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2013 2 (10.30 am) 3 Housekeeping 4 MR MOTT: Just two matters of housekeeping before I call 5 Mr Inch. 6 MR JUSTICE BURTON: Yes. 7 MR MOTT: The first is that we have the three notes that 8 your Lordship requested on various issues. 9 MR JUSTICE BURTON: Good. 10 MR MOTT: They are the note on Tullow's payment obligations 11 to Total and CNOOC. 12 MR JUSTICE BURTON: Yes, very helpful. I was going to ask 13 about that, thank you. 14 MR MOTT: The second one is the note on the various 15 contractual debts owed by Tullow to Heritage, and the 16 third is on the changes between the draft MOU 17 on December 2010 and the final MOU in March 2011. 18 MR JUSTICE BURTON: Yes, good. Thank you very much indeed. 19 How are we on the arbitration? Any news? 20 MR QURESHI: My Lord, I can only turn to our friends from 21 Curtis to ask whether or not ... 22 MR JUSTICE BURTON: We have an even fuller contingent, do 23 we? No, the same contingent. 24 THE SOLICITOR: We are still awaiting for instructions from 25 the Government.
Page 2 1 MR QURESHI: My Lord, I understand Curtis are still awaiting 2 instructions from their clients. 3 MR JUSTICE BURTON: You mean it hasn't even gone yet? 4 MR QURESHI: That is my understanding. 5 MR JUSTICE BURTON: This is really getting quite 6 aggravating. I'm sorry, I can't have this situation of 7 nothing happening. Can one of you please go and phone 8 and say the judge is getting quite disturbed. Please 9 phone now and say we must have an answer today. 10 THE SOLICITOR: I have discussed this. I have been in 11 contact with the client and they have not got back to 12 us. 13 MR JUSTICE BURTON: I can't understand what is the problem. 14 You are not asking them to commit themselves to anything 15 other than a joint request from both sides to invite the 16 Arbitrators, in much less strong terms than I wanted -17 I wanted to say much more like: "The judge requests that 18 you please produce this award at your earliest 19 convenience". 20 THE SOLICITOR: I understand. 21 MR JUSTICE BURTON: The letter is even nicer than that, it 22 is not going to upset anybody, and I rather hoped we 23 would have the result by Easter. It is ridiculous that 24 we can't even send them a letter. 25 THE SOLICITOR: Because the Government is not a party to
Page 3 1 this case is it possible that perhaps Heritage will be 2 able to address that letter to the Arbitrators, if you 3 are concerned about the timing. 4 MR JUSTICE BURTON: I am concerned not to prejudice Heritage 5 and I don't see that I can possibly force them to send 6 a letter on their own and make it look as though they're 7 in some way prejudicing the Arbitrators. It really 8 ought to be a joint letter, and all it is is a letter 9 saying: when will the award be ready? 10 Please go and phone now, rather than stay here in 11 court. You have a colleague who can remain behind and 12 in any event there is a transcript. Please go and phone 13 now and say the judge is becoming really quite 14 disturbed. 15 THE SOLICITOR: I understand, my Lord. One point if I may 16 address you. With all due respect, you say you cannot 17 force the defendant in this case to send a letter to the 18 Arbitrators. 19 MR JUSTICE BURTON: I can't. I have no conceivable 20 jurisdiction. I have no jurisdiction over your clients. 21 I am asking as a matter of courtesy that you please go 22 now and say to those instructing you that the judge is 23 very unhappy, all right? Please do that now. 24 THE SOLICITOR: Yes, I will do that now. 25 MR JUSTICE BURTON: Right, let us get on with the case.
Page 4 1 Please go and do it now. Thank you. 2 THE SOLICITOR: Yes, I will do it again, my Lord. 3 MR JUSTICE BURTON: Yes, thank you. So that is the 4 arbitration. I had just a couple of other questions. 5 The first is this: what is the proper law -- is this 6 something the two of you have discussed, I have probably 7 missed it in the skeleton argument -- the proper law of 8 the restitutionary claim? I have only come to consider 9 this when I read the experts' reports and they are 10 obviously opining about Ugandan law but they don't, 11 I think, either of them opine about what the Ugandan law 12 of restitution is and it may be because the parties have 13 agreed something. 14 MR MOTT: My Lord, nothing has been agreed but neither party 15 has pleaded that the applicable law is Ugandan law. 16 MR JUSTICE BURTON: So I'm to assume that the law of 17 restitution is the English law. 18 MR MOTT: The conventional principle. 19 MR JUSTICE BURTON: That's fine. No problem at all. There 20 is one other question that I have and it relates to 21 page 154 which I think must be 154 of D1. 22 MR MOTT: This is another expert law point, my Lord? 23 MR JUSTICE BURTON: Yes. It is page 154 of D1 and it is the 24 joint memorandum of the experts. 25 MR MOTT: My Lord, yes.
Page 5 1 MR JUSTICE BURTON: Am I right in thinking that there is 2 a typographical error? 3 MR MOTT: Would you be able to identify the particular -4 MR JUSTICE BURTON: Yes, page 154, subparagraph (c), second 5 line. Am I right in thinking that the word "not" should 6 be there? 7 MR MOTT: My Lord, I believe you are. Yes. "... is not 8 sufficient to constitute a dispute", quite right, yes. 9 MR JUSTICE BURTON: Thank you very much. Good. On we go. 10 MR MOTT: My Lord, I call Mr Inch. 11 MR RICHARD CHARLES INCH (affirmed) 12 Examination-in-chief by MR MOTT 13 MR MOTT: Mr Inch, can you be passed bundle C. If you turn 14 to tab 4 of that bundle, page 105? 15 A. Yes. 16 Q. Can you confirm that that is your witness statement? 17 A. Yes. 18 Q. Can you now turn to page 165 of the bundle? Can you 19 confirm that that is your signature? 20 A. That is my signature, my Lord. 21 Q. I understand that there are two typographical errors in 22 your witness statement you would like to correct. 23 A. Yes. 24 Q. So I am just going to run through those. Firstly, can 25 you turn to paragraph 98 of your witness statement. In
Page 6 1 paragraph 98, I understand that you believe the second 2 sentence is mistaken. Would you mind explaining to the 3 court in what way it is? 4 A. Well, I think it's just there has been some error in the 5 typing. The second sentence basically makes the same 6 point as the explanation in parenthesis, and I think the 7 paragraph reads properly with the deletion of the second 8 sentence. 9 Q. Thank you. 10 MR JUSTICE BURTON: Can you just read it out so we are 11 clear. Because funnily enough I was just looking for my 12 list of questions I had and I can't find them at the 13 moment, and that was one of them: 14 "I believe that Mr Kiiza also told me that day that 15 Heritage had lodged a formal appeal of the tax 16 assessment dated 6 July." 17 Then you want the next sentence out? 18 A. Yes. 19 MR JUSTICE BURTON: "(On 19 August the URA issued a second 20 tax assessment on Heritage [you are explaining it] and 21 demanded another 30 million. However, we only learned 22 of this later.)" 23 I see. Yes, thank you. 24 MR MOTT: Next, can you turn to paragraph 161, please. 25 I understand that there is a figure in the first line
Page 7 1 that you would like to correct. 2 A. Yes, the payment on 7 April was not the 283 million. It 3 was 313 million with the additional 30 million. 4 MR JUSTICE BURTON: 161, yes, should be 313; is that right? 5 A. It should be, sorry, it should be 313 million. 6 MR JUSTICE BURTON: Not 283. 7 A. Correct. 8 MR JUSTICE BURTON: Thank you. 9 MR MOTT: There is a change, I understand, that you would 10 like to make at paragraph 149 of your witness statement. 11 At paragraph 149 you say that: 12 "On 9 December 2010 I attended a meeting with the 13 URA team in Kampala. The meeting was led by 14 Ali Sseketawa, a URA litigation lawyer and an Assistant 15 Commissioner. In the main, the discussion at the 16 meeting focused on the draft MOU." 17 A. Yes. 18 Q. I understand you would like to make a change to this 19 paragraph? 20 A. Yes. 21 Q. Would you mind explaining the change to the court? 22 A. Yes. The meeting on 9 December wasn't led by 23 Mr Sseketawa. As I said, this is true, the meeting on 24 9 December was primarily focused on the MOU. 25 Subsequently there was a meeting, another meeting with
Page 8 1 the URA which Mr Sseketawa led really in his capacity as 2 litigator and when I referred to the meeting led by 3 Mr Sseketawa it was at a second meeting some time after 4 9 December. 5 Q. Just to confirm the position by reference to the 6 documents, could you be passed bundle E17. Could you go 7 to page 4706, please. 8 A. Yes. 9 Q. First off, are you able to tell the court whose 10 handwriting this is? 11 A. This is my handwriting. 12 Q. If you look in the top right-hand corner are you able to 13 tell the court the date that these notes were made? 14 A. Well, I believe it's 9 December, I think. 15 Q. And if you look in the top left-hand corner or the top 16 of the document are you able to tell the court what 17 meeting these are a record of? 18 A. Well, this is Uganda and it says "Technical committee 19 MOU discussion". 20 Q. Is that the meeting that you are referring to in the 21 first sentence of paragraph 149 of your witness 22 statement? 23 A. No. This is the -- this is my preparatory note on 24 9 December for the actual meeting with the full 25 technical committee. After this meeting with the
Page 9 1 technical committee, I think on the same day there would 2 have been a side meeting with the URA on the tax 3 technical points and there will be a separate note of 4 that meeting, certainly in my manuscript notebooks. 5 Q. If you turn forward from page 407, are you able to 6 identify the page? 7 MR JUSTICE BURTON: Turn forward from where? 8 MR MOTT: From page 4707. 9 MR JUSTICE BURTON: You said 407. 10 MR MOTT: 4706. Are you able to identify whether there was 11 any note of the subsequent meeting with the URA on that 12 day? 13 A. Hold on, I need to flick through -- I've got a lot of 14 paper here. If you -- so the actual meeting with the 15 URA that took place I think probably on 9 December is 16 document E/4724 which is unhelpfully headed up "AK 17 letter" but it is in fact a letter of the points that 18 were discussed with the URA regarding the MOU. 19 Q. Thank you very much. To move on, can you now look in 20 the same bundle at page 4743 and just to give you the 21 reference, the corresponding handwritten page for 4743 22 is 4739. 23 A. Yes. 24 Q. Are you able to say whether or not this handwritten note 25 relates to the subsequent meeting with Mr Sseketawa that
Page 10 1 you have previously told the court about this morning? 2 A. Yes, this is the meeting that Mr Sseketawa led. If you 3 refer to E/4740 you will see a manuscript note about 4 halfway down the page of an extensive discussion of nill 5 mill assessment result not being acceptable to the URA. 6 That whole discussion was led by Mr Sseketawa as 7 the -- in terms of litigation against Heritage and 8 litigation against Tullow. 9 Q. Just to try and date this note, because this handwritten 10 note at 4739 and 4743 doesn't have a date in the top 11 right-hand corner? 12 A. No. 13 Q. So just in order to date the range in which this note 14 would have been made can you first go back in the bundle 15 to 4732.001? 16 A. Right. 17 Q. If you look at the top right-hand corner of this 18 handwritten note, are you able to see what date this 19 note was made? 20 A. Yes, 27 January 2011. 21 Q. So would the note of your meeting with Mr Sseketawa have 22 been made before or after this note? 23 A. After this note. All my notes are in my notebooks in 24 sequential order. 25 Q. If you go forward in the bundle to 4749, and the
Page 11 1 transcription of that is at 4749.001, if you look in the 2 top left-hand corner are you able to say what meeting 3 this is a note of? 4 A. Well, this is a note of either a telephone call or 5 a conference with Mr Wolfson. 6 Q. Are you able to remember the date that you had that call 7 or meeting with Mr Wolfson? 8 A. Not without reference to some record of it, no. 9 Q. Perhaps you could be passed -- keep that bundle open, 10 please, but if you could be passed core bundle 3, 11 page 909. Do you have that, page 909? Does that 12 document help you remember the date of the call or 13 meeting with Mr Wolfson? 14 A. It is very heavily redacted. I assume -- I do assume it 15 is a meeting on 4 February and I did notice that 16 document E/4750 is dated 7 February, so that seems quite 17 consistent, I think, with the dates that I have. 18 Q. Thank you for dating the date range of the -19 MR JUSTICE BURTON: And we are going to date this -20 E/4749.001 is dated 4 February, is that right? 21 A. I believe so, my Lord, yes. 22 MR JUSTICE BURTON: Well, can you just go to that document 23 again. Just what are we talking about? How many pages? 24 It is awfully difficult when it is redacted to know when 25 it starts and when it finishes. So 4749.001, I'm to put
Page 12 1 4 February and how many pages go with those notes? 2 A. I'm waiting for the document, sorry, my Lord. Do you 3 mean from my notebook, sir? 4 MR JUSTICE BURTON: Because 4754 is "Oscar K discussion, 5 7 February", so that's probably is a new document, is 6 it? 7 A. Yes, that's Oscar discussion -- a discussion with 8 Oscar Kambona on 7 February and then again, in terms of 9 the Wolfson document, as far as I can see, as far as 10 I can tell, my Lord, from the redactions, I believe it's 11 just the one page, E4749. 12 MR JUSTICE BURTON: I see, so 4750 is already on to 13 something different. 14 A. That is the Oscar Kambona discussion, 7 February. 15 MR JUSTICE BURTON: Yes. Thank you. This relates to what? 16 We have moved on to a different point now in the witness 17 statement, have we? 18 MR MOTT: My Lord, at the moment I was just engaged in 19 attempting to establish by date range the date of the 20 note of the meeting with Mr Sseketawa. 21 MR JUSTICE BURTON: I see, you have not gone on to anything. 22 MR MOTT: But Mr Inch -23 MR JUSTICE BURTON: At the moment I'm -- all very well to 24 do this and you are very carefully not leading but I'm 25 not sure what the significance of this is at all.
Page 13 1 MR MOTT: I was attempting to establish firstly the 2 handwritten note corresponding to the meeting on 3 9 December, and secondly to identify the subsequent 4 handwritten note which corresponds with the substance of 5 the meeting, the subsequent meeting with Mr Sseketawa 6 that is referred to at paragraph 150. 7 MR JUSTICE BURTON: Yes. But what you have now done is 8 shown us a meeting or a telephone conference with 9 Mr Wolfson, or was it the meeting? I'm lost. 10 A. I think the only point I'm trying to make, my Lord, is 11 that the meeting that was led by Mr Sseketawa wasn't on 12 the 9 December. 13 MR JUSTICE BURTON: I have that. 14 A. It was a subsequent meeting. That was the only point. 15 MR JUSTICE BURTON: You have made that point but now counsel 16 is attempting without leading, and doing it very 17 carefully but let us try and shorten it if we can 18 because I'm not sure what the materiality of any of this 19 is other than correcting your witness statement, but 20 what was the point of this 4 February note of your 21 conversation with Mr Wolfson? 22 MR MOTT: May I ask one more question then, my Lord? 23 MR JUSTICE BURTON: Yes. 24 MR MOTT: Would the date of your handwritten note of your 25 meeting with Mr Sseketawa have been before or after the
Page 14 1 date of the note of the call with Mr Wolfson? 2 A. Before. 3 MR MOTT: Thank you, my Lord. 4 MR JUSTICE BURTON: This is completely meaningless to me, 5 particularly as it is redacted, but is there any 6 substance in this meeting with Mr Wolfson, this note of 7 your meeting? Does it say anything of any significance? 8 A. Not in terms of correcting my witness statement, no. 9 MR JUSTICE BURTON: No, but in terms of anything? 10 A. In terms of anything? 11 MR JUSTICE BURTON: Can you decipher it for us while we have 12 it? 13 A. I think if you look at the typed version -14 MR JUSTICE BURTON: Yes. 15 A. Well, again, it is quite difficult without seeing the 16 redacted pieces. 17 MR JUSTICE BURTON: Yes. 18 A. I'm obviously -- then there is some discussion, I guess 19 about the various notices to section -- 283, was that 20 covered by 108? 21 MR JUSTICE BURTON: Material difference, 283 and 131, you 22 add on the 131 which has already been -- the 131 is the 23 subject of the second notice, is that right? 24 A. I think -- well again, I'm not very clear whether that 25 should be the 30 or where the 131 comes from.
Page 15 1 MR JUSTICE BURTON: Then it says: "Section 108 S/T to 2 dispute if H challenge falls away". 3 Can you -4 A. So the section 108 it means is subject to dispute, so 5 I think there was some discussion then about would 6 section 108 apply in the circumstances of there being 7 a tax dispute in Uganda, and then I think there is 8 a reference here to what happens if the Heritage 9 challenge, ie their objection, falls away. 10 So overall it's a discussion of the application of 11 section 108, the application of section 106 in the 12 context of the dispute and what would happen if Heritage 13 withdrew from that dispute. 14 MR JUSTICE BURTON: Yes, thank you. 15 MR MOTT: My Lord, I have one or two further questions just 16 to develop from the meeting with Mr Sseketawa. 17 MR JUSTICE BURTON: Yes, please. 18 MR MOTT: In order to set it in context. 19 Can you be given -- please don't put bundle E17 20 away. 21 A. All right. 22 Q. But please can you be given bundle E19 and turn to 23 page 5403. Do you have 5403? 24 A. Yes. 25 Q. My Lord, if you are following this in the core it is
Page 16 1 903. 2 A. 5403. 3 Q. Mr Inch, would you mind reading the first few lines of 4 5403 to yourself, please. (Pause). 5 A. Yes. 6 Q. In light of paragraph 150 of your witness statement -7 and do feel free to look back at it if you want to 8 refresh your memory of what it says. 9 A. Right. 10 Q. In light of paragraph 150 are you able to assist the 11 court with what contributed to your position 12 in February 2011 changing from what had previously been 13 your position in August 2010? 14 A. Well, I think in a general sense I had gone back and 15 I had looked at the provisions quite carefully following 16 the sort of post-Gulu discussions and I looked at it and 17 I concluded that the view I had was that section 108 was 18 intended as a security-type of provision really intended 19 to deal with securing tax owed by a non-resident. That 20 was my first point. 21 I think while I was thinking about these things, and 22 again I was trying to take some soundings in Uganda from 23 various people about what actually happened in practice, 24 at the meeting we had with Mr Sseketawa who led the 25 discussion, as we left that meeting I just had a brief,
Page 17 1 very brief, discussion with him as we walked out the 2 room together and I asked him, you know, I asked him: 3 "Do you usually send out these notices where there is a 4 dispute?" And he immediately said, "Yes, we do." And 5 I said, I asked him, "Who do you send them to?" And he 6 said, "The banks, the local banks." I said, "Do the 7 banks ever challenge those notices?" And he said, "No, 8 the banks never challenge notices. It is always the 9 taxpayer." 10 And then I asked him, the last question I asked him 11 was, "What happens to the cash if the notice gets 12 lifted?" And he said, "We give it back to the bank." 13 MR JUSTICE BURTON: "Do you usually send out these notices 14 where there is no dispute?" Is that what you say? 15 A. No, where there is a dispute. 16 MR JUSTICE BURTON: The [draft] transcript records you as 17 saying: "I asked him, 'Do you usually send out these 18 notices where there is no dispute?' And he immediately 19 said 'yes'." 20 A. I asked him, where -- because I was trying to understand 21 in circumstances where there was a dispute as with 22 Heritage and he sent out a notice, was that their usual 23 practice and he said "yes". 24 MR JUSTICE BURTON: I understand that, I am just -- the 25 transcript is not right. So I didn't think that is what
Page 18 1 you said. But you can confirm that the conversation you 2 had with Mr Sseketawa was when you asked him, "Do you 3 usually send out these notices where there is 4 a dispute?" and he immediately said, "Yes, we do"? 5 A. Yes. 6 MR MOTT: Perhaps with reference to the transcript writers 7 this is a convenient moment to observe that my screen 8 hasn't even started this morning, if they could help. 9 My Lord, just to follow this point forward by 10 a couple of documents for completeness. Mr Inch, can 11 you turn to page 5413 in bundle 19, please. 12 MR JUSTICE BURTON: Just remind me, Mr Inch, I am not sure 13 I know, I suppose I do, I have looked again at the 14 beginning of your witness statement. You were head of 15 tax for Tullow? 16 A. Yes. 17 MR JUSTICE BURTON: Your legal qualifications? 18 A. No, I'm a chartered accountant and I'm a member of the 19 Institute of Taxation. 20 MR JUSTICE BURTON: Right. So that leads you to have to 21 read a lot of tax statutes. 22 A. Well, I've practised tax all my professional career. 23 MR JUSTICE BURTON: Yes, thank you. 24 MR MOTT: Mr Inch, you should have page 5413 in front of 25 you.
Page 19 1 A. Yes. 2 Q. It is an email from Miss Reshma Shah. We see at the 3 bottom of the email that Miss Shah -4 MR JUSTICE BURTON: Is this in the core bundle? 5 MR MOTT: Pardon me, my Lord, it is 903. No, that is not 6 right. It is page 907 in the core bundle, my Lord. 7 You see at the bottom of the email, Mr Inch, that 8 Miss Shah is an international tax manager? 9 A. Yes. 10 Q. Are you able to identify which Tullow individual she 11 worked with most closely in relation to the Heritage 12 issue? 13 A. Reshma Shah is a member of my team. She's somebody 14 I recruited, so her role is to deal with international 15 tax matters, primarily focused in East Africa. She's 16 Kenyan and speaks Swahili so she looks after Uganda, 17 Ethiopa and our various interests there. So she really 18 was my assistant on all matters dealing with Uganda. We 19 have a small two-person team in Uganda of quite junior 20 accountants, whereas Reshma is much more an 21 international tax specialist and deals with more complex 22 issues with me. 23 Q. You will see that the date of the email is 24 Friday, February 4th. In the first sentence of the 25 email she says:
Page 20 1 "Here below are some of the issues we would like to 2 discuss on the call on Monday." 3 Which would be Monday the 7th. Can you just read 4 numbered paragraph 1 of the email, please? 5 A. Read it out? 6 Q. No, just read it to yourself, please. 7 A. Okay. (Pause). 8 Q. So she says: 9 "On this basis we understand the tax is currently 10 under dispute. We would therefore like to understand 11 the status of payments made under a section 108 notice." 12 Are you able to tell the court whether 13 in February 2011 it was your understanding that 14 section 108 was applicable despite the fact that tax was 15 disputed or whether you believed that section 108 was 16 inapplicable if there was a dispute? 17 A. No, I thought it was applicable even though there was 18 a dispute. 19 Q. Now, keep that bundle, but if you turn back to 20 bundle E17, which as we know has your handwritten notes 21 in it, if you can go to page 4750 which you have briefly 22 referred to this morning. If you look at the date in 23 the top right-hand corner, are you able to tell the 24 court what the date of this note is? 25 A. 7 February.
