Steven Chong J:
Introduction
A joint venture between two companies is akin to the marriage of a couple. If the relationship works, it can be hugely rewarding – in the case of corporations, financially so, and in the case of couples, personal fulfilment. Joint corporate success will usually translate into diversification of the business, spawning subsidiaries in the same way a harmonious union between individuals produces offspring. But if the venture does not work for whatever reason, like a failed marriage, it can lead to an acrimonious and unforgiving fall-out.
The dispute before me exemplifies such a fall-out following a bitter breakdown of the relationship between two joint venture partners, the plaintiff and the second defendant, under a shareholders’ agreement dated 4 July 2007 (“the Shareholders’ Agreement”).1Affidavit of Tan Lay Ling for Suit No 1166 of 2013 dated 26 March 2014 (“TLL affidavit for Suit 1166”), para 8. Their relationship broke down more than seven years ago, and has generated a slew of litigation which carries on till this day. It is in the context of this protracted dispute that the plaintiff’s current application – for leave to commence arbitration proceedings in the name of the first defendant against its former ship manager Nordic Maritime Pte Ltd (“Nordic Maritime”) – has arisen.
Although this action concerns substantially the same losses which are the subject matter of other related proceedings, it raises several interesting issues for my determination, particularly on the application of the Limitation Act (Cap 163, 1996 Rev Ed) to common law derivative actions, and on the requirement for such proceedings to be brought in good faith and in the best interest of the company.
Background
The plaintiff, Sinwa SS (HK) Co Ltd (“Sinwa”), is a company incorporated in Hong Kong engaged in the business of, inter alia, marine supply and logistics.2TLL affidavit for Suit 1166, para 6. The second defendant, Mr Morten Innhaug (“Mr Innhaug”), is a Norwegian national habitually resident in Singapore with vast experience in the operation and management of seismic survey vessels.3TLL affidavit for Suit 1166, para 7. He is the founding shareholder of the first defendant, Nordic International Limited (“Nordic International”). Nordic International was incorporated in the British Virgin Islands for the purposes of acquiring and owning a fishing trawler that was to be converted into and operated as a seismic survey vessel (“the Vessel”).4Affidavit of Evidence-In-Chief of Morten Innhaug for Suit No 1165 of 2013 dated 8 March 2016 (“MI affidavit”), para 4.
As financing was required for the conversion of the Vessel into a seismic survey vessel, Mr Innhaug entered into the Shareholders’ Agreement, which was initially between him and Sinwa Limited, a Singapore public listed company. Under the terms of the Shareholders’ Agreement, Sinwa Limited injected capital of US$2m into Nordic International in return for a 50% stake in the company.5Affidavit of Evidence-In-Chief of Tan Lay Ling for Suit No 1165 of 2013 dated 19 January 2016 (“TLL affidavit”), para 6. Mr Innhaug retained the remaining 50% of Nordic International’s shares.6TLL affidavit for Suit 1166, para 9. The Shareholders’ Agreement was later novated to Sinwa pursuant to a novation agreement dated 28 August 2007.7TLL affidavit for Suit 1166, para 10. On paper, the joint venture was expected to be a productive liaison – a combination of Sinwa’s financial resources with Mr Innhaug’s technical know-how in the operation of a highly specialised and potentially lucrative seismic survey vessel. Unfortunately, it turned out to be a nightmare.
Initially, things appeared to be going well as a time charterparty for the Vessel was concluded on 8 June 2007 between Nordic International and BGP Geoexplorer Pte Ltd (“BGP”) (“the Time Charter”).8TLL affidavit for Suit 1166, para 12. At that point, BGP already had an agreement with TGS-NOPEC Geophysical Company SA (“TGS”) for the provision of seismic services dated 22 December 2006 (“the Seismic Agreement”).9MI affidavit, para 5. Not long after, however, disputes surfaced between the parties. It appears that the catalyst for these disputes was the purported assignment by BGP of the Time Charter to another company owned by Mr Innhaug, Nordic Geo Services Ltd (“NGS”), pursuant to a memorandum of agreement between Nordic Maritime, BGP and TGS dated 23 August 2008.10MI affidavit, para 17. This purported assignment was executed without the knowledge or consent of Sinwa. The seeds of distrust between Sinwa and Mr Innhaug were thus sowed, which then took root and proliferated.
