Sinwa SS (HK) Co Ltd v Nordic International Ltd: Derivative Action & Limitation Act

Sinwa SS (HK) Co Ltd, a shareholder of Nordic International Limited, sought leave from the High Court of Singapore to commence a derivative action in the name of Nordic International against Nordic Maritime Pte Ltd for alleged breaches of a ship management agreement. The second defendant, Morten Innhaug, opposed the application. Steven Chong J dismissed the application, finding that most of the claims were time-barred under the Limitation Act and that the application was not brought in good faith or in the best interest of Nordic International.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Sinwa's application for leave to commence arbitration proceedings against Nordic Maritime is dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Derivative action by Sinwa against Nordic International. Court denies leave due to time-barred claims and lack of good faith.

1.7 Decision Date

6 June 2016

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Nordic International Limited	Defendant	Corporation
Morten Innhaug	Defendant	Individual	Judgment in favor of Defendant	Won	Joseph Tan Wee Kong of Legal Solutions LLC Joanna Poh Ying Ying of Legal Solutions LLC
Sinwa SS (HK) Co Ltd	Plaintiff	Corporation	Application Dismissed	Lost	June Lim Pei Ling of One Legal LLC Anthony Soh Leong Kiat of One Legal LLC Andrew Ho Yew Cheng of One Legal LLC

3. Judges

Judge Name	Title	Delivered Judgment
Steven Chong	Judge	Yes

4. Counsels

Counsel Name	Organization
Joseph Tan Wee Kong	Legal Solutions LLC
Joanna Poh Ying Ying	Legal Solutions LLC
June Lim Pei Ling	One Legal LLC
Anthony Soh Leong Kiat	One Legal LLC
Andrew Ho Yew Cheng	One Legal LLC

4. Facts

Sinwa and Mr Innhaug entered into a Shareholders’ Agreement on 4 July 2007.
Sinwa injected US$2m into Nordic International in return for a 50% stake in the company.
A time charterparty for the Vessel was concluded on 8 June 2007 between Nordic International and BGP.
Disputes arose after BGP purportedly assigned the Time Charter to NGS without Sinwa's knowledge.
Sinwa claims Nordic International has claims against Nordic Maritime for misappropriation of funds, losses arising from excessive bunkering charges, double payment of insurance premiums, losses arising from the termination of the Seismic Agreement, discrepancies uncovered in Nordic International’s accounts, and an account of profits in respect of revenue earned by the Vessel for certain ad-hoc projects.
Sinwa conceded that the claims for misappropriation of US$400,000, losses arising from the excessive bunkering charges, and the double payment of the insurance premium were without basis.
The leave application was filed on 20 December 2013.

5. Formal Citations

Sinwa SS (HK) Co Ltd v Nordic International Ltd and another, Suit No 1165 of 2013, [2016] SGHC 111

6. Timeline

Date	Event
2007-01-01	Ship Management Agreement signed between Nordic International and Nordic Maritime.
2007-04-04	Shareholders’ Agreement dated.
2007-06-08	Time Charterparty concluded between Nordic International and BGP Geoexplorer Pte Ltd.
2007-08-28	Novation agreement dated.
2008-05-28	Alleged misappropriation of funds in the sum of US$400,000.
2008-06-01	Excessive bunkering charges incurred by the Vessel.
2008-08-23	Purported assignment by BGP of the Time Charter to Nordic Geo Services Ltd.
2008-09-01	Administrative charges levied by Nordic Maritime on Nordic International from September 2008.
2008-11-01	Double payment of insurance premiums.
2008-12-05	TGS letter to Nordic Maritime highlighting technical problems with the Vessel.
2008-12-19	Termination of the Seismic Agreement by TGS.
2009-02-01	Erroneous and/or excessive payments for crew salaries between February 2008 to April 2009.
2009-05-25	Audit on Nordic International conducted between 25 May 2009 to June 2009.
2009-11-18	BGP Arbitration commenced.
2010-07-01	Ship Management Agreement termination date.
2010-09-29	Court of Appeal grants leave to bring a derivative action against Mr Innhaug.
2010-10-07	Meeting on 7 October 2010 that the Ship Management Agreement had expired by September 2010.
2012-01-01	SIAC Arbitration No 4 of 2012 commenced.
2013-10-01	Partial arbitral award dated.
2013-12-20	Sinwa commenced this action.
2016-03-15	Trial began.
2016-04-04	Second Defendant’ Closing Submissions dated.
2016-06-07	Judgment reserved.

