John Reginald Stott Kirkham v Trane US Inc.

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 15 July 2009
• Neutral Citation: [2009] SGCA 32
• Citation: [2009] SGCA 32
• Date: 15 July 2009
• Published date: 21 July 2009
• Plaintiff Counsel: Rajah Chelva Retnam SC and Chew Kei-Jin (Tan Rajah & Cheah)
• Docket Number: Civil Appeal No 103 of 2008
• Defendant Counsel: Kanapathi Pillai Nirumalan (Niru & Co)
• Court: Court of Appeal (Singapore)
• Year: 2009

15 July 2009

Chao Hick Tin JA (delivering the grounds of decision of the court):

Introduction

1 Civil Appeal No 103 of 2008 (“CA 103”), was an appeal by the defendants (“the Appellants”) against the decision of the High Court judge (“the Judge”) in Summons No 5248 of 2007 (“SUM 5248”), in which the Judge granted the plaintiffs (“the Respondents”) an injunction (otherwise known as an “anti-suit injunction”) to restrain the Appellants from continuing with the Indonesian proceedings which the Appellants had brought against the Respondents (“the Indonesian Action”). CA 103 was heard together with Civil Appeal No 128 of 2008 (“CA 128”), which was an appeal by the Appellants against the Judge’s dismissal of their application in Summons No 5167 of 2007 (“SUM 5167”) for a stay of the action which the Respondents had instituted in Singapore against the Appellants (“the Singapore Action”) on the ground of forum non conveniens. The reasons for the Judge’s decisions in SUM 5248 and SUM 5167 can be found in his grounds of decision, viz, Trane US Inc v Kirkham John Reginald Stott [2008] SGHC 240 (“the GD”).

2 After hearing the parties, we allowed the appeal in CA 103 but dismissed the appeal in CA 128. The present grounds of decision are issued solely in relation to CA 103 to explain why we have allowed that appeal.

The parties

3 Trane US Inc (“the First Respondent”) is a company incorporated in Delaware, USA. It is in the business of providing air conditioning systems and services under the Trane name (“the Products”). The First Respondent and Trane International Inc (“the Second Respondent”), a company also incorporated in Delaware, are wholly-owned subsidiaries of American Standard Companies Inc, a company incorporated in Delaware as well. Trane Export LLC (“the Third Respondent”), which is a wholly-owned subsidiary of the Second Respondent, is a company incorporated in Delaware and is a provider of the Products.

4 John Reginald Stott Kirkham (“the First Appellant”) is a director of Solutions Pte Ltd (“the Second Appellant”) and one of the three commissioners of PT Tatasolusi Pratama (“the Third Appellant”), an Indonesian company. Under Indonesian company law, a company must have a two-tier board, consisting of directors that manage the company and commissioners that supervise the policies of the directors in managing the company. The First Appellant is a Singapore citizen, and is also a director and majority shareholder of Amazon Investments (Singapore) Pte Ltd, the sole shareholder of the Second Appellant. The Respondents claimed that the First Appellant was the alter ego of the Second Appellant and the Third Appellant. They further claimed that the Second Appellant and the Third Appellant were merely corporate manifestations of the First Appellant. The Second Appellant, which is a company incorporated in Singapore, is in the business of making investment, as well as the provision of management and administrative support services, and has an 88% shareholding in the Third Appellant. The Third Appellant, which is a trading company incorporated in Indonesia with a branch registered in Singapore, was, before the dispute arose which formed the basis of the Indonesian Action, distributing the Products in Indonesia.

Background facts

5 On 15 May 1990, the First Respondent incorporated TAC Distribution Pte Ltd (“TAC”) which had the object of distributing the Products in Singapore, Malaysia, Indonesia and Brunei. On 23 July 1990, the First Respondent and the Second Appellant entered into a shareholders’ agreement in relation to TAC (“the Shareholders’ Agreement”), which was to be governed by Singapore law and under which the parties agreed to submit to the non-exclusive jurisdiction of the Singapore courts. Pursuant to the Shareholders’ Agreement, TAC would distribute and sell the Products in Singapore. It was envisaged that separate subsidiaries of TAC would eventually be incorporated for the distribution of the Products in Malaysia, Indonesia and Brunei. Once such a subsidiary was incorporated in any of those territories, the distributor agreement and the trade mark agreement that would be entered into subsequently between TAC and the First Respondent would cease to apply to the country in question, and a separate distributor agreement and trade mark agreement, identical to the original distributor agreement and trade mark agreement, would be entered into between the First Respondent and the subsidiary in question. It was further agreed in the Shareholders’ Agreement that the First Respondent would hold no less than 30% of the share capital of TAC while the Second Appellant would hold up to 70% of the share capital of TAC.

