Go Go Delicacy Pte Ltd v Carona Holdings Pte Ltd and Others

• Jurisdiction: Singapore
• Judgment Date: 31 July 2008
• Date: 31 July 2008
• Docket Number: Civil Appeal No 90 of 2007
• Court: Court of Appeal (Singapore)

Carona Holdings Pte Ltd and others

Plaintiff

and

Go Go Delicacy Pte Ltd

Defendant

[2008] SGCA 34

Andrew Phang Boon Leong JA

and

V K Rajah JA

Civil Appeal No 90 of 2007

Court of Appeal

Arbitration–Stay of court proceedings–Defendant applying for stay and refusing to file defence–Steps to be taken by defendant applying for stay of proceedings–Whether application for extension of time would constitute “step in the proceedings” under Arbitration Act (Cap 10, 2002 Rev Ed)–Civil Procedure–Stay of proceedings–Scenario where defendant did not file defence because of its pending application for stay in favour of arbitration–Whether defendant could be compelled to file defence notwithstanding its pending stay application

The first appellant and the respondent entered into an exclusive franchise agreement (“the Franchise Agreement”) containing a clause which provided that in the event of any disputes between both parties, these were to be resolved by arbitration (“the arbitration clause”). Disputes and differences erupted between the parties and on 20 March 2007, the respondent commenced proceedings against the appellants for breach of the Franchise Agreement. The writ of summons was served on 27 March 2007 and the appellants entered appearance on 2 April 2007. On 18 April 2007, the appellants filed a stay application in view of the arbitration clause in the Franchise Agreement. The stay application was scheduled to be heard on 2 May 2007. In the meantime, the appellants declined to file their defence. On 20 April 2007, the respondent's solicitors gave the appellants' solicitors 48 hours' notice to file their defence. No defence was filed by the deadline, whereupon the respondent took out aninter partes application for judgment to be entered in default of defence.

The stay application and the default judgment application were fixed for hearing together. However, curiously, the default judgment application was heard before the stay application. At first instance, the assistant registrar granted the default judgment application and made no order on the stay application. This was upheld on appeal by a judge (“the Judge”). Relying on Australian Timber Products Pte Ltd v Koh Brothers Building & Civil Engineering Contractor (Pte) Ltd [2005] 1 SLR (R) 168 (“Australian Timber”) which stated that a pending stay application did not prevent time from running for the service of the defence, the Judge held that first, the appellants should have either asked for the hearing of the stay application to be brought forward or sought an extension of time to file their defence; and second, such applications would not constitute a “step in the proceedings” for the purposes of s 6 of the Arbitration Act (Cap 10, 2002 Rev Ed). The appellants appealed.

Held, allowing the appeal and setting aside the default judgment:

(1) The filing of a stay application did not automatically bring all timelines in the Rules of Court (Cap 322, R 5, 1997 Rev Ed) to a standstill. In particular, as in Australian Timber, the filing of a stay application did not stop time for service of the defence from running: at [25] and [32].

(2) The decisions of Samsung Corp v Chinese Chamber Realty Pte Ltd [2004] 1 SLR (R) 382 (“Samsung Corp”) and Australian Timber were not conflicting as both cases involved different factual matrices. In Samsung Corp,the issue was whether the defendant could be compelled to file its defence so that the plaintiff could then file an O 14 application. In Australian Timber, the issue was whether an O 19 judgment could be entered where the defendant failed to file its defence because it was awaiting the outcome of the stay application: at [27] to [31].

(3) Where a stay application and a default judgment application were concurrently pending, they should be heard together. The merits of the stay application had to be heard first to minimise duplicity in arguments and save costs. Ordinarily, a defendant should not be asked or compelled to file its defence while its stay application was pending. Thus, where a defendant wished to invoke an arbitration clause to resolve its dispute with the plaintiff, the correct procedure in future was as follows: (a) if the parties could not agree on a stay in favour of arbitration, the defendant should file its stay application within the time limited for filing its defence; (b) the stay application should include a prayer asking for all proceedings in the action (including the filing of the defence) to be stayed until the stay application had been disposed of; (c) the stay application and the default judgment application should be heard together, with the stay application being dealt with first; and (d) where counsel sought to abuse the process or behaved unreasonably, appropriate costs sanctions would be imposed: at [37] to [39].

(4) A “step in the proceedings” under the Arbitration Act referred to whether, by the step taken, the defendant had, first, evinced its intention to submit to the court's jurisdiction rather than seek recourse via arbitration; and, second, advanced the hearing of the matter in court: at [52], [55], [93] and [100].

(5) Applications which would amount to a step in proceedings included, inter alia, an application for leave to defend, an application for discovery and an application for directions: at [52] to [55].

(6) The courts in jurisdictions such as Hong Kong, Malaysia and Canada appeared to take into consideration the circumstances enveloping an act in deciding if it constituted a step in the proceedings. First, where a party performed or carried out a significant act signifying it submitted to the court's jurisdiction rather than to arbitration, that party would be deemed to have taken a step in the proceedings. Second, the act would be regarded as a step in the proceedings if it was a step in furtherance of the action by advancing the hearing of the matter in court rather than serving to smother the action. Third, where a party did an act with the consent of the other party, this would not amount to taking a step in the proceedings. Finally, the courts usually took the position that parties should not blow hot and cold or equivocate. Should a party wish to proceed to arbitration, that party had to be ready and willing to do all things necessary for the proper conduct of the arbitration: at [93].

(7) In the context of an application for an extension of time specifically, such an application would not be regarded as a “step in the proceedings” if it was made bona fide to protect the defendant's position in the event the defendant's stay application was refused. It would not be tantamount to an unequivocal submission to the court's jurisdiction and the court could exercise its discretion to either refuse the extension of time or dismiss the stay application: at [94] to [99].

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