DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries Ltd and another

CourtInternational Commercial Court (Singapore)
JudgeAnselmo Reyes IJ
Judgment Date24 September 2021
Neutral Citation[2021] SGHC(I) 12
Citation[2021] SGHC(I) 12
Docket NumberSuit No 7 of 2020
Plaintiff CounselJimmy Yim Wing Kuen SC, Lee Soong Yan, Kevin, Eunice Lau Guan Ting, Lim Joe Jee and Chloe Shobhana Ajit (Drew & Napier LLC)
Defendant CounselDhillon Dinesh Singh, Loong Tse Chuan, Margaret Joan Ling Wei Wei, Dhivya Rajendra Naidu and Chee Yi Wen, Serene (Allen & Gledhill LLP)
Anselmo Reyes IJ: Introduction

This is the trial of the Counterclaim (the “Counterclaim”) of the first defendant (“Kiri”) in SIC/S 7/2020 (“SIC 7”) against the plaintiff (DyStar Global Holdings (Singapore) Pte Ltd (“DyStar”)). The second defendant in SIC 7, Mr Manishkumar Pravinchandra Kiri (“Mr Kiri”) is not involved in the Counterclaim. The Counterclaim arises from Clause 7.2 (“Clause 7.2”) of the Share Subscription and Shareholders Agreement (“SSSA”) dated 31 January 2010 between (among others) Kiri and DyStar. Clause 7.2 stipulates:

... [DyStar] shall procure that Zhejiang Longsheng Group Co, Ltd and its Affiliates and [Kiri] shall be the preferred suppliers of all goods and services in connection with textile chemicals, dyestuffs and dyes to the DyStar companies and business that form part of the DyStar Assets.

DyStar is a joint venture between Kiri (2,623,354 shares (about 37.57%)) on the one hand and Senda International Capital Limited (“Senda”) (4,359,520 shares (about 62.43%)) and Well Prospering Limited (“WPL”) (1 share) on the other. Senda and WPL are wholly owned by Zhejiang Longsheng Group Co Ltd (“Longsheng”). Longsheng, like Kiri, is in the business of dye chemicals. Senda acts on Longsheng’s instructions. The terms regulating the parties’ joint venture are to be found (among other documents) in the SSSA. This judgment will also refer to a joint venture in India between Kiri and WPL called Lonsen-Kiri Chemical Industries Limited (“Lonsen-Kiri”) in which Kiri holds 40% and WPL 60% of the shares.

The present action is part of a series of actions involving DyStar and Kiri before the Singapore International Commercial Court (“SICC”). In SIC/S 3/2017 (“SIC 3”) DyStar alleged (among other matters) that Kiri: had breached Clause 15.1(a) (a non-compete term), Clause 15.1(b) (a non-solicitation term) and Clause 17 (a confidentiality term) of the SSSA; had conspired against DyStar; and owed €1.7 million in process technology development fees and S$443,813 in audit costs to DyStar.

In SIC/S 4/2017 (“SIC 4”) Kiri alleged that, through Senda as majority shareholder in DyStar, Longsheng had engaged in acts which were oppressive of Kiri’s interest as minority shareholder in DyStar. DyStar was joined as a party to SIC 4 to be bound by the SICC’s findings in that action. SIC 3 and SIC 4 were consolidated and heard together. In SIC 3 the SICC dismissed most of DyStar’s allegations but held that Kiri had breached Clauses 15.1(a) and (b) in connection with one customer. On appeal, the Court of Appeal held that Kiri had also breached Clauses 15.1(a) and (b) in respect of two other customers. In SIC 4 the SICC found that Longsheng had acted oppressively and ordered that Senda buy out Kiri’s minority interest at a valuation to be assessed. The SICC directed that the valuation be as at the date of its judgment (3 July 2018): see DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries Ltd and others and another suit [2018] 5 SLR 1. Senda’s appeal against the buy-out order was dismissed. On 15 June 2021, after further court hearings (including another appeal), the SICC determined that for the purposes of its buy-out order Kiri’s shares should be valued at US$481.6 million as at 3 July 2018: see Kiri Industries Ltd v Senda International Capital Ltd and another [2021] SGHC(I) 6. The latter valuation is now under appeal.

In SIC 7, DyStar has claimed against Kiri for further breaches of Clauses 15.1(a) and (b) of the SSSA. Kiri responded with the Counterclaim. DyStar’s claim was later settled between the parties, leaving only the Counterclaim to be heard. In the Counterclaim, Kiri contrasts the position in 2010 and 2011 with that from 2012 onwards. In 2010 and 2011, Kiri says that DyStar complied with Clause 7.2 by showing preferential treatment to Kiri. Thus, DyStar regularly sent Kiri open orders for raw materials and intermediates. DyStar regularly asked Kiri for price lists of finished dyes and informed Kiri whenever it needed specific raw materials or intermediates. DyStar provided Kiri with samples of DyStar’s standard dyes for Kiri to develop and produce such dyes for DyStar. DyStar shared information with Kiri about DyStar’s target prices and the prices at which dyes were being offered to DyStar by other suppliers, thereby giving Kiri the opportunity to match or improve upon those prices. But, from 2012, Kiri alleges that, contrary to Clause 7.2, DyStar steadily reduced its purchases of dyes, raw materials and intermediates from Kiri. DyStar (Kiri complains) stopped sending Kiri open orders for raw materials and intermediates. DyStar (Kiri adds) gradually ceased to share information regarding its prices, denying Kiri the chance to match or better DyStar’s target prices or the prices quoted by DyStar’s other suppliers. In 2015 DyStar completely stopped asking for Kiri’s price lists. Accordingly, the Counterclaim seeks damages from DyStar for the breach of Clause 7.2. DyStar counters that there is nothing in the Counterclaim. First, according to DyStar, the Counterclaim is barred by issue estoppel. Second, the Counterclaim constitutes an abuse of process under the extended doctrine of res judicata. Third, Clause 7.2 was merely “aspirational”. It did not give rise to any contractual obligation. Fourth, even if Clause 7.2 is enforceable, DyStar was justified in reducing its purchases from Kiri and did not breach Clause 7.2. Finally, DyStar says that Kiri is entitled to no damages or at best purely nominal damages.

