Transocean Offshore International Ventures Ltd v Burgundy Global Exploration Corp

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 28 January 2010
• Neutral Citation: [2010] SGHC 31
• Date: 28 January 2010
• Docket Number: Suit No 87 of 2009 (Registrar’s Appeal No 311 of 2009)
• Published date: 02 February 2010
• Plaintiff Counsel: Toh Kian Sing, Ian Teo and Aston Lai (Rajah & Tann LLP)for the plaintiff
• Hearing Date: 13 October 2009
• Defendant Counsel: Rakesh Vasu and Winnifred Gomez (Gomez & Vasu)for the defendant.
• Court: High Court (Singapore)
• Subject Matter: Stay of Court Proceedings,Arbitration

Andrew Ang J: Introduction

This was an appeal against the decision of the assistant registrar (“the AR”) in Summons No 3009 of 2009 who ordered that all further proceedings in the action brought by the plaintiff against the defendant be stayed in favour of arbitration in Singapore.

Background The parties

The plaintiff, Transocean Offshore International Ventures Ltd, is a company incorporated in the Cayman Islands. Its business includes that of supplying mobile offshore drilling units and providing drilling services for the development of oil and natural gas reserves.

The defendant, Burgundy Global Exploration Corporation, is a company incorporated in the Republic of the Philippines. It was, at all material times, in the business of exploration and development of oil and gas resources in the Philippines.

The facts

The plaintiff and defendant were parties to a novated offshore drilling contract dated 29 September 2008 read with Amendment No 1 dated 30 October 2008 (collectively “the Drilling Contract”). As novated, the Drilling Contract provided for the plaintiff to supply a drilling unit or vessel “C Kirk Rhein Jr” (“the Vessel”) and related drilling services to the defendant.

The Vessel was to be made ready and thereafter mobilised from Singapore to the drilling site off the Philippines some time in January 2009. The commencement of such mobilisation by the plaintiff was defined by Art I(b) of the Drilling Contract as the “Commencement Date”. Article 11 of the Drilling Contract then expressly stipulated that prior to the Commencement Date, it was a condition precedent that the plaintiff and defendant entered into an escrow agreement (“the Escrow Agreement”) for the opening of an escrow account (“the Escrow Account”). The Escrow Agreement was backdated to 31 October 2008 to be consistent with the date of Amendment No 1.

The Escrow Agreement provided for the following: The establishment of the Escrow Account with the Singapore branch of Banco Bilbao in the joint names of the parties (cl 3.1(a)). The depositing by the defendant of the escrow amount (“the Escrow Amount”) into the Escrow Account. The initial amount to be paid into this account was US$16.5m (cl 3.2(a)) payable on or before 15 December 2008 or 30 days prior to the Commencement Date, whichever was the earlier. Failure to deposit moneys into the Escrow Account in accordance with cl 3.2 entitled the plaintiff to terminate the Drilling Contract (cl 2). Further funding of the Escrow Account by the defendant on a monthly basis (cl 3.2(b)). Release of the funds in the Escrow Account to the plaintiff against joint instructions from the parties upon the defendant receiving an original invoice from the plaintiff (cll 4.1 and 4.2).

The defendant failed to deposit the Escrow Amount in accordance with cl 3.2(a). The plaintiff treated the defendant’s failure to deposit as a repudiatory breach which it elected to accept. Accordingly, in accordance with the general law and cl 2 of the Escrow Agreement, which conferred on the plaintiff the right to terminate the Drilling Contract should the defendant fail to deposit the Escrow Amount into the Escrow Account in accordance with cl 3.2(a), the plaintiff issued a letter to the defendant on 22 December 2008 stating that it had: terminated the Drilling Contract pursuant to cl 2 of the Escrow Agreement; and accepted the defendant’s repudiation of the Escrow Agreement due to its failure to deposit the Escrow Amount.

Thereafter, the parties entered into correspondence with the aim of finding a “suitably workable solution” but that did not bear fruit. The plaintiff then commenced the current action claiming, inter alia, damages for the defendant’s breach and/or repudiation of the Escrow Agreement. A writ was filed on 29 January 2009 with an Amended Writ and Statement of Claim filed subsequently on 19 March 2009.

Subsequent to the commencement of the suit, the defendant appeared before the AR in Summons No 3009 of 2009 seeking a stay of the action brought by the plaintiff in favour of arbitration. The AR granted the application on the basis that the Escrow Agreement could not be seen as being separate and distinct from the Drilling Contract. Hence, the arbitration clause under the Drilling Contract could be extended to cover disputes arising out of the Escrow Agreement. Further, she also found that the true dispute between the parties lay under the Drilling Contract and, accordingly, that the matter ought to be stayed in favour of arbitration pursuant to Art 25.1 of the Drilling Contract.

