Fasi v Specialty Laboratories Asia Pte Ltd (No 1)

• Jurisdiction: Singapore
• Judgment Date: 13 April 1999
• Date: 13 April 1999
• Docket Number: Suit No 1130 of 1998 (Registrar's
• Court: High Court (Singapore)

Fasi Paul Frank

Plaintiff

and

Specialty Laboratories Asia Pte Ltd

Defendant

[1999] SGHC 89

Tay Yong Kwang JC

Suit No 1130 of 1998 (Registrar's Appeal No 599 of 1998)

High Court

Arbitration–Stay of court proceedings–Grounds–Defendant applying for stay–Whether arbitration precluded in cases of allegations of fraud or dishonesty in professional context–Finality of arbitration award not grounds for refusing stay–Defendant's procedural error leading to matter going into advanced stage of judicial proceedings–Whether sufficient reason for stay to be granted–Section 7 (2)Arbitration Act (Cap 10, 1985 Rev Ed)–Civil Procedure–Costs–Security–Whether fact that plaintiff not resident ipso facto meaning security for defendant's costs to be ordered–All circumstances to be taken into account–Words and Phrases–“Sufficient reason”–Section 7 (2) Arbitration Act (Cap 10, 1985 Rev Ed)

This was an appeal by the defendant from the decision of an assistant registrar refusing a stay of proceedings under the Arbitration Act (Cap 10, 1985 Rev Ed) in favour of arbitration and refusing an application by the defendant for the plaintiff to provide security for costs. The plaintiff, a US citizen, commenced an action for breach of the service agreement against the defendant as Singapore law had been agreed to contractually. The defendant had earlier applied for stay of proceedings under the International Arbitration Act (Cap 143A, 1995 Rev Ed), and this was dismissed in a separate appeal. Meanwhile, summary judgment proceedings were well in progress by the time of this appeal. The defendant was granted leave to defend on condition it furnish security for S$100,000, about 20% of the total claim value. The defendant was a holding company of ten companies out of which only two were operating, and was financially in the red.

Held, dismissing the appeal:

(1) The defendant had filed the application for a stay of proceedings in favour of arbitration under the wrong statute and then compounded it by not having this present appeal heard on an early date. As a consequence, this action had proceeded past the summary judgment stage by the time this appeal came up for hearing. It did not make much sense for the court to then order that everything be stayed and parties return to the starting line in another forum. Accordingly, the plaintiff had therefore discharged the burden of showing “sufficient reason” pursuant to s 7 (2) of the Arbitration Act why the matter should not be referred to arbitration: at [16] and [19].

(2) It was not an inflexible rule that security for costs should always be furnished by a non-resident plaintiff. All the circumstances of the case should be considered. As the circumstances indicated that the plaintiff was suing in Singapore out of procedural necessity, and the defendant's defence was shadowy, the plaintiff need not provide security for costs of this action: at [33].

[Observation: The words “sufficient reason” in s 7 (2) of the Arbitration Act could encompass any relevant circumstances - other than showing that there was no sustainable defence to a claim - that would assist the court in coming to a conclusion on whether a stay ought to be granted on the facts of any particular case: at [18].

It was not an inflexible rule that where fraud or dishonesty was in issue, especially in the case of a professional man, the matter had to necessarily be aired in open court and not be resolved by arbitration. Allegations of fraud or dishonesty were an important factor but it remained as only one of the considerations in the whole spectrum and should not in itself swing the exercise of judicial discretion to the side of no stay of proceedings: at [23].

Finality of awards was one of the attractions of arbitration and should not be used to argue against enforcement of an agreement to refer disputes to arbitration. This was subject to s 28 of the Arbitration Act which permitted appeals to the High Court on questions of law: at [28].]

