Kannan Ramesh JADKiri Industries Ltd v Senda International Capital Ltd

• Jurisdiction: Singapore
• Judge: Kannan Ramesh JAD,Roger Giles IJ,Anselmo Reyes IJ
• Judgment Date: 08 February 2023
• Docket Number: Suit No 4 of 2017
• Court: High Court (Singapore)

Kiri Industries Ltd

and

Senda International Capital Ltd and another

[2023] SGHC(I) 3

Kannan Ramesh JAD, Roger Giles IJ and Anselmo Reyes IJ

Suit No 4 of 2017

Singapore International Commercial Court

Companies — Shares — Valuation of shares — Determining value of notional licence fee based on quantity of infringing products falling within scope of patent — No direct evidence on quantity of products due to inadequate disclosure — Drawing of adverse inference — Whether court could rely on estimates provided in expert evidence

Held, determining the annual tonnage of the Related Products:

(1) In Armory v Delamirie(1722) 1 Stra 505 (“Armory v Delamire”), as the stolen property was not produced at trial, there was a presumption against the wrongdoer that the goods converted bore the highest value of the goods of that type. As the interplay between illus (g) of s 116 of the Evidence Act 1893 (2020 Rev Ed) and the principle in Armory v Delamirie had yet to be fully explored, and the authorities did not speak with one voice on the application of this principle, the SICC preferred to instead rely on the well-established principles of drawing the appropriate inference when necessary to do so depending on the circumstances of the case: at [8] and [9].

(2) Mr Chan's expert report (“CKT-3”) was not adopted by the SICC for calculating the tonnage of Related Products. First, the model relied on by Mr Chan in CKT-3 was the same February 2020 model that had been rejected by the SICC previously in the Valuation Judgment on the basis of Senda's failure to disclose the financial documents supporting it. Second, the tonnage of all Related Products in CKT-3 of 41,750 tonnes was inexplicably lower than Longsheng's total sales of more than 50,000 tonnes for just three of the Related Products: at [16] to [18].

(3) Mr Chan's alternative computation based on the revision of CKT-3 was also rejected. First, it was not evident why DyStar's proportion of the sale of Related Products provided a reliable proxy for Longsheng's own proportion. Second, the alternative computation suffered from the same defect that impacted CKT-3 in that it relied on unsupported data. Third, the alternative computation of 20,875 tonnes annually for all Related Products was again inexplicably lower than the 50,000 tonnes produced annually for just three of the Related Products: at [20].

(4) Kiri's expert, Ms Roula Harfouche (“Ms Harfouche”), estimated that Longsheng produced 120,000 tonnes of Related Products annually. The calculation was summarised in her first table of estimates (using facts asserted by the Chief Executive Officer of DyStar, Mr Eric Hopmann, in his affidavit of evidence-in-chief). Ms Harfouche cross-checked the accuracy of this figure using a second table of estimates (which relied on broker reports). There were errors in Ms Harfouche's first table of estimates. The primary error was her assumption that all of Longsheng's production of black and navy disperse dyes were Related Products. Longsheng was capable of producing dyes without using the Patent and had other patents for dye production. Ms Harfouche was also incorrect in assuming that all of the production of another Chinese producer, Zhejiang Runtu Co Ltd, involved use of the Patent. There was no evidential basis for the assumption. Further, there was an inconsistency between the first table of estimates and the second table of estimates in terms of the assumptions that Ms Harfouche made regarding the proportion of Related Products and the approach she used to arrive at her conclusion: at [22], [23] and [26] to [29].

(5) Kiri's reliance on the principle in Armory v Delamire was flawed as it was impermissible to draw an inference which was contrary to established facts. There was cogent contrary evidence showing that not all of Longsheng's production of black and navy disperse dyes might have been Related Products. Accordingly, Ms Harfouche's calculation in the first table of estimates was rejected: at [30] and [31].

(6) The SICC determined the tonnage of Related Products partly based on Ms Harfouche's second table of estimates which was premised on reliable evidence in the form of publicly available broker reports. There was an error in the calculations in the second table of estimates. However, once this was corrected, and certain figures were accepted as appropriate proxies (in the absence of better evidence due to the inadequate disclosure by Senda), the SICC concluded that the annual tonnage of Related Products produced by Longsheng between 31 August 2010 to 23 March 2019 was 56,750 tonnes. After deducting 3,200 tonnes (representing the Related Products that Longsheng produced for Dystar, which the parties accepted was a relevant deduction), the final figure of 53,550 tonnes annually was derived for the purposes of calculating the notional licence fee: at [32] and [36] to [38].

