Carlsberg Breweries A/S v CSAPL (Singapore) Holdings Pte Ltd

• Jurisdiction: Singapore
• Court: International Commercial Court (Singapore)
• Judge: Jeremy Lionel Cooke IJ
• Judgment Date: 12 March 2021
• Neutral Citation: [2021] SGHC(I) 1
• Citation: [2021] SGHC(I) 1
• Plaintiff Counsel: Chew Kei-Jin, Yeo Chuan Tat, Tan Silin Stephanie, Ervin Tan and Lam Yan-Ting Tyne (Ascendant Legal LLC)
• Defendant Counsel: Michael Anthony Palmer, Wee Shilei, Martin Eddie Butler, Joel Ng Yuan-Ming and Sharmaine Chan (Quahe Woo & Palmer LLC)
• Subject Matter: Breach,Contract
• Hearing Date: 10 February 2021,05 February 2021,04 February 2021,11 February 2021,09 February 2021,08 February 2021
• Docket Number: Suit No 5 of 2019
• Published date: 16 March 2021

Jeremy Lionel Cooke IJ: Introduction

In this suit, the plaintiff (“Carlsberg”) claims against the defendant (“CSAPLH”) for the repayment of a loan extended by Carlsberg to CSAPLH under a loan agreement concluded on 23 December 2010 and subsequently amended by addenda dated 24 September 2013 and 31 October 2013 (“the Loan Agreement”). Carlsberg’s claim for repayment of the loan is based on alleged breaches of a Deed of Undertaking dated 12 April 2018 (“the Deed of Undertaking”) which would entitle Carlsberg to terminate a Deed of Release of the same date (“the Deed of Release”) and to declare all outstanding amounts under the Loan Agreement immediately due and payable.

Carlsberg claims repayment of the balance of what was originally a US$40 million loan extended to CSAPLH under the Loan Agreement to enable the latter to pay the former for a 40% shareholding in a joint venture vehicle, namely, Carlsberg South Asia Pte Ltd (“CSAPL”). CSAPLH is an entity ultimately controlled by Mr Chandra Prakash Khetan (“CPK”), a member of the Khetan family with extensive business interests in a business empire founded by the now deceased Mr MG Khetan. Those interests, since the founding father’s death in 2007, have been the subject of some dispute between the two sons, CPK and Rajendra Kumar Khetan (“RKK”) and their cousin who was brought up as a son, Prem Prakash Khetan (“PPK”). CSAPL was incorporated in 2010 as part of a restructuring process to consolidate Carlsberg’s and the Khetan family’s interests in the brewery businesses in India and Nepal into a single joint venture entity. 60% of the shares in CSAPL were held through a subsidiary by Carlsberg and the remaining 40% were held by CSAPLH. As hereafter appears, CSAPL owns shares in an Indian subsidiary and a Nepali subsidiary, the latter being Gorkha Breweries Pte Ltd (“GBPL”). 90% of the shares in GBPL are held by CSAPL and a 9.94% holding is registered in the name of RKK. The small balance of shares is held by individual Nepali shareholders who do not feature in the material events with which this court is concerned. By virtue of their respective shareholdings in CSAPL, Carlsberg was entitled to nominate four directors and CSAPLH was entitled to nominate one director, each through CSAPL, to the board of GBPL. In this judgment, the directors nominated through CSAPL to the GBPL board by Carlsberg are referred to as “the Carlsberg-nominated directors” whilst the CSAPLH-nominated director at the material time was Mr Pawan Jagetia (“Mr Jagetia”).

In 2018, as part of a wider settlement to resolve differences that had arisen between the parties to this suit, Carlsberg agreed to write off the balance of moneys owing under the Loan Agreement pursuant to the Deed of Release, provided that CSAPLH complied with its obligations under the Deed of Undertaking. Carlsberg alleges breaches of CSAPLH’s obligations under clauses 2(a) and 2(c) of the Deed of Undertaking. CSAPLH has raised defences and cross-claims. The amount said to be outstanding under the loan, as at 8 May 2017 when the loan allegedly fell due for repayment, was US$36,743,478.34. Interest runs on that figure under the Loan Agreement.

The court ordered a stay of all matters in the suit pending the final determination of disputes in a related arbitration between the parties, save for Carlsberg’s allegation that CSAPLH breached clause 2(c) of the Deed of Undertaking (hereafter referred to as “clause 2(c)”), which clause imposed an obligation on CSAPLH that “it shall use its best efforts to ensure that the director appointed by Rajendra Kumar Khetan to the board of directors of Gorkha attends all meetings of the board of directors of Gorkha”.

