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    10:17 PM Yip Man (Assistant Professor, Singapore Management University)

    Service Out of Jurisdiction: Submission and Natural Forum

        

    In Zoom Communications Ltd v Broadcast Solutions Pte Ltd [2014] SGCA 44, an interesting issue on submission arose before the Court of Appeal for the first time: whether submission should be inferred where a foreign defendant challenges the existence of the Singapore court’s jurisdiction, and that defendant, as a fall back, also applies for a stay of the local proceedings on natural forum grounds.  In answering this question in the negative, the Court of Appeal clarified the principles on submission and advised that it would be unnecessary and risky to put in both applications. A second noteworthy point from the judgment relates to determining the natural forum for a case of breach of contract, an issue that merits fuller consideration.

    Facts and Decision

    In the case, Broadcast Solutions, a Singapore company, commenced proceedings in Singapore against Zoom Communications, an Indian company, for outstanding payments under three contracts for hire of equipment, and was granted leave to serve the writ of summons on Zoom Communications in India.  Zoom Communications entered appearance to challenge the existence of the Singapore court’s jurisdiction and, as a fall back, it also applied for a stay of proceedings on forum non conveniens grounds in a single summons.  In the inter partes hearing to determine the Singapore court’s jurisdiction, however, Zoom Communications proceeded to argue on its stay of proceedings application first, out of concern that it could be sued again in Singapore even if it had succeeded on the setting-aside application.  In its view, winning the stay application would, by contrast, foreclose any risk of the dispute being tried in Singapore.  

    At first instance, the assistant registrar opined that the prayer for the setting aside of the leave order was “fundamentally inconsistent” with the prayer for a stay of proceedings before the Singapore court because the latter prayer presumed that the Singapore court had jurisdiction over the dispute.  It was thus held that the prayer for stay of Singapore proceedings amounted to a submission to the Singapore court’s jurisdiction.  On the stay application, the assistant registrar found that the respective connections to India and Singapore were evenly balanced and as a result, Zoom Communications failed in proving that India was the “clearly more appropriate” forum.  

    On appeal, the High Court held that Zoom Communications had submitted to the jurisdiction of the Singapore courts by arguing on the stay of proceedings prayer, even if the mere act of including such a prayer did not amount to submission.  The High Court also dismissed the stay application after evaluating the connecting factors of the case, concluding that India was only slightly more appropriate, as opposed to being the clearly or distinctly more appropriate forum.  

    Zoom Communications appealed.  The Court of Appeal, reversing the decision below, held that Zoom Communications had not submitted to the jurisdiction of the Singapore courts.  The Court affirmed the established principle that the court should only infer submission to jurisdiction if the foreign defendant has taken a step that is “only necessary or only useful” if (a) there has been a waiver of objection to the existence of the local court’s jurisdiction, or (b) where no such objection has been made.  The Court then clarified that given that the timeframe for seeking to aside the leave for service out of jurisdiction is the same as that for seeking a stay of Singapore proceedings, putting both applications in the same summons as alternative prayers will not amount to submission, provided that the setting aside order is sought as primary relief and the stay order is sought as a fall-back.  On the facts of the case, the Court was satisfied that by arguing on the stay application first as a matter of convenience, Zoom Communications had not submitted to the Singapore courts’ jurisdiction because it had made clear, as early as the hearing before the assistant registrar, that it had not waived its objection to the existence of the Singapore courts’ jurisdiction.  It nevertheless cautioned that such a strategy was both unnecessary and risky.  The natural forum grounds could have been pursued as part of the arguments for setting aside the leave for service out of jurisdiction as proving Singapore was the proper forum for the dispute was one of the requirements for establishing jurisdiction.  

    Following from its finding on the issue of submission, the Court proceeded to consider if the leave order should be set aside either on the basis that Broadcast Solutions had failed to make full and frank disclosure of all material facts in the ex parte hearing to obtain the leave order, or on the basis that Singapore is not the proper forum for the determination of the dispute.  On the first ground, Broadcast Solutions did not disclose that it was disputed between the parties whether a set of standard terms (which contained a governing law clause) applied to the three contracts; and further, that there were ongoing proceedings between the parties before the Indian court. These undisclosed facts, which related to the connecting factors of the case to the competing forum, were not considered by the Court to be sufficiently material as to warrant setting aside the leave order on non-disclosure alone.   

    On the natural forum issue, the Court affirmed that the two-stage Spiliada test applies in the determination of proper forum in both service in and service out of jurisdiction cases.  The only difference is that in a case of service in jurisdiction, the burden of proof lies with the defendant; in a case of service out of jurisdiction, the burden lies with the plaintiff.  The Court did not think that the governing law of the three contracts would be decisive on the question of proper forum because it could not assess, based on the limited evidence before it (even including the set of standard terms), whether Singapore law or Indian law was applicable.  As for the Indian proceedings, the Court found that they were not related to the Singapore proceedings because the claim in the Indian proceedings was for the return of equipment and damages for wrongful detention, and the mere fact that Broad Solutions mentioned its claim for monies owing under the three hire contracts in the course of the Indian proceedings was insufficient to constitute the requisite degree of relevance.   Accordingly it could not be shown that there was a tangible risk of multiple and inconsistent judgments, which was the material consideration under the Spiliada test.   That being the case, the Court was satisfied that Singapore was the proper forum for the case owing to a single factor which titled the balance: the place of breach of contract was Singapore. It was undisputed that payment was to be made to Broadcast Solutions in Singapore.   

