Itochu Steel Asia Pte Ltd v C V Wira Mustika Indah and Others

• Jurisdiction: Singapore
• Judge: Amarjeet Singh JC
• Judgment Date: 16 December 1999
• Neutral Citation: [1999] SGHC 321
• Published date: 11 March 2013
• Court: High Court (Singapore)
• Plaintiff Counsel: Philip Lam (Foo Liew & Philip Lam)
• Defendant Counsel: Low Chai Chong (Rodyk & Davidson)

JUDGMENT:

GROUNDS OF JUDGMENT

1. The Asst. Registrar dismissed the 2^nd Defendant’s application to stay the action against him as a guarantor liable to the Plaintiffs on the ground of forum non conveniens. The 2^nd Defendant appealed against this decision. I allowed the appeal and stayed the action against the 2^nd Defendant holding that Indonesia was clearly and distinctly the more appropriate forum for an action against the 2^nd Defendant than Singapore.

Background to Action

2. The events leading to this action against the 2^nd Defendant and others are briefly as follows:-

3. The Plaintiffs are a Singapore incorporated company carrying on business in the trading of cold rolled steel sheets in coil and other steel products.

3.1 The 1^st Defendants are a limited partnership company established and existing under the laws of the Republic of Indonesia. The partners at the material times consisted of the 2^nd Defendant, his wife and another. The 2^nd Defendant withdrew from the partnership on 3 February 1998.

3.2 The 2^nd Defendant is an Indonesian citizen and generally resides in Indonesia where he now lives. He also holds the status of a permanent resident of Singapore. He has property both in Singapore and Indonesia.

3.3 The 3^rd Defendant, an Indonesian citizen, is the 2^nd Defendant’s son. The 3^rd Defendant is the sole proprietor of Tria Niaga Enterprise which is registered in Singapore.

4. Between 1996 to October 1997, the Plaintiffs and the 1^st Defendants entered into contracts for the sale and supply of cold rolled sheets in coils (‘the goods’) to the 1^st Defendants in Indonesia.

4.1 The Plaintiffs, the 1^st and 3^rd Defendants further agreed that the 3^rd Defendant shall issue Bills of Exchange to the Plaintiffs in payment for the goods to be shipped for delivery in Indonesia. Accordingly, upon each shipment of goods to the 1^st Defendants in Indonesia, the Plaintiffs would be invoicing the 3^rd Defendant for value of the shipment.

5. Further, byy Guarantee dated March 1995 (‘1^st Guarantee’) the 2^nd Defendant guaranteed the due discharge of all liability that the 3^rd Defendant may have to the Plaintiffs up to US$3,000,000/- as a primary obligation on demand. This sum was increased to US$5,000,000/- (clause 5) by the 2^nd Defendant when he signed a second Guarantee on 1st April 1996 (‘2^nd Guarantee’) in otherwise identical terms. The 1^st Guarantee gave the 2^nd Defendant’s address as TMN Tomang Indah, Blk V/3, Djakarta Bonel, Indonesia. The 2^nd Guarantee left the address blank next to the address column. Both Guarantees were prepared by the Plaintiffs’ solicitors and signed in Indonesia by the 2^nd Defendant. In the Guarantees, the sole proprietorship Tri Niaga Enterprise fully owned by Tan Peng Boen with its registered address of business in Singapore is referred to as the ‘Principal’ and a subsidiary of the 1^st Defendants. This Principal in effect is the 3^rd Defendant.

5.1 The relevant portions of both Guarantees then go on to read as follows:

Clause 2

I, the undersigned, guarantee to you the due discharge by the Principal of each and every liability the Principal may now or hereafter have to you (whether solely or jointly with one or more other and whether as principal or as surety or in some other capacity) and promise to pay to you forthwith on demand being made in writing by you on me the unpaid balance of each and every sum (of principal, interest or otherwise) now or hereafter owing, due and payable by the Principal to you in respect of any such liability.

Clause 3

I, the undersigned, hereby for the same consideration agree as a primary obligation to indemnify you in full forthwith on demand being made in writing by you on me against any loss you may incur as a result of any such liability, or any agreement relating thereto, being or becoming void, voidable or unenforceable for any reason whatever, and whether or not known to you, the amount of such loss being in each case the amount which you would otherwise have been entitled to recover from the Principal.

Clause 4

I agree that my obligation hereby is that of sole or principal obligors …….

Clause 15

This guarantee shall be governed by and construed in accordance with Indonesia law and the undersigned hereby irrevocably submits to the non-exclusive jurisdiction of the Indonesian courts.

Clause 16

The undersigned hereby waives any and all of its rights against you regarding the provisions of section 1430, 1831, 1847 through 1849 of the Indonesian Civil Code.

