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X v Holdings and Enterprises Ltd (appeal) [2013] WSCA 5 (15 November 2013)

COURT OF APPEAL OF SAMOA

X v Enterprises Ltd and Holdings Ltd and A company registered in Brunei v Enterprises Ltd and Holdings Ltd [2013] WSCA 05

Case name: X v Enterprises Ltd and Holdings Ltd A company Registered in Brunei v Enterprises Ltd and Holdings Ltd

Citation: [2013] WSCA 05

Decision date: 15 November 2013
Parties:
X, a Taiwanese businessman (Appellant) and ENTERPRISES LTD a duly registered international company (First Respondent) and HOLDINGS LTD a duly registered international company (Second Respondent). A COMPANY REGISTERED IN BRUNEI (Appellant), ENTERPRISES LTD a duly registered international company (First Respondent) and HOLDINGS LTD a duly registered international company (Second Respondent).

Hearing date(s): 12 November 2013

File number(s): CA05/13, CA06/13

Jurisdiction: Civil

Place of delivery: Mulinuu
Judge(s):
Justice Fisher
Justice Hammond
Justice Blanchard

On appeal from:

Order:
Representation:
J Annandale, M Betham-Annandale for Appellants
S Leung Wai for Respondents

Catchwords:

Words and phrases:
Legislation cited:

Reciprocal Enforcement of Judgments Act 1970
Cases cited:
The Eleftheria [1970] P 94

Summary of decision:

IN THE COURT OF APPEAL OF SAMOA

HELD AT MULINUU

FILE NO: C.A05/13, C.A06/13

BETWEEN

X a Taiwanese businessman and A COMPANY REGISTERED IN BRUNEI

Appellants

ENTERPRISES AND HOLDINGS LTD duly registered international companies

Respondents

Coram: Honourable Justice Fisher

Honourable Justice Hammond

Honourable Justice Blanchard

Counsel: J Annandale, M Betham-Annandale for Appellants

S Leung Wai for Respondents

Hearing: 12 November 2013

Judgment: 15 November 2013

JUDGMENT OF THE COURT

Introduction

1. This is an appeal from a judgment of the Chief Justice staying two proceedings brought against the present respondents, whom we will call Enterprises and Holdings, by the present appellants whom we will call X and the Brunei Co (which is where the latter is incorporated). In these proceedings X and the Brunei Co seek specific performance of agreements for the transfer to them respectively of shareholdings in Holdings registered in the name of Enterprises (being parcels of 1.35% and 5% of the share capital of Holdings). As we understand it, the Brunei Co is associated with X or his interests. It seems that the transfer of these shares to X and the Brunei Co will give them control of Holdings as the Brunei Co already owns a 45% stake in Holdings.
2. All three companies are domiciled in Taiwan and carry on their businesses there or in mainland China. X and his brother, with whom he is in dispute concerning Holdings, are Taiwanese citizens.
3. There is already ongoing litigation in the Taiwan Taipei District Court concerning what we are told is a related matter. That litigation has yet to be resolved.
4. The only connection with Samoa is that both Enterprises and Holdings are incorporated here under the International Companies Act 1987. As such they are prohibited from carrying on business in Samoa or having Samoan shareholders. They have registered offices in Samoa under the Act. Their share registers may be kept in Samoa or elsewhere. We understand that they may presently be kept in Samoa.
5. X’s only connection with Samoa is that he is a director of both the international companies. The Brunei’s Co’s only connection is its shareholding in Holdings.
6. It is in these circumstances that X and the Brunei Co have brought their separate proceedings for specific performance in the Supreme Court of Samoa. Enterprises and Holdings applied for a stay of both, which the Chief Justice granted at the end of a hearing on 15 April 2013, delivering his reasons for judgment on 26 April.

