The English High Court held that, to avoid multiple proceedings and potential inconsistent judgments, England was the proper forum to determine a dispute against an additional party even though the claimant had begun pre-action proceedings against the additional party in Singapore.
ED&F Man Capital Markets Ltd (MCM), an English company, entered into Master Commodities Sale and Purchase Agreements (Master Agreements) with two Hong Kong companies: Come Harvest Holdings Limited (CHH) and Mega Wealth International Trading Limited (MWI). The Master Agreements provided for exclusive jurisdiction in English courts.
Under the Master Agreements, MCM entered into several separate sale and purchase agreements of nickel with each of CHH and MWI. The metal was stored in various warehouses in Asia. In the majority of these separate contracts, the warehouse operator would issue warehouse receipts to the order of Straits (Singapore) Pte Ltd (SPL), who would then endorse them to CHH or MWI, who in turn blank endorsed and delivered them to MCM. MCM would pay CHH and MWI after receiving the warehouse receipts. A dispute arose when MCM discovered that all but one of the warehouse receipts were forged.
MCM commenced pre-action disclosure proceedings in Singapore against SPL in May 2017 and commenced proceedings in England against CHH and MWI in December 2017. In September 2018, MCM obtained an order in the English Courts to join SPL to the existing proceedings held in England against CHH and MWI. SPL challenged the order and sought to have the proceedings held in Singapore.
The English court dismissed the challenge by SPL and ruled that England was the appropriate forum. In reaching the decision, considerable weight was given to the need to avoid the risk of multiple and inconsistent judgments in different jurisdictions.
In reliance on an established concept of choice (Lungowe v Vedanta Resources plc [2019] UKSC 20 (Vedanta)), SPL contended that MCM intended to have substantive proceedings brought in Singapore as it exercised a choice to proceed with pre-action disclosure there. The principle in Vedanta established that the risk of irreconcilable judgments cannot be used as a “trump card” in cases where the risk arose purely from the claimants’ choice to proceed in another jurisdiction despite having a straightforward choice of jurisdiction for claims.
However, the court distinguished Vedanta from the current case and rejected SPL’s arguments. In Vedanta the claimants had a straightforward choice between two jurisdictions, Zambia and England. Despite the overwhelming ties to Zambia, the parties chose to pursue their claims in England. In contrast, MCM did not have a straightforward option to sue all parties in a single jurisdiction, therefore it should not be held to its initial choice despite appearing to have the intention to hold initial proceedings in Singapore.
One factor considered was that MCM was bound by the English jurisdiction clauses in the Master Agreements, where the court explained that the concept of choice cannot be stretched to require a party to act in breach of contract. Therefore, MCM should not be held to their initial choice. It is entitled to say that it had no choice but to sue CHH and MWI in England where a single composite forum can be achieved.
Companies should take extra care before entering into complex contractual relationships involving multiple international parties. This decision highlights the importance of jurisdictional clauses and for companies to assess whether there is a choice of jurisdiction in the event of a dispute. Despite the risk of irreconcilable judgments being a major factor considered by courts in determining the appropriate forum, companies should note that the English courts do not recognise this factor where the risk arises solely out of the claimant’s choices, and that the concept of choice cannot be extended where it may cause a party to act in breach of contract.
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Disclaimer: This article is for general information only and does not constitute legal advice.
