Arbitration

Citation(2018) 19 SAL Ann Rev 42
Date01 December 2018
Published date01 December 2018

4.1 In 2018, the courts in Singapore dealt with a higher number of arbitration-related cases than in 2017. The majority of these cases involved applications for stay of court proceedings in favour of arbitration and applications to either resist enforcement of foreign awards in Singapore or to set aside awards in relation to which Singapore courts were the curial courts. Two applications to review arbitral tribunals' decisions on jurisdiction under s 10(3) of the Singapore International Arbitration Act1 (“IAA”) were also reported. On the whole, these decisions continued to show Singapore's stance of minimal inference with the arbitration process and respect of the parties' agreement to arbitrate.

Stay of court proceedings
Domestic arbitration under Arbitration Act2 (“AA”)

4.2 While Singapore maintains separate statutory regimes for international and domestic arbitrations, courts have scrupulously been clear that, in so far as possible, the judicial approach in upholding party autonomy applies to the domestic cases in the same manner it does in international cases. This is reflected in the cases relating to applications for stay under s 6(2) of the AA.3 Despite the wider discretion given to

the courts, recent court decisions have consistently adopted the prima facie approach prescribed by the Court of Appeal in Tomolugen Holdings Ltd v Silica Investors Ltd4 (“Tomolugen”) (which dealt with a case under the IAA) when considering whether the party seeking a stay of court proceedings could show that the arbitration agreement was not “‘null and void’, ‘inoperative’ or ‘incapable of being performed’”.5
Arbitration and judicial management

4.3 In Takenaka Corp v Tam Chee Chong,6 Takenaka Corporation (“Takenaka”) had engaged Acesian Star (S) Pte Ltd (“Acesian Star”) in two construction projects at Changi airport. When Acesian Star, however, went under judicial management in January 2017, Takenaka terminated the contracts in relation to both projects, one for breach of contract and the other on the basis of judicial management, which was a default event under the contract. Takenaka's proof of debt was rejected by the judicial managers. Dissatisfied, Takenaka commenced proceedings to set aside the rejection of the proof of debt. The judicial managers sought a stay of proceedings on the basis of the existence of an arbitration agreement between the parties. Takenaka's main argument was that it would be better and more efficient for the court to have oversight of the dispute given the ongoing judicial management with a potential clawback action. It also submitted that Acesian Star would unlikely be able to bear the cost of the arbitration and that should Takenaka succeed, it would unlikely be able to recover the costs incurred.

4.4 Aedit Abdullah J granted the stay on condition that the deposit for cost of the arbitration be paid by Acesian Star to the Singapore International Arbitration Centre (“SIAC”). In coming to his decision, the learned judge said that the ongoing judicial management of itself could not constitute a “sufficient reason” as to why a stay should be refused. In the court's view, the reasons given by the party seeking the stay must outweigh the fact that the parties had voluntarily bound themselves to arbitrate. The learned judge reminded the parties that while the court's power to order a stay is discretionary, such discretion make an order, upon such terms as the court thinks fit, staying the proceedings so far as the proceedings relate to that matter.

ought to be exercised in a guarded manner, and stay would be denied only in exceptional circumstances, especially when the defendant is ready and willing to arbitrate. The court also rejected Takenaka's argument based on its unlikely ability to recover the cost to be incurred in the arbitration as a reason to refuse the stay.

4.5 The court's approach is unquestionably proper in that Takenaka's originating summons to set aside the rejection of its proof of debt appears to be an attempt to get the judicial manager to admit its claims without the merits of the case being adjudicated by the agreed process. The poor financial state of a party alone, in particular that of the respondent, should not be a ground for justifying a claimant reneging from its obligation to pursue its claim by the agreed dispute resolution mechanism. No party should be deprived of the right to defend a claim on the merits merely on the basis that it is in a poorer financial state than the other.

4.6 While stay was ordered, the learned judge did so on the condition that Acesian Star had to lodge its share of the costs of arbitration with the SIAC and, should it fail to do so, Takenaka would be at liberty to apply to the court. While it is a pragmatic step to ensure that the judicial managers are committed to pursue arbitration, such a condition could sometimes operate oppressively against a financially weaker party, thus depriving it of the opportunity to present its case before the agreed forum. The issue of inability to fund the arbitration by a party (in particular a responding party) has yet to be fully canvassed and its implications examined.

