NO DISPUTE AMOUNTING TO STRONG CAUSE; STRONG CAUSE FOR DISPUTE?

Citation(2001) 13 SAcLJ 428
Date01 December 2001
Published date01 December 2001

The decision of the Singapore Court of Appeal in The Jian He1 supports the proposition that if there is ‘no dispute’ on the merits of the case, this can amount to ‘strong cause’ for the purposes of the test enunciated by Brandon J in The Eleftheria.2

Essentially, the issue of whether there is ‘strong cause’ arises in the context of an application for a stay of proceedings by an unwilling defendant in the courts of the forum where he is sued in defiance of an exclusive jurisdiction clause.

In an oft-cited passage,3 Brandon J summarised the applicable principles:

‘(1) Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign court, and the defendants apply for a stay, the English court, assuming the claim to be otherwise within its jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not.

(2) The discretion should be exercised by granting a stay unless strong cause for not doing so is shown.

(3) The burden of proving such strong cause is on the plaintiffs.

(4) In exercising its discretion the court should take into account all the circumstances of the case.

(5) In particular, but without prejudice to (4), the following matters, where they arise, may properly be regarded:

  1. (a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign courts.

  2. (b) Whether the law of the foreign court applies and, if so, whether it differs from English law in any material aspects.

  3. (c) With what country either party is connected, and how closely.

  4. (d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages.

  1. (e) Whether the plaintiffs would be prejudiced by having to sue in the foreign court because they would:

    1. (i) Be deprived of security for their claim;

    2. (ii) Be unable to enforce any judgment obtained;

    3. (iii) Be faced with a time bar not applicable in England; or

    4. (iv) For political, racial, religious or other reasons be unlikely to get a fair trial.’

Several pertinent points are to be noted. It is clear from Brandon J’s formulation that:4

  1. (1) the prima facie position is that a stay should be granted to prevent the plaintiff from breaching his contract;

  2. (2) the burden of proof lies squarely on the plaintiffs to justify their breach of the agreement to sue in the contractual forum;

  3. (3) the list of factors is non-exhaustive; in that the court is to take into account all the circumstances of the case in deciding whether ‘strong cause’ is demonstrated on the facts of the case.

Crucially, The Jian He appears to create a dichotomy in the application of the strong cause test between cases which do not have a dispute on the merits, and those which might. The case, if brought to its logical conclusion, would mean Singapore courts arrogating to themselves a power to give immediate relief for cases in which there is no dispute on the merits. Cases which are entitled, in the view of the Singapore courts, to something akin to summary judgment on the merits, should not be stayed in favour of the foreign court.5 This principle could potentially have application, at the very least, to actions based on misdelivery of cargo, bills of exchange and letters of credit. It is an issue of some gravity that demands a rational and commercially acceptable solution.

It will be argued that the approach of the Court of Appeal is difficult to reconcile with the underlying rationale of the Eleftheria‘strong cause’ test and other established conflicts principles. As a matter of principle, there is no justification for the court refusing a stay simply because it is of the view that there is ‘no dispute’ or no defence on the merits.

In any event, it is contended that if the ‘no dispute’ approach is to be retained, two modifications should be effected to ensure that fairness and rationality is preserved.

The Jian He

The case of The Jian He involved a Singapore company (the plaintiffs) which had sold goods to a company in Johannesburg, South Africa. The goods were shipped upon the defendants’ vessel ‘Jian He’. When the consignees in South Africa presented the original bill of lading to the defendants’ agent to take delivery of the goods, it was discovered that the goods had already been surrendered upon the presentation of a false bill of lading. The legal position is that the defendant carriers were in breach of their obligation to deliver the goods against a genuine bill of lading. The insurers of the goods, after meeting the claim, brought the action in that case by way of subrogation.

The defendants, in response to a summary judgment application by the plaintiffs, instead of filing their show cause affidavit to resist this, applied to the Singapore courts for a stay of all proceedings on the basis that the dispute was one to which the parties had agreed to be determined in China.