The nature of the obligation

The effect of clause 2(c) as a matter of law is not in dispute, being settled by the decision of the Court of Appeal in KS Energy Services Ltd v BR Energy (M) Sdn Bhd [2014] 2 SLR 905 (“KS Energy”) at [47] and [93] and other authorities. The phrase “best efforts” is synonymous with “best endeavours”, which requires the obligor to do everything reasonable in good faith with a view to procuring the contractually stipulated outcome within the time allowed. This means taking all those reasonable steps which a prudent and determined man, acting in the interests of the obligee and anxious to procure the contractually stipulated outcome within the available time, would have taken. This is an objective test to be applied by reference to all the surrounding circumstances. It is accepted here by CSAPLH that, although the obligor may in some circumstances take into account its own interests when taking such steps, that qualification has no application here. The obligor is not entitled to sit back and allege that it could not reasonably have done more where, if it had asked the obligee, it might have discovered other steps that could have been taken. If the obligee points to steps which the obligor could have taken to procure the relevant outcome, the evidential burden of proof ordinarily shifts to the obligor to show that: it took those steps; or that those steps were not reasonably required; or that those steps would have been futile in achieving the desired result.

The provision in clause 2(c) is to be contrasted with the undertaking in clause 2(b) of the Deed of Undertaking, whereby CSAPLH undertook to “ensure that at least one (1) of its nominated directors attends all meetings convened by the Board or any Subsidiary Board with at least 14 days’ prior written notice”. The reason for the difference is apparent in as much as clause 2(b) referred to directors nominated by CSAPLH itself, whereas clause 2(c) referred to the director appointed by RKK.

The parties adduced some evidence of the reason for incorporation of clause 2(c) but that amounted to no more than evidence of subjective intention on the part of each party and was not only inadmissible, as they accepted, but could be of no assistance in determining the meaning of the clause (the effect of which is settled) or its application.

The issues in contention

At all material times, the director appointed by RKK to the board of GBPL was PPK who did not attend the board meetings of GBPL on 26 February 2019, 25 March 2019, 26 April 2019 and 1 July 2019 (referred to as “the 26 February meeting”, “the 25 March meeting”, “the 26 April meeting” and “the 1 July meeting” respectively). The central issue between the parties which I have to determine is whether or not CSAPLH complied with clause 2(c) by using its best efforts to ensure that PPK attended the meetings in question.

Under the GBPL shareholders’ agreement dated 1 November 2010 (“the GBPL SHA”) made between CSAPL, its parent company and RKK, to whom the definition the “Khetan Family” was given in the agreement itself: GBPL was to have a board consisting of up to six directors, up to five of whom were to be nominated by CSAPL and one by the Khetan Family. A director could be removed from office only by the party who nominated the director in question. Each party had the right to nominate an alternate director if a director was prevented from attending board meetings.

Although RKK was the registered owner of the 9.94% shareholding in GBPL, the evidence suggests that it was CPK who put forward PPK as the nominated director for the Khetan Family (as defined in the GBPL SHA). It was also CPK who, on 7 June 2012, informed the GBPL board that Arun Adhikary (“Arun”) had joined the Khetan Group as business development director, that Arun would work closely with him in Nepal and India, and that Arun would be the alternate director to PPK in GBPL.

The extent to which CSAPLH, in the person of CPK, could and did control or influence PPK, as the director nominated by RKK/the Khetan Family is hotly disputed in the light of the less than straightforward relationships between the two brothers and the cousin. CPK’s evidence was that differences arose between them and in 2010 he decided to emigrate to Singapore and that their inter-relationship reached a nadir in 2014 when PPK filed a police report in Nepal against him alleging assault. On 23 October 2014, a written family settlement agreement was concluded which essentially resulted in CPK giving up his claim to the family assets in Nepal, whilst RKK was to transfer the 9.94% shareholding in GBPL in his name to CPK. In addition, large sums of money were to change hands. CPK’s evidence was that he and RKK are still hostile and their relationship was finished, whilst he and PPK are on somewhat better terms in an up-and-down relationship which has improved since 2014. They trust what the other says. On PPK’s evidence, there is currently an uneasy peace amongst the three of them and he was and remains anxious not to upset the 2014 deal concluded with CPK, before the deal is finally consummated and the 9.94% shareholding is transferred to CPK, although the time for that to be done expired at the end of March 2019. In his testimony, PPK said that he saw himself as the director nominated by RKK and as representing RKK’s interests as the registered owner of the minority shareholding which has yet to be transferred to CPK.

CSAPLH was, at the time the Deed of Undertaking was made, and still is, the owner of a reduced holding of 33% of the shares in CSAPL, the joint venture company in which Carlsberg has a 67% interest. As set out at [2(d)] above, CSAPL owns 90% of the shares in GBPL, whilst RKK is the registered owner of 9.94% of GBPL shares, which have not been transferred to CPK nor to his nominated company, Amazonia Capital Pte Ltd (“Amazonia”), for reasons which are disputed. It is perhaps worth pointing out at this juncture that when the GBPL SHA was concluded on 1 November 2010 and RKK was referred to throughout as the “Khetan Family”, the three Khetan protagonists each claimed a third of MG Khetan’s estate, with no agreement as to who was to take what....