BXY and others v BXX and others

• Jurisdiction: Singapore
• Judge: Roger Giles IJ
• Judgment Date: 19 July 2019
• Neutral Citation: [2019] SGHC(I) 11
• Court: International Commercial Court (Singapore)
• Docket Number: Originating Summons No 3 of 2019
• Year: 2019
• Published date: 06 August 2019
• Hearing Date: 27 June 2019,24 June 2019
• Plaintiff Counsel: Palmer Michael Anthony, Reuben Tan Wei Jer and Chen Yi-Tseng (Quahe Woo & Palmer LLC)
• Defendant Counsel: Francis Xavier S/O Subramaniam Xavier Augustine SC, Tan Hua Chong, Edwin, Tee Su Mien and Ang Tze Phern (Rajah & Tann Singapore LLP)
• Subject Matter: Arbitration,Conduct of arbitration,Preliminary issues
• Citation: [2019] SGHC(I) 11

Roger Giles IJ:

The plaintiffs are respondents in an arbitration. They applied to the Tribunal for an order that the first defendant, a claimant in the arbitration together with the other defendants, be struck out as a party, on the ground that it had assigned all its rights in the agreement containing the arbitration clause to the second defendant and so was not a proper party to the arbitration. The Tribunal dismissed the application.

This is an application for a decision of the High Court, pursuant to s 10(3) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”) and/or Article 16(3) of the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”), asking that the ruling “be reversed”. The application was brought in the Singapore High Court, and was transferred to the Singapore International Commercial Court in its jurisdiction to hear proceedings relating to international commercial arbitration (see s 18D(2) of the Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed)) (“the SCJA”).

For the reasons which follow, the application should be dismissed. The first defendant is a proper party to the arbitration and the Tribunal has jurisdiction to hear and determine its claims; and in any event, the application was brought out of time.

Background

The plaintiffs, Thai and Cambodian nationals, owned through a company and/or managed a business in Cambodia. In 2015 it was agreed that the business would be acquired by the first defendant, an Australian company. The transaction was structured as a transfer of the business to a new company incorporated by the second and third plaintiffs; and then a transfer of the shares in the new company to the second defendant, a wholly owned subsidiary of the first defendant, as the first defendant’s nominee.

The parties to the share sale agreement (“the SSA”) were the second and third plaintiffs as vendors and the first defendant as purchaser: the second defendant was not a party. The SSA contained a choice of law clause (cl 12) in favour of the laws of Singapore, and an arbitration clause (cl 11) providing for settlement of disputes by arbitration in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC”).

In 2018, the first and second defendants commenced arbitration proceedings against the second and third plaintiffs, alleging breaches of non-compete and non-solicitation provisions in the SSA and associated other wrongs. The proceedings were consolidated with another arbitration commenced by the new company, now the third defendant, against the first and second plaintiffs, alleging breaches of a management agreement entered into concurrently with the SSA. The consolidation explains the joinder of the first plaintiff and the third defendant in the present application, although the jurisdictional question does not concern them. As did counsel, I will refer globally to the plaintiffs and the defendants.

The challenge to jurisdiction before the Tribunal

In their Statement of Defence and Counterclaim, the plaintiffs asserted that the first defendant was not a proper party to the arbitration because it had vested “all its rights, title and interest in, under and/or pursuant to the SSA” in the second defendant, and was therefore no longer a party to the arbitration agreement in the SSA; nor was it a party to the management agreement.¹ This was duly denied by the defendants in their Reply.

By letter dated 7 December 2018, the plaintiffs applied to the Tribunal for an order that the first defendant “be struck out as a party to the Arbitration” because “all [its] rights and obligations under [the SSA] have been assigned to [the second defendant]”. Submissions in support of the application were included in the letter.

The Tribunal gave directions for responsive submissions, which were provided by letters dated 21 December 2018 from the defendants and 4 January 2019 from the plaintiffs in reply.

On 8 January 2019, the Tribunal issued its decision as Directions (2), dismissing the application.

This Application

Article 16 of the Model Law relevantly provides that an arbitral tribunal may rule on its own jurisdiction (Article 16(1)), that a plea that the tribunal does not have jurisdiction shall be submitted not later than the submission of the statement of defence (Article 16(2)), and: (3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this Article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in Article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.

