Morgan Stanley Asia (Singapore) Pte v Hong Leong Finance Ltd

• Jurisdiction: Singapore
• Judgment Date: 19 April 2013
• Date: 19 April 2013
• Docket Number: Originating Summons No798 of 2012
• Court: High Court (Singapore)

Morgan Stanley Asia (Singapore) Pte (formerly known as Morgan Stanley Dean Witter Asia (Singapore) Pte) and others

Plaintiff

and

Hong Leong Finance Ltd

Defendant

[2013] SGHC 83

Belinda Ang Saw Ean J

Originating Summons No798 of 2012

High Court

Conflict of Laws—Restraint of foreign proceedings—Comity—New York court dismissing jurisdiction challenge in class action suit involving same operative facts based on principles broadly similar to those applied by Singapore court—Whether granting of anti-suit injunction contrary to considerations of comity

Conflict of Laws—Restraint of foreign proceedings—Several factors connecting dispute to Singapore—Defendant commencing action against plaintiffs in New York—Separate class action suit by third party investors against plaintiffs in New York involving similar and overlapping complex issues and facts—Whether non-exclusive jurisdiction clause ‘a very strong indicator’ that Singapore was clearly more appropriate forum—Whether case management considerations pointed to New York as more appropriate forum—Whether court should give weight to ‘Cambridgeshire Factor’

Conflict of Laws—Restraint of foreign proceedings—Vexatious and oppressive conduct—Defendant's main allegation against US incorporated plaintiff not party to distribution agreement—Defendant making equitable subrogation claim in New York—Whether vexatious or oppressive for defendant to frame claims in manner it did—Whether defendant entitled to avail itself of juridical advantages in New York

Hong Leong Finance Limited (‘HLF’) distributed a series of credit-linked notes known as ‘Pinnacle Notes’ to Singaporean-based customers pursuant to a master distributor appointment agreement (‘the MDAA’) between HLF and the first, second and third plaintiffs (‘P1’, ‘P2’ and ‘P3’ respectively). The MDAA contained a non-exclusive jurisdiction clause in favour of Singapore. The fourth and fifth plaintiffs (‘P4’ and ‘P5’ respectively) were Delaware incorporated companies. The plaintiffs were indirect wholly-owned subsidiaries of Morgan Stanley.

Following the failure of the Pinnacle Notes during the 2008 global financial crisis, HLF compensated some of its Singapore-based customers for over US$32m in losses under a process set up by the Monetary Authority of Singapore and was also penalised for having mis-sold the Pinnacle Notes. After seeking and obtaining pre-action discovery of documents in Singapore against P1 (the arranger of the Pinnacle Notes), HLF did not commence proceedings in Singapore. Instead, HLF commenced proceedings in New York against the plaintiffs (‘the NY Proceedings’), alleging, inter alia, that P5 had deceptively sold the Pinnacles Notes which were designed to fail and was positioned to profit from their failure because of swap transactions entered into by its affiliate, P4.

More than a year and a half prior to the commencement of the NY Proceedings, a group of Singapore investors who had purchased the Pinnacle Notes commenced a class action in New York, alleging fraud against the plaintiffs (‘the US Class Action’). In fact, HLF based its claims in the NY Proceedings on the claims of the Singapore investors. HLF further claimed in the NY Proceedings that under New York law, the doctrine of ‘equitable subrogation’ entitled it to assert legal claims sought by the Singapore investors in the US Class Action. There was no equivalent doctrine under Singapore law.

In the US Class Action, the plaintiffs previously applied to the New York court to dismiss the claims of the Singapore investors on, inter alia, forum non conveniens grounds. The judge in the US Class Action accepted that New York had jurisdiction by applying principles that were broadly similar to those that the Singapore court would have applied.

In the present application, the plaintiffs sought to restrain HLF from suing or continuing to prosecute proceedings outside Singapore in relation to the Pinnacle Notes. At the time of the hearing, there were no proceedings filed in Singapore. In addition, both the NY Proceedings and the US Class Action had been transferred to the docket of the same judge in the New York court. During the hearing of the present application, both sides agreed that this court need not decide on issues raised by their experts on New York law.

