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The Davy Charter presented by Stephen Carver - North East branch event

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‘The story of how one man forced a multi-million-pound company to sell the Ritz Hotel and the QE2 liner’.

Contracts provide structure to project delivery. However, when they are not understood, the consequences can be dire, as demonstrated in this story.

In the late 1970s, the North Sea was a focal point in the search for oil and gas for some of the world’s largest companies, and for entrepreneurs bringing together those wanting to invest in developing the industry. Risk management was a key element in the successes and failures of such a challenging industry; the fields were of varying degrees of difficulty to develop, so the industry initially set about extracting the ‘easy’ wins until they needed to look at higher risk options.

‘The man with a vision’

During this time, Martyn Deaner developed a business around de-compression chambers, which originated from his experience of deep-sea diving. To expand he needed to upscale his business approach, and he began to create a web of contracts.

As oil development grew throughout the 1980s, European governments became keen to invest. Martyn Deaner saw the opportunity to raise funding through government loans and letters of credit. By borrowing money using offset repayments to a timescale to allow the returns to be made he was able to obtain investment from the likes of the Dutch and British governments.

These loans provided a vehicle to gather other organisations – such as engineering contractors and design consultants – to create partnerships to transform fishing trawlers into support vessels, and redundant oil platforms into floating oil rigs. Deaner convinced these firms to sign contracts which paid on delivery of the oil, meaning they were funding the investment themselves.

‘Risk and reward’

Martyn Deaner started to attract interest from smaller oil companies. He set up contracts agreeing to a base price for a barrel of oil, with a 50:50 share of the profit when the price rose above it. So again, the investment was coming from the company in the contract, not Martyn Deaner himself. Due to the fluctuations in the industry, he was able to buy rigs at a ‘knock down’ price using the money he’d obtained from the various investors.

‘Big companies become stupid’

This led to the next thread in the web of investors. Davy Offshore Engineering and GVA Technology consultants stepped in to refurbish platforms, working on a turnkey contract which paid on delivery of the first barrel of oil. They didn’t bother to take advice on the contract, so the investment came from the very companies providing the service, and not the entrepreneur Martyn Deaner!

‘The English Breakfast Company’

The analogy is of the chicken and the pig entering into a contract to produce the classic English breakfast. The ‘chicken’ (GVA) was going around collecting all of its ingredients, whilst the ‘pig’ (Davy Offshore) was naturally busy growing bigger. Then the day came that the chicken provided the eggs and asked the pig to complete his end of the deal and get ready to end up on the breakfast plate! This is when things started to go wrong: the engineers and the consultants didn’t see eye to eye as one thought it knew better on how to refurbish hundreds of tonnes of floating steel.

The contract entered by Davy Offshore Engineering and GVA was written in British Common Law, whereas elsewhere the ‘Red Book’ was used. This led to protracted wrangles and lengthy proceedings in court, which only benefits the lawyers, resulting in a fallout between the parties.

‘Piper Alpha Disaster’

The key outcome of the Piper Alpha disaster was the increased safety measures required on oil rigs. This led to the cost of the work agreed in the turnkey contract tripling. Davy Offshore took Martyn Deaner to court, however Deaner was able to demonstrate that the contract was legally binding, based on examples of case law. Davy Offshore’s share price collapsed, and the vultures started circling, seeing a cheap way into the oil boom.

‘Bigger companies become even more stupid’

Seeing an opportunity, Trafalgar House – the biggest UK engineering company of their day – bought out Davy Offshore. They immediately took Martyn Deaner back to court and lost the case again. Trafalgar House then had to complete the oil rig – the costs of which spiralled to ten times the original estimate – pushing them to the brink of bankruptcy. This led to Trafalgar House having to infamously sell the Ritz Hotel and QE2 liner to stay afloat.

In stepped Hongkong Land to take over Trafalgar House, quickly followed by Danish engineering company Kvaerner, when the former’s share price plummeted, and ultimately also led to their demise.


Understand the way the contract is written, and the liabilities you are taking on. Remember that ‘cash is king’, as when you take over the assets of a company you also take over its liabilities!

• ‘The person with experience finds the person with the money’
• ‘The person with the money gets the experience’
• ‘The person without the money gets the experience’

Glyn Jenkins ChPP MAPM
Project Manager


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