Novus International Pte Ltd v Good Earth Agricultural Co Ltd

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu J
• Judgment Date: 06 September 2007
• Neutral Citation: [2007] SGHC 143
• Docket Number: Suit No 164 of 2007 (Registrar's
• Date: 06 September 2007
• Published date: 11 September 2007
• Year: 2007
• Plaintiff Counsel: Roland Tong (Wong Tan & Molly Lim LLC)
• Citation: [2007] SGHC 143
• Defendant Counsel: Ranvir Kumar Singh (Unilegal LLC)
• Court: High Court (Singapore)
• Subject Matter: Circumstances where court would grant stay,No governing law clause in oral agreement,Choice of jurisdiction,Whether Hong Kong proper forum after separate action had been heard there,Conflict of Laws,Stay of proceedings on ground of forum non conveniens

6 September 2007

Lai Siu Chiu J

The background

1 The defendant, Good Earth Agricultural Company Limited, was sued by the plaintiff, Novus International Pte Ltd, for inter alia breach of fiduciary duty and for secret profits amounting to US$1,698,484, arising out of an oral distributorship agreement made in 1978 between the parties (‘the agreement”). The plaintiff is a Singapore registered company and is a wholly owned subsidiary of an American company called Novus International Incorporated (“the parent company”) while the defendant is a trading company incorporated in Hong Kong.

2 Earlier, the defendant had sued the plaintiff in Hong Kong in October 2002 in Commercial Action No. 74 of 2002 (“the Hong Kong action”). By a judgment dated 25 January 2007 (“the Hong Kong judgment”), the Hong Kong court held the plaintiff liable to the defendant in the sum of US$542,594 with interest of US$157,873.31, making a total of US$700,467.31 (“the judgment sum”).

3 The plaintiff did not file an appeal against the Hong Kong judgment and by Originating Summons No. 326 of 2007 (“the OS”), the defendant applied to our courts and the Hong Kong judgment was registered in Singapore on 1 March 2007 under the Reciprocal Enforcement of Foreign Judgments Act (Cap 265, 2001 Rev Ed). The plaintiff however has applied to set aside the registration. The plaintiff has also paid the principal amount on the judgment sum to the defendant. In support of the setting-aside application, the plaintiff’s director of finance and operations Cecilia Chan (“Chan”) filed two affidavits, one of which was referred to in the hearing before me.

4 On 5 April 2007, the defendant applied by Summons No. 1495 of 2007 (“the stay application”) for a stay of proceedings under O 12 r 7(2) and/or O 92 r 4 of the Rules of Court (Cap 322, R 5, 2006 Rev Ed) on the ground that Singapore was not the proper forum for the disputes raised in the statement of claim and/or on the ground of forum non conveniens. In the event the stay was not granted, the defendant applied for 14 days’ extension of time after the decision of the Registrar and/or after the outcome of any appeals, for the defendant to file its defence.

5 The stay application was heard and dismissed by the Assistant Registrar (“AR”) on 7 May 2007. The defendant appealed against the AR’s decision in Registrar’s Appeal No. 128 of 2007 (“the Appeal”). I heard and dismissed the Appeal on 25 June 2007. The defendant has now filed a notice of appeal (in Civil Appeal No. 83 of 2007) against my decision.

The facts

6 The defendant was a distributor of the plaintiff’s products which were animal feed ingredients and supplements (“the goods”). It was the plaintiff’s case that it would set the price for the goods to be distributed or sold by the defendant, say at $X. When the defendant’s customers placed an order for the goods, the defendant would place a corresponding order with the plaintiff and open a letter of credit to secure the order placed.

7 The plaintiff would deliver directly to the defendant’s customer the goods ordered. The defendant would bill the customer at $X as previously fixed by the plaintiff and collect payment accordingly. In turn, the plaintiff would invoice the defendant for the goods ordered and delivered at $X less the agreed commission payable to the defendant, which for most periods was set at 8%. In effect, the plaintiff would bill the defendant 92% of $X. For the years 1993 to 2002, the defendant paid the plaintiff who accepted, sums totalling US$132,840,012.00 based on 92% of $X.

