International Research Corporation Plc v Lufthansa Systems Asia Pacific Pte Ltd

JurisdictionSingapore
Judgment Date18 October 2013
Date18 October 2013
Docket NumberCivil Appeal No 12 of 2013
CourtCourt of Appeal (Singapore)
International Research Corp PLC
Plaintiff
and
Lufthansa Systems Asia Pacific Pte Ltd and another
Defendant

[2013] SGCA 55

Sundaresh Menon CJ

,

V K Rajah JA

and

Quentin Loh J

Civil Appeal No 12 of 2013

Court of Appeal

Arbitration—Agreement—Incorporation—Arbitration clause contained in first agreement which supplemental agreements said to be ‘annexed to and made a part of’—Party to supplemental agreements not party to first agreement—Whether arbitration clause validly incorporated by reference into supplemental agreements—Whether arbitration clause binding on party to supplemental agreements—Whether clear and express reference to arbitration clause required before arbitration clause validly incorporated

Arbitration—Arbitral tribunal—Jurisdiction—Dispute resolution clauses containing preconditions to arbitration—Whether preconditions enforceable—Whether preconditions complied with—Whether substantial compliance sufficient

Arbitration—Arbitral tribunal—Jurisdiction—Whether preliminary ruling on jurisdiction could be set aside—Section 10 International Arbitration Act (Cap 143 A, 2002 Rev Ed) —Article 16 (3) Model Law on International Commercial Arbitration in the First Schedule to International Arbitration Act (Cap 143 A, 2002 Rev Ed)

The first respondent, Lufthansa Systems Asia Pacific Pte Ltd (‘the Respondent’), and the second respondent, Datamat Public Company Ltd (‘Datamat’), entered into an agreement referred to as the ‘Cooperation Agreement for Applications and Services Implementation’ (‘the Cooperation Agreement’) under which the Respondent was to supply, deliver, and commission a new ‘maintenance, repair and overhaul system’. This system was a component of the electronic data protection system that Datamat had agreed to provide Thai Airways under another agreement. The Cooperation Agreement contained a dispute resolution mechanism which prescribed in cl 37.2 that any dispute shall first be resolved by a specified mediation procedure, failing which, in cl 37.3, that the dispute shall be resolved by arbitration. Owing to the financial difficulties of Datamat, the Respondent threatened to cease work unless Datamat could secure another party that would settle outstanding payments due to it as well as undertake to pay all future invoices. The Respondent, Datamat and the appellant, International Research Corporation PLC (‘the Appellant’), entered into Supplemental Agreement No 1 whereby Datamat undertook to transfer to the Appellant moneys it received from Thai Airways, whereupon the Appellant would use those moneys to pay the Respondent for works and services rendered by it under the Cooperation Agreement. Supplemental Agreement No 2 was entered into by the parties subsequently under which it was agreed that sums due to the Respondent from Datamat under the Cooperation Agreement would be settled by deducting those sums directly from the Appellant's bank account and this was effected by way of a payment instruction from the Appellant to the bank. These Supplemental Agreements provided that they were ‘annexed to and made a part of’ the Cooperation Agreement.

Payment disputes arose between the parties. Several meetings were held between the parties between March 2006 and July 2009. On 24 February 2010, the Respondent informed Datamat and the Appellant that it was terminating the Cooperation Agreement and the Supplemental Agreements. On 13 May 2010, the Respondent filed a notice of arbitration with the Singapore International Arbitration Centre pursuant to cl 37.3 of the Cooperation Agreement, naming Datamat and the Appellant as respondents. The Appellant objected to the jurisdiction of any arbitral tribunal to hear the matter on the grounds, firstly, that it was not a party to the arbitration agreement contained in the Cooperation Agreement, and secondly, that even if it was, the Respondent had not fulfilled the preconditions for the commencement of arbitration.

The arbitral tribunal rejected the Appellant's challenge by way of a preliminary ruling on jurisdiction. The Appellant applied to the High Court, pursuant to s 10 of the International Arbitration Act (Cap 143 A, 2002 Rev Ed) (‘the IAA’) read with Art 16 (3) of the Model Law on International Commercial Arbitration (‘the Model Law 1985’) in the First Schedule to the IAA, to set aside the arbitral tribunal's preliminary ruling on jurisdiction. The application was dismissed by the High Court and the Appellant appealed to the Court of Appeal.

Held, allowing the appeal:

(1) The strict rule that clear and express reference to an arbitration clause was required before it could be satisfactorily incorporated into another contract was a rule overextended impermissibly from its original application in the context of bills of lading and charterparties and should not be taken as a rule of general application. The question of whether an arbitration clause was satisfactorily incorporated by reference was a matter of contractual interpretation, and in undertaking this exercise, as laid down in Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd[2008] 3 SLR (R) 1029, the task was one which had to be done having regard to the context and the objective circumstances attending the entry into the contract: at [34] .

