Kiri Industries Ltd v Senda International Capital Ltd and another

• Jurisdiction: Singapore
• Judge: Kannan Ramesh JAD
• Judgment Date: 08 February 2023
• Neutral Citation: [2023] SGHC(I) 3
• Court: International Commercial Court (Singapore)
• Docket Number: Suit No 4 of 2017
• Hearing Date: 08 August 2022,29 August 2022
• Citation: [2023] SGHC(I) 3
• Year: 2023
• Plaintiff Counsel: Dinesh Dhillon Singh, Lim Dao Kai, Margaret Joan Ling Wei Wei, Dhivya Rajendra Naidu and Serene Chee Yi Wen (Allen & Gledhill LLP)
• Defendant Counsel: Toh Kian Sing SC, Cheng Wai Yuen Mark, Chew Xiang, Soh Yu Xian Priscilla, Tan Tian Hui and Lim Wee Teck Darren (Rajah & Tann Singapore LLP),Audie Wong Cheng Siew (Drew & Napier LLC)
• Subject Matter: Companies,Shares,Valuation of shares
• Published date: 11 February 2023

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

The relevant factual background to this long-running case can be found in DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries [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.

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 be made to the interim valuation arising from the Nine Issues and directed the parties’ experts to tender an agreed computation of DyStar’s final valuation. Based on the agreed computation, the SICC adjudged the final valuation of Kiri’s shareholding in Dystar to be US$481.6m for the purpose of the Buy-Out Order (see Kiri Industries Ltd v Senda International Capital Ltd and another [2021] 5 SLR 111).

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 (“Longsheng”) unauthorised use of DyStar’s patent (“the Patent”) over “Orange 288” dyes to produce various dyes. The SICC decided that the compensation for such unauthorised use was to be assessed on the basis of a notional licence fee, ie, how much Longsheng would have paid DyStar to obtain its consent to use the Patent to manufacture the said dyes (see the Valuation Judgment at [183]). The notional licence fee that was assessed would then be incorporated into the valuation of Dystar to arrive at the value of Kiri’s shareholding for the purpose of the Buy-Out Order.

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, in determining the quantity of the Related Products and using Longsheng’s licencing agreement with another company as a proxy for the rate, subject to certain adjustments (see the Valuation Judgment at [190]). The SICC accepted Mr Chan’s evidence as Kiri had not submitted an alternative case on this issue and the court did not have direct evidence on the quantity of the Related Products that Longsheng had produced. This was a result of Senda’s failure to give adequate discovery on, inter alia, the quantity of the Related Products that was produced (see the Valuation Judgment at [194]).

On appeal from the Valuation Judgment, in Kiri Industries Ltd v Senda International Capital Ltd and another and other appeals and other matters [2022] SGCA(I) 5 (“Kiri Industries (Valuation) (CA)”), the Court of Appeal upheld the SICC’s decision on the use of a notional licence fee but disagreed with the SICC’s assessment of the notional licence fee on the basis of Mr Chan’s evidence, in particular, in arriving at the quantity of the Related Products. The Court of Appeal held that the SICC’s approach “had the effect that Senda was to be rewarded for its under-disclosure because the onus of proving the amount of products produced by Longsheng and which were covered by the relevant claims in [the Patent], fell on Kiri” (Kiri Industries (Valuation) (CA) at [267]). 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 the Related Products (Kiri Industries (Valuation) (CA) at [291]–[292]).

Accordingly, in the present proceedings, the key issue for us is to determine the quantity of infringing products produced by Longsheng between 31 August 2010 to 23 March 2019 using the Patent, ie, the Related Products. Such quantity was measured in terms of tonnage. As there was no direct evidence on the quantity of the Related Products, we must instead rely on the indirect evidence on this issue that was before us.