Chao JA, delivering the judgment on behalf of the Court of Appeal, disagreed with the plaintiffs’ contention that several factors in the case could amount to strong cause. In particular, he was of the view that neither the fact that the action was time barred in China, nor the fact that delay in making the stay application or any of the other alleged acts of the defendants could be construed as amounting to a waiver of their right to insist on the exclusive jurisdiction clause. These factors alluded to by the plaintiffs were insufficient to satisfy the ‘strong cause’ needed to persuade the Court not to stay the proceedings in favour of the contractual forum.

At that stage, the case adopted no more than a straightforward application of the Eleftheria principles. However, thereafter, a rather novel line was taken by the Court of Appeal.6 It held, despite finding against the plaintiffs on every other point on the application of the ‘strong cause’ test, that a stay should nevertheless not be granted on the ground that there was ‘no defence’ or ‘no dispute’ on the facts of the particular case.7

Chao JA was reported to have said:8

‘We turn next to the final point. Is there a defence to the claim? Or putting it another way, is there a dispute? It is there that the defendants’ position becomes untenable and which shows that the defendants are really not interested in a trial in China but are seeking a procedural advantage. On the evidence before us, there is no indication by the defendants that they have any defence to the claim. Furthermore, on the question of the entitlement to sue, other than asking for certain documents, the defendants have not asserted that the plaintiffs are not entitled to sue. Accordingly, there is really no dispute to be determined by the contractual forum … there is really no defence to the claim, the defendants having released the goods against a forged bill of lading. There is nothing to proceed to trial in China. Even on the question of the entitlement to sue, the defendants have not challenged the plaintiffs’ right thereof. We would further add that even if the defendants do challenge the plaintiffs’ right to sue, the evidence relating thereto are to be found wholly in Singapore, the goods having been shipped from Singapore. No useful purpose would have been served in ordering a stay. In the premises we hold that a strong cause has been shown why there should not be a stay of proceedings. To grant the stay in these circumstances would not only cause further delay, it would also give undue advantage to the defendants. We, therefore, do not think that the defendants genuinely wanted a trial in China.’ [emphasis mine]

The reasoning of the Singapore Court of Appeal was that the mere fact that there was no defence to the claim or no dispute on the facts of the case was, in itself, sufficient to amount to strong cause for the purposes of the Eleftheria‘strong cause’ test.

This approach is also evident from a more recent case of the Singapore Court of Appeal. In The Hung Vitong-2,9 the Court of Appeal was confronted with a similar situation where the appellants, in response to the respondent’s application for summary judgment, sought to have proceedings stayed on the ground that there was a jurisdiction clause in favour of the Vietnamese Courts. Following the approach in The Jian He, the Court expressed the view that one of the factors in determining if ‘strong cause’ has been shown is whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages. In this regard, Chao JA explained that whether there was a genuine dispute between the parties was crucial; that it would be difficult

for the parly to contend that he seriously desired trial in the contractual forum if he was unable to show that there was a ‘real dispute’ or a ‘real defence’ to the claim. He reaffirmed the jurisdiction of the Court to determine, on the merits, if such a dispute exists10 and held that on the facts of the particular case, there was ‘no dispute’ to be submitted for trial at the contractual forum and that the appellants were only seeking a technical advantage for a stay which would only cause further unnecessary delay. He opined that where there was no defence or no dispute to the claim, there was nothing to go for trial in the contractual forum and considerable doubt would be cast upon the bona fides of the defendant in going to trial in the contractual forum.11

The issue thus arises as to whether, as a matter of principle, the factor of ‘no dispute’ should be a factor in the ‘strong cause’ inquiry, either as a factor in Lord Brandon’s formulation or otherwise.

Procedural advantages and genuine desire for trial

The Court of Appeal in the course of its judgment, referred to three first instance English cases12 which appear to support the ‘no dispute’ approach. The authors of Cheshire and North‘...

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