Heartronics Corporation v EPI Life Pte Ltd and others

• Jurisdiction: Singapore
• Judge: Teo Guan Kee AR
• Judgment Date: 17 October 2017
• Neutral Citation: [2017] SGHCR 17
• Court: High Court (Singapore)
• Docket Number: Suit No 192 of 2017 (Summons No 1372 and 1396 of 2017)
• Published date: 24 October 2017
• Year: 2017
• Hearing Date: 17 May 2017,09 June 2017
• Plaintiff Counsel: Mr Colin Liew Wey-Ren (TSMP Law Corporation)
• Defendant Counsel: Mr Jimmy Yim, SC and Ms Dierdre Grace Morgan (instructed counsel),Mr Jimmy Yim, SC and Ms Dierdre Grace Morgan (Drew and Napier LLC)
• Subject Matter: Arbitration,Mediation-Arbitration Clause
• Citation: [2017] SGHCR 17

Teo Guan Kee AR:

The Plaintiff herein commenced these proceedings (Suit No. 192 of 2017, the “Suit”) against the four Defendants on 1 March 2017.

On 25 March 2017, the first and second Defendants filed Summons 1372 of 2017 (“SUM 1372”), seeking, inter alia, an order that these proceedings be stayed as against the first and second Defendants. On 27 March 2017, the third and fourth Defendants filed Summons 1396 of 2017 (“SUM 1396”), similarly seeking an order that these proceedings be stayed but as against the third and fourth Defendants.

After hearing parties, I have decided that the applications in both SUM 1372 and 1396 (together, the “Summonses”) for a stay of these proceedings are to be dismissed. I set out below the grounds for my decision.

Background

The Plaintiff is a company incorporated in Labuan, Malaysia and is a distributor of medical devices.

The first Defendant is a company, incorporated in Singapore, which, at all material times, carried on business as a wholesaler and distributor of medical devices.

The second Defendant is a company incorporated in Singapore and, since 11 October 2011, has been the sole shareholder of the first Defendant.

The third Defendant was at all material times a director of the first and second Defendants. The fourth Defendant, a practising cardiologist, was also a director of the second Defendant at all material times.

In this Suit, the Plaintiff seeks damages as well as the rescission of a License Agreement dated 7 October 2010 (the “License Agreement”) and a Distribution Agreement (the “Distribution Agreement”) dated 9 November 2010, both of which were entered into between the Plaintiff and the first Defendant.

Briefly, under the Distribution Agreement, the Plaintiff would, for consideration, be appointed as a distributor for a medical device carried by the first Defendant (the “Product”) whereas under the License Agreement the Plaintiff would be licensed to use software and provide services related to the Product in India.

The Plaintiff alleges that it was induced into entering into the Agreements as a result of various false representations made to it by one or more of the Defendants. In particular, it is alleged that one or more of the Defendants had falsely represented to the Plaintiff that: the first or second Defendant would launch a 3G-enabled version of the Product by the end of 2010; the Product had obtained certification (“CE certification”) allowing it to be sold in France; and a data server and call centre (the “Indian Infrastructure”) had been set up in India for the purpose of marketing the Product in India.

Purportedly in reliance upon the above representations, the Plaintiff entered into a number of downstream distribution agreements with third parties with a view to distributing the Product in France (the “French Agreement”) as well as India (the “Indian Agreements”).

The Plaintiff alleges that the representations set out in [10] above were false, in that the Product could not be marketed in France because CE Certification had not in fact been obtained for the Product, nor in India as the Indian Infrastructure had not in fact been established. The Plaintiff alleges that it had relied on these false representations and as a result suffered loss and damage.

The Applications

By way of SUM 1372, the first Defendant sought a stay of these proceedings pursuant to s 6 of the International Arbitration Act (Cap 143A, 2002 Rev Ed, the “IAA”). For ease of reference, in the remainder of these Grounds, I shall refer to this application as the “IAA Stay Application”.

By way of other prayers in SUM 1372 and by way of SUM 1396, and subject to the Suit being stayed as against the first Defendant, each of the second to fourth Defendants sought a stay of the Plaintiff’s claim against it pursuant to the court’s

inherent powers of case management pursuant to Order 92 Rule 4 of the Rules of Court (Cap 322).

