON: Exactly.

15 MR JUSTICE BURTON: And I'm hoping not to have to decide

16 that.

17 MR WOLFSON: And this point may not be relevant even if your

18 Lordship ends up having to decide the tax point so it is

19 a double --

20 MR JUSTICE BURTON: Where are we? Do you want to

21 re-examine?

22 MR QURESHI: No, my Lord.

23 MR JUSTICE BURTON: Thank you very much. Thank you for

24 coming.

25 MR WOLFSON: Thank you for attending to my questions. (the.


1 MR JUSTICE BURTON: You are released.

2 (The witness withdrew)

3 MR JUSTICE BURTON: Where are we on the magic formula, if

4 anything? Did you discover whether there was anything

5 else that I --

6 MR WOLFSON: I did ask my learned junior.

7 My Lord, it was that point. It was that point of

8 the 30 million and I said we would be coming to it.

9 MR JUSTICE BURTON: Good, thank you.

10 MR WOLFSON: My Lord, we had provided to some of the counsel

11 team a two-page document which -- would it assist if

12 I took your Lordship briefly through it?


14 MR WOLFSON: As I say, this is intended to be a constructive

15 and hopefully helpful approach.

16 What we have done is to set out as neutrally as we

17 can the position and I hope all of this will not be

18 controversial.

19 Paragraph 2, it doesn't arise in the context of the

20 primary claim. We think that is agreed.

21 MR JUSTICE BURTON: That is the contractual claim.

22 MR WOLFSON: That is the contractual claim. It only arises

23 in the alternative claim in unjust enrichment, and we

24 have a primary and secondary claim in unjust enrichment.

25 The primary claim is that Heritage has been enriched


1 because the liability under the assessments was

2 discharged, based on the argument that the effect of the

3 assessments was without more sufficient to impose

4 a liability on Heritage.

5 Just pausing there. Of course when I said all this

6 was agreed, I just mean the way the argument is put. Of

7 course my learned friend disagrees with a large part of

8 the argument.

9 The argument is that the assessments were

10 subsisting, continue to subsist, and the way we put the

11 case on the primary basis is that there is no need for

12 the court therefore to consider the underlying question

13 as a matter of Ugandan substantive tax law.

14 If we are wrong on that, then the secondary case on

15 unjust enrichment is that we effectively discharge their

16 substantive tax liability.

17 So it is the secondary case on our alternative

18 unjust enrichment argument.

19 MR JUSTICE BURTON: Yes, I expect so far that is common

20 ground. Yes, paragraph 6.

21 MR WOLFSON: Paragraph 6. What we say in those

22 circumstances is that the primary submission will be the

23 TAT has ruled and, with great respect, this court should

24 not go behind that ruling. That will be the submission.

25 If that primary case and the secondary case in that


1 etiolated form in 6 were not accepted then we would

2 submit that the court should make findings on all other

3 aspects of the unjust enrichment claim but postpone any

4 ruling on the issue of whether Heritage has in fact been

5 enriched and therefore would stay the entire unjust

6 enrichment claim --

7 MR JUSTICE BURTON: Pending what you call the final and

8 conclusive determination --

9 MR WOLFSON: In the Ugandan courts.

10 MR JUSTICE BURTON: It says "in the Ugandan courts". Of

11 course Mr Qureshi would no doubt want to say "or in

12 arbitration".

13 MR WOLFSON: Let us see if he does say that and of course if

14 he does say that then of course --

15 MR JUSTICE BURTON: I don't need to decide.

16 MR WOLFSON: You don't need to decide that now, exactly,

17 because of course if Heritage win in Uganda then that

18 point falls away.

19 MR JUSTICE BURTON: Yes, certainly, but I think Heritage

20 would want to say, not least in the light of

21 Mr Kabatsi's evidence, that they may not have as good

22 a chance in the Ugandan courts as they would in the

23 arbitration which is no doubt why they are wanting to

24 fight the arbitration.

25 But if the arbitration panel decide they have not


1 got jurisdiction, either because the clause doesn't bite

2 or because this is a matter of tax law which can only be

3 decided by the Ugandan courts, that is the end of

4 arbitration.

5 MR WOLFSON: Precisely.

6 MR JUSTICE BURTON: Subject to any appeal to this court.

7 MR WOLFSON: Exactly.

8 MR JUSTICE BURTON: Which is rare and far between or

9 whatever it is -- far and far between. Then it would be

10 the Ugandan courts. All I am pointing out is that

11 Mr Qureshi may want to put in or take out, "conclusive

12 determination of the issue of Heritage's substantive tax

13 liability", just take out the words "in Uganda".

