KS Energy v BR Energy: Breach of Joint Venture Agreement & Endeavours Clauses

The Singapore Court of Appeal heard an appeal by KS Energy Services Ltd (KSE) against the High Court's decision finding them liable for breaching a joint venture agreement (JVA) with BR Energy (M) Sdn Bhd (BRE) regarding the construction and delivery of an oil rig. BRE claimed KSE failed to use 'all reasonable endeavours' to meet the deadline. The Court of Appeal allowed the appeal, finding that KSE did not breach the JVA. The court also addressed KSE's counterclaim, finding that BRE's termination of the JVA was wrongful, but that KSE suffered no quantifiable loss as a result.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal Allowed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore Court of Appeal clarifies 'endeavours' clauses in a joint venture dispute between KS Energy and BR Energy over a delayed oil rig.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
KS Energy Services LtdAppellantCorporationAppeal AllowedWon
BR Energy (M) Sdn BhdRespondentCorporationAppeal DismissedLost

3. Judges

Judge NameTitleDelivered Judgment
Sundaresh MenonChief JusticeYes
Andrew Phang Boon LeongJustice of the Court of AppealYes
V K RajahJustice of the Court of AppealYes

4. Counsels

Counsel NameOrganization
Chan Hock KengWongPartnership LLP
Alvin YeoWongPartnership LLP
Alma YongWongPartnership LLP
Benjamin FongWongPartnership LLP
Ng Hui MinRodyk & Davidson LLP
Koh Kia JengRodyk & Davidson LLP
Ling Tien WahRodyk & Davidson LLP
Philip JeyaretnamRodyk & Davidson LLP
Germaine TanRodyk & Davidson LLP

4. Facts

  1. BRE submitted a tender to PCSB for the provision of a WPU, supported by COSL and RG.
  2. PCSB issued a letter of award to BRE, with a delivery deadline of 2006-03-21.
  3. COSL and RG pulled out of the WPU project.
  4. KSE was introduced to BRE to find a new rig builder.
  5. KSE identified Oderco as an alternative rig builder.
  6. PCSB varied the delivery deadline to 2006-05-21.
  7. BRE and KSE entered into a joint venture agreement on 2005-12-13.
  8. KSE entered into a contract with Oderco, with a shipment deadline of 2006-06-04.
  9. Oderco was unable to meet the deadline, and PCSB granted several extensions.
  10. PCSB terminated the PCSB contract on 2007-04-12.
  11. KSE terminated the Oderco contract on 2007-08-20.
  12. The partially-completed WPU was moved to KSE's yard in Dubai in early November 2007.
  13. BRE terminated the JVA on 2007-12-26.

5. Formal Citations

  1. KS Energy Services Ltd v BR Energy (M) Sdn Bhd, Civil Appeal No 46 of 2013, [2014] SGCA 16
  2. BR Energy (M) Sdn Bhd v KS Energy Services Ltd, , [2013] 2 SLR 1154

6. Timeline

DateEvent
BRE submitted a tender to Petronas Carigali Sdn Bhd for the provision of a WPU.
COSL and RG pulled out of the WPU project.
PCSB issued a letter of award to BRE.
TFG e-mailed LHK about Oderco's quotation with delivery in Abu Dhabi estimated at five months.
Mr. Yazid informed PCSB that RG was no longer involved and nominated Oderco as an alternative rig builder.
PCSB acceded to the variation of the deadline for delivery to 2006-05-21.
BRE and KSE entered into a joint venture agreement.
Mr. Yazid signed the Authorisation Document authorizing KSE to contract with Oderco.
KSE entered into a contract with Oderco.
BRO was incorporated.
KSE and BRO entered into a contract for KSE to sell and BRO to buy the WPU.
BRE entered into the charter agreement with BRO.
Original deadline for Oderco to have the WPU ready for shipment.
Original deadline for BRE to deliver the WPU to PCSB in Labuan.
PCSB granted an extension of time for the completion of the WPU to 2006-07-25.
Deadline for KSE to have the WPU ready for shipment on an ex-works basis under the BRO contract.
PCSB could terminate the PCSB contract for late delivery.
KSE deployed Michael Connolly to monitor Oderco’s progress.
PCSB granted an extension of time for the completion of the WPU to 2006-09-04.
PCSB granted an extension of time for the completion of the WPU to 2006-10-06.
Deadline for BRO to procure the construction and delivery of the WPU under the Charter Agreement.
PCSB granted an extension of time for the completion of the WPU to 2006-10-26.
Revised deadline for completion of WPU.
Michael Connolly resigned.
PCSB terminated the PCSB contract.
KSE terminated the Oderco contract with BRE’s consent.
Partially-completed WPU moved to KSE's yard in Dubai.
KSE wrote to BRO seeking payment of US$7,784,385.
BRE wrote to KSE purporting to terminate the JVA.
High Court decision in BR Energy (M) Sdn Bhd v KS Energy Services Ltd [2013] 2 SLR 1154.
Court of Appeal decision.