Page 21 1 Q. And if you look in the top left-hand corner are you able 2 to tell the court who this is a note of a discussion 3 with? 4 A. This was a discussion with Oscar Kambona. 5 Q. If it is easier, the typed-up version of this note is at 6 4754. Can you read to yourself the text next to 7 subparagraph (a) of this note? (Pause). 8 A. Yes. 9 Q. "So section 108, status of payment deemed to be on 10 taxpayer's account and is deemed to be the taxpayer's 11 payment." 12 Did you understand Mr Kambona's view to be that 13 section 108 was applicable even if there was a dispute 14 over the tax or did you understand his view to be that 15 section 108 was inapplicable if there was a dispute? 16 A. I understood that he believed it was applicable even 17 though there was a dispute. 18 Q. I think just one more document, my Lord, just to show 19 how this point then develops. 20 MR JUSTICE BURTON: Yes, fine. 21 MR MOTT: The final bundle, Mr Inch. If you could be given 22 E20. 23 MR JUSTICE BURTON: Does this tie up with anything in his 24 witness statement, 4750 and 4754? 25 MR MOTT: I will need to check that for you, my Lord.
Page 22 1 MR JUSTICE BURTON: I am looking at his witness statement. 2 We have got to, as you rightly say, we had the meeting 3 with Mr Sseketawa which we now know was not on 4 9 December but was at some date in February probably, 5 but at any rate prior to the 7th. This discussion with 6 Oscar Kambona, this was by you, obviously, because it is 7 in your handwriting. 8 A. Yes. 9 MR JUSTICE BURTON: And the question is: do you deal with it 10 in your witness statement? 11 MR MOTT: I don't believe he does, my Lord. 12 MR JUSTICE BURTON: Right. Thank you. 13 MR MOTT: So, Mr Inch, you should have 5427 in bundle 20, 14 please. My Lord, in the core that is core bundle 3/927. 15 MR JUSTICE BURTON: Thank you. 16 MR MOTT: So, Mr Inch, you should have 5427, an email from 17 Oscar Kambona on Wednesday, 9th: 18 "Hi Reshma, attached is the write-up on section 108. 19 Kindly peruse and advise whether we need to make 20 adjustments." 21 If you then turn over the page you will see the 22 advice that he sent. 23 If you look at the underlined heading of this 24 document, are you able to identify which section of the 25 Income Tax Act it is dealing with?
Page 23 1 A. Section 108. 2 Q. And if you look at the last paragraph on this page, if 3 you just read that paragraph to yourself, please. 4 (Pause). 5 Again, did you understand Mr Kambona's view to be 6 that section 108 was applicable even if there was 7 a dispute or did you understand his view to be that 8 section 108 was inapplicable if there was a dispute? 9 A. My understanding was in his view it was applicable. 10 MR JUSTICE BURTON: Which paragraph are you reading for that 11 paragraph? The last paragraph on page 928; is that 12 right? 5428. 13 MR MOTT: 5428, my Lord. I am not going to take the witness 14 through every other paragraph. 15 MR JUSTICE BURTON: That is fine. I just wanted to be sure 16 I had the right page. 17 MR MOTT: I hope that is enough to chase that point down. 18 The last thing I am going to ask you to do, Mr Inch, 19 is having made the corrections to your witness statement 20 you have just identified for the court, is this witness 21 statement true to best of your knowledge and belief? 22 A. My Lord, there is one further change to my witness 23 statement which I had actually discussed with certainly 24 my solicitors, which is in the account I give of the 25 Gulu meeting I make a reference, I believe, to a quite
Page 24 1 junior lawyer from the URA berating senior Ministers but 2 I now realise, looking at the minutes from the meeting, 3 that she was in fact the senior lawyer from the URA 4 although she looked very young. 5 MR JUSTICE BURTON: Right. Thank you very much. 6 MR MOTT: For your Lordship's reference the paragraph there 7 is 140. 8 MR JUSTICE BURTON: Thank you. 9 MR MOTT: The final sentence. 10 MR JUSTICE BURTON: A quite junior URA, right, a quite young 11 looking URA ... 12 A. That is more appropriate. 13 MR JUSTICE BURTON: Yes, thank you. 14 MR MOTT: Be with that caveat, is this witness statement 15 true to the best of -16 A. She was the senior lawyer of the URA. 17 MR JUSTICE BURTON: Yes, thank you. 18 A. Now we have discussed those points, I'm perfectly happy 19 with my witness statement. 20 MR MOTT: If you wait there, I am sure there will be 21 questions. 22 MR JUSTICE BURTON: I have some questions just to sort out 23 before Mr Qureshi starts with the cross-examination. 24 Can I ask you, please, to look at the -- I don't 25 know where it is most conveniently found -- the tax, the
Page 25 1 Revenue Act. 2 MR MOTT: Bundle D2, my Lord. 3 MR JUSTICE BURTON: Thank you. Section 106. 4 MR MOTT: D2/350, my Lord. 5 MR JUSTICE BURTON: Section 106, subsection (4). I have it 6 in D1, tab 7, at page 350 but it probably comes up in -7 MR MOTT: Yes, my Lord, that will be the second page of the 8 second agency notice which, as you will remember, 9 attached both sections 108 and 106. 10 MR JUSTICE BURTON: I see. Right. Whatever it is, wherever 11 you are looking at it, I am looking at it in the -- do 12 you have it now? 13 A. I don't have it. 14 MR JUSTICE BURTON: Could you please find it. Let us look 15 at D1/350. Section 106(4), of course as both the 16 experts have pointed out, there is no equivalent section 17 in section 108 so this only applies to the second 18 notice, the 106 notice, and section 106(4) says: 19 "Where a person served with a notice under 20 subsection 4 is unable to comply with the notice by 21 reason of lack of monies owing to or held for the 22 taxpayer, the person shall as soon as is practical and 23 in any event before the payment date specified in the 24 notice, notify the Commissioner accordingly in writing, 25 setting out the reasons for the inability to comply."
Page 26 1 Was your attention drawn to this at any stage? 2 A. Well, I certainly read it, my Lord. I certainly felt as 3 far as -- for a company like Tullow, I mean, to the 4 extent we owed Heritage money, we wouldn't -- we were 5 not in a position to plead that we couldn't afford to 6 pay. We certainly always had the resources to pay any 7 amounts due. 8 MR JUSTICE BURTON: This was the second notice which on the 9 face of it -- I forget how much it was for. Was it 10 38 million? 11 A. Yes. 12 MR JUSTICE BURTON: Did you take advice or consider as to 13 whether you needed to serve a notice? 14 A. I think -15 MR JUSTICE BURTON: Yes, notify the Commissioner In writing? 16 A. No, I think -- well, no. I think in terms of sort of 17 lack of monies owing to the taxpayer, I mean, I think as 18 between the gap, if you like, between the 283 million, 19 the working capital amount on the one hand and the 20 313 million there was -- in my parlance, there was 21 a gap, if you like, to be filled and that was filled 22 then by -- that was filled by the various invoices -23 MR JUSTICE BURTON: I know all that. But you didn't pay. 24 A. -- withholding tax -25 MR JUSTICE BURTON: You paid all those over to Heritage,
Page 27 1 didn't you? 2 A. Yes, we made a commercial decision to pay Heritage 3 because -4 MR JUSTICE BURTON: You will be asked about that. At any 5 rate, you didn't hold those, you paid them over. In 6 relation to the items that you were in possession of, if 7 you were in possession of them, namely the escrow 8 amounts, you couldn't pay those. 9 A. No. 10 MR JUSTICE BURTON: By December, what was your attitude to 11 whether the notice affected those sums? 12 A. Well, I still felt, you know, just on the kind of -- you 13 know, on a narrow interpretation of the section I felt 14 that we were, you know, on the one hand we were in 15 possession of the funds in that we had -- we were joint 16 signatories in the bank account and we had joint control 17 with Heritage and the fact that we couldn't access those 18 monies wasn't really of itself a defence to our 19 obligations under the notice. Because again, I think if 20 you look at the plain language of the section it simply 21 says: if you are in possession of an asset up to this 22 value your obligation is to pay up to the level of that 23 asset that you hold. And the fact -- and really my view 24 of how a court in Kampala would approach it, I don't 25 think they'd be at all sympathetic to a position that
Page 28 1 says, "Well, we can't access these things due to 2 a contract with Heritage." 3 MR JUSTICE BURTON: You will no doubt be asked about this 4 but you didn't think of and/or take advice on whether 5 you needed to serve a notice under section 106(4)? 6 A. No, and again, if we had gone to the -- if we'd gone to 7 the URA with that kind of -- trying to fob them off with 8 that kind of approach, they would have erupted. 9 MR JUSTICE BURTON: Yes, thank you. My next question 10 relates to paragraph 58 of your witness statement. 11 I didn't really follow this paragraph if you can expand 12 on the point: 13 "Independently of my own actions I understood from 14 my colleagues at Tullow that discussions were taking 15 place between Tullow, Heritage and the Ministry of 16 Energy such that Tullow would act as [this is in May] an 17 escrow agent rather than as an agent under 106. On 18 20 May I emailed Mr Kiiza, saying, 'I understand that 19 there might be some interest in an escrow arrangement 20 ... Will you give me a call to discuss please? I'm also 21 looking at the collection mechanics under a section 106 22 notice but a payment into escrow might well suit 23 everyone best.' I subsequently learned that Heritage 24 had rejected this idea." 25 There were two things I didn't really follow if you
Page 29 1 can just expand on it for us. The first is, this 2 suggests then that you had 106 in mind, but not 108, as 3 early as May 2010. Is this right? 4 A. Yes, well, the whole -- again, the whole discussion 5 really I had with the Ugandan authorities, Mr Kiiza, 6 again, if we go back to the very earliest stages of this 7 transaction being announced in December, Heritage had 8 gone to the market very, very clearly that there was no 9 tax payable on this transaction and I had listened to 10 the call with the analysts and Mr Atherton, who was very 11 very bullish that there was no tax payable, there was no 12 provision, tax provision made in the accounts for any 13 settlement. And then it seemed, I think, that -14 I certainly thought that Heritage would do whatever they 15 could not to pay the tax and the Ugandans thought 16 Heritage would do whatever they could not to pay the tax 17 and Mr Kiiza made it clear that he was going to put that 18 problem on to us and he said, you know, "You're going to 19 have to collect it and we're going to make you agent 20 under 106" and force us to deal with it. 21 So that was why from that early stage, and again it 22 was the only possibility I considered because I had no 23 conception we would be left in a position of, you know, 24 still holding funds in a joint bank account, a joint 25 escrow account with Heritage after completion. It was
Page 30 1 completely unforeseeable. So the only situation that 2 I had in mind was the potential application of 3 section 106. 4 As we paid the completion monies to Heritage was 5 there somehow some basis under section 106 that we would 6 be obliged to pay URA instead in respect of the tax. 7 MR JUSTICE BURTON: That answers that part of my question 8 and the other part is: "I'm looking at the collection 9 mechanics under 106 but a payment into escrow might well 10 suit everyone best", you had said to Mr Kiiza. 11 A. Yes. 12 MR JUSTICE BURTON: "I subsequently learned that Heritage 13 had rejected this idea." 14 What do you mean by that? 15 A. Again, the whole -- there was a discussion, and it 16 wasn't a meeting that I was at but there was a meeting 17 in Kampala, I believe, and Tim O'Hanlon and Brian Glover 18 went to a meeting where Minister Onek was there, not 19 Mr Atherton, but there was Mr Smith and Mr Westwood from 20 the Heritage side and again, there was a very memorable 21 quote in Tim's email. He says: "Minister Onek showed 22 his fangs and it did the trick" and it said that 23 Heritage openly admitted that they hadn't done anything 24 to get the tax position agreed up to that point, 20 May, 25 and that now however, they accepted that they had to
Page 31 1 deal with it. 2 At that meeting, as I understood it, there was then 3 discussion, rather than talking about a formal 4 collection process, there had been a sensible discussion 5 about: okay, why don't we have an escrow account, why 6 don't we have Tullow acting as agent? And as we 7 understood it, Brian Smith -- Mr Smith and Mr Westwood 8 thought that was a good idea. 9 Now, after that, and because of that I actually 10 telephoned Mr Atherton because I thought this was great 11 news for everybody (a) that we were moving the 12 transaction forward, and I phoned Mr Atherton and 13 I said, you know, "Okay, I understand it's all agreed 14 now we're going to have this escrow arrangement. Why 15 don't we then pay, ie Tullow, why don't we pay for the 16 Ugandans to have appropriate tax and legal advice on 17 these escrow arrangements and we're done? We'll get the 18 transaction finished." And then when I asked him he 19 just immediately said, "No, no, we don't like that 20 escrow. We don't like that escrow set-up. We're 21 thinking about it. We need to talk to advisers and it's 22 all off." 23 So that's really where we got to with that. 24 MR JUSTICE BURTON: When you say, "I subsequently learned 25 that Heritage had rejected this idea", this was in
Page 32 1 a conversation with Mr Atherton shortly afterwards? 2 A. I have to say again I think in truth, I think when 3 I wrote this I had it in my mind that I had learned it 4 from Graham because I think Graham certainly told me 5 I think at some stage -- Graham Martin, Mr Martin, had 6 told me at some stage that the whole escrow thing was 7 off. But again, when I actually looked through all the 8 documents and the emails I remembered that, that I had 9 actually called Mr Atherton and I had a very brief chat 10 with him about it but I did call him. 11 MR JUSTICE BURTON: But it was on again later, of course. 12 A. I have to say that was something I wasn't really aware 13 of when it was put in place. 14 MR JUSTICE BURTON: So as far as you were concerned, it was 15 off in May? 16 A. Yes. 17 MR JUSTICE BURTON: But without your involvement it came 18 back on again in July? 19 A. That's right. 20 MR JUSTICE BURTON: Thank you. 21 The next question I have is paragraph 152: 22 "One of the consequences of that appeal was that we 23 believed there was no basis to withhold from the working 24 capital payments due to Heritage under section 106 ... 25 I did not have time to make any kind of detailed review
Page 33 1 of all the amounts that were potentially subject to 108 2 but I felt that with the sum held in the escrow account, 3 including accrued interest, the working capital 4 settlement, the withholding tax obligation and other 5 amounts due to Heritage, the total amounts in question 6 would be very close to the US$313 million required by 7 the notices." 8 Can you help me about that thinking, given that, as 9 we discussed a few moments ago, in the event you didn't 10 pay those sums over and above the escrow account to the 11 Government but you paid them over to Heritage? 12 A. Yes, I think, and again perhaps -- well, again, I don't 13 know whether you want to turn to it, but the draft 14 letter that I am referring to was drafted on the Friday 15 and again, I don't know if I have -16 MR JUSTICE BURTON: By all means have it. I think it is 17 core bundle 824 to 826 and it is E/4932 to 4934: yes. 18 A. I am still waiting for the document. 19 MR JUSTICE BURTON: E18/4932 to 4934. Is that what you had 20 in mind? 21 A. No. 22 MR JUSTICE BURTON: This is what I have marked. "I amended 23 the draft letter", is this what you have in mind? 24 A. I was thinking of going to the actual draft letter of 25 the 10th just so I could explain.
Page 34 1 MR JUSTICE BURTON: It will be in the same bundle further 2 back. I was going by the noted-up part of your witness 3 statement. 4 A. I was just trying to clarify what changed, if you like, 5 because of the appeal. I was just trying to ... 6 MR JUSTICE BURTON: Yes. Mr Mott, are you able to help? 7 I simply relied on what was noted up on my witness 8 statement that it was E18/4932 to 4934 but apparently 9 this isn't what the witness had in mind. 10 A. I am looking -- it is E/4921, I think. 11 MR JUSTICE BURTON: Thank you. Yes, thank you. 12 A. And again, I think at this stage this was before we 13 understood that an appeal had been lodged. Again, if 14 I can just be clear in my own mind perhaps what the 15 question is, but what I was really -16 MR JUSTICE BURTON: The question was, just so I can be clear 17 about it because you will be cross-examined no doubt in 18 due course but I'm trying to clarify -19 A. Right. 20 MR JUSTICE BURTON: -- you say in your witness statement 21 that you didn't do a detailed review of all the amounts 22 that were potentially subject to 108 but you felt they 23 totted up, including everything, to well over the 24 amount, indeed you say very close to the amount. 25 My question was, given that you were including at
Page 35 1 that stage all those sums as being covered by 106 or 2 108, why is it that you didn't in the end keep those 3 sums but paid them over, or at any rate once you 4 decided, as you told us a few moments ago, for 5 commercial reasons to pay them over, did you rework your 6 calculations? 7 A. No it was purely a commercial decision at this stage. 8 MR JUSTICE BURTON: Yes. 9 A. Again, all I'm really saying about E/4921 is what 10 I understood the position to be here in respect of the 11 assessments and really there seemed to be here, at this 12 stage, two opportunities to collect the Heritage cash, 13 if you like. One was on the basis that the assessment 14 for 30 million hadn't been appealed in time, the payment 15 hadn't been made in time and, therefore, it seemed to us 16 that that assessment had become finally conclusive. 17 Now under the supplemental agreement and the escrow 18 arrangements, once a final judgment had been given on 19 the tax, certainly as we understood it, we had the 20 ability on behalf of the URA to go to the escrow agent 21 and ask for the 30 million because there was no further 22 appeal possible. 23 The point I was trying to make in this 10 December 24 -25 MR JUSTICE BURTON: Go to the escrow agent and ask for the
Page 36 1 283 million. 2 A. No, go only in respect of the 30 million. So the 3 30 million had become final, so that was the only amount 4 which was not subject to any further appeal. So for 5 that 30 we thought we could, or I thought we could go to 6 the escrow agent and ask for the money. With respect to 7 the rest of it, again the advice that I had been having 8 at this stage was that once the URA had made an 9 objection decision, and this is in respect of the first 10 assessment, the advice from Oscar Kambona was that the 11 283 million actually became payable again at that stage 12 and that was subject -- then it was subject to Heritage 13 in making their appeal to request a stay of collection. 14 Now, obviously if Heritage, once the objection 15 decision had been issued, if Heritage then had to go to 16 a court in Kampala and say, "We want to appeal against 17 this objection decision", what I understood the position 18 to be from Oscar was that the URA could ask the court 19 that, rather than allow the stay of the collection of 20 the 70 per cent, the URA could ask the court to say, in 21 the circumstances, dealing with a non-resident which has 22 left the country, has no assets here, they could ask the 23 funds to be paid into court. And then that obviously 24 would put tremendous commercial pressure on Heritage as 25 they couldn't access the 283 million on their own.
Page 37 1 So this, in this situation, pre -- before we 2 understood there was any appeal, I understood that the 3 monies, if you like, could be collected on the basis 4 I have just outlined. 5 Now, when the actual -- when Heritage had actually 6 made the appeal, it seemed to me, again on the advice 7 I had from Oscar, that it was too late to go into that 8 whole process, so at that stage, by the time we get to 9 the Monday or whenever it is and we find out there has 10 been an appeal, this approach appeared to be no longer 11 available. We were back into this question of: do we 12 pay the money we owe Heritage, be it the transitional 13 service amounts, withholding tax, whatever it is, really 14 the working capital? The question then of whether -15 that question was back on the table now and we had to 16 make a decision if we paid them or not, and in fact they 17 had a meeting to make that decision, I think with 18 Graham Martin and myself and the head treasury guy, 19 Mr Williams, on our side, and really it was the whole 20 question of we couldn't take the risk in the guarantee 21 by making a payment to Heritage so that idea had to be 22 dropped. 23 MR JUSTICE BURTON: Right, thank you. The next question 24 relates to -- well, it is on a similar point but it 25 arises out of 136 and 138 of your statement. You refer
Page 38 1 there to E16, if you can have that, please, 4480 to 2 4482. 3 A. Sorry, my Lord, 136 to 138? 4 MR JUSTICE BURTON: 136 and 138. On your copy you won't 5 have the annotations but I have that annotated E16/4480 6 to 4482. 7 It is Reshma Shah's email to you at the top, 8 I think. Do you have it now, 4480? 9 A. Yes. 10 MR JUSTICE BURTON: If you could read that to yourself. 11 (Pause). Can you help us as to what that relates to? 12 A. Yes, the basic issue here, again it goes to the 13 mechanics of the completion statements. And again, as 14 operator, Heritage would bill us for our 50 per cent 15 share of costs that were being incurred which they would 16 then pay on a 100 per cent basis as operator. So the 17 position with the withholding tax, and again I think 18 there was an amount -- some amount, I think possibly 19 around 5 million, I don't have the details, which had 20 actually been included in the billing statements from 21 Heritage, so there was an accrued liability in the 22 completion statements for the 5 million or so that had 23 actually been cash called by Heritage. 24 MR JUSTICE BURTON: Yes. 25 A. Additionally to that, though, over and above what had
Page 39 1 been accounted for in the completion statements, the URA 2 had obviously demanded a much -- a significantly higher 3 amount of tax which is why we had this question, 4 I think, a question from me on E/4480 about asking them 5 to accrue this 18.1 million which I think was our 6 potential maximum share of the withholding tax in the 7 closing statements. 8 MR JUSTICE BURTON: Yes, it is just at 138 you say: 9 "... various permutations of how we might settle our 10 share of the withholding tax obligations, either under 11 the SPA final settlement procedures or otherwise ..." 12 And then you say: 13 "... and the implications that might have for any 14 obligations to withhold under the 27 July 2010 notice." 15 That is what I was trying to understand. What 16 implications did she or you think it would have or might 17 have? 18 A. Well, some of these things -- I think at this stage we 19 had separate correspondence with Mr Atherton about: 20 would we have like a side letter agreement to pay any 21 additional sums? So I think the point here really was 22 the question of, you know, if we paid as part of the 23 completion process then you're potentially I guess 24 within -- well, I don't know if it would make such 25 a difference but you would potentially be in a different
Page 40 1 analysis of the tax treatment under 106 and 108 2 depending if we had some separate agreement with 3 Mr Atherton. 4 If you look at things like the transitional service 5 agreements, some of them were subject to gross-up 6 clauses, some of the agreements. I mean, the TSA was 7 subject to a gross-up clause. Various different 8 payments like under the SPA were subject to the 9 guarantee, whereas I think an ordinary cash call 10 wouldn't have been subject to the guarantee. So it was 11 this different -- almost like a matrix of the different 12 implications that arose under the guarantee and under 13 commercial exposures from gross-up clauses depending on 14 what basis we made this -15 MR JUSTICE BURTON: Did you at that stage take the view that 16 the agency notice was something that you had to think 17 about? Well, it says so. Did you take the view that it 18 was or wasn't valid and binding? 19 A. I certainly took the -- this is in October. 20 MR JUSTICE BURTON: Yes. 21 A. Certainly by October I thought, yes, I thought it was, 22 you know, pretty likely that it would be enforceable in 23 the courts in Kampala. I mean, I think again, the real 24 risk from my perspective was by this time, you know, 25 I think there was no question that we were going to pay
Page 41 1 the 313 million to the URA under the notices. My real 2 concern at this stage was that if the URA found -- not 3 found out, but if the URA learned that, you know, we had 4 paid Heritage, say, you know, I don't know, $20 million 5 or something that was technically subject to those 6 agency notices, given the kind of -- given the 7 atmosphere, the terrible relations we had with the 8 Government and with the URA, they could have taken us to 9 court. They could have restrained our assets. It could 10 have been completely misinterpreted by the authorities 11 and we could have been in very serious trouble. 12 MR JUSTICE BURTON: Yes, thank you. The next question, and 13 I think the last one, relates to paragraph 160 of your 14 witness statement. This is a reference to E21, if you 15 could have, please, 5827 to 5828. This is an email from 16 you to Total, is that right? 17 A. Yes. 18 MR JUSTICE BURTON: And you say there, 29 March 2011 -- I 19 can't remember how that ties in with the date of the 20 MOU. 21 MR MOTT: It is two weeks later, my Lord. 22 MR JUSTICE BURTON: Thank you. So you say: 23 "The position on the application of section 108 is 24 that under Ugandan law we are regarded as in possession 25 of an asset of Heritage's, ie the escrow account."