The IAA provides in s 3(1): 3.—(1) Subject to this Act, the Model Law, with the exception of Chapter VIII thereof, shall have the force of law in Singapore.

Chapter VIII is not presently relevant. Pursuant to s 8(1) of the IAA, the High Court in Singapore is taken to be the court specified in Article 6 for the purposes of Article 16(3).

Section 10 of the IAA relevantly provides: 10.—(1) This section shall have effect notwithstanding Article 16(3) of the Model Law. (2) An arbitral tribunal may rule on a plea that it has no jurisdiction at any stage of the arbitral proceedings. (3) If the arbitral tribunal rules — (a) on a plea as a preliminary question that it has jurisdiction; or (b) on a plea at any stage of the arbitral proceedings that it has no jurisdiction,

any party may, within 30 days after having received notice of that ruling, apply to the High Court to decide the matter.

(4) An appeal from the decision of the High Court made under Article 16(3) of the Model Law or this section shall lie to the Court of Appeal only with the leave of the High Court. (5) There shall be no appeal against a refusal for grant of leave of the High Court.

…

Although the application to the Tribunal was described as an application to strike out rather than a plea that the Tribunal did not have jurisdiction, it was not in dispute that a jurisdictional challenge was raised by the plaintiffs in conformity with Article 16(2) of the Model Law, and was ruled on as a preliminary question within Article 16(3) and s 10(3) of the IAA.

The plaintiffs applied to the High Court by an Originating Summons filed on 22 February 2019. A prayer that the arbitration be stayed until its final determination was not pursued. The substantive prayer was that:

The Tribunal’s ruling in [Directions (2)] … that [the first defendant] is a proper party to the Arbitration and therefore that the Tribunal has jurisdiction to hear [the first defendant’s] claims in the Arbitration, be reversed[.]

The Originating Summons was filed more than 30 days after Directions (2) was issued, and the 30 days in Article 16(3) and s 10(3) was therefore in question. The plaintiffs also sought a declaration that the Originating Summons had been filed within the time prescribed under Article 16(3) and/or s 10(3) for appeal [sic] against the Tribunal’s ruling on jurisdiction, or, alternatively, an extension of time and/or leave to file the Originating Summons out of time.

It was common ground that I should decide the present application de novo: see BCY v BCZ [2017] 3 SLR 357 at [36] and BNA v BNB and another [2019] SGHC 142 at [10] (the latter case having been decided after the hearing of this application).

The Issues

The issues in the application were: procedurally, whether the application was brought within the 30 days stated in Article 16(3) and s 10(3); and if not: whether there was power to extend the time; and if so, whether the time should be extended; and substantively, whether the Tribunal had jurisdiction to hear and determine the first defendant’s claims.

As earlier indicated, my decision of the procedural issues is adverse to the plaintiffs. In case I am incorrect, and there being provision for an appeal by leave (s 10(4) of the IAA), I consider that I should nonetheless decide the substantive issue. I will do so first.

Does the Tribunal have jurisdiction?

The SSA was preceded by an agreement dated 23 January 2015 and a supplementary agreement dated 22 May 2015. Amendments then led to a Deed of 18 June 2015, giving effect to the SSA as a Restated Share Sale Agreement.

The SSA recited that the vendors (the second and third plaintiffs) agreed to sell and the purchaser (the first defendant) agreed to purchase the shares in the new company, for the consideration and on the terms and subject to the conditions therein. The operative clause, cl 3.1(a), was in like terms: 3.1 Sale and Purchase (a) Subject to the terms and conditions of this Agreement, each of the Vendors shall sell as beneficial owner, or shall cause the Shareholders to sell as beneficial owner and the Purchaser shall purchase the Sale Shares free from all Encumbrances and together with all rights and benefits now and hereafter attaching thereto.

The transfer of the shares to the second defendant was not expressly directed in the SSA, but was reflected in the conditions precedent in cl 2.1.

One condition precedent (cl 2.1(n)) was that the purchaser had obtained from the vendors undated share transfer documents completed for submission to the Cambodian Ministry of Commerce (“the Ministry”) applying for, inter alia, “the registration of the transfer of the Sale Shares to [the second defendant]” and “the listing of [the second defendant] as the owners [sic] of the Sale Shares to satisfy the minimum number of shareholders and the ratio of shareholding as required by laws of Cambodia”.

The other condition precedent (cl 2.1(o)) was: (o) the letter of...