Good Earth Agricultural Co Ltd v Novus International Pte Ltd

• Jurisdiction: Singapore
• Judge: Andrew Phang Boon Leong JA
• Judgment Date: 13 March 2008
• Neutral Citation: [2008] SGCA 13
• Citation: [2008] SGCA 13
• Defendant Counsel: Tong Beng Teck Roland (Wong Tan & Molly Lim LLC)
• Published date: 18 March 2008
• Plaintiff Counsel: Mohan Reviendran Pillay and Toh Chen Han (MPillay)
• Date: 13 March 2008
• Docket Number: Civil Appeal No 83 of 2007
• Court: Court of Appeal (Singapore)
• Subject Matter: Circumstances where court would grant a stay,Stay of proceedings on ground of forum non conveniens,Spiliada Maritime Corporation v Cansulex Ltd principles for determining whether stay of proceedings should be granted on ground of forum non conveniens,Singapore-incorporated company commencing suit in Singapore after application to file counterclaim in earlier Hong Kong action dismissed because too close to trial date,Choice of jurisdiction,Whether Hong Kong was proper forum since Singapore suit was continuation of parties' disputes that led to Hong Kong action,Conflict of Laws,Whether factors such as "judge shopping" that concerned substantive justice should be considered at stage 1 or stage 2 of Spiliada test

13 March 2008

Andrew Phang Boon Leong JA (delivering the grounds of decision of the court):

1 The respondent, Novus International Pte Ltd (“Novus”), sued the appellant, Good Earth Agricultural Company Limited (“Good Earth”), for breach of fiduciary duty and for recovery of secret profits in the Singapore High Court (“the Singapore action”). Good Earth contended that Hong Kong would be the natural or more appropriate forum to try Novus’s claim and applied for a stay of the Singapore action on the ground of forum non conveniens. In the proceedings below, the learned assistant registrar dismissed Good Earth’s application. Good Earth’s subsequent appeal from that decision to the High Court was dismissed by the learned judge (“the Judge”) in Novus International Pte Ltd v Good Earth Agricultural Co Ltd [2007] 4 SLR 402 (“the GD”). We allowed Good Earth’s appeal and now give the reasons for our decision.

Background

2 Good Earth, a Hong Kong-registered company, entered into an oral agreement with Monsanto, an American corporation, in 1978 (“the oral agreement”) under which Good Earth was appointed Monsanto’s exclusive distributor within South-East Asia for certain animal feed products. In 1991, Novus International Inc (“NII”) purchased Monsanto’s animal feed business. In the same year, Novus was incorporated in Singapore as a wholly-owned subsidiary of NII to undertake the marketing and sale of the various animal feed products in the region. Pursuant to a variation of the earlier arrangement between Good Earth and Monsanto, Good Earth continued to distribute the animal feed products for Novus.

3 The parties’ business relationship broke down over disagreements about the rate of commission paid to Good Earth. By a letter dated 14 January 2002, Novus terminated the distributorship agreement with Good Earth without giving notice. This prompted Good Earth to commence legal proceedings against Novus in the High Court of Hong Kong in late 2002 for wrongful termination of contract (“the Hong Kong action”). Novus submitted to the jurisdiction of the Hong Kong court and defended the suit accordingly. The trial took place in December 2006. Good Earth prevailed and it was awarded US$542,594 in damages, plus interest and costs. Good Earth registered the Hong Kong judgment in Singapore on 1 March 2007 to recover US$700,467.31, comprising the principal sum of US$542,594 and interest of US$157,873.31. Novus filed interlocutory applications to resist execution of the Hong Kong judgment, although it appears to have paid the principal amount on the judgment sum to Good Earth (see the GD at [3]).

Novus’s claim for secret profits

4 What brought the parties before the Singapore courts is Novus’s allegation that Good Earth made secret profits by charging end-customers a higher price than that agreed to between the parties. Under the distributorship agreement, Novus would set a price, say $X, at which Good Earth was required to sell the products to its end-customers. Good Earth would be paid commission at a rate that was usually 8%; according to Novus, the commission rate was 5% or 3.2% on some occasions. Novus would bill Good Earth for (100-C)% of $X, where C was the agreed rate of commission, and would be paid that amount. In the Singapore action, Novus claims that Good Earth had wrongfully retained US$1,698,484 of secret profits, in breach of the fiduciary duty it owed to Novus, and Novus is seeking to recover this sum. Even if Good Earth’s defence that Novus applied the incorrect exchange rate and overstated its claim by US$428,059.56 was accepted, Novus contends that it was entitled to apply for summary judgment in respect of the remaining sum.

