Oro Negro Drilling Pte Ltd and others v Integradora de Servicios Petroleros Oro Negro SAPI de CV and others and another appeal (Jesus Angel Guerra Mendez, non-party)

• Judge: Steven Chong JA
• Judgment Date: 27 November 2019
• Neutral Citation: [2019] SGCA 74
• Citation: [2019] SGCA 74
• Date: 27 November 2019
• Published date: 12 December 2019
• Hearing Date: 12 September 2019,09 September 2019
• Plaintiff Counsel: Toby Landau QC and Calvin Liang (Instructed Counsel) (Essex Court Chambers Duxton (Singapore Group Practice)), Ajaib Haridass, Mohammed Haireez bin Mohameed Jufferie, Ragini d/o Parasuram and C Sivah (Haridass Ho & Partners)
• Docket Number: Civil Appeals No 194 of 2018 and 105 of 2019
• Defendant Counsel: Cavinder Bull SC, Christopher Chong, Rajaram Vikram Raja, Lua Jie Ying Kelly and Sam Yi Ting (Drew & Napier LLC),Thio Shen Yi SC and Md Noor E Adnaan (TSMP Law Corporation)
• Court: Court of Appeal (Singapore)
• Subject Matter: Conflict of Laws,Directors,Incorporation of company's constitution into director's contract of service,Parties,Joinder,Terms of appointment,Injunctions,Natural Forum,Companies,Civil Procedure,Corporate governance and internal management of Singapore-incorporated companies,Prohibitory injunction to restrain breach of negative covenant

Steven Chong JA (delivering the grounds of decision of the court):

The pursuit of foreign proceedings can, in limited circumstances, be restrained by different types of injunctive relief. However, not all injunctions which have the effect of restraining the pursuit of or participation in foreign proceedings can be classified as anti-suit injunctions. The difference in classification is not just a matter of form but a distinction which carries crucial significance. A proper classification of the precise nature of the injunction bears on the correct appreciation of the issues before the court which in turn impacts on the correct application of the governing legal principles. The converse is equally true.

In the court below, the converse in fact occurred. The High Court Judge (“the Judge”), was persuaded by the respondents to examine the ex parte interim injunctions on the basis that they were in substance anti-suit injunctions to restrain the commencement and continuation of insolvency proceedings (“the concurso proceedings”) purportedly commenced on behalf of the appellants, all Singapore incorporated companies, before the insolvency court in Mexico. However, in truth, the ex parte interim injunctions were not obtained to restrain the concurso proceedings per se but to enforce a negative covenant in the appellants’ constitutions. Each of the appellants’ constitutions expressly provided that its directors were not to carry into effect any petition to initiate concurso proceedings unless this was approved by an independent director. It was common ground that no such approval was procured. In fact, the independent director was not even notified of the resolution prior to the commencement of the concurso proceedings. Under these circumstances, the injunctions sought by the appellants were to restrain the respondents from purporting to represent them in the concurso proceedings in light of the breach of this negative covenant. As such, comity considerations which typically take centre stage in deciding whether to grant an anti-suit injunction were strictly not engaged.

Once the precise nature of the relief was properly identified, it became self-evident that the crucial issue was whether the appellants had a good arguable case against the respondents as regards the breach of the negative covenant. In that respect, the importance of Singapore law to determine the capacity of and issues relating to the internal governance of the appellants, as Singapore incorporated companies, to commence the concurso proceedings would have been apparent for the purposes of determining whether service outside jurisdiction should have been granted and in particular, whether Singapore was clearly the most appropriate forum to hear the dispute. As the Judge did not attach sufficient weight to the importance of Singapore law in determining the key issue in the action and Singapore as the appellants’ place of incorporation, the Judge had misdirected herself. She found that the appellants’ reliance on their being Singapore incorporated companies and the application of Singapore law for the purposes of Originating Summons No 126 of 2018 (“OS 126”) were “contrived”, “an afterthought” and “tactical” when in fact, it was as a matter of law and right.

These appeals concerned the Judge’s decision in Oro Negro Drilling Pte Ltd and others v Integradora de Servicios Petroleros Oro Negro, SAPI de CV and others [2019] SGHC 35 (“the GD”) to set aside: (a) an order granting the appellants leave to serve OS 126 out of Singapore (“the Overseas Service Order”); and (b) ex parte interim injunctions granted in the appellants’ favour against the first to third respondents (“the Interim Injunctions”). After hearing the parties on 9 September 2019, we allowed Civil Appeals No 194 of 2018 and 105 of 2019 (“the appeals”) on 12 September 2019 with brief oral grounds. We now elaborate on the grounds for our decision.