Both parties say that, if successful, they should have their costs of SIC 7.

Discussion Is the Counterclaim barred by issue estoppel?

In SIC 4, Kiri alleged (among other matters) that DyStar was in breach of Clause 7.2 and Longsheng had procured such breach. Kiri claimed that such conduct constituted oppressive and unfairly prejudicial conduct to Kiri. More specifically, Kiri framed the issue thus:

Whether DyStar had failed and/or refused to purchase/procure supplies from Kiri (and whether this was at the direction of the Longsheng directors) in breach of the [SSSA] and Kiri has not been treated as preferred supplier of DyStar, and whether any of the aforesaid constituted an act of oppression …

The SICC held that the evidence was insufficient to prove a breach of Clause 7.2, much less establish that Longsheng had procured any such breach. In support of its case then, Kiri relied heavily on an email of 4 January 2016 to Ms Vera Huang (“Ms Huang”) (DyStar’s head of global procurement) in which Dr Monika Singh (“Dr Singh”) (DyStar’s Associate Director of Global Procurement (Dyes Category) & Regional Procurement Head (South Asia)) stated that she “understood from Luo [that is, Mr Luo Shixin (“Mr Luo”), Manager of Lonsen-Kiri]” that DyStar was “not allowed to place [orders] on Kiri”. But the SICC was unable to conclude on that evidence in SIC 4 that Longsheng had imposed a prohibition on DyStar placing orders with Kiri. Even if there had been a policy to that effect, it was unclear whether the rationale for the policy was because “it was thought genuinely, but erroneously, that Kiri orders should be routed through Lonsen-Kiri” or because (as Ms Huang maintained in SIC 4) there were “concerns with the quality or prices of Kiri’s products”. Nor was the evidence before the SICC enough to establish that the reduction over time in orders placed by DyStar with Kiri was due to Longsheng’s instigation. The SICC therefore rejected the breach of Clause 7.2 as a ground for minority oppression on Longsheng’s part.

DyStar now argues that, the breach of Clause 7.2 having been raised in SIC 4, such issue must be res judicata and cannot be re-litigated. According to DyStar, the four requirements for issue estoppel are met in this case. First, the SICC’s judgment in SIC 4 is a conclusive determination of the issue. Second. there can be no doubt that the SICC was acting as a court of competent jurisdiction in coming to its decision in SIC 4. Third, the parties to SIC 4 and the present action are the same. While it is true that DyStar had been joined as a nominal defendant to SIC 4, DyStar should be considered as having been involved in SIC 4 as Senda’s privy. This is because Senda has majority control over DyStar. Kiri’s allegation in SIC 4 of a breach of Clause 7.2 was “primarily directed” at DyStar and it was logically necessary to decide that issue as between DyStar and Kiri, before dealing with the allegation that Senda had acted oppressively by procuring DyStar to breach Clause 7.2.

I am not persuaded by Dystar’s arguments.

The judgment in SIC 4 cannot be characterised as “a declaration or determination of a party’s liability and/or his rights or obligations leaving nothing else to be judicially determined” (Goh Nellie v Goh Lian Teck and others [2007] 1 SLR(R) 453 at [28]). The SICC concluded in SIC 4 that the evidence of a breach of Clause 7.2 was inconclusive. The SICC left the question of whether there had been a breach of Clause 7.2 open. It was unnecessary to go further. Given the indeterminate nature of the evidence adduced on the incidental question (whether there had been a breach by DyStar of Clause 7.2), the main question (whether Senda had caused DyStar to breach Clause 7.2) simply fell away. There was consequently no res judicata in SIC 4 on the issue whether Clause 7.2 had been breached. As Chua Lee Ming J observed in Griffin Real Estate Investment Holdings Pte Ltd (in liquidation) v ERC Unicampus Pte Ltd [2019] 5 SLR 105 at [24], “[o]nly determinations which are necessary for the decision, and fundamental to it, will create an issue estoppel”.

Is the Counterclaim an abuse of process under extended res judicata?

On 27 April 2019, Kiri commenced a similar action to the Counterclaim against DyStar in India. On 22 September 2020, the Indian action was withdrawn after DyStar’s lawyers applied for an anti-suit injunction on the ground of duplicity with the...

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