Conflict of Laws

• Citation: (2017) 18 SAL Ann Rev 284
• Date: 01 December 2017
• Published date: 01 December 2017

Introduction

11.1 For 2017, there are nine cases that will be examined in this review. This excludes Ong Ghee Soon Kevin v Ho Yong Chong,1 which was reported in the previous year.2

11.2 As in previous years, it is useful to note that conflict of laws cases sometimes relate to other areas of law. In these situations, this review will only examine those parts of the case that are relevant to the field of conflict of laws.

11.3 It is trite that before a court can hear a matter, it must be seized of jurisdiction. Jurisdiction can be in personam or in rem. In personam jurisdiction also includes the court's long-arm discretionary jurisdiction under O 11 r 1 of the Rules of Court.3 There are certain circumstances in which the jurisdiction of the court can be challenged. In addition, a party can apply to the court to exercise its discretion not to hear the matter.

Stay of proceedings

11.4 One of the strategic actions a defendant can take is to apply for a stay. Staying proceedings based on the doctrine of forum non conveniens is a mainstay in international commercial litigation. It is well-accepted that the doctrine of forum non conveniens consists of two stages (as established in Spiliada Maritime Corp v Cansulex Ltd)4 (“Spiliada”). Stage 1 seeks to see if there exists a more appropriate forum than Singapore and this burden falls on the defendant who is applying for the stay. If it is shown that there is a more appropriate forum, then the burden shifts to the plaintiff in Stage 2 to show that the action should, nonetheless, not be stayed because it would deprive the plaintiff of a

legitimate juridical or personal advantage. At the end of the day, the doctrine of forum non conveniens seeks to identify the best location to hear the matter in the interests of justice.

Forum non conveniens

11.5 Sinco Technologies Pte Ltd v Singapore Chi Cheng Pte Ltd5 (“Sinco Technologies”) revolved around an attempt by the plaintiff (incorporated in Singapore) to acquire the shares of a Chinese company, Zhuhai Chi Cheng Technology Co Ltd (“ZCC”). The first defendant held the majority of shares in ZCC and the second defendant was a director of the first defendant. There was a long series of negotiations and interactions which saw the plaintiff signing a letter of intent, paying a deposit of US$3m and subsequently another advance payment of US$2.6m. According to the plaintiff, signing the letter of intent and making these payments were based on a series of representations made by the defendants. A disagreement arose about whether the plaintiff was liable to bear ZCC's daily operating expenses and the transaction fell through. The plaintiff sought the return of the US$5.6m that had already been paid. US$2.6m was returned but it was the defendants' position that the deposit of US$3m was a penalty for the plaintiff's breach of contract. As such, it was not refundable. The plaintiff commenced proceedings in Singapore for misrepresentation and unjust enrichment. It is also facing a suit in China by the shareholders of ZCC. The defendants have applied to stay proceedings in Singapore on the basis of forum non conveniens.

11.6 The court began by reviewing the two-stage test from Spiliada and identifying which party bore the respective burdens of proof at each stage. The court then found that the factors at Stage 1 pointed overwhelmingly in favour of China as the more appropriate forum and the plaintiff would not be deprived of substantive justice should the stay be granted. In doing so, the court reinforced the point that at Stage 1, it was the weight, and not quantity, of factors that was significant and that at Stage 2, showing differences and procedures in remedies is insufficient to fend off a stay.

11.7 Although this case is a straight forward application of the forum non conveniens analysis from Spiliada, it is interesting to note that the court began the analysis by seeking to identify the proper law of the contract. It is not clear, however, to what contract the court was referring. The share transfer agreement was not signed. Yet, it seems like the court went through the standard three-stage test for determining the

proper law of the contract. It opined that since the share transfer agreement was not signed, there was no express choice. Fair enough. It is odd, however, that the court then proceeded to look at an implied choice law, considering that an unsigned share transfer agreement should also be fatal to the existence of an implied choice. The court then went on to consider various factors, some of which properly point to an implied choice (had the share transfer agreement been signed) while others were standard connecting factors pointing to China as an appropriate forum.

