Burgundy Global Exploration Corp v Transocean Offshore International Ventures Ltd and another appeal

• Court: Court of Appeal (Singapore)
• Judge: Sundaresh Menon CJ
• Judgment Date: 14 May 2014
• Neutral Citation: [2014] SGCA 24
• Citation: [2014] SGCA 24
• Docket Number: Civil Appeals Nos 48 and 55 of 2013
• Hearing Date: 07 February 2014
• Plaintiff Counsel: Rakesh Vasu and Winnifred Gomez (Gomez & Vasu LLC),Ong Ying Ping, Lim Seng Siew and Susan Tay Ting Lan (OTP Law Corporation)
• Defendant Counsel: Toh Kian Sing SC, Ian Teo and Jonathan Wong (Rajah & Tann LLP)
• Subject Matter: Damages,Civil Procedure,Service,Jurisdiction,Conflict of Laws
• Published date: 25 June 2014

Sundaresh Menon CJ (delivering the judgment of the court): Introduction

These two appeals came before us after a long and somewhat convoluted procedural course. Unfortunately, some part of the litigation has been in vain because, in our judgment, the respondent’s claim for damages was premised on a fundamental conceptual error.

Civil Appeal No 48 of 2013 (“CA 48/2013”) concerns two interrelated contracts. The first contract was governed by an arbitration agreement while the second was governed by a jurisdiction clause in favour of the Singapore courts. The second contract provided that a breach of its terms would also give the respondent the right to terminate the first contract. The respondent purported to exercise this right when the appellant breached the second contract. The critical issue in this appeal is whether the respondent can claim, in an action for breach of the second contract, damages for its loss of profits arising from the termination of the first contract.

In Civil Appeal No 55 of 2013 (“CA 55/2013”), the appellants, who are the directors of the appellant in CA 48/2013, are appealing against the High Court’s refusal to set aside an order for substituted service of examination of judgment debtor (“EJD”) orders that had previously been issued against them. The appellants are foreign nationals who are ordinarily resident overseas. The issue raised is whether a Singapore court has the jurisdiction to issue an EJD order against company officers who are ordinarily resident overseas, and if so, whether leave is required for service of the EJD orders out of jurisdiction.

We reserved judgment after the hearing of oral arguments. Having considered the matters, we have decided to allow both appeals for the reasons that follow.

Facts Parties to the dispute

The appellant in CA 48/2013 is Burgundy Global Exploration Corporation (“Burgundy”), a Philippines company engaged in the business of exploring and developing oil and gas resources in the Philippines.

The five appellants in CA 55/2013 are the directors of Burgundy (the “Directors”), and they are ordinarily resident in the Philippines.

The respondent in both appeals is Transocean Offshore International Ventures Limited (“Transocean”), a company listed on the New York Stock Exchange. It supplies mobile offshore drilling units and provides drilling services for oil and natural gas reserves.

Background to the dispute The contractual relationship between Burgundy and Transocean

Under an offshore drilling contract dated 29 September 2008 and a novation agreement dated 30 October 2008 (collectively, the “Drilling Contract”), Transocean agreed to supply a semi-submersible drilling rig (the “Rig”) and provide offshore drilling services to Burgundy. Article XI of the Drilling Contract provided as follows:

ARTICLE XI – ESCROW AGREEMENT

It shall be a condition precedent that prior to Commencement Date under this Contract, [Burgundy] and [Transocean] shall enter into an Escrow Agreement in the manner approved by [Transocean].

Pursuant to Article XI, Burgundy and Transocean entered into an escrow agreement on 31 October 2008 (the “Escrow Agreement”). The Escrow Agreement required Burgundy to deposit certain amounts into an escrow account following a specified timeline, failing which Transocean was entitled, among other things, to terminate the Drilling Contract. The material clauses were as follows:

Acknowledgement Subject to Burgundy depositing the Escrow Amount into the Escrow Account in accordance with clause 3.2, Transocean acknowledges that the requirements of Article XI of the Drilling Contract are satisfied by the execution of this Agreement by Burgundy and Transocean.

Notwithstanding any other provision of this Agreement or the Drilling Contract, in the event that Burgundy fails to deposit the Escrow Amount into the Escrow Account in accordance with clause 3.2, Transocean shall have the right to suspend the work while simultaneously accruing the Standby rate under the Drilling Contract and/or terminate the Drilling Contract.

...