Page 42 1 And that is 29 March and you had by that stage 2 already paid the money over; is that right? How does it 3 come about that you are telling this to Total? 4 A. Well, Pierrick Salles is broadly my equivalent or 5 Reshma's equivalent on the Total side. He is the Total 6 tax chap. 7 MR JUSTICE BURTON: Yes. 8 A. And I think, I mean, in terms of what he had asked for, 9 I think he asked -- he made some comment, I think, if 10 you turn the page, he says, second line: 11 "Section 108 of the ITA which is referred to 12 concerns a case where an agent owns an asset of a 13 non-resident taxpayer and I understood that Tullow" -14 MR JUSTICE BURTON: Are you reading over the page? 15 A. Yes: 16 "... and I understood that Tullow had already paid 17 Heritage and that correspondingly there is no basis ..." 18 And so he talks about that analysis and again, 19 I suppose at this stage he's looking at it, you know, at 20 this stage -- I don't know at this stage if he's looking 21 at it from the perspective of Total and these agreements 22 being made that they would lend us the money for 23 a certain time or whatever. So I guess he was looking 24 to understand it from his perspective and he was looking 25 for a double check and I just told him, you know, where
Page 43 1 we'd got to on it really. 2 MR JUSTICE BURTON: Yes. Was that your belief at the time? 3 A. Yes, that was my belief at the time. 4 MR JUSTICE BURTON: Yes, thank you. 5 MR QURESHI: My Lord, would this be a convenient moment for 6 a break for the shorthand writers before we progress? 7 MR JUSTICE BURTON: Yes, if you would like it. 8 (11.42 am) 9 (A short break) 10 (11.52 am) 11 Cross-examination by MR QURESHI 12 MR QURESHI: Good morning, Mr Inch. 13 A. Good morning. 14 Q. You ought to have in front of you a bundle which is 15 marked bundle C. 16 A. Yes. 17 Q. With your witness statement -18 A. Yes. 19 Q. -- at tab C4. Your witness statement tells us that you 20 have been a chartered accountant for some 22 years; is 21 that right? 22 A. That's about right, yes. 23 Q. And you joined Tullow as group tax manager in 2007? 24 A. Yes. 25 Q. And you became head of tax for Tullow Oil when?
Page 44 1 A. Probably about a year ago, I think, my Lord. 2 Q. 2012? 3 A. Late 2011/2012, yes. About a year, maybe two years. 4 Q. How many people are in the Tullow tax team in total? 5 A. They have about 14 people in the team worldwide. 6 Q. 14? 7 A. 14. 8 Q. And in your offices in Chiswick? 9 A. Including me, five. 10 Q. Is Reshma Shah still with you? 11 A. She's just about to take up a new commercial position in 12 our Kenya organisation. 13 Q. In your witness statement, if you just turn to 14 paragraph 4, you refer to Mr Martin's witness statement 15 of 9 November, do you see that? 16 A. Yes. 17 Q. You have been in court since the beginning of these 18 proceedings, haven't you? 19 A. I have. 20 Q. You have heard Mr Martin's testimony? 21 A. I have. 22 Q. Is there anything in Mr Martin's testimony that you 23 disagree with? 24 A. I think at certain stages I think Mr Martin's a little 25 bit vague on the detail. I think there's quite a few
Page 45 1 things that here and there I don't think he quite 2 recollected exactly what happened, I have to say. 3 Q. So you are going to fill us in on the detail where he 4 didn't recollect. But other than that, is there 5 anything that you disagree with? 6 A. There are a couple of things I disagreed with, yes. 7 Q. Why don't you tell us what they are? 8 A. Well, I think Mr Martin said that he believed that 9 Heritage had acted with integrity throughout this 10 transaction and that was a statement that I would not 11 agree with. 12 Q. All right. What else do you not agree with? 13 A. Can I have a look at the transcripts, my Lord? 14 MR JUSTICE BURTON: Three whole days' worth. Can we come 15 back to this? 16 A. Well -17 MR QURESHI: Just to help me, have you looked at the 18 transcripts? 19 A. No. 20 Q. You haven't? 21 MR JUSTICE BURTON: You sat and listened? 22 A. I just -- I mean -23 MR JUSTICE BURTON: Was there anything else that stuck out? 24 The position is you can feel free this evening at your 25 leisure to be given a copy of the transcript and to look
Page 46 1 through if you would like to do so and identify 2 anything. 3 A. I understand. Broadly Graham's outlined exactly what 4 happened. I thought he was -- frankly, I thought he 5 just didn't remember the detail. He was asked a lot of 6 detailed things about emails and things or opinions 7 I had read but I wouldn't expect a general counsel of 8 a FTSE 100 company to get involved in. So I think he 9 was, quite understandably, not completely on top of the 10 detail but apart from that one statement which did stick 11 out, everything else -- in broad terms everything 12 Mr Martin said was correct. 13 MR QURESHI: Just help me explore what you understand by the 14 concept of integrity. Does integrity mean operating in 15 a manner which is honest and truthful? 16 A. Yes. 17 Q. Does integrity mean complying with contractual 18 obligations? 19 A. It does. 20 Q. Does integrity mean -21 A. I would say it does but also I think perhaps more 22 importantly, it means behaving on principle I would say 23 is the key aspect of integrity to me. 24 Q. Well, most of us have a fairly clear understanding of 25 what integrity means. But let us understand what
Page 47 1 "integrity" means to you and what "principle" means to 2 you. What do you mean by "principle"? 3 A. Well, I mean by "principle", I mean the kind of settled 4 basis for your actions that you normally apply, maybe 5 that's -- but I think -- the point I'm trying to get to, 6 in principle in business I think that most companies in 7 business act in principle. They do a deal, they shake 8 hands and that's it. I think it is unprincipled to -9 I think where I say has Heritage behaved in an 10 unprincipled manner, I think they had a very credible 11 threat to knock over this transaction by letting it wind 12 down to the long stop date. I think they used that 13 legal position to beat down the Ugandans on the tax, 14 they used it to try to gouge us for the tax in the 15 alternative and I think that is unprincipled. 16 I also feel that they were unprincipled in not 17 pursuing their best endeavours to get the consents, 18 consents that we were both sides trying to -- under an 19 obligation to get in the period from January right 20 through to July. 21 Q. Thank you, Mr Inch. Now that you have got that off your 22 chest can we understand more clearly whether being 23 principled also means not engaging in discussions behind 24 the back of your contracting partner with a third party? 25 A. Oh, I believe there are appropriate channels of informal
Page 48 1 communication, so I wouldn't necessarily agree. 2 Q. Does being principled also include not receiving 3 documents that are obviously confidential and 4 privileged? 5 A. If, and I was, given documents on an unsolicited basis, 6 it would be foolish to refuse them given the information 7 given but I do feel I would have a professional 8 obligation not to misuse that information. 9 Q. What do you constitute as misuse? 10 A. Telling the press, insider trading, using some form of 11 commercial advantage against somebody, those kind of 12 things. 13 Q. But not using them yourself, that is not taking 14 advantage? 15 A. I'm not absolutely aware that the document that I did 16 receive in confidence, I'm not sure that I did put it to 17 any kind of use. 18 Q. We'll have a look at that, Mr Inch, in due course. But 19 given that you are very fastidious about integrity and 20 principles -21 A. Mr Qureshi, I'm not making any claims on myself. I'm 22 just an ordinary chartered accountant. I do my best. 23 Q. You are the tax chap at Tullow, aren't you? 24 A. That's right, sir. 25 Q. You have had a look at your witness statement, you have
Page 49 1 made some amendments to it? 2 A. Yes. 3 Q. And now is it fair to say, when I say "fastidious", you 4 emphasise or you place, not unnaturally as a chartered 5 accountant for 22 years, you place considerable emphasis 6 upon accuracy, is that right? 7 A. I accept responsibility for this document, yes, that's 8 true. 9 Q. You place considerable emphasis on accuracy? 10 A. Yes, I often do, yes. 11 Q. You place considerable emphasis upon clarity? 12 A. Certainly in my written communications I try to be as 13 clear as possible, yes. 14 Q. And if there is something that you don't understand, you 15 will seek clarification; is that right? 16 A. I would say I do. The difficulty in my job, in 17 operating in countries in Africa, countries in Asia, is 18 that often it is not very easy to obtain that kind of 19 clarity. 20 Q. Why? Language? 21 A. Language, cultural aspects and frankly the -- you know, 22 the available group of advisers in somewhere say like 23 Dakar, it doesn't have the quality of advice that one 24 can obtain in London. They are completely different 25 environments to do business in.
Page 50 1 Q. We are not talking about Dakar at the moment, are we, 2 Mr Inch, we are talking about Uganda? 3 A. It was only an example. 4 Q. Let us look at Uganda. Are you saying that the quality 5 of advice that is available in Uganda doesn't have the 6 ring of quality that one can obtain in London; is that 7 what you are saying? 8 A. I think that the quality -- I think the quality, the 9 quality of the advice in London is so superlative it is 10 certainly not matched by the quality of advice that one 11 obtains in Uganda, that's correct. 12 Q. It is superior, is it? 13 A. The Ugandan advice at least is relevant to the position 14 as things actually play out in Uganda. That is 15 certainly true. 16 Q. Well, in terms of understanding a situation, what you 17 are telling us is that advice in London is not matched 18 by advice from, in this particular case, Uganda. That 19 advice, if it is provided, would need quite a lot of 20 weight to be displaced, wouldn't it, London advice? 21 A. What I mean is that when I'd -- and again, as 22 a practical matter and I deal commercially with these 23 issues, what I feel is in my position I get whatever 24 advice I can, I try and understand the situation, I try 25 and understand the purpose of the legislation itself and
Page 51 1 I think with my experience, which Mr Qureshi has 2 referred to, I try and make the best judgment that I can 3 on what is sometimes imperfect information. 4 Q. But just to be clear, there is nothing to stop you 5 seeking clarification if clarification is necessary? 6 A. Well, I think it depends what the matter is. I can seek 7 clarification in London, that's true, but if you take, 8 for example, the attitudes of the Ugandan judiciary 9 I don't believe that I would necessarily get better 10 information in London than I will in Kampala. 11 Q. You have told us that you are head of tax for Tullow and 12 you have considerable experience of international tax 13 matters? 14 A. Yes. 15 Q. Substantial experience of international taxation in 16 different jurisdictions and tax codes, paragraph 13 of 17 your witness statement? 18 A. Yes. 19 Q. The experience covers what kind of jurisdictions, if you 20 could help us? 21 A. Well, I started my professional career advising 22 primarily on European tax issues. Moving to Sony, 23 I moved into US jurisdictions, the Japanese kind of 24 overlay on to the kind of work we were doing. I think 25 at Global Crossing, when I was head of tax, that was
Page 52 1 a global role and I dealt with tax issues in Peru, the 2 Phillipines, all round the world in terms of 3 jurisdiction. And then I guess with Tullow, my 4 particular focus has been Africa, for myself 5 particularly on Uganda, and on a personal level Uganda 6 and Bangladesh have been the key jurisdictions for me. 7 Q. So you joined Tullow in 2007 as tax manager? 8 A. Group tax manager. 9 Q. Group tax manager, yes? 10 A. Yes. 11 Q. You mention in your witness statement that you had 12 discussions with the Ugandan tax authorities, 13 paragraph 14, in negotiating the settlement and made 14 a number of policy submissions to Ministry of Finance on 15 Tullow's behalf? 16 A. Yes. 17 Q. When was that? 18 A. Well, I think -- sorry, could I have the paragraph 19 reference, please? 20 Q. Yes, of course, paragraph 14. 21 A. Yes, I think this would have been around from 2007 22 I think probably some time into 2008. 23 Q. So 2007/2008, you would have had occasion to familiarise 24 yourself with the Ugandan tax legislation? 25 A. Yes.
Page 53 1 Q. And the Ugandan tax legislation, we have seen it, is in 2 English? 3 A. Yes. 4 Q. And so when you negotiated the settlement and made 5 policy submissions to the Ministry of Finance on 6 Tullow's behalf, do you recall whether you would have 7 done that with external legal advice or you would have 8 been confident in handling that yourself? 9 A. Well, I think at this stage, again, if I can set 10 a little background. We had acquired these two 11 companies, relatively small oil companies, Energy Africa 12 and Hardman. Their tax affairs weren't up-to-date, 13 really in the areas of they hadn't accounted for 14 withholding tax and various types of services they had 15 obtained. They perhaps hadn't dealt with VAT very 16 comprehensively, so the discussions that we were having 17 were on fairly practical compliance matters and when we 18 acquired Hardman, in fact, the only person I think we 19 retained from the whole Hardman acquisition was the 20 Hardman tax chap who himself had a lot of practical 21 experience of the kind of tax issues you find with 22 regards to employing contractors, withholding taxes, so 23 in the main we dealt with our policy submissions 24 ourselves, possibly with some limited input from KAA. 25 Q. Could I ask you, please, to look at bundle E2, page 489.
Page 54 1 My Lord, before I forget, I have a list of core and 2 E bundle references. (Handed) 3 MR JUSTICE BURTON: This one isn't in the core? 4 MR QURESHI: E/489. It is 156. Do you see this, Mr Inch? 5 A. I do. 6 Q. The manuscript document is at -- sorry, we start at 485. 7 This is a document dated 19 January 2010. 8 A. Sorry, 48? 9 Q. Start at 485. I just want to establish -- do you have 10 it? 11 A. Yes. 12 Q. Headed "Ugandan discussion"? 13 A. Mmm. 14 Q. Just to confirm, this is your note? 15 A. Yes, yes. 16 Q. If we go to 487, that is also your note? 17 A. Yes. 18 Q. 489 is the typed version of that note. Can you see the 19 top right? 20 A. Yes, I see. 21 Q. Do you see it? 22 A. Yes. 23 Q. The top right, just help me, what is the date of this 24 document? 25 A. 2 February.
Page 55 1 Q. 2 February 2009? 2 A. Yes. 3 MR JUSTICE BURTON: Whereas what you went to first, which is 4 485 you were taken to first, is 19 January 2010. So 5 they are out of order, aren't they; is that right? 6 A. I see, yes. 7 MR QURESHI: My Lord, I just wanted to check. 8 A. I see. 9 MR QURESHI: It is 2 February 2009, correct? 10 MR JUSTICE BURTON: That is fine, but you took him first to 11 the Uganda discussion and until I looked at it, because 12 it isn't in the core bundle, I assumed it was going to 13 be the first couple of pages of this document but it is 14 actually on the face of it dated 19 January 2010. Can 15 you help us? This is a different meeting, is it? 16 A. Yes, they are completely separate meetings. Again, the 17 process, if you like, the whole discussion regarding 18 Uganda started for me I guess sort 19 of December, December 2009 when we started to look at 20 pre-emption. 21 This note, 19 January 2010, is a note regarding -22 is regarding our tax position, I think on the farmdown. 23 So I think this is us talking about our own tax 24 position. 25 MR JUSTICE BURTON: That is a one-page document,
Page 56 1 handwritten. 2 The next one, which is what you are being asked 3 about at 487, that is headed, you say, 2 February. 4 A. Yes, I don't -- I honestly don't understand why I have 5 a 9 in there but from possibly absentmindedness. 6 MR JUSTICE BURTON: You think it could be 10? 7 A. I can assure you it is 2010 because this is me following 8 up from a February discussion. 9 MR JUSTICE BURTON: We all do it. It takes a bit of time 10 for the new year to settle down. 11 A. So this was a whole discussion -- again, I think this 12 started off with Mr Kiiza made it clear in February 2010 13 that he intended to make us an agent on the Heritage 14 transaction. And the discussion with Oscar, which it 15 then all goes into, the detail, it is February 2010, 16 not February 2009. 17 MR JUSTICE BURTON: Thank you. 18 MR QURESHI: That is -19 A. And my notebooks are sequential, so, you know ... this 20 note follows the January note in a sequential notebook. 21 MR JUSTICE BURTON: We have sorted that one out, yes. 22 MR QURESHI: Thank you. I was just trying to ascertain 23 whether the date was wrong because it says 2009. 24 A. It is wrong, sir. 25 Q. All right. This refers to a meeting with Oscar Kambona?