14 MR WOLFSON: Yes, we weren't actually intending that

15 paragraph 7 would be agreed to.

16 MR JUSTICE BURTON: I understand. "Following such

17 determination ...", so if it turns out that --

18 MR WOLFSON: Any of this is necessary, and of course, as

19 your Lordship said, there are a number of permutations,

20 then, so to speak, the unjust enrichment case will be

21 live, we will advance the primary and secondary case as

22 set out in paragraphs 4 and 5 --

23 MR JUSTICE BURTON: The primary and secondary case on your

24 alternative case.

25 MR WOLFSON: Exactly. The whole thing is the alternative


1 case. Exactly.

2 MR JUSTICE BURTON: Because you can't even run your

3 alternative case at the moment because the Tax Appeal

4 Tribunal is under appeal.

5 MR WOLFSON: I am sorry to split hairs. We can't run the

6 secondary argument on the alternative case. The primary

7 one we can run, based on the assessments.

8 MR JUSTICE BURTON: Yes, of course.

9 MR WOLFSON: The secondary one we would run on the basis

10 that this court should not go behind the TAT and make

11 that submission.

12 MR JUSTICE BURTON: Yes, what I'm saying is it is still

13 subject to appeal.

14 MR WOLFSON: We would still make the submission but I see

15 the point your Lordship puts to me. If it's subject to

16 appeal, it is a less attractive suggestion.

17 MR JUSTICE BURTON: As of today, I wouldn't have thought it

18 was a final judgment if it is under appeal.

19 MR WOLFSON: Again, we wouldn't be making the submission on

20 the basis that it is a final judgment in a res judicata

21 sense but more in the comity sense that this court ought

22 not to go behind it.

23 MR JUSTICE BURTON: They may have made a complete pig's ear

24 of it and no comity applies.

25 MR WOLFSON: I see, with respect, the force of the point


1 your Lordship is making.

2 So what we propose is that Heritage would make

3 submissions in response to the cases.

4 MR JUSTICE BURTON: There may not need to be a further

5 hearing because if I were to be against you on the

6 contractual claim but still -- and of course Mr Qureshi

7 says if you lose on the contractual claim, that's it.


9 MR JUSTICE BURTON: Because of his submission that the terms

10 of the contract override any contractual claim. But on

11 the assumption that you lose on contract and you are

12 still allowed to run your alternative case, then you

13 would come back, but you'd only come back if there was

14 something to dispute and if the position were that in

15 fact there was no tax liability, or indeed whichever way

16 it is I am not going to reopen that question. I would

17 simply be dealing with consequences, I suppose.

18 MR WOLFSON: Yes, I suppose the parties could make these

19 submissions. I suppose, just thinking about the

20 permutations, let us assume that Heritage win in the

21 Appeal Court.

22 MR JUSTICE BURTON: Or wherever.

23 MR WOLFSON: Or wherever. I could still make the submission

24 that as a matter of law at the time of payment

25 I discharged based on the assessment.


1 MR JUSTICE BURTON: That is your primary case.

2 MR WOLFSON: Your Lordship may think that is good, bad or

3 indifferent knowing now that there is no tax, but we

4 could debate that. I suppose theoretically Heritage

5 could say: even though the Appeal Court has found there

6 is tax due they also got it wrong or whatever and

7 therefore we want to litigate the point. Theoretically

8 there could be points.

9 MR JUSTICE BURTON: It is probably going to be

10 consequential, including, if the arbitration hasn't

11 resolved it, what should happen to the escrow account.

12 MR WOLFSON: Yes. So far as the arbitration, the reason why

13 we are focusing on the Ugandan court is this: that of

14 course in Uganda, the issue is plainly before the

15 Ugandan court, point one, and two, we can see what's

16 going on.


18 MR WOLFSON: Of course the arbitration award we'd have to

19 find a way, I am sure it is not beyond the wit of man,

20 to get it before the court given that it is

21 confidential, and we are not a party to it.

22 Secondly, of course, it is not absolutely clear to

23 us, because we are not a party, it isn't a criticism,

24 whether the issue of Heritage's substantive tax

25 liability as opposed to, for example, stabilisation


1 clauses, double tax treaty, is actually before the

2 arbitrators.

3 MR JUSTICE BURTON: Yes, we don't know.

4 MR WOLFSON: We just don't know.

5 MR JUSTICE BURTON: And we won't know anyway whether the

6 arbitrators are going to hear it until we have had

7 jurisdiction.

