Hai Jiao 1306 Ltd and others v Yaw Chee Siew

• Court: International Commercial Court (Singapore)
• Judge: Kannan Ramesh J
• Judgment Date: 13 July 2020
• Neutral Citation: [2020] SGHC(I) 16
• Citation: [2020] SGHC(I) 16
• Published date: 16 July 2020
• Plaintiff Counsel: Toh Kian Sing SC, Ting Yong Hong, Davis Tan Yong Chuan, Lau Chuan Ying, Rebekah, Wang Yufei, Yu Qianqian, Bhieman Anandakumar (Rajah & Tann Singapore LLP)
• Defendant Counsel: Clarence Lun Yaodong, Tan Yingxian, Selwyn, Giam Zhen Kai, Lim Jia Ying, Alicia Puah, Samuel Lim Jie Bin, Lin Yu Mei, Leng Ting Kun, Ammani Mathivanan (Foxwood LLC)
• Docket Number: Suit No 7 of 2018 (Consolidated with Suit Nos 8 and 9 of 2018)
• Hearing Date: 08 May 2020,20 November 2019,14 November 2019,14 February 2020,11 February 2020,18 November 2019,09 January 2020,13 November 2019,21 November 2019,19 November 2019,11 November 2019,12 November 2019,15 November 2019,10 January 2020
• Date: 13 July 2020
• Subject Matter: Best endeavours,Misrepresentation,Contract,Express terms,Breach,Contractual terms

Sir Henry Bernard Eder IJ (delivering the judgment of the court): Introduction

The plaintiffs are three special purpose vehicles controlled by ICBC Financial Leasing Co Ltd (“ICBCL”). Each of them is incorporated in the Marshall Islands. ICBCL is a state-owned company in the People’s Republic of China (“PRC”), and is a wholly-owned subsidiary of Industrial and Commercial Bank of China (“ICBC”). ICBCL is in the business of ship leasing with strong roots in the maritime and offshore industry.

The defendant, Mr Yaw Chee Siew (the “defendant” or “Mr Yaw”), is an individual who was at all material times the sole director and Executive Chairman of Otto Marine Limited (“OML”). OML was a Singapore-incorporated company originally listed on the main board of the Singapore Stock Exchange (“SGX”) until its delisting on 6 October 2016. At its heyday, OML controlled a large fleet of offshore vessels through its group of companies, collectively, the Otto Marine Group (“OM Group”). Following its delisting and until it entered liquidation on 5 October 2018, OML was wholly owned by Ocean International Capital Limited (“Ocean International”), a company incorporated in the British Virgin Islands which was beneficially owned by the defendant and of which the defendant was the sole shareholder and director.

In 2013 and 2014, ICBCL provided substantial financing to OML in relation to three super-large anchor handling tugs, ie, the “Go Phoenix”, “Go Pegasus” and “Go Perseus” (collectively, the “vessels”). The agreed financing was up to the value of US$255m, of which US$185.5m was paid by ICBCL to OML and the remaining US$69.5m was in the form of OML’s seller’s credit. In summary, the financing took the form of what was, in effect, a sale-and-leaseback of each of the vessels whereby each of the plaintiffs became registered owners of each of the vessels and then chartered them back to companies in the OM Group under separate bareboat charterparties. In summary: The Go Phoenix and the Go Pegasus were both chartered by the second plaintiff (ie, Hai Jiao 1207 Ltd) and the third plaintiff (ie, Hai Jiao 1307 Ltd) respectively to Otto Fleet Pte Ltd (“Otto Fleet”), a subsidiary of OML under separate bareboat charterparties both dated 26 July 2013 (respectively the “Go Phoenix BBC” and the “Go Pegasus BBC”). In addition, a corporate guarantee was issued by OML in favour of the second plaintiff and third plaintiff, guaranteeing as primary obligor the due and punctual performance by Otto Fleet of all its obligations under the two bareboat charterparties, including its payment of charter hire amongst other things. The Go Perseus was chartered by the first plaintiff (ie, Hai Jiao 1306 Ltd) to another separate entity within the OM Group, Go Offshore (L) Pte Ltd (“Go Offshore”) under a separate bareboat charterparty dated 26 December 2014 (the “Go Perseus BBC”). In addition, OML and Go Offshore’s parent company, Go Marine Group Pty Ltd (“Go Marine”), which was itself a wholly owned subsidiary of OML, extended a corporate guarantee jointly and severally in favour of the first plaintiff, guaranteeing as primary obligors the due and punctual performance by Go Offshore of all its obligations under the Go Perseus BBC. We refer to the Go Phoenix BBC, Go Pegasus BBC and the Go Perseus BBC collectively as the “BBCs”; Otto Fleet and Go Offshore collectively as the “Charterers”; OML and Go Marine collectively as the “Guarantors”; and the three corporate guarantees extended by OML and/or Go Marine in favour of each of the plaintiffs, as the case may be, collectively as the “guarantees”.

