Transocean v Burgundy: Breach of Escrow Agreement & Damages for Loss of Drilling Contract Profits

Transocean Offshore International Ventures Limited sued Burgundy Global Exploration Corporation in the High Court of Singapore for breach of an escrow agreement. Tay Yong Kwang J. upheld the Assistant Registrar's award of damages to Transocean for loss of profits resulting from the termination of a drilling contract due to Burgundy's failure to deposit funds into an escrow account, a condition precedent to the drilling contract. The court varied the award, limiting cold-stacking expenses to the minimum hire period of the drilling contract. The appeal was dismissed in part.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Appeal dismissed in part; damages varied regarding cold-stacking expenses.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Transocean sued Burgundy for breach of an escrow agreement. The court upheld damages for loss of profits from a related drilling contract.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Burgundy Global Exploration CorporationDefendant, AppellantCorporationAppeal dismissed in partPartial
Transocean Offshore International Ventures LimitedPlaintiff, RespondentCorporationDamages awarded; appeal dismissed in partPartial

3. Judges

Judge NameTitleDelivered Judgment
Tay Yong KwangJudgeYes

4. Counsels

Counsel NameOrganization
Winnifred GomezGomez & Vasu LLC
Rakesh VasuGomez & Vasu LLC
Toh Kian SingRajah & Tann LLP
Ting Yong HongRajah & Tann LLP
Ian TeoRajah & Tann LLP

4. Facts

  1. Transocean and Burgundy entered into a drilling contract.
  2. The drilling contract had a condition precedent that Burgundy and Transocean enter into an Escrow Agreement.
  3. Burgundy failed to deposit the initial escrow amount by the agreed date.
  4. Transocean terminated the drilling contract due to Burgundy's failure to deposit the escrow amount.
  5. Transocean claimed damages for loss of profits under the drilling contract.
  6. The Escrow Agreement was intended to provide Transocean with security for payments under the Drilling Contract.
  7. The market for semi-submersible drilling units deteriorated rapidly in 2009.

5. Formal Citations

  1. Transocean Offshore International Ventures Limited v Burgundy Global Exploration Corporation, Suit No 87 of 2009 (Registrar's Appeal No 158 of 2012), [2013] SGHC 117

6. Timeline

DateEvent
Burgundy entered into a contract with Triton Industries Inc for drilling services.
Transocean, Burgundy, and Triton entered into an agreement assigning Triton's rights and obligations to Transocean.
Transocean and Burgundy entered into an escrow agreement.
Burgundy failed to make the initial deposit into the escrow account.
Transocean terminated the drilling contract due to Burgundy's failure to deposit the escrow amount.
Burgundy expressed a desire to cooperate and find a workable solution.
Transocean issued a writ of summons claiming damages for breach of the escrow agreement.
Intended commencement date of drilling contract.
Burgundy's application to vacate hearing dates was dismissed.
High Court decision on appeal.
Court of Appeal allowed the appeals to this decision.

7. Legal Issues

  1. Breach of Contract
    • Outcome: The court found that Burgundy breached the Escrow Agreement.
    • Category: Substantive
  2. Remoteness of Damages
    • Outcome: The court held that the loss of profits under the Drilling Contract was not too remote under the first rule in Hadley v Baxendale.
    • Category: Substantive
    • Related Cases:
      • Hadley v Baxendale (1854) 9 Exch. 341
  3. Interpretation of Exclusion Clauses
    • Outcome: The court found that the exclusion clause in the Drilling Contract (Art 19.1) did not exclude Transocean's claim for loss of net profits.
    • Category: Substantive
    • Related Cases:
      • [2006] 2 SLR(R) 195
  4. Arbitrability of Dispute
    • Outcome: The court held that the claim for breach of the Escrow Agreement was not subject to the arbitration clause in the Drilling Contract.
    • Category: Jurisdictional
    • Related Cases:
      • [2010] 2 SLR 821

8. Remedies Sought

  1. Monetary Damages

9. Cause of Actions

  • Breach of Contract

10. Practice Areas

  • Commercial Litigation
  • Arbitration

11. Industries

  • Oil and Gas

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Transocean Offshore International Ventures Ltd v Burgundy Global Exploration CorpHigh CourtYes[2010] 2 SLR 821SingaporeCited regarding the inapplicability of the arbitration clause in the Drilling Contract to claims arising from the Escrow Agreement.
Emjay Enterprises Pte Ltd v Skylift Consolidator (Pte) LtdHigh CourtYes[2006] 2 SLR(R) 268SingaporeCited for the proposition that a contractual exclusion clause should be dealt with at the liability stage.
Lee Tat Development Pte Ltd v MSCT Plan No 301Court of AppealYes[2005] 3 SLR(R) 157SingaporeCited regarding the requirements for issue estoppel to arise.
Singapore Telecommunications Ltd v Starhub Cable Vision LtdCourt of AppealYes[2006] 2 SLR(R) 195SingaporeCited for principles of interpretation of exclusion clauses.
Homburg Houtimport BV v Agrosin Private LtdHouse of LordsYes[2004] 1 AC 715England and WalesCited for the principle that exemption clauses must be construed strictly.
Hong Realty Pte Ltd v Chua Keng MongCourt of AppealYes[1994] 2 SLR(R) 90SingaporeCited for the principle that the application of exemption clauses must be restricted to the particular circumstances the parties had in mind at the time they entered into the contract.
Kay Lim Construction & Trading Pte Ltd v Soon Douglas (Pte) Ltd and anotherHigh CourtYes[2013] 1 SLR 1SingaporeCited for the narrow construction of the phrase 'any indirect or consequential loss howsoever caused or arising'.
Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd and anotherHigh CourtYes[2008] 2 SLR(R) 623SingaporeCited for the definition of direct loss under the first rule in Hadley v Baxendale.
Out of the Box Pte Ltd v Wanin Industries Pte LtdCourt of AppealYes[2013] 2 SLR 363SingaporeCited for the test of remoteness of damage for breach of contract and the analytical framework for remoteness.
MFM Restaurants Pte Ltd and another v Fish & Co Restaurants Pte Ltd and another appealCourt of AppealYes[2011] 1 SLR 150SingaporeCited for affirming the Hadley v Baxendale test.
Hadley v BaxendaleCourt of ExchequerYesHadley v Baxendale (1854) 9 Exch. 341England and WalesCited for the test of remoteness of damage for breach of contract.

13. Applicable Rules

Rule Name
Order 14 of the Rules of Court

14. Applicable Statutes

Statute NameJurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

  • Escrow Agreement
  • Drilling Contract
  • Repudiatory Breach
  • Loss of Profits
  • Cold-Stacking
  • Condition Precedent
  • Remoteness of Damage
  • Consequential Loss

15.2 Keywords

  • Breach of contract
  • escrow agreement
  • drilling contract
  • loss of profits
  • damages
  • arbitration
  • cold-stacking
  • remoteness

17. Areas of Law

Area NameRelevance Score
Breach of Contract90
Damages80
Escrow Agreements70
Contract Law70
Drilling Contracts60
Commercial Disputes40
Arbitration30
Jurisdiction20
Summary Judgement20
Costs10

16. Subjects

  • Contract Law
  • Arbitration
  • Damages
  • Breach of Contract