Bunge SA and another v Shrikant Bhasi and other appeals

• Judge: Steven Chong JA
• Judgment Date: 30 September 2020
• Neutral Citation: [2020] SGCA 94
• Citation: [2020] SGCA 94
• Hearing Date: 19 August 2020
• Subject Matter: Conflict of Laws,Natural forum
• Plaintiff Counsel: Gary Leonard Low, Vikram Ranjan Ramasamy and Kellyn Lee Miao Qian (Drew & Napier LLC),Toby Landau QC and Rachel Low Tze-Lynn (instructed), and Ang Hui Ming Vivian, Ho Pey Yann and Douglas Lok Bao Guang (Allen & Gledhill LLP),Sarjit Singh Gill SC, Jamal Siddique Peer and Jason Leong (Shook Lin & Bok LLP)
• Published date: 07 October 2020
• Court: Court of Appeal (Singapore)
• Date: 30 September 2020
• Docket Number: Civil Appeal Nos 106, 107, 155 and 157 of 2019

Belinda Ang Saw Ean J (delivering the judgment of the court):

These four appeals – CA/CA 106/2019 (“CA 106”), CA/CA 107/2019 (“CA 107”), CA/CA 155/2019 (“CA 155”), and CA/CA 157/2019 (“CA 157”) – arise out of the decision of the High Court judge in [2019] SGHC 292 (“the HC Judgment” or “the Judge”, as the case may be) regarding the jurisdictional challenges mounted by the defendants in Suit No 438 of 2018 (“Suit 438”). We reserved judgment after hearing the parties and now deliver our decision allowing CA 106 and 107, and dismissing CA 155 and CA 157. The result is that all the claims in Suit 438 are ordered to be heard in Singapore.

Relevant background

The plaintiffs in Suit 438 were Grains and Industrial Products Trading Pte Ltd (“GRIPT”) and Bunge SA (“BSA”). GRIPT and BSA are from the same company group (the “Bunge Group”) and we will refer to them collectively as the “Bunge Entities”. The defendants were Advantage Overseas Private Limited (“AOPL”); AOPL’s bank, the State Bank of India (“SBI”); and AOPL’s one-time director and shareholder, Mr Shrikant Bhasi (“Mr Bhasi”).

The claims in Suit 438 arose out of a merchanting trade structure between the Bunge Group and AOPL (“BMT structure”), under which goods would flow from GRIPT to BSA and funds from BSA to GRIPT, in both cases via intermediaries (including AOPL as the Indian merchanting trader). The purpose and precise mechanics of the BMT structure are disputed, and we set these out only as far as they constitute the necessary background to these appeals.

The BMT structure involved three back-to-back contracts per transaction, with each transaction being termed a “string sale”. The “import leg” involved a contract between GRIPT as seller and AOPL as intermediary buyer (“GRIPT-AOPL contract”); the “intermediate leg” involved a contract between AOPL as seller and an offshore entity (being either Arabian Commodities FZE (“ACF”) or Tracon General Trading LLC (“Tracon”)) as buyer; and the “export leg” involved a contract between ACF or Tracon as seller and BSA as buyer. Not all legs of each string sale contract had the same governing law and exclusive jurisdiction (“EJ”) clauses, a point we will return to below.

For each shipment of goods, BSA would transfer around 98.5% of the transaction’s value to AOPL as payment. AOPL would place the funds in fixed deposits with SBI, and issue a mandate letter to SBI for the latter to issue an irrevocable payment undertaking (“IPU”) in favour of GRIPT. The fixed deposits were originally for a term of one year. Sometime after late 2014, the funds were instead placed in two-year fixed deposits to secure higher interest rates. Under the IPU, SBI promised to either procure a letter of credit due for payment within six months for 100% of the transaction’s value, or, if the letter of credit was not issued, pay that sum to GRIPT within five days. Upon maturity of the fixed deposits, AOPL would retain some interest and return the balance to the Bunge Group. Because AOPL was required to maintain the two-year fixed deposits even whilst funds were paid out to GRIPT at six-month intervals, there was a need to periodically inject funds through “rollover” transactions, these being fresh transactions for new shipments of goods.

According to AOPL and Mr Bhasi, the true purpose of the BMT structure was interest arbitrage: The Bunge Group would engage in circular trade with itself, thereby bringing in large amounts of foreign funds to place in Indian banks in circumvention of Indian foreign exchange regulations. The Bunge Entities accepted that interest could be earned under the BMT structure but denied that the purpose was interest arbitrage.

Procedural history

The events leading to Suit 438 were essentially that one transaction for US$50m entered into around September 2015 (out of an alleged total of US$400m) had gone awry: SBI purportedly failed to issue a letter of credit for US$50m or pay this sum to GRIPT despite having entered into an IPU to do so. About two years later, AOPL through its Indian counsel issued a letter demanding US$277m in damages (the “Kantawala Letter” or “Kantawala Claims”, as the case may be) for breach of certain assurances given by the Bunge Entities regarding the continuity of the rollover transactions (“the Assurances”). AOPL allegedly suffered loss because the promised rollover transactions did not materialise, leading to AOPL having insufficient funds for rolling over, breaking the fixed deposits with SBI, incurring late interest penalties, and making losses as it did not receive interest as expected. The Kantawala Letter called upon the Bunge Group to reimburse AOPL’s losses, failing which AOPL would “initiate appropriate legal action and/or proceedings in [the] Civil and Criminal Courts of India”.