The Supreme Court judgment

7. In a comprehensive judgment the Chief Justice dealt first with the effect of certain articles in the agreements on which X and the Brunei Co are suing. It is unnecessary to describe those agreements which are called an Agreement for Share Transfer, Licensing and Technology (“the STA”) and a Shareholders’ Agreement (“the SHA2”). (There was an SHA1 which has been superseded). The articles in question are Art 15 of the STA and Arts 26 and 27 of the SHA2. They were said by the respondents to confer exclusive jurisdiction on the Taiwan Court.
8. The matter was slightly complicated by the fact that the agreements, which were executed in Taiwan, are written in a Chinese language and each side produced slightly different translations of the three articles.
9. The version of Art 15 put forward by Enterprises and Holdings is:

15. “The three parties hereby agree that Taiwan Taipei District Court shall be the court of first instance having jurisdiction over any dispute arising out of this Agreement.”

whereas X and the Brunei Co contend that it says:

15. “Parties agree that the Taipei District court shall be the court of first instance having jurisdiction over any litigation initiated in connection with this Share Transfer Agreement.

10. Likewise Enterprises and Holdings translate Arts 26 and 27 as follows:

26. “The execution, force, interpretation and performance of this Agreement, as well as the resolution of any dispute arising therefrom, shall be governed by the applicable laws of Taiwan.”

27. “Any and all disputes arising out of or in connection with the performance of this Agreement shall be reconciled through friendly negotiations among the parties hereto. If the negotiations should fail to reconcile any dispute, it shall be submitted to arbitration or the judiciary for resolution thereof.”

whereas the version preferred by X and the Brunei Co is:

26. “The execution of this Agreement and the effect, interpretation, performance and dispute resolution thereof, ‘making a reference to’ the relevant laws of Taiwan”

27. “Any dispute arising out of performance of this agreement or in relation thereto, Parties shall resolve it through amicable negotiation/conciliation, should negotiation/ conciliation fail to resolve the same, it shall be resolved through arbitration or judicial system”

11. Very understandably, the Chief Justice could discern no significant differences. He concluded, and we respectfully agree, that these clauses were intended to confer jurisdiction in any dispute about either of the agreements on the Taiwan Court and that the SHA2 was to be governed by the law of Taiwan. He also said that one would expect that the law applied by the Taiwan Court under the STA would be the same law, noting that the STA has been incorporated into the SHA2. Again, we must agree. In argument in this Court it was not suggested that the differences in translation were of any moment.
12. The Chief Justice observed that the question of whether the jurisdiction of the Taiwan Court was exclusive or non-exclusive needed to be determined on the basis of Taiwanese law, not Samoan law. But there was no evidence of the applicable Taiwanese law. Enterprises and Holdings had failed to prove that it was an exclusive jurisdiction. The Chief Justice proceeded on the basis that they were non-exclusive clauses and there is no cross-appeal. He discussed the effect of such clauses, concluding that they are not absolutely binding on a Samoan Court but will be a strong ground to take into account in exercising a discretion whether to grant a stay of proceedings in this country. He added that a court would in all probability, in exercising its discretion, give effect to an exclusive jurisdiction clause and also to a non-exclusive clause of the kind be found in this case.
13. The Chief Justice approved the approach set out by Brandon J in The Eleftheria [1970] P 94 at 110:

“The principles established by the authorities can, I think, be summarised as follows: (1) Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign Court, and the defendants apply for a stay, the English Court, assuming the claim to be otherwise within its jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not. (2) The discretion should be exercised by granting a stay unless strong cause for not doing so is shown. (3) The burden of proving such strong cause is on the plaintiffs. (4) In exercising its discretion the Court should take into account all the circumstances of the particular case. (5) In particular, but without prejudice to (4), the following matters, where they arise, may properly be regarded: (a) 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 English and foreign Courts. (b) Whether the law of the foreign Court applies and, if so, whether it differs from English law in any material respects. (c) With what country either party is connected, and how closely. (d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages. (e) Whether the plaintiffs would be prejudiced by having to sue in the foreign Court because they would: (i) be deprived of security for their claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a time bar not applicable in England; or (iv) for political, racial, religious or other reasons be unlikely to get a fair trial.”

14. The Chief Justice said that the Supreme Court had jurisdiction to determine the proceedings for specific performance because the defendants, Enterprises and Holdings, were present in Samoa as registered international companies and had been served in Samoa. But they were relying upon the foreign choice of jurisdiction clause and upon the doctrine of forum non conveniens. He considered those matters consecutively but found the same factors to be relevant. They were:

(a) The bulk of the evidence was in Taiwan. The witnesses would be Taiwanese nationals residing in Taiwan. Their first language was Chinese. There was no evidence they spoke or were fluent in English. Translation would be necessary in Samoa. There was no evidence that a competent translator was available here.