Stay and breach of natural justice

4.7 While people join clubs and form associations for specific interests, recreation and/or social networking, it is not uncommon that members and clubs as well as members inter se do get into occasional disagreements. Most clubs and associations, whether organised as companies or societies, often have disciplinary processes and dispute resolution mechanisms. Often, however, they end up in litigation with full media attention.7

4.8 In Ling Kong Henry v Tanglin Club,8 Ling was alleged to have sent “shockingly disrespectful” and “insulting” messages to other members. The club took disciplinary proceedings against Ling, resulting in a letter of reprimand. Ling then commenced proceedings for, inter alia, a declaration that the club had breached the rules of natural justice and fairness in its conduct of the disciplinary proceedings, and also sought various consequential reliefs. The club sought a stay under s 6 of the AA as the club's rules contained an agreement to arbitrate.

4.9 Valerie Thean J made two noteworthy preliminary points in her decision: (a) that clubs' rules form a contractual basis for the relationship between a club and its members; and (b) that multi-tiered dispute resolution clauses ending with arbitration are proper agreements to arbitrate that could be invoked upon exhaustion of upper tiers. In the circumstances, she was satisfied that there was an agreement to arbitrate between the parties within the meaning of s 6 of the AA.

4.10 Ling had argued that his claim did not fall within the scope of the arbitration agreement, which stated that only disputes “for which express provision has not been made in these Rules” will go to arbitration, given that the club's rules contained provisions on disciplinary proceedings and his claims arose out of those disciplinary proceedings. To this, the learned judge found that the review of the disciplinary proceedings was not provided for under the club's rules; thus, the subject matter fell within the scope of the arbitration provision.

4.11 The plaintiff's second argument was that, as the claim concerned breaches of the rules of natural justice, as a matter of public policy, such matters should be dealt with in court. The learned judge, citing Tomolugen,9 viewed it as being “in line with the desirability of holding the parties to their agreement, as well as Singapore's strong policy in favour of arbitration”, thereby upholding the principle of judicial non-intervention when parties have expressly agreed to arbitrate. In her view, a stay would only be refused in exceptional cases. In the circumstances, the court was not satisfied that “sufficient reasons” had been advanced to avert the stay sought. The learned judge's robust stand sends a clear signal that clubs and associations should now be conscious that the dispute resolution process in their rules and by-laws will be steadfastly upheld and that members should, therefore, not be too quick to drag their clubs to court. They should instead adhere to the dispute resolution processes set out in their constitutional documents and avoid the unnecessary unpleasant publicity and costs.

International arbitration under IAA
“Effective case management” as basis for stay

4.12 The statutory power of the court to order a stay of proceedings in international cases involving arbitration clauses is set out in s 6 of the IAA, which mandates the court to stay the pending proceedings so long as:

… the proceedings relate to [a matter which is the subject of the agreement], unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed.

The Court of Appeal had held in Tomolugen that stay could be granted in favour of arbitration even if a party before the court was not a party to the arbitration agreement, pursuant to its “effective case management power” in the fair and efficient administration of justice.

4.13 The inherent case management power applied by the Court of Appeal in Tomolugen must, however, be distinguished from the statutory power under s 6 of the IAA which obliges the court to grant a stay. This was noted by Choo Han Teck J in Epoch Minerals Pte Ltd v Raffles Asset Management (S) Pte Ltd.10 The plaintiff (“Epoch”) employed the fourth defendant (“Gangadhara”) to help find investors who might be interested in the plaintiff's business. Gangadhara allegedly found a potential investor and Epoch paid various sums to people/companies, including the second defendant (“AKS”), as directed by Gangadhara, supposedly to secure the investment. A “Term Sheet” was thereafter signed between Epoch and the third defendant (“Kamil”) on behalf of the first defendant (“Raffles”) to reflect the parties' agreement. No money was, however, ever...

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