Held, dismissing the application:

(1) The broad principle underlying the anti-suit jurisdiction was that it was to be exercised when the ends of justice required it. The factors to be considered in an anti-suit application were: (a)whether the defendant was amenable to the jurisdiction of the Singapore court; (b)whether Singapore was the natural forum for the dispute; (c)whether the foreign proceedings would be vexatious or oppressive to the plaintiff if they were allowed to continue; (d)whether an injunction would cause any injustice to the defendant by depriving the defendant of legitimate juridical advantages sought in the foreign proceedings; and (e)whether the commencement of the foreign proceedings was in breach of any agreement between the parties: at [26].

(2) The natural forum was the forum which was clearly more appropriate than an alternative forum for the trial of the action. The onus of showing that Singapore was clearly and distinctly the more appropriate forum was on the applicant for the anti-suit injunction. However, even if Singapore was the natural forum, it did not follow that the foreign proceedings should be automatically restrained as this would be inconsistent with comity: at [27] and [28].

(3) A party would not ordinarily be in breach of a contract containing a non-exclusive jurisdiction clause merely by pursuing proceedings in an alternative jurisdiction; in such a situation, either party would be prima facie entitled to bring proceedings in a court of competent jurisdiction: at [30].

(4) The court had to have regard to considerations of comity and be aware that the anti-suit jurisdiction had to be exercised with caution: at [33] to [35].

(5) The plaintiffs had failed to show that Singapore was clearly the more appropriate forum than New York. While the plaintiffs relied on the existence of the non-exclusive jurisdiction clause in the MDAA (cl 24) as ‘a very strong indicator’ that the Singapore court was the correct one to resolve the disputes, there was no explanation why greater weight ought to be placed upon cl 24 as a factor in determining the appropriate forum. Clause 24 was not expressed in wide terms to cover ‘any dispute which may arise out of or in connection with’ the MDAA. Moreover, it was not explained how P4 and P5, who were not parties to the MDAA, were entitled to rely on cl 24. In fact, the thrust of the plaintiffs' argument was that cl 24, together with all other factors, pointed towards Singapore as the natural forum. In the final analysis, cl 24 was merely one factor to be weighed against all the other factors in the case: at [56] to [58].

(6) The plaintiffs were already defending the US Class Action. Both sets of proceedings against the plaintiffs in New York were closely connected and it would be expedient to hear them in the same jurisdiction. A refusal to grant an anti-suit injunction would create the best chance for all matters to be effectively determined in one jurisdiction, thus obviating the undesirability of parallel proceedings elsewhere and the risk of inconsistent judgments: at [59] and [60].

(7) Both the US Class Action and the NY Proceedings had been reassigned to the same judge, which was a strong sign that the New York court recognised that the subject matters of both proceedings were closely connected. Case management by the same judge would be sensible and expedient: at [61] and [62].

(8) Some weight had to be given to the likely emergence of the ‘Cambridgeshire Factor’. It was pertinent that the plaintiffs had instructed the same lawyers in the US in both proceedings before the same judge in highly complex cases which would inevitably have many overlapping issues and require multiple witnesses and experts: at [63] and [64].

(9) It could not be vexatious or oppressive for HLF to frame its claim in a manner which was most advantageous to it. It was not for the plaintiffs to straight jacket HLF's claims as being principally against P1 to P3 in order thereby to argue that the connection to New York was tenuous and that HLF acted in a vexatious manner by commencing the NY Proceedings: at [69] and [70].

(10) Neither HLF nor the plaintiffs had commenced substantive proceedings in Singapore. The court should be slow to grant an anti-suit injunction where there was no existing lis in Singapore. The non-exclusive jurisdiction clause itself envisaged that proceedings might be commenced elsewhere besides Singapore: at [71] and [72].

(11) As the plaintiffs failed to show that Singapore was the natural forum, it was hard to see why HLF's ability to avail itself of the juridical advantages in pursuing its claims in New York was vexatious and unjust to the plaintiffs per se. In fact, a loss of a potential juridical advantage was a factor to be considered in deciding whether to grant an anti-suit injunction since the court was concerned with the ends of justice. HLF's equitable subrogation claim in the NY Proceedings was a relevant consideration and was a matter for the New York Court to decide on the merits. If an anti-suit injunction was granted, HLF would suffer prejudice because it might be deprived of any meaningful ability to pursue this claim. Also, it seemed practical and expedient to let HLF's equitable subrogation claim proceed in the same forum as the US Class Action because its outcome was dependent on the result of the US Class Action: at [73], [74] and [76] to [78].

(12) Taking a commonsensical approach, in light of the fact that the NY Proceedings had ‘the same core nucleus of operative facts’ as the claims asserted in the US Class Action and that HLF's equitable subrogation...