Carlsberg Breweries A/S v CSAPL (Singapore) Holdings Pte Ltd

• Jurisdiction: Singapore
• Court: International Commercial Court (Singapore)
• Judge: Jeremy Lionel Cooke IJ
• Judgment Date: 04 March 2020
• Neutral Citation: [2020] SGHC(I) 5
• Citation: [2020] SGHC(I) 5
• Defendant Counsel: Davinder Singh SC, Jaikanth Shankar, David Fong, Tan Mao Lin, Vanessa Poo, Shannon Peh (Davinder Singh Chambers LLC) (instructed), Michael Palmer, Martin Eddie Butler, Lim Wei Ming, Keith, Wee Shilei and Joel Ng Yuan-Ming (Quahe Woo & Palmer LLC)
• Published date: 07 March 2020
• Plaintiff Counsel: Chew Kei-Jin, Yeo Chuan Tat and Tan Silin, Stephanie (Ascendant Legal LLC)
• Hearing Date: 19 February 2020
• Date: 04 March 2020
• Docket Number: Suit No 5 of 2019 (Summons No 5626 of 2019)
• Subject Matter: Arbitration,Case management stay of proceedings,Stay of court proceedings

Jeremy Lionel Cooke IJ:

This is an application by the defendant for a stay of the proceedings in Suit No 5 of 2019 (“the Suit”) in their totality pending the final determination of Arbitration No 152 of 2019 (“the Arbitration”) in the Singapore International Arbitration Centre. The Arbitration is a conjoined arbitration arising out of a number of different requests for arbitration made by both parties. The defendant contends that the claims, issues and matters raised in the Arbitration between the same parties overlap with, and will have a direct impact on, the claims, issues and matters raised in the Suit. The defendant therefore submits that a stay of all proceedings in the Suit, pending the final determination of the Arbitration, will be the fairest and most efficient way forward and will save judicial time and resources.

The plaintiff’s claim in this action is for repayment of a loan under a loan agreement that was amended by two addenda (“the Amended Loan Agreement”), which is interconnected with an Amended Shareholders’ Agreement, a Deed of Undertaking and a Deed of Release and Discharge (“the Deed of Release”). The Amended Shareholders’ Agreement contains an arbitration clause.¹

The plaintiff contends that repayment of the loan was triggered by way of a notice issued to the defendant on 12 July 2019. According to the plaintiff, its entitlement to make such a demand resulted from the defendant’s breaches of clauses 2(a) and 2(c) of the Deed of Undertaking, some of which were constituted by breaches of the Amended Shareholders’ Agreement. The issues which arise in that latter respect are, by common consent, to be determined in the conjoined references to arbitration.

The essence of the defendant’s case is that it was not in breach of the Amended Shareholders’ Agreement and that it was the plaintiff which was in breach. At the heart of the dispute is Carlsberg South Asia Pte Ltd (“CSAPL”), a joint venture company in which both the parties are shareholders. The dispute principally boils down to whether clause 5 of the Amended Shareholders’ Agreement (a) required the parties to cooperate in bringing about an Initial Public Offering (“IPO”) of CSAPL’s combined businesses in India and Nepal in India alone, or (b) provided for an IPO in a number of possible locations inside or outside India (“the clause 5 issue”). Each alleges that the other failed to cooperate in bringing about the IPO inside or outside India, as the case may be, and alleges breaches of the Amended Shareholders’ Agreement in blocking CSAPL’s Board of Directors or company meetings or causing failures in proper governance of the various other connected companies, with a view to achieving their respective desired outcomes.

There is only one issue between the parties on this application, which is the extent of the stay that should be ordered. The plaintiff maintains that the stay should only extend to the part of the Suit which is the subject of the reference to arbitration and that there remains a discrete area of the Suit which does not overlap with the Arbitration. Both parties agree that the part of the plaintiff’s claim which proceeds on the basis of a breach of clause 2(a) of the Deed of Undertaking should be stayed because that alleged breach itself depends upon alleged breaches of the Amended Shareholders’ Agreement, including the clause 5 issue. Similarly, the counterclaims brought by the defendant in the Suit all allege breaches of the Amended Shareholders’ Agreement and hence fall to be decided in the Arbitration.

By contrast, the plaintiff argues that its claim in relation to the breach of clause 2(c) of the Deed of Undertaking and the defences thereto (“the clause 2(c) issues”) are independent of any breach of the Amended Shareholders’ Agreement, in circumstances where the Deed of Undertaking contains an exclusive jurisdiction clause in favour of the Singapore courts.²

In these circumstances, if the plaintiff is right, the court will have to hear parties on the clause 2(c) issues in the absence of either: any agreement between the parties that they be included in the Arbitration; or some finding of fact in the Arbitration which precludes the plaintiff from pursuing the clause 2(c) claim.

There is no agreement that the clause 2(c) issues be referred to arbitration. The basis for a stay of the clause 2(c) issues is therefore that it would be a more efficient, expeditious and cost-effective way of dealing with the dispute between the parties for the Arbitration to take place first in order to see if the grounds for the clause 2(c) claim are ruled out by a finding of the arbitrators. If the Arbitration does not have that effect, however, the clause 2(c) issues will have to be determined by this court. The position is therefore that unless there is good reason to consider that the arbitrators’ findings will be or may well be determinative of the clause 2(c) issues, there would be no good reason for a stay.

I was taken through the pleadings in some detail by counsel and have considered them with care, including the 62-page defence and counterclaim, in order to focus upon the nature of the issues which arise in relation to clause 2(c). Clause 2(c) provides that the defendant “… shall use its best efforts to ensure that the director appointed by Rajendra Kumar Khetan to the board of directors of [Gorkha Breweries Pte Ltd (“GBPL”)] attends all meetings of the board of directors of [GBPL]”. GBPL is a subsidiary of CSAPL.

The plaintiff expressly pleads at paragraphs 45 and 46 of its statement of claim that the defendant breached clause 2(c) by failing to use its best endeavours to ensure that the appointed director, PP Khetan, attended four different board meetings scheduled for 26 February 2019, 25 March 2019, 26 April 2019 and 1 July 2019, with the result that there was no quorum present and GBPL’s Board of Directors was unable to proceed with board business. The plaintiff’s case is that it was consequently entitled to: give notice of this breach of clause 2(c), revocation of the Deed of Release and termination of the Deed of Release; declare the loans under the Amended Loan Agreement immediately due and payable; and demand repayment of the sum of approximately USD$36.74 million, with interest of approximately USD$6.2 million.

The plaintiff did all of the above on 12 July 2019. Since a breach of clause 2(c) constitutes a “Write-off...