Gulf Hibiscus Ltd v Rex International Holding Ltd and another

• Jurisdiction: Singapore
• Judge: Aedit Abdullah JC
• Judgment Date: 24 August 2017
• Neutral Citation: [2017] SGHC 210
• Court: High Court (Singapore)
• Docket Number: Suit No 412 of 2016 (Registrar’s Appeal No 348 of 2016, Summons No 5355 of 2016 and Summons No 5691 of 2016)
• Published date: 31 August 2017
• Year: 2017
• Hearing Date: 21 December 2016,16 March 2017,14 December 2016,20 October 2016
• Plaintiff Counsel: Jason Chan and Daniel Seow (instructed) (Allen & Gledhill LLP) and Cai Enhuai Amos (instructing) (Tito Isaac & Co LLP)
• Defendant Counsel: Jaikanth Shankar and Bryan Leow (Drew & Napier LLC)
• Subject Matter: Arbitration,Stay of court proceedings,Inherent Jurisdiction,Agreement,Scope,Civil Procedure,Pleadings,Amendment
• Citation: [2017] SGHC 210

Aedit Abdullah JC: Introduction

This is an appeal from the decision of the learned Assistant Registrar (“the AR”), who granted a stay of court proceedings on the basis that the matters raised in the court proceedings were covered by an arbitration clause.

Background facts

Lime Petroleum PLC (“Lime PLC”) is an Isle of Man company. It has three shareholders (“the Shareholders”), namely the plaintiff, Gulf Hibiscus Limited (“the Plaintiff”), which is a Malaysian company, Rex Middle East Limited (“RME”) and Schroder & Co Banque S.A. (“Schroder”). The first defendant, Rex International Holding Limited (“the 1st Defendant”) is the ultimate holding company of RME. The second defendant, Rex International Investments Pte Ltd (“the 2nd Defendant”) is the intermediate holding company of RME, and a wholly owned subsidiary of the 1st Defendant. Both the 1st and 2nd Defendants are locally incorporated companies and will collectively be referred to as “the Defendants”.

The issued shares in Lime PLC are currently held by the Shareholders in the following manner: Plaintiff – 35%; RME – 56.4%; and Schroder – 8.6%.

Lime PLC has a number of subsidiaries, including a wholly owned company incorporated in the British Virgin Islands (“BVI”), Lime Petroleum Ltd (“Lime BVI”). Lime BVI in turn owns shares in the following BVI companies: Dahan Petroleum Limited (“Dahan”), Zubara Petroleum Limited (“Zubara”), Masirah Oil Limited (“MOL”) and Baqal Petroleum Limited. Lime PLC also owns shares in Lime Petroleum Norway A.S. (“Lime Norway”), a Norwegian company.

A Shareholders’ Agreement dated 24 October 2011 was entered into between the Plaintiff, RME (then known as Rex Oil & Gas Ltd), Schroder and Lime PLC (“the SHA”).¹ Clause 1(H) of the SHA provided that the parties had entered into the agreement to “regulate the affairs of” Lime PLC and “their respective rights and obligations as shareholders of” Lime PLC.² Most pertinently, cl 25.2 of the SHA provides for a dispute resolution procedure with an arbitration mechanism (“the arbitration clause”).³

There are, inter alia, two other relevant agreements. First, the Project Management and Technical Services Agreement dated 24 October 2011 (dated the same date as the SHA) (“the PMTSA”), which was entered into between Lime PLC and Hibiscus Oilfield Services Limited (“HOSL”). HOSL is an affiliate company of the Plaintiff’s parent company. Under the PMTSA, HOSL was appointed as a service provider for Lime PLC wherein it was tasked to prepare annual work programmes or plans and budgets (“the WPBs”) for, inter alia, MOL. The WPBs would then be submitted to Lime PLC’s board, the approval of which would represent a commitment by the Shareholders to fund specific items within the WPBs.

The second relevant agreement is the Operating Services Agreement dated 22 March 2012 (“OSA”) that was entered into between Lime PLC and MOL. In 2014, the Ministry of Oil and Gas in Oman alleged that MOL had not complied with good oilfield practices with regard to the drilling of an offshore exploration well. MOL relied on this allegation to terminate the OSA by way of a letter dated 28 February 2015.

Although Lime PLC initially owned the whole of Lime Norway, its shareholding was subsequently reduced. The Plaintiff alleged this was the result of various wrongs committed by the Defendants (“the Lime Norway Allegations”). Allegations were also made by the Plaintiff in respect of the conduct of the Defendants, their associated companies and associated persons. The Plaintiff commenced an action by way of Suit 412 of 2016 (“S 412/2016”). The Defendants sought a stay of proceedings in S 412/2016 in light of the court’s exercise of case management powers, relying on the arbitration clause in the SHA.

There are or were other connected proceedings in the Isle of Man and Norway (“the foreign proceedings”): the Isle of Man matter concerned a derivative action against the directors of Lime PLC; and the Norwegian proceedings apparently involved a putative action against officers of Lime Norway.

