Oro Negro Drilling Pte Ltd and others v Integradora de Servicios Petroleros Oro Negro, SAPI de CV and others

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu SJ
• Judgment Date: 15 February 2019
• Neutral Citation: [2019] SGHC 35
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 126 of 2018 (Summons Nos 2473, 2960 and 4396 of 2018)
• Published date: 12 December 2019
• Year: 2019
• Hearing Date: 12 September 2018,08 November 2018,13 September 2018,11 September 2018,14 September 2018,12 October 2018
• Plaintiff Counsel: Ajaib Haridass, Mohammad Haireez Bin Mohameed Jufferie and Ragini d/o Parasuram (Haridass Ho & Partners), Calvin Liang (instructed counsel
• Defendant Counsel: Cavinder Bull SC, Rajaram Vikram Raja and Lua Jie Ying, Kelly (Drew & Napier LLC),Thio Shen Yi SC and Md Noor E Adnaan (TSMP Law Corporation)
• Subject Matter: Civil Procedure,Injunctions,Appeals,Leave
• Citation: [2019] SGHC 35

Lai Siu Chiu SJ: Introduction

On 30 January 2018, this court granted an interim injunction (“the Order of Court dated 30 January”) against the three defendants on behalf of the six plaintiffs in Originating Summons No 126 of 2018 (“the OS”). The Order of Court dated 30 January, inter alia, restrained the defendants from taking or continuing legal action in Mexico or elsewhere, on behalf of the plaintiffs. The plaintiffs’ application was made ex parte by way of Summons No 482 of 2018 (“the Injunction Application”).

On 30 May 2018, by way of Summons No 2473 of 2018 (“the Setting Aside Application”), the three defendants applied, inter alia, to set aside the Order of Court dated 30 January.

Subsequently, on 28 June 2018, a non-party to the OS, one Jesús Ángel Guerra Méndez (“Mendez”), who is a lawyer from the Mexican law firm of Guerra González y Asociados S.C. (“Guerra”), sought by Summons No 2960 of 2018 to vary the Order of Court dated 30 January (“the Variation Application”). Mendez sought, inter alia, a declaration that the powers of attorney (“the POAs”) granted to members of Guerra by the plaintiffs are not subject to the injunction contained in the Order of Court dated 30 January. In the alternative, Guerra sought to limit the jurisdiction of the Order of Court dated 30 January to the extent that it is enforceable only if a court in the relevant country so declares it to be enforceable.

Both the Setting Aside and the Variation Applications came up for determination before this court. After a prolonged hearing spread over four days, the court granted the Setting Aside Application and discharged the orders made under the Order of Court dated 30 January. This included the order for service outside jurisdiction on the defendants in Mexico. Having done that, the orders prayed for in the Variation Application became academic. Consequently, the court made no orders on the prayers sought therein but awarded Mendez his costs.

The plaintiffs are dissatisfied with this court’s decision and have filed an appeal in Civil Appeal No 194 of 2018 against the orders (a) setting aside the leave granted for service outside Singapore; (b) the declaration that a Singapore court has no jurisdiction over the defendants in respect of the reliefs sought in the OS; and (c) the costs order of $40,000 (excluding disbursements) to the defendants.

The plaintiffs also applied by way of Summons No 4396 of 2018 (“the Leave Application”) pursuant to s 34(2)(d) of the Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed) (“SCJA”) for leave to appeal against the setting aside of the ex parte injunction and the costs of $20,000 (excluding disbursements) awarded to Mendez.

The Leave Application in [6] was heard and dismissed by this court on 8 November 2018. The plaintiffs have filed Civil Appeal Originating Summons No 41 of 2018 to appeal against the court’s refusal to grant leave to appeal.

In the light of the plaintiffs’ two appeals, I now set out the reasons for this court’s decisions in the Setting Aside and the Leave Applications.

The Facts The parties

The six plaintiffs in this case are all Singapore-incorporated companies.¹ Oro Negro Drilling Pte Ltd (“Oro Negro”), the first plaintiff, is the holding company of the other five plaintiffs. Oro Negro Decus Pte Ltd (“Decus”), Oro Negro Fortius Pte Ltd (“Fortius”), Oro Negro Impetus Pte Ltd (“Impetus”), Oro Negro Laurus Pte Ltd (“Laurus”) and Oro Negro Primus Pte Ltd (“Primus”) are the second to sixth plaintiffs respectively. The second to sixth plaintiffs each own jack-up oil rigs (“the rigs”) which bear the names set out in parentheses above.² Henceforth, the second to sixth plaintiffs will be referred to collectively as “the rig owners” and all six plaintiffs would be referred to collectively as “the plaintiffs”.

