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

• Jurisdiction: Singapore
• Judge: Anselmo Reyes IJ
• Judgment Date: 24 September 2021
• Court: High Court (Singapore)
• Docket Number: Suit No 7 of 2020

DyStar Global Holdings (Singapore) Pte Ltd

and

Kiri Industries Ltd and another

[2021] SGHC(I) 12

Anselmo Reyes IJ

Suit No 7 of 2020

Singapore International Commercial Court

Abuse of Process — Henderson v Henderson doctrine — Extended doctrine of res judicata — Prior related proceedings — Pursuing distinct causes of action in different proceedings — Whether present claim could have been brought in prior related proceedings — Whether failure to bring present claim in prior related proceedings was abuse of process

Contract — Breach — Preferred supplier clause — Margin of discretion to act reasonably in commercial interest — Whether preferred supplier clause was breached

Contract — Contractual terms — Enforceability — Preferred supplier clause — Whether preferred supplier clause was vague and uncertain — Whether preferred supplier clause was aspirational — Whether preferred supplier clause was enforceable

Contract — Formation — Certainty of terms — Preferred supplier clause — Multiple potential interpretations of clause — Whether preferred supplier clause was tolerably clear

Res Judicata — Issue estoppel — Prior related proceedings — Alleged breach of contractual term — Alleged breach raised in prior related proceedings — Question of breach left open in prior related proceedings — Whether present claim for breach of contractual term barred by issue estoppel

Held, dismissing the counterclaim:

(1) The Counterclaim was not barred by issue estoppel. While a breach of Clause 7.2 had been raised in SIC 4, the judgment in SIC 4 could not 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[2007] 1 SLR(R) 453 at [28]. In SIC 4, the SICC concluded 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, and it was unnecessary to go further. Given the indeterminate nature of the evidence adduced in SIC 4 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 on the issue whether Clause 7.2 had been breached: at [11].

(2) The Counterclaim was not an abuse of process under extended res judicata. The alleged breach of Clause 7.2 was a different question from the breach of the SSSA's non-compete, non-solicitation and confidentiality clauses relied on by DyStar in SIC 3. There was accordingly no obligation on Kiri to raise the breach of Clause 7.2 as a counterclaim in SIC 3. It was true that Kiri had alleged the breach of Clause 7.2 in SIC 4. But that was merely as an ancillary issue to establishing oppressive conduct on Senda's part. SIC 4 left the question of the breach of Clause 7.2 unresolved, so there could not have been a res judicata on that matter: at [16].

(3) It remained open to Kiri to sue DyStar in India (as it did) for the breach of Clause 7.2. When DyStar started SIC 7 in Singapore, Kiri withdrew the Indian proceedings and pursued the Counterclaim in Singapore instead. While Kiri might be faulted for not withdrawing its Indian action earlier, that was a matter which could have been (and had been) dealt with through an appropriate costs order of the Indian court. In those premises, the bringing of the Counterclaim could hardly be characterised as “harassment” or as “manifestly unfair” to DyStar and as “bringing the administration of justice into disrepute”: at [16].

(4) Clause 7.2 gave rise to an enforceable obligation. In its natural and ordinary meaning, the words “shall procure” in Clause 7.2 imposed a positive obligation on DyStar to bring about an outcome, namely, that Longsheng (and its affiliates) and DyStar were treated as “preferred suppliers of all goods and services in connection with textile chemicals, dyestuffs and dyes”. This did not mean (and Kiri did not contend) that DyStar should place the interests of Longsheng (and its affiliates and DyStar) above its own. DyStar would enjoy a wide discretion in its purchasing decisions under Clause 7.2 in light of geographical, commercial, and practical considerations. For example, obviously, where Longsheng's or Kiri's prices were uncompetitive, DyStar would be free to purchase from other suppliers. The mere fact that there were many ways of preferring a supplier did not render the obligation under Clause 7.2 so vague and uncertain as to be unworkable: at [21] and [22].

(5) There was no breach of Clause 7.2 as regards raw materials and intermediates. Clause 7.2 did not require DyStar to treat Kiri as a preferred supplier of raw materials and intermediates not produced by Kiri. The clause allowed a margin of discretion to DyStar to act reasonably in its commercial interest. If Kiri was not producing the relevant raw materials or intermediates, it would have had to source them from third parties and offer the goods to DyStar at a mark-up. On those premises, it would not have been reasonable to expect DyStar to obtain the goods through Kiri as middleman. It would have been more conducive to DyStar's commercial and practical interests to obtain the materials directly from Kiri's suppliers. While, in 2010 and 2011, DyStar had submitted open orders for raw materials and intermediates to Kiri, DyStar might well have acted in a manner that went beyond what Clause 7.2 required: at [29].

