Sinwa SS (HK) Co Ltd v Nordic International Ltd and others

Choo Han Teck J:

[1] This was the plaintiff’s application for summary judgment. Its prayer under Summons No 1544 of 2014 read:

[2] The plaintiff was a company incorporated in Hong Kong, in the business of marine supply and logistics. The second defendant, a Norwegian national, was habitually resident in Singapore. On 4 July 2007, Sinwa Limited, a company incorporated in Singapore, and the second defendant entered into a shareholders’ agreement (“the Agreement”) which set out the terms of the parties’ joint venture involving the conversion of a fishing trawler into a seismic survey vessel (“the Vessel”). The first defendant, a company incorporated in the British Virgin Islands, was designated as the vehicle of this joint venture. The first defendant owned the Vessel. Pursuant to the Agreement, the second defendant, who originally owned all the shares in the first defendant, sold half his shares to Sinwa Limited. On 28 August 2007, the rights and obligations of Sinwa Limited under the Agreement were novated to the plaintiff. The relevant portions of the Agreement are:

In the light of the novation, all references to “Sinwa Limited” should be read as references to the plaintiff.

[3] Meanwhile, in June 2007, the first defendant entered into a time charter with the third defendant for the employment of the Vessel. The time charter was for a fixed three-year period at a daily rate of US$37,000. Clause 17(a) of the time charter read:

The third defendant had, earlier in December 2006, entered into an agreement with TGS-NOPEC Geophysical Company SA (“TGS”) to provide seismic acquisition services (“the Seismic Agreement”).

[4] Unbeknownst to the plaintiff, the second defendant had entered into an agreement with the third defendant, TGS and Nordic Maritime Pte Ltd (“NMPL”) on 23 August 2008 to assign the time charter to a company called Nordic Geo Services Limited (“NGS”), a wholly-owned subsidiary of NMPL. The plaintiff alleged that the second defendant controlled NMPL. In addition to this agreement, the second defendant, the third defendant, NMPL, and TGS entered into a memorandum of understanding, under which the third defendant was to transfer to NMPL its rights and obligations in the time charter as well as in the Seismic Agreement. The plaintiff only became aware of this agreement and memorandum of understanding on 9 September 2008.

[5] Shortly after, on 19 December 2008, TGS terminated the Seismic Agreement. The effect was that the Vessel was largely laid-up for the remainder of the three-year time charter period. The plaintiff took the view that, pursuant to cl 17(a) of the time charter, the third defendant was (notwithstanding the assignment to NGS) still liable to pay the outstanding charter fees. The plaintiff calculated the outstanding fees owing from the third defendant to the first defendant to have been US$29,411,379.57, inclusive of late interest.

[6] In November 2009, the plaintiff, on behalf of the first defendant, commenced arbitration proceedings against the third defendant for the recovery of the outstanding fees (“BGP Arbitration”). The second defendant opposed this, and on 7 January 2010, applied to the High Court (Originating Summons 22 of 2010) to effectively restrain the BGP Arbitration. Justice Lai Siu Chiu found that the case turned on the interpretation of cll 8.1.1 and 8.1.2 of the Agreement (see Morten Innhaug v Sinwa SS (HK) Co Ltd and others [2011] SGHC 20 at [36]). She held that the matter of the assignment and memorandum of understanding did not fall strictly within either cl 8.1.1 or 8.1.2, and as such cl 8.1.3 came into play. The parties were obliged to come to a unanimous decision on the matter. If the parties could not agree, pursuant to cl 16.2, they were to proceed to arbitration. As such, she dismissed the second defendant’s application.

[7] Shortly after the decision of Justice Lai Siu Chiu, the third defendant applied to the High Court (Originating Summons 650 of 2011) seeking an order that the appointed arbitrator (in the BGP Arbitration) did not have jurisdiction to act as the plaintiff did not have the requisite authority to commence the arbitration proceedings. The High Court held in favour of the third defendant and ordered that the arbitrator did not have jurisdiction. Consequently, the BGP Arbitration was discontinued.

[8] On 24 October 2011, a board of directors’ meeting of the first defendant was convened to discuss possible proceedings against the third defendant. The meeting ended in a deadlock. As such, on 9 January 2012, the second defendant commenced arbitration proceedings (Singapore International Arbitration Centre Arbitration No 4 of 2012) against the plaintiff, seeking to resolve this deadlock. The arbitration proceedings were to be held in two stages. First, the arbitrator would determine if there was a deadlock within meaning of the Agreement. Second, the price at which the second defendant was to buyout the plaintiff’s share would be determined.

[9] On 1 October 2013, a partial award was made. The arbitrator found that a deadlock had arisen, and that the plaintiff was to sell its shares to the second defendant at a price to be assessed (in the second stage of arbitration). Notwithstanding the decision of the arbitrator, the plaintiff continued to pursue its arbitration efforts (on behalf of the first defendant) against the third defendant. It was in this spirit that the plaintiff appeared before me on 11 June 2014 seeking summary judgment. Having understood that the partial award had already been made, and that the plaintiff was soon to sell its stake in the first defendant, I made no order, without prejudice to a fresh application.

[10] Barring a breakdown in the ongoing arbitration proceedings between plaintiff and second defendant, the plaintiff would soon likely have neither any legal interest nor standing to pursue proceedings against the third defendant on behalf of the first defendant. In fact, the second stage of arbitration was already somewhat underway. When parties appeared before me, they informed me that the valuation process was due to be completed by 31 July 2014. It was never the plaintiff’s case that the ongoing arbitration proceedings or valuation were unfair. In fact, the avenue remains open to the plaintiff to raise such arguments when it appears before the arbitrator for the second stage of proceedings. Notwithstanding that, instead of shutting the plaintiff out from the High Court, I gave it liberty to apply should it have better evidence and arguments than it produced before me. There is no order in this case upon which to appeal.

[11] Nevertheless, the plaintiff has since appealed to the Court of Appeal.