7. Legal Issues

Limitation Act
- Outcome: The court held that the claims, except for the ad-hoc projects claim, are time-barred since no notice of arbitration was issued within the six-year limitation period.
- Category: Substantive
- Sub-Issues:
  - When time ceases to run for a derivative action
  - Application of section 24A of the Limitation Act
  - Application of section 6(3) of the Limitation Act
Good Faith
- Outcome: The court held that the application was not bona fide in the best interest of Nordic International.
- Category: Substantive
- Sub-Issues:
  - Pursuit of claims without merit
  - Availability of alternative remedies
  - Unreasonable delay
  - Collateral purpose
Derivative Action
- Outcome: The court denied leave to commence the derivative action.
- Category: Procedural
- Sub-Issues:
  - Requirements for a common law derivative action
  - Prima facie case on the merits
  - Action within the proper boundaries of the exceptions to the rule in Foss v Harbottle
  - Action bona fide in the best interest of the company
- Related Cases:
  - Foss v Harbottle (1843) 2 Hare 461; 67 ER 189

8. Remedies Sought

Leave to commence arbitration proceedings
Monetary Damages
Account of Profits

9. Cause of Actions

Breach of Contract
Breach of Directors’ Duties
Breach of Ship Management Agreement
Misappropriation of Funds

10. Practice Areas

Commercial Litigation
Arbitration

11. Industries

Marine
Logistics
Seismic Survey

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Sinwa SS (HK) Co Ltd v Nordic International Ltd and another	Court of Appeal	Yes	[2015] 2 SLR 54	Singapore	Summarizes the history of disputes between the parties.
Sinwa SS (HK) Co Ltd v Morten Innhaug	High Court	Yes	[2010] 4 SLR 1	Singapore	Defines the requirements for a common law derivative action.
Foss v Harbottle	N/A	Yes	Foss v Harbottle (1843) 2 Hare 461; 67 ER 189	N/A	Cited for the rule that the proper plaintiff in an action for a wrong done to a company is the company itself.
Prudential Assurance Co Ltd v Newman Industries Ltd and others (No 2)	N/A	Yes	[1982] Ch 204	N/A	Cited for the rule that the proper plaintiff in an action for a wrong done to a company is the company itself.
Ting Sing Ning (alias Malcolm Ding) v Ting Chek Swee (alias Ting Chik Sui) and others	High Court	Yes	[2008] 1 SLR(R) 197	Singapore	Cited for the principle that the court will consider the availability of alternative remedies when deciding whether to grant leave to commence a derivative action.
Carr v Cheng, Dorset College Inc	British Columbia Supreme Court	Yes	2007 BCSC 1693	Canada	Discusses the calculation of the limitation period in a derivative action.
Daniel Winfield v Ian Daniel and another	Alberta Court of Queen's Bench	Yes	2004 ABQB 40	Canada	Discusses the calculation of the limitation period in a derivative action.
Denis Cassegrain v Gerard Cassegrain & Co Pty Ltd and another	New South Wales Supreme Court	Yes	[2008] NSWSC 976	Australia	Discusses the calculation of the limitation period in a derivative action.
Management Corporation Strata Title Plan No 2677 v Hock Chuan Ann Construction Pte Ltd (in liquidation)	High Court	Yes	[2008] 1 SLR(R) 77	Singapore	Discusses the interplay between the Limitation Act and the requirement for leave of court to commence an action.
Yong Kheng Leong and another v Panweld Trading Pte Ltd and another	High Court	Yes	[2013] 1 SLR 173	Singapore	Cited regarding the interpretation of the Limitation Act.
Tom Michael Oates v Consolidated Capital Services Pty Ltd and others	New South Wales Court of Appeal	Yes	[2009] NSWCA 183	Australia	States that there is no requirement under the general law relating to derivative actions for leave to be obtained before a plaintiff commences such an action.
Jumabhoy Rafiq v Scotts Investment (Singapore) Pte Ltd (in compulsory liquidation)	High Court	Yes	[2003] 2 SLR(R) 422	Singapore	States that retrospective leave can be sought in the context of liquidation for claims against the insolvent company.
Excalibur Group Pte Ltd v Goh Boon Kok	High Court	Yes	[2012] 2 SLR 999	Singapore	States that retrospective leave can be sought in the context of liquidation for claims against the liquidator.
Dominion Cotton Mills Co Ltd and others v George E Amyot and others	N/A	Yes	[1912] AC 546	N/A	States that a plaintiff in a derivative action cannot have a larger right to relief than the company itself would have if it were plaintiff.
Lee Tat Development Pte Ltd v Management Corporation of Strata Title Plan No 301	High Court	Yes	[2005] 3 SLR(R) 157	Singapore	Defines the requirements for issue estoppel to apply.
Ang Thiam Swee v Low Hian Chor	Court of Appeal	Yes	[2013] 2 SLR 340	Singapore	States that an applicant with an unmeritorious claim will typically be unable to demonstrate that he is acting in good faith and for the benefit of the company.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Limitation Act (Cap 163, 1996 Rev Ed)	Singapore
Arbitration Act (Cap 10, 2002 Rev Ed)	Singapore
International Arbitration Act (Cap 143A, 2002 Rev Ed)	Singapore
Companies Act (Cap 50, 2006 Rev Ed)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Derivative action
Shareholders’ Agreement
Ship Management Agreement
Time Charter
Limitation Act
Good faith
Ad-hoc projects
Seismic Agreement
Bona fide
Locus standi

15.2 Keywords

derivative action
limitation act
companies act
arbitration
good faith
shareholder
ship management
singapore

17. Areas of Law

Area Name	Relevance Score
Derivative action	90
Limitation	80
Corporate Law	75
Company Law	70
Shareholders Agreement	65
Arbitration	60
Civil Litigation	50
Contract Law	40
Fiduciary Duties	30

16. Subjects

Company Law
Civil Litigation
Arbitration