Singapore Court of Appeal applies “strong cause” test for non-exclusive jurisdiction clauses
29 May 2019
Shanghai Turbo Enterprises Ltd v Liu Ming [2019] SGCA 11
The Singapore Court of Appeal has issued an important judgment on the interpretation and effect of non-exclusive jurisdiction clauses. The decision in Shanghai Turbo Enterprises Ltd v Liu Ming comes less than four months after the Court of Appeal issued a judgment restating the law relating to an application for a stay of proceedings based on an exclusive jurisdiction clause in Vinmar Overseas (Singapore) Pte Ltd v PTT International Trading Pte Ltd [2018] 2 SLR 1271 (“Vinmar”). An article on Vinmar appeared in the A&G Legal Bulletin (December 2018).
In Shanghai Turbo Enterprises Ltd v Liu Ming, the Court of Appeal discussed the appropriate threshold to challenge the jurisdiction of the Singapore courts, despite having contractually agreed to submit to the non-exclusive jurisdiction of the Singapore courts. The Court of Appeal held that in such cases, the defendant must show “strong cause” why he should not be bound to his contractual agreement to submit to the jurisdiction of the Singapore courts.
Facts
Shanghai Turbo Enterprises Ltd (“Shanghai Turbo”) commenced proceedings in Singapore against Mr Liu Ming (“Liu”) for alleged breaches of a service agreement under which Liu was appointed as an executive director (“Service Agreement”). Among other things, clause 17 of the Service Agreement provided that the parties submitted to the non-exclusive jurisdiction of both the Singapore and the Chinese courts.
As Liu resided in China, Shanghai Turbo made an application for leave to serve the relevant court papers on Liu in China, in accordance with Order 11 of the Rules of Court. The application was granted at first instance before the Assistant Registrar (“Service Order”). On appeal, the Service Order was set aside by the High Court. One of the reasons for the setting aside was that Singapore was not the proper forum for the trial of the action. Applying the Spiliada test, the High Court considered that China was the natural forum for the claim, in view of the location of the parties, the place of performance of the Service Agreement, the place where the breaches occurred, the presence of related proceedings in China, and other factors.
On appeal from the High Court, the Court of Appeal had to consider whether in light of the non-exclusive jurisdiction clause, Liu had to show strong cause why the matter should not be tried in Singapore or whether Liu only had to satisfy the Spiliada test and show that China was the more appropriate forum.
Decision of the Court of Appeal
The Court of Appeal stated that the approach a court should take when faced with a challenge to the exercise of jurisdiction would depend on whether Singapore is the forum named in the non-exclusive jurisdiction clause:
- If Singapore is the forum named in the non-exclusive jurisdiction clause, then the defendant must show strong cause why he should not be bound to his contractual agreement to submit. This will be difficult unless he can rely on factors which were not foreseeable at the time of contracting. The usual connecting factors in the Spiliada analysis will generally not suffice.
- If Singapore is not the forum named in the non-exclusive jurisdiction clause, then the defendant may apply for a stay or to set aside service on the basis that Singapore is forum non conveniens. In that case the court will apply the Spiliada test, taking into account the usual connecting factors, including the non-exclusive jurisdiction clause itself. The weight attributed to the non-exclusive jurisdiction clause would then depend on the circumstances of the case. These include whether the clause formed part of a closely negotiated contract or was a standard term in a contract of adhesion (i.e. a standard form contract on a “take it or leave it” basis), and whether the forum stated in the clause was chosen for its neutrality.
The Court of Appeal stated that the factors relevant to the test of strong cause in the context of exclusive jurisdiction clauses were also applicable, with the appropriate adaptations, to the context of non-exclusive jurisdiction clauses. This is because the requirement of “strong cause” in both cases stems from the applicant’s desire to renege on his contractual obligations. In this regard, following the Court of Appeal’s recent decision in Vinmar, where a defendant applies to set aside service or stay proceedings in breach of a non-exclusive jurisdiction clause favouring Singapore, the court will consider the following factors:
- In what country the evidence on the issues of fact is situated or more readily available, and the effect of that on the relative convenience and expense of trial as between the Singapore and foreign courts. This consideration would have little weight if it was foreseeable when the parties made the jurisdiction agreement.
- Whether the law of the foreign court applies and, if so, whether it differs from Singapore law in any material respect.
- With what country either party is connected and, if so, how closely. This consideration would have little weight if it was foreseeable when the parties made the jurisdiction agreement.
- Whether the plaintiff’s conduct would constitute an abuse.
- Whether the defendant would be prejudiced by having to defend in Singapore.
Having regard to the facts of the case, the Court of Appeal found that the factors raised by Liu were insufficient to constitute strong cause. For example, Liu’s residence in China and the place of contracting were ascribed little weight as these were known to or foreseeable by the parties at the time of contracting.
Consequently, the Court of Appeal found that Liu had not shown strong cause justifying a release from his contractual bargain.
Comment
The decision makes clear that a non-exclusive jurisdiction clause does not merely establish the existence of the court’s jurisdiction but also affects the court’s exercise of jurisdiction. In a paradigmatic non-exclusive jurisdiction clause, the parties are deemed to consent to the exercise of jurisdiction by the courts in the named jurisdiction and to waive any objection thereto. Accordingly, as the defendant has promised to submit to the jurisdiction of the chosen court, the defendant must show strong cause why he should not be bound to his contractual agreement to submit and not merely attempt to show that another court is the more appropriate forum.
This decision provides useful guidance on the scope and application of the Spiliada test in the context of challenges to the jurisdiction of the Singapore courts where the parties have agreed to a non-exclusive jurisdiction clause. The decision also clarifies the weight and significance to be attributed to a non-exclusive jurisdiction clause in an application to set aside service or stay proceedings brought before the Singapore courts; the non-exclusive jurisdiction clause will not always be treated as simply one of the connecting factors to be considered in the Spiliada test but may displace the Spiliada test entirely if Singapore is the forum named in the non-exclusive jurisdiction clause.