Adams v Catley (1892) 66 LT 687 (refd)

Hashim bin Majid v Param Cumaraswamy [1993] 2 MLJ 20 (refd)

Kwan Im Tong Chinese Temple v Fong Choon Hung Construction Pte Ltd [1998] 1 SLR (R) 401; [1998] 2 SLR 137 (folld)

Lai Siew Wah Sdn Bhd v Ng Chin [1988] 1 MLJ 393 (refd)

Radford v Hair [1971] Ch 758 (refd)

Turner v Fenton [1982] 1 WLR 52; [1982] 1 All ER 8 (refd)

Arbitration Act (Cap 10, 1985 Rev Ed) s 7 (2) (consd);ss 5, 7, 7 (1), 12, 12 (2), 12 (3), 28, 28 (2), 33, 34

Companies Act (Cap 50, 1994 Rev Ed)

International Arbitration Act (Cap 143A, 1995 Rev Ed)

Samuel Chacko (Manjit Samuel & Pnrs) for the plaintiff/respondent.

Melvin Khoo and Elaine Tay (Harry Elias & Pnrs) for the defendants/appellants.

Tay Yong Kwang JC

1 This appeal concerns SIC 7434/1998 which was the defendants' application for the following orders:

1. 1. That the plaintiff's action herein and all proceedings arising therefrom be stayed pursuant to s 7 of the Arbitration Act (Cap 10), and/or under the inherent jurisdiction of this honourable court and the matter be referred to arbitration in accordance with the arbitration agreement entered into between the plaintiff and the defendants on 15 October 1996.

2. 2. Further or alternatively, that the plaintiff provides security for the defendants' costs of the action herein pursuant to O 23 r 1 of the Rules of Court in the sum of $50,000 to be provided by way of a banker's guarantee from a first class bank in Singapore.

3. 3. That pending the provision by the plaintiff of such security for costs as aforesaid, the plaintiff's action herein be stayed.

4. 4. That, in the event the application for a stay of these proceedings under Prayer 1 hereof be not granted, time be extended for the defendants to file an affidavit in reply to the plaintiff's application for summary judgment by way of SIC entered No 7222/1998 and coming up for hearing on 26 October 1998, and if necessary, that the hearing of SIC 7222/1998 be adjourned or re-fixed for hearing on a suitable date.

5. 5. That the costs of this application, alternatively, under Prayers 1 and 2 hereof, be granted to the defendants on an indemnity basis.

6. 6. Such further or other relief as this honourable court may in its discretion deem fit.

2 The application was heard and dismissed by the learned Assistant Registrar Ms Sia Aik Kor on 28 November 1998. This appeal is in respect of that decision.

The plaintiff's claim

3 The plaintiff, a citizen of the United States of America, was employed by the defendants as their managing director pursuant to an agreement dated 1 October 1996 and signed on 15 October 1996 (the “service agreement”). He was to be employed between 1 April 1996 through to 31 March 1999 and to receive a base salary of US$175,000 per year beginning on 1 November 1996. He would be entitled to participate in the defendants' stock purchase and option scheme and a draft in-principle agreement had been agreed upon at the time of execution of the service agreement. He was also entitled to other benefits including severance pay as provided in cll 2 and 3 of the service agreement.

4 The service agreement was executed by James Bernard Peter, a director of the defendants, whose action was approved and ratified by the defendants' board of directors on 30 October 1996. On 27 June 1997, the board also approved the payment of severance compensation and the provision of health insurance coverage to the plaintiff in accordance with the terms of the service agreement.

5 On 27 October 1997, the defendants at an extraordinary general meeting resolved that the terms of the service agreement be approved except for the payment of severance compensation.

6 The plaintiff claimed that the defendants were therefore in repudiatory breach of the service agreement by evincing an intention not to be bound by cl 3 thereof. Despite repeated written requests for confirmation that they would honour all their obligations under the service agreement, none was forthcoming. The defendants had therefore repudiated the said agreement.

7 The defendants also refused or neglected to enter into the stock purchase and option agreement with the plaintiff. Further, the defendants imposed unilaterally an additional...