Car & Cars Pte Ltd v Volkswagen AG and Another

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 19 October 2009
• Neutral Citation: [2009] SGHC 233
• Citation: [2009] SGHC 233
• Defendant Counsel: Chan Kia Pheng, Ang Keng Ling and Audra Balasingam (KhattarWong)
• Published date: 02 November 2009
• Plaintiff Counsel: Lok Vi Ming SC, Koh Kia Jeng and Vanessa Yong Shuk Lin (Rodyk & Davidson LLP)
• Date: 19 October 2009
• Docket Number: Suit No 960 of 2008 (Registrar's Appeal No 136 of 2009)
• Court: High Court (Singapore)
• Subject Matter: Arbitration

19 October 2009 Judgment reserved.

Andrew Ang J:

Introduction

1 The case before me is an appeal against the decision of assistant registrar Saqib Alam (“the AR”) in Summons No 261 of 2009 granting the second respondent’s application for an order that all further proceedings in the action brought by the appellant against the second respondent in Suit No 960 of 2008 be stayed in favour of arbitration.

Background

The parties

2 The appellant, Car & Cars Pte Ltd, is a company incorporated in Singapore. Between 1999 and 2004, it was the importer of Volkswagen passenger cars and commercial vehicles pursuant to an agreement made between itself and the first respondent (“the Importer Agreement”).

3 The first respondent, which this present appeal does not concern, is a company incorporated in Germany, named Volkswagen Aktiengesellschaft. It is in the business of manufacturing Volkswagen vehicles. The first respondent was not represented at the hearings before me.

4 The second respondent, Volkswagen Group Singapore Pte Ltd, is a company incorporated in Singapore. It is a subsidiary of the first respondent.

The facts

5 The appellant and the first respondent entered into the Importer Agreement in 1999. By that agreement, the appellant was granted the right to import into Singapore, and to distribute, vehicles carrying the Volkswagen marque. These included passenger cars and commercial vehicles. Based on its understanding that the parties would work together on a long-term basis, the appellant made investments to build up the Volkswagen brand in Singapore.

6 However, the respondents later became desirous of importing the Volkswagen vehicles directly on their own. The appellant was initially reluctant to terminate the Importer Agreement but eventually a Memorandum of Understanding (“MOU”) was entered into between the appellant and the first respondent on 2 November 2004. Clause 2 of the MOU provided that “conditional upon the signing of a definitive agreement … the parties [were] prepared to accept the following in principle:”

(a)	the second respondent would “officially take over the importer function and responsibilities for Volkswagen passenger cars” by 1 January 2005 and the Importer Agreement would be terminated by 31 December 2004;
(b)	the appellant would “remain as the Importer for After-Sales business (service and parts)” and would be “the single VW dealer with effect from 01/01/2005” and “get a standard VW dealer contract (varied as mutually agreed) with agreed sales quota”; and
(c)	in the event that the appellant could not “achieve the sales quota agreed jointly at any point in time” due to its own fault or if the appellant lacked “the resources to cope with market demand”, the respondents would have the right to appoint other dealers.

In addition, cl 3 of the MOU provided:

The parties will on good faith and best endeavour basis negotiate and conclude all terms and condition and enter into a definitive agreement in respect hereof within 4 weeks from the date of this Memorandum of Understanding, failing which this Memorandum of Understanding shall expire. Upon expiry, the parties shall be under no obligation to proceed further.

7 The appellant’s understanding of the terms of the MOU was that it would give up the Importer Agreement in exchange for sole or exclusive dealership status. However, the latter never came to pass.

8 The MOU expired in due course. Nevertheless, on 9 December 2004, the appellant and the first respondent entered into a formal written agreement that superseded the terms of the MOU (“the 2004 Agreement”). By cl 2 of the 2004 Agreement, the appellant and the first respondent agreed to terminate the Importer Agreement with regard to only the import of Volkswagen passenger cars. The termination took effect on 31 December 2004 and the second respondent became the Singapore importer for Volkswagen passenger cars. By cl 3 of the same 2004 Agreement, the appellant assumed the status of an authorised dealer of Volkswagen passenger cars for the second respondent from 1 January 2005 onwards. The eventual dealership arrangement between the appellant and the second respondent was made partly in writing and partly by conduct. Meanwhile, the appellant also continued to be the importer of Volkswagen commercial vehicles and products other than passenger cars.

