MAN Diesel & Turbo SE and another v IM Skaugen SE and another

• Jurisdiction: Singapore
• Court: Court of Three Judges (Singapore)
• Judge: Woo Bih Li J,Steven Chong JA
• Judgment Date: 04 December 2019
• Neutral Citation: [2019] SGCA 80
• Citation: [2019] SGCA 80
• Plaintiff Counsel: Ong Tun Wei Danny, Yam Wern-Jhien, Tay Shi Ing and Bethel Chan Ruiyi (Rajah & Tann Singapore LLP)
• Docket Number: Civil Appeal No 213 of 2017
• Published date: 07 December 2019
• Hearing Date: 20 November 2019
• Subject Matter: Civil Procedure,Natural forum,Service,Conflict of Laws
• Date: 04 December 2019
• Defendant Counsel: Koh Junxiang and Charis Toh (Clasis LLC),Teh Kee Wee Lawrence and Wong Yong Jing, Justin (Dentons Rodyk & Davidson LLP)

Steven Chong JA (delivering the judgment of the court): Introduction

The doctrine of forum non conveniens has an impact not only in deciding on the appropriate forum to hear the dispute but more fundamentally, it also decides whether service outside jurisdiction can be granted. The act of service in compliance with O 11 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“ROC”) is a necessary condition before the court can exercise jurisdiction over the putative foreign defendant. Consequently, in cases where a foreign defendant disputes that Singapore is the appropriate forum, that foreign defendant would typically oppose the action with an application to set aside the service and in the alternative, to stay the proceedings in favour of another forum.

This appeal concerns tortious claims arising from alleged negligent and/or fraudulent misrepresentations. The claims bear connections of varying degrees and relevance with a number of competing jurisdictions – Germany, Norway and Singapore. About seven months after commencing the action in Singapore, the respondents commenced an action in Norway in respect of the same claims. The appellants applied to set aside the service and/or to stay the proceedings on the basis that none of the limbs of O 11 r 1 is satisfied and that Singapore is not forum conveniens. Although the Assistant Registrar (“the AR”) found that the respondents had demonstrated a good arguable case that the claims fell within O 11 r 1(f)(ii), he found that Singapore was not forum conveniens and accordingly set aside the service. On appeal, the High Court Judge (“the Judge”) allowed the appeal.

This appeal raises several interesting points of law and the Judge rightly recognised this by granting leave to appeal. In finding that the cause of action arose in Germany, the Judge correctly applied the substance test. He went on to observe, however, that the substance test is only relevant for the purposes of determining the place where the cause of action arose in the context of a stay application on grounds of forum non conveniens. But, for the purposes of satisfying the leave requirements for service outside jurisdiction under O 11 r 2(2), a different approach, which he described as plaintiff-centric, is warranted. In his view, this approach was consistent with the cause of complaint test based on his understanding of the Privy Council decision in Distillers Co (Biochemicals) Ltd v Laura Anne Thompson [1971] AC 458 (“Distillers”). At the same time, the Judge acknowledged that Distillers was in fact interpreted by this court in JIO Minerals FZC and others v Mineral Enterprises Ltd [2011] 1 SLR 391 (“JIO Minerals”) to represent the substance test albeit in a different context.

Determining the place where the cause of action arose, in our view, should neither be plaintiff-centric nor defendant-centric. Instead, it should necessarily be fact-centric by examining all the material facts. Therefore, is there any justification to adopt different tests to arrive at the same factual finding, ie, the place where the cause of action arose, even if such finding may well serve or be in aid of different purposes? Are the two tests in substance the same? Or as the Judge observed, is the distinction between the two tests a “false dichotomy”? Furthermore, since the decision below, the proceedings in Norway have reached an advanced stage. In examining whether Singapore is the appropriate forum to hear the dispute, is the court entitled to take into account subsequent developments or should the court confine its analysis to the state of affairs at the time when the order granting leave for service was made? These are some of the questions which we will address below.

Facts The parties

There are four parties to this dispute. The first respondent, IM Skaugen SE, is a company incorporated in Norway. It is the holding company of the Skaugen group, which provides marine and transportation services in the oil and gas industry. The second respondent, IM Skaugen Marine Services Pte Ltd, is a Singapore-incorporated company. It is a wholly owned subsidiary of the first respondent and is one of the various ship-owning arms of the Skaugen group.¹

The first appellant, MAN Diesel & Turbo SE, is a company incorporated in Germany. It is part of the MAN group which, amongst other things, designs and manufactures engines for ships. The second appellant, MAN Diesel & Turbo Norge AS, is a company incorporated in Norway. It is a wholly owned subsidiary of the first appellant and maintains contact with the customers of the MAN group in Norway.²

In both the Singapore and Norwegian proceedings, the respondents allege that the appellants fraudulently and/or negligently misrepresented the rate of fuel consumption in a particular model of engines which they supplied to the Skaugen group (“the engines”).

