K.V.C. Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd and another suit

• Jurisdiction: Singapore
• Judge: Pang Khang Chau JC
• Judgment Date: 23 February 2017
• Neutral Citation: [2017] SGHC 32
• Plaintiff Counsel: P Jeya Putra and Thomas A. Chuang (AsiaLegal LLC)
• Docket Number: Suit No 539 of 2016 (Registrar’s Appeal No 295 of 2016), Suit No 541 of 2016 (Registrar’s Appeal No 296 of 2016)
• Date: 23 February 2017
• Hearing Date: 19 September 2016
• Subject Matter: Appointing authority,Singapore International Arbitration Centre,Arbitration,Stay of court proceedings,Mandatory stay under International Arbitration Act,Terms for grant of stay
• Year: 2017
• Defendant Counsel: Bazul Ashab and Jason Goh (Oon & Bazul LLP)
• Court: High Court (Singapore)
• Citation: [2017] SGHC 32
• Published date: 02 March 2017

Pang Khang Chau JC: Introduction

This case concerns two registrar’s appeals (“the RAs”) in two separate suits (“the Suits”) that were heard together before me. The Suits each concern an international contract containing a bare arbitration clause, ie, an arbitration clause which specifies neither the place of arbitration nor the means of appointing arbitrators. As a result, the plaintiffs faced difficulties getting an arbitration underway in the absence of cooperation from the defendant. This led them to commence the Suits. The defendant applied to stay proceedings in the Suits in favour of arbitration and the learned assistant registrar granted the stays without imposing any conditions.

Since the relevant provisions of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”) apply only when the place of arbitration is Singapore, a bare arbitration clause which fails to designate the place of arbitration raises questions regarding the extent to which the Singapore courts and the Singapore International Arbitration Centre (“SIAC”), in its capacity as the default appointing authority under the IAA, are able to support and facilitate an arbitration pursuant to such a clause. This in turn raises the question of whether a clause of this nature should be considered “null and void, inoperative or incapable of being performed” for the purposes of s 6(2) of the IAA. The principal issue presented in this case is neatly summarised in the following observation from Nigel Blackaby et al, Redfern and Hunter on International Arbitration (Oxford University Press, 5th Ed, 2009) (“Redfern and Hunter”), at para 4.43:

… A clause that fails to provide either for an effective method of constituting the arbitral tribunal, or for the place of arbitration, may turn out to be inoperable. It is likely to lead to the claimant being unable to enforce the arbitration agreement. If a claimant takes its case to a national court, it may be met by an application for a stay of the proceedings on the grounds of the existence of an arbitration clause. At best there is considerable potential for delay. At worst, there is the possibility that the claimant may find there is no effective remedy at all, since the courts will refuse to entertain an action and the arbitration clause is defective.

[emphasis added]

The parties

The defendant in both of the Suits is Asian Mineral Resources Pte. Ltd. (“Asian Mineral”), a company incorporated in Singapore. The plaintiff in Suit No 539 of 2016 is K.V.C. Rice Intertrade Co., Ltd (“KVC Rice”) while the plaintiff in Suit No 541 of 2016 is Tanasan Rice Co. Ltd (“Tanasan Rice”). Both plaintiffs are companies incorporated in Thailand. Although they are represented by the same counsel, I was informed by the plaintiffs’ counsel that KVC Rice and Tanasan Rice are not related companies.

Background

The facts in both of the Suits are practically identical. The disputes arose out of contracts under which the plaintiffs each agreed to sell 5,000 metric tons of rice to Asian Mineral, to be delivered directly from Thailand to Benin, Africa. The terms of the two contracts are practically identical. The main differences are the price and one word in the arbitration clauses.

The plaintiffs each shipped the rice in five consignments. All ten consignments arrived in Benin on or about 10 January 2015. Asian Mineral paid for the first four consignments under each contract but withheld payment for the fifth consignments. The reason given by Asian Mineral for withholding payment was that it had reached oral agreements separately with KVC Rice and Tanasan Rice for a 15% discount off the total contract price under each contract. For KVC Rice’s contract, this discount would have reduced the outstanding payment from USD 441,000 to USD 73,500. For Tanasan Rice’s contract, this discount would have reduced the outstanding payment from USD 430,884.20 to USD 69,206.65. KVC Rice and Tanasan Rice both denied ever giving such discounts.

Asian Mineral did not tender the alleged discounted sums of USD 73,500 to KVC Rice and USD 69,206.65 to Tanasan Rice. Instead, Asian Mineral claimed not to have received the fifth consignment under either contract because the plaintiffs had, in breach of contract, sold the fifth consignments to third parties without informing Asian Mineral. Both plaintiffs denied having sold their respective fifth consignments to third parties. They maintained that the fifth consignments under their respective contracts were duly delivered to Asian Mineral’s agent in Benin.