Thereafter, crude oil prices suffered a marked decline, leading to significant fluctuations in oil prices coupled with an overall deterioration in upstream capital expenditure of oil and gas projects. This in turn had knock-on effects, which included depressed demand for offshore vessels, shipbuilding and subsea services. The utilisation and charter hire rates of the vessels were also severely impacted by the sharp decline in oil prices. The result was that financial difficulties hit the Charterers as well as OML and its related entities.

As a result, the defendant was desirous of delisting OML so that it would be easier for him to personally fund the Charterers and the Guarantors in order to enable punctual performance of the payment obligations under the BBCs and the guarantees. However, delisting OML would be a breach of a term in each of the BBCs and therefore the plaintiffs’ consent was required.

Following various meetings and discussions in the course of mid-2016, the plaintiffs consented to the delisting of OML in consideration of the defendant agreeing to issue letters of support. These letters of support were drafted by ICBCL and sent to the defendant for his execution of the same (we subsequently refer to these letters as the “First Letters of Support”; see [54] below); they were subsequently amended, and eventually issued to the plaintiffs in September 2017 after extensive delay and protracted negotiations (in this amended form, the letters are subsequently referred to as the “Second Letters of Support”; see [140] below). The three Second Letters of Support were in identical form, but for the formal parts and provided in relevant parts as follows: To: [Hai Jiao 1207 Limited] [Hai Jiao 1306 Limited] [Hai Jiao 1307 Limited] From: Yaw Chee Siew, the majority shareholder and the Executive Chairman of Otto Marine Limited

Dear Sirs:

In consideration of your consent to the restructuring and potential delisting arrangement in relation to Otto Marine Limited (the “Guarantor”) and…… (the “Charterer”), and forbearance at your sole discretion towards the Charterer and/or Guarantor, I, Yaw Chee Siew, hereby issue to [Hai Jiao 1207 Limited] [Hai Jiao 1306 Limited] [Hai Jiao 1307 Limited] (the “Owner”) this Letter of Support that I will use best endeavours to support the Charterer and the Guarantor in meeting all obligations under or in relation to the Bareboat Charter Agreement between [Hai Jiao 1207 Limited] [Hai Jiao 1306 Limited] [Hai Jiao 1307 Limited] and the Charterer, and the relevant Guarantee issued by the Guarantor.

This Letter shall not be construed as a guarantee and/or an indemnity. This Letter is legally binding and its obligations enforceable in accordance with its terms. 1. At all times during the terms of this Letter: (a) Upon delisting of the Guarantor from SGX, I shall use best endeavours to continue to own and hold no less than 70% percent of the legal and beneficial title to all the shares of the Guarantor; (b) I shall use best endeavours to procure that the title, rights and interests in the shares of the Charterer’s Company are not pledged or in any way encumbered other than in accordance with the Bareboat Charter Agreement. 2. At all times during the term of this Letter, I shall use best endeavours to: (a) procure the Guarantor and Charterers to have sufficient liquidity to make timely payment of any amounts payable by the Guarantor and Charterers under or in respect of the Bareboat Charter Agreement and the Guarantee; and (b) procure the Guarantor and Charterers to remain solvent and a going concern at all times under the laws of the of its jurisdiction of incorporation or applicable accounting standards so long as any Charter Hire and/or any other obligations under or in respect of the Bareboat Charter Agreement and the Guarantee is outstanding. 3. If the Guarantor and Charterers at any time have insufficient liquidity or cashflow to meet any obligations under or in respect of the Bareboat Charter Agreement and the Guarantee as they fall due, I shall use best endeavours to procure for the Charterer (but shall in no way guarantee), before the relevant due date of the relevant obligations, sufficient funds by means as permitted by applicable laws and regulations so as to enable the Guarantor and Charterers to meet such obligations in full as they fall due. 4. Any rights and obligations which I have under this Letter will remain valid and binding notwithstanding any bankruptcy, receivership or liquidation of, or moratorium involving the Guarantor and Charterers. 5. This Letter shall remain in full force or effect so long as any obligation under or in respect of the Bareboat Charter Agreement or Guarantee remains outstanding. 6. This Letter and any non-contractual obligations arising out of or in connection with this Letter shall be governed by and construed in accordance with English law. 7. The terms of this Letter shall take effect retrospectively from 7 October 2016, and the parties shall be entitled to enforce their rights and obligations under the Letter from that date.

As stated above, OML was delisted on 6 October 2016. However, substantial amounts due under the BBCs remained unpaid. Thereafter, the first plaintiff eventually terminated the Go Perseus BBC on 15 November 2017; the second and third plaintiffs terminated the other two BBCs a little later on 31 January 2018. On 21 March 2018, OML was placed in judicial management. However, this failed, and OML subsequently entered liquidation on 5 October 2018. The result is that the plaintiffs have lost substantial sums of money and have outstanding claims including claims for loss of charter hire and damages.

The present proceedings were commenced by three separate writs of summons but were consolidated by order of court. In summary, the plaintiffs advance three main claims against the defendant personally viz: A claim for damages for breach of contract, ie, breach of what are said to be the obligations of the defendant as contained in the relevant letters of support – in particular, the obligation by the defendant to use “best endeavours” to support the Charterers and the Guarantors. A claim for damages for loss allegedly caused to the plaintiffs as a result of certain misrepresentations allegedly made by or...