Bdg v Bdh

• Jurisdiction: Singapore
• Judge: Aedit Abdullah JC
• Judgment Date: 29 September 2016
• Neutral Citation: [2016] SGHC 211
• Published date: 04 October 2016
• Date: 29 September 2016
• Year: 2016
• Hearing Date: 16 September 2016
• Plaintiff Counsel: Jainil Bhandari, Aleksandar Anatoliev Georgiev, Raelene Su-Lin Pereira & Han JiaMin (Rajah & Tan Singapore LLP)
• Defendant Counsel: Nicholas Lazarus and Elizabeth Toh Guek Li (Justicius Law Corporation)
• Court: High Court (Singapore)
• Citation: [2016] SGHC 211
• Docket Number: Originating Summons No 633 of 2016

Aedit Abdullah JC: Introduction

The Plaintiff sought to restrain the presentation of a winding up application against it by the Defendant, arguing that there was a dispute between them that was governed by an arbitration clause. The case turns on the resolution of the conflict between the relevant standards for a stay in favour of arbitration on the one hand, which requires a dispute prima facie, and the standard required for a stay of winding up on the other, requiring a triable issue. I find that an injunction as applied for should be granted.

Background

The Plaintiff, [BDG], contracted with the Defendant, [BDH], for the supply of drilling units for fossil fuel production off Nigeria. There were two separate contracts, the [B] Contract, and the [C] Contract, named after the respective fossil fuel fields. The two contracts were in the same form, with payment milestones specified. The submission of documents was made a condition for payment.

The contracts included a tiered dispute resolution clause, Clause 28.1 which specifies that discussions are to be held between representatives, and eventually the top management, of each company:

28 DISPUTE RESOLUTION

28.1 Any dispute between the [Plaintiff] and the [Defendant] in connection with or arising out of the PURCHASE ORDER or the GOODS shall be resolved by means of the following procedure:

28.1.1. the dispute shall initially be referred to the [representatives of the Plaintiff and Defendant] who shall discuss the matter in dispute and make all reasonable efforts to reach an agreement;

28.1.2 if no agreement is reached under Clause 28.1.1 the dispute shall be referred to the two persons each nominated by the [Plaintiff and Defendant];

28.1.3 if no agreement is reached under Clause 28.1.2 the dispute shall be referred to the Managing Directors of the [Plaintiff and Defendant].

Only if the above dispute resolution mechanisms do not work out does arbitration come in:

28.2 If no agreement is reached under Clause 28.1.3 above, the parties shall refer the dispute to arbitration…

28.3 It shall be a condition precedent to the referral of a dispute to the Arbitration under Clause 283 that the party which intends to commence proceedings in relation to the dispute first uses its reasonable endeavours to follow and complete the procedures set out in Clauses 28.1 …

As things turned out, a number of invoices from the Defendant were not paid by the Plaintiff. The circumstances are in dispute: the Plaintiff claims there was a suspension of work agreed between the parties as well as that some of these invoices were not accompanied by the necessary documents. The Defendant contends that the money was due.

Discussions were held between the two sides. The Defendant says ultimately nothing was agreed. The Plaintiff contends that there was a settlement agreement. It is undisputed that two payments of US$300,000 were made by the Plaintiff: the Plaintiff says this shows that a settlement agreement was made; the Defendant says that the payments were accepted as part-payment of the claims it had made. Further, a third payment of US$300,000 was put by the Plaintiff into escrow. Arbitration notices were also issued by the Plaintiff. The Defendant however took the position that there was no dispute subject to the arbitration clause.

Rather, in April 2016, the Defendant, through its former solicitors, issued a statutory demand for US$8.9 million (the 1st Statutory Demand) as due under various invoices. While there was a change of solicitors representing the Defendant, the new solicitors (who are the present ones), maintained the 1st Statutory Demand and filed a winding up application against the Plaintiff. The Plaintiff in turn filed an application to restrain the commencement of winding up proceedings. Both applications were eventually withdrawn.

Then in June 2016, another statutory demand (the 2nd Statutory Demand) was served by the Defendant: this covered a similar set of invoices, though several were omitted. That led to the present application to restrain the commencement of winding up proceedings.

The Plaintiff’s Case

The Plaintiff argues that an injunction may be granted to restrain the commencement of winding up if the winding up application is not an appropriate means of enforcing a debt; one ground would be that there is a debt that is bona fide disputed. For this proposition, the Plaintiff cited various cases including Metalform Asia Pte Ltd v Holland Leedon Pte Ltd [2007] 2 SLR(R) 268 (“Metalform”) and Re Mechanised Construction and Lai Shit Har v Lau Yu Man [2008] 4 SLR(R) 348. The usual standard is the same as that required to defeat a summary judgment application, ie, triable issues must be raised: Mohd Zain bin Abdullah v Chimbusco International Petroleum (Singapore) Pte Ltd and another appeal [2014] 2 SLR 446 at [16].

However, where an arbitration agreement governs the dispute, the relevant standard is whether prima facie there is an arbitration clause and if so, the dispute is governed by that clause: Salford Estates (No 2) Ltd v Altomart Ltd (No 2) [2015] Ch 589 (“Salford Estates”); Eco Measure Market Exchange Ltd v Quantum Climate Services [2015] BCC 877. The position in England and Wales should be adopted in Singapore as well as it gives due recognition to the upholding of arbitration agreements. Using the summary judgment standard of triable issues would result in the courts usurping the functions of the arbitral tribunal and condoning breach of the arbitration agreement. The English approach in Salford Estates would be consistent with Singapore decisions granting stay of proceedings in favour of arbitration. There is also a strong leaning in Singapore towards upholding arbitration agreements.

Following Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2016] 1 SLR 373 (“Tomolugen”), disputes should be referred to arbitration if prima facie there is a valid arbitration clause, the dispute falls within its scope and the arbitration clause is not null and void, inoperative or incapable of being performed. In this case, there is prima facie a dispute, as all that needs be shown is that there is an assertion of a dispute or denial of a claim: Tjong Very Sumito and others v Antig Investments Pte Ltd [2009] 4 SLR(R) 732 (“Tjong Very Sumito”). The fact that the dispute may be readily determined does not show that there is no dispute. Moreover, the arbitration clause covered the dispute between the parties as it covered whether a settlement agreement was reached: Doshion Ltd v Sembawang Engineers and Constructors [2011] 3 SLR 118 (“Doshion”).

On the facts, the Plaintiff had complied with the requirements of the dispute resolution clause. A dispute did arise on the facts as there is disagreement in relation to one of it the invoices: the parties disagree whether it is due; there is also the question of whether a binding settlement was reached. That settlement covered the whole of the claim between the parties, including even otherwise undisputed invoices.

In addition, the Defendant’s conduct disclosed an abuse of process as the threat of winding up was used as illegitimate pressure to compel payment of a debt disputed bona fide. This was evidenced by the conduct of the Defendant in accepting the installment payments while denying a settlement being reached, the Defendant’s failure to take steps in compliance with the dispute resolution process, and a false statement in the solicitors’ letter sent for the Defendant.

The Defendant’s Case

The Defendant argues that there was no agreement reached between the parties. Nothing was signed, there was no agreement on important elements including the quantum of payment, and negotiations were stalled when the Plaintiff did not remit US$300,000 to the Defendant as an indication of good faith ahead of the finalisation of the agreement.

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