Page 57 1 A. Yes. 2 Q. That is right? 3 A. Yes. 4 Q. Could I ask you, where it says "LK advice", is that 5 Lawrence Kiiza, the Director of Economic Affairs at the 6 Ministry of Finance? 7 A. Yes. 8 Q. Just help us, in terms of "LK advice", if you can help 9 us, this is a note dated 2 February 2010, you now 10 helpfully are telling us? 11 A. Yes. 12 Q. Was Mr Kiiza present at the meeting with Mr Kambona? 13 A. No. 14 Q. Mr Kiiza's advice you identify: 15 "95(4) -- assessment then appoint vs under 106 and 16 revisit." 17 What does that mean? 18 A. What I think -- this is advice to Mr Kiiza, I think. 19 Again because the position was Mr Kiiza had said to us 20 he intended to appoint us as agent. Okay, I went to see 21 Oscar Kambona, who is our tax guy in KAA, and we went 22 through whatever the domestic provisions were that that 23 might be -- the way you might enforce that against us. 24 So then I think as we went through it he said there were 25 a couple of possibilities then. It seemed to be this
Page 58 1 kind of assessment followed by a 106 agency notice, or 2 much more simply, certainly in my view, it would have 3 been just, you know, just make it a condition of the 4 consent to withhold the cash on the escrow. 5 Q. This is the advice you are giving to Mr Kiiza as 6 of February 2010, is that right? 7 A. I don't know if I had at that stage but that was me 8 thinking then, having talked to Oscar, of what I would 9 then probably say to Lawrence Kiiza. 10 Q. But you can't recall whether you did or not? 11 A. Whether I then subsequently told him? 12 Q. Yes. 13 A. No, I definitely would have had subsequent discussions 14 about it, yes. 15 Q. If I can ask you to look at 493, please, this is 16 a document 10 February 2010. 17 A. Yes. 18 Q. "LK discussion." 19 A. Yes. 20 Q. This is where you tell Mr Kiiza, is that right? 21 A. Yes. 22 Q. "Section 106, RI to send proposal." 23 What was the proposal? 24 A. Well, what I was -- again, the proposal and what I did 25 was actually I set it out as a private letter ruling so
Page 59 1 when I had spoken to Oscar about the operation of these 2 provisions, when I looked at the possible way the 3 mechanics of what the section 106 route might possibly 4 apply, it seemed to me to give a very serious risk to 5 Tullow. 6 Now, the risk was, as I understood it, that first of 7 all we had to have an assessment which hadn't been 8 disputed. So the assumption at this stage was we were 9 only talking about a situation where Heritage hadn't 10 lodged an appeal within the 45 days, and I think 11 otherwise the assumption was Heritage would have lodged 12 their appeal and, you know, had their discussion with 13 the court about whatever security they had to post. We 14 weren't worried about that situation. We were worried 15 about the situation where there had been no appeal by 16 Heritage, the tax was now final and determined and we 17 owed the completion monies to Heritage. 18 Now, the risk it seemed to us was if you assume the 19 assessment had become final and determined, so there was 20 a due debt, there was no doubt about that, the date -21 the notice couldn't be any earlier than the date we owed 22 the money to Heritage, which was at completion. And so 23 the risk to Tullow was unfortunately at completion we 24 would not be in possession of the funds because the 25 funds had to be deposited on escrow five days prior to
Page 60 1 completion. So the risk was that technically at 2 completion we would owe Heritage the money, the money 3 due at completion, but the money would have already gone 4 into escrow and we couldn't access it. 5 So I drafted specifically under a statutory 6 provision a private letter ruling which said: if these, 7 and again quite specific circumstances arose, that in 8 that case our only obligation really was to attempt to 9 recover the cash under the indemnities and if we had 10 exhausted that possibility, then there was no further 11 liability on us. So it was to protect our position. 12 Q. We'll get to your private letter ruling shortly, but 13 what do you mean by "email trail"? 14 A. So, yes, this is -- and again I do remember this -- we 15 had a discussion. Lawrence said to me, when I was to 16 send a proposal, Lawrence asked me to send that proposal 17 to his Gmail account. I did ask him why and he said 18 and, you know, I absolutely accept it, he said "It works 19 better than my office email", and that is the truth. 20 The other thing he said, though, was that he was 21 concerned that if there was an email trail under his 22 official address that it would leak because he said that 23 was his basic concern, if we were having this 24 correspondence about what his plans were for Heritage, 25 his concern was -- and again I don't know if he was
Page 61 1 under obligations to copy his emails to people or 2 whether his secretary could see his emails or what 3 happened internally, but his concern was, if I sent him 4 an email to his official address it would leak. 5 Q. So let me get this right: Mr Kiiza was concerned about 6 ensuring that communications that you sent him were not 7 leaked, disseminated? 8 A. Yes. 9 Q. But he had no concern about sending you confidential 10 minutes of meetings and letters headed "Without 11 prejudice, strictly private and confidential", that were 12 directed towards -13 A. That is a question for Mr Kiiza, with all respect. 14 Q. 493. Let us just look at the heading "Tullow tax". 15 A. Yes. 16 Q. You refer to Newco. Can you help us, what does that 17 mean? 18 A. Well Newco, it was a suggestion on my part, it was 19 a structuring suggestion on my part as a kind of -- as 20 a tax planning exercise in connection with the 21 acquisition and the on-sale to CNOOC. 22 Q. For you, for Tullow? 23 A. Tax planning on behalf of -- yes, on behalf of Tullow in 24 respect of -- as you can see here, at this stage, 25 my Lord, all that was being proposed in our proposal
Page 62 1 internally was that what we wanted to sell to CNOOC was 2 the 50 per cent to be acquired from Heritage, and this 3 structure is some tax planning around that commercial 4 deal. 5 Q. Just to help us in terms of the chronology, 6 26 January 2010 is when the sale and purchase agreement 7 was signed with Heritage, wasn't it? 8 A. Yes, so we had signed -- we had had the go ahead for the 9 pre-emption to acquire the 50 per cent and then, I mean, 10 I think everybody understood these assets were being 11 acquired for the purposes of the subsequent farmdown and 12 at this stage this proposal, which was not accepted by 13 Government, our proposal was to farm down the 14 50 per cent acquired from Heritage to CNOOC to set up 15 a 50/50 partnership with them. 16 Q. Understood. Could we turn, please, to 499, 17 10 February 2010. 18 A. Yes. 19 Q. This is a GOU discussion with Fred Kabagambe-Kaliisa, 20 the Permanent Secretary, Ministry of Energy and Mineral 21 Development, is that right? 22 A. I mean, I'm not -- I mean, there is a meeting here, 23 there are various, I think, and again I have to say I'm 24 not -- I don't absolutely recall this meeting but there 25 was a meeting. Certainly looking at the comments,
Page 63 1 Fred's here, "ER comment" refers to Ernest Rubondo, "LK" 2 refers to Lawrence Kiiza. It seems to be some meeting 3 with three or four Government Permanent Secretaries, top 4 officials, yes. 5 Q. Understood. If we can turn to 500, under the heading: 6 "Pay tax within the law. Maximum benefit from 7 reinvestment relief. Blocks 1 to 3A ..." 8 Is that right? B1 to 3A is blocks 1 to 3A. 9 "... Acquiring/selling H interest: no gain 10 anticipated." 11 A. Yes, again, so these were the three elements if you 12 like, so again, I think what's maybe missing from the 13 first line is that the, hold on. No, you are quite 14 right, I think, because at this stage we are just at the 15 50/50 deal, okay, so I think then -- I think then you 16 have to pay tax within the law, you can take the maximum 17 benefit you can from reinvestment relief, which was 18 actually quite limited, and then as far as the Heritage 19 piece was concerned, I mean, obviously then we were 20 buying at 1.45 billion. We were selling 21 at 1.35 billion. We had an economic loss on the 22 Heritage piece and then with regards to Block 2 there is 23 a contractual exemption from tax in the PSA for 24 exploration area 2 only. So our view was that the 25 consideration for Block 2 on the farmdown wouldn't be
Page 64 1 taxable because of the contractual exemption with the 2 State of Uganda. 3 Q. After that very helpful comprehensive explanation, do 4 I understand your note effectively to be contending as 5 at this stage that Tullow was not liable for tax in 6 Uganda? 7 A. Absolutely. That was the position that we -- that's how 8 we understood it based on those two elements and we 9 didn't expect a gain to arise. 10 Q. Is it fair as of February 2010, two weeks after the 11 (inaudible) agreement has been signed with Heritage you 12 are actively considering tax planning interposition of 13 a company, corporate restructuring, and you are actively 14 maintaining that you are not liable for tax on the 15 transaction? 16 A. Well, the point we were trying to avoid, and the 17 exposure we were trying to avoid by this is again, is 18 the -- it is a tax issue, if you like, which was 19 translating an economic loss on the Heritage deal into 20 a taxable gain. 21 Q. Let me just -22 A. If you maybe let me explain as you have asked the 23 question. The issue from my point of view was the 24 combination of the interests within the existing Tullow 25 Uganda Limited entity. We were requiring 50 per cent
Page 65 1 which had a tax basis of 1.45 billion and we had an 2 existing 50 per cent interest which had a tax basis of 3 $150 million only. The combined basis if the interests 4 were to merge would be 1.6 billion and a disposal that 5 was taxed on the basis of that merged interest would 6 only have a tax basis of 800 million. Therefore, by 7 selling out to CNOOC at 1.35 billion we stood the risk 8 of turning what was an economic loss of 100 million into 9 a taxable profit of 550 million. That is why we looked 10 at the Newco structure. That is tax planning, not tax 11 avoidance. 12 Q. Mr Inch, as a simple lawyer, again, and again I have 13 understood your lengthy explanation, let me repeat the 14 question: no one used the phrase avoidance. What 15 I said -- and if you can answer yes or no then please 16 do, if you need to give us an elaborate explanation, 17 then by all means do so, there is plenty of time. What 18 I said is: is it fair in February 2010 two weeks after 19 the agreement had been signed with Heritage you are 20 actively considering tax planning, interposition of 21 a company, restructuring and you are actively 22 maintaining that you are not liable for tax on the 23 transaction? Is the answer yes or no? 24 A. The answer is that to avoid a tax liability I had to 25 consider the tax planning but the introduction of the
Page 66 1 Newco, as I have just outlined, to ensure that the 2 taxable income was equal to the economic transaction. 3 Q. All right. I am not going to try a third time, Mr Inch. 4 I will take that as a yes. We can move in the bundle 5 to -- if you want to disagree with me by all means do. 6 You are smiling but ... 7 A. Which bundle? I think we should move on. 8 Q. 511, Mr Inch. Can you help us in terms of the date for 9 this document? It is headed "David Mpanga discussion". 10 Can you help us with the date? 11 A. I would have to look back. It's some time, assuming 12 I have the right dates on 507, it is some time after 13 10 March and some time before 8 April. 14 Q. So some time in March or April of 2010? 15 A. Yes. 16 Q. Under the heading (d) -- because this is redacted. 17 A. Sorry, which particular document are we on now? 18 Q. 511 is what we were looking at. "David Mpanga, 19 discussion". David Mpanga is one of the lawyers at KAA, 20 correct? 21 A. Yes. 22 Q. Within KAA you mentioned that Oscar Kambona was the tax 23 guy? 24 A. Yes. 25 Q. Is he --
Page 67 1 A. Sorry, what I should say is Oscar's practice is, as 2 I understand it, exclusively taxation and he's quite 3 a sort of technical tax guy. David Mpanga is also a tax 4 person but perhaps more commercially, more of 5 a commercial perspective, if that helps. 6 Q. But these are the two tax men -7 A. Yes. 8 Q. -- within KAA? 9 A. Absolutely. 10 Q. What about Elly Karuhanga? 11 A. No, he's not a tax expert. 12 Q. What is he an expert in, if you can help us? 13 A. I think he's a very very senior lawyer. He's an ex MP. 14 You know, he has -- he knows lots of people in 15 Government. He's -16 Q. He is a mover and a shaker? 17 A. Like any country that's he is part of the legal elite 18 which is close to Government. 19 Q. So heading (d) "Heritage tax position -- assistance to 20 GOU/opinion". 21 Just help me there. What did you have in mind 22 there? Is it a fair representation that as 23 of March/April 2010 you are contemplating KAA providing 24 assistance to the GOU by way of an opinion on Heritage's 25 tax position?
Page 68 1 A. So in all honesty I'm not sure who's suggesting what in 2 the context of this note, whether David thought it would 3 be helpful, whether I thought it would be helpful. 4 I really can't say. I don't know if the redacted 5 information would be helpful, but -- I mean, just 6 looking at that as it stands -- I mean, if there's -- if 7 I could read the rest of the note. 8 Q. Please. Just to be clear, Mr Inch, you are at liberty 9 to read the entirety of the note. Take your time. 10 A. Thank you. (Pause). I don't know. 11 Q. Sorry? 12 A. I don't know. I don't know. I honestly don't know 13 exactly what it refers to or who brought it up, sorry. 14 Q. It is your note, isn't it? 15 A. It is my note written some time ago, yes. 16 Q. Mr Inch, you do appreciate that the issue of Heritage's 17 tax is a matter that as of February 2010 at the latest 18 you are engaged in active discussions with Mr Kiiza on, 19 yes? 20 A. Can I just actually, going back to my previous answer, 21 I mean, really when I look at the final kind of summary 22 comment on this note, when we are talking about Heritage 23 tax position the whole discussion with David, as I seem 24 to summarise in 512, is with regards to collection. So 25 if at (d) I was discussing the Heritage tax position,
Page 69 1 all I can see here from the summary is that what we were 2 discussing was the mechanics of the collection, so 3 I think looking at that my best judgment would be that 4 is a discussion relating to the collection from 5 Heritage. 6 Q. Just turn over the page, 512, you just mentioned the bit 7 that we can see which isn't redacted under the heading 8 "David M". This is Mr Mpanga I assume? 9 A. Yes. 10 Q. 3: 11 "Agency notice against banks: T letter?" 12 What did that mean? 13 A. If you maybe just let me refer to my manuscript notes. 14 Q. 510. 15 A. Yes. I think, again, sort of piecing it together and 16 again looking at my manuscript notes, if you look at 1 17 there is: 18 "Possibility that letter could be imposed on us to 19 collect", which is Tullow. 20 And then I see this: "T letter"? 21 Then it says: "To mention obligation on H. T to be 22 withholding agent". 23 Whether that is to do that would be the what letter 24 to us should contain I don't know. 25 Q. You can't help us what this is referring to?
Page 70 1 A. I think I have given you as much as I can I think 2 looking at what's available on the page, yes. 3 Q. You can't give us any further elaboration on what item 3 4 agency notice against banks refers to? 5 A. No, I don't think I can. 6 Q. Could we, please, turn to Bundle E3/626 to 628. 626 to 7 628, Mr Inch? 8 A. Okay. 9 Q. So if we start at 628 we see that there is text 10 redacted. At the bottom of 627 we see an email from you 11 to Graham Martin, Peter Sloan? 12 MR MOTT: Sorry, my Lord, just to be clear. I'm not sure 13 this text is redacted. I think it is an image inserted 14 into the email which hasn't been displayed properly. 15 MR QURESHI: Fine. 16 A. Drawings -- maybe not. I thought there were -- I may be 17 wrong -- no, I think the pdf -18 MR MOTT: For example, my Lord, if you look at page 633 you 19 can see it is not redactions. Someone has cut and 20 pasted from other documents particular statutory 21 sections. You can see at 633, 634, 635 and those are 22 images which haven't come out in the document that 23 Mr Qureshi has taken the witness to. 24 MR QURESHI: I am grateful to my friend for pointing out 25 that these are not redactions and perhaps the key lies
Page 71 1 in page 627, top left-hand corner there is a little 2 symbol there which I have to confess I can't understand 3 but in the box above I'm assuming there is a redaction 4 there unless ... 5 A. I think honestly as looking at it I believe -- if you 6 look at (a) it says: 7 "This is a provision which I believe gives rise to 8 the charge." 9 I think I have pasted in the pdf. As it says: 10 "Apologies for the lateness of this note, I had to 11 cut and paste from pdf." 12 Q. Understood. 13 A. I think it is pdf sections I think. 14 Q. "(a) This is the provision that I believe gives rise to 15 the charge the protection in 89G(a) was deleted by the 16 2009 Finance Act." 17 A. Yes. 18 Q. It need not trouble his Lordship but this the point 19 where Heritage invokes the stabilsation clause saying 20 there has been a detrimental change in the legislation: 21 "I was told by Lawrence Kiiza this change was 22 specifically to make such a transaction chargeable." 23 Lest there was any doubt that Heritage was being 24 targeted? 25 A. And us, sir.
Page 72 1 Q. If we go over to page to 626, bottom of the page? 2 A. Sorry, 626? The previous page? 3 Q. Yes, 626. We are going backwards because the email 4 trail -5 A. Understood. 6 Q. -- goes from that email to Peter Sloan. 7 A. Yes. 8 Q. "Thanks, Richard -- let's discuss when we're all freed 9 up. I'm not convinced I agree that 106 gives the 10 Ugandan Government the ability to come against us for 11 the full sum of any tax due from Heritage -- only to get 12 at any amount we might owe to Heritage." 13 A. Sorry, could you just highlight where we are? I have 14 lost it. 15 Q. 626, bottom of the page, 626. 16 A. At the very bottom, I get it, yes. 17 Q. Peter Sloan to you. 18 A. Yes. 19 Q. 28 January. My apologies, Mr Inch. 4 o'clock. Under 20 the heading "Thanks, Richard." Do you have it? 21 A. Yes. 22 Q. "Let's discuss when we're all freed up. I'm not 23 convinced I agree 106 gives the Ugandan Government the 24 ability to come against us for the full sum of any tax 25 due against us from Heritage -- only to get at any
Page 73 1 amount we might owe to Heritage (therefore, maybe the 2 150 in certain circumstances?)." 3 What is the 150? 4 A. The 150 I believe is the contingent consideration that 5 was possibly owed to Heritage. 6 Q. What circumstances did Mr Sloan have in mind, and if you 7 can help us? 8 A. Well, there were two circumstances: one being that if we 9 had within a period of two years managed to obtain an 10 extremely specific set of tax breaks, in those 11 circumstances we would have had an obligation to pay 12 Heritage and also in the, as I understood it, they had 13 some kind of penalty provision that if we sold the 14 assets on to somebody acceptable to the Government there 15 would still need to be a payment to Heritage in those 16 circumstances. 17 Q. Mr Sloan is stating: 18 "The powers also do not apply in the circumstances 19 that tax due is disputed." 20 This is Mr Sloan, one of the senior lawyers in 21 Tullow, reaching a view upon his reading of the plain 22 wording of section 106, isn't it? 23 A. Well, that's true, but again, I think all -- again all 24 I was referring to in my note, as I just outlined 25 previously, was to an extremely narrow set of
Page 74 1 circumstances where I thought this might apply and 2 I don't know whether or not Peter had absolutely 3 considered everything I'd said to him. 4 Q. So you mean his view was a view that was incomplete? 5 A. Well, again, I think it is just an email that's the -6 this, you know, whether or not he had completely waded 7 through, thought about all the detail at this stage. We 8 hadn't had the discussions, so on first reading he might 9 not have been convinced. I don't know. 10 Q. Let us follow the chain through. This is your response 11 back to him some 13 minutes later is above the section 12 that we have just read. 13 A. Right. 14 Q. Richard to Peter. Do you have it, 626? 15 A. Yes. 16 Q. "Peter, on the 106 point, the position I'm concerned 17 about is that if URA issue an assessment against HOGL 18 now which is not appealed, the tax becomes due 45 days 19 later. At that point URA could I believe ask Tullow for 20 the cash under 106 as a person which may owe HOGL 21 money -- ie consideration for the pre-emption? Perhaps 22 that is really a timing issue as to when URA could issue 23 an assessment but they do seem to have a very wide 24 discretion." 25 Mr Sloan back to you some 30 minutes later:
Page 75 1 "I just can't see myself how they could issue an 2 assessment pre-completion because surely the tax cannot 3 become due legally until that point, but in a way if 4 they did I think we would have a stronger argument to 5 set off the sum against the consideration of completion 6 monies." 7 What does he mean by that? 8 A. Well, on this first point that I think that he said -9 this is the point about whether or not the tax 10 authorities could issue an assessment pre-completion 11 because surely the tax cannot become due until that 12 point, with respect to Peter, I don't believe that's the 13 situation even in the UK. I mean, in the UK I'm obliged 14 to make payments on account as we go through the year 15 and if I have an expectation of realising a chargeable 16 gain later in the year, the Inland Revenue would expect 17 me to take that into account in deciding if I had made 18 adequate payments as we went along through the year. 19 So although -- and I agree it does all sound, and 20 I think I said above it's all a bit mad, but actually 21 you know, and again I think these kind of discretionary 22 powers that the Commissioner has under the Ugandan rules 23 they give them very very broad powers to issue an 24 assessment. So it didn't seem that unusual to me. 25 Q. Just pause there.
Page 76 1 A. Yes. 2 Q. You just told us that you wrote back to him but what we 3 see is it's from an unspecified sender. Can you help us 4 why? 5 A. I have absolutely no idea why that says unspecified 6 sender. 7 Q. All right. Where you are saying it is all a bit mad, 8 what is all a bit mad, the Ugandan tax framework? 9 A. I think -- no, I think in fairness, you know, it is 10 a relatively lighthearted comment between me and Peter. 11 Peter's coming back to me and saying, "I don't quite see 12 this." I'm not going back to Peter and saying, "You 13 don't understand the Ugandan tax legislation." It is 14 just my old acceptance of, "I know it all seems a bit 15 funny, Peter, but despite what you think I think that's 16 how it could work in practice, sorry." 17 Q. So you didn't correct him? 18 A. No, not in an email like that. 19 Q. You didn't consider there to be any need. Mr Sloan, is 20 one of the senior lawyers in Tullow. There is an 21 exchange taking place on an issue which is of 22 considerable significance for Tullow. You are telling 23 his Lordship now that Mr Sloan, with respect, got it 24 a bit wrong, didn't fully understand but you don't see 25 fit to correct him?
Page 77 1 A. All I'm saying is, and again, if you look at the email 2 from him on 28 January at the bottom he says, "Let's 3 discuss when we're all freed up". It is the kind of 4 point we would have a discussion about and talk through 5 in detail. We are not in the practice of trying to send 6 each other definitive Ugandan legal opinions by email. 7 Q. So are you saying there was a discussion at which you 8 disabused Mr Sloan of his misconceptions? 9 A. Mr Sloan is an excellent lawyer. He doesn't need 10 disabusement about anything from me but I'm sure we 11 would have sat down, not that I can recall every detail, 12 but I'm sure we would have sat down and gone through 13 these provisions and talked about how they worked. And 14 I had my views on how they worked; Peter may have had 15 different views on how they worked. I certainly don't 16 recall that we came to any particular definitive 17 discussion. 18 I mean, Peter, in fairness, Peter would -- is not 19 a tax guy. He's an oil and gas. He's very much an oil 20 and gas lawyer. He's not somebody within the legal 21 department I would associate with taxation matters. 22 Q. Let me just understand that. Let us go back to your 23 legal department on the third floor in Chiswick in this 24 that case. Mr Martin who is here, sitting 50 yards away 25 from his cohorts. In 2010 if you wouldn't talk to
Page 78 1 Mr Sloan because he's an oil and gas man, who would you 2 talk to in Tullow Oil for tax law issues? 3 A. There would be no lawyer within the Tullow legal 4 department, as you might expect, that I would go to for 5 a legal opinion on tax matters. If I needed a legal 6 opinion on a tax matter in the main my primary advisers 7 in the UK are PricewaterhouseCoopers on tax affairs and 8 if I need to get specific legal advice I would generally 9 go to see somebody like Jonathan Peacock QC or 10 Mr Bramwell or one of the top QCs in the specific areas 11 they deal with. I would not ordinarily have a chat with 12 one of the commercial lawyers on a tax matter. 13 Q. Are you telling us that you did go to one of the top QCs 14 in this case for advice? 15 A. Advice on what precisely? 16 Q. Tax matters? 17 A. Which tax matters? 18 Q. Heritage's tax matters, the Heritage issue? 19 A. Well, in the -- when we did -- when the discussions and 20 process with Heritage seemed to break down in May time 21 and they declined to take forward the escrow 22 arrangements as a satisfactory means to complete the 23 transaction at that stage, as I have said, yes, we did 24 go to our advisers with regards to Heritage's tax 25 position and that was PricewaterhouseCoopers.
Page 79 1 Q. Could you turn, please, to 644 in Bundle E3. Again, 2 just look at the bottom of the page. It is an email 3 from you to Oscar Kambona and David Mpanga, 4 28 January 4.50 and you are providing them with extracts 5 from 89G, 92, 95, 106, yes? 6 A. This is 644, yes? 7 Q. Yes. 8 A. Yes. 9 Q. We have from Mr Kambona on 29 January the next day an 10 answer: 11 "Richard, we are preparing a response to the queries 12 raised and should be in a position to get back to you on 13 1 February. The response should cover all the concerns 14 raised regarding the Heritage deal. In the meantime 15 kindly send the stabilisation clause. 16 "On whether URA can require Tullow to pay tax due 17 from Heritage, that is only possible after failure on 18 the part of Heritage to pay the tax. URA will then rely 19 on 106 dealing with recovery of tax from third parties 20 but it must be proved that Tullow is in possession of 21 funds due to Heritage and there shouldn't be a dispute 22 regarding tax." 23 That is a fairly clear statement, isn't it? 24 A. All on 106, yes. 25 Q. Yes?
Page 80 1 A. Yes. 2 Q. Fairly clear? 3 A. Absolutely. 4 Q. Anything in the wording of 106 to dispute that? 5 A. Well, I think looking at this -- where he talks about 6 a failure on the part of Heritage to pay the tax I think 7 obviously -- again Heritage did, they paid the 8 30 per cent in order to lodge an appeal. Had they not 9 paid that 30 per cent, then I guess that could have been 10 enforceable under 106, but broad -- in the main I think 11 this is fine. I would agree with it. 12 Q. Sorry, "in the main"? Was the only qualification the 13 one that you just mentioned? 14 A. Well, actually the 106, the possession language that's 15 referred to here, again, I haven't got the section in 16 front of me but I don't believe that 106 talks about 17 possession. Possession, which to my mind is a wider 18 concept, is only found in 108. 19 Q. Can you turn to 679, please, in the same bundle. Do you 20 have that? 21 A. Yes. 22 Q. I don't know if anybody is going to provide you with 23 a magnifying glass. You have it. From you to 24 Graham Martin, 2 February, meeting with Lawrence Kiiza. 25 Heritage tax on pre-emption. The penultimate line:
Page 81 1 "[You] agreed that [you] would send him a suggested 2 mechanism after consultation with legal..." 3 The first paragraph, first line? 4 A. First paragraph? 5 Q. The one that is numbered 1, Heritage? 6 A. Okay. 7 Q. "Heritage tax on pre-emption". The third line. 8 A. Right, yes. 9 Q. "... agreed that I would send him a suggested mechanism 10 after consultation with legal." 11 A. Yes. 12 Q. "I am meeting with KAA today and I will send out 13 a suggestion to Peter and Graham after that." 14 Peter being Peter Sloan? 15 A. Peter being Peter Sloan, correct. 16 Q. And Graham being Graham Martin? 17 A. Yes. 18 Q. So a suggested mechanism for what? 19 A. I think almost we have gone through the day in reverse 20 order because it is a suggested mechanism for the acting 21 as agent which was then the whole discussion I had with 22 Oscar Kambona after this email. 23 Q. The 106? 24 A. Yes. 25 Q. If we can turn to 683, please.