    Natural Forum Arguments

    The most significant point that has emerged from the Court of Appeal decision is that, for a case of service out of jurisdiction, the foreign defendant should raise the natural forum arguments within the setting aside application because he has the benefit of the legal burden lying with the plaintiff.  This could make a critical difference in outcome at the jurisdiction stage where evidence might not be plentiful.  Such a clarification clears up the confusion and alleviates pressure that foreign defendants face in putting together both setting aside and stay applications within the same time line, while being very cautious that they have not acted in a way that amounts to a waiver of challenge to existence of jurisdiction.  In effect, the stay application has been hitherto rendered otiose for service out of jurisdiction cases.  

    At the same time, this illuminating direction would also mean that, should there be a repeat of the same practice adopted by the defendant’s counsel in the future, the court might be less willing to find that there has been no submission.  There is little if no justification, with the benefit of the Court of Appeal’s guidance, that counsel for foreign defendants should consider it necessary to put in both setting aside and stay prayers in the same application, and to argue the stay application first.  

    Submission

    Indeed, one might have thought that the Court of Appeal’s ruling on the issue of submission was a rather generous gesture, although not unjustifiably so.  Following Lord Fraser’s judgment in Williams & Glyn’s Bank plc v Astro Dinamico Compania Nviera SA [1984] 1 SLR 438 (“Williams”), the Court considered two tests to determine whether submission to jurisdiction may be inferred from a particular case.  The first test is whether the defendant has taken a step in the proceedings which is “only necessary or only useful if the objection has been actually waived, or if the objection has never been entertained at all” (Rein v Stein (1892) 66 LT 469 at 471).   The second test was whether the defendant has at all times been vigorously protesting that the court has no jurisdiction.  If so, the defendant has not submitted. 

    The case of Williams illustrated the application of the two tests to a peculiar set of facts. A bank brought proceedings in England to enforce guarantees that had purportedly been entered into by companies that were owned and managed in Greece.  The companies applied to challenge the existence of the English courts’ jurisdiction as well as to stay the English proceedings on the basis that proceedings had been commenced in Greece to determine the very issues that would be relevant to the question of the English courts’ existence of jurisdiction and the merits of the case.  The bank argued that the English courts had jurisdiction over the companies on the basis of a choice of court clause in favour of the English courts contained in the guarantees.  Incidentally, the trial in Greece was to determine the issue of whether the guarantees sought to be enforced by the bank had been executed fraudulently.  The outcome of the Greek proceedings therefore went to the heart of English proceedings. Before the House of Lords in Williams, therefore, the issue was whether it should decide the question of existence of jurisdiction or that of a stay first.   Applying the two tests Lord Fraser held that there was no submission because the very objective of the stay application was to postpone the issue on existence of the English courts’ jurisdiction until the outcome of the Greek proceedings was known.   Moreover, the defendant companies had always protested the existence of the English courts’ jurisdiction. One could view this as part of the English courts’ case management strategy to avoid conflicting judgments emanating from both the English and Greek courts on the issue of the English courts’ jurisdiction.   Indeed, Lord Fraser had compared the power to stay proceedings in Williams with the court’s power to adjourn proceedings until a vital witness can be found (at 442).  

    But the situation in Broadcast Solutions was rather different. Zoom Communications’ objective in arguing the stay application first was to foreclose the risk of the case being heard in Singapore, for once and for all.  One question that should have been given further thought is whether necessity or usefulness ought to be assessed objectively or based on the defendant’s subjective perspective.  Zoom Communications had clearly, albeit mistakenly, considered its litigation strategy to be necessary and useful.  By contrast, in Williams, the companies had all along maintained that the English proceedings ought to be stayed, pending the outcome of the Greek proceedings owing to its impact on the question of the English courts’ jurisdiction over the dispute.   That notwithstanding, given that waiver must be unequivocal, the benefit of doubt should be resolved in favour of Zoom Communications in the case.   After all, it had all the time been protesting the existence of the jurisdiction of the Singapore court.  Further, the pressure on the foreign defendant to put in a stay application within the same time line as a setting aside application might have contributed to its misguided strategy. 

    Natural Forum for Breach of Contract

    A final noteworthy point concerns the natural forum test.  The Court of Appeal decided that the place of breach of contract tilted the otherwise evenly-balanced connecting factors at stage one of the Spiliada test towards Singapore as the proper forum for the trial of the dispute.  To say that it could tilt the balance was to attribute significant weight to this connecting factor.  But it is not immediately apparent why this factor should be accorded greater weight in the present dispute.  After all, Zoom Communications was not denying that it owed the sums claimed by Broadcast Solutions (at [90]).  Breach of contract was thus not a live issue; accordingly, the place of breach of contract ought not be significant to the dispute. 

    Perhaps, the Court’s decision was subconsciously influenced by the well-established principle that the place of tort is prima facie the natural forum for tortious claims and/or a significant factor to be taken into account in the natural forum test (see Rickshaw Investments Ltd v Nicolai Baron von Uexkull [2007] 1 SLR(R) 377 at [38]-[39]).  It should be noted that this principle is only a presumption that can be displaced if the place of tort is fortuitous (JIO Minerals FZC v Mineral Enterprises Ltd [2011] 1 SLR 391 at [106]-[107]).   The rationale behind the principle is that the place of tort is where it is “manifestly just and reasonable that the defendant should answer for his wrongdoing” (The Albaforth [1984] 2 Lloyd’s Rep 91 at 96).   It is also the place where most of the evidence and witnesses – matters that are critical to the determination of the alleged tort - are likely to be found.   The same cannot, however, be said in respect of the place of breach of contract, especially where the breach has not been disputed.  That being said, it does not appear from the judgment that the Court is laying down a general rule for breach of contract.  Rather, it was a decision that was based on the facts of the case.  

    * This blog entry may be cited as Yip Man, "Service Out of Jurisdiction: Submission and Natural Forum" Singapore Law Blog (20 October 2014)

    ** A PDF version of this entry may be downloaded here

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