5 Among the bases for Good Earth’s assertion that the Novus’s claim for secret profits should be heard in Hong Kong is the fact that Novus first introduced its claim for secret profits by way of a counterclaim in the Hong Kong action (“the Hong Kong counterclaim”). This is, in our view, a significant consideration in so far as the present appeal is concerned. It warrants a closer examination of the circumstances under which the Hong Kong counterclaim was filed (unsuccessfully, as we shall see) in the Hong Kong action.

6 In 2004, during the discovery process for the Hong Kong action, Novus learnt – from the invoices that Good Earth disclosed – that the latter had been charging its customers marked up prices of $(X+Y) and not $X as agreed between Novus and Good Earth. Good Earth’s explanation was that it had implemented a scheme under which $Y constituted rebates that it returned to its customers. Novus disputed this and filed the Hong Kong counterclaim in February 2005, but the application was subsequently adjourned because Novus was unable to obtain relevant evidence from potential witnesses. In the meantime, both parties corresponded on a “without prejudice” basis regarding the nature of the mark-up.

7 On or about 26 September 2006, Novus applied for leave to file the Hong Kong counterclaim after obtaining a witness statement from Chuah Chong Hin (“Chuah”), Novus’s managing director from June 1996 to August 2001. This second application was heard on 24 October 2006 by Stone J, the trial judge in the Hong Kong action. Good Earth objected to the late timing of Novus’s application, claiming that it would suffer prejudice. Stone J dismissed the application on the ground that it was too late since trial of the Hong Kong action had been set down to commence on 4 December 2006.

The Spiliada test

8 It is now clearly established that the Singapore courts apply the “Spiliada principles” laid down by Lord Goff of Chieveley in the seminal House of Lords decision of Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 (“Spiliada”) to determine when a stay of proceedings should be granted on the ground of forum non conveniens: see, for example, the decisions of this court in Brinkerhoff Maritime Drilling Corp v PT Airfast Services Indonesia [1992] 2 SLR 776 (“Brinkerhoff”), Oriental Insurance Co Ltd v Bhavani Stores Pte Ltd [1998] 1 SLR 253, PT Hutan Domas Raya v Yue Xiu Enterprises (Holdings) Limited [2001] 2 SLR 49 (“PT Hutan”), and Rickshaw Investments Ltd v Nicolai Baron von Uexkull [2007] 1 SLR 377 (“Rickshaw Investments”). Indeed, Chao Hick Tin J, delivering the judgment of this court in Brinkerhoff, observed as follows (id at 784, [35]):

Lord Goff, who delivered the judgment of the House [in the Spiliada case], to which the other four Law Lords agreed, restated the law (and in so restating, took into account the Scottish authorities as well) which is summarized in the third cumulative supplement to Dicey & Morris on Conflict of Laws (11th Ed) at para 393–395 as follows:

(a) the basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, ie in which the case may be tried more suitably for the interest of all the parties and the ends of justice;

(b) the legal burden of proof is on the defendant, but the evidential burden will rest on the party who asserts the existence of a relevant factor;

(c) the burden is on the defendant to show both that England is not the natural or appropriate forum, and also that there is another available forum which is clearly or distinctly more appropriate than the English forum;

(d) the court will look to see what factors there are which point to the direction of another forum, as being the forum with which the action has the most real and substantial connection, eg factors affecting convenience or expense (such as availability of witnesses), the law governing the transaction, and the places where the parties reside or carry on business;

(e) if at that stage the court concludes that there is no other available forum which is clearly more appropriate it will ordinarily refuse a stay;

(f) if there is another forum which prima facie is clearly more appropriate the court will ordinarily grant a stay unless there are circumstances by reason of which justice requires that a stay should not be granted, and, in this inquiry the court will consider all the circumstances of the case. But the mere fact that the plaintiff has a legitimate personal or juridical advantage in proceeding in England is not decisive; regard must be had to the interests of all the parties and the ends of justice.

9 And Chao Hick Tin JA, also delivering the judgment of this court in PT Hutan, described how the principles are applied in practice (at [16]):

The first stage is for the court to determine whether, prima facie, there is some other available forum, having competent jurisdiction, which is more appropriate for the trial of the action. The legal burden of showing that rests on the defendant. In determining that issue the court will look to see what factors there are which point in the direction of another forum as being the forum with which the action has the most real and substantial connection, eg availability of witnesses, the convenience or expenses of having a trial in a particular forum, the law governing the transaction and the places where the parties reside or carry on business.Unless there is clearly another more appropriate available forum, a stay will ordinarily be refused. If the court concludes that there is such a more appropriate forum, it will ordinarily grant a stay unless, in the words of Lord Goff, ‘there are circumstances by reason of which justice requires that a stay should nevertheless not the granted. In this inquiry the court will consider all the circumstances of the case, including circumstances which go beyond those taken into account when considering connecting factors with other jurisdictions’ … [In the second stage,] all circumstances must be taken into account, including those taken into account in determining the question of the more appropriate...