Page 82 1 MR JUSTICE BURTON: This should come before what you were 2 being asked about before; is that right? In terms of 3 putting it in order in our bundle, 46 to 50 in the core 4 bundle, which was Friday, January 29th -- no, we were 5 looking at your conversation with Oscar Kambona was 6 29 January. So it is not out of order. 7 A. I'm sorry, I'm losing the -- sorry, which? 8 MR JUSTICE BURTON: 0644 was what we looked at before and 9 you are discussing with Oscar -10 A. Okay. 11 MR JUSTICE BURTON: -- 106. 12 A. 29 January. 13 MR JUSTICE BURTON: And then we had gone on to 679 and your 14 answer was we have gone through the day in reverse, but 15 it is not the same day. 16 A. My mistake. My mistake, sorry. I think I'm getting 17 muddled up by the previous -- we had looked at 18 a 7 February note of an Oscar discussion. 19 MR JUSTICE BURTON: Yes, we have jumped out around there, 20 but 29 January, antedated 7 February, do you want to 21 reconsider the position at all? 22 29 January, Oscar tells you about -- well, gives you 23 advice or you discuss with Oscar about section 106. 24 A. Yes. 25 MR JUSTICE BURTON: And then 679, the following Tuesday, you
Page 83 1 have this email. 2 A. Meeting with -- on the 2nd, yes, that's absolutely fine. 3 MR JUSTICE BURTON: And so the suggested mechanism that you 4 are talking about is 106 which you had discussed with 5 Oscar the previous Friday, is that right? 6 A. That's right. And there was then scheduled a further 7 meeting with KAA because I was in Kampala. 8 MR JUSTICE BURTON: I see. 9 A. So I was -- another meeting. 10 MR JUSTICE BURTON: That is the 7 February which we have 11 looked at earlier? 12 A. No, I think I had a meeting again with KAA on the 2nd 13 after this email. Just looking at this note, "I am 14 meeting with KAA today", the 2nd, "and will send out 15 a suggestion after that." 16 MR JUSTICE BURTON: Thank you. 17 MR QURESHI: 688, please. This is an email from Mr Mpanga 18 to you of 3 February? 19 A. Yes. 20 Q. Is that right? 21 A. Yes. 22 Q. You had had a meeting with him the day before; is that 23 right? 24 A. Yes, I think so, yes. 25 Q. "Dear Richard/Sunil ..."
Page 84 1 Who is Sunil? Sunil Puri? 2 A. Sunil Puri, he's another lawyer. 3 Q. An oil and gas lawyer or a tax lawyer? 4 A. No, he's an oil and gas lawyer. He's currently on 5 secondment to our Ghana office. 6 Q. To what, sorry? 7 A. He is working as a commercial lawyer in our Ghana office 8 on a secondment. 9 Q. Senior to or junior to Mr Peter Sloan? 10 A. Definitely junior to Mr Sloan. 11 Q. Dear Richard/Sunil ..." Just help me understand, why is 12 Mr Mpanga referring to you and Sunil? What is the 13 involvement of Sunil in this matter at this stage? 14 A. He, I think, as I recall this and again I need to think 15 a little bit, but I thought at this stage, his 16 involvement at this stage was that he was drafting the 17 SPAs for the CNOOC farmdown. That was I think his 18 involvement at this stage. So at this point he's not in 19 Ghana doing his commercial role, he's in London. The 20 only involvement I'm aware he had with any of this was 21 he was the guy who did the CNOOC SPA. 22 Q. "We have completed our review, research and analysis of 23 the issues you presented to us as well as reviewed the 24 law. We have also taken into account the discussion we 25 had in our offices on 25 January as well as today's
Page 85 1 meeting at Tullow's offices in Uganda on 2 February. 2 Our opinion and advice is as follows ..." 3 Obviously (i) to (v) is redacted. (vi): 4 "In a separate email you requested our advice on 5 whether in the event of a sale by Heritage to T-Ug or 6 T-Newco ..." 7 This SPV that you had in mind? 8 A. Yes. 9 Q. "... the URA could require Tullow to remit CGT otherwise 10 due from Heritage directly to URA. Our view is that 11 this would only be possible after failure on the part of 12 Heritage to remit the tax. In such an event, URA will 13 then rely on 106 dealing with recovery of tax ... 14 However, it would have to be proved that Tullow is in 15 possession of funds and that there is no dispute 16 regarding the tax, ie whether it is due or not or on 17 account of the quantum." 18 Yes? 19 A. Yes. 20 Q. These are the points that my Lord Identified as the 21 payable and possession points, yes? 22 A. I understand, and again that was basically my view, you 23 know. I had sent Oscar and -- I think I had sent Oscar 24 and these guys my kind of analysis of how I thought it 25 worked and to a large extent they were confirming what
Page 86 1 I already thought at this stage. 2 Q. 701, please. It is an email from you to Peter Sloan, 3 subject: "Heritage tax issues." 4 It is fair, isn't it, that notwithstanding the fact 5 that Mr Sloan is, as you describe him, an oil and gas 6 lawyer, there has been significant involvement on the 7 part of Mr Sloan in this matter on the tax issue, the 8 Heritage tax issue, isn't it? There are emails copied 9 to him and emails from him on what this email describes 10 as the "Heritage tax issue"? 11 A. Well, again, why I think there were emails, I think his 12 concern was in the context of completion, so I think he 13 was looking at these matters to see if there were any 14 foreseeable issues with completion of the Heritage 15 transaction. That was his interest. 16 Q. So just to be clear, are you telling us that where 17 Mr Sloan is copied in on any emails relating to what is 18 described as the Heritage tax issue, the only reason why 19 he's copied in is because of his, as you described it, 20 concern with the completion of the transaction; is that 21 it? 22 A. I think subject to seeing any particular email you have 23 in mind, I think that's a fair summary of what I would 24 think at this point, yes. 25 Q. "In advance of tomorrow's discussion ..."
Page 87 1 Do you recall what that discussion was? 2 A. I don't know if this was a discussion -- this might have 3 been a discussion with Pete and Graham, again just 4 regarding this whole completion mechanism, you know, 5 what impact that would have on us, what the implications 6 were for the deal. I think it might be that. 7 Q. "... here is a scenario for your consideration. The 8 timings are intended to crystallise a liability prior to 9 completion." 10 Just pause there: "timings are intended to 11 crystallise a liability prior to completion." 12 Are these timings that you are postulating in this 13 email? 14 A. Yes, what I'm trying to set out here, and again actually 15 again, I think this was, this was the discussion that we 16 had with Pete and -- Peter and -- Peter Sloan and Pete 17 Dickerson because I just recall we had like one 18 conversation on this point and again, what we were 19 really getting to is was: was there really an issue on 20 completion? 21 So to kind of -- what I was setting out here was 22 this scenario, so that we had -- this was the position 23 that we were supposed to be talking about. Lawrence on 24 the Revenue, on the URA or the Government side was kind 25 of putting forward this position. He was going to
Page 88 1 appoint us as a tax agent. The concern on our side was 2 how was that going to work? So to discuss that position 3 with Peter Sloan and with Pete Dickerson the commercial 4 guy, I set out this kind of basic: okay, well let's 5 assume this particular set of circumstances that, you 6 know, 65 days prior to completion the URA issue an 7 assessment and then let's walk through what happens in 8 terms of the SPAs and completion and if we have a -- you 9 know, if this is going to be something that's going to 10 stop us completing our farmdown to CNOOC. It was very 11 important that we all understood how this agency issue 12 might impact the deal. 13 Q. Under heading (b) "20 days prior to completion": 14 "After 45 days, if there is no appeal, the 15 assessment becomes final and the tax is due. Then and 16 only then ..." 17 A. Yes, exactly. 18 Q. I don't understand what you meant by "exactly". Perhaps 19 you can help us? 20 A. I think that is exactly my understanding of what the 21 section says, so that it's only under 106 that there can 22 be a liability -- there can only be a liability under 23 106 once the tax is due, ie if it's under dispute, you 24 know, the 70 per cent unpaid balance in the course of 25 a dispute can't be collected under 106 pending
Page 89 1 determination of the assessment. 2 Q. And that is still your view? 3 A. Yes. 4 Q. 739, this is an email from you to Lawrence Kiiza, 5 11 February, "Follow up from meeting": 6 "Hi Lawrence ... section 106 notice: I have attached 7 the draft ..." 8 A. Can I just say it says "private letter ruling, 9 section 106". 10 Q. Yes, thank you, we are going to turn to that. 11 A. Thank you. 12 Q. "Hi Lawrence, thanks again for taking the time to see 13 me." 14 If you can recall, when would that have been? 15 A. Well, I certainly saw him on 2 February. I'm not sure 16 if I saw him between 2 February and the 11th. I might 17 have. I don't know. 18 Q. "Section 106 notice: I have attached the draft of our 19 proposal." 20 If we can turn to 740/741, specifically 21 paragraph 1.3 of your note for discussion headed "Draft 22 private letter ruling: Tullow Uganda Limited". 1.3: 23 "This ruling sets out the application of section 106 24 and in particular the basis upon on which any notice is 25 to be varied under 106(5)."
Page 90 1 A. Yes. 2 Q. Now, 106(5) you should be able to find, just so we 3 understand what we are referring to, in D2/116. Do you 4 have 106? 5 A. Yes. 6 Q. Does my Lord have 106? 7 MR JUSTICE BURTON: Yes. 8 MR QURESHI: 106, a section I'm sure you are very familiar 9 with, headed "Recovery of tax from person owing money to 10 the taxpayer". Section 106(2): 11 "The date specified in the notice under subsection 12 (1) must not be a date before the money becomes due to 13 the taxpayer or is held on behalf of the taxpayer. At 14 the same time that notice is served under subsection (1) 15 the Commissioner shall also serve a copy of the notice 16 on the taxpayer." 17 (4): 18 "Where a person served with a notice ..." 19 Which in this case you are contemplating Tullow, 20 yes? 21 A. Yes. 22 Q. "... under subsection (1) is unable to comply with the 23 notice by reason of lack of monies owing to or held for 24 the taxpayer, the person shall as soon as is practicable 25 and in any case before the payment date specified in the
Page 91 1 notice notify the Commissioner accordingly in writing 2 setting out the reasons for the inability to comply." 3 That is (4). 4 A. Yes. 5 Q. "We don't have any money belonging to the taxpayer, 6 essentially", yes? That is what 106(4) is contemplating 7 notification being provided to the Commissioner of, 8 correct? 9 A. Can I just read it? (Pause). Yes, yes, I do agree with 10 you. 11 Q. So 106(5) is envisaging a situation in which the 12 Commissioner has received a notice from somebody saying: 13 "I can't comply. I don't hold money on behalf of the 14 taxpayer." Yes? 15 A. Yes. 16 Q. So what does it say: 17 "Where a notice is served on the Commissioner under 18 subsection (4), the Commissioner may by notice in 19 writing accept the notification [all right, fine, you 20 don't have any money] and cancel or amend the notice 21 issued under subsection (1) or reject the notification." 22 Just help me here. In terms of your private letter 23 ruling, let us go back to 740, paragraph 1.3 of your 24 letter: 25 "This ruling sets out the application of section 106
Page 92 1 and in particular the basis on which any notice is to be 2 varied under section 106(5)." 3 What did you envisage? 4 A. Again, I think I have -- I think when I went through the 5 circumstances I thought this would apply, I think that 6 that was the point I was trying to make. The way I read 7 106(4) is that there is no doubt, I think -- you know, 8 the question is whether we are unable to comply with the 9 notice by reason of lack of monies owing to Heritage. 10 The point is, and again the point I was trying to 11 make, is that at completion we did owe the money to 12 Heritage. Now, the fact the consideration, the fact 13 that the 283 million or whatever it was happened to be 14 in escrow and outside our control, it didn't mean that 15 we didn't also have our own 313 million potentially 16 available to pay the Commissioner. And that was my 17 concern, is that we owed the money to Heritage at 18 completion, although the escrow funds were no longer 19 available to us to satisfy that obligation, there's 20 nothing in 106 to say that you don't have to pay up from 21 your own cash, and that's the whole point really and 22 again, I think if you go through the circumstances that 23 I set out in my private letter ruling, that was the risk 24 I perceived. 25 MR JUSTICE BURTON: So what did you want to achieve by this
Page 93 1 draft? 2 A. So what I wanted it to be absolutely clear is that, and 3 again let's say that URA is not doing us any favours, 4 right, that at completion we owe, and again if we can 5 just say 283 million -- 313 million, let us say the 283 6 because that is in escrow so we owed the Heritage the 7 283 million in escrow. We owed Heritage 283 million. 8 There is 283 million put into escrow outside our control 9 but, you know, let's say we have 283 million of our own 10 money. I thought under 106 then the URA could ask us to 11 pay from our own money so we would effectively pay 12 twice. We would have paid the completion monies. 13 MR JUSTICE BURTON: You have explained that and of course in 14 a way that's exactly what happened in due course. 15 A. Exactly. 16 MR JUSTICE BURTON: What I am asking you and I think what 17 counsel is asking is what were you seeking to achieve by 18 this private letter ruling which would avoid or mitigate 19 that consequence? 20 A. The risk we had was the double expense, and so the 21 variation then I asked for was well, actually in those 22 circumstances you don't have to pay the additional 283. 23 What you have to do is to seek payment from Heritage 24 under the indemnities, you know, against Plc and HOGL 25 and, you know, if you have done your best to get the
Page 94 1 money and you don't get it, well that's fine. 2 MR JUSTICE BURTON: Where does it say that? 3 A. So it says if you look at -- so then, 3.2 -4 MR QURESHI: Do you want to start with 3.1 under "Variation 5 of the 106 notice". 6 MR JUSTICE BURTON: In 3.1 you wanted it amended, right, and 7 then hereafter is what you hoped to achieve. 8 A. Yes. So here we are saying, if HOGL pays us under the 9 indemnity, then we would pay the money over to the 10 Government. Under 3.3 we were saying if Plc pays us the 11 money as the guarantor then we would pay the money to 12 the Government. 3.4 says that if neither of them pays 13 us, and again, what I'm saying here, is okay, if -- we 14 expect them to pay the cash, then I'm saying that we 15 would then go to court -16 MR JUSTICE BURTON: That is all you needed to commence 17 proceedings. 18 A. -- go to court and in the event 3.5, if there was 19 nothing received following that attempt to enforce the 20 indemnity it was saying, well in those circumstances you 21 don't have the sort of double jeopardy of having to pay 22 the 283. 23 MR JUSTICE BURTON: If this private ruling letter had been 24 accepted none of what happened thereafter would have 25 occurred.
Page 95 1 A. Exactly. 2 MR JUSTICE BURTON: But it wasn't. 3 A. Exactly. 4 MR QURESHI: There is a very simple reason why the private 5 letter ruling wasn't accepted: it is because the scheme 6 that you so elaborately set out in paragraph 3 is not 7 only a nonsense, Mr Inch, in terms of its operation, but 8 it bears no relation to the operation of 106. 106(5) 9 does not contemplate you going back to the 10 Commissioner with a helpful suggestion as to how the 11 goalposts can be moved, does it? 12 A. My Lord, I think I've explained quite comprehensively 13 how I thought this private letter ruling applied. 14 I think I have been quite specific about the 15 circumstances in which I thought it would apply and the 16 mischief towards Tullow that I was hoping to avoid. If 17 I have to go through it and explain it all again I will 18 if it's necessary. But I feel that I've already 19 answered that question. 20 Q. If you feel that you've already answered it, you've 21 answered it, Mr Inch. 22 My Lord, is that a convenient ...? 23 MR JUSTICE BURTON: That is a very convenient moment. We'll 24 start again at 2.05. I have to rise at 3.40 because 25 I have other judicial commitments, thereafter so perhaps
Page 96 1 we can try and do without, subject to the shorthand 2 writers feeling exhausted, if we start at 2.05 can we 3 see if we can go through to 20 to 4 without a break. 4 Thank you, 2.05. 5 (1.05 pm) 6 (Luncheon Adjournment) 7 (2.05 pm) 8 MR JUSTICE BURTON: What news on arbitration? 9 THE SOLICITOR: Good afternoon, my Lord. I have spoken to 10 Curtis with the partner charged and we have relayed your 11 Lordship's concern to the client and he has not received 12 instructions yet. We will communicate those 13 instructions if and when we get them, my Lord, and I am 14 really sorry. 15 MR JUSTICE BURTON: Right, there we are. Thank you. 16 MR QURESHI: My Lord, there is one point that I feel 17 compelled to raise with your Lordship. It concerns -18 I ought to make it absolutely clear, Mr Mott gave the 19 witness the normal instruction in terms of communication 20 with others because he is giving evidence. It appears, 21 and I might seek to ask Mr Inch why he did this or your 22 Lordship may, it appears that Mr Inch accosted 23 Mr Atherton on the steps coming up and the conversation 24 or the exchange was along the following lines: "You 25 should stop this. You are going to get into so much
Page 97 1 trouble." 2 My Lord, I only raise this because it is singularly 3 unfortunate, if not improper, for Mr Inch to have 4 engaged in that exchange within sight of Mr Reason from 5 McCarthy Tetrault and those instructing me were taken 6 somewhat aback that Mr Inch should consider it 7 appropriate to say such things. 8 MR JUSTICE BURTON: Yes. It was in full view, so it wasn't 9 covert. 10 There are two answers to that, Mr Inch. I don't 11 need at this stage to know whether you challenge it or 12 not, but at the moment I shall accept that that is what 13 happened. 14 Number one, you must not talk to anyone while you 15 are giving evidence. 16 A. Yes. 17 MR JUSTICE BURTON: But number two, it is not advisable to 18 talk to someone on the other side. If somebody wants to 19 settle the case then they can do so through solicitors 20 at this stage. 21 A. Yes, sir. 22 MR JUSTICE BURTON: And in any event you are not authorised 23 on behalf of your company to make any such approach. 24 I don't think it conceivably can be read as a threat or 25 anything of that kind in the light of the way it has
Page 98 1 been described to me. But it could be taken as such in 2 different circumstances and you mustn't do that. 3 A. Yes. 4 MR QURESHI: Good afternoon, Mr Inch. If we could turn to 5 bundle E4, please, page 909. We start from the bottom. 6 A. Yes. 7 Q. We have an email from you to various persons on 7 April 8 recalling a meeting with Lawrence Kiiza: 9 "The following came out of today's meeting with 10 a further meeting now planned for 5 pm today. 11 "Capital Gains Tax ruling. 12 "(a) LK would like to see details of the 13 consideration before he decides on the CGT position. 14 Ian/Pete okay to discuss the latest numbers I have per 15 attached. 16 (b) He proposes to tax the gains realised on our own 17 16.66 of Blocks 1 and 3A in consideration for agreeing 18 no tax on the Heritage 50 per cent and no tax on 19 Block 2. I estimate this is a gross gain of 406 on 20 which the tax would be 122. If he allows reinvestment 21 relief for the 2008 budgeted capex of 170 the tax is 22 reduced to 71. While I stick to our position of asking 23 for all the gain to be covered by an extended investment 24 relief, some level of tax up to the 71 now looks 25 likely."
Page 99 1 Just pausing there. Just on the basic gain, you are 2 looking at 122 tax; is that right? 3 A. Yes. 4 Q. And with all of the various -5 A. Can I just be clear. The gross gain, when I think I am 6 talking about the gross gain here, is in respect of (b) 7 only, in respect of the disposal of our own blocks. I 8 am not absolutely clear about the numbers but I think it 9 is probably just in respect of what I see as the taxable 10 element. 11 Q. Your tax? 12 A. What I mean is there are three components. There is the 13 EA2 exempt portion which is exempt under contracts. 14 There is the Heritage piece, which is a loss, and then 15 by this stage we are now talking about a two-thirds 16 transaction, so there was an additional 16.67 per cent 17 to be dealt with from our own interests which had a very 18 low tax basis. So I think that the gross gain of 406 is 19 in relation to 1(b), our own 16.66 per cent of our 20 interests in the blocks. 21 Q. All right, so you are looking at 122 and then you are 22 looking at a tax up to 71 million, yes? 23 A. Yes. 24 Q. And above that you refer, at 3 o'clock the same day, to 25 a proposal from Lawrence to settle at 50 million?
Page 100 1 A. Yes. 2 Q. That is the 71 million figure, isn't it, that you are 3 talking to? 4 A. Sorry? 5 Q. 50 million including the 13 million of stamp duty, ie 6 37 million of Capital Gains Tax? 7 A. Yes. 8 Q. Yes? 9 A. Yes. 10 Q. That is your tax? 11 MR JUSTICE BURTON: That is to settle the 71 is what counsel 12 asked you. 71 is in the middle there. We just looked 13 at it. 14 A. Yes, 71 looking only at one year's capex reinvestment. 15 Can I make that point? Because at that point when I was 16 discussing the extended reinvestment relief with 17 Mr Kiiza, the point I was making was that the nature of 18 the reinvestment relief related to an involuntary 19 disposal, so to the extent we had disposed of the 20 16.67 per cent to accommodate Government's position it 21 was involuntary. 22 MR JUSTICE BURTON: Yes. 23 A. The reinvestment period in the legislation is one year 24 but the extended relief I was discussing with him was on 25 the basis that our commitment in that first year was far
Page 101 1 ahead of the 208 budgeted capex of 117 million. Our 2 commitment to reinvest in the first year would be 3 one-third of the whole project in the $2 billion to 4 $3 billion that we had to reinvest. So on that extended 5 basis, the tax payable would have been nil, with that 6 extended reinvestment looking at our total committed 7 capex for the whole project. 8 So although I had a technical position for zero, if 9 you like, I think looking at the sort of strict position 10 in terms of one year's reinvestment and the taxable gain 11 on our 16.67 per cent, then the maximum tax on that, 12 that would be 122 without the reinvestment and 71 with 13 the investment. 14 MR JUSTICE BURTON: So this was an offer to settle the 71 -15 A. Yes. 16 MR JUSTICE BURTON: -- with all the caveats you have just 17 mentioned for 50? 18 A. Yes, from him, yes. 19 MR QURESHI: Just pause there. This is in the context of 20 discussions with Mr Kiiza, is that right? He is the one 21 who is offering the proposal. 22 A. Mr Kiiza is the Director of Economic Affairs and the 23 head of the tax policy unit in Ministry of Finance. 24 He's the person to talk to on these matters. 25 Q. The person to talk to. So you mean when Mr Kiiza puts
Page 102 1 forward a proposal you can take it as a given that he 2 has the authority to do so? 3 A. Well, in all honesty I don't know what was happening 4 internally within the Ministry of Finance. I don't know 5 if this had been discussed with Mr Kassami or with 6 Mr Mahakanezi(?) or with the Minister of Finance, 7 Bbumba. I have no idea what internal processes Mr Kiiza 8 was following at this stage but he certainly was the guy 9 to have a technical tax discussion with, I believe. 10 Q. But he has told you that the 50 million includes the 11 13 million of stamp duty and 37 million of Capital Gains 12 Tax, yes? 13 A. Yes. 14 Q. And is he the one who said to you there might still be 15 scope for further discussion or is that your 16 observation? 17 A. That's my observation. 18 Q. How do you make that observation? 19 A. Well, again, as I say, at this stage in the context of 20 this note I'm reporting back to Mr Springett who is my 21 boss. Mr Springett is the CFO of Tullow. Mr Dickerson 22 here is the head of M&A. Paul McDade is another 23 executive member, he is the chief operating officer. 24 Mr Glover is the country manager, and then obviously 25 Mr Martin is the general counsel.
