A co and others v D and another

JurisdictionSingapore
JudgeTan Teck Ping Karen AR
Judgment Date20 June 2018
Neutral Citation[2018] SGHCR 9
CourtHigh Court (Singapore)
Docket NumberSuit No 102 of 2018 (Summons No 1304 of 2018)
Year2018
Published date21 August 2018
Hearing Date02 May 2018,23 May 2018,09 May 2018,31 May 2018
Plaintiff CounselMr Niklas Wong See Keat and Ms Thara Gopalan (TSMP Law Corporation)
Defendant CounselMr Mahesh Rai, Mr Raeza Ibrahim and Ms Grace Morgan (Drew & Napier LLC)
Subject MatterArbitration,Stay in favour of arbitration,Case management stay
Citation[2018] SGHCR 9
Tan Teck Ping Karen AR: Introduction

This application to stay proceedings in favour of arbitration is the latest salvo in the long string of court proceedings between the parties to the joint venture agreement which led to creation of the joint venture company, A co.

In Summons 1304/2018, D & E seek an order that the present suit be stayed in favour of arbitration pursuant to section 6 of the International Arbitration Act (Cap 143A) (“IAA”). Alternatively, D & E seek a case management stay pursuant to the Court’s inherent jurisdiction.

I decline to grant a stay of proceedings on both of the grounds advanced by D & E and give my reasons below.

Background facts The parties

The relationship between parties are set out in the diagram below which was provided by D & E:

A co is incorporated in Singapore pursuant to a joint venture between F co and G co.

On 8 December 2009, A co, F co and G co, among others, entered into an investment agreement (“IA”) which governs the relationship of the parties to the joint venture.

The shares in A co are currently held by G co (55.35%) and F co (44.65%). A co is the investment holding company of, inter alia: B co who is the parent company of H co; and C co.

Both H co and C co are incorporated in Singapore.

D has at all material times been the Executive Chairman and the Chief Executive officer of G co. He is also a director and the Chairman of A co.

E, is the son of D and is a director of A co. E was the managing director of C co and resigned from this position on or about 18 July 2016.

It is alleged that D & E were at all material times de facto and/or shadow directors of H co and D was at all material times a de factor and/or shadow director of C co.

Commencement of the suit: Suit 102 of 2018 (“Suit 102”)

On 26 January 2018, Pang Khang Chau JC (“Pang JC”) granted F co leave under Section 216A of the Companies Act (Cap. 50) in HC/OS XD/2016 (“OS XD”) to bring an action against D & E on behalf of A co, H co and C co (collectively the “Companies”). Appeals to the Court of Appeal against Pang JC’s decision have been filed.

In Suit 102, it is alleged that D & E, as directors of the Companies, are in breach of their fiduciary duties as they have placed themselves in a position of conflict, failed to make full and frank disclosure of their interest in related party transactions and have benefited from these related party transactions.

The legal proceedings between parties

To date, the parties have been involved in numerous legal proceedings.

The 1st proceeding. HC/OS XE/2015 (“OS XE”) is an application filed pursuant to section 199 of the Companies Act by a director on the Board of A co for documents from A co. On 11 March 2016, the Court made an order that the director and his appointed public accountant, KordaMentha Pte Ltd (“KordaMentha”) have access to relevant documents from A co. On 15 July 2016, KordaMentha prepared a preliminary report (“KordaMentha Report”).

The 2nd proceeding. Based on the findings in the KordaMentha Report, F co commenced OS XD seeking leave under section 216A of the Companies Act to bring proceedings against D & E in the name of the A co, H co and C co for alleged breaches of fiduciary duties. On 26 January 2018, Pang JC granted leave to F co to bring a derivative action on behalf of A co, H co and C co against D & E. As mentioned above, both parties have filed notices of appeal against this decision.

3rd proceeding. On 14 June 2016, F co commenced arbitral proceedings against A co in SIAC/ARB XA/2018 (“ARB XA”) seeking a declaration that it is entitled to exercise its rights under clause 10.4 of the IA to, inter alia, appoint an independent firm of accountants to prepare and provide information under clause 10.1.1 of the IA and enquire into and report on A co and its subsidiaries as required by F co, and to be indemnified by A co for the accountants’ costs. A co has brought a counterclaim for the loss of profits allegedly suffered due to F co’s alleged failure to approve certain related party transactions since 3 June 2015.