The Relevant Arbitration Clauses

KVC Rice’s contract with Asian Mineral contains the following arbitration clause (cl 12):

The Seller and the Buyer agree that all disputes arising out of or in connection with this agreement that cannot be settled by discussion and mutual agreement shall be referred to and finally resolved by arbitration as per Indian Contract Rules.

The arbitration clause in Tanasan Rice’s contract with Asian Mineral, also cl 12, is identical to that in KVC Rice’s contract except that, instead of the word “Indian”, the word “Singapore” is used. These arbitration clauses provide neither for the place of the arbitration nor the law applicable to the arbitration. They also contain no provisions specifying the number of arbitrators or the mechanism for constituting the arbitral tribunal. Further, neither contract contains a governing law clause.

While it may seem odd that a contract between a Thai company and a Singapore company to deliver rice from Thailand to Benin should refer to “Indian Contract Rules”, and neither counsel provided any explanation for this, I note that the two directors who gave evidence on behalf of Asian Mineral in these proceedings are Indian nationals. On a related note, while plaintiffs’ counsel submitted that both contracts were drafted by Asian Mineral, Asian Mineral’s counsel made it a point to state categorically during arguments that this is not admitted by Asian Mineral.

Attempts by plaintiffs to pursue arbitration KVC Rice’s attempts to pursue arbitration

According to the plaintiffs’ counsel, after numerous telephone conversations and exchanges of Whatsapp messages between KVC Rice and Asian Mineral failed to resolve their dispute, KVC Rice engaged the services of the plaintiffs’ counsel, who issued a letter of demand on 10 September 2015 to Asian Mineral. Asian Mineral responded through its counsel on 30 September 2015 disputing KVC Rice’s claim. After further exchanges of correspondence on 4 and 6 November 2015, the plaintiffs’ counsel wrote to Asian Mineral’s counsel on 18 November 2015 to propose commencement of arbitration. The letter made the following points: The arbitration clause in the contract between KVC Rice and Asian Mineral “has no meaning given that ‘Indian Contract Rules’ do not exist”. KVC Rice did not see any point arbitrating in India given the fact that it is based in Thailand and Asian Mineral is based in Singapore. KVC Rice therefore proposed that both sides agree to arbitrate in Singapore, with Singapore law as the law applicable to the arbitration. KVC Rice proposed Mr Jaya Prakash of Pandisea Pte Ltd as the sole arbitrator. The proposed arbitration between KVC Rice and Asian Mineral should be consolidated with the proposed arbitration between Tanasan Rice and Asian Mineral, so as to save time and costs.

On 11 December 2015, Asian Mineral’s counsel replied as follows: 2. Our clients do not agree to your client’s request for clause 12 to be amended or replaced with the clause as set out at paragraph 5 of your 18 November Letter. In this regard and for the avoidance of doubt, our clients do not agree to your request for any arbitration proceedings commenced pursuant to the said clause to be heard on an ad hoc basis before Mr. Jaya Prakash as sole arbitrator in Singapore. 3. Our clients do not agree to your client’s request at paragraph 7 of your 18 November Letter for the consolidation of the arbitral proceedings for this matter and for the matter concerning the dispute between Tanasan Rice Co Ltd since the parties to both proceedings are different. There was no counterproposal from Asian Mineral on how to move forward with the arbitration.

Tanasan Rice’s attempts to pursue arbitration

According to the plaintiffs’ counsel, like KVC Rice, Tanasan Rice made several unsuccessful attempts to resolve its dispute with Asian Mineral through telephone conversations and Whatsapp messages. These were followed by e-mails sent on 4 July 2015 and 7 August 2015 making demands for payment. Tanasan Rice then engaged the plaintiffs’ counsel, who issued a letter of demand on 1 September 2015. Asian Mineral responded through its counsel on 28 September 2015 disputing Tanasan Rice’s claim. After further exchanges of correspondence on 27 October and 6 November 2015, the plaintiffs’ counsel wrote to Asian Mineral’s counsel on 13 November 2015 to propose commencement of arbitration. The letter made the following points: The phrase “Singapore Contract Rules” in the arbitration clause possibly referred to the contract law of Singapore. Tanasan Rice therefore interpreted the arbitration clause in its contract with Asian Mineral as providing for ad hoc arbitration in Singapore with Singapore law to apply. Tanasan Rice proposed Mr Jaya Prakash of Pandisea Pte Ltd as the sole arbitrator.

On 11 December 2015, Asian Mineral’s counsel replied as follows: 2. Our clients do not agree to your clients’ proposal for any arbitration proceedings commenced pursuant to the said clause to be heard on an ad hoc basis before Mr. Jaya Prakash as sole arbitrator.

The plaintiffs’ counsel replied on 16 December 2015 as follows: 2. We note the position taken by your clients in relation to our client’s proposal and note that your clients have also failed to provide any form of counterproposal. 3. Your clients are hereby put on...