The rigs were either built in Singapore or purchased from Singapore-based shipbuilders. After their construction or purchase, they were all relocated to Mexico and are currently lying in Mexican waters. The rigs are collectively worth approximately between US$1.2 and US$1.6bn. The rigs are estimated by the defendants to be worth between US$1.4 and US$1.6bn.³ At the Injunction Application, the plaintiffs estimated that the rigs are worth US$1.2bn.⁴

The first defendant Integradora De Servicios Petroleros Oro Negro SAPI De CV (“Integradora”) is the sole shareholder of Oro Negro. It is a company incorporated in Mexico and is in the business of providing integrated and diversified oilfield services. The first defendant’s operations are centred in Mexico and its sole client is the Mexican state-owned petroleum company known as Petroleos Mexicanos (“Pemex”). The first defendant provides services to Pemex through its Mexican-incorporated subsidiary Perforadora Oro Negro S de RL de CV (“Perforadora”).⁵

The relationship between the various companies and Pemex is best seen in the diagram below:⁶

The second and third defendants were directors of the plaintiffs until their removal in September 2017 (see [26]).⁷ It suffices to note at this juncture that the validity of their removal was disputed by the parties.

Perforadora entered into bareboat charters for the rigs with the rig owners which Perforadora then chartered to Pemex (“the Pemex Charters”). The Pemex Charters are governed by Mexican law and any disputes arising therefrom are subject to the jurisdiction of the Federal Courts of the City of Mexico.⁸ Pemex assigned the charters in turn to its subsidiary Pemex Perforacion y Servicios.⁹

Apart from the fact that they own the rigs built in or bought from Singapore, the rig owners do not carry on any business activities in Singapore. In fact, their only source of income is from Mexico where they are tax residents. Similarly, the rig owners’ parent company Oro Negro does not conduct any business activities in Singapore. Its directors and management are located in Mexico. It pays taxes in Mexico on the income it receives from the charters of the rigs through the rig owners.¹⁰

Currently, there are court proceedings in Mexico between Oro Negro and/or its subsidiaries and the bondholders of Oro Negro. There are also court proceedings in the United States (“US”) which however have been stayed.¹¹

By an agreement dated 24 January 2014 (“the Bond Agreement”) that is subject to Norwegian law, Oro Negro issued bonds to various bondholders. The parties to the Bond Agreement are Oro Negro and Nordic Trustees ASA (“Nordic Trustee”). The latter acts on behalf of the bondholders. Events of default are set out under cl 15.1 of the Bond Agreement. In particular, under cl 15.1(g)(i), it would constitute an event of default if the issuer (ie, Oro Negro), parent (ie, the first defendant), charterer (ie, Perforadora) or the rig owners take “any corporate action, legal proceedings or other procedure [sic] step” in relation to, inter alia, winding up, dissolution, administration or reorganisation (“the Event of Default clause”).¹²

Events in 2017 caused a liquidity crunch for the first defendant, Perforadora and Oro Negro. Between March and August 2017, Pemex insisted that permanent amendments be made to the terms of the Pemex Charters (“the Pemex Proposal”). The Pemex Proposal would have drastically reduced the charter hire and in turn the revenue of Oro Negro and the rig owners. The Pemex Proposal included suspending the operations of the Laurus and Primus rigs and drastically reducing the daily hire rates of the other three rigs. In addition, Pemex refused to allow Perforadora to invoice Pemex for the services provided by the rigs from and after April 2017.¹³

Income from the Pemex Charters are paid into trust accounts with banks in Mexico (“the Mexican Trust Accounts”). The Mexican Trust Accounts are operated by a Mexican subsidiary of Deutsche Bank (“DB Mexico”) as trustee in accordance with the terms of a trust agreement dated 21 June 2016 (“the Trust Agreement”). The Trust Agreement is governed by Mexican law with Mexican courts having exclusive jurisdiction.¹⁴ The monies in the Mexican Trust Accounts are distributed to the plaintiffs in accordance with the provisions of the Trust Agreement and the Bond Agreement in [17]. Perforadora first receives payment to fund its operating expenses and overheads. Thereafter, the rig owners receive their charter hire and the balance is paid to Oro Negro.¹⁵

Consequently, any reduction in the charter hire would adversely affect the plaintiffs. If Oro Negro defaults under the Bond Agreement, Nordic Trustee would be entitled to pursue the rig owners under various security documents.¹⁶

Unless the Bond Agreement was restructured to take into account the Pemex Proposal, Oro Negro would not have sufficient cash to fund its operations and would eventually default on its repayment obligations under the Bond Agreement.¹⁷ However, Oro Negro’s attempts to put forward a debt restructuring proposal through the first defendant were thwarted by obstacles placed in its path by an ad hoc group of bondholders (“the Ad Hoc Group”). Their demands would have meant draining Oro Negro’s cash flow and resulted in its defaulting under the Bond Agreement.¹⁸

The first defendant surmised that the Ad Hoc Group had an ulterior motive for its actions. The first defendant suspected that the Ad Hoc Group was secretly negotiating with Pemex for new charters for the rigs. The Ad Hoc Group would benefit greatly from a creditor seizure of the rigs. This was particularly so as a member of the Ad Hoc Group is an investment fund which is closely related to one of the first defendant’s competitors, Seamex Ltd (“Seamex”). Seamex has extensive experience contracting with Pemex, having already leased five rigs to the latter with the most favourable commercial terms amongst any of Pemex’s vendors.¹⁹

Nordic Trustee’s subsequent letter to the bondholders dated 5 October 2017 proved that the first defendant’s suspicions were...