Related proceedings
Over the last seven years, the parties have been frequent users of our judicial and arbitral services, the details of which are summarised in Sinwa SS (HK) Co Ltd v Nordic International Ltd and another [2015] 2 SLR 54 (“Sinwa (CA 108)”) (at [11]-[17]). For present purposes, it suffices to recount that the disputes between the parties have engendered two arbitral proceedings,11BGP Arbitration commenced on 18 November 2009; SIAC Arbitration No 4 of 2012. three originating summonses,12Originating Summonses Nos 960 of 2009, 22 of 2010 and 650 of 2011. three suits (including the present action)13Suits Nos 875 of 2010, 1165 and 1166 of 2013. and two appeals to the Court of Appeal.14Civil Appeals Nos 5 of 2010 and 108 of 2014. They have also contributed to our jurisprudence through several written judgments, two of which have been published: Sinwa SS (HK) Co Ltd v Morten Innhaug [2010] 4 SLR 1 (“Sinwa (OS 960)”) and Sinwa (CA 108).
These arbitral and court proceedings, although against different parties and premised on different causes of action, relate substantially to the same losses which Sinwa says Nordic International has suffered as a result of Mr Innhaug and/or BGP’s actions. Currently, the following proceedings are still pending: SIAC Arbitration No 4 of 2012 (“SIAC 4”) between Sinwa and Mr Innhaug, which resulted in a partial arbitral award dated 1 October 2013. Under this partial award, the arbitrator found that there was a deadlock between the two parties for the purposes of the Shareholders’ Agreement, and ordered Sinwa to sell its shares in Nordic International to Mr Innhaug at a price to be assessed. The assessment has stalled due to disputes on the valuation methodology to be adopted. Sinwa has obtained leave of court vide Originating Summons No 960 of 2009 (“OS 960”) to commence a derivative action in the name and on behalf of Nordic International against Mr Innhaug for breach of directors’ duties. The trial of this action, Suit No 875 of 2010 (“Suit 875”), is currently fixed for hearing in the second half of this year. Sinwa has also obtained leave of court vide Suit No 1166 of 2013 to commence separate arbitration proceedings in the name of Nordic International against BGP for alleged breaches of the Time Charter.15Order of Court No 40 of 2015. Although leave was obtained on 18 December 2014, the arbitration has not progressed beyond service of the notice of arbitration. In fact, the arbitral tribunal has yet to be even constituted.16Second Defendant’ Closing Submissions dated 4 April 2016 (“DCS”), para 269.
Present application
In spite of the multiple pending proceedings, relating substantially to the same alleged losses, Sinwa has brought this suit to obtain leave of court to commence yet another derivative action on behalf of Nordic International. This time the intended action is against Nordic Maritime, the former ship manager of Nordic International. Nordic Maritime is a Singapore company of which Mr Innhaug is also a director and shareholder.17MI affidavit, para 6. It entered into a ship management agreement dated 1 January 2007 with Nordic International to manage the Vessel (“the Ship Management Agreement”), which Sinwa claims it has breached. Sinwa intends to pursue the derivative action against Nordic Maritime by way of arbitration in Singapore as the Ship Management Agreement is subject to an arbitration clause. The clause provides for the Ship Management Agreement to be governed by and construed in accordance with Singapore law, and for any dispute arising out of or in connection with the agreement to be referred to arbitration in Singapore.18MI affidavit, p 131, cl 19.3 read with p 127, box 18.
Claims for which leave is sought
Sinwa alleges that Nordic International has claims against Nordic Maritime for: the misappropriation of funds in the sum of US$400,000 on 28 May 2008;19Statement of Claim (Amendment No 2) dated 27 May 2014 (“SOC”), paras 22-27. losses arising from the failure to inform Nordic International of excessive bunkering charges incurred by the Vessel in June 2008;20SOC, paras 42-43. the double payment of insurance premiums in November 2008;21SOC, paras 44-46. and losses arising from the conduct of Nordic Maritime which led to the termination of the Seismic Agreement by TGS on 19 December 2008;22SOC, paras 28-35. losses arising from the following discrepancies uncovered in Nordic International’s accounts: administrative charges levied by Nordic Maritime on Nordic International from September 2008,23SOC, paras 38-39; TLL affidavit, para 19. erroneous and/or excessive payments for crew salaries between February 2008 to April 2009,24SOC, paras 40-41. excessive payments for provisions, cabin stores, bonded stores and stores and consumables in 2008;25SOC, paras 47-51. and an account of profits in respect of revenue earned by the Vessel for certain ad-hoc projects carried out by the Vessel in the period after 15 June 2010.26SOC, paras 55-59.
In the course of the trial, Sinwa’s director, Ms Tan Lay Ling (“Ms Tan”), conceded that the following claims are unsustainable:27Notes of Evidence (“NOE”) for 15 March 2016, pp 111:17-118:23. the alleged misappropriation of US$400,000; the losses...