Asia-Pacific Ventures II Ltd and Others v PT Intimutiara Gasindo and Others

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin JC
• Judgment Date: 22 June 2001
• Neutral Citation: [2001] SGHC 144
• Docket Number: Suit No 312 of 2001 (Registrar's
• Date: 22 June 2001
• Published date: 19 September 2003
• Year: 2001
• Plaintiff Counsel: Molly Lim SC and Roland Tong (Wong Tan & Molly Lim )
• Citation: [2001] SGHC 144
• Defendant Counsel: Chong Boon Leong and Edric Pan (Rajah & Tann )
• Court: High Court (Singapore)
• Subject Matter: Contracting parties having no connection with Singapore,Concurrent proceedings in Indonesia,Natural forum,Relevant consideration in granting stay,Stay of proceedings,Whether justice requires that plaintiffs be permitted to proceed with action in Singapore,Whether Singapore more appropriate forum than Indonesia,Dispute pertaining to agreement governed by Singapore law and providing for non-exclusive jurisdiction of Singapore courts,Defendants Indonesian companies or citizens,Conflict of Laws

: In SIC 815/2001, the defendants applied for the following substantive orders:

(1) the service of the writ of summons on the defendants be set aside;

(2) further and/or in the alternative, the proceedings in this matter be stayed.

In the affidavit supporting the application, the defendants made the following assertions:

(1) the plaintiffs had served the writ on the wrong service address; and

(2) the proceedings ought to be stayed on two grounds, viz:
(a) there was an arbitration clause; and
(b) forum non conveniens.

On 30 April 2001 the senior assistant registrar heard the application and dismissed it with costs.

The defendants appealed against the whole of that decision and the matter was fixed before me on 14 June 2001. At the outset counsel for the defendants, Ms Lim, abandoned the appeal in respect of the first prayer, ie the setting aside of the service of the writ. In respect of the second prayer for the stay, she abandoned one of the grounds, ie that there was an arbitration agreement. Ms Lim proceeded only on the remaining ground, ie forum non conveniens. I dismissed the appeal with costs. Ms Lim asked for a stay of proceedings pending appeal to the Court of Appeal. The plaintiffs objected because an O 14 application had already been fixed for hearing on 22 June 2001 and they were concerned that a stay would delay the progress of the action and thereby prejudice their ability to enforce a judgment. I was of the view that whatever the merits may be for a stay of execution of judgment, the hearing of the O 14 application should not be delayed. I therefore refused a stay but it was to be without prejudice to any application by the defendants to apply for a stay of judgment if that was given at the hearing of the O 14 application. In the circumstances, I granted an order for an expedited appeal with the skeletal arguments tendered to stand as the parties` cases in the appeal. I now give my written grounds of decision.

This matter concerns a bond issue by the first defendants (`the company`), an Indonesian company carrying on the business of operating a chemical plant in Indonesia. On 3 September 1997 the company entered into a bond subscription agreement (`the agreement`) with the nine plaintiffs and two other parties (`the bondholders`). The second defendants, also an Indonesian company, were a major shareholder of the company. The third, fourth and fifth defendants are the shareholders of the second defendants.

The terms and conditions of the bonds (`the bond conditions`) are set out in Sch 4 of the agreement. Condition 5.2.1 provides that if the net profit after tax (`NPAT`) of the company for 1998 or 1999 should be less than 90% of the projected net profit after tax (`PNPAT`) for those years, then any bondholder shall have the option of redeeming part or all the bonds held by him. Condition 5.2.1 states as follows:

In the event that any of the NPAT for 1998 or 1999 is less than 90% of the respective PNPAT for 1998 or 1999, the Company will, at the option of any Bondholder, such option to be exercised by such Bondholder sending the Redemption Notice to the Company, redeem all or part of the Bonds held by such Bondholder as may be notified by such Bondholder at the applicable Redemption Amount for the Bonds together with all unpaid interest accrued thereon.

The plaintiffs claim that for 1998, the PNPAT was Rp25bn whereas the estimated NPAT was a negative figure, ie a loss was incurred. As a percentage, the NPAT was -125% of the PNPAT. As for 1999, the plaintiffs claim that the PNPAT was Rp39bn whereas the estimated NPAT was Rp26.9bn, or 69% in percentage terms. Pursuant to cl 5.2.1, the plaintiffs issued the requisite redemption notices and claim against the company various redemption amounts totalling US$21m.

The plaintiffs filed the writ of summons in this action on 16 March 2001. The claim against the company is that they had failed to pay on the due date in respect of the redemption of those bonds. The plaintiffs therefore seek to recover that sum plus contractual interest from the company. As against the second to fifth defendants, the plaintiffs rely on a shareholders` undertaking agreement (`the undertaking`) entered into between the plaintiffs and the second to fifth defendants. Clause 8.2.3 of the undertaking provides that, should the company fail to redeem the bonds, those defendants shall purchase the bonds from the plaintiffs in accordance with a pre-determined formula. In the alternative, the plaintiffs claim against the second to fifth defendants under cl 8.3.1 of the undertaking which is essentially a guarantee by those defendants of the company`s payment obligations under the agreement.

On behalf of the defendants, the fourth defendant filed two affidavits. He did not challenge the basic facts asserted by the plaintiffs. However, he claimed that there was some collateral agreement or implied term in the agreement that the company would be relieved of their obligation if there were circumstances beyond their control. This is what he said in paras 22 to 26 of his affidavit of 6 April 2001:

22 Briefly, the entire transaction between the Plaintiffs and the Defendants was based on the understanding and intention that the 1st Defendant would be listed on the Stock Exchange of Jakarta. However, due to circumstances which were beyond the Defendants` control, namely the political turmoil and economic downturn in Indonesia, the 1st Defendant company was unable to proceed towards the intended initial public offering.

23 The Plaintiffs had subscribed to bonds issued by the 1st Defendant with the intention that the 1st Defendant would be listed on the Stock Exchange of Jakarta.

24 On the 1st Defendant company being listed, the understanding and agreement was that the Plaintiffs would convert the bonds held by them to shares in the 1st Defendant company.

25 However, due to the economic downturn in Indonesia, the weakened Indonesian currency and the recent political instability, the 1st Defendant was unable to meet certain requirements for the initial public offering and its profitability was also substantially affected. These intervening events were totally beyond the control of the Defendants and constitutes a "force majeure".

26 Based on the above, I am advised by my solicitors and verily believe that the Plaintiffs should have proceeded by way of arbitration instead of litigation. The Court should thus grant a stay of this action in favour of arbitration.

The defendants do not deny that there is no express provision in the agreement that would deprive the plaintiffs of their rights under cl 5.2.1 in the circumstances described by the fourth defendant in his affidavit. They would have to rely on some collateral agreement or implied term.

The governing law of the agreement is Singapore law and it specifies that Singapore courts have non-exclusive jurisdiction. This is provided in cl 21.1(a) which states as follows:

This Agreement, as to which time shall be of the essence, shall be governed by and construed in accordance with the laws of Singapore and the parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of the courts in the Republic of Singapore. For the avoidance of doubt, the parties hereby acknowledge and agree that any party may bring an action in the courts of a jurisdiction other than the Republic of Singapore and the parties hereto submit to the

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