7. Legal Issues

  1. Breach of Contract
    • Outcome: The Court of Appeal found that KSE did not breach the JVA.
    • Category: Substantive
    • Sub-Issues:
      • Failure to use all reasonable endeavours
      • Failure to deliver WPU on time
    • Related Cases:
      • [2013] 2 SLR 1154
  2. Interpretation of Endeavours Clauses
    • Outcome: The Court of Appeal held that the test for determining whether an 'all reasonable endeavours' obligation has been fulfilled should ordinarily be the same as the test for determining whether a 'best endeavours' obligation has been fulfilled.
    • Category: Substantive
    • Sub-Issues:
      • Meaning of 'all reasonable endeavours'
      • Distinction between 'reasonable endeavours', 'all reasonable endeavours', and 'best endeavours'
    • Related Cases:
      • [2008] 2 SLR(R) 474
      • (1911) 27 TLR 451
      • [1980] FSR 335
      • [2011] SLT 75
      • [2007] 1 CLC 59
      • [2007] 1 EGLR 137
      • [2012] 1 CLC 605
  3. Causation
    • Outcome: The Court of Appeal found that there was a lack of direct evidence that KSE's breach caused BRE's loss.
    • Category: Substantive
    • Sub-Issues:
      • Whether breach caused loss
      • Whether termination of contract was caused by breach

8. Remedies Sought

  1. Damages for breach of contract
  2. Loss of profits
  3. Loss of dividend payouts
  4. Incurred expenses
  5. Loss of share of residual value of WPU

