SINGAPORE-LISTED Rex International has scored a victory in the first of three legal cases brought against it by Malaysia-listed Hibiscus Petroleum.  

Hibiscus Petroleum, through subsidiary Gulf Hibiscus, holds 35% of the shares in Lime Petroleum Plc. 


Rex owns, also indirectly, the remaining 65% of Lime. 

Lime is the holding company of, among others, Lime Petroleum Norway which is in the business of exploring and exploiting oil and gas reserves in Norway and elsewhere.


Karl Lidgren
When [Gulf] had failed to pay its share of the capital injection I was shocked and worried. I realised that if Lime Norway was not funded there was a risk of a call on the Guarantee and that [Lime] would have no funds to meet it. I was deeply disturbed by the thought of being a director of a company that was unable to discharge its debts."

"Lime Norway is now properly funded. Crucially, also Rex Investments has taken over the parental guarantee of Lime Norway's liabilities and allowed [Lime] to exit the Guarantee."

-- Karl Lidgren (photo, as quoted in court judgement)

The legal action traces back to when Hibiscus' interest in Lime Petroleum Norway was diluted substantially while Rex's stake rose as a result.

This followed Hibiscus' failure to contribute its share of the second tranche of NOK100 million (US$12.3 million) to fund Lime Petroleum Norway when called upon -- while Rex did so.

Rex's effective interest in Lime Petroleum Norway thus increased from 74.16% to 98.77%.  Hibiscus was none too happy about the dilution of its stake, and has initiated legal action against Rex and its directors in the past year or so.

In the court case heard in Isle of Man, Hibiscus subsidiary Gulf asserted that Laurence Keenan, Karl Lidgren and Simon Comina, who are three of the four directors of Lime, have acted in breach of their common law and/or fiduciary duties owed by them to Lime. 

(Dr Karl Lidgren is an executive director of Rex). 

Gulf asserted that these directors:

(1) failed to take any reasonable steps to prevent Lime's interest in its subsidiary, Lime Norway, to be diluted;

(2) put the interests of Rex (and the interests of the Rex Group) ahead of the interests of Lime;

(3) acted, or omitted to act, so as to promote the interests of third parties ahead of the interests of all the shareholders of Lime, thereby acting for an improper purpose and/or not in the best interests of Lime; and

(4) failed to take steps to vote down the Lime Norway proposals at an extraordinary general meeting of Lime Norway on 12 October 2015 thereby allowing the Lime Norway proposals to be approved and implemented when such proposals were manifestly not in the interests of Lime. 


Gulf said that Lime's loss is at least US$99.1 million, and alleged that such loss is directly caused by the breaches of duty by Mr Keenan and/or Mr Lidgren and/or Mr Comina.

The judge has refused Gulf’s application to bring a derivative claim on behalf of Lime against the Lime Directors. He also made an order for Gulf to pay the costs of its failed application and he would make his final determination after receiving additional submissions, if any.

♦ Judge: "I have concerns as to whether Gulf is acting in good faith..."

On 31 May, the judge (the Deemster Doyle) delivered a written judgement.

In paragraph 141,
 he said: “I have to say that I have concerns as to whether Gulf is acting in good faith. I also have serious concerns in respect of the way in which Gulf has conducted itself in the presentation and progression of its application."

In paragraph 166: “The way in which Gulf have presented the application, its initial lack of candour on the State of Norway Guarantee point, the failure to put all relevant evidence before the court, the presentation of an unduly partial picture to the court, the conspiracy claim being raised in evidence and skeleton argument but forming no part of the pleaded case all cast doubt in my mind as to whether Gulf is acting in good faith.” 


For the reasons I have referred to I am not persuaded that Gulf is acting in good faith. I am concerned, on the evidence and arguments presented that Gulf´s conduct and approach taints its good faith and I am not convinced that Gulf is acting with entirely “clean hands”. Frankly, based on the evidence presented to me, I am of the view that Gulf has no real genuine interest in advancing the interests of Lime. I am of the view that Gulf simply wishes to advance its own interests and to damage those of Rex.

-- His Honour the Deemster Doyle

In paragraph 167: “Moreover, I am not convinced that Gulf is acting in the best interests of Lime in seeking to bring a derivative claim. From the evidence and arguments presented to me it would appear that Gulf is simply endeavouring to advance its own interests. I have considered the conduct of Gulf and I am not satisfied that it is appropriate for Gulf to bring the claim on behalf of Lime. For the reasons I have referred to I am not persuaded that Gulf is acting in good faith. I am concerned, on the evidence and arguments presented that Gulf´s conduct and approach taints its good faith and I am not convinced that Gulf is acting with entirely “clean hands”. Frankly, based on the evidence presented to me, I am of the view that Gulf has no real genuine interest in advancing the interests of Lime. I am of the view that Gulf simply wishes to advance its own interests and to damage those of Rex.”

His Honour concluded: "I have reached the conclusion that I should exercise the court's discretion by refusing to grant leave to Gulf to bring the derivative claim on behalf of, and in the name of, Lime. I have concerns as to whether Gulf has acted in good faith. I am conscious of the interests that Gulf and the target directors seek to promote and protect, but having considered the views of the directors on commercial matters I doubt whether the derivative claim is in the interests of Lime.

"I am not persuaded that the proceedings are likely to succeed. In light of that view I doubt whether such proceedings would be cost effective. Moreover, an alternative remedy to the derivative claim is available. For all the reasons contained in this judgment I dismiss the application for leave."


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