Escrow Amount Burgundy will cause to be deposited into the Escrow Account the following amounts:

(a) 30 days prior to the planned Commencement Date or by December 15, 2008 whichever is earlier, Burgundy shall deposit the sum of US$16,500,000 (calculated as the Operating Rate multiplied by thirty (30) days) into the Escrow Account; and on the Commencement Date, Burgundy shall again deposit the same amount into the Escrow Account and (b) thereafter, on each day which is a multiple of thirty (30) days from the date of the second deposit in accordance with clause 3.2 (a) above or from the Commencement Date, until the total amount deposited by Burgundy in accordance with this clause 3.2 is equal to the amount that is the Operating Rate multiplied by the entire anticipated maximum duration of the relevant Term, Burgundy shall further deposit into the Escrow Account the amount that is the Operating Rate multiplied by lesser of: (i) thirty (30) days (of the Term) or (ii) the number of days remaining in the Term if such number is less than 30 days,

(Escrow Amount) and provide documentary evidence of such deposit to Transocean.

[emphasis in original in bold; emphasis added in italics]

Burgundy failed to make the initial deposit of US$16.5m (the “Escrow Amount”) into the escrow account by 15 December 2008. One week later, by a letter dated 22 December 2008, Transocean informed Burgundy that: it was exercising its right under cl 2 of the Escrow Agreement to terminate the Drilling Contract with immediate effect; and Burgundy’s failure to deposit the Escrow Amount constituted a repudiatory breach of the Escrow Agreement which Transocean accepted as terminating the Escrow Agreement with immediate effect.

Burgundy replied the next day saying that it respected Transocean’s decision but that the parties should “cooperate and find a suitably workable solution”. However, nothing came out of this.

Transocean’s suit against Burgundy

On 29 January 2009, Transocean commenced Suit No 87 of 2009 (“S 87/2009”) against Burgundy for its breach or repudiation of the Escrow Agreement. In its Statement of Claim (Amendment No 2), Transocean claimed the following relief (amongst others): a declaration that Burgundy was in repudiatory breach of the Escrow Agreement; a declaration that the Drilling Contract had been validly terminated; damages in the sum of US$105,937,952, which represented Transocean’s loss of net profits under the Drilling Contract; in the alternative, damages in the sum of US$55,001.46, which represented Transocean’s wasted costs and expenses in entering into the Escrow Agreement; and further or in the alternative, damages to be assessed. Leave to serve the writ of summons out of jurisdiction on Burgundy, in the Philippines, was obtained on 15 April 2009.

On 5 June 2009, Burgundy applied for a stay of the proceedings in favour of arbitration pursuant to Art 25.1 of the Drilling Contract, which provided as follows:

Arbitration The following Dispute Resolution provision shall apply to this Contract.

(a) Any dispute, controversy or claim arising out of or in relation to or in connection with this Contract, including without limitation any dispute as to the construction, validity, interpretation enforceability, performance, expiry, termination or breach of this Contract whether based on contract, tort or equity, shall be exclusively and finally settled by arbitration in accordance with this Article XXV. Any Party may submit such a dispute, controversy or claim to arbitration by notice to the other Party.

…

(c) Unless otherwise expressly agreed in writing by the Parties to the arbitration proceedings:

… (ix) Indirect, consequential or exemplary damages (Including loss of profit, loss of production, etc.) shall not be allowed except those payable to third parties for which liability is allocated among the Parties by the arbitration award; …

The stay application was granted by an assistant registrar at first instance but the appeal against the order was allowed by Andrew Ang J (“Ang J”), whose decision is reported as Transocean Offshore International Ventures Ltd v Burgundy Global Exploration Corp [2010] 2 SLR 821 (“Transocean (Jurisdiction)”). Ang J held that Art 25.1 of the Drilling Contract did not apply to claims arising from Burgundy’s failure to pay the Escrow Amount into the escrow account in accordance with the terms of the Escrow Agreement. Instead, the Escrow Agreement was governed by a separate dispute resolution clause which subjected any legal action or proceedings relating to the Escrow Agreement to the “non-exclusive jurisdiction” of the Singapore courts: Jurisdiction (a) Each of the Parties irrevocably submits to and accepts generally and unconditionally the non-exclusive jurisdiction of the courts and appellate courts of Singapore with respect to any legal action or proceedings which may be brought at any time relating in any way to this Agreement. (b) Each of the Parties irrevocably waives any objection it may now or in the future have to the venue of any action or proceedings, and any claim it may now or in the future have that the action or proceeding has been brought in an inconvenient forum. The High Court’s decision was affirmed on appeal to this Court in Civil Appeal No 137 of 2009 (“CA 137/2009”) with no grounds issued.

Burgundy then filed its defence in which it pleaded that it was not liable because Transocean had breached various implied terms (which are not germane to this appeal). It further pleaded that even if Transocean was entitled to any damages under the Escrow Agreement, it was precluded from making any claim for consequential losses by reason of Art 19.1 of the Drilling Contract, which provides as follows:

...