Transocean Offshore International Ventures Ltd v

• Jurisdiction: Singapore
• Judgment Date: 21 June 2013
• Date: 21 June 2013
• Docket Number: Suit No 87 of 2009 (Registrar's Appeal No 158 of 2012)
• Court: High Court (Singapore)

Transocean Offshore International Ventures Ltd

Plaintiff

and

Burgundy Global Exploration Corp

Defendant

[2013] SGHC 117

Tay Yong Kwang J

Suit No 87 of 2009 (Registrar's Appeal No 158 of 2012)

High Court

Contract—Contractual terms—Exclusion clauses—Party in breach relying on exclusion clause which excluded ‘indirect and consequential loss’ under general law as well as specific categories of losses—Whether innocent party's net loss of profits under contract fell within scope of exclusion clause

Contract—Remedies—Remoteness of damage—Innocent party quantifying damages on basis of loss of profits under independent but related contract as between same parties—Whether loss of profits was too remote to be recovered as damages

Transocean Offshore International Ventures Limited (‘Transocean’) and Burgundy Global Exploration Corporation (‘Burgundy’) were parties to a contract involving the hire of a semi-submersible drilling rig (‘the Drilling Contract’). It was a condition precedent of the Drilling Contract that the parties were to enter into an escrow agreement (‘the Escrow Agreement’), which required Burgundy to deposit a sum of US$16,500,000 into an escrow account by 15 December 2008 or 30 days prior to the commencement date in the Drilling Contract. Under the Escrow Agreement, a failure to deposit the required escrow sums entitled Transocean to terminate the Drilling Contract. Burgundy failed to deposit this sum by 15 December 2008 and Transocean elected to terminate the Drilling Contract. Transocean then commenced an action against Burgundy for breach of the Escrow Agreement, claiming damages quantified by its net losses of profits under the Drilling Contract, or, in the alternative, wasted costs and expenses. Following an unsuccessful attempt by Burgundy to stay the action in favour of arbitration in reliance on an arbitration clause in the Drilling Contract, Transocean obtained summary judgment against Burgundy and the assistant registrar (‘the AR’) assessed damages on the basis of Transocean's net loss of profits under the Drilling Contract.

Burgundy appealed the AR's decision, arguing that the assessment of damages ought to have been stayed in favour of arbitration and that Transocean was precluded from claiming for loss of profits as Art 19.1 of the Drilling Contract provided that Transocean would ‘save, indemnify, release, defend and hold harmless [Burgundy] from [Transocean's] own Consequential Loss’ (‘the Exclusion Clause’) and the loss of profits constituted ‘Consequential Loss’.

Held, dismissing the appeal but varying one head of damage:

(1) The issue of whether Transocean's claim for breach of the Escrow Agreement was a dispute falling within the scope of the arbitration clause in the Drilling Contract was the subject of a final and conclusive determination. The High Court had previously held, at the liability stage, that Transocean's claim was not subject to the arbitration clause in the Drilling Contract; the assessment of damages flowing from this liability could not then be subsequently subject to the clause. The Drilling Contract was not the source of the parties' rights or obligations giving rise to the claim and was only a reference for ascertaining the financial consequences of the breach: at [16] and [18] .

(2) The construction of the Exclusion Clause had been considered by the assistant registrar who heard the summary judgment application, but the issue was not res judicata as the scope of the Exclusion Clause had not been considered within the subject matter parameters of what categories of losses arising from a termination of the Drilling Contract were excluded by the clause and no final determination of the merits of this particular issue had been made. Burgundy was not precluded from raising arguments on the interpretation of the Exclusion Clause: at [22] and [25] .

(3) The Exclusion Clause defined the term ‘Consequential Loss’ in terms of the general law on ‘indirect and consequential loss’ and a list of specific categories of losses that were additionally included. With respect to the general limb, ‘any indirect or consequential loss’ should be construed narrowly as only covering losses that fell within the second rule in Hadley v Baxendale(1854) 9 Exch 341 (‘Hadley v Baxendale’): at [29] and [30] .

(4) The specific categories of losses included, inter alia, ‘loss or damage arising out of any delay, postponement, interruption or loss of production, any inability to produce, deliver or process petroleum or any loss of or anticipated loss of use, profit or revenue’ and ‘loss of bargain, contract, expectation or opportunity’. Read ejusdem generis, the phrase ‘any loss of or anticipated loss of ... profit’ in the former category was only intended to cover loss of profit attributable to causative events related to production issues. The natural meaning of the words ‘bargain, contract, expectation or opportunity’ used in the latter category were also more apt to describe contractual arrangements with a third party or additional alternative business opportunities that a party to the contract could have been obtained, and not the loss of profits that one party expected to have made under the Drilling Contract: at [31] , [33] and [35] .