(6) Kiri suggested that the production of raw materials and intermediates from DyStar's plants in Brunsbüttel, Leverkusen and Cilegon was transferred to DyStar's other plants in Gabus, Omuta and Ankleshwar. Kiri reasoned that it could have fulfilled the needs of those other plants and in any event should have been afforded with the opportunity to do so. It based this allegation on a production transfer schedule issued in July 2010.

(a) Mr Peter Euschen (“Mr Euschen”) (now DyStar's “Global Head of Engineering & HSE [Health, Safety & Environment]”) gave compelling evidence that explained that the production transfer schedule was an early version which “simply sets out a schedule for the transfer of production from the Brunsbüttel and Leverkusen plants to other plants such as Nanjing, Omuta, Gabus, and so forth”. Mr Euschen was an appropriate person to give evidence on this issue as he was one of the authors of the production transfer schedule and was personally involved in the transfer of know-how from DyStar's German plants from 2010 to August 2013: at [27] and [30] to [32].

(b) As for Cilegon, at a meeting on 28 and 29 July 2010, DyStar's board decided that Cilegon should be closed as soon as possible, and its production of reactive dyes should be transferred to Lonsen-Kiri. The thinking was to transfer production from high-cost sites in Germany (Brunsbüttel and Leverkusen) and Indonesia (Cilegon) into one low-cost site at Lonsen-Kiri for economies of scale and thereby maximise savings: at [33].

(7) There was no breach of Clause 7.2 as regards the use of raw materials and intermediates at DyStar's plants in Wuxi, Nanjing, Ankleshwar, Gabus and Omuta. The SICC accepted the evidence of Ms Vera Huang (“Ms Huang”) (DyStar's head of global procurement) in this regard; Ms Huang's evidence was supported by evidence in the form of DyStar's “System Application and Product in Processing” system (“SAP”). The evidence showed, among other things, that Kiri did not produce the raw materials which DyStar's various plants purchased from other suppliers during the relevant period: at [34] to [39].

(8) There was no breach of Clause 7.2 in respect of finished dyes. The SICC was persuaded by DyStar's arguments on Kiri's lack of reliability as a supplier of such dyes. As a result of Kiri's lack of dependability, DyStar saw a need in 2012 to develop alternative dye sources to Kiri. This was necessary to safeguard DyStar's supply of its products to customers on a timely basis and at an acceptable price and quality. The need for alternative sources arose from Kiri's high prices at the time and Kiri's inability to provide a reliable supply of dyes in the nine months from January to September 2012. Even after these events, Kiri had been given a further opportunity by DyStar, in December 2012, to supply reactive dyes. Unfortunately, Kiri's execution of that order was far from smooth: at [62] to [66].

(9) While there was evidence that Kiri's capability as a supplier had improved in the years following 2013, specifically between March 2014 and December 2015 and thereafter, this potential aspect of Clause 7.2 was neither pleaded nor was it explored at trial. In particular, it was never put to any of DyStar's witnesses that, however commercially justified DyStar might have been in acting as it did in 2013, over the next few years, DyStar failed: (a) to check whether Kiri's ability to supply finished dyes at competitive prices had improved; and (b) (to the extent there was a change for the better) to resume regular (as opposed to sporadic) dealing with Kiri as a supplier. It therefore could not be concluded that DyStar's decision to stop placing orders with Kiri from 2013 ought to have been reviewed and (possibly) rescinded at a later stage: at [67].

(10) Kiri relied on DyStar's treatment of Lonsen-Kiri and a supplier known as Colourtex in support of its argument that a nine-month disruption in supply could not be a valid reason for ceasing to place orders. However, the situations of Lonsen-Kiri and Colourtex were distinguishable:

(a) Colourtex was a major supplier of DyStar, and DyStar's commercial considerations in dealing with Colourtex were different from those with Kiri. Accordingly, it did not follow that by reason of Clause 7.2, DyStar was obliged to give Kiri a price increase merely because it was forced to agree one with Colourtex: at [68].

(b) There was also no breach as regards Lonsen-Kiri's supply of “Reactive...