8 The plaintiff discovered that the defendant did not bill its customers $X but instead had billed based on $X plus $Y, thereby wrongfully retaining (without the plaintiff’s knowledge) $Y, which was the secret profits the plaintiff claimed in this suit.

9 The plaintiff’s claim for secret profits of US$1,698,484 was based on the difference between the defendant’s actual gross sales figures (to customers) and the plaintiff’s own invoices to the defendant.

The stay application

10 In his first affidavit filed on 5 April 2007 in support of the stay application, the defendant’s deputy managing-director Herbert Tsan (“Tsan”) deposed that this suit and the Hong Kong action were not the only disputes between the parties arising out of the distributorship agreement. He revealed that this suit was also not the first time the plaintiff had claimed against the defendant for breach of fiduciary duty. The plaintiff had attempted to introduce the claim in the Hong Kong action and failed.

11 Tsan said the defendant disputed the plaintiff’s claims but the appropriate venue for the resolution of the disputes was Hong Kong. Tsan pointed out that witnesses would have to be called by both parties and the majority of them were located in Hong Kong. In the Hong Kong action, the plaintiff called one witness from Singapore while the defendant had six witnesses, four from Hong Kong, one from Thailand and one from Singapore. He identified the defendant’s witnesses for this suit as Q N Wong (the defendant’s chairman), Edwin Wong (the defendant’s managing-director), himself and Paweenee Mirinda Wuttiattapong [“Mirinda”] (the marketing manager of the defendant and wife of a son of the founder of the defendant).

12 Tsan added that documents which were the basis of the plaintiff’s claim for breach of fiduciary duty were the defendant’s documents such as invoices issued by the defendant to its final customers from Hong Kong. Documents evidencing payments made by the defendant’s customers would also be relevant. These documents were voluminous, spanned a number of years and were located in Hong Kong.

13 Tsan understood from the defendant’s Hong Kong solicitors that the Hong Kong court only had one dedicated judge (Justice Stone) to hear matters in the Commercial List. He anticipated that any proceedings in the Hong Kong court would have to be by way of a Commercial Action. If the plaintiff commenced proceedings in Hong Kong other than by way of a Commercial Action, the defendant could apply to transfer the proceedings to the Commercial List. Justice Stone heard the Hong Kong action and was familiar with the background facts in relation to the agreement.

14 The plaintiff quite naturally resisted the stay application. In the affidavit filed by its solicitor Roland Tong (“Tong”) to oppose the same, he deposed that if the plaintiff succeeded in this action, its claim would extinguish the judgment sum. Tong exhibited in his affidavit the first affidavit filed by Chan in the OS (supra ([3]).

15 Tong pointed out that the plaintiff’s suit here differed from the counterclaim it attempted but failed to introduce in the Hong Kong action albeit both involved secret profits retained by the defendant.

16 Tong gave the following reasons why Singapore was the proper forum for this suit:

(a) the plaintiff is a Singapore company;

(b) when the Hong Kong action was commenced, the plaintiff did not raise any dispute on jurisdiction by the Hong Kong courts because the plaintiff then had a presence in Hong Kong in the form of shareholdings in a company called Novus International Nutrition Limited (“Nutrition”). Nutrition had since ceased operations and was liquidated in March 2005. The plaintiff therefore no longer had a presence in Hong Kong and had no reason to litigate there. If it was forced to litigate in Hong Kong, the plaintiff would have to furnish security for costs which was a procedural disadvantage;

(c) it was the plaintiff’s understanding that Singapore law would govern the relationship between the parties and that Singapore courts would have jurisdiction. The understanding was reflected in the draft distribution agreements proposed by the plaintiff to the defendant in 1992-1993 and which were drafted by Singapore lawyers. Although the defendant did not sign the proposed drafts, it did not object to the provisions on Singapore law and jurisdiction;

(d) all the documentation relating to sale of the goods by the plaintiff to the defendant were issued or originated from Singapore;

(e) the...