9 Despite these adjustments, the relationship between the appellant and the respondents was not to last. By way of a letter dated 16 November 2006, the second respondent purported to give the appellant 12 months’ notice of its intention to terminate the dealership agreement. The parties later mutually decided to terminate the dealership before the expiry of the notice period and to terminate, in addition, what was left of the Importer Agreement, ie, with regard to the importing of Volkswagen commercial vehicles and products other than passenger cars. In the terms used by the appellant, there was to be a “clean break” between the appellant and respondents.

10 To facilitate the parting of ways, the parties entered into four written agreements:

(a)	an agreement dated 31 January 2007 made between the appellant and the first respondent in respect of the termination of the Importer Agreement (“the Termination of Importer Agreement”);
(b)	an agreement dated 31 January 2007 made between the appellant and the second respondent in respect of the termination of the Dealership Agreement (“the Termination of Dealership Agreement”);
(c)	a Sale of Assets and VW Parts Agreement dated 31 January 2007 made between the appellant, Group Exklusiv Pte Ltd (“GEPL”), and the second respondent (“the Sale of Assets and VW Parts Agreement”); and
(d)	an assignment of the lease (of certain units at 247 Alexandra Road (“the premises”) where the appellant carried on its business) dated 1 February 2007 made between GEPL and the second respondent (“the Assignment of Lease Agreement”).

11 For a fuller understanding, it ought to be explained that the appellant is a subsidiary of GEPL, which was party to the Sale of Assets and VW Parts Agreement and the Assignment of Lease Agreement. However, GEPL is not a party to the present dispute. Also, it ought to be mentioned at this point that the appellant regarded these four agreements as a “global settlement”, ie, one single and indivisible arrangement, whereas the second respondent took the view that the four documents “were intended at law to be, standalone [sic] agreements each creating different legal rights and obligations as set out in the respective agreements”. I am inclined to agree with the second respondent for reasons which will be explained below (at [44]).

12 By the terms of the Termination of Importer Agreement, the appellant was to receive a payment of $1.2m from the first respondent. Similarly, under the Termination of Dealership Agreement, the second respondent would pay the appellant $800,000. In each agreement, it was agreed that by the payment of the named sum, “neither Party shall have any claim against the other Party for any breach, default, contravention or other non-observance of any nature whatsoever of any term …”. Also, both agreements provided that the respective payments were to be made to Volkswagen Financial Services Singapore Pte Ltd (“VFS”) to be set off against an outstanding sum owed by the appellant to that entity. The payment of these sums was timed to take place on 1 February 2007.

13 Unfortunately, the respondents did not make the requisite payments on the stipulated date. On 2 February 2007, despite not having been paid, the appellant made its own arrangements to settle the sum it owed to VFS. The second respondent later paid its dues on 6 February 2007. However, the first respondent did not give its cheque for the sum of $1.2m to the appellant until 20 March 2007. By that time, the appellant had elected to treat the failure to pay as repudiatory conduct and, as such, the appellant did not present the cheque for payment.

14 In the main action, namely, Suit No 960 of 2008, the appellant alleges that the failure of the second respondent to pay the $1.2m in a timely fashion constituted a repudiation of not just the Termination of Dealership Agreement but all four agreements. The appellant alleged that its rights against both respondents before the agreements were concluded had been restored as a result of the second respondent’s repudiatory conduct. As such, it could once again make claims against both respondents because the terms of the four agreements were no longer effective. Accordingly, the appellant made a claim, inter alia, for loss and damages arising from the breach of the Importer Agreement and, in the alternative, loss and damages arising from the breach of an agreement to appoint the appellant as the exclusive or sole dealer of Volkswagen vehicles.

15 Subsequent to the commencement of the suit, the second respondent came before the AR, in Summons No 261 of 2009, seeking a stay of the action brought by the appellant in favour of arbitration. The provision on which the second respondent based its application was contained in cl 6 of the Termination of Dealership Agreement, which reads as follows:

This agreement herein shall be governed by and its provisions interpreted in accordance with the law of Singapore. Any disputes arising out of or in connection with this agreement herein shall be referred to arbitration in the Singapore International Arbitration Centre in accordance with the Rules of the Singapore International Arbitration Centre for the time being in force. [emphasis added]

As already mentioned above, the AR granted the application. He took the position that by the wording of cl 6, the rules of the Singapore International Arbitration Centre (“SIAC”) in force at the time of the commencement of the arbitration (ie, SIAC Rules (3rd Ed, 2007) (“SIAC Rules 2007”) applied to the dispute rather than the rules in force at the...