Hua Xin Innovation Incubator Pte Ltd v IPCO International Ltd

• Judge: Keith Han AR
• Judgment Date: 14 November 2012
• Neutral Citation: [2012] SGHCR 18
• Citation: [2012] SGHCR 18
• Court: High Court (Singapore)
• Published date: 13 December 2012
• Docket Number: Suit No 729 of 2012 (Summons 4865 of 2012)
• Plaintiff Counsel: Low Chai Chong, Loh Kia Meng, Diyanah Baharudin and Patrick Wong (Rodyk & Davidson LLP)
• Defendant Counsel: Imran Hamid Khwaja, Moiz Haider Sithawalla, Derek Low and Michelle Ong (Tan Rajah and Cheah)
• Subject Matter: Arbitration,stay of court proceedings,court's discretion under Arbitration Act,Civil Procedure,Consolidation
• Hearing Date: 07 November 2012

Keith Han AR:

This was an application by IPCO International Limited (“the defendant”) to stay the proceedings commenced by Hua Xin Innovation Incubator Pte Ltd (“the plaintiff”) in Suit No 729 of 2012 in favour of arbitration.

The facts

The plaintiff is a limited exempt private company involved in incubator marketing and consultant services, as well as investment and business consultancy¹. The defendant is a public company limited by shares and listed on the Singapore Stock Exchange².

On 12 March 2012, the plaintiff and the defendant (collectively referred to as “the parties”) entered into an agreement to record their principles of agreement and certain commitments (“the Agreement”), which would form the basis for the negotiation of the Joint Development Agreement in relation to the Falling Water Land project (“the project”).³ The project relates to the development of certain parcels of land in Washington, United States of America. It was envisaged under the Agreement that the parties would subsequently enter into the Joint Development Agreement with certain other relevant parties for the purposes of implementing the project.⁴

The advance amount

Under Clause 3.1 of the Agreement, the plaintiff made an advance payment of S$1,350,000.00 (“the advance amount”) to the defendant in exchange for the defendant granting the plaintiff the right to participate in the joint development of the project. Clause 3.2 of the Agreement further provided that if the Agreement were to lapse or terminate, the advance amount would be repaid by the defendant to the plaintiff immediately without interests. Specifically, Clause 6.1 stipulated that if the Joint Development Agreement was not executed within 2 months from the date of the Agreement, the Agreement would lapse and cease to have further effect. As a result of that, the defendant would come under an obligation to return the advance amount to the plaintiff within five (5) working days (see Clause 6.2 of the Agreement).

The arbitration agreement

Clause 7, the dispute resolution clause, read as follows:

Dispute resolution

Any dispute arising out of or in connection with this Agreement including any question regarding its existence, validity or termination shall be referred to and finally resolved by arbitration in Singapore according to the Arbitration rules of the Singapore International Arbitration Centre for the time being in force which rules are deemed to be incorporated by reference into this Clause. The Tribunal shall consist of one (1) arbitrator. All arbitration proceedings shall be in the English language. The decision of the arbitrator shall be final and binding on all the Parties.

As it turned out, on or about 12 May 2012, the Agreement lapsed and ceased to have further effect as the Joint Development Agreement was not executed. On 31 August 2012, the plaintiff filed Suit 729 of 2012 (“the proceedings”) against the defendant to claim the advance amount. The defendant has not filed any defence or taken any step in the proceedings, save that it has filed the present application for a stay in favour of arbitration.

Suit 630 of 2012/P (“Suit 630”) and the global settlement agreement

Earlier, on 29 July 2012, several plaintiffs commenced proceedings against a company, Sunmax Global Capital Fund 1 Pte Ltd (“Sunmax”) and one Li Hua in Suit 630. The plaintiff and the defendant were not parties to Suit 630. However, Ms Quah Su-Ling (“Ms Quah”), a director and CEO of the defendant who filed the affidavits in support of the present stay application, is one of the plaintiffs in Suit 630. At the same time, the 2nd defendant in Suit 630, Li Hua, is the deponent of the only affidavit made on behalf of the plaintiff in the present stay application. It is the defendant’s case that Li Hua is a shadow or de facto director of the plaintiff, as he is the husband of one of the plaintiff’s director, with the other director being his relative.

Central to the dispute in Suit 630 is a purported global settlement agreement (“the global settlement agreement”) reached by the parties at a meeting held on 24 July 2012.⁵ Under the global settlement agreement, the plaintiffs in Suit 630 were to repay various debts owed to Sunmax. In exchange, Sunmax would return certain shares which it held as security for the debts.

