Burgundy Global Exploration Corporation v Transocean Offshore International Ventures Ltd

JurisdictionSingapore
CourtCourt of Three Judges (Singapore)
Judgment Date14 May 2014
Date14 May 2014
Docket NumberCivil Appeals Nos 48 and 55 of 2013

Court of Appeal

Sundaresh Menon CJ

,

VK Rajah JA

and

Judith Prakash J

Civil Appeals Nos 48 and 55 of 2013

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

Rakesh Vasu and Winnifred Gomez (Gomez & Vasu LLC) for the appellant in CA 48/2013

Ong Ying Ping, Lim Seng Siew and Susan Tay Ting Lan (OTP Law Corporation) for the appellants in CA 55/2013

Toh Kian Sing SC, Ian Teo and Jonathan Wong (Rajah & Tann LLP) for the respondent in CA 48/2013 and CA 55/2013.

Amin Rasheed Shipping Corp v Kuwait Insurance Co [1984] AC 50 (refd)

CIGNA Worldwide Insurance Co v ACE Ltd (13 May 2013) (Cayman Islands) (refd)

Dar Al Arkan Real Estate Development Co v Majid Al-Sayed Bader Hashim Al-Refai [2013] EWHC 4112 (QB) (refd)

Goh Nellie v Goh Lian Teck [2007] 1 SLR (R) 453; [2007] 1 SLR 453 (refd)

Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 (refd)

HRH Maharanee Seethadevi Gaekwar of Baroda v Wildenstein [1972] 2 QB 283 (refd)

JIO Minerals FZC v Mineral Enterprises Ltd [2011] 1 SLR 391 (refd)

Lee Tat Development Pte Ltd v MCST Plan No 301 [2005] 3 SLR (R) 157; [2005] 3 SLR 157 (folld)

Mackinnon v Donaldson, Lufkin and Jenrette Securities Corp [1986] Ch 482 (refd)

Masri v Consolidated Contractors International (UK) Ltd (No 4) [2010] 1 AC 90 (distd)

National Justice Compania Naviera SA v Prudential Assurance Co Ltd (No 2) [2000] 1 WLR 603 (refd)

Panwah Steel Pte Ltd v Koh Brothers Building & Civil Engineering Contractor (Pte) Ltd [2006] 4 SLR (R) 571; [2006] 4 SLR 571 (folld)

PT Bakrie Investindo v Global Distressed Alpha Fund 1 Ltd Partnership [2013] 4 SLR 1116 (refd)

Satef-Huttenes Albertus Sp A v Paloma Tercera Shipping Co SA (The Pegase) [1981] 1 Lloyd's Rep 175 (distd)

Seagull Manufacturing Co Ltd, Re [1993] Ch 345 (refd)

Serious Organised Crime Agency v Perry [2013] 1 AC 182 (refd)

Transocean Offshore International Ventures Ltd v Burgundy Global Exploration Corp [2010] 2 SLR 821 (refd)

Tucker (RC) (a bankrupt) , Re; ex parte Tucker (KR) [1990] Ch 148 (refd)

Vitol SA v Capri Marine Ltd [2009] Bus LR 271; [2008] EWHC 378 (Comm) (refd)

International Arbitration Act (Cap 143 A, 2002 Rev Ed) s 6 (1)

Interpretation Act (Cap 1, 2002 Rev Ed) s 9 A

Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 11 r 8 (1) , O 48 r 1 (consd) ;O 2 r 1 (2) , O 11 r 8, O 24 r 6 (2) , O 26 A r 1 (2) , O 38 r 16 (2) , O 45 r 5, O 48 r 1 (2) , O 62 r 5

Rules of the Supreme Court 1970, The O 11 r 9 (4)

Rules of the Supreme Court (Amendment No 3) Rules 1991 (S 532/1991)

Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed) s 16 (1)

Bankers' Books Evidence Act 1879 (c 11) (UK) s 7

Bankruptcy Act 1914 (c 59) (UK) ss 25 (1) , 25 (6) , 122

Civil Procedure Rules 1998 (SI 1998 No 3132) (UK) rr 6.20 (9) , 6.30 (2) (now 6.38 (1) ) , 71.2, 71.2 (4) , 71.2 (5) , 81.4

Grand Court Rules 1995 (Revised Edition) (Cayman Islands) O 11 r 9 (2)

Insolvency Act 1986 (c 45) (UK) ss 133, 133 (1)

Proceeds of Crime Act 2002 (c 29) (UK) ss 357, 357 (4) , 357 (5) , 359 (1)

Rules of the Supreme Court 1965 (UK) O 11 r 9 (4)

Civil Procedure—Judgment and orders—Whether examination of judgment debtor orders could be made against company officers resident overseas—Order 48 r 1 Rules of Court (Cap 322, R 5, 2006 Rev Ed)

Civil Procedure—Service—Whether examination of judgment debtor orders could be served out of jurisdiction without leave of court—Circumstances in which leave would be granted—Order 11 r 8 (1) Rules of Court (Cap 322, R 5, 2006 Rev Ed)