9. Cause of Actions

  • Breach of Contract

10. Practice Areas

  • Commercial Litigation
  • Construction Law
  • Contract Disputes

11. Industries

  • Oil and Gas
  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
BR Energy (M) Sdn Bhd v KS Energy Services LtdHigh CourtYes[2013] 2 SLR 1154SingaporeDecision from which this appeal arose.
Ng Giap Hon v Westcomb Securities Pte Ltd and othersCourt of AppealYes[2009] 3 SLR(R) 518SingaporeCited for the court's note on the doctrine of good faith in Singapore contract law.
Travista Development Pte Ltd v Tan Kim Swee Augustine and othersCourt of AppealYes[2008] 2 SLR(R) 474SingaporeEstablished the test for interpreting 'best endeavours' clauses in Singapore.
Sheffield District Railway Company v Great Central Railway CompanyCourt of AppealYes(1911) 27 TLR 451EnglandDiscusses the meaning of 'best endeavours' and the obligor's quasi-fiduciary position.
IBM United Kingdom Ltd v Rockware Glass LtdEnglish Court of AppealYes[1980] FSR 335EnglandDefines 'best endeavours' as taking all reasonable steps to obtain the required result.
Justlogin Pte Ltd v Oversea-Chinese Banking Corp LtdHigh CourtYes[2004] 1 SLR(R) 118SingaporeReferred to in Travista Development Pte Ltd v Tan Kim Swee Augustine and others [2008] 2 SLR(R) 474 at [22].
Ong Khim Heng Daniel v Leonie Court Pte LtdHigh CourtYes[2000] 3 SLR(R) 670SingaporeReferred to in Travista Development Pte Ltd v Tan Kim Swee Augustine and others [2008] 2 SLR(R) 474 at [22].
UBH (Mechanical Services) Ltd v Standard Life Assurance CoEngland and Wales High Court (Queen's Bench Division)YesThe Times (13 November 1986)England and WalesDiscusses the different levels of onerousness between 'reasonable endeavours', 'all reasonable endeavours', and 'best endeavours' clauses.
Jolley v Carmel LtdEnglish High CourtYes[2000] 2 EGLR 153EnglandDiscusses the spectrum of obligations for obtaining permissions, including 'reasonable efforts', 'all reasonable efforts', and 'best endeavours'.
Oversea Buyers Ltd v Granadex SAHigh CourtYes[1980] 2 Lloyd’s Rep 608EnglandSuggests that there is no substantial difference between 'best endeavours' and doing all that can reasonably be expected.
EDI Central Ltd v National Car Parks LtdScottish Court of SessionYes[2011] SLT 75ScotlandOpines that any difference between 'all reasonable endeavours' and 'best endeavours' is likely to be metaphysical rather than practical.
Rhodia International Holdings Ltd & Anor v Huntsman International LLCEnglish High CourtYes[2007] 1 CLC 59EnglandSuggests that 'all reasonable endeavours' may equate with 'best endeavours'.
Terrell v Mabie Todd & Coy LdHigh CourtYes(1952) 69 RPC 234EnglandStates that a 'best endeavours' clause requires the obligor to do what it could reasonably do in the circumstances.
Transfield Pty Ltd v Arlo International LtdHigh CourtYes(1980) 144 CLR 83AustraliaStates that a 'best endeavours' clause prescribes a standard of endeavour measured by what is reasonable in the circumstances.
B. Davis Ltd. v. Tooth & Co. LtdEngland and Wales High Court (King's Bench Division)Yes[1937] 4 All ER 118England and WalesReferred to in Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83.
Hospital Products Limited v United States Surgical Corporation and othersHigh CourtYes(1984) 156 CLR 41AustraliaDiscusses the implied term to use 'best efforts' to promote the sale of certain goods.
Shepherd v. Felt and Textiles of Australia LtdHigh CourtYes[1931] 45 CLR 359AustraliaReferred to in Hospital Products Limited v United States Surgical Corporation and others (1984) 156 CLR 41.
Randall v. Peerless Motor Car CoCourt of Appeals of New YorkYes[1912] 99 NE 221United StatesReferred to in Hospital Products Limited v United States Surgical Corporation and others (1984) 156 CLR 41.
Paige v. FaureCourt of Appeals of New YorkYes[1920] 127 NE 898United StatesReferred to in Hospital Products Limited v United States Surgical Corporation and others (1984) 156 CLR 41.
A P Stephen v Scottish Boatowners Mutual Insurance Association (The “Talisman”)House of LordsYes[1989] 1 Lloyd’s Rep 535United KingdomInterprets an 'all reasonable endeavours' clause in an insurance contract.
Rackham v Peek Foods LtdEngland and Wales High Court (Chancery Division)Yes[1990] BCLC 895England and WalesAn individual obliged to exercise 'best endeavours' is nevertheless entitled to have regard to his pre-existing duties.
Yewbelle Limited v London Green Developments Limited, Knightsbridge Green LimitedEnglish High CourtYes[2007] 1 EGLR 137EnglandDiscusses the operation and extent of an 'all reasonable endeavours' obligation.
Phillips Petroleum Co UK Ltd & Ors v Enron Europe LtdEnglish Court of AppealYes[1997] CLC 329EnglandStates that an obligor is not required to sacrifice its own commercial interests in performing its obligations.
Yewbelle Limited v London Green Developments Limited, Knightsbridge Green LimitedEnglish Court of AppealYes[2007] 2 EGLR 152EnglandDiscusses the operation and extent of an 'all reasonable endeavours' obligation and the need for a real chance of success.
CPC Group Ltd v Qatari Diar Real Estate Investment CoEngland and Wales High Court (Chancery Division)Yes[2010] EWHC 1535 (Ch)England and WalesStates that the obligation to use 'all reasonable endeavours' does not always require the obligor to sacrifice his commercial interests.
Jet2.com Limited v Blackpool Airport LimitedEngland and Wales High Court (Commercial Court)Yes[2011] EWHC 1529 (Comm)England and WalesDiscusses the extent to which an obligor is required to sacrifice its own commercial interests in performing its obligations in the context of a 'best endeavours' obligation.
Jet2.com Ltd v Blackpool Airport LtdEnglish Court of AppealYes[2012] 1 CLC 605EnglandDiscusses the extent to which an obligor is required to sacrifice its own commercial interests in performing its obligations in the context of a 'best endeavours' obligation.
Patel v Brent LBCEngland and Wales High Court (Chancery Division)Yes[2004] EWHC 763 (Ch)England and WalesDeals with the continuing obligation to use reasonable endeavours after a deadline.
Asia Hotel Investments Ltd v Starwood Asia Pacific Management Ptd Ltd and anotherCourt of AppealYes[2005] 1 SLR(R) 661SingaporeCited for the proposition that causation is an essential element of liability.
Sunny Metal & Engineering Pte Ltd v Ng Khim Ming EricCourt of AppealYes[2007] 3 SLR(R) 782SingaporeCited for the proposition that causation is an essential element of liability.
Salcon Ltd v United Cement Pte LtdCourt of AppealYes[2004] 4 SLR(R) 353SingaporeCited for the proposition that causation must be established before the question of quantification of damages arises.
Mactaggart & Mickel Homes Ltd v HunterCourt of Session Outer HouseYes[2010] CSOH 130ScotlandReferred to in EDI Central Ltd v National Car Parks Ltd [2011] SLT 75.
Atmospheric Diving Systems Inc v International Hard Suits Inc and Can-Dive Services LtdBritish Columbia Supreme CourtYes[1994] 5 WWR 719CanadaRelied on by the Judge for the matter of causation in the context of damages.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

  • Workover pulling unit
  • WPU
  • Joint venture agreement
  • Endeavours clauses
  • All reasonable endeavours
  • PCSB contract
  • Oderco contract
  • BRO contract
  • Charter agreement
  • Completion
  • Liquidated damages

15.2 Keywords

  • breach of contract
  • joint venture
  • endeavours clause
  • oil rig
  • construction
  • singapore
  • court of appeal

17. Areas of Law

Area NameRelevance Score
Best Efforts Clause95
Contract Law80
Breach of Contract75
Contracts70
Interpretation of Contracts60
Commercial Disputes60
Summary Judgement20
Building and Construction Contracts15
Contracts (Rights of Third Parties) Act10

16. Subjects

  • Contract Law
  • Joint Ventures
  • Construction
  • Oil and Gas Industry
  • Commercial Disputes