Case(s) referred to

Armory v Delamirie (1722) 1 Stra 505 (not folld)

DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries Ltd [2018] 5 SLR 1 (refd)

Jones v Dunkel (1959) 101 CLR 298 (refd)

Kiri Industries Ltd v Senda International Capital Ltd [2021] 3 SLR 215, SICC (refd)

Kiri Industries Ltd v Senda International Capital Ltd [2021] 5 SLR 1, SICC (refd)

Kiri Industries Ltd v Senda International Capital Ltd [2021] 5 SLR 111, SICC (refd)

Kiri Industries Ltd v Senda International Capital Ltd [2022] SGCA(I) 5 (refd)

Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd [2008] 2 SLR(R) 623; [2008] 2 SLR 623 (refd)

Sea-Shore Transportation Pte Ltd v Technik-Soil (Asia) Pte Ltd [2018] SGHC 231 (refd)

Senda International Capital Ltd v Kiri Industries Ltd [2019] 2 SLR 1 (refd)

Sudha Natrajan v The Bank of East Asia Ltd [2017] 1 SLR 141 (folld)

Facts

The Singapore International Commercial Court (“SICC”) previously held that Senda International Capital Ltd (“Senda”) had engaged in instances of oppressive conduct against Kiri Industries Ltd (“Kiri”) in relation to DyStar Global Holdings (Singapore) Pte Ltd (“DyStar”), which was their joint venture vehicle. Senda was thus ordered to purchase Kiri's 37.57% shareholding in DyStar.

The most recent tranche of proceedings concerned the valuation of DyStar and Kiri's shareholding in DyStar, which turned primarily on expert evidence. Having heard the parties, the SICC delivered its judgment in Kiri Industries Ltd v Senda International Capital Ltd[2021] 3 SLR 215 (“the Valuation Judgment”). One of the issues addressed in the Valuation Judgment was the quantum of the notional licence fee. That issue related to Zhejiang Longsheng Group Co, Ltd's unauthorised use of DyStar's patent over “Orange 288” dyes (“the Patent”). The SICC decided that compensation for such unauthorised use was to be assessed on the basis of a notional licence fee, ie, how much Zhejiang Longsheng Group Co, Ltd (“Longsheng”) would have paid DyStar to obtain its consent to use the Patent.

The notional licence fee was to be assessed based on the quantity of infringing products produced by Longsheng falling within the scope of the Patent (the “Related Products”). In the Valuation Judgment, the SICC determined that in assessing the amount of the notional licence fee, the appropriate basis was to employ the methodology proposed by Senda's expert, Mr Chan Kheng Tek (“Mr Chan”).

On appeal from the Valuation Judgment, in Kiri Industries Ltd v Senda International Capital Ltd[2022] SGCA(I) 5, the Court of Appeal disagreed with the SICC's assessment of the notional licence fee on the basis of Mr Chan's evidence. Thus, the Court of Appeal remitted the issue on the value of the notional licence fee back to the SICC to be reassessed based on the best available evidence that was before it on the quantity of Related Products.

Legislation referred to

Evidence Act 1893 (2020 Rev Ed) s 116 illus (g)

Dinesh Dhillon Singh, Lim Dao Kai, Margaret Joan Ling Wei Wei, Dhivya Rajendra NaiduandSerene Chee Yi Wen (Allen & Gledhill LLP) for the plaintiff;

Toh Kian Sing SC, Cheng Wai Yuen Mark, Chew Xiang, Soh Yu Xian Priscilla, Tan Tian HuiandLim Wee Teck Darren (Rajah & Tann Singapore LLP) for the first defendant;

Audie Wong Cheng Siew (Drew & Napier LLC) for the second defendant.

8 February 2023

Judgment reserved.

Kannan Ramesh JAD (delivering the judgment of the court):

Introduction

1 The relevant factual background to this long-running case can be found in DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries Ltd[2018] 5 SLR 1, where the Singapore International Commercial Court (the “SICC”) held that Senda International Capital Ltd (“Senda”) had engaged in instances of oppressive conduct against Kiri Industries Ltd (“Kiri”) in relation to DyStar Global Holdings (Singapore) Pte Ltd (“DyStar”), which was their joint venture vehicle. Senda was ordered to purchase Kiri's 37.57% shareholding in DyStar at a price based on a valuation to be assessed as at the valuation date of 3 July 2018 (“the Buy-Out Order”). The findings in relation to oppression and the valuation date were upheld on appeal in Senda International Capital Ltd v Kiri Industries Ltd[2019] 2 SLR 1.

2 The most recent tranche of proceedings concerned the valuation of DyStar and Kiri's shareholding in DyStar. The question of the appropriate valuation of Dystar and Kiri's shareholding in Dystar turned primarily on expert evidence. In this regard, Kiri and Senda had engaged valuation experts in support of their respective positions. Having heard the parties, the SICC delivered its judgment in Kiri Industries Ltd v Senda International Capital Ltd and another[2021] 3 SLR 215 (“the Valuation Judgment”), where the court provided an interim valuation of DyStar, subject to adjustments to be made by the parties' valuation experts on nine issues (“the Nine Issues”). Subsequently, in Kiri Industries Ltd v Senda International Capital Ltd and another[2021] 5 SLR 1, the SICC addressed the adjustments to...