Case Summaries

POSH Semco Pte Ltd v Makamin Petroleum Services Co and another (Case Summary)

29 December 2020

Case summary

Singapore International Commercial Court Suit No 1 of 2019

POSH Semco Pte Ltd v Makamin Petroleum Services Co and another

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Decision of Jeremy Lionel Cooke IJ

Outcome: SICC holds that plaintiff is entitled as against a guarantor,  to balance of outstanding debt due under a guaranteed settlement agreement.

Background

1.The defendants are shareholders of Makamin Offshore Saudi Ltd (“MOS”). On 28 October 2013, MOS entered into a time charterparty (the “Charter”) with POSH Semco Pte Ltd (the “plaintiff”) in relation to the vessel POSH Pelican. Under cl 41 of the Charter, MOS provided a bank guarantee to the plaintiff issued by the Royal Bank of Scotland plc (the “RBS Guarantee”).

2. As of 17 October 2014, the plaintiff claimed that MOS owed it more than US$3.7m pursuant to the Charter. MOS sought to persuade the plaintiff to withdraw its call on the RBS Guarantee. The plaintiff agreed on condition that the second defendant, Offshoreworks Global (L) Ltd (“OWG”), and three other parties related to the Charter furnish guarantees to secure MOS’ performance of its obligations under the Charter. On 24 October 2014, OWG issued the requested guarantee.

3. On 15 November 2015, MOS and the plaintiff entered into a settlement agreement in relation to the outstanding debt (the “Settlement Agreement”). The Settlement Agreement set out the parties’ agreement on, inter alia, (a) MOS’ outstanding debt under the original Charter (the “Outstanding Debt”); (b) MOS’ payment plan with regard to a settlement sum to be paid in eight monthly instalments in full and final settlement of claims that the plaintiff had against MOS; and (c) the Charter being amended by the Addendum in Annex B of the Settlement Agreement. The Settlement Agreement also provided that in the event that any of the eight instalments were not paid on time, the entire Outstanding Debt would immediately become payable.

4. On 26 March 2016, the plaintiff withdrew its vessel and terminated the Charter for MOS’ alleged repudiatory breach. Default judgment was entered against the first defendant on 30 November 2017. On 6 September 2019, the plaintiff successfully applied for summary judgment against OWG for the sum of US$3,306.446.50. OWG was granted unconditional leave to defend the plaintiff’s remaining claim for US$771,779.98, ie, the difference between the Outstanding Debt and Settlement Sum. This was because OWG had raised an arguable defence that the Settlement Agreement was governed by Saudi Arabian law and that this would preclude the enforcement of the acceleration provision therein.

5. OWG’s solicitors discharged themselves in April 2020. OWG failed to appear at subsequent case management conferences and did not acknowledge correspondence from the plaintiff and the court. On 21 October 2020, the court gave directions for the matter to be fixed for trial between on 15-16 December 2020. In its opening statement, the plaintiff submitted that judgment ought to be entered without a trial. It was, however, willing and able to proceed with the hearing.

The court’s decision

6. The court declined to the give judgment without a trial. Although OWG had shown no intention of defending the balance of the plaintiff’s claim, it had previously adduced evidence on the issue of Saudi law when resisting summary judgment. It was not appropriate to give judgment without exploring this evidence as against the evidence adduced by the plaintiff (at [7], [10]).

7. Under Saudi law, a commercial party was bound by obligations of good faith found in the Qur’an and the Sunnah. This included the principle that parties should comply with their contractual commitments. The doctrine of good faith fell to be applied in specific situations in light of the overall facts (at [18], [21]–[22]).

8. On the facts, the plaintiff had not breached its good faith obligations towards MOS under Saudi law. The plaintiff had exercised patience and forbearance in not withdrawing the vessel during an extended period of time when MOS was in breach (at [25], [27]). MOS was liable for the balance of the outstanding debt and as its guarantor, so also was OWG.

9. Judgment was entered for the plaintiff for US$771,779.98 with interest of $519,855.72 at a rate of 12% per annum and pro rata up to the date of judgment and continuing thereafter at the same rate up to the date of actual payments. The court exercised its discretion to award interest at the rate agreed between the plaintiff and MOS in the Charter even though this was unenforceable against MOS under Saudi law. Where there was agreement in the guaranteed contract to pay interest, effect had to be given to the true mutual intention of the parties. Costs were ordered on an indemnity basis with interest on those costs running from the date of the judgment at 5.33% per annum pro rata (at [31], [35]).

This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.