Canadian Pacific (Bermuda) Ltd v Nederkoorn Pte Ltd and Another

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 08 March 1999
• Neutral Citation: [1999] SGCA 15
• Docket Number: Civil Appeal No 269 of 1997
• Date: 08 March 1999
• Published date: 19 September 2003
• Year: 1999
• Plaintiff Counsel: Jeremy Lionel Cooke QC, Govindarajalu Asokan and Lawrence Teh (Rodyk & Davidson)
• Citation: [1999] SGCA 15
• Defendant Counsel: Michael Collins QC and Thomas Tan (Haridass Ho & Partners)
• Court: Court of Appeal (Singapore)
• Subject Matter: Joint venture business carried on by two private limited companies,Whether director personally liable in tort for decision to discharge company's contractual obligations,Civil Procedure,Mareva injunctions,Absence of shareholders' agreement between the two private limited companies,Companies,Whether joint venture business carried on by two private limited companies constitutes a partnership,Entitlement to profits and losses in joint venture in absence of shareholders' agreement,Signing MOU on joint business,Liabilities,Whether inquiry for damages to be ordered,Directors,Obtaining mareva injunction on untrue basis of company dissipating cash at bank,Incorporation of companies,Claim for damages for obtaining injunction on false and misleading evidence

Judgment:

LP THEAN JA

(delivering the judgment of the court): Facts

1.The appellants are a company incorporated in Bermuda. They carry on, among other things, the business as ship owners and operators for the carriage of specialised liquid cargo, such as chemicals, clean petroleum products, molasses and vegetable oils. The operation hub of their business is in London while their corporate affairs are handled in Bermuda.

2.The first respondents are a company incorporated in Singapore. They carry on the business as brokers of vegetable oils. Their business operation hub is in Singapore. The second respondent is the chief executive officer and principal shareholder of the first respondents.

3. Joint venture

Owing to the complementary nature of their businesses, as well as to avoid competing with one another, the appellants and the respondents decided to embark on a joint venture. The first joint venture was made orally and involved only two ships. Profit and loss were shared equally between them. It started in June 1988 and terminated in September 1988. It was a success, and the parties decided to initiate a second joint venture.

4.The second joint venture was more formalized. An undated memorandum of understanding expressed to be made between the appellants and `the Nederkoorn Group of Companies` was entered into and was signed by one B G Williams on behalf of the appellants and the second respondent on behalf of the first respondents. Essentially, the terms were that the appellants were to provide the ships, and the Nederkoorn group of companies were to secure the cargoes. A total of five ships were involved. A company within the Nederkoorn group called Fairfield Ship Management Pte Ltd managed the ships. The appellants paid the charter hires, bunker bills, canal tolls and fees to all the agents. On this occasion, the profit and loss were shared between the parties in the proportion of 40% thereof to the appellants and 60% to the first respondents. It started in September 1988 and continued until November 1988. This joint venture was again successful. As a result, the parties decided to continue their collaboration and proceeded to enter into a third joint venture. This, unfortunately, was the joint venture which led to the present dispute.

5.For this third joint venture (`CPN joint venture`), the parties entered into an agreement dated 4 November 1988 which was also called the memorandum of understanding (`MOU`) and was expressed to be made between the appellants and `the Nederkoorn Group of Companies` (`Nederkoorn group`). One George Bateman signed the MOU for the appellants and the second respondent signed it for `Nederkoorn (Singapore) Pte Ltd`. It is common ground that `Nederkoorn (Singapore) Pte Ltd` was a misnomer and that the intended party was the first respondents. It is also common ground that subject to certain modifications, the CPN joint venture was a continuation of the second joint venture. By the MOU the parties essentially agreed to `form a joint venture company to further develop business for mutual benefit` on a certain basis to which we shall advert in detail shortly.

6.Pursuant to the MOU, CPN Tankers Pte Ltd (`CPN (Singapore)`) was incorporated in Singapore on 18 November 1988. That company was intended to be a management company and to act as the agent for the operating company which was to be incorporated.

7.As the CPN joint venture was a continuation of the second joint venture, at the time of the execution of the MOU there were already six ships, namely, Barbarosa, Conny, Grazia, Iver Hawk, Petersfield and Roxanne, on time-charter to the appellants for second joint venture. It was contemplated in the MOU that these six ships would be continued to be used for the CPN joint venture business. Hence, the business of this joint venture commenced and was carried on with the commencement of the respective voyages of these ships. In essence, the substratum of the CPN joint venture business strategy was for the appellants to provide the ships and secure the cargoes other than vegetable oil and the respondents to provide the vegetable oil cargoes.

