Dalian Hualiang Enterprise Group Co Ltd and Another v Louis Dreyfus Asia Pte Ltd

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 07 September 2005
• Neutral Citation: [2005] SGHC 161
• Docket Number: Suit No 1002 of 2004 (Registrar's Appeal No 129 of 2005)
• Date: 07 September 2005
• Year: 2005
• Published date: 08 September 2005
• Plaintiff Counsel: Michael Lai and Wendy Tan (Haq and Selvam)
• Citation: [2005] SGHC 161
• Defendant Counsel: P Jeya Putra (AsiaLegal LLC)
• Court: High Court (Singapore)
• Subject Matter: Section 6(2) Arbitration Act (Cap 10, 2002 Rev Ed), s 6(2) International Arbitration Act (Cap 143A, 2002 Rev Ed),Whether court having to consider if dispute between parties in fact existing before deciding to order stay or obliged to order stay whenever any dispute between parties arising,Arbitration,Stay of court proceedings,Section 6(1) International Arbitration Act (Cap 143A, 2002 Rev Ed),Whether court having jurisdiction to order stay of proceedings under s 6(1) International Arbitration Act on ground that dispute existing between parties that should be referred to arbitration in another jurisdiction

7 September 2005

Woo Bih Li J:

1 Dalian Hualiang Enterprise Group Co Ltd (“DHE”) and Dalian Jinshi Oil-Making Co Ltd (“DJOM”) are the first and second plaintiffs respectively. Louis Dreyfus Asia Pte Ltd (“Louis Dreyfus”) is the defendant.

2 Under Sales Contract No SBS 031103 (“SBS 031103”) dated 1 November 2003, DHE agreed to buy from Louis Dreyfus 55,000mt of soya beans, with ten per cent more or less at Louis Dreyfus’ option and at a premium. The shipment was to be ex-US Gulf, Brazil or Argentina. The vessel Armonikos was eventually designated to carry the cargo. Hence SBS 031103 was referred to as “the Armonikos contract”. I will adopt that description as well for convenience.

3 By agreement dated 8 March 2004, the Armonikos contract was assigned by DHE to DJOM. Louis Dreyfus was also a party to this assignment.

4 Subsequently, DJOM claimed for payment of despatch money and overage premium under the Armonikos contract. By email dated 6 September 2004, one Sally Yang of Louis Dreyfus Beijing confirmed the amount payable as

DES – US$122,269.51

OAP [meaning the overage premium] – US$66,547.46

This email was sent to Christina Wang Xiuling a staff of Beijing Canma Grain Corporation, the agent for DHE and then for DJOM.

5 The present action was filed by both DHE and DJOM to claim the despatch money and overage premium. However Louis Dreyfuss applied for a stay of the action on the ground that pursuant to an arbitration agreement in the Armonikos contract, the dispute between the parties should be referred to arbitration in London under the auspices of FOSFA, ie the Federation of Oils, Seeds and Fats Association Limited.

6 The assistant registrar who heard the stay application said that Mr Michael Lai, who represented both DHE and DJOM, had conceded in the course of submission that there was a subsisting arbitration agreement between DHE and Louis Dreyfus (but not between DJOM and Louis Dreyfus). The assistant registrar then referred to the issues before him as threefold:

(a) whether the arbitration agreement had been incorporated into the contract between DJOM and Louis Dreyfus; and

(b) whether there was a dispute between the parties which was capable of arbitration under s 6(1) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”) which could in turn be split into two issues:

(i) whether there was an admission by Louis Dreyfus of the debt, and

(ii) assuming there was such an admission, whether Louis Dreyfus could claim a set-off from a running account.

I should add that the set-off issue was raised by Louis Dreyfus because it had a claim not against DHE or DJOM but a different company by the name of Guangdong Fuhong Edible Oil Co Ltd (“Fuhong”) and under a different contract SBS 040412B. It was alleged by Louis Dreyfus that the vessel of carriage for that contract was Hanjin Tacoma and that contract was referred to as “the Hanjin Tacoma contract”. I will also adopt that description for convenience.

7 Louis Dreyfus alleged that DHE and DJOM were part of a group of companies known as the “JINSHI GROUP”. It was also alleged that Fuhong was a close trading partner of the JINSHI GROUP and was treated at all material times as part of the JINSHI GROUP in so far as the alleged running account was concerned.

8 The assistant registrar concluded that the arbitration agreement had been incorporated into the contract between DJOM and Louis Dreyfus as well.