11.8 To be clear, identifying the lex causae, which could be the same as or derived from the proper law of the contract, is often an important factor in the Spiliada analysis. If the lex causae is a foreign law, the general argument is that the courts of a foreign jurisdiction are often better placed to apply their own law. However, it is confusing why it would be necessary to identify the proper law of the contract in this case. The causes of action were in misrepresentation (whether fraudulent or negligent) and unjust enrichment. Even if there was a need to connect these causes of action to a contract (in order to derive a lex causae), the relevant contract should have been the letter of intent.

11.9 With respect, the court seems to have conflated the three-stage test for identifying the proper law of a contract with identifying the factors that point to the natural forum in Stage 1 of the forum non conveniens analysis. This is not to say that the conclusion that the court came to was wrong. At the end of the day, the Spiliada test clearly pointed to China as the natural forum. It is important, however, for the relationship between the lex causae and Stage 1 of the Spiliada test to be clear and kept separate from the three-stage test for identifying the proper law of a contract.

Forum non conveniens – Choice of Law

11.10 Rotary Engineering Ltd v Kioumji & Eslim Law Firm6 (“Rotary Engineering”) was an appeal from the High Court.7 The facts can be stated simply here. The defendants entered into a contract with a Saudi Arabian company, for the design and construction of an integrated petroleum refinery and petrochemical complex in Saudi Arabia. The work was completed but full payment was not made. The defendants entered into a Proxy Agreement with the plaintiffs whereby the plaintiffs would negotiate a settlement on behalf of the defendants with the Saudi

company and would receive a percentage of the proceeds as professional fees. The claim was settled and the professional fees were not paid. In a separate conversation, the second plaintiff entered into a joint venture with the second and third defendants, where the second plaintiff was to have received an equity share in one of the subsidiaries owned by the first plaintiff. This did not happen.

11.11 The plaintiffs commenced proceedings in Singapore for breach of the Proxy Agreement and the Joint Venture Agreement, and for conspiracy between the defendants to cause the first defendant to breach the two agreements. The defendants applied to stay the proceedings in favour of Saudi Arabia. At first instance, the High Court held that the defendants did not discharge their burden in showing that Saudi Arabia was a more appropriate forum than Singapore. On appeal, the Court of Appeal found for the defendants and ordered a stay. There are a number of noteworthy points in this judgment.

11.12 The first was a point the Court of Appeal made in passing in response to counsel for the plaintiff. Counsel had expressed that, within the context of the two-stage test from Spiliada, even if a defendant had succeeded in showing that there was a more appropriate forum elsewhere (at stage 1), it would not be exceptional for the court to refuse a stay at Stage 2. This view was righted by the court, which opined that if Stage 1 has been satisfied, the stay would ordinarily be granted unless justice requires otherwise. It should therefore not be taken that fending off a stay would be a matter of course and would at the least be considered something unusual.

11.13 Secondly, the court made an observation about the applicable approach for appellate intervention in applications for a stay. Because the court at first instance is exercising a discretion, an appellate court cannot intervene simply because it disagrees with the outcome of the discretion. It can only intervene if the court at first instance had “erred in principle, took into account irrelevant matters, failed to take into account relevant matters, or made a decision that was plainly wrong”.

11.14 At first instance, the court had opined that where parties had not expressly or implied chosen a law, an objective inquiry analysing various connections was called for and having gone through this query, the court held that the governing law of the Joint Venture Agreement was Singapore.

11.15 On this, the Court of Appeal disagreed. Apart from the place of contracting (which was Singapore), the shares to be received were in a Saudi company, and the plaintiff was to have taken a management role in a Saudi company to develop business in Saudi Arabia with an injection of funds from another Saudi company and with negotiations occurring in Saudi. As such, the proper law of the Joint Venture Agreement should have been Saudi law.

11.16 Of course, in the larger forum non conveniens analysis, this is only one factor which may not have changed the conclusion that the lower court had arrived at. However, in this case, the Court of Appeal opined that the proper law of the Joint Venture Agreement was so weighty that it swayed the balance to Saudi Arabia. In their analysis, the two agreements, both governed by Saudi law, were central to the causes of action...