A number of adjournments were sought and granted, particularly in light of the foreign proceedings.

Decision of the AR

Before the AR, the Defendants relied on two separate bases in their application to stay proceedings in S 412/2016. First, they sought to invoke the court’s inherent jurisdiction to stay proceedings for case management interests. On this basis, they submitted that the claims raised in S 412/2016 were premised on or overlapped with the alleged breaches of the disputes arising out of the SHA. As such, the claims should be referred to arbitration in accordance with the SHA and S 412/2016 should be stayed pending the arbitration. Second, they submitted that the institution of S 412/2016 was an abuse of process, which justified for a stay of the proceedings.

The AR granted the Defendants’ application for stay on the first basis but found that the second basis was not made out, issuing oral grounds for his decision.

The AR found that on the pleadings as they stood, the legal and factual disputes in the Plaintiff’s claims overlapped and were intertwined with those concerning breaches of the SHA. The conspiracy allegations were founded on events concerning the dilution of Lime PLC’s shareholding in Lime Norway, and thus involved breaches of the SHA, though there were some issues which were technically unrelated. The claims in relation to the various subsidiaries of Lime PLC were also similarly founded on breaches of the SHA. As for the unjust enrichment, wrongful interference and inducement for breach of contract claims, these were also found to be based on breaches of the SHA. Given the significant overlap, the close relationship between the parties in the two proceedings, the duplication of witnesses, the risk of inconsistent findings, and there being no bar to the claims in S 412/2016 being pursued in arbitration in accordance with the SHA, a stay was ordered.

The AR noted that the Plaintiff’s counsel wished to pursue its claims as pleaded, and there was no intention to amend its pleadings. Given this indication, the AR did not find it necessary to give the Plaintiff an opportunity to amend its pleadings.

As for the Defendants’ argument that there was, alternatively, an abuse of process, the AR found that there was insufficient evidence of this.

The current applications

On 29 September 2016, the Plaintiff filed an appeal against the AR’s decision to grant a stay of court proceedings (“RA 348/2016”) and subsequently applied to amend its pleadings on 3 November 2016 (“SUM 5355/2016”).

The Defendants then sought leave to file a further affidavit on 24 November 2016 (“SUM 5691/2016”).

After hearing the parties, I allowed the Plaintiff to amend its pleadings and consequently granted leave to the Defendants to adduce further evidence by way of an affidavit. However, I reserved my decision with regard to the stay of court proceedings in RA 348/2016.

Plaintiff’s case

In SUM 5355/2016, the Plaintiff argued that the proposed amendments to the pleadings should be permitted as no prejudice would result from them. The Plaintiff submitted that the AR had erred in not inviting an amendment, as was required by the Court of Appeal’s decision in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2016] 1 SLR 373 (“Tomolugen”). With respect to SUM 5691/2016, it was argued that the Defendants should not be allowed to raise new evidence on appeal and the further affidavit should thus not be admitted.

Following the amendments to the pleadings by way of SUM 5355/2016, the Plaintiff submits that there is no longer any basis to order a stay. The Plaintiff argues that the amendments removed all reliance on breaches of the SHA. The SHA is thus irrelevant in respect of the amended claims.

The Plaintiff agrees with the Defendants and the observations made in Tomolugen that the relevant question is whether the substance of the controversy is covered by the arbitration clause. On the facts however, the Plaintiff argues that the scope of the SHA does not cover the amended claims.

The Plaintiff further submits that it cannot be compelled to bring arbitration proceedings against a specific party that it does not intend to sue. This approach is evident from some of the cases relied upon by the Defendants (including Tomolugen) where the plaintiff had already initiated arbitration and/or court proceedings against a party, with whom the plaintiff has an arbitration agreement, thereby evincing an intention to bring legal proceedings against this party.

Furthermore, it is significant that neither the Plaintiff nor the Defendants are parties to the PMTSA or OSA. Thus, the Plaintiff argues that the Defendants cannot invoke the arbitration clauses in either agreements to stay the action.

In addition, the Plaintiff asserts that the Defendants’ arguments in relation to the abuse of process and multiplicity of proceedings are not made out. According to the Plaintiff, the Lime Norway Allegations do not raise issues of abuse of process, or create multiplicity of proceedings. The appropriate standard was noted in Chee Siok Chin and others v Minister for Home Affairs and another [2006] 1 SLR 582 – a high threshold for abuse of process or vexatiousness is to be made out and clear evidence is required. For abuse of process to be made out, it must also be shown that unmeritorious claims are being made: see Chua Choon Lim Robert v MN Swami and others [2000] 2 SLR 589.

The Plaintiff’s position is that no abuse of process arises on the facts. There is no clear evidence of abuse and the multiple suits are not intended to apply maximum pressure. The Plaintiff also highlights the differences between the proceedings in Singapore, Isle of Man and Norway. The Isle of Man proceedings concern derivative claims, and no substantive claims are being pursued there. In...