The issues

What is significant for the purposes of this appeal is that the Drilling Contract and the Escrow Agreement have different dispute resolution clauses.

The dispute resolution clause under the Escrow Agreement

Clause 6.2(a) of the Escrow Agreement confers non-exclusive jurisdiction in favour of the Singapore Courts. It reads as follows:

Each of the Parties irrevocably submits to and accepts generally and unconditionally the non-exclusive jurisdiction of the courts and appellate courts of Singapore with respect to any legal action or proceedings which may be brought at any time relating in any way to this Agreement. [emphasis added]

Clause 6.2(b) further provides:

Each of the Parties irrevocably waives any objection it may now or in the future have to the venue of any action or proceedings, and any claim it may now or in the future have that the action or proceeding has been brought in an inconvenient forum. [emphasis added]

The dispute resolution clause under the Drilling Contract

The Drilling Contract provides for arbitration in the event of disputes between the parties. In so far as it is material to this appeal, Art 25 (as amended) reads: 25.1 Arbitration

The following Dispute Resolution provision shall apply to this Contract. (a) Any dispute, controversy or claim arising out of or in relation to or in connection with this Contract, including without limitation any dispute as to the construction, validity, interpretation, enforceability, performance, expiry, termination or breach of this Contract whether based on contract, tort or equity, shall be exclusively and finally settled by arbitration in accordance with this Article XXV. Any Party may submit such a dispute, controversy or claim to arbitration by notice to the other Party. (b) The arbitration shall be heard and determined by three (3) arbitrators. Each side shall appoint an arbitrator of its choice within fifteen (15) days of the submission of a notice of arbitration. The Party-appointed arbitrators shall in turn appoint a presiding arbitrator of the tribunal within thirty (30) days following the appointment of both Party-appointed arbitrators. If the Party-appointed arbitrators cannot reach agreement on a presiding arbitrator of the tribunal and/or one Party refuses to appoint its Party-appointed arbitrator within said thirty (30) day period, the appointing authority for the implementation of such procedure shall be the London Court of International Arbitration (“LCIA”), who shall appoint an independent arbitrator who does not have any financial interest in the dispute, controversy or claim. All decisions and awards by the arbitration tribunal shall be made by majority vote. (c) Unless otherwise expressly agreed in writing by the Parties to the arbitration proceedings: (i) The arbitration proceedings shall be held in Singapore; (ii) The arbitration proceedings shall be conducted in the English language and the arbitrator(s) shall be fluent in the English language; (iii) The arbitrator(s) shall be and remain at all times wholly independent and impartial; (iv) The arbitration proceedings shall be conducted under the LCIA Rules, as amended from time to time (“LCIA Rules”), which Rules are deemed to be incorporated by reference into this Section 25.1; (v) Any procedural issues not determined under the LCIA Rules shall be determined by the applicable laws of Singapore, other than those laws, which would refer the matter to another jurisdiction;

…

25.2 Continuing Obligation

The provisions of this Article XXV shall continue in force notwithstanding the expiration or prior termination of this Contract.

[emphasis added in bold italics]

The Court’s decision

After hearing both parties, I allowed the plaintiff’s appeal against the AR’s decision. I set out the grounds of my decision below:

The defendant’s breaches of the Escrow Agreement

The plaintiff’s cause of action against the defendant was a straightforward claim arising from the defendant’s failure to pay the Escrow Amount into the Escrow Account in accordance with the terms of the Escrow Agreement. Indeed, the defendant did not dispute that it failed to deposit the requisite sum pursuant to cl 3.2(a) of the Escrow Agreement. As such, the claim fell squarely within cl 3.2(a) of the Escrow Agreement. The defendant argued that the termination of the Drilling Contract was premised on a breach of the Drilling Contract. Since Art 25.1 of the Drilling Contract provided that any dispute to the termination or breach would be governed by arbitration, Art 25.1 would also apply to the plaintiff’s claim in this action. I rejected this argument as the reason for the termination was the defendant’s breach of the Escrow Agreement.

The inapplicability of Art 25 of the Drilling Contract

The burden then fell on the defendant to establish why the jurisdictional agreement in favour of the Singapore courts should not be honoured. Generally, a party wishing to depart from a non-exclusive jurisdiction clause must show exceptional circumstances amounting to strong cause before it may be allowed to do so: S&W Berisford Plc and another v New Hampshire Insurance Co [1990] 2 QB 631; Bayerische Landesbank Girozentrale v Kong Kok Keong and another action [2002] 1 SLR(R) 485; Bambang Sutrisno v Bali International Finance...