The initial contracts

On 6 July 2000, the first respondent entered into four shipbuilding contracts with shipbuilders from China (“the first four contracts”). The terms of the first four contracts gave the first respondent the right to approve the supplier of the main engines in the ships. On 7 August 2000, the first four contracts were novated to Somargas Limited, a special purpose vehicle (“SPV”) incorporated in the Cayman Islands.³ Somargas Limited is owned equally by the first respondent and GATX Third Aircraft Corporation (“GATX”).⁴

Vintergas Limited is another SPV incorporated in the Cayman Islands which is also owned equally by the first respondent and GATX. On 15 May 2001, Vintergas Limited entered into another two contracts with the shipbuilders. The terms were similar to the first four contracts.

In total, there were therefore six ships which were to be built by the shipbuilders for the Skaugen group. We refer to the six ships as “the Vessels”.⁵

The misrepresentations

Pursuant to its right to approve the supplier of the main engines, the first respondent entered into negotiations with the appellants. In the course of negotiations, the appellants provided to the first respondent and the shipbuilders various documents which contained representations concerning the engines’ rate of fuel consumption.⁶

Subsequently, the first respondent chose the appellants’ engines for installation in the Vessels. Between May 2001 and June 2002, as and when an engine was ready to be handed over by the first appellant to the shipbuilders, the first appellant would conduct a field acceptance test (“FAT”) at its factory in Germany. The purpose of the FATs were to, inter alia, verify the fuel consumption values of the engines.⁷

Close to ten years later, in May 2011, the first appellant issued a press release stating that there were indications of possible irregularities in the FATs (“the May 2011 Press Release”). Specifically, the results of the fuel consumption measurement could have been internally manipulated.⁸ Following investigations, the first appellant then informed the respondents that three of the six engines supplied to the Vessels could have been affected by the irregularities. In this connection, we note that the respondents’ position is that all six engines would have been affected by the irregularities.⁹ That is a question of fact which we do not have to deal with presently.

For present purposes, we should highlight that the Judge found the misrepresentation at each FAT to be at the “core of the [respondents’] loss”, as opposed to the misrepresentations that were made in the course of negotiations. Accordingly, the Judge held that the misrepresentation of the engines’ rate of fuel consumption was made in Germany, received by the respondents in Germany and relied upon in Germany. Applying the substance test, Germany was the place of the tort (IM Skaugen SE and another v MAN Diesel & Turbo SE and another [2018] SGHC 123 (“the GD”) at [104]).

We observe that the Judge’s finding that Germany is the place of the tort is not an issue before us. Hence, for this appeal, we will proceed on the basis that Germany is the place of the tort, as opposed to Norway or Singapore.

Ownership of the Vessels

We now turn to the ownership of the Vessels both before and after the May 2011 Press Release. This is a vital piece of information as the only claim brought by the respondents in their own capacity is the Investigation Costs Claim (as defined at [21] below). The remaining three claims are brought by way of assignment from successive owners of the Vessels, who are as follows: Somargas HK: On 12 March 2002, Somargas Limited and Vintergas Limited entered into novation agreements with a Hong Kong-incorporated company known as Somargas Ltd (“Somargas HK”). They agreed to transfer all their rights, benefits, obligations and liabilities under the six shipbuilding contracts to Somargas HK, which was owned equally by the first respondent and GATX.¹⁰ The Vessels were duly delivered by the shipbuilders to Somargas HK between October 2002 and October 2003.¹¹ Somargas SG: In February 2011, Somargas HK transferred ownership of the Vessels, as well as its assets and liabilities to Somargas II Pte Ltd (“Somargas SG”), its wholly owned subsidiary incorporated in Singapore.¹² GATX entities: In April 2013, Somargas SG transferred ownership of three of the Vessels to the GATX group (“the GATX entities”), which continues to own these Vessels.¹³ The remaining three Vessels were sold to third parties between June 2013 and December 2014.¹⁴

The assignment agreements

From the sequence of events described in the preceding paragraph, Somargas HK, Somargas SG and the GATX entities were successive ship owners who owned the Vessels at different time periods. Pursuant to two agreements, all possible claims held by Somargas HK, Somargas SG and the GATX entities against the appellants were assigned to the respondents. Assignment of claims held by GATX entities : On 23 June 2014, by way of a claims transfer agreement, GATX...