6 Pursuant to the Shareholders’ Agreement, on 17 August 1990, the First Respondent and TAC entered into a distributor agreement for TAC to distribute and sell the Products in Singapore, Malaysia and Brunei (“the Distributor Agreement”). Under this agreement, TAC was appointed by the First Respondent to be its exclusive distributor of the Products in these three countries for an indefinite term, unless terminated due to material breach or change in capacity, or if 12 months’ written notice was given by either party to the other in the event of a fundamental disagreement between them. The rights granted under the Distributor Agreement to TAC were non-transferable. All trade secrets and other intellectual property rights made available to TAC were not to be disclosed to third parties. Like the Shareholders’ Agreement, the Distributor Agreement provided that it was to be governed by Singapore law.

7 On 18 November 1991, a separate distributor agreement was entered into with regard to the distribution of the Products in Malaysia (“the Malaysian Distributor Agreement”) following the formation of a subsidiary of TAC in that country. The Malaysian Distributor Agreement was essentially similar to the Distributor Agreement, except for the choice of law clause, which provided that the agreement was to be governed by Malaysian law.

8 Under the Distributor Agreement, TAC’s distributorship of the Products did not extend to Indonesia, as at that time, an Indonesian company known as PT Unitrade had the rights to distribute the Products in that country. However, it was contemplated that TAC would eventually be the distributor of the Products in Indonesia. Thus, on 4 August 1990, a memorandum was signed between TAC and the First Respondent recording the parties’ acknowledgement that efforts would be made to accommodate PT Unitrade and to restructure PT Unitrade’s distributorship so as to permit TAC to be a distributor of the Products in Indonesia. This led to a settlement agreement between the First Respondent and PT Unitrade for the cessation of PT Unitrade’s distribution rights for the Products in Indonesia.

9 Subsequently, on 8 November 1991, the First Respondent and TAC agreed to an amendment to the Distributor Agreement (“the Distributor Agreement Amendment”), which extended the territories covered by the Distributor Agreement to Indonesia. This agreement, which was also governed by Singapore law, had a clause, viz, cl B, which provided that the distributorship of the Products in Indonesia would be undertaken by either a joint venture subsidiary if and when it was permissible under Indonesian law for the First Respondent to be a shareholder in such an entity, or, in the alternative, by another company designated by TAC provided certain conditions were met. Clause B is reproduced below:

The [First Respondent and TAC] agree that they will form a joint venture operating subsidiary in Indonesia only when it is permissible under Indonesian law for [the First Respondent] to be a shareholder in such company. However, in the event that TAC wishes to designate another company in Indonesia to be its distributor, then, it shall assure that:

i) If [the First Respondent] so requests, H.K. Aditirto shall be offered the right to subscribe to up to 20% of the shares of that company, and

ii) TAC shall procure for itself the right to subscribe to the balance of such shares, or it shall procure for [the First Respondent] the right to subscribe to shares in such company up to 30% of the balance, at a price not to exceed the book value of such shares.

iii) It shall comply with all applicable Indonesian laws and ordinances.

10 The Appellants claimed that the Third Appellant, which was incorporated in Indonesia in 1993, was designated by TAC to be the distributor company pursuant to cl B, and that the conditions stipulated had been met, and since 1993, the Third Appellant was the exclusive distributor of the Products in Indonesia. In contrast, the Respondents claimed that cl B was never put into effect. As regards the role of the Third Appellant, the Respondents submitted that while no Indonesian entity was formally appointed as a distributor, informal arrangements were made with the Third Appellant for the Third Appellant to distribute the Products in Indonesia on an ad hoc basis as a stop-gap measure until a subsidiary was incorporated pursuant to cl B.

11 On 16 October 1998, the First Respondent became the sole shareholder of TAC after it acquired all the shares in TAC from the Second Appellant. The Respondents submitted that by reason of this event, the Shareholders’ Agreement ceased to have effect. After the First Respondent became the sole shareholder of TAC, the First Respondent made a proposal to the Third Appellant to appoint it as a non-exclusive distributor of the Products in Indonesia. On 29 October 1999, the First Respondent sent a draft distributor agreement between the Third Respondent and the Third Appellant (“the Draft Distributor Agreement”) to the First Appellant and the Second Appellant. The Draft Distributor Agreement provided for a non-exclusive and non-transferable distributorship for five years to be followed thereafter by automatic one-year renewals, and was to be governed by Indonesian law....