QCR Autumn 2018: Singapore Court of Appeal departs from long line of authorities – Merits of defence no longer relevant in deciding whether proceedings should be stayed to give effect to exclusive jurisdiction clause

QCR Autumn 2018: Singapore Court of Appeal departs from long line of authorities – Merits of defence no longer relevant in deciding whether proceedings should be stayed to give effect to exclusive jurisdiction clause

Vinmar Overseas (Singapore) Pte Ltd v PTT International Trading Pte Ltd [2018] SGCA 65

Facts

The Appellant entered into four contracts to purchase commodities from the Respondent and the Respondent’s parent company. The contracts were concluded in the same way, ultimately with the Respondent or the Respondent’s parent company sending supply agreements to the Appellant, such agreements containing the full terms of the contract. One term found in all supply agreements was an exclusive jurisdiction clause (“EJC”) stating, inter alia, that any dispute arising out of the agreement shall be referred to and finally resolved by the High Court of England.

In November 2014, the Appellant agreed to purchase styrene monomer from the Respondent, with the key terms being set out in an email dated 21 November 2014. By an email to the Appellant dated 27 November 2014, the Respondent enclosed a supply agreement (“Written Terms”), referring to the same as a “draft contract”. Like the four contracts, the Written Terms contained an EJC.

Disputes subsequently arose in respect of the contract for the sale and purchase of styrene monomer (the “Contract”), and the Respondent commenced proceedings against the Appellant. The Appellant applied for a stay of the proceedings on the basis that the parties had agreed to refer the dispute to the English High Court.

Judgement

Decisions below

The Assistant Registrar dismissed the Appellant’s stay application. Although the Assistant Registrar found that the Appellant had made out a good arguable case that the parties had accepted the Written Terms and therefore the Written Terms (which included the EJC) were part of the Contract, there was strong cause to refuse a stay on the basis that the Appellant did not have a genuine or bona fide defence to the Respondent’s claim.

The Appellant’s appeal against the Assistant Registrar’s decision was dismissed by the Judge, on the principal ground that the Appellant did not have a genuine defence.

Court of Appeal

The Court of Appeal allowed the appeal and ordered a stay of the proceedings. 

While the Court of Appeal considered various issues, the most pertinent issue related to whether the Court should depart from its earlier holdings. The Court of Appeal took the view that it should, and held that in determining whether to grant a stay in an EJC application, the merits of the defence are irrelevant.

  1. Position in Singapore prior to this case

    Under English and Singapore law, where a party sues in breach of an exclusive jurisdiction agreement, the court will stay the proceedings unless there is “strong cause” for refusing a stay. In determining whether there is “strong cause”, the court considers several factors including whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages.

    Following English law, the Singapore Courts held in a line of cases that a stay application should be refused if the applicant has no genuine defence, as the applicant does not genuinely desire trial in the agreed jurisdiction but is merely seeking a procedural advantage. Hong Kong Courts have taken a similar position.

  2. Position in Singapore after this case
     

    The position under English law has since changed (following the decision in Donohue v Armco Inc and others [2002] 1 Lloyd’s Rep 425), such that where parties enter into an exclusive jurisdiction agreement conferring jurisdiction on a foreign court, and one party sues in England in breach of that clause, the court will “in all probability” give effect to the clause by granting a stay of proceedings, unless the interests of non-contracting parties are involved. Hong Kong Courts have applied the English position.

    After considering various authorities, the Court of Appeal restated the law. In an EJC application, the overarching test remains that of whether there is “strong cause” to refuse a stay. In considering the factors relevant to determining whether there was “strong cause”, the court should bear in mind that factors relating to the relative convenience of litigation in Singapore and abroad have little weight if they were foreseeable at the time of contracting.

    The Court of Appeal also held that the time has come to depart from its previous position. In determining whether to grant a stay in an EJC application, the merits of the defence are irrelevant.

    The Court then recognised that there are at least two general grounds upon which a stay may be refused in an EJC application where the only parties involved in the dispute are the parties to the jurisdiction agreement: namely, abuse of process and denial of justice.

  3. Outstanding issues

    There were several issues that were left open by the Court of Appeal as they were not relevant to the present case.

    One issue was whether the current position under Singapore law applies equally to jurisdiction clauses in bills of lading and standard form contracts that the plaintiff was not in a position to negotiate. The Court of Appeal expressed a “tentative preference” for the view that the same principles should apply, but left the issue open for determination in a subsequent case.

Comments

With the Courts in more jurisdictions (including England, Hong Kong and Singapore) appearing to take a more robust approach in granting a stay in an EJC application and hence giving effect to parties’ agreement, Members may wish to give more serious consideration to the jurisdictions agreed in their exclusive jurisdiction clauses.

Vinmar makes it clear that it is no longer possible for a plaintiff to argue that a stay should not be granted simply because the defendant does not have a genuine or bona fide defence.

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