Karaha Bodas Co LLC v Pertamina Energy Trading Ltd and Another

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang J
• Judgment Date: 19 June 2006
• Neutral Citation: [2006] SGHC 105
• Docket Number: Originating Summons No 1646 of,Originating Summons No 1646 of (Notice of Motion No 115 of 2005)
• Date: 19 June 2006
• Year: 2006
• Published date: 26 June 2006
• Plaintiff Counsel: Oommen Mathew and Raj Mohan (Haq & Selvam)
• Citation: [2006] SGHC 105
• Defendant Counsel: Alvin Yeo SC, Tan Kay Kheng and Tan Hsiang Yue (Wong Partnership)
• Court: High Court (Singapore)
• Subject Matter: Legal Profession,Whether solicitor may be held liable for contempt of court for breach of implied undertaking by company solicitor representing,Order 45 r 5(1)(ii) Rules of Court (Cap 322, R 5, 2006 Rev Ed),Injunctions,Contempt proceedings for alleged breach of terms of order for Mareva injunction,Whether implied undertaking existing that information disclosed according to terms of Mareva injuction not to be used for collateral purpose,Liability of law firm for contempt of court by one solicitor from such law firm,Mareva injunction,Contempt of court,Whether breach of such undertaking amounting to frustration of operation of injunction and contempt of court by parties in breach

19 June 2006

Tay Yong Kwang J:

The application

1 Pursuant to leave granted by the High Court on 17 November 2005, the first defendant (“the applicant”) applied by way of motion for the following orders:

(a) that a fine be imposed as a penalty each on the plaintiff; its lawyer in Hong Kong, Michael Joseph Pilkington of Clyde & Co, Hong Kong; and Clyde & Co, Hong Kong (collectively, “the respondents”) for such amount as the court may deem just and proper for their contempt of court;

(b) that the respondents pay to the applicant the costs of and incidental to the application; and

(c) for such further or other orders as the court may deem just.

The statement of facts

2 The Statement of Facts prepared pursuant to O 52 r 2(2) of the Rules of Court (Cap 322, R 5, 2004 Rev Ed) sets out the following grounds for the application:

1. The Application is made by the 1^st Defendant, Pertamina Energy Trading Limited (“Petral”). Petral is a company incorporated in Hong Kong. Petral has an office with staff members at Room 703, Far East Finance Centre, 16 Harcourt Road, Hong Kong, China.

2. Karaha Bodas Company LLC (“KBC”) is a company incorporated in the Cayman Islands and is a special project vehicle formed for the purposes of producing and developing energy resources in Indonesia. It is not carrying on any business. The only address as provided by KBC in the proceedings is that of KPMG’s trust office in the Cayman Islands, which is KPMG Genesis Trust Company Ltd, P.O. Box 448 GT, Century Yard, Grand Cayman, Cayman Islands.

3. Michael Joseph Pilkington is a solicitor in Hong Kong and a partner of Clyde & Co, Hong Kong, the law firm having conduct of the legal proceedings in Hong Kong for KBC as against Petral. Michael Joseph Pilkington and Clyde & Co have been the Plaintiffs’ solicitors in Hong Kong. Their address is Clyde & Co, 18^th Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong.

4. The relief sought is that a fine be imposed on KBC, Michael Joseph Pilkington and Clyde & Co, Hong Kong for such amount as the Honourable Court deems just and proper for the contempt of the Court and that KBC, Michael Joseph Pilkington and Clyde & Co, Hong Kong do pay the Applicants the costs of and occasioned by these proceedings.

5. The grounds for the relief sought against the abovementioned KBC, Michael Joseph Pilkington and Clyde & Co, Hong Kong are as follows:

(a) On 22 December 2004, Honourable Justice Choo Han Teck ordered a Mareva Injunction (“Mareva Injunction”) in favour of the Plaintiffs. As required by the Mareva Injunction, the Applicants, through their solicitors in Singapore, Messrs Haq & Selvam, wrote to KBC’s solicitors in Singapore, Messrs Wong Partnership informing them of Petral’s remittance of HK$890,022.34 (approximately US$115,000.00) from Petral’s account in Bank Mandiri, Singapore to its own account with their bank in Hong Kong for payment of staff salary and other debts. Petral provided the information as ordered by the Mareva Injunction and under fear of penalty for contempt of court. The payment for which the money was remitted is pursuant to and as permitted by the exceptions to the Mareva Injunction. Messrs Wong Partnership relayed this information to their clients, KBC and KBC’s Hong Kong lawyers, Clyde & Co. Wong Partnership are the solicitors on record for KBC and they acted on the instructions of Michael Joseph Pilkington and Clyde & Co, Hong Kong.

(b) The Mareva Injunction placed no limits on the ordinary expenses payable by Petral.

(c) KBC, Michael Joseph Pilkington and Clyde & Co, Hong Kong misused the information and frustrated the operation of the Mareva Injunction and application of the remittance by using it to intercept the monies by garnishing the monies rightfully remitted by Petral from its account in Bank Mandiri, Singapore to its account with their bank in Hong Kong for uses permitted by the exceptions to the Mareva Injunction and without reference to the Defendants or this Honourable Court.