6. Again, by letters dated March 1995 and 1^st April 1996 to the Plaintiffs, the 3^rd Defendant represented to the Plaintiffs that the Principal (Tri Niaga Enterprise) was a sole proprietorship, that he was its owner and that he was fully liable to the Plaintiffs for any and all liabilities arising from transactions with them in the name of Tri Niaga Enterprise and further stated that:

"the said Principal (Tri Niaga Enterprise) is a subsidiary of C.V. Mustika Indah (‘C.V.’) an Indonesian partnership and he shall cause the C.V. to make sure a business of the Principal and further to inject cash into the Principal in case of a shortfall in funds of the Principal". [sic]

7. Pursuant to the contracts and the agreement earlier referred to, the 3^rd Defendant drew Bills of Exchange from 24 April 1997 to 16 January 1998 payable on the Plaintiffs’ invoices as presented to him from time to time and exchanged the said Bills of Exchange for Bills of Lading issued by the Plaintiffs for the release of the goods on their arrival in Indonesia in respect of the total sum of $5,992,375.18cts. There is no dispute that the goods under the said contracts were delivered to the 1^st Defendants to the said total value. The Plaintiffs presented each and every Bill for payment on the due dates but all the said Bills were dishonoured on the due dates resulting in a notice of dishonour being given to both the 1^st and 3^rd Defendants.

8. The 1^st and 3^rd Defendants acknowledged in writing on 20^th May and 13^th April 1998 that as at 29^th June 1998 the sum of US$5,992,375.18cts was owed to the Plaintiffs.

9. Between 12^th January 1999 and 2^nd March 1999 the Plaintiffs were repaid $533,063.00 leaving the current balance due and owing in the sum of US$5,459,312.18cts.

10. Upon demand being made of the 2^nd Defendant to pay the said current sum due and owing as a guarantor, the 2^nd Defendant failed and or neglected to repay the said sum resulting in loss to the Plaintiffs.

11. As for the Plaintiffs’ claim against the 3^rd Defendant, the same came on for summary judgment by application made but the 3^rd Defendant was granted unconditional leave to defend the action. The 3^rd Defendant had raised the defence that he was merely a conduit for payment of the 1^st Defendants’ outstandings and would pay and had made part payment when funds were transmitted to him for the 1^st Defendants in Djakarta.

11.1 In April 1999, the Plaintiffs obtained leave to serve the papers in this action on the 1^st Defendants.

12. On 8^th August 1999, the Plaintiffs applied for Mareva Injunction against the 2^nd Defendant to prevent dissipation of his assets. On 10^th August 1999, the Plaintiffs obtained the Mareva Injunction.

13. The 2^nd Defendant in support of his application to stay the action, filed an Affidavit explaining that the 1^st Defendants had previously paid for all goods ordered but was unable to pay the outstanding amount in the current transactions at the expiry of 180 days because of the economic crisis that enveloped Indonesia which had very badly affected his business. There had been a sharp drop in demand for the 1^st Defendants’ manufactured products, the firm’s factory had to close down because of rioters due to mischief caused by them and the value of the Rupiah had plunged from one US Dollar to 3,000 Rupiahs to one US Dollar to 15,000 Rupiahs then. The 1^st Defendants had usually a credit of US$5m every month and the 1^st Defendants had been caught in the crisis and it was not possible to repay the Plaintiffs in view of such adverse conditions.

13.1 The 2^nd Defendant on the advice of his Indonesian solicitors Laode M Sabur (‘Laode’) stated that if the action aginst him was tried in Indonesia, the 1^st Defendants and himself would have available to them the defence of force majeure (or overmacht) – an unpredictable situation not caused by the debtor.

13.2 The 2^nd Defendant also averred that Laode had further advised him on the matter being taken up by his wife Madam Ng Tja Giok to whom he had been married since 26 August 1964 that under Indonesian law all property acquired after marriage was the joint property owned by the husband and wife and a husband could not issue any Guarantee in respect of such property jeopardising the same unless the wife consented to the Guarantee. The 2^nd Defendant therefore could not issue any guarantee after that date without his wife’s permission and the Guarantee having been issued was invalid/voidable. The 2^nd Defendant’s wife also filed an Affidavit confirming that the 2^nd Defendant had never sought her consent before signing the Guarantees and she had never given him such consent. She had only come to know of the Guarantees well after they were signed.

13.3 Laode filed a number of Affidavits and explained that he had been consulted by the 2^nd Defendant and his wife and had given them advice as set out earlier. He went on in his Affidavits to set out and to give his expert opinion on various aspects of Indonesian law highlighting two main defences available to the 2^nd Defendant in Indonesia i.e. force majeure and the invalidity or voidability of the Guarantees in view of the absence of consent from his wife before he signed the same as it would affect her rights to share in the property jointly owned by her and the 2^nd Defendant.

13.4 Concerning force majeure, Laode referred to Article 1245 of the Indonesian Civil Code which stipulated:

"Tidaklah biaya rugi dan bunga,...