Page 103 1 So I'm reporting back to the executive management on 2 my discussions with Mr Kiiza and saying back to them, 3 and what I'm really trying to do is: we've had this 4 proposal from Mr Kiiza. Now, you know, if the board 5 really wanted me to, you know, they could maybe still 6 have some further discussion if they really felt it was 7 appropriate, but I thought it was a good deal and 8 I asked for the authority to agree the position with 9 Mr Kiiza in this email. 10 Q. Understood. Page 919, please, just go to the bottom of 11 the page. Mr Springett; just remind us who Mr Springett 12 is. 13 A. Mr Springett is the CFO. 14 Q. So Mr Springett to you, the same day, in the afternoon. 15 Go over the page to 920: 16 "Can you confirm that the 50 million payment, 37 CGT 17 plus 13, is as you say below on just the 16.67 on Blocks 18 1 and 3 and in consideration once and for all in 19 Lawrence agreeing no tax on the Heritage 50 per cent or 20 Block 2, ie no need to demonstrate subsequent 21 reinvestment of Blocks 2 gains ... On this basis 22 subject to any further comment from Aidan, then Paul, 23 Graham and I believe you should proceed and settle up to 24 this amount. We believe this should help move things 25 along and is also consistent with what we have said
Page 104 1 externally, ie maximum tax exposure limited to 16.67." 2 Is it clear, or is the context of this email 3 essentially: subject to that confirmation, you have 4 authority to settle? 5 A. Well, the point here I think, and again I think the 6 concern that was being raised by the executive here, was 7 that at this stage Ian's concern was this needed to 8 demonstrate subsequent reinvestment of Block 2 gains. 9 As I said, the economic position, if you like, was 10 we had done this transaction in order to set up 11 a partnership. We were now looking for and anticipating 12 a farmdown with CNOOC and Total into a very expensive 13 project. This is a project that would cost about 14 $12 billion to $14 billion of which our share then would 15 be at least $4 billion. 16 The context of this note, though, is that until 17 the -- and again the sort of fuel development plan, 18 until the precise nature of that development had been 19 agreed with the Government in terms of export pipelines 20 and refineries, the board was not in a position to make 21 a commitment that the proceeds would definitely be 22 reinvested without having agreed commercially the 23 commercial nature of the development. 24 So they are coming back to me at this stage to say: 25 well, taxwise on the numbers that's fine. But again, as
Page 105 1 I understand it, the board was not in a position for me 2 to give Mr Kiiza formal assurance that this money was 3 committed because that board decision would be subject 4 to agreement of the fuel development plan. 5 Q. Just go back to 920, the second substantive paragraph 6 after "Can you confirm ...": 7 "On this basis, subject to any further comment from 8 Aidan, then Paul, Graham and I ..." 9 Paul is McDade? 10 A. So this is the three members of the exec. So "On this 11 basis", ie with no commitment to reinvest as I have just 12 outlined, "subject to any further comment from Aidan", 13 that is Mr Heavey, the chief executive, "then Paul, 14 Graham and I" is Paul McDade, Graham Martin and 15 Ian Springett, ie three out of the five executive 16 directors on the board. 17 Q. Are saying you should go ahead and settle? 18 A. Yes. 19 Q. That is fine. Back to page 919, middle of the page, 20 your email back to Mr Springett, can you see it? 21 A. Yes. 22 Q. Half an hour or so later: 23 "Ian, confirm everything per your note except the 24 reinvestment requirement on Block 2. We have not 25 discussed eliminating this. I haven't seen the Block 2
Page 106 1 reinvestment as too onerous a requirement. If we plan 2 to ...(Reading to the words)... reinvest. All we are 3 agreeing to is to test the Block 2 PSA exemption through 4 the appeal process, not to pay any tax. I will ask LK 5 if required but I don't think the suggestion will be 6 well received. I believe he's under some pressure to 7 justify any deal and reinvestment is part of that 8 justification." 9 A. Yes. 10 Q. Then you have an email back from Mr Springett to you an 11 hour or so later: 12 "On the phone with Aidan. Don't do anything until 13 Graham and I call you." 14 Then you get back to him half an hour or so later at 15 the top of the page. This is the text that we spent 16 some time with Mr Martin on and so we hopefully won't 17 spend that much time with you: 18 "I am now due to see Lawrence at 8 am. The consent 19 has not been issued yet. I have asked him to make the 20 consent unconditional on the payment. I have told him 21 assessment process can continue in parallel and he can 22 take comfort from: (a) FTSE company will pay up." 23 Is that you? 24 A. No, that's Heritage. 25 Q. "(b) We will chase as agent if required."
Page 107 1 Agent for whom? 2 A. The Government. 3 Q. "50 million is confirmed okay, but to remain 4 undocumented." 5 Now, you were in court. 6 A. Yes. 7 Q. Do you recall Mr Martin sought to provide us with some 8 understanding as to what you may have had in mind when 9 you used this -10 MR JUSTICE BURTON: Well, he was critical of it. What is 11 your answer on that? 12 A. What I understood from Mr Kiiza is that he was not in 13 a position then to issue the formal private letter 14 ruling at this stage. We'd had the policy discussion. 15 We'd had an open and honest discussion about the tax 16 position which, you know, involved me showing him my 17 cards if you like on this Newco point because he knew 18 exactly -- I had taken him into my trust, if you like, 19 by telling him about the tax exposure on us. 20 I had actually been in the process and again through 21 this entire process not only had I been submitting 22 private letter rulings in respect of the operation of 23 the agency notices, I had also been providing Mr Kiiza 24 with draft proposals, proposed private letter rulings, 25 not to be signed by Mr Kiiza, to be signed by the URA
Page 108 1 and drafted in the name of Madam Kagina, the 2 Commissioner of the URA, under a legal process, a ruling 3 process available under the law. 4 So although -- and again, the way I understood 5 matters at this stage, Mr Kiiza is in a position of 6 dealing with the whole tax position on the farmdowns, 7 these transactions. He's agreed, or he's come to a view 8 on what's reasonable in the context of our deal, but he 9 still has to pin down Heritage and agree what's going to 10 happen on their cash position, and I think it was very 11 much again, whether it was the whole Ministry of Finance 12 or just him personally, what got put forward in respect 13 of the taxation of these transactions would have been 14 regarded as one package, ie, for example, 360 million 15 from Heritage on the basis that they're leaving the 16 country but with relief for their costs and 50 million 17 from Tullow on the basis of they've made a loss on the 18 Heritage piece, they have an exemption and they are 19 reinvesting billions and billions of dollars in the 20 country. 21 MR JUSTICE BURTON: So it was a piece in the jigsaw. 22 A. Yes, it was just part of an overall package and our 23 piece couldn't be dealt with independently, I'm saying. 24 MR QURESHI: Sorry, forgive me. So that's the answer, is 25 it, at the end of that rather lengthy explanation,
Page 109 1 forgive me, Mr Inch, that "the 50 million is confirmed 2 okay but to remain undocumented", we unpackage 3 "undocumented" and what you mean is the 50 million is 4 part of the package and -5 A. When I -6 Q. -- it couldn't be dealt with independently? 7 A. Again, when I talk about "package", as I have just said, 8 I am using "package" in the context of what the Ministry 9 of Finance would be saying to its internal constituents, 10 including the President, the URA, whoever else they had 11 to talk to, the Attorney General's office, I don't know. 12 I'm only using "package" in that sense and again, 13 I think the Ministry of Finance would be putting forward 14 a paper or somehow a proposal to say: "We propose that 15 these transactions, being Heritage's disposal to Tullow 16 and Tullow's farmdown, should be dealt with on this 17 basis", which would be Heritage X, Tullow Y. 18 Q. Let me understand what you are saying, and if I have 19 misunderstood you please do correct me. I know you 20 won't hesitate. 21 A. Thank you. 22 Q. Is what you are saying, Mr Inch, that in the context of 23 this package dealing with the whole question of tax, 24 where the 50 million was to remain undocumented, what 25 that meant was that within the mass of the detail it
Page 110 1 would not be visible; is that what you mean? 2 A. No, that's very far from what I mean. 3 Q. Then explain to me. 4 A. Once again, I'll explain it to you. That the Ministry 5 of Finance would be under an obligation to, again, and 6 I imagine they would -7 MR JUSTICE BURTON: Let us try and take it much more simply. 8 A. Right. 9 MR JUSTICE BURTON: Without repeating everything you said 10 because it is all on record. I think I need to 11 understand this. 12 Mr Martin seemed to think that there was something 13 underhand about having an undocumented agreement, he 14 couldn't think of why it should be undocumented. 15 A. Yes. 16 MR JUSTICE BURTON: And you will need to deal with that. 17 A. Yes. 18 MR JUSTICE BURTON: As I understand what you are saying, you 19 are saying it was part of the package, have I got that 20 right, that you would pouch that part and then move on 21 and deal with the rest of the package? Is this it? 22 A. No. 23 MR JUSTICE BURTON: In which case you wouldn't document that 24 for the moment because other things remained in hand and 25 counsel is asking you whether that is right, ie that it
Page 111 1 was part of an overall package. He has added the 2 suggestion that it should be lost in the package and you 3 will no doubt want to deal with that. 4 A. When I talk about "package", I don't mean it's my 5 package. 6 MR JUSTICE BURTON: No, of course not. 7 A. I mean it is Mr Kiiza's package. So I think Mr Kiiza is 8 the one who is looking: I've come with a position with 9 you, I'll deal with the Heritage situation, and then 10 once I've got the whole picture clear, I will produce -11 I'll talk to the Revenue about the private letter 12 rulings, et cetera, et cetera. 13 For this to remain undocumented for us, this is all 14 a ruling request how a transaction is to be taxed. You 15 still have to prepare the tax computations, the tax 16 returns, you have to file them. You have to get it all 17 approved by the Inland Revenue. On our side, all these 18 payments have to be appropriately authorised by the 19 board, put through the accounting systems and 20 procedures, looked at by the auditors. There is 21 absolutely nothing underhand in any of this. 22 MR JUSTICE BURTON: No, but what does "but to remain 23 undocumented" mean? Does it mean it would never be 24 documented? 25 A. No.
Page 112 1 MR JUSTICE BURTON: Or it would be undocumented for the 2 moment? 3 A. So he's saying he couldn't issue the private letter 4 ruling as at that date. So undocumented pro tem, 5 pending you know, the Ugandans being satisfied about the 6 overall tax position on all these transactions. 7 MR JUSTICE BURTON: When they were all agreed about 8 everything, what would happen? 9 A. Then, and again there are various drafts in the 10 correspondence files here, that I had prepared a draft 11 ruling. I expected then, with whatever variations the 12 Ugandans might want to put, that that would be agreed 13 between the Ministry of Finance, the URA and Tullow, so 14 that everybody agreed how this transaction was to be 15 taxed in advance and we would be given that ruling in 16 writing by Madam Kagina, the Commissioner of Taxes for 17 the URA, under the statutory appropriate provisions. So 18 it is all wholly in accordance with the law and 19 perfectly proper and legitimate. 20 MR JUSTICE BURTON: At that stage what would happen in 21 relation to the 50 million? 22 A. Then once I had my ruling, and again depending if there 23 were any special arrangements for payments, I would 24 ordinarily expect that I would -- you know, if this was 25 happening in 2010, I'm on an instalment basis of
Page 113 1 taxation, so if this had been agreed at April 7, I would 2 have been under an obligation to pay 25 million on 3 1 July, 25 million on 31 December because they have 4 a provisional collection system that works like that. 5 I would pay my provisional taxes in the year, in 6 accordance with the law. After the year end, we would 7 prepare the statutory accounts. They would be audited 8 by Deloittes. I would prepare a tax return. We would 9 have it reviewed by KAA. I would sign it or a director 10 would sign it and it would be submitted and the whole 11 transaction would be assessed in accordance with the 12 law. 13 MR JUSTICE BURTON: Yes. 14 MR QURESHI: By all means take a pause. That was an 15 incredibly lengthy answer, Mr Inch. Thank you for that 16 detail. What you are telling us is that when you are 17 communicating to the executive, where you are saying 18 "50 million is confirmed okay but to remain 19 undocumented", all of that is implicitly contained in 20 the language "50 million is confirmed okay but to remain 21 undocumented"? 22 A. Well, I just think, you know, I know these people, these 23 are the most senior executive management in the company. 24 I'm just being completely open with them all at the same 25 time on a copy email to everybody because it's just --
Page 114 1 you know, I'm just reporting back what's been said to me 2 and I'm telling the senior guys back in London what's 3 happening, and that's all. 4 Q. You are being open with them and if I have understood 5 you correctly, you know these people. They are the most 6 senior executives? 7 A. Yes. 8 Q. And your evidence is that when you say "50 million is 9 confirmed okay but to remain undocumented", they know 10 fully what you mean; is that what you are saying? 11 A. I think that the executive would be quite clear that 12 I wasn't proposing some kind of illegal, back door 13 transaction which was supposed to take care of our tax 14 bill without any involvement of the URA or without -15 pulling the wool over the eyes of Deloittes. Yes, 16 I think that wouldn't even cross their minds because 17 they know that's not how I work and that's certainly not 18 how any of these gentlemen work. 19 Q. And that is why you felt there was no need to clarify 20 the language that you have put in that email? 21 A. To my mind, my Lord, that language is completely open 22 and transparent and is not intended to conceal anything 23 from anybody. 24 Q. And that is the reason why no one ever subsequently 25 queried your reference to the 50 million being confirmed
Page 115 1 okay but to remain undocumented. No one queried what it 2 meant "to remain undocumented" and you didn't provide 3 any further explanation as to what you meant by "remain 4 undocumented"? 5 A. I don't believe -- again, at some stage between these 6 emails, I had a telephone call back to London, I don't 7 know what was discussed. 8 MR JUSTICE BURTON: Did the agreement stay that way or did 9 it unravel or did -10 A. Everything unravelled because although I had done the 11 draft private letter rulings, of course when the whole 12 Heritage situation then impacted at closing, you know, 13 any kind of prospect of a deal with us and the Ugandans 14 on the tax completely disappeared out of the window. 15 The URA at that point then thought we were in total 16 collusion with Heritage, that we were trying to rob the 17 URA of their money with the Heritage guys and, as is 18 quite obvious, they were having nothing to do with us. 19 They were throwing the book at us at that stage. 20 MR JUSTICE BURTON: How much did you pay for this tax 21 liability in the end? A lot more? 22 A. This is still going through the courts now because we 23 have been assessed to tax for $473 million. So we are 24 now in a situation where we are in the middle of court 25 proceedings in Kampala. We are now facing the prospect
Page 116 1 potentially of having to go to arbitration in respect of 2 this PSA 2 exemption which is precisely the kind of 3 confrontational relationship with the Government that, 4 you know, I tried to avoid. 5 MR QURESHI: We know from the documents, Mr Inch, that the 6 figures did indeed change and it certainly looks like 7 a very good deal at 50 million. But there is not 8 a single document in any of the documents that have been 9 disclosed by Tullow after this email which contains any 10 reference to the way in which the 50 million was arrived 11 at or how that 50 million was going to feature in 12 subsequent documentation, is there? 13 A. Well, I'm not surprised because I think prior to this 14 email you will find at least one, if not more, of the 15 draft private rulings that I gave to Mr Kiiza to show 16 how our transaction ought to be taxed and then I think 17 after this from April -- certainly from April to the 18 whole debacle of the completion then, yes, there was 19 nothing then further in terms of documentation that came 20 to us. 21 Q. Are you saying that the 50 million is a figure that was 22 reflected in your communications to Mr Kiiza concerning 23 the private letter ruling? Is that what you are saying? 24 A. No, I'm saying that I sent -- and again, I wouldn't mind 25 having a look at the last private letter ruling that
Page 117 1 I did send him, but I'd sent him a private letter ruling 2 outlining the basis for taxation and I think in 3 particular outlining the availability of a reinvestment 4 relief, whether that was with reference to one year or 5 for three/four years of the development. So I can't 6 recall, and I would have to consult the document, 7 whether the draft private letter rulings I was sending 8 him had precise figures in. The PLRs I was sending him 9 outlined how I thought the transaction ought to be taxed 10 and really the amount of tax to be paid would be 11 determined by the reinvestment relief allowed by the 12 URA. 13 Q. The reality, Mr Inch, with respect, is that what you 14 were contemplating on 7 April is perfectly clear? 15 MR JUSTICE BURTON: Well, what is it? 16 MR QURESHI: For the 50 million to remain undocumented, the 17 plain and simple message that you are sending is that 18 there is going to be a deal done but that is a deal that 19 cannot be expressly the subject of a written record; 20 isn't it? 21 A. No, that is completely wrong. 22 Q. And that insofar as it was going to be swept up in 23 anything, it was going to be swept up in the package. 24 That is what you had in mind when you referred to 25 a package, isn't it?
Page 118 1 A. That is not what I had in mind. When I referred to 2 a package, I meant the package Mr Kiiza would put 3 forward to Government for its own internal 4 considerations. 5 MR JUSTICE BURTON: Yes, let us be quite clear what is being 6 suggested. There are two kinds of packages. It could 7 be a two kinds of thing. One is a package in the sense 8 of an overall deal which included settling a number of 9 different things, and at that stage, whenever that 10 package is arrived at, the 50 million is going to form 11 part of it, in the meanwhile having been put on ice 12 because that part of the package is settled. That is 13 one possibility of a package. 14 A. Yes. 15 MR JUSTICE BURTON: The other possibility of a package is 16 what is being put to you, namely that this would be part 17 of a package but would be lost in it and not identified 18 and never documented. 19 Which is it, if either? 20 A. No, it is not the latter. It is not something which was 21 to remain undocumented in any way. 22 MR JUSTICE BURTON: Right. 23 A. It was an agreed interpretation of the law which would 24 be reflected in a private letter ruling and again, my 25 private letter ruling, in terms of the numbers, would
Page 119 1 all be subject to the final accounts and tax returns. 2 MR JUSTICE BURTON: So it would appear in the private letter 3 ruling, you thought? 4 A. Well, the private letter ruling would set out the 5 principle and then the Revenue would agree to tax the 6 transaction on that basis so long as all the facts were 7 in accordance with their understanding and then I would 8 provide the accounts and tax returns and everything else 9 to document it, you know, and we would pay on a tax 10 assessment in the system. 11 MR JUSTICE BURTON: Thank you. 12 MR QURESHI: There is only one interpretation, one possible 13 interpretation, of the phrase "to remain undocumented", 14 and it is the word "remain" that is the give-away, isn't 15 it? 16 A. Well, I have explained, I have explained my view of it, 17 my understanding. I'd like to be absolutely clear: 18 Mr Kiiza at no stage ever made any kind of suggestion of 19 any kind of "back door" or funny arrangement. We were 20 just -- you know, he was on his side, I was on my side 21 and we were seeking to agree a number satisfactory to 22 both parties. 23 MR JUSTICE BURTON: You said "remain pro tem". 24 A. Yes, exactly. It was to remain undocumented until at 25 some stage I thought that we would get a signed --
Page 120 1 again, what I had asked for was to get a signed ruling, 2 not from Mr Kiiza but from Madam Kagina and the URA 3 agreeing in advance to how this transaction would be 4 taxed. 5 MR QURESHI: We have heard what you have said, Mr Inch, and 6 it is not true. 7 A. Well, it is true, my Lord. I'm not letting that -- that 8 is the absolute truth. 9 Q. All right, Mr Inch. Let us move to bundle 5, please. 10 E5, page 1179. Do you have it? 11 A. Yes. 12 Q. If we look at the bottom, just so we can track it 13 through because it is another email chain. At the 14 bottom of the page, 19 May, it is Mr Heavey. Initially 15 this email starts off as being distributed to the 16 Executive Group which includes Elly Karuhanga. It is 17 the bottom of 1179. 18 A. This is a note from Tim O'Hanlon to Mr Heavey. 19 Q. Yes, forgive me, Aidan Heavey, it is the Executive 20 Group, "Uganda update", and it is Tim O'Hanlon over the 21 page, 1180, relaying a meeting, that "Brian" -- is that 22 Dr Glover, Brian Glover? 23 A. Hold on. Yes, that will be Brian. 24 Q. "... and I met with Fred." 25 That is Fred Kabagambe-Kaliisa, Permanent Secretary
Page 121 1 at the Ministry of Industry, yes? 2 A. Yes. 3 Q. And there is a proposal put forward by Fred and we have 4 an answer from Pete Dickerson to Tim O'Hanlon: 5 "Hate to be negative but looks like it will be 6 totally unworkable with respect to both clean title to 7 sell on and acting as tax collector." 8 Because there is a mechanism where 9 Fred Kabagambe-Kaliisa is referring to tax and what 10 Tullow's role would be in that context? 11 A. Could I just refer myself to that mechanism that Fred -12 Q. Yes, sure. Go ahead. 13 A. Could you tell me which paragraph? 14 Q. Yes, of course, the second paragraph: 15 "The meeting alone with Fred went as follows but the 16 information had to be dragged out of him ... a couple of 17 attempts ... may therefore not yet be fully decided. 18 Looks as follows: 19 "There will be a formal meeting. A letter will be 20 addressed to Heritage and copied to Tullow, approving 21 the Heritage sale to Tullow based on the CGT issue being 22 resolved. A separate letter will be addressed to 23 Tullow, copied to Heritage, appointing us as agent. 24 A third letter will be addressed to Heritage from the 25 URA and be effectively a tax assessment on them."
Page 122 1 A. I understand, yes. 2 Q. You have the mechanism? 3 A. Yes, I understand. 4 Q. Do you want to see any more of the mechanism? 5 A. That is fine, thank you. 6 Q. All right, let us turn over the page, back to Pete 7 Dickerson to Tim O'Hanlon: 8 "Hate to be negative but this looks like it will be 9 totally unworkable with respect to clean title to sell 10 on and acting as tax collector". 11 Of course this is where Mr Kaliisa is identifying 12 your role as agent, isn't it, the third bullet point 13 that we looked at? 14 A. Tullow's potential. 15 Q. Yes. 16 A. Yes. 17 Q. "One possible suggestion re any is could we offer the 18 refinery or do they want upstream. Everyone in our JV 19 is enthused about the refinery. ...(Reading to the 20 words)... There would just be an issue of dedicating. 21 Also think we should widen the internal debate to 22 include Peter Sloan and Richard Inch." 23 So it moves on from the execs to you and to 24 Peter Sloan? 25 A. Yes.