(b) The governing law was that of Taiwan. The claim was likely to involve questions of construction of the agreements, which would have to be determined with reference to Taiwanese law.

(c) The only connection of Enterprises and Holdings to Samoa was their registration as international companies. Neither carried on business here.

(d) Enterprises and Holdings genuinely sought trial in Taiwan with which they and the other parties were more closely connected.

(e) There was no prejudice to X and the Brunei Co. The Chief Justice was not convinced that if specific performance was obtained in Taiwan it would be difficult to enforce it in Samoa. There was nothing to suggest there would not be a fair trial in Taiwan or that the agreements could not be enforced there.

15. The Chief Justice concluded that a stay should be granted on the basis of the jurisdiction clause. But he also made it clear that he would have taken the same view if he had needed to decide the application under the doctrine of forum non conveniens. The parties and the proceedings had close connections to Taiwan which was clearly the more appropriate forum.

Appellant’s argument

16. In support of their appeals, X and the Brunei Co have submitted that the registration of share transfers will affect the form and structure of an international company, Holdings, which, they say, can only be done in accordance with Samoan law, viz, the International Companies Act. They submit that proceedings which will have this effect must be conducted in the Samoan Court. Therefore the foreign jurisdiction clause is unlawful. If the decision of the Supreme Court is upheld in these cases, the appellants say it will open the way for a circumventing of the intended application of the Act by means of the adoption of foreign jurisdiction clauses. They also say that it was wrong, in determining that a stay should be granted, to give significant weight to the fact that Enterprises and Holdings do not carry on business in Samoa or have Samoan shareholders, since those are requirements of the Act itself: if this approach is followed, international companies wanting to have their disputes heard in Samoa will always be disadvantaged if another party objects since the bulk of the evidence will be likely to be found overseas. It may mean that people are deterred from utilising the Samoan international companies regime, with consequent loss of resulting revenues.
17. The appellants have further argued that with modern communications, including air travel and video links (the latter being a permitted practice in the courts of this country), there are no longer significant problems in taking evidence from persons resident out of Samoa and that, as many people speak Chinese, it is probable that a competent translator can be found locally. It is submitted that the costs of trial in Samoa have been overstated. The appellants also say that the issues in the case revolving around the agreements are not about construction of the documents.
18. It was submitted, additionally, that if X and the Brunei Co are successful in the Taiwan Court in obtaining orders for specific performance of the share transfer agreements, they will still face an obstacle, requiring further Samoan proceedings, because the Reciprocal Enforcement of Judgments Act 1970 does not permit registration of an order for specific enforcement.

