Mancon (BVI) Investment Holding Co Ltd v Heng Holdings SEA (Pte) Ltd and Others

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang JC
• Judgment Date: 28 December 1999
• Neutral Citation: [1999] SGHC 324
• Docket Number: Suit No 1348 of 1999
• Date: 28 December 1999
• Published date: 19 September 2003
• Year: 1999
• Plaintiff Counsel: AT Selvam (S Nabham & Partners)
• Citation: [1999] SGHC 324
• Defendant Counsel: Zaheer Merchant (Madhavan Partnership)
• Court: High Court (Singapore)
• Subject Matter: ss 5, 6(2) International