Contract—Remedies—Damages—Parties entering into two separate but interrelated contracts with different dispute resolution clauses—Breach of second contract entitling innocent party to terminate first contract—Innocent party terminating first contract upon breach of second contract—Whether innocent party could recover loss of profits under first contract as damages in action for breach of second contract

The appellant in CA 48/2013 (‘Burgundy’) entered into two separate but interrelated contracts with the respondent (‘Transocean’). Under the first contract (‘the Drilling Contract’), which was governed by an arbitration clause and included certain exclusion causes, Transocean agreed to supply a drilling rig and provide offshore drilling services to Burgundy in return for payment. Under the second contract (‘the Escrow Agreement’), which was governed by a jurisdiction clause in favour of the courts of Singapore, Burgundy agreed to secure its payment obligations under the Drilling Contract by depositing certain amounts into an escrow account following a specified timeline, failing which Transocean was entitled, among other things, to terminate the Drilling Contract.

When Burgundy failed to make the initial deposit required under the Escrow Agreement, Transocean exercised its right to terminate the Drilling Contract and commenced proceedings against Burgundy in the High Court for breach of the Escrow Agreement (leave to serve the writ of summons out of jurisdiction on Burgundy in the Philippines was obtained). Relying on the arbitration clause in the Drilling Contract, Burgundy applied for a stay of proceedings, but was unsuccessful. Transocean eventually obtained summary judgment against Burgundy and damages were assessed by an assistant registrar in the sum of US$105,536,922 plus interest, which represented Transocean's loss of profits under the Drilling Contract.

Transocean then applied for and obtained examination of judgment debtor orders (‘the EJD Orders’) under O 48 r 1 of the Rules of Court (Cap 322, R 5, 2006 Rev Ed) (‘ROC’) against the directors of Burgundy (‘the Directors’). Although the Directors were resident in the Philippines, Transocean did not apply for leave under O 11 r 8 (1) to serve the EJD Orders out of jurisdiction. After several unsuccessful attempts at serving the EJD Orders on the Directors in the Philippines, Transocean applied for and obtained leave to effect substituted service of the EJD Orders by serving them on Burgundy's Singapore lawyers instead. The Directors applied to set aside the order for substituted service but their application was dismissed by an assistant registrar.

Burgundy appealed against the award of damages while the Directors appealed against the assistant registrar's refusal to set aside the EJD Orders. Upon the dismissal of their appeals by the High Court, both Burgundy and the Directors appealed to the Court of Appeal. Burgundy based its appeal on two main grounds: (a) Transocean's claim for loss of profits under the Drilling Contract was subject to arbitration; and (b) liability for loss of profits was excluded under the Drilling Contract. As for the Directors, they argued that the court should follow the English House of Lords decision of Masri v Consolidated Contractors International (UK) Ltd (No 4) [2010] 1 AC 90 (‘Masri’), which held that under r 71.2 of the Civil Procedure Rules 1998 (SI 1998 No 3132) (UK) (‘CPR’) (which was the English counterpart of O 48 r 1 of the ROC), EJD orders could not be issued against company officers who were resident overseas. The Directors further argued that EJD orders could not be served out of jurisdiction on a foreign company officer.

Held, allowing the appeals:

(1) The main issue in CA 48/2013 was whether Transocean could recover damages for losses due to the termination of the Drilling Contract under a claim that was based on breach of the Escrow Agreement, or whether such claims were subject to arbitration under Art 25.1 of the Drilling Contract. Contrary to Transocean's submission, the dismissal of Burgundy's stay of proceedings application did not render this issue res judicata, as the sole issue in that application was whether Transocean's action should be stayed in favour of arbitration when its cause of action was based on the Escrow Agreement. The court did not consider the further question of whether Transocean could recover the specific losses it claimed to have suffered given its pleaded cause of action, which would have been more relevant at the assessment of damages stage: at [32] and [42] .

(2) Transocean's performance interest under the Escrow Agreement was to obtain security for Burgundy's performance of its payment obligations under the Drilling Contract. This had to not be confused with Transocean's performance interest under the Drilling Contract, which was to make profits from carrying out the contracted services. The true damage caused by Burgundy's breach of the Escrow Agreement was the loss of its security, and not the loss of profits under the Drilling Contract. The latter loss was in fact the result of Transocean's decision not to perform the Drilling Contract without security, and however reasonable a decision that might appear to be, the proper cause of action for recovering those losses was a claim under the Drilling Contract: at [45] .

(3) The fact that cl 3.2 of the Escrow Agreement entitled Transocean to terminate the Drilling Contract upon a breach of the Escrow Agreement did not change the preceding analysis. The contractual right to terminate the Drilling Contract upon a breach of the Escrow Agreement was just that - a right to terminate; it did not serve to import all the obligations under Drilling Contract into the Escrow Agreement and allow Transocean to treat them as a single composite contract. This was a matter of some significance where, as here, each contract had unique features including distinct dispute resolution mechanisms: at [46] .

(4) Transocean's claim for loss of profits required it to establish that: (a) there had been a breach of the Drilling Contract, and (b) liability for loss of profits was not excluded under Art 19.1 or possibly Art 25.1 (c) (ix) of the Drilling Contract. These were plainly matters that, under Art 25.1 (a), were reserved for arbitration. Transocean could not circumvent the...

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3 cases
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