Canadian Pacific (Bermuda) Ltd	5,997 shares
Aquaspan Ltd	5,997 shares
Robin H Nederkoorn	1 share
Matthys A Nederkoorn	1 share
Harvey Romoff	1 share
Roger C Shutter	1 share
David J Doyle	1 share
Michael J Spurling	1 share

8.The operating company, CPN Tankers (Bermuda) Ltd (`CPN (Bermuda)`) was incorporated only on 8 February 1989, which was some three months after the execution of the MOU. The corporate affairs of CPN (Bermuda) including the issue of shares were handled by the appellants in Bermuda. On the date of its incorporation, there was a meeting of the provisional directors of CPN (Bermuda) and the following, among others, were transacted:

It was reported to the meeting that the minimum share capital of the company had been fully subscribed and it was resolved that the minimum share capital of US$12,000.00 divided into 12,000 shares of par value US$1.00 each, be and is hereby allotted at a price of US$1.00 per share as follows:

The chairman noted that the shares so allotted had been subscribed for upon terms that no payment would be due upon allotment and that there was no proposal to make a call on the shares at this time.

From these minutes, it is clear that at that time there was no intention or requirement that the shareholders would pay for the shares.

9.After their incorporation, CPN (Bermuda) and CPN (Singapore) proceeded to carry on their respective businesses. Bank accounts were established and operated by both the joint venture companies. Cheques were signed by officers appointed by both sides. Both sides deployed their personnel and resources to ensure the success of the joint venture business. The two CPN joint venture companies operated as independent entities. The personnel of CPN (Singapore) came from the appellants` side as well as from the Nederkoorn group. At all material time, the second respondent himself was also an employee of CPN (Singapore).

10.Soon after the incorporation of CPN (Bermuda), the fleet of six ships chartered by the appellants for the CPN joint venture business was expanded by another four ships, OT Sonja, Nand Vishnu, Eulota, Cosmos A. These vessels nicknamed as the `Ugly Four` were chartered in the name of CPN (Bermuda).

11.The shareholders` agreement contemplated by the parties and referred to in the MOU was never signed by the parties, although two drafts had been put up and exchanged between them: one by the solicitors for the appellants and the other by the solicitors for respondents. The parties, however, did not proceed further to negotiate the conclusion of the shareholders` agreement. Apparently the appellants sometime in or about the middle of March 1989 instructed their lawyers to put the agreement on hold.

12. Ceres Hellenic

The joint venture business appeared to be running smoothly. However, this successful co-operation was brought abruptly to an end some six months after the start-up. Near the end of May 1989, the appellants sprang a surprise on the respondents by informing the respondents that they had disposed of their entire shipping interests including their 50% interests in the CPN joint venture to a certain Greek concern called Ceres Hellenic Shipping Enterprise Ltd (`Ceres Hellenic`). The sale was effected by two principal contracts: these were the master agreement made on 23 May 1989 between the appellants and Ceres Hellenic and the asset sale agreement made on 30 June 1989 between the appellants and Ceres Hellenic`s nominee, El Commerce Inc. The date 30 June 1989 was the completion date of the sale.

13.The respondents appeared to have accepted Ceres Hellenic as a party to the CPN joint venture in substitution for the appellants. The CPN joint venture as between the appellants and the first respondents terminated on 30 June 1989. However, the sale by the appellants of their shipping interests to Ceres Hellenic was never completed. Approximately two months after the execution of the sale of assets agreement or thereabouts, disputes between the appellants and Ceres Hellenic arose, and the latter wanted to pull out of the joint venture with the first respondents. The respondents found themselves in a predicament. As the learned judge said, `it would be a commercial disaster to be hobbled by an unwilling party`. With Ceres Hellenic refusing to take over the appellants` interest in the CPN joint venture, the respondents were compelled to agree to dissolve whatever relationship there was between the first respondents and Ceres Hellenic pertaining to the joint venture business. This was done by the second respondents agreeing to take over the entire CPN joint venture business through one of the companies in the Nederkoorn group, Tamar Shipping Bermuda Ltd (`Tamar Shipbuilding`). To effect Ceres Hellenic`s withdrawal, a memorandum of understanding was made on 18 October 1989 between Ceres Hellenic and the first respondents (`the Ceres MOU`), and the material terms were as follows:

(1) Under the terms of the sale of the Canadian Pacific Tanker business to the Ceres Hellenic Group the Canadian Pacific 50 percent shareholding in CPN is to be transferred to Ceres. When Ceres acquires this 50 percent shareholding, the shares will immediately be transferred to Nederkoorn so that CPN becomes fully owned by the Nederkoorn Group. All profits/losses incurred by CPN from 1st July 1989 will be for the account of the Nederkoorn Group. However, there is a disagreement between Canadian Pacific and Ceres as to the financial responsibility for the OT Sonja, Nand Vishnu, Eulota and Cosmos A from 1st July 1989. If Canadian Pacific are unwilling to accept their 50 percent share of the losses from 1st July 1989 then this 50 percent share of the losses will be borne by Ceres.

(2) ...

(3) ...

(4) The operations of CPN (Bermuda) Ltd will be transferred from Singapore to the UK and Nederkoorn...