One month after receiving the Kantawala Letter, GRIPT and BSA commenced Suit 438. Five claims were brought, respectively by: GRIPT against AOPL, a claim for US$50m allegedly due and payable under a GRIPT-AOPL contract dated 14 September 2015 (the “AOPL US$50m Claim”); GRIPT against SBI, a claim for US$50m or damages to be assessed, for SBI’s alleged breach of an IPU dated 15 December 2015 (the “SBI IPU Claim”); the Bunge Entities against AOPL, a claim for a declaration that they are “under no liability to AOPL (whether in contract, tort or otherwise) arising out of or in connection with any and all claims made by AOPL including claims arising out of or in connection with any Indian merchanting trade dealings between GRIPT, BSA and AOPL, whether as alleged or alluded to in the Kantawala Letter or at all” (the “Negative Declaration Claim”); the Bunge Entities against Mr Bhasi, a claim for damages and profits for breach of contractual and fiduciary duties under the terms of two agency agreements with GRIPT dated 1 January 2009 and 1 January 2016 (the “First Agency Agreement” and “Second Agency Agreement”) (the “Agency Claim”); and the Bunge Entities against Mr Bhasi, a claim for an indemnity for liability arising from the Kantawala Claims pursuant to both Agency Agreements (the “Indemnity Claim”).

SBI, AOPL and Mr Bhasi entered appearance without filing their defences. Instead they sought variously to set aside the orders for service out of jurisdiction, to stay the proceedings on forum non conveniens (“FNC”) grounds, or to stay the proceedings in favour of arbitration.

CA 155 is SBI’s appeal against the Judge’s decision in Registrar’s Appeal No 227 of 2018 to dismiss SBI’s application to stay the SBI IPU Claim on FNC grounds.

The remaining appeals arise from Summons No 3235 of 2018, in which AOPL and Mr Bhasi applied to set aside the orders for service out of jurisdiction against them or, in the alternative, to stay proceedings against them on FNC grounds. Without prejudice to the former application, Mr Bhasi also sought to stay the Agency Claim and Indemnity Claim in favour of arbitration. The Judge refused to set aside the service out orders and refused to stay the AOPL US$50m Claim on FNC grounds, but stayed the Negative Declaration Claim in favour of India and stayed both claims against Mr Bhasi in favour of arbitration. CA 157 is AOPL’s and Mr Bhasi’s appeal against the Judge’s refusal to set aside the service out orders for the claims against them and refusal to stay the AOPL US$50m Claim and claims against Mr Bhasi on FNC grounds. CA 106 and CA 107 are, respectively, the Bunge Entities’ appeals against the stay of the claims against Mr Bhasi in favour of arbitration, and the stay of the Negative Declaration Claim on FNC grounds.

After the HC Judgment was handed down, as foreshadowed in the Kantawala Letter, AOPL commenced proceedings in India against GRIPT, BSA and Bunge India Private Limited. In its Plaint filed in the Bombay High Court (“BHC”). AOPL sought damages for both the loss arising from the fixed deposits having to be broken, and the shortfall under 33 specific invoices issued under several intermediate leg contracts. Counsel for AOPL and Mr Bhasi, Mr Sarjit Singh Gill SC (“Mr Gill”) informed us at the hearing that there were five applications before the BHC for stay of the BHC proceedings. These had been put on hold pending the parties’ negotiations and the four Singapore appeals before us. Subsequent to the hearing of these appeals on 19 August 2020, we were informed that the BHC had on 21 September 2020 granted AOPL’s application, filed on 17 September 2020, to discontinue the BHC proceedings. The BHC also dismissed all pending interim applications.

Arguments and decision below

In respect of the AOPL US$50m Claim, AOPL sought to set aside the service out order or, alternatively, to stay the proceedings in favour of India. The Judge declined to grant both reliefs as she found Singapore to be the natural forum: HC Judgment at [109]. The strong cause test applied as there was a Singapore EJ clause in the relevant AOPL-GRIPT contract. There were no special circumstances that amounted to strong cause for not enforcing the Singapore EJ clause. The connections of parties to the dispute and witness availability factor were both finely balanced and split across Singapore and India, the express choice of law was Singapore law, and the Judge was not persuaded by AOPL’s argument that the AOPL US$50m Claim should be stayed to prevent fragmentation in light of how Negative Declaration Claim would on their case (and as the Judge eventually held) be litigated in India. We observe here that the EJ clause also entailed a waiver of FNC arguments, by its wording “The Parties agree that the courts of Singapore are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary” [emphasis added]. We will return to the correctness of examining connecting factors in light of the waiver of FNC below (at [40]).

In respect of the Negative Declaration Claim, AOPL similarly sought to set aside the...