The court’s approach in evaluating the evidence for quantifying the tonnage of the Related Products

In evaluating the evidence, Kiri urges us to apply the principle in Armory v Delamirie (1722) 1 Stra 505 (“Armory v Delamirie”). If applied, Kiri argues that its expert’s (ie, Ms Harfouche’s) estimates of the quantity of the Related Products should be accepted wholesale in assessing the notional licence fee, with the benefit of any doubt being given to Kiri. This is because per the principle in Armory v Delamirie, Senda ought to be liable for the greatest value of the notional licence fee given its under-disclosure of the quantity of the Related Products (ie, the court should agree with Ms Harfouche’s higher estimate on the quantity of the Related Products).

The case of Armory v Delamirie is a well-known decision concerning the determination of property rights in a stolen jewel which was not produced at trial. The principle is applied to decide on the value of goods that were tortiously converted and where the alleged wrongdoer refuses to produce the goods, such that the value remains unknown. In such cases, there is a presumption against the wrongdoer that the goods converted bear the highest value of the goods of that type (see Halsbury’s Laws of Singapore vol 18 (LexisNexis, 2019 reissue) at para 240.564, footnote 1).

But the interplay between the illustration (g) of s 116 of the Evidence Act 1893 (2020 Rev Ed) (the “EA”) and the principle in Armory v Delamirie has yet to be explored fully. In the majority of cases, there is simply no need to resort to the principle in Armory v Delamirie as the court can instead rely on illustration (g) of s 116 of the EA to draw an adverse inference that the evidence which could be and was not produced would, if produced, be unfavourable to the person who withholds it (see Sudha Natrajan v The Bank of East Asia Ltd [2017] 1 SLR 141 (“Sudha Natrajan”) at [19]). The rationale for the adverse inference is the natural inference that the party fears that the evidence, if produced, would be unfavourable to himself (see Jones v Dunkel (1959) 101 CLR 298 at 320–321). Further, it has been observed that the “authorities do not necessarily speak with one voice” on the application of the Armory v Delamire principle (Sea-Shore Transportation Pte Ltd v Technik-Soil (Asia) Pte Ltd [2018] SGHC 231 (“Sea-Shore”) at [70]). We would thus prefer to rely on the well-established principles of drawing the appropriate inference when necessary and to do so depending on the circumstances of the case as laid down in the Court of Appeal’s decision in Sudha Natrajan (read with illustration (g) of s 116 of the EA).

In the present proceedings, as will be explained further below (see [30]), we do not in fact find it appropriate to draw an adverse inference against Senda that it should be liable for the greatest value of the tonnage of the Related Products. Neither do we consider it appropriate to rely on the principle in Armory v Delamirie. In either case, the asserted presumption by Kiri against Senda in relation to the tonnage of the Related Products, simply does not square with the factual matrix before the court as there was contrary evidence that renders the presumption and Ms Harfouche’s estimates inaccurate.

We also are guided by the Court of Appeal’s statement that a robust approach to the assessment of damages should be taken where loss has been suffered but the quantum is difficult to assess (Kiri Industries (Valuation) (CA) at [291], citing Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd and another [2008] 2 SLR(R) 623 at [30] and [36]). The court must do its best based on the available evidence on whether there was damage suffered, and if so, to what extent (see James Edelman, McGregor on Damages (Sweet & Maxwell, 21st Ed, 2021) at para 10-002). Accordingly, having set out the appropriate approach, we turn to assess what represented the best available evidence before the court regarding the tonnage of the Related Products.

Quantifying the tonnage of the Related Products based on the best available evidence before the court

Before proceeding further, it is necessary to clarify the meaning of “Related Products” as the parties do not agree on the products that fall within this definition. Kiri’s position is that Related Products are those that are produced using the Patent. On the other hand, Senda argues that products produced using the Patent (which it calls “Patented Products”) are only a subset of Related Products, and that Related Products are all navy and black disperse dyes, with some navy and black disperse dyes produced or capable of being produced without using the Patent. Thus, on Senda’s...