PT Selecta Bestama v Sin Huat Huat Marine Transportation Pte Ltd

• Jurisdiction: Singapore
• Judge: Steven Chong J
• Judgment Date: 18 November 2015
• Neutral Citation: [2015] SGHC 295
• Plaintiff Counsel: Jason Tan Hin Wa (Asia Ascent Law Corporation)
• Docket Number: Admiralty in Personam No 135 of 2014 (Registrar’s Appeal No 236 of 2015)
• Date: 18 November 2015
• Hearing Date: 02 October 2015,15 September 2015
• Subject Matter: Setting aside,Choice of jurisdiction,Conflict of laws,Judgment in default of appearance,Civil procedure,Exclusive
• Year: 2015
• Citation: [2015] SGHC 295
• Defendant Counsel: Michael Chia Peng Chuang and Darius Lee Zhen Ying (Legal Solutions LLC)
• Court: High Court (Singapore)
• Published date: 24 November 2015

Steven Chong J: Introduction

This case arose from the defendant’s application before the assistant registrar (“the AR”) in Summons No 1088 of 2015 to set aside a judgment in default of appearance and to stay the proceedings in favour of the courts in Batam as stipulated in the exclusive jurisdiction clause of two signed contracts between the defendant and the plaintiff. Although the AR set aside the default judgment, the order was conditional upon the defendant paying the sum of $173,500 into court, being the sum of liquidated damages awarded to the plaintiff under the default judgment. He refused the stay on the premise that “the obligation to negotiate was a precondition to the exclusive jurisdiction agreement … and given that negotiations have not been attempted, it follows that the parties’ promise to submit to the exclusive jurisdiction of the Batam court is not yet enforceable” (PT Selecta Bestama v Sin Huat Huat Marine Transportation Pte Ltd [2015] SGHCR 16 (“the AR’s decision”) at [54]–[55]).

The defendant appealed against both decisions by the AR and the appeal came before me. After two rounds of hearing, I allowed the defendant’s appeal against both decisions. First, I set aside the condition requiring the defendant to pay the sum of $173,500 into court and second, I ordered the stay of proceedings in accordance with the exclusive jurisdiction clause. I had issued brief oral grounds when delivering my decision, but as the appeal had raised points of law and procedure which were of interest, I believe it may be useful to provide my full written grounds.

Typically, the party resisting the stay application is the same party who challenges the validity of the contract which contains the exclusive jurisdiction clause. In such cases, the conventional approach taken by the court is to order that the validity of the contract be determined by the forum stipulated in the exclusive jurisdiction clause, and as a consequence, that the proceedings be stayed. Here, the situation was the converse. Can the defendant, who is challenging the validity of the contracts on the ground of misrepresentation, rely on the exclusive jurisdiction clause contained therein to stay the Singapore proceedings? I found that there was no reason in law or principle why the outcome should be any different in such a situation particularly since, by the plaintiff’s own case, the contracts are valid and therefore the commencement of the Singapore proceedings is ex facie in breach of the exclusive jurisdiction clause. Furthermore, contrary to the AR’s holding, I was of the view that the plaintiff could not rely on its own breach in failing to attempt negotiations to argue that the exclusive jurisdiction clause had not been engaged. Put another way, if the plaintiff had commenced the action in Batam without first attempting settlement negotiations, the action would probably be stayed (in the absence of evidence that Indonesian law on this issue is different from Singapore law) until the parties’ attempt to settle the dispute amicably had failed. If so, why should the plaintiff be in a better position to resist the stay application in circumstances where it had breached not one, but both steps in the exclusive jurisdiction clause?

The heart of the dispute pertained to two contracts to build two barges in Batam. The plaintiff produced two contracts which the defendant admitted to signing. The defendant’s case was that although it did sign the two contracts, it had ordered only one barge and it believed that subsequently, the contract for the one barge was agreed to be cancelled.