(5) The term ‘Consequential Loss’ in the Exclusion Clause did not extend to Transocean's net loss of profits under the Drilling Contract. The loss of profits were direct losses under the first rule in Hadley v Baxendale and did not fall within either the scope of the general limb in the Exclusion Clause or the specific categories of excluded losses. The Exclusion Clause thus did not exclude any claim that Transocean could potentially have had for the net loss of profits it would have made had the Drilling Contract been performed: at [37] to [39] .

(6) There had been no available substitute contract that Transocean could have entered into to mitigate its losses from the termination of the Drilling Contract. The loss of profits was correctly quantified by the AR on the basis of the hire payable for the minimum period of hire less the expenses that Transocean would have incurred in performing the contract: at [43] .

(7) Transocean's losses of profits as a result of the termination of the Drilling Contract were recoverable damages for breach of the Escrow Agreement; they were not too remote under the first rule in Hadley v Baxendale.Burgundy had actual knowledge - based on the terms of the Escrow Agreement, the manner in which parties had chosen to structure the Escrow Agreement and Drilling Contract, and the surrounding context - that Transocean had the option of terminating the Drilling Contract if Burgundy were to breach the Escrow Agreement. It had to therefore have been within the parties' reasonable contemplation that Transocean's loss of profits under the Drilling Contract would be a natural consequence flowing from Burgundy's breach: at [49] and [55] .

(8) The net loss of profits under the Drilling Contract was logically quantified on the basis of estimated total revenue less total estimated expenses of performance plus actual costs incurred. However, the sum that the AR had awarded to Transocean for expenses incurred in mooring the rig, ie, cold-stacking expenses, were varied such that Transocean would only be entitled to the expenses incurred over the minimum period during which Burgundy was obliged to hire the rig: at [56] and [59] .

Emjay Enterprises Pte Ltd v Skylift Consolidator (Pte) Ltd [2006] 2 SLR (R) 268; [2006] 2 SLR 268 (refd)

Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 (refd)

Kay Lim Construction & Trading Pte Ltd v Soon Douglas (Pte) Ltd [2013] 1 SLR 1 (refd)

Lee Tat Development Pte Ltd v MCST Plan No 301 [2005] 3 SLR (R) 157; [2005] 3 SLR 157 (refd)

MFM Restaurants Pte Ltd v Fish & Co Restaurants Pte Ltd [2011] 1 SLR 150 (refd)

Out of the Box Pte Ltd v Wanin Industries Pte Ltd [2013] 2 SLR 363 (refd)

Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd [2008] 2 SLR (R) 623; [2008] 2 SLR 623 (refd)

Singapore Telecommunications Ltd v Starhub Cable Vision Ltd [2006] 2 SLR (R) 195; [2006] 2 SLR 195 (folld)

Transocean Offshore International Ventures Ltd v Burgundy Global Exploration Corp [2010] 2 SLR 821 (refd)

Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 14

Toh Kian Sing SC, Ian Teo and Ting Yong Hong (Rajah & Tann LLP) for the plaintiff/respondent

Rakesh Vasu and Winnifred Gomez (Gomez & Vasu LLC) for the defendant/appellant.

Tay Yong Kwang J

1 This was an appeal against the assessment of damages by an assistant registrar (‘the AR’) awarding the plaintiff, Transocean Offshore International Ventures Limited (‘Transocean’), damages in the sum of US$105,536,922 plus interest for breach of contract by the defendant, Burgundy Global Exploration Corporation (‘Burgundy’), in a transaction involving the hire of a semi-submersible drilling rig. I upheld the AR's quantification of damages on the basis of net loss of profits flowing from a related contract but varied the award on one particular element - the ‘cold-stacking’ expenses for maintaining the drilling rig after Burgundy's repudiatory breach of contract.

2 Burgundy has appealed in Civil Appeal No 48 of 2013 (‘CA 48/2013’) against my decision. I now set out the reasons for my decision.

Background facts

3 Transocean is a company listed on the New York Stock Exchange and is the world's largest offshore drilling contractor. It supplies mobile offshore drilling units and provides drilling services for oil and natural gas reserves. Burgundy is a company incorporated in the Republic of the Philippines (‘the Philippines’) and is engaged in the business of exploration and development of oil and gas resources in the Philippines.

The Drilling Contract and the Escrow Agreement

4 On 29 September 2008, Burgundy entered into a contract with one Triton Industries Inc (‘Triton’) for the provision of a semi-submersible...