Page 123 1 Q. And Peter Sloan is being involved presumably because he 2 is part of the legal team and also because there are 3 questions that he might be able to provide input on? 4 A. Yes, he was dealing with the kind of completion aspects 5 of the Heritage deal, yes, and I guess the onsale. 6 Q. Sorry? 7 A. He would be dealing with the legal aspects of the 8 acquisition from Heritage and the farmdowns to Total and 9 CNOOC. 10 Q. So are you saying again that Mr Sloan, insofar as he is 11 being asked to address anything, tax questions are 12 beyond his remit or beyond his capability? 13 A. Mr Sloan, as I'm trying to say, he is effectively the 14 M&A lawyer in this discussion. This is how I would put 15 it. 16 Q. He is the oil and gas and M&A lawyer? 17 A. Oil and gas M&A. He would do transactions. We buy 18 companies, sell companies, yes. 19 Q. So Pete Dickerson to yourself and Peter Sloan? 20 A. Yes. 21 Q. "You both need to see this sooner rather than later." 22 Then your answer: 23 "It would be worth looking at a scenario where we 24 are put under a notice now [this is May] to pay the tax 25 in two instalments, half on completion, half on July 1,
Page 124 1 if later." 2 A. Yes. 3 Q. "What then happens (a) under article 7 indemnity or (b) 4 article 3.7, no withholding except as required by law." 5 Just pause there. Help us in terms of what you are 6 referring to here. 7 "What then happens under (a) article 7 indemnity 8 ..." 9 What are you referring to there? 10 A. Again, this is just going back to the situation where 11 the Government is trying to get us to act as agent in 12 this transaction and collect from Heritage. We are now 13 in a position from a transaction which we (inaudible) 14 in January and which has a long stop date of 16 July, we 15 are now in May and we are now no clearer or closer to 16 finding out what arrangement Heritage might put in place 17 with regards to the settlement of their tax liabilities 18 and at this stage I think we are looking at all 19 available options whereby if we are to be appointed as 20 agents what would be the means by which that might be 21 done effectively? 22 Q. You are looking at all available options, if you are 23 appointed as agents, the means by which that might be 24 done effectively, and when you are saying "that might be 25 done effectively", are you talking about collection of
Page 125 1 the tax? 2 A. Well, again, with regards to the tax that's being 3 assessed on Heritage on the disposal, and again, let us 4 just bear in mind that what we are talking about is 5 Heritage's $360 to 400 million tax liability, the 6 Government are putting us under tremendous pressure to 7 act as agent in this transaction. 8 As Pete had said in this note, if we didn't have 9 clean title, ie unconditional consent, we were not in 10 a position to complete our farmdown transaction and the 11 whole commercial rationale for the pre-emption from 12 Heritage would disappear. So yes, we are under a lot of 13 pressure, I think, to try to find ways to satisfy the 14 tax because by this stage, as late as 20 May, Heritage 15 didn't seem to make any arrangements whatsoever to deal 16 with this issue. 17 Q. All right. So it is quite clear, isn't it, that 18 by May 20th there was no agency notice and no agency 19 notice had been served upon you, had it? 20 A. Well, we had put forward -- or I had put forward 21 a private letter ruling request. There had been 22 absolutely -- and there never was any discussion with 23 anybody from the URA, that is for sure, in terms of 24 issuing an agency notice against us. 25 Q. Just to help us understand, the private letter ruling
Page 126 1 was effectively you inviting the URA to serve you with 2 a 106 notice, wasn't it? 3 A. No, that is not correct. 4 Q. What was it? 5 A. As I said, I had been told by Government, I had been 6 told by Mr Kiiza, that they intended to appoint us as 7 agent. What I was trying to do was if they were going 8 to give us -- if they were going to issue a section 106 9 notice against us, what I tried to do in the private 10 letter ruling was to restrict its operation or to 11 restrict the risk of Tullow having to pay the tax twice 12 under it. 13 Q. What you mean is that what you were trying to do through 14 the private letter ruling is, in the manner that you 15 articulated in the draft that you sent through Mr Kiiza, 16 to try to ensure, insofar as you could, that that burden 17 fell upon Heritage and not yourselves? 18 A. I was -- well, it is Heritage's tax we are talking 19 about. I was trying to avoid a situation where legally 20 we were compelled to complete with Heritage and pay them 21 283 million and also pay 283 million to the Revenue 22 under an agency notice, and avoid an additional 23 $283 million cost on the transaction -24 Q. So you were -25 A. -- in very, very narrow and specific circumstances.
Page 127 1 Q. So you were seeking to devise a mechanism -- we have 2 heard a lot of about mechanisms -- through the private 3 letter ruling where the URA could serve a section 106 4 notice on you and recovery might be possible against 5 Heritage when otherwise it wouldn't be, correct? 6 A. As I said, I was looking at, and this is a variation 7 I think on that theme, that the Government had intended 8 to make us an agent on some basis or another, in some 9 circumstances that put Tullow in severe commercial and 10 financial exposure of a $283 million additional cost, 11 but there is no doubt at this stage that we wanted this 12 transaction to complete and, therefore, you know, the 13 transaction was not going to complete unless the 14 Government was satisfied that Heritage would settle its 15 tax liabilities and it was because of the fact that 16 Heritage wouldn't engage with the Government that we 17 were being forced into this position of engaging with 18 the Government and trying to find some mechanism whereby 19 the Government's concerns could be satisfied. 20 Q. We'll consider who did and did not engage with the 21 Government and who else, but at this juncture, when you 22 are providing all of this helpful input to the Ugandan 23 authorities, you certainly aren't engaging with Heritage 24 on the same basis, are you? 25 A. No, I'm not no.
Page 128 1 Q. Help us understand what you had in mind in your email of 2 20 May when you asked the question: "What then happens 3 under (a), article 7, indemnity?" Just focus on that if 4 you can, please. What did you have in mind? 5 A. So again, in this scenario that I had put forward, and 6 again, as I said earlier, the taxpayers in Uganda are 7 under an obligation to make provisional payments of tax, 8 so the question or the scenario that I put out for 9 consideration was that if those two instalment 10 liabilities had been assessed against Heritage, claimed 11 against Heritage -- I don't really know what the 12 technical procedure was -- what I was asking was: okay, 13 well, what happens under the indemnity provisions, in 14 much the same way as my section 106 private letter 15 ruling anticipated that we would take Heritage to court 16 if absolutely required and similarly, whether or not in 17 those circumstances we would be able to withhold the 18 relevant amount of tax from payments due to Heritage 19 under the SPA in accordance with article 3.7 which 20 allowed for withholding when required by law. 21 Q. Let us just deal with article 3.7. So you obviously 22 considered at this point in time, you have considered 23 article 7 of the sale and purchase agreement? 24 A. Yes. 25 Q. And you have considered article 3.7?
Page 129 1 A. Yes. 2 Q. And is it your understanding that if there is a legal 3 basis for you to withhold monies due under the SPA to 4 Heritage, 3.7 provides you with a complete answer? 5 A. 3.7 is the contractual term which provides for no 6 withholding except as may be required by law. 7 Q. Yes, and if you are required by law, you can withhold 8 and that's -9 A. That's right. 10 Q. It provides you a complete answer? 11 A. It would, yes. 12 Q. Could I ask you to look at 1191, please. 1191 is an 13 email from Mr Bill Page of Deloitte to you concerning 14 Ugandan tax collection. 15 A. Mmm. 16 Q. If I could ask you to look at the third paragraph, this 17 is in the context of again, just to make sure there is 18 no misunderstanding, there is an email chain and there 19 is a query from you to Mr Page, 20 May, and this is 20 Mr Page coming back to you. Third paragraph: 21 "I understand your concern. Tullow may be required 22 to pay the tax due if URA invokes section 106 which is 23 problematic for you because of 3.7 which states that the 24 buyer cannot make any form of withholding." 25 A. Yes.
Page 130 1 Q. "As you point out, the remedy in this case is under SPA 2 7.2, which requires the seller to reimburse any such 3 amount. The issue here is the timing, of course [as 4 with most things in life]. If an assessment was made 5 today, then 45 days would elapse before payment was due 6 (section 103(1)(b)). As you say, if seller ignores the 7 assessment, then collection proceedings under 106 cannot 8 start until 5 July when 45 days are up. Under SPA 3.2 9 the amount due to seller has to be paid into escrow on 10 the third day prior to closing. After that point 11 I believe that section 106 can't have effect as Tullow 12 no longer owes money to the seller. Closing is five 13 days after a notice that all conditions precedent have 14 been fulfilled." 15 The next paragraph: 16 "On payment in the event of an appeal, section 17 103(2), the amount is 30 per cent or the undisputed 18 amount, whichever is greater. I assume in this case the 19 whole amount will be disputed in the first instance. 20 105 gives the right to prevent persons leaving the 21 country if tax has not been paid in full." 22 That wasn't invoked here, was it 105? 23 A. I think that applies to natural persons rather than 24 legal persons. 25 Q. But it wasn't invoked, was it?
Page 131 1 A. It wasn't invoked as it applies to natural persons not 2 legal persons, in my view. 3 Q. That is what Mr -4 A. That is what Bill Page thinks. 5 Q. You said it only applies to natural persons. Bill Page 6 seems to disagree with you. He talks about "persons"? 7 A. If you want to look at the section I think what you will 8 find is it talks about immigration officials. 9 Q. We don't need to look at it, Mr Inch. I am not going to 10 have an argument about what 105 does or doesn't say. 11 "But the rest of it is drafted in such a way that it 12 can only apply to individuals and I'm not sure certain 13 whether this would give the Government the right to 14 require additional payment from the seller by preventing 15 company officers from leaving. Have your lawyers found 16 any other legislation on this point or are they relying 17 on the tax law only?" 18 As at May 21, who was he referring to when he 19 identified "your lawyers"? 20 A. KAA. 21 Q. Did you seek any further advice from Deloittes 22 subsequently? 23 A. Well, again, I am conscious of the fact that I did make 24 some reply and I think if you look at 1204 you see my 25 reply to what Bill said.
Page 132 1 Q. I am sorry? 2 A. I think if you look at 1204 what I said to Bill, I mean 3 I think we did seem to agree on the 106 point being down 4 to timing. Thankfully we seem to be moving by which 5 I understood -- I think I had had the discussion that 6 day or the day before that Heritage now seemed to be 7 keen on an escrow arrangement. And then finally my 8 point when Bill said that 3.7 didn't apply, I noted that 9 it said no withholding savers required by law and so 10 I thought 3.7 was the relevant section rather than 7.2. 11 So that was my kind of quick response to what Bill had 12 said. 13 Q. Very helpfully you have taken me to document that I was 14 actually going to take you to to ask. 15 A. Thank you. 16 Q. So as at this point in time just help us, when you are 17 saying "we are pretty much on the same page re 106, it 18 all comes down to timing", again, just help us 19 understand what you mean by that? 20 A. Again, I think this is this point that Bill says, so in 21 his third paragraph: 22 "As you see if seller ignores the assessment, then 23 collection proceedings under 106 cannot start until 24 after 5 July when 45 days are up." 25 Really what he's --
Page 133 1 "Under SPA 3.2 the amount due to seller has to be 2 paid into escrow on the third day prior to closing. 3 After that point I believe that section 106 can't have 4 effect as Tullow no longer owes money to seller." 5 That is the point that I didn't agree with him on 6 because at that point although the money was in escrow, 7 we did still owe Heritage the money and we would still 8 owe Heritage the money up to completion on my 9 understanding despite the money was in escrow. 10 So I didn't agree with everything Bill said. But, 11 you know, in terms of the 45 days and the kind of 12 interaction with the dates, the monies actually owed to 13 Heritage I thought we were pretty much on the same page 14 and it all really came down to this specific issue of 15 timing. 16 Q. So you didn't agree with Mr Page on that point, but am 17 I right in thinking that you didn't go back to Deloittes 18 at any stage thereafter for further advice? 19 A. No, again, I said I thought we were pretty much on the 20 same page. As I said, my attention was more on 3.7 21 rather than 7.2 but, no, I didn't actually have further 22 discussions with Bill. There was a problem with 23 Deloittes, and again, at the time we thought -- because 24 actually Bill declined to give us an opinion on our 25 liability on tax.
Page 134 1 Now, I've got a load of respect for Bill. I knew 2 Bill from London. The problem was that he felt he had 3 a conflict. At the time we thought Deloitte was 4 actually acting for Heritage. What I understand now is 5 that actually they had reviewed the Heritage's opinions 6 and things in the context of a potential takeover and as 7 Bill had specific advice, had specific personal 8 knowledge about Heritage's tax affairs and the opinions 9 that they had as a consequence of the due diligence work 10 they had done for a third party, Bill felt conflicted 11 out on this and declined to give his advice in respect 12 of our own tax. 13 So I didn't go back to Bill for anything else on 14 this because it was all too much of a problem, plus they 15 are also our auditors. 16 Q. Deloittes? 17 A. Yes. 18 Q. Let us move in to the bundle at 1208 in that case. So 19 what you are telling us is Deloittes are conflicted at 20 two levels. Mr Page is conflicted? 21 A. And the guys in London because they had -- because the 22 London office had done the transactional due diligence 23 work for third party and of course they had referred the 24 Uganda aspects down to Bill for his input. 25 Q. Because he was sitting in Uganda, wasn't it?
Page 135 1 A. He's a Deloittes tax guy in Uganda, yes. 2 Q. 1208, please. It is from you to Mark Schofield, another 3 one of the big four? 4 A. Yes. 5 Q. This time we have had Bill Page at 9 o'clock and now we 6 have PwC at 6 o'clock. Mark Schofield: 7 "Are you around? Just left you voicemail on some 8 urgent work for Govt of Uganda if you can do it. I will 9 send you the materials I have, ie some of my thoughts 10 and an analysis the Ugandans are sending me. Please 11 note GOU does not want PwC Kampala involved." 12 Just pause there. Do you happen to have a note of 13 what the voicemail was that you left for Mr Schofield? 14 A. You know, I do generally take notes but I wouldn't take 15 a note of a message I had left somebody, I'm sorry. 16 Q. What was the urgency? 17 A. I think as I said, and I said earlier, on 20 May -18 again, if I get this quite right, but on 20 May there 19 had been the Onek meeting with Heritage and Tullow with 20 Onek baring his fangs and Heritage willing admitting 21 they hadn't engaged at all with the Government on the 22 tax position. The meeting in Kampala with Mr Smith and 23 Mr Westwood, our understanding was they liked the idea 24 of this escrow arrangement. They liked the idea of 25 somehow of us being involved in some kind of agency
Page 136 1 basis and then the next day -- the next day what 2 happened on the 21st, round about now, as I said 3 I called Mr Atherton, I told him I thought we were all 4 moving forward. I say, "This is great. We will arrange 5 for the Ugandans to get the advice on the escrow and 6 everything else." He said, no, no, they've given up on 7 that idea and, you know, just off thinking about their 8 advisers. And frankly, this really was quite a turning 9 point because at that stage although there had been 10 a lot of talk about Heritage trying to push things 11 through to the longstop stop date and make the whole 12 transaction fall over, it was really at this point that 13 I really believed it. 14 What I understood from Mr Kiiza in the discussions 15 that I had was that there was a body of thought, 16 a school of thought within the URA that some of the 17 people in the URA, for whatever reason, didn't want to 18 go to arbitration in London, didn't feel that -- they 19 would lose if they went to London, it was too 20 complicated and too sophisticated and at this stage 21 there was a lot of -- I think, as I understood the 22 reports I was getting back there was one camp which was 23 quite happy to take Heritage on and assess the tax and 24 go through the due legal process and there was an 25 opposing body who didn't want to have that engagement on
Page 137 1 any basis and didn't want to go to London. 2 Now, when Mr Atherton refused my offer to have the 3 Ugandans properly advised with respect to these escrow 4 arrangements and everything else, I knew that Mr Kiiza 5 was due to chair a critical critical meeting with 6 Heritage in the following week and I said in a note 7 I sent to Lawrence, I said something along the lines: 8 well, I did speak to Paul but he doesn't want to do this 9 escrow thing, and I suggested to him and again, just 10 almost as an adviser, like, from my days in professional 11 practice, I said, "Lawrence, you ought to take some 12 advice on this." And when I made the suggestion I said, 13 "You know, you really need to get some advice before 14 these discussions", he came back to me, I don't know if 15 it was by phone or whether it was by an email, but he 16 basically said -- he agreed. And I talked to Mr 17 Martin -- so he agreed and said that would be a good 18 idea. I can't remember who I talked to first. I had 19 talked to Mr Martin and said that unless the Ugandans 20 are clear about the strength of their position either in 21 Kampala or in London, this whole deal is going to 22 collapse, and by this stage this is where we had got to: 23 that Heritage were deliberately trying to pull the deal, 24 you know, because they had a better alternative and at 25 this stage when the whole escrow discussion had
Page 138 1 collapsed I suggested to Mr Kiiza he ought to take some 2 advice. He came back to me and he said, "Yes, please." 3 And I talked to Mr Martin and we went to PwC and asked 4 them to advise the Government. 5 Q. It is my turn to sigh. Mr Inch, can I with your 6 indulgence ask you to help me decipher that. Firstly, 7 you mentioned that you at paragraph 65 of your witness 8 statement that you were authorised by Mr Graham Martin 9 to instruct PwC? 10 A. Yes. 11 Q. It is the fourth line of paragraph 65. 12 A. Yes. 13 Q. You see it? 14 A. Yes. 15 Q. Just help me understand the mechanics here. PwC are tax 16 advisers? 17 A. Yes. 18 Q. Why would you need to seek Mr Martin's approval to 19 instruct PwC? 20 A. Because in terms of our delegation of authority and 21 financial controls I'm not permitted to enter into 22 a financial commitment in excess of $50,000. 23 Q. Right. You say that you had discussed with Mr Atherton 24 the proposal that you, Tullow, would obtain legal advice 25 on behalf of the Ugandan authorities to help the Ugandan
Page 139 1 authorities? 2 A. That's true. 3 Q. Where do you mention that in your witness statement? 4 A. I don't think that I do. 5 Q. You don't mention it, Mr Inch, because fastidious as you 6 are, with respect, it didn't happen, did it? 7 A. That is not true. I did -- I had a brief call with 8 Paul. The main thing I remember about that -- again, 9 I just phoned him up. 10 Q. Was it -11 A. I just phoned him up. I understood that Brian Smith and 12 Brian Westwood had all been on board. That was the 13 discussion he had had with Fred and our guys in Kampala. 14 It seemed to be that everyone was agreed. I phoned them 15 up quite cheerfully thinking we were going to get this 16 thing sorted out. He said, "No, we're thinking about 17 it. We don't like it any more. We've been speaking to 18 advisers over the weekend and it's off." And that was 19 the chat I had with him. It was just a few minutes. 20 That's it. But I did definitely talk to him. 21 MR JUSTICE BURTON: What are you suggesting didn't happen, 22 Mr Qureshi? 23 MR QURESHI: My Lord, Mr Inch has just given evidence to the 24 effect that prior to or contemporaneous with the 25 instruction of PwC he had proposed to Mr Atherton that
Page 140 1 Tullow would in fact instruct PwC to provide advice to 2 assist the Ugandan authorities. Have I got that right, 3 Mr Inch? 4 A. Can you just give me one second? (Pause) 5 MR QURESHI: My Lord, is that clear enough? 6 A. Can you just give me one short second. (Pause). Could 7 you have a look at, my Lord, if you could look at E/1194 8 and read the message I sent to Lawrence Kiiza. 9 MR JUSTICE BURTON: That is bundle E5. 10 A. Yes, sir. 11 MR QURESHI: What you are saying here to Mr Kiiza? 12 A. Can I read it out, my Lord. 13 MR JUSTICE BURTON: We can see it: 14 "We did contact Paul Atherton with the suggestion 15 that we would pay your fees." 16 You are telling that to Mr Kiiza. 17 A. Yes. 18 MR QURESHI: But there is no email to Mr Atherton or anybody 19 at Heritage? 20 A. I telephoned Mr Atherton. 21 Q. You telephoned? 22 A. As I have said. 23 Q. Yes. Mr Inch, we heard you the first time and there is 24 no note of that conversation with Mr Atherton anywhere, 25 is there --
Page 141 1 A. Apart from this email. 2 Q. -- to Mr Kiiza? 3 A. Apart from it being noted in this email, as far as I'm 4 aware there is no manuscript note of that. 5 MR JUSTICE BURTON: He said "no". 6 A. He said -7 MR JUSTICE BURTON: Mr Atherton said "no". 8 A. Yes. 9 MR QURESHI: You. 10 MR JUSTICE BURTON: And then the response one from Mr Kiiza 11 was: 12 "We decided to invite both Heritage and Tullow for 13 a meeting." 14 Did that happen? 15 A. Well, we certainly did -- I mean we certainly did have 16 a Heritage/Tullow meeting -- it was after this -17 certainly with Fred. I can't -- I need to look through 18 the file. There was certainly some meeting thereafter I 19 think. We certainly had a meeting with Mr Martin and 20 myself and Mr Atherton and Mr Smith and with 21 Mr Kabagambe-Kaliisa and various other Government 22 officials. I think that was after this but I'm not 23 sure. 24 MR QURESHI: Just to be clear, you are saying in this email 25 that you contacted Mr Atherton around about this time
Page 142 1 offering to pay Uganda's fees with regards to advice on 2 drawing up an escrow arrangement, correct? 3 A. Well, I think when I talked -- "the legal and tax advice 4 on escrow arrangement" I mean perhaps more widely just 5 in terms of settlement of our dispute. 6 Q. So "legal and tax advice on drawing up an escrow 7 arrangement", we ought to read that as being: and also 8 advising the Ugandan authorities on the position on tax 9 whether or not Heritage's interest is taxable? 10 A. You don't ordinarily need much tax advice to draw up an 11 escrow arrangement. 12 Q. That is all that your email is saying to Mr Kiiza, isn't 13 it: legal and tax advice on drawing up an escrow 14 arrangement? 15 A. As I look at it, that's what I recall. 16 Q. You said that there was some hesitation on your part in 17 suggesting to the Ugandan authorities that they should 18 seek advice. Is this what you are referring to when you 19 tell Mr Kiiza: you might want to take some technical 20 advice on your position? 21 A. What I'm saying is I only suggested to Mr Kiiza that he 22 should take some advice because I had had the discussion 23 with Mr Atherton and it seemed to me that Heritage had 24 absolute no absolutely no interest in sitting down and 25 coming to an agreement about escrow arrangements or
Page 143 1 everything else despite the meeting that had happened 2 either on that day or the day before in Kampala. 3 Q. Are we talking about two different types of assistance 4 in this email? The first paragraph you are suggesting 5 that you may have had a conversation with Paul Atherton 6 but that plainly is focused on the escrow arrangement 7 and advice relating to that, isn't it? 8 A. That's true, Mr Qureshi. I think that the tax and legal 9 advice around the escrow arrangement were to do with in 10 terms of it if it's there as security for a potential 11 arbitration or, you know, actions through the Kampala 12 courts I don't really know. So that I think is -- you 13 are probably quite -- that is one separate matter in 14 terms of how the security works, and then I think though 15 that given that the kind of discussions had broken down 16 with the Heritage guys in terms of the kind of escrow 17 arrangements, then I'm suggesting -- I am certainly 18 suggesting here in the second paragraph that if there is 19 not going to be any agreement on the collection 20 mechanism, then Lawrence would have been well advised to 21 understand his technical position given there seemed to 22 be a lot of debate, as I understood it, internally about 23 whether or not the Government would even risk going to 24 arbitration. 25 Q. Just help me on this, Mr Inch: are you saying that when
Page 144 1 you had the conversation with Mr Atherton you also said 2 to him, "And by the way, we think it would be a good 3 idea for us to pay for Uganda to get tax advice on its 4 position with regards to your tax"? 5 A. No, I'm sure -- I didn't have that conversation at all 6 with Mr Atherton. I don't mean to suggest that at all. 7 We had a very brief -- I put it to him, that we would 8 pay -- basically finance the Ugandans, who didn't have 9 the cash, to get their satisfactory advice so they could 10 formalise the escrow arrangements that we all understood 11 had been agreed the day before, but when he said "no", 12 when that proposal was dismissed, then I thought 13 separately the advice here, I'm talking about technical 14 advice, is an understanding of Uganda's technical 15 position. I discussed the first with Mr Atherton not 16 the second. 17 Q. So Mr Martin, just to be clear, is giving you permission 18 to instruct PwC to provide advice to Uganda on its 19 technical position, as you put it, with regards to 20 Heritage's tax? 21 A. I mean precisely the technical position with regard to 22 Heritage's tax, yes. 23 Q. If we can turn to bundle E6, please. Do you have it, 24 Mr Inch? 25 A. E6, yes.