I had my initial doubts about this defence. But several odd and suspicious features of the case led me to decide that the defendant should be entitled to defend the claim unconditionally. For one, although the two initial instalments payable upon the signing of the contracts (20 percent) and the laying of the keels (a further 20 percent) amounting to a total of $1,064,000 were not paid by the defendant after invoices were issued, the plaintiff nevertheless claimed to have build the barges to 90 percent completion. Moreover, it did so despite the fact that the defendant had not stationed a representative at the plaintiff’s shipyard as required under the terms of the contracts. This representative was meant to provide instructions to the plaintiff in relation to, inter alia, the plans, drawings, modifications of the specifications, attendance to tests and inspection of the barges. Curiously, throughout the shipbuilding process, there was no communication whatsoever with the defendant about the construction progress of the two barges following the receipt of the initial invoices – a period of complete silence for six months. No progress report was ever sent to the defendant. Instead, the progress reports (without any photographs attached) purportedly showing that the barges were 72 percent completed were enclosed in the letter of demand sent by the plaintiff’s solicitors. Significantly, when the defendant was informed about the default judgment, it sought permission to inspect the two barges in Batam but its request was inexplicably denied. Why would the plaintiff deny the defendant the right to inspect the barges if they were being built for the defendant?

The unusual features of this case will be examined in greater detail below.

Facts

The plaintiff commenced the present suit to recover sums it claimed were due to it from the defendant under two signed contracts dated 25 September 2013 for the building of two barges (“the Contracts”). The Contracts were identical. Under each of the Contracts, the plaintiff was to build a single barge for the defendant at a price of $1.33m. The only thing that distinguished the Contracts was its cover page – one was marked “DATE:”, whilst the other was marked “Contract No: 001/SV/IX/2013”.¹

As mentioned at [4] above, the defendant did not dispute that it had signed the Contracts. However, it claimed that prior to the signing of the Contracts, the parties had entered into an in-principle oral agreement for the construction of only one barge at the same price of $1.33 million.² The payment terms according to the defendant were also quite different – 20 percent payable upon signing and the balance 80 percent payable upon delivery. The defendant also claimed that the parties orally agreed that if the defendant failed to pay the initial 20 percent deposit, the contract would be cancelled and the plaintiff would not proceed with the building of the barge.³

The defendant’s director, Mr Low Swe Teen (“Low”), claimed that on or about 25 September 2013, the plaintiff had presented him with a large number of documents to sign.⁴ He did not understand the documents, which were in English, but the plaintiff’s director, Mr Andy Lynn (“Lynn”), had allegedly represented to him that his signature was needed on the documents simply to formalise the oral agreement (described at [8] above).⁵ Low claimed that he did not know that the documents he signed were multiple contracts for more than one vessel. Nor did he know that under the terms of the Contracts, he had to pay 20 percent of the purchase price upon signing the Contracts, and another 20 percent upon the laying of the keel, with the balance 60 percent payable within seven days upon completion.⁶ He was instead under the impression that the Contracts would be cancelled if the defendant did not pay the initial 20 percent deposit (as per the in principle oral agreement). The defendant thus claimed that the agreement was voidable on the ground of misrepresentation.⁷ For the avoidance of doubt, the defendant did not rely on the defence of non est factum.

I should mention that apart from the Contracts which the plaintiff relied on, Low exhibited in his affidavit another 14 contracts (each with a different reference on the cover page). Apart from the fact that four of the contracts stipulated a price of $1.6m instead of $1.33m, these contracts, which were all signed by Lynn, were identical to the two signed by Low. Low claimed that these contracts were handed to him by Lynn on 25 September 2013 and that he only retrieved them from the defendant’s files and realised they were identical contracts when he consulted the defendant’s lawyers for the present suit. Of the 14 contracts retrieved from the defendant’s files, there was one additional contract which was also signed by Low on behalf of the defendant. In other words, including the two contracts which the plaintiff was suing on (ie, the Contracts), there were a total of three contracts signed by both parties, each for the construction of a barge at a price of $1.33m.

The plaintiff did not deny that it provided the defendant with a number of identical, signed contracts. However, it claimed that it did so because Low had requested for “blank” contracts so that the defendant could consider whether to order more barges.⁸ The plaintiff maintained that the in-principle oral agreement between the parties always concerned the construction of two barges and that in any event, any prior oral agreement would have been superseded by the Contracts executed by the parties.⁹

According to the plaintiff, the barges were 90 percent completed at the time of the commencement of the action herein.¹⁰ However, the defendant had not paid a cent for the barges. Following the defendant’s failure to enter an appearance, on 3 November 2014, the plaintiff obtained judgment in default of appearance against the defendant in the sum of $173,500 with interest and damages to be assessed. The application to set aside the default judgment and to stay the present proceedings was filed by the defendant on 10 March 2015.

Setting aside the default judgment

It is necessary to first consider the defendant’s application to set aside the default judgment before considering its stay application. This is because there would be nothing to stay...