8 MR WOLFSON: Exactly.

9 MR QURESHI: Perhaps my learned friend --

10 MR WOLFSON: Let me just finish one point, though, just to

11 make it absolutely clear. Having said all of that,

12 my Lord, let me just finish where I started. This is

13 meant to be a constructive proposal to deal with the

14 issue and if my learned friend has constructive

15 amendments to it, this is not set in stone.


17 MR QURESHI: My Lord, we are all appreciative of

18 constructive proposals that are not set in stone and

19 what I propose to do is to provide a considered

20 response, not now.

21 MR JUSTICE BURTON: Certainly so, but I would like it to be

22 done sooner rather than later. You have tomorrow when

23 you are not sitting. I need to know whether I have to

24 read those parts of the experts' reports which deal with

25 the underlying tax question, so that I won't read


1 tomorrow anything and we are ploughing on with Mr Inch

2 on Monday, but I mean the probability is I'm going to

3 have to spend some time over the weekend reading the

4 experts' reports, even if I don't spend the whole

5 weekend or read all the experts' reports. What I would

6 like is an answer by tomorrow evening --

7 MR WOLFSON: I was going to suggest to my learned friend

8 that we put our heads together.

9 MR JUSTICE BURTON: -- of what I am to read.

10 MR WOLFSON: Of the expert material.

11 MR QURESHI: My Lord, one way or another, we would propose

12 to provide your Lordship, through your Lordship's clerk,

13 with an indication by 2 o'clock tomorrow.


15 MR WOLFSON: And if there are any points between us we will

16 try and have those resolved as well.

17 MR JUSTICE BURTON: Let us say 3 o'clock to enable inter

18 partes discussions to go on. That would be helpful.

19 I then would then would like to know -- I don't need to

20 know what's been agreed, in the sense that we can talk

21 about that next week. All I need is a reading list and

22 I very much hope and expect that the reading list will

23 not include the substantive tax position. Because not

24 only do I think that this has the makings of a sensible

25 way forward but I think it is completely ridiculous for


1 me to be deciding questions of substantive tax law which

2 are already before other tribunals and, more important,

3 in which the Government, who has the real interest in

4 whether tax is due or not, have an opportunity to be

5 heard. The prospect of my deciding as between two

6 civilians what tax is due to a third party is

7 offputting.

8 MR WOLFSON: Also having crashed one of your Lordship's

9 weekends, we are suitably chastised before overly

10 crashing another.

11 MR JUSTICE BURTON: It sounds good to me.

12 All right, so by 3 o'clock tomorrow you will let my

13 clerk know what I have to read and I am hoping that that

14 will be relevant paragraphs of the experts' reports not

15 including the substantive tax. Obviously I can't do

16 that without some idea between the two of you of the

17 basis of going forward but I suppose your agreement

18 doesn't need to be set in stone.

19 MR WOLFSON: Can I, for the record, record my thanks to your

20 Lordship for allowing me not to be present on Monday,

21 Tuesday and part of Wednesday.

22 MR JUSTICE BURTON: Yes, of course. So Monday, Tuesday and

23 Wednesday morning we shall plough on with Mr Inch, or

24 start with Mr Inch on Monday and I would have thought

25 that we'd finish him comfortably by Wednesday lunchtime.


1 MR QURESHI: My Lord, yes.

2 MR JUSTICE BURTON: But you will need some possibility of

3 re-examination time.

4 MR WOLFSON: My Lord, we'll see how that goes. It may be my

5 learned junior will do it. We will keep that under

6 review.

7 MR JUSTICE BURTON: Yes, that is certainly helpful.

8 One final matter which I hope won't cause a problem.

9 Supposedly the Commercial Court judges are being

10 addressed on Monday morning on the new costs budgeting

11 and management and suchlike proposals. I have said that

12 I can't be there because I promised myself to you.

13 I have said if there was any point at all in my coming

14 for the first three-quarters of an hour then I would be

15 willing to do so. I am going to find out more about

16 that. If there really is some point in that, but

17 I don't think there will be, then I will let you know

18 and we'll start at 11 o'clock or 11.15 on Monday but

19 I just can't see the sense of that. I think I shall

20 expect to be supplied literature instead and hope that

21 it doesn't make me too ignorant when it comes to the

22 horrific prospect of dealing with all this, although the

23 good news, of course, is that the Commercial Court is to

24 a large extent exempt.



1 MR JUSTICE BURTON: So unless you hear otherwise, 10.30 on

2 Monday. Thank you very much.

3 (4.05 pm)

4 (The court adjourned until Monday, 25 March at 10.30 am)
























2 Housekeeping .........................................1

3 MR PAUL RICHARD ATHERTON (sworn) ....................13

4 Examination-in-chief by MR QURESHI ..............13

5 Cross-examination by MR WOLFSON .................16