What is material for present purposes is that the defendant claims that the advance amount was included as part of the global settlement agreement.⁶ The plaintiff, however, disputes this.⁷

The parties’ submissions The defendant’s arguments

In support of its application for a stay of the proceedings in favour of arbitration, the defendant relied on the following grounds⁸: (a) The dispute between the parties ought to be determined by way of arbitration pursuant to the arbitration agreement found in Clause 7 of the Agreement; (b) The International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”) is applicable and thus, it is mandatory to stay the present proceedings; (c) Alternatively, if the IAA does not apply, there are sufficient grounds warranting the court’s exercise of discretion to stay the present action under the Arbitration Act (Cap 10, 2002 Rev Ed) (“the AA”).

The plaintiff’s arguments

On the other hand, the plaintiff argued that the stay application should be dismissed for the following reasons. First, there was no dispute referable to arbitration as the defendant had admitted unequivocally that it owes the plaintiff the advance amount. The only dispute relied upon by the defendant vis-a-vis the advance amount relates to the global settlement agreement, which according to the plaintiff, is separate and unrelated to the Agreement. Accordingly, there is no dispute within the scope of the arbitration agreement between the parties.⁹

Second, the plaintiff submitted that a stay of the present proceedings in favour of arbitration would result in a multiplicity of proceedings as the existence of the global settlement agreement is the subject matter of Suit 630. Furthermore, the court has discretion to refuse to grant a stay of proceedings under s 6(2) of the AA, which the plaintiff argued applied instead of the IAA.

Issues before the court

In light of the foregoing, the following issues arose for my determination: Whether the IAA or the AA governs; Whether a valid dispute existed between the parties; If the answer to (b) is in the affirmative, whether the present proceedings should be stayed in favour of arbitration;

Whether the IAA or the AA governs The choice of the SIAC Rules in the arbitration agreement

In Navigator Investment Services Ltd v Acclaim Insurance Brokers Pte Ltd [2010] 1 SLR 25 (“Navigator”), the arbitrator clause provided that any dispute was to be resolved “in accordance with the Arbitration Rules of the [SIAC] for the time being in force”. It was undisputed that this was a reference to the SIAC Rules 2007. Rule 32 of the SIAC Rules 2007 provided that:

Where the seat of arbitration is Singapore, the law of the arbitration under these Rules [ie, the SIAC Rules 2007] shall be the International Arbitration Act (Chapter 143A, 2002 Ed, Statutes of the Republic of Singapore) [ie, the IAA] or its modification or re-enactment thereof.

The Court of Appeal in Navigator was thus faced with the issue of whether the reference to, as well as the incorporation of, the SIAC Rules 2007 was sufficient to bring an arbitration commenced pursuant to the Arbitration Clause within the purview of the IAA (see [34] of Navigator). Drawing support from the cases of NCC International AB v Alliance Concrete Pte Ltd [2008] 2 SLR(R) 565 and Smebawang Engineers and Constructors Pte Ltd v Covec (Singapore) Pte Ltd [2008] SGHC 229, and in light of the fact that Rule 32 of the SIAC Rules 2007 provided for the lex arbitri to be the IAA, the court found at [35] that:

In our view, if the parties have agreed that the lex arbitri is the IAA, it is difficult to see how the parties can be said not to have agreed that the IAA was to apply within the meaning of s 5(1) of the IAA.

In the present case, however, the reference to the “to the Arbitration rules of the Singapore International Arbitration Centre for the time being in force” is to the SIAC Rules 2010. Under the SIAC Rules 2010, the previous Rule 32 from the SIAC Rules 2007 has been deleted and under the new Rule 18, it is no longer provided that the IAA will automatically apply to the conduct of the arbitration proceedings where the seat of arbitration is Singapore (See Richard Tan, Daniel Lim & Mervyn Cheong, “The New Arbitration Rules of the Singapore International Arbitration Centre” (Sep 2010) 59 IPBA Journal 16). Absent the express choice of the parties, the governing legislation will depend on whether the arbitration is international or domestic. In other words, the default position is reinstated under the SIAC Rules 2010: the IAA will apply only if one of the requirements of s 5(2) is satisfied.

S 5(2)(b)(ii) of the IAA

S 5(1) and (2) of the IAA reads as follows:

5.

—(1) This Part and the Model Law shall not apply to an arbitration which is not an international arbitration unless the parties agree in writing that this Part or the Model Law shall apply to that arbitration.

(2) Notwithstanding Article 1(3) of the Model Law, an arbitration is international if —

(a) at least one of the parties to an arbitration agreement, at the time of the conclusion of the agreement, has its place of business in any State other than Singapore; or

(b) one of the following places is situated outside the State in which the parties have their places of business:

(i) the place of arbitration if determined in, or pursuant to, the arbitration agreement;

(ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or

(c) the...