Page 145 1 Q. Can we start at the bottom of the page. 2 A. 1300? 3 Q. 1500. 4 A. 1500? 5 Q. 1500, forgive me. 6 A. Yes. 7 Q. The bottom is Graham Martin to himself. 8 A. Yes. 9 Q. 8 June. That is then circulated to the Executive Group. 10 "Here is a summary of today's meeting. Brian and 11 I met with Fred for about an hour." 12 Then Lawrence Kiiza. 13 Then the rest of it is redacted but what we get 14 above it is: 15 "Richard Inch [that is you to Graham Martin] I don't 16 know if you'll be able to read this [this is 8 June] but 17 I don't think we will be caught by section 108." 18 A. Yes. 19 Q. Then you extract section 108(1) and Mr Martin writes 20 back to you a few minutes later: 21 "its comes down to a timing issue." At the instant 22 it belongs to Heritage we don't have the money or is 23 that right? Strictly the consideration becomes a debt 24 due to Heritage once notice has been given of fulfilment 25 of the last CP..."
Page 146 1 CP being? 2 A. Condition precedent. 3 Q. "... (ie consent). Perhaps there is a five day window 4 for this work. Peter, any thoughts?" 5 A. Yes. 6 Q. Mr Martin is asking the oil and gas M&A lawyer -7 Mr Martin is general counsel -- for his observations on 8 sections 108; do you see that? 9 A. Yes. 10 Q. He is not asking you, he is asking Mr Sloan, isn't he? 11 A. Absolutely. 12 Q. And Mr Sloan's answer: 13 "It's a possible interpretation though persuasive 14 counter argument is that payment is not due from us 15 until completion, or payment into escrow account in this 16 case (ie we own the money til then). There are a number 17 of completion obligations that need to take place, even 18 once condition precedents are satisfied. If we did 19 that, Heritage would almost certainly refuse to complete 20 so it would force the dispute between us to mandate 21 completion. I may send sections 106 and 108 off to 22 Ashursts as well since they are very relevant to any 23 dispute on enforcing completion." 24 Pausing there. Anything in what Mr Sloan has said 25 which you -- because you are copied in together with
Page 147 1 Mr Martin, anything that he said that you disagreed 2 with? 3 A. Yes, I mean, I don't disagree with what Peter said. 4 I think this is happening in the context, and again, 5 certainly my own view at this stage, I didn't feel that 6 we were in -- we were in possession of monies in escrow. 7 The debate I think which was going -- which Graham had 8 started was this kind of confusion about, you know, if 9 you satisfy a debt to somebody, you know, are you in 10 possession of an asset belonging to them? Obviously it 11 is your money, you use to discharge your liability to 12 someone and then obviously Graham raised these things 13 about it comes down to timing, the instant it belongs to 14 Heritage we don't have it. 15 So he's questioning, Graham, I think, he says, you 16 know, he's a bit uncertain: "At the instant it belongs 17 to Heritage we don't have the money or is that right?" 18 There is a bit of a debate going on. And then I think, 19 you know, Peter's coming and saying, "Well that's 20 possible but there are counter persuasive arguments." 21 It was a live issue between us and people are exchanging 22 their interpretations of how it might work and Peter, 23 quite sensibly, said, "Send it off to Ashursts and let 24 them have a look." 25 Q. Are you saying Mr Martin was confused or this email
Page 148 1 exchange evidence is confusion on the part of Mr Martin? 2 A. No, what I'm saying is it shows that Mr Martin was 3 looking at it from a different angle. He makes 4 a statement: "It is a timing issue. It says at the 5 instant it belongs to Heritage. We don't have the 6 money", and then he asks the question, "Or is that 7 right?" So I think he was mulling over -- in terms of 8 he was mulling over it in terms of how you might regard 9 it. He was asking Peter for his views and it was 10 expanding until, okay let's get Ashursts involved 11 because it's something that needs to be considered 12 further. 13 Q. It is something that needed to be considered so why get 14 Ashursts involved? 15 A. Well, because it was, I think because as he says here, 16 since it is very relevant to any dispute on enforcing 17 completion, and I think that was his main concern. 18 Q. That Ashurst's consideration of section 106 and 108 19 would be very relevant to any dispute on enforcing 20 completion? 21 A. Well, the legal interpretation of 106/108. If money had 22 been withheld from Heritage under these notices and let 23 us say we had done that under a misapprehension, we had 24 the wrong analysis and Heritage had refused to complete, 25 then obviously this is a massive transaction, then, you
Page 149 1 know, people are trying to work out: what are the 2 implications of that? 3 Q. Could you please turn to 1571, please. This is an email 4 from you to Lawrence Kiiza: 5 "The note below is the PwC analysis on the best 6 approach to take on negotiation." 7 This is your $50,000 worth of advice, correct? 8 A. This note, this analysis from PwC? 9 Q. Yes. 10 A. Yes, this is PwC's advice, yes. 11 Q. "I will have two further things to send you, firstly an 12 appendix to the finalised opinion which sets out the 13 Ugandan analysis and confirms the licences are Ugandan 14 immovable property." 15 Pausing there, the Ugandan analysis would have been 16 undertaken by who? 17 A. KAA. 18 Q. "They would be grateful ..." 19 Who is "they"? 20 A. PwC, I think. 21 Q. "... would be grateful if you could have the analysis 22 confirmed locally by or on behalf of the URA. They will 23 then send you a finalised opinion which supports the 24 position outlined below." 25 Just turn to 1593. This is an email from you to
Page 150 1 Mr Kiiza, again the same day, four hours later: 2 "Lawrence, If your legal people can agree the 3 analysis ..." 4 Pausing there, who did you have in mind when you 5 were referring to the legal people? 6 A. I'm very sorry, could you just repeat that again? 7 I just lost the place. 8 Q. 1593. This is your email to Mr Kiiza. 9 A. Yes. 10 Q. 10 June, about hour fours after you have sent him the 11 PwC note? 12 A. Okay. 13 Q. "If your legal people can agree the analysis ..." 14 This is to Mr Kiiza. Who are the legal people? His 15 legal people? 16 A. Yes, the URA's legal people, the Government legal 17 people. 18 Q. "... can you please send us confirmation that PwC can 19 base their opinion on these assumptions. In particular 20 it would be very helpful if you could confirm the 21 licences are to be regarded as immovable property 22 situated in Uganda under domestic law. 23 "If we can have that tomorrow, I will be able to 24 have PwC issue their opinion, which is looking very 25 solid, by the end of the day in London."
Page 151 1 A. Yes. 2 Q. Just pause there. Was written confirmation provided by 3 Mr Kiiza or his people? 4 A. No, not to me, I don't think, no. 5 Q. To anybody in Tullow? 6 A. As far as I'm aware, PwC's advice was never finalised. 7 Q. Did the Ugandan authorities ever take up your suggestion 8 that you made in May 2010 and obtain legal advice on the 9 Heritage tax issue themselves? 10 A. The position was, from completion, from 26 July when the 11 Government believed that we were kind of acting in 12 cahoots with Heritage, the URA never at any time had any 13 discussion with us about the tax analysis of the 14 Heritage position. They didn't engage with us at all. 15 Mr Kiiza, after 26 July, I guess because of the uproar 16 that arose by the fact that the 283 million hadn't been 17 dealt with as the Government wanted, was really removed 18 from the action. Although he had been the chair of the 19 committees and things up to this point, and pretty 20 central to the discussions, after the whole completion 21 thing the URA basically stepped in and took over and the 22 URA never asked us for any kind of opinion or any kind 23 of advice about Heritage's tax position. 24 Q. So the answer to my question is that, so far as you are 25 aware, the URA never provided you with any written
Page 152 1 analysis of the legal position prepared by them, 2 produced by them, with regards to the Heritage tax 3 issue? 4 A. Yes, that's correct. 5 MR JUSTICE BURTON: With regards to Heritage's liability for 6 tax. 7 MR QURESHI: Yes. And equally, it is the case, if it isn't, 8 tell me, that the URA never provided you or anybody in 9 Tullow at any time in 2010 with any document evidencing 10 analysis by the Ugandan authorities of the position with 11 regards to section 106/108? 12 A. Yes, it was only assertion on their part. They never 13 provided us with any kind of legal analysis. I mean, 14 they issued the notice on 26 July. That was their -15 you know, they told us what they thought by their 16 actions, not by providing back-up legal analysis. 17 Q. But they had -- Mr Kiiza had shared with you some 18 analysis of the Heritage tax position which you had 19 passed on to PwC previously, hadn't you? 20 A. Yes. 21 Q. But they never provided you with any legal analysis in 22 written form of their assertion, as you put it, with 23 regards to the section 106 and 108 notices at any 24 material time? 25 A. No, they never provided us with any kind of legal
Page 153 1 analysis of why they thought 106/108 works, that is 2 absolutely true. 3 Q. Can we move to bundle E7, please. Can I ask you to turn 4 to 1642, please. Do you have it? 5 A. Yes, I do. 6 Q. We are coming back to your understanding of principles 7 and integrity, Mr Inch. 8 A. Mmm. 9 Q. Lawrence Kiiza is sending you by email a letter from 10 McCarthy Tetrault of 16 June and minutes of the meeting 11 held on 2 and 4 June between GOU officials and 12 representatives of Heritage Oil: 13 "Richard, given in confidence both papers relating 14 to our minutes and their letter. Confirm receipt. We 15 may discuss after this." 16 What do you think he meant by "given in confidence"? 17 A. Well, as you see, it was a confidential -- it was 18 a minute of a confidential meeting and he gave it to me 19 in the expectation that it certainly wouldn't be made 20 public or I would misuse it in any kind of way. 21 Q. What about the letter at 1643 to 1646, headed "Without 22 prejudice and strictly private and confidential"? This 23 is to Mr Fred Kaliisa -- not Lawrence Kiiza -- the 24 Permanent Secretary in the Ministry of Energy and 25 Mineral Development and Mr Kiiza in the Ministry of
Page 154 1 Finance seems to have got his hands on this. You didn't 2 ask him how he had got hold of this? 3 A. Sorry, this letter addressed to Mr Kabagambe-Kaliisa? 4 Q. Fred Kabagambe-Kaliisa. 5 A. Yes, well, they are all -- you know, Fred is a Permanent 6 Secretary and I imagine that as soon as a letter like 7 this comes in, as it would in any other civil service, 8 it would get copied round all the relevant people who 9 need to see it. 10 MR JUSTICE BURTON: At page 1646 it is very widely copied. 11 Are any of those Mr Kiiza, I don't mean personally but 12 his area of interest? 13 A. Hold on a second. 14 MR QURESHI: It might be the third one, my Lord, the 15 Permanent Secretary/Secretary to the Treasury. 16 A. The Permanent Secretary to the Treasury, Mr Kassami, and 17 Keith Mahakanezi is Secretary to the Treasury, one of 18 those gentleman, I think Chris, as I believe, is 19 Permanent Secretary and is Lawrence's boss. 20 Q. The letter isn't addressed to Mr Kiiza, is it? 21 A. Well, in any organisation, letters come in to Tullow Oil 22 Plc, not addressed to me, they still get sent to me to 23 deal with, even if my name is not on it. I don't see 24 anything unusual about what you are suggesting. 25 Q. You don't see anything unusual in what?
Page 155 1 A. I don't see anything unusual that a letter which is 2 regarding tax matters that has been sent to the PS of 3 the Energy Department, I don't see anything unusual that 4 that letter, which is stated to be copied -- stated as 5 copied to the Permanent Secretary and the Secretary to 6 the Treasury at the Ministry of Finance, I don't find 7 anything odd that either of those gentleman would have 8 given a copy to Mr Kiiza, who is their subordinate. 9 Q. So it is clear that the boss of Mr Kiiza is cc'd on this 10 letter? 11 A. Yes. 12 Q. And what you are saying is there is nothing unusual in 13 Mr Kiiza's boss giving him a copy? 14 A. I don't see anything unusual in Mr Kassami saying to 15 Lawrence, "Here's a letter from Heritage's lawyers, you 16 deal with it" or "This is for your information". 17 Q. But do you see anything unusual in Mr Kiiza then passing 18 that letter on to you? 19 A. Yes, it was given to me in confidence. I never asked 20 Mr Kiiza to give me this letter and in all honesty there 21 is nothing in any of this that actually is of any 22 particular relevance to me. 23 Q. That's all right then, isn't it? 24 A. Whether or not it's not all right for Mr Kiiza to do 25 that, that's up to Mr Kiiza. With respect, what am
Page 156 1 I supposed to do? Hand it back? 2 Q. Well -3 A. I think if it had been a situation where if it had been 4 a sort of bid situation and we were being told, "Some 5 company is bidding X million and this lets you know that 6 we can take a commercial advantage out of it", there was 7 nothing in this, as far as I'm aware, which gave us any 8 kind of improper commercial advantage or any kind of 9 factual information that we could turn into account in 10 any way. It simply -- I mean, Mr Kiiza shouldn't have 11 given this to me, but it didn't give me any particular 12 information and it didn't give me anything that I acted 13 on. 14 Q. You are familiar with your code of conduct, aren't you, 15 Tullow's code of conduct? 16 A. Yes. 17 Q. And I am not going to bore you with the details because 18 I am sure I have bored Mr Martin with the details, 19 Mr Martin has his photograph on one version, you don't 20 have your picture there, but you recall what we went 21 through. I am not going to go through the details, 22 Mr Inch. Receipt of documents which are confidential on 23 the face of it is a breach of your code of conduct, 24 isn't it? 25 A. I -- in all honesty, well, I couldn't specifically say.
Page 157 1 What I can say is if I had been given confidential 2 information which had given us some kind of commercial 3 advantage or given us some kind of secret inside 4 information which we then used in some transaction or 5 something, that would have been highly improper and, 6 code of conduct or no code of conduct, I think as a 7 chartered accountant I would seek not to behave like 8 that. This was confidential information but all it set 9 out to me was the respective technical arguments on the 10 tax. None of it was new to me. None of it was 11 unfamiliar territory. It gave me no new information. 12 Q. Mr Inch, whilst you were giving us that elaborate 13 answer, I was looking for the scrap of paper, and 14 I don't mean to be derogatory but the scrap of paper 15 which enshrines the code of conduct at Tullow because it 16 is perfectly obvious from your answer, Mr Inch, that you 17 pay nothing more than lip service to that, isn't it? 18 A. No, that's not true. The basic core principles, 19 I think, of any code of conduct is that people are -20 that we are not, we do not make inappropriate payments 21 to people, we are not dishonest, those kind of general 22 standards of behaviour you would expect from 23 professional people. 24 I can't say that I know line by line what's in the 25 code of conduct but I know it's intended to avoid
Page 158 1 situations of bribing officials or seeking undue 2 influence or anything improper, and I absolutely accept 3 it was not right for me to have been given these papers. 4 I absolutely accept that. But I can also say that in my 5 view that from the information contained in these 6 papers, I did nothing improper as a consequence of the 7 information I received. 8 Q. I have finally found that scrap of paper which I am sure 9 was a product of much earnest endeavour by teams of 10 compliance lawyers: 11 "Tullow competes fairly and honestly and we only 12 acquire information about our competitors by legal and 13 ethical means." 14 So you accept that you didn't do that when it came 15 to this document? 16 A. Could you just repeat that? 17 MR JUSTICE BURTON: He doesn't accept that. If there is 18 a specific clause on dealing with confidential 19 documents, then you must put it to him. Otherwise he 20 says he doesn't regard receiving and not using 21 a document which had been wrongly supplied to him as 22 either dishonest or, whatever the other word was, 23 unfair. 24 A. Or improper. 25 MR JUSTICE BURTON: Or improper. But if there is some
Page 159 1 specific provision you must put it to him. 2 MR QURESHI: It is your code of conduct which states at 3 page 39 of the version which I have, dated August 2011, 4 which Mr Martin confirmed had not changed substantially 5 from 2010 onwards, where you -- forgive me, not you, 6 Mr Inch -7 A. Excuse me, could I have a copy, please? 8 MR JUSTICE BURTON: Yes. Is it page 31? Is that where we 9 are? 10 MR QURESHI: Page 39, my Lord. There ought to be a copy up 11 with the papers that -12 MR JUSTICE BURTON: If there isn't, let me hand mine over. 13 It has a marking on it. (Handed). 14 MR QURESHI: There ought to have been. You might have it 15 there. There is a nice collection of documents there. 16 Keep looking. It is the one that has an oil rig on the 17 front. 18 MR JUSTICE BURTON: To save time, we only have five more 19 minutes this evening, so he's looking at my copy. 20 MR QURESHI: Page 39, "We compete fairly", do you see it? 21 A. Yes. 22 Q. "Tullow competes fairly and honestly and we will only 23 acquire ..." 24 "Acquire" means receive? 25 A. Yes.
Page 160 1 Q. Yes, you accept that? 2 A. Absolutely. 3 Q. "... information about our competitors by legal and 4 ethical means." 5 Do you see that as well? 6 A. I do. 7 Q. So it is not about honesty and fairness and competitive 8 advantage, but do you accept that receiving a document 9 that is headed "Without prejudice, strictly private and 10 confidential", does not seem to chime with this 11 particular aspect of your code of conduct? 12 A. Well, what I would say, my Lord, is that the taxation of 13 Heritage is not a matter in which we are in competition 14 with them. The taxation of Heritage is according to the 15 law. We have no competitive interest on how Heritage 16 gets taxed, whether there is no tax due or whether there 17 is 404 million of tax due. 18 As it says here, the competition issues that are 19 being addressed here are matters such as price fixing, 20 market sharing, limiting production, capacity of use by 21 monopolising a market. This is talking about 22 competition. Competition -- you know, when we compete 23 in the market, the competition with their market isn't 24 how we conduct our business. We are not in the business 25 of competing with Heritage over their tax affairs. So
Page 161 1 although I was improperly given information regarding 2 the position Heritage had taken with respect to its tax, 3 which I won't repeat in this court, it was nothing to do 4 with competition between us and them. 5 Q. So there is no breach of your code of conduct? 6 A. Looking at that, I don't believe there has been 7 a breach, sir. 8 Q. All right. Look at page 24 whilst we have that 9 colourful document in front of us. 10 A. Yes. 11 Q. We discussed what "remain undocumented" would be 12 understood to mean by the uninitiated, and do you accept 13 that if a transaction was to remain undocumented, just 14 focusing on the words "remain undocumented", it would be 15 a breach of the key requirement that is identified at 16 page 24? 17 A. What I understand by the undocumented transaction 18 arrangement in the sense that you are using it is that 19 if I have, say, a supplier and I have an undocumented 20 agreement whereby the supplier will then give me cash in 21 my pocket in order to keep the business, that is an 22 undocumented agreement I think in this sense and is not 23 the kind of thing that I would do or in fact have ever 24 done. 25 Q. All right, so just to be clear, your email of 7 April
Page 162 1 and that exchange which uses the terminology "remain 2 undocumented" -3 MR JUSTICE BURTON: He has explained that. 4 MR QURESHI: -- it is not a breach, it is not a breach of 5 your code of conduct? 6 A. No, that is not a breach of my code of conduct at all. 7 Q. Understood. 1714, please, Mr Inch? 8 A. Have you finished with this? Is this finished? 9 Q. Yes, it is finished, Mr Inch. 1714. This is an email 10 from Graham Martin. I appreciate you are not copied in 11 on this. You may not be able to help. If you can't 12 help, then say so. 1714 to 1726. 1714 is the cover 13 email -14 A. Yes. 15 Q. -- from Graham Martin forwarding a pdf which has been 16 received from, it would appear, Elly Karuhanga, bottom 17 of the page? 18 A. Yes. 19 Q. The attachments, 1716 onwards, appear to be draft 20 letters and if you just look at the letter at 1722 to 21 1723, that is reflected in a document at 1736/1737 22 signed by Fred Kalisa? 23 A. Yes. 24 Q. Can you help us with understanding where these documents 25 came from, apart from the obvious Mr Karuhanga
Page 163 1 apparently having provided them to Mr Martin? Do you 2 know? 3 A. I don't know. I don't know where he got them from. 4 MR QURESHI: My Lord, I see it is 3.40. 5 MR JUSTICE BURTON: Yes, unless there is something connected 6 with this? 7 MR QURESHI: No. 8 MR JUSTICE BURTON: No. Right. Now, how are we getting on, 9 Mr Qureshi? Incidentally, I think you should complain 10 vigorously to the shorthand writers for demoting you on 11 the front page of every day's transcript. 12 MR QURESHI: I can live with that, my Lord. 13 MR JUSTICE BURTON: No doubt they'll put it right from now 14 on. Where have we got to? 15 MR QURESHI: Your Lordship has the list so your Lordship can 16 see where we are on the list. 17 MR JUSTICE BURTON: Yes. Are we going to finish in a day 18 and a half? 19 MR QURESHI: I will endeavour to ensure that happens. 20 MR JUSTICE BURTON: Yes, thank you very much. 10.30. 21 (3.40 pm) 22 (The court adjourned until the following day at 10.30 am) 23 24 25
Page 164 1 INDEX 2 Housekeeping .........................................1 3 MR RICHARD CHARLES INCH (affirmed) ...................5 4 Examination-in-chief by MR MOTT ..................5 5 Cross-examination by MR QURESHI .................43 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25