4th proceeding. HC/OS XB/2017 (“OS XB”) is an application by F co for declarations that approval of the annual accounts of A co and its subsidiaries for the financial year ending 31 December 2015 (“2015 Accounts”) by A co’s board of directors and its shareholders are void and ultra vires and for an injunction restraining A co from distributing the 2015 Accounts until the same are properly approved and adopted. A co applied for a stay of proceedings in favour of arbitration which I granted at first instance. On appeal, the Vinodh Coomaraswamy J (“Coomaraswamy J”) reversed this decision and accordingly, there is no stay in favour of arbitration in OS XB. An appeal to the Court of Appeal has been filed and OS XB is stayed pending the appeal.

5th proceeding. HC/OS XC/2018 (“OS XC”) is an application by A co for a declaration that the arbitral tribunal in ARB XA has no jurisdiction to hear the dispute placed before the tribunal in accordance with the expedited procedure (“Expedited Procedure”) under the SIAC Rules 2013 (“SIAC Rules”). Belinda Ang Saw Ean J (“Ang J”) heard OS XC and made no orders. A co has file an application for leave to appeal against Ang J’s decision which is pending.

Issues to be determined

D & E are not signatories to the IA which contains the arbitration agreement. Therefore, the issues which arise in this application are: Whether D & E are party to the arbitration agreement and are entitled to seek a stay of proceedings pursuant to s6 of the IAA; and Alternatively, whether this present Suit 102 should be stayed pursuant to the Court’s inherent powers of case management.

Section 6 of the International Arbitration Act (“IAA”)

Section 6 of the IAA provides as follows: —(1) Notwithstanding Article 8 of the Model Law, where any party to an arbitration agreement to which this Act applies institutes any proceedings in any court against any other party to the agreement in respect of any matter which is the subject of the agreement, any party to the agreement may, at any time after appearance and before delivering any pleading or taking any other step in the proceedings, apply to that court to stay the proceedings so far as the proceedings relate to that matter. The court to which an application has been made in accordance with subsection (1) shall make an order, upon such terms or conditions as it may think fit, staying the proceedings so far as the proceedings relate to the matter, unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed.

[Emphasis added]

The core issue is whether D & E, who are not signatories to the IA, are considered parties to the arbitration agreement contained in the IA.

D & E say they should be considered “parties” to the arbitration agreement on the following bases: It was the intention of the parties that D & E should be entitled to invoke the arbitration agreement. Though D & E are non-parties to the arbitration agreement, they can compel the Companies to arbitrate the dispute under the arbitration agreement.

The intention of the parties to the Investment Agreement

D & E acknowledge that they are not signatories to the IA and are not parties to the arbitration agreement. Nonetheless, D & E take the position that the signatories to the IA intended D & E to be entitled to invoke the arbitration agreement.

D & E argue that a non-signatory can be considered to be a party to an arbitration agreement if parties intended the non-signatory to be party to the arbitration agreement. They refer to International Commercial Arbitration, Volume I: International Arbitration Agreements (Wolters Kluwer, 2nd Ed, 2014)32 (“Gary Born”) at p 1486:

The touchstone should be whether the parties intended that a non-signatory be bound and benefitted by the arbitration clause. Answering that question cannot be achieved through abstract generalizations, but requires considerations of the arbitration clause’s language and the relations and dealings among the parties in a specific factual setting.

[Emphasis added]

Clause 1.1 of the IA provides as follows: Interpretation

Affiliate” means:

with respect to G co: D and any Controlled Person or Relative of D; any Controlled person of G co

Group” (except where specifically defined otherwise) means [A co] and its subsidiaries for the time being (including, for the avoidance of doubt, [B co and … and C co] with effect from Completion) and any New Holding Company, and “Group Company” shall be construed accordingly

D & E submit that as defined in the IA, D is an Affiliate and E, as the son of D, also falls under the definition of Affiliate. In addition, it is submitted that A co, H co (as the subsidiary of B co) and C co all fall under the definition of Group Company.

Flowing from Gary Born read with the above definition in the IA, D & E submit that the objective intention of the signatories to the IA was that the arbitration agreement was intended to apply to disputes where claims are made by Group Companies (which include the Companies) against Affiliates (which include D & E) in relation to all matters arising out of or in connection with the IA. D & E say that this amounts to consent by the signatories to extending the arbitration agreement to D & E as Affiliates. It is submitted that this intention is supported by the holistic reading of numerous sections of the IA, including clause 11.4 (below) and clause 29.2 (which contains the arbitration agreement). The concomitant consent of D & E is said to be evident by their conduct in making this stay application. Reliance is placed on The Titan Unity [2014] SGHCR 4 at [35] for this point.

In The Titan Unity, the plaintiff (“Portigon”) provided financing to Onsys Energy Pte...

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