(2) The purpose and terms of the Supplemental Agreements was only to constitute the Appellant as a payment conduit, and the Appellant's only obligation was to make payment to the Respondent upon receiving moneys paid by Thai Airways. The rule of construction that parties would ordinarily not intend that different dispute resolution mechanisms would apply to resolve the same issues did not apply because the only issue which could arise between the Appellant and the Respondent was whether or not the Appellant had received the moneys paid by Thai Airways, and so there was no overlap of issues with those between the Respondent and Datamat under the Cooperation Agreement. Finally, the language of cll 37.2 and 37.3 also pointed against their incorporation into the Supplemental Agreements. On a contextual interpretation of the Supplemental Agreements, the parties had not intended that the dispute resolution clauses in the Cooperation Agreement were to be incorporated as part of the Supplemental Agreements. The Appellant was accordingly not bound by the arbitration agreement and the arbitral tribunal thus did not have jurisdiction over the Appellant and its dispute with the Respondent: at [40] , [41] , [46] to [48] and [51] to [53] .

(3) The preconditions to arbitration had not been complied with because the precise persons required by cl 37.2 to meet to try to resolve any dispute between the parties were not so involved. It was also not clear that the payment dispute had in fact been discussed at the meetings that had been held: at [57] and [58] .

(4) Where parties had clearly contracted for a specific set of dispute resolution procedures as preconditions for arbitration, then, absent any question of waiver, those preconditions had to be complied with. There was no basis for contending that the preconditions had been substantially complied with because it could not be said that the preconditions in question in this case required some meetings between some persons discussing some variety of matters: at [62] .

(5) The court was empowered pursuant to s 10 of the IAA read with Art 16 (3) of the Model Law 1985 under the words ‘decide the matter’ to reverse an arbitral tribunal's preliminary ruling on jurisdiction. It did not matter that the form of the relief sought was expressed in terms of a setting aside of that ruling: at [69] and [70] .

[Observation: The High Court was correct in holding that the preconditions for arbitration in cl 37.2 were not uncertain and were enforceable: it set out in mandatory fashion and with specificity the personnel from the Respondent's side who were required to meet with Datamat's designees as part of a series of steps that were to precede the commencement of arbitration; it further specified the purpose of each such meeting, which was to try to resolve any dispute that had arisen between the parties: at [54] .]

Astel-Peiniger Joint Venture v Argos Engineering & Heavy Industries Co Ltd [1994] 3 HKC 328 (folld)

Aughton Ltd v MFKent Services Ltd (1991) 31 Con LR 60 (refd)

Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corporation Ltd [1981] AC 909 (refd)

Concordia Agritrading Pte Ltd v Cornelder Hoogewerff (Singapore) Pte Ltd [1999] 3 SLR (R) 618; [2001] 1 SLR 222 (refd)

De Valk Lincoln Mercury, Inc v Ford Motor Co 811 F 2 d 326 (7th Cir, 1987) (folld)

Econ Piling Pte Ltd v NCC International AB [2007] SGHC 17 (distd)

Federal Bulk Carriers Inc v CItoh & Co Ltd (The Federal Bulker) [1989] 1 Lloyd's Rep 103 (refd)

Fiona Trust & Holding Corp v Privalov [2007] Bus LR 1719; [2008] 1 Lloyd's Rep 254 (distd)

Gay Constructions Pty Ltd v Caledonian Techmore (Building) Ltd [1995] 2 HKLR 35 (folld)

Haba? Sinai Ve Tibbi Gazlar Isthisal Endüstri A? v Sometal SAL [2010] Bus LR 880 (refd)

Halifax Financial Services Ltd v Intuitive Systems Ltd [1999] 1 All ER (Comm) 303 (distd)

Hamilton & Co v Mackie & Sons (1889) 5 TLR 677 (refd)

HSBC Institutional Trust Services (Singapore) Ltd v Toshin Development Singapore Pte Ltd [2012] 4 SLR 738 (refd)

Mancon (BVI) Investment Holding Co Ltd v Heng Holdings SEA (Pte) Ltd [1999] 3 SLR (R) 1146; [2000] 3 SLR 220 (refd)

PTAsuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR (R) 597; [2007] 1 SLR 597 (refd)

Sea Trade Maritime Corp v Hellenic Mutual War Risks Association (Bermuda) Ltd (The Athena) (No 2) [2007] 1 Lloyd's Rep 280 (refd)

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TWThomas & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1 (refd)

Tjong Very Sumito v Antig Investments Pte Ltd [2009] 4 SLR (R) 732; [2009] 4 SLR 732 (ref...

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