(d) KBC’s and Clyde & Co’s conduct in using the letter and the information contained therein, which was provided by the Applicants in compliance with the Mareva Injunction and where the monies remitted were for uses permitted under the exceptions to the Mareva Injunction, without the consent of Petral or the approval of this Honourable Court was intended or calculated to impede, frustrate, obstruct or prejudice the administration of justice. KBC and their Hong Kong Solicitors, Clyde & Co in garnishing the sums remitted from Singapore to Hong Kong was a misuse by KBC, Michael Joseph Pilkington and Clyde & Co of the letter and information provided by the Applicants under compulsion of the Mareva Injunction, is in contempt of the Mareva Injunction issued by the Singapore Courts and frustrated the operation of the exceptions under the Mareva Injunction. The entire interception proceedings were conducted under the directions of Michael Joseph Pilkington. No affidavit was filed by any officer of the Plaintiffs and no evidence of their authority has been produced.

6. The Hong Kong Court permitted the improper interception of the remittance sub silentio in relation to the meaning and effect of the exceptions to the Mareva Injunction notwithstanding objections raised on behalf of the Applicants. The order is under appeal to be heard in April 2006. The action and the Mareva Injunction in the Originating Summons were set aside by Honourable Justice Choo Han Teck and an order for damages against the Plaintiffs was made on 14 March 2005. The setting aside order made by Honourable Justice Choo Han Teck was affirmed by the Court of Appeal on 24 August 2005. The Grounds of Judgment of the Court of Appeal were delivered on 12 October 2005.

In the premises, the Applicants seek leave to apply for an order granting the relief sought.

The factual background

3 The first defendant is a company registered and carrying on business in Hong Kong. It is almost entirely owned by Pertamina, an Indonesian oil and gas corporation. The second defendant is a company incorporated in Singapore. It is wholly owned by the first defendant. Pertamina has no part in this contempt of court application.

4 Karaha Bodas Company LLC (“KBC”), the plaintiff in this action and one of the respondents in this application, does not currently carry on any business because the basis for its creation, namely, to engage with Pertamina in a geothermal resources project in 1994, ended when the project was cancelled by presidential decrees issued by the government of Indonesia in 1997/1998. The cancellation of the said project led to arbitration proceedings and the making of a US$261m Swiss arbitral award (“the arbitral award”) in favour of KBC against Pertamina (and another entity known as PT.PLN (Persero)). KBC began enforcement proceedings of the arbitral award in Singapore pursuant to the New York Convention in March 2002 by way of Originating Summons No 342 of 2002. Enforcement proceedings by KBC against Pertamina are also going on in the United States.

5 On 15 March 2002, the Hong Kong High Court gave leave to KBC to enforce the arbitral award and ordered that judgment be entered in terms of the arbitral award. The Hong Kong judgment was served on Pertamina in Indonesia. KBC then commenced enforcement proceedings in respect of the Hong Kong judgment (“the Hong Kong proceedings”). Michael Joseph Pilkington (“Pilkington”) of Clyde & Co, Hong Kong (“Clyde & Co”), one of the three respondents, had conduct of the Hong Kong proceedings. Pertamina applied unsuccessfully to set aside service of the Hong Kong judgment and the judgment itself. A garnishee order was taken out and made absolute subsequently. In the course of the Hong Kong proceedings, the first defendant’s manager, who was orally examined before a master of the Hong Kong High Court, revealed that the first defendant paid Pertamina some US$5.5m in breach of a garnishee order nisi obtained against the first defendant. The said manager also admitted that some US$36m was transferred from the first defendant to the second defendant and that the said sum would be returned to the first defendant when the Hong Kong proceedings were over. Consequently, the master ordered the first defendant to pay KBC such sum representing the debt due from Pertamina to the first defendant as at the date of service of the garnishee order nisi (“the US$5.5m order”). The first defendant appealed against the making of the garnishee order absolute and the US$5.5m order. A judge of the Hong Kong High Court dismissed both appeals.

6 On 21 December 2004, KBC obtained a worldwide Mareva injunction in Hong Kong against the first defendant for up to US$36m (“the Hong Kong Mareva injunction”). On 22 December 2004, KBC commenced this originating summons seeking a declaration that the sum of US$36,236,581.65 transferred from the first defendant to the second defendant prior to 30 September 2004 was held by the second defendant on trust for or on behalf of or was controlled by the first defendant and also seeking an order that the said sum be repaid by the second defendant to the first defendant. On the same day, KBC obtained an ex parte domestic Mareva injunction (“the Singapore Mareva injunction”) against the first and second defendants. The relevant terms of the Singapore Mareva injunction are:

IMPORTANT:-

NOTICE TO THE DEFENDANTS

(1) This order prohibits you from dealing with your assets up to the amount stated. The order is subject to the exceptions at the end of the order. You should read it all carefully. …

(2) If you disobey this order you will be guilty of contempt of Court and may be sent to prison or fined.

…

As a result of the application IT IS ORDERED by Justice Choo that:

Disposal of assets

1 (1) The 1st defendant must not remove from Singapore in any way dispose of or deal with or diminish the value of any of his assets which are in Singapore whether in his own name or not and whether solely or jointly...