For ease of reference, in the remainder of these Grounds, I shall refer to the application described in the preceding paragraph as the “Case Management Stay Application”.

For reasons which will be explained below, the second to fourth Defendants accepted that the Case Management Stay Application could not succeed if the first Defendant was unsuccessful in its IAA Stay Application.

The applicable dispute resolution clauses

The dispute resolution clauses contained in the License Agreement and the Distribution Agreement state as follows:

License Agreement

6.2 The law applicable to this agreement, including issues of the validity of the agreement and/or any of the Clauses set out in this agreement shall be the laws of Singapore. All disputes, controversies or differences arising out of or in connection with this agreement shall be submitted to the Singapore Mediation Centre and the Singapore International Arbitration Centre for resolution by med-arb in accordance with the SMC-SIAC Med-Arb Procedure for the time being in force, which procedure is deemed to be incorporated by reference into this clause. [Emphasis added]

Distribution Agreement

23 Mediation-Arbitration, Choice of law and jurisdiction

The law applicable to this agreement, including issues of the validity of the agreement and/or any of the Clauses set out in this agreement shall be the laws of Singapore. All disputes, controversies or differences arising out of or in connection with this agreement, including any issue regarding the validity of this Agreement and/or any clause in this Agreement, shall be submitted to the Singapore Mediation Centre and the Singapore International Arbitration Centre for resolution by med-arb in accordance with the SMC-SIAC Med-Arb Procedure for the time being in force, which procedure is deemed to be incorporated by reference into this clause. Any award granted / settlement reached as a result of this Med-Arb Procedure shall be fully binding on the parties. For the avoidance of doubt, if there is no settlement reached during the mediation process and the matter has to proceed for arbitration the provisions of the International Arbitration Act (Cap 143A) (or any subsequent changes/amendments/revisions/updates) shall be applicable to the arbitral proceedings. [Emphasis added]

It will be apparent, upon a review of the clauses reproduced above (together the “ADR Clauses”), that those portions of the two clauses requiring the parties to proceed to mediation-arbitration (“med-arb”) in the event of a dispute are in essence identical and the submissions made by the parties in the Summonses proceeded on this basis.

The parties agree that the reference to the “SMC-SIAC Med-Arb Procedure for the time being in force” in the ADR Clauses was a reference to the version of the procedure jointly promulgated by the Singapore Mediation Centre (the “SMC”) and Singapore International Arbitration Centre (the “SIAC”) dated 27 September 2007. For ease of reference, this version of the procedure will be referred to in the remainder of these Grounds of Decision as the “SMC-SIAC Procedure”.

The IAA Stay Application

It is not disputed that the IAA applies in respect of the ADR Clauses.

S 6(1) and s 6(2) of the IAA form the basis of the first Defendant’s application in SUM 1372. The material portions of these provide as follows:

Enforcement of international arbitration agreement

6.—(1) … 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.

(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.

In Tomolugen Holdings Ltd v Silica Investors Ltd [2015] SGCA 57 (“Tomolugen”) at [63], the Court of Appeal held that a court hearing a stay application under s 6 of the IAA should grant a stay in favour of arbitration if the applicant is able to establish a prima face case that: (a) there is a valid arbitration agreement between the parties to the court proceedings; (b) the dispute in the court proceedings (or any part thereof) falls within the scope of the arbitration agreement; and (c) the arbitration agreement is not null and void, inoperative, or incapable of being performed.

For the purpose of the IAA Stay Application, and with reference to conditions (a) and (b) reproduced in the preceding paragraph, the parties in these proceedings agreed that: each of the ADR Clauses contains an arbitration agreement (although, as will be explained below, the parties disagreed as to the precise terms of the arbitration agreement in question); subject to one qualification which I will deal with below, the dispute between the Plaintiff and the first Defendant which is the subject matter of this Suit falls within the scope of the arbitration agreement.

Dealing first with the qualification referred to in [23(b)] above, in its initial set of written submissions for SUM 1372, the Plaintiff submitted that its claims against the first Defendant for the loss of profits which the Plaintiff would have made on the French Agreement and the Indian Agreements fall outside the scope of the arbitration agreements contained in the ADR Clauses.

This is because, the Plaintiff submitted, the ADR Clauses refer only to disputes between the Plaintiff and the first Defendant which arise out of or in connection...