Facts

The appellants were a group of Singapore-incorporated companies which comprised of: Oro Negro Drilling Pte Ltd (“Oro Negro”) Oro Negro Primus Pte Ltd (“Primus”) Oro Negro Laurus Pte Ltd (“Laurus”) Oro Negro Fortius Pte Ltd (“Fortius”) Oro Negro Decus Pte Ltd (“Decus”) Oro Negro Impetus Pte Ltd (“Impetus”)

Oro Negro was the holding company and sole shareholder of all the other appellants. It was in turn solely owned by the first respondent, Integradora de Servicios Petroleros Oro Negro, SAPI de CV (“Integradora”). Oro Negro had no business activities of its own and had no employees. It paid its taxes in Mexico and its sole purpose was to serve as a holding company for the second to sixth appellants, and to receive funds from those companies.¹ Each of the other appellants owned an offshore jack-up drilling rig named after their respective owners (“the Rigs”). For this reason, we shall refer to these other appellants collectively as “the Rig Owners”. The Rigs were deployed in Mexican waters.²

Integradora was a Mexican-incorporated company that was in the business of providing integrated and diversified oilfield services.³ All of Integradora’s operations were located in Mexico, and its sole client was the Mexican state-owned petroleum company, Petroleos Mexicanos (“Pemex”).⁴ Integradora provided its services to Pemex through Perforadora Oro Negro S de RL de CV (“Perforadora”), a Mexican-incorporated entity which was 99.25% owned by Integradora.

Perforadora was the bareboat charterer of the Rigs. It in turn sub-chartered the Rigs (“the Pemex Charters”) to Pemex’s subsidiaries.⁵ Pursuant to a Mexican law-governed trust agreement which was also subject to the Mexican court’s exclusive jurisdiction (“the Mexican Trust”),⁶ income from the Pemex Charters were paid to Perforadora through trust accounts with a Mexican subsidiary of Deutsche Bank (“DB Mexico”). After receiving its income from the Pemex Charters, Perforadora would deduct its operating expenses and overheads before distributing the balance to the Rig Owners. The Rig Owners would then deduct their respective charter fees before transferring the balance to Oro Negro.⁷

The second and third respondents, Mr Alonso Del Val Echeverria (“Mr Alonso”) and Mr Gonzalo Gil White (“Mr Gonzalo”) (collectively, “the former directors”) were directors of the appellants at the material time. They were eventually removed from office in September 2017, though we note for the moment that they have challenged the validity of their removal under Mexican law. We shall elaborate on this and the circumstances surrounding their removal subsequently. At the time they were directors of the appellants, Mr Gonzalo was a director of Integradora while Mr Alonso was authorised to execute important documents on Integradora’s behalf.⁸

For convenience, we shall henceforth refer to Integradora, Mr Alonso and Mr Gonzalo, the three respondents herein, collectively as “IAG”.

The non-party in this appeal was Mr Jesus Angel Guerra Mendez (“Mr Mendez”), a lawyer in Guerra Gonzalez y Asociados SC (“Guerra”), a Mexican law firm. He (and IAG) claimed that the appellants had appointed him and other lawyers in his firm as their attorneys pursuant to powers of attorney (“POAs”) granted by the appellants on or around 31 August 2017.⁹ It suffices for the moment to note that the appellants challenged his appointment and authority to act on their behalf. Mr Mendez became a non-party to this appeal as he had filed an application to vary the Interim Injunctions that the Judge had initially granted (see below at [38]).

Background to the dispute The financing of the Rigs

The Rigs’ purchase and operation was financed, inter alia, by bonds worth approximately US$940m (“the Bonds”) issued by Oro Negro to various bondholders pursuant to an agreement dated 24 January 2014 (“the Bond Agreement”) between Oro Negro and Nordic Trustee ASA (“NT”), a Norwegian company that acted as the bond trustee on the bondholders’ behalf.¹⁰ The Bond Agreement was governed by Norwegian Law. Although it was subsequently amended and re-stated,¹¹ none of the amendments were material for the purposes of these appeals. We only need to highlight the following clauses of the Bond Agreement.

First, cl 13.5(a) of the Bond Agreement required Oro Negro to procure the amendment of the appellants’ constitutions to provide: (a) NT with a right to appoint an independent director to each of the appellants’ board of directors; and (b) the independent director with a veto over any attempt by the appellants to place themselves in any insolvency-related proceedings. It also provided that the appellants were not to amend their constitutions in a manner contrary to these two requirements.¹²

Second, and significantly, cl 13.5(g) of the Bond Agreement also provided, inter alia, that Oro Negro was not to change its place of incorporation.

Finally, cl 15.1(g) (“the EOD Clause”) gave NT the right to declare the Bonds to be in default if the appellants, Integradora, or Perforadora took any steps to liquidate themselves or place themselves in insolvency-related proceedings.¹³

As part of the financing arrangement, fixed charges over the appellants’ shares were also granted in favour of NT through deeds between Integradora and NT and Oro Negro and NT (“the Share Charges”).¹⁴ The Share Charges were governed by Singapore law and were subject to the Singapore court’s exclusive jurisdiction.¹⁵ For present purposes, it would suffice to highlight that cl 4.7 of the Share Charges provided that: (a) the chargors shall comply with cl 13.5(a) of the Bond Agreement (see above at [13]) as though it were set out expressly in the Share Charges; and (b) that they would procure the independent director’s appointment upon receiving a written notice from NT to that effect.¹⁶

The amendments to the appellants’ constitutions

A raft of amendments to the appellants’ constitutions were passed in April 2016. However, only one amendment was...