Discussion

19. We do not accept that the foreign jurisdiction clauses in the STA and the SHA2 are unlawful. Mr Annandale was not able to point to any provision in the International Companies Act or other Samoan law with which they are in conflict. We will assume, without deciding, that if the implementation of an agreement containing such a clause would result in a change to the structure of an international company, that might be contrary to a discernible purpose of the Act that such a change be governed by Samoan law. But, even on that assumption, counsel’s argument founders because the registration of the share transfer in these cases will not in any way alter the capitalisation of Holdings or the rights attaching to any of its shares. It will not for example, convert the shares from one class to another or affect the voting rights attached to any of the shares.
20. In fact, all the shares in Holdings are of the same class of ordinary share carrying the same voting right for each share. The consequence of the transfers of the disputed parcels of shares will be that one of the existing shareholders (and a person associated with it) acquires further shares and the other’s holding is correspondingly reduced. But that does not mean that there is any change in the structure of the company as provided for in its memorandum and articles of association, even if control of the company thereby passes. There will still be exactly the same total number of shares on issue and the same voting and other rights attaching to each of the shares in the capital of the company.
21. The next point taken for the appellants was that the Chief Justice erred in failing to exercise his residual discretion to refuse to give effect to the non-exclusive foreign jurisdiction clause. Mr Annandale at first appeared to go so far as arguing that the well-established approach to such clause taken in The Eleftheria, which is described in the several texts and the case-law referred to by the Chief Justice, should be discarded altogether in a case involving a Samoan international company, although counsel did not say what approach should replace it. In the end, counsel advanced the more limited argument that in the present context a different weighting of the relevant factors should be carried out. Essentially this was an argument that it well-nigh determines the result (in favour of the foreign jurisdiction) if any real weight is given to the fact that, as in this case, all or most of the documentation and witnesses are not in Samoa, since it naturally follows from the requirements of the Act alone that they will not be found in Samoa, where an international company is not permitted to do business or have any local shareholder.
22. Counsel said that to give this factor substantial weight, as the Chief Justice did – it was the first factor he mentioned – was much too favourable to someone seeking to avoid having a case litigated in Samoa. The argument was that unless this Court were to adjust for this bias against Samoan jurisdiction, arising from the requirements of the Act, people may be disinclined to register international companies under the Act because they will be unlikely to be able to have their contractual disputes determined in Samoa.
23. If, however, this had really been a concern of those responsible for the passage of the Act, provision would surely have been expressly made requiring such litigation concerning an international company to be conducted in Samoa unless the Samoan Court decided otherwise. It seems to us, moreover, that in all probability those who operate international companies will generally prefer to litigate where they conduct business. In any event, it would be simple enough for them, to provide accordingly in their contracts if they have a contrary desire, perhaps in the interests of secrecy – a factor not raised in this case. The need to take such a step is hardly likely to deter them from taking up the advantage of registration under the Act.
24. The appellants’ argument that there will not be much extra time, trouble and expense in taking evidence in Samoa from witnesses who are Chinese speaking, and making reference to documents recorded in their language, was unconvincing. That problem rather speaks for itself, even if it can be reduced to an extent by electronic communication, air travel and the like. We have no knowledge of whether documents will need to be construed but, even if this is not required, translation will be necessary. The Chief Justice was quite right to give this factor substantial weight. We add to this that it is surely more convenient to have the litigation conducted in the same forum as the connected litigation already under way in Taiwan.
25. The last criticism made of the Chief Justice’s discussion of the relevant factors was that he was wrong to find that there would not be a difficulty in obtaining enforcement of any Taiwan judgment in Samoa. Counsel for the appellants said that the Reciprocal Enforcement of Judgments Act would not assist because the Taiwan judgment would not be for a monetary sum. The appellants did not support this argument about the difficulty of enforcement by tendering to the Supreme Court any expert evidence directed to show that a problem actually existed under Taiwanese law and practice. It was for them to discharge the burden of demonstrating that there would be a substantial difficulty for the would-be transferees of the shares in this respect, and they have not done so. In the absence of evidence to the contrary, the Supreme Court was entitled to assume that the Taiwan Court will have available to it all the mechanisms to which the Samoan Court and comparable common law courts can have resort when a litigant fails to obey an order for specific performance. There would be no need to attempt to use the Reciprocal Enforcement of Judgments Act here in Samoa. It can be expected that the Taiwanese Court would have power to appoint an official to execute the share transfers on behalf of the recalcitrant transferors and then to deliver them to the transferees. The transferees in turn would then be able to present the transfers to Holdings with a request, also signed by the official at the direction of the Court under s.68 of the International Companies Acts, that they be registered. A mechanism also exists under that section for obtaining delivery of share certificates. We envisage that, by these means, and if necessary with assistance from the Supreme Court, orders made by the Taiwan Court could be implemented. It was for the appellants to show this could not be achieved without undue difficulty. They have not done so.
26. It follows that there was a strong case for giving effect to the foreign jurisdiction clauses. The Chief Justice was well able to conclude that there was no justification for him to refuse to give effect to the foreign jurisdiction clauses in the STA and the SHA2. His orders staying the two proceedings should remain.

Result

27. The appeals are therefore dismissed with costs to the respondents of $5000 against each of the appellants.

Secrecy orders

28. In accordance with s227 of the Act we direct that there be no publication in relation to these proceedings. However this judgment may be published for law reporting purposes after removal of all details that might directly identify the international companies referred to in the judgment and any individuals or companies actually or allegedly associated with that company.
    

Honourable Justice Fisher

Honourable Justice Hammond

Honourable Justice Blanchard