9 On the issue as to whether there was an admission by Louis Dreyfus, he split this into two sub-issues, ie firstly, was there an admission and, secondly, did the admission come from Louis Dreyfus? There seemed to be an admission by Sally Yang but Louis Dreyfus was taking the position that Ms Yang was employed by Louis Dreyfus, China, and was not an employee of Louis Dreyfus itself. Therefore, it was alleged that Ms Yang had no authority to bind Louis Dreyfus on liability or quantum.

10 The assistant registrar concluded that there was clearly a dispute on the second sub-issue involving the authority of Sally Yang. On the authority of Coop International v Ebel SA [1998] 3 SLR 670 (“Coop International”), he found that that was not a dispute capable of resolution by the courts.

11 The assistant registrar went on to say that if he had to decide on the issue of set-off, he would have ruled against Louis Dreyfus because Fuhong was a different company. Furthermore, the Hanjin Tacoma contract was entered into after the Armonikos contract had been assigned by DHE to DJOM.

12 DHE and DJOM were dissatisfied and appealed against the stay order of the assistant registrar. Their appeal was heard by me. At the first hearing of the appeal on 27 June 2005, Mr Lai informed me that he was not taking the issue whether the arbitration agreement was incorporated into the Armonikos contract. The arguments therefore centred on whether there was an admission binding on Louis Dreyfus. This involved a consideration of the court’s role under s 6(2) of the IAA. This consideration was also relevant for the set-off issue. On the court’s role under s 6(2) IAA, the question was whether the court had jurisdiction to consider if there was in fact a dispute, sometimes referred to as a genuine dispute, between the parties or whether the court was obliged to refer any dispute to arbitration so long as there was a dispute.

13 As the question about the court’s jurisdiction under s 6(2) IAA would be of importance to other litigants as well, I asked the parties to present further arguments on it. As it turned out, the further arguments for DHE and DJOM canvassed a new point as well, ie that the set-off issue was not even within the scope of the arbitration agreement. In the meantime, the further arguments for Louis Dreyfus did not raise any new point. Accordingly, in the light of the new point raised for DHE and DJOM, I allowed Louis Dreyfus to present arguments solely in response to the new point. After such arguments in response were received, I gave my decision. I allowed the appeal with costs. Louis Dreyfus has filed an appeal to the Court of Appeal. I set out below my reasons.

The admission issue

14 The question of the authority of Sally Yang turned out to be a red herring. I say this because she was not the only one who had admitted the claims for despatch money and overage premium under the Armonikos contract. The sums payable on these claims were disclosed in a statement of account issued by Louis Dreyfus itself. True, that statement of account had a self-serving reference to the JINSHI GROUP but that was relevant only to the set-off issue. In my view, the statement of account demonstrated that Louis Dreyfus was accepting that the sums claimed under the Armonikos contract would be due and payable but for its claim under the Hanjin Tacoma contract.

Whether the set-off issue was within the scope of the arbitration agreement

15 As regards the question whether the set-off issue was within the scope of the arbitration agreement, both sides had assumed that I had the jurisdiction to rule on the question.

16 Sections 6(1) and 6(2) IAA state:

6.—(1) Notwithstanding Article 8 of the Model Law, where any party to any 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 the court to stay the proceedings so far as the proceedings relate to that matter.

(2) 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.

17 As s 6(1) IAA refers to Art 8 of the Model Law, which is the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985, I set out Art 8(1) of the Model Law which is the material provision for present purposes. It states:

(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

18 Accordingly, the reference in s 6(1) IAA to “Notwithstanding Article 8 of the Model Law” applies primarily to the second part of Art 8(1) regarding the stage when an application for a stay may be made. The substance of the first part of Art 8(1) stating that the matter has to be the subject of an arbitration agreement is also found in s 6(1) IAA. The third part of Art 8(1) stating that the court “shall … refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed” is, for present purposes, substantially the same as s 6(2) IAA, although s 6(2) IAA does permit the court to make a stay order on such terms and conditions as the court may think fit. I will refer to this third part as “the third part of Art 8(1)” for convenience.

19 I mention that the third part of Art 8(1) is substantially the same as s 6(2) IAA because there is case law in other jurisdictions on Art 8(1) or on provisions whose substance is, for present purposes, the same as the third part of Art 8(1).

20 Before elaborating on s 6(2) IAA, I should first deal with s 6(1) as s 6(2) IAA only applies if the stay application is made in accordance with s 6(1). In turn s 6(1) applies where the proceedings in court are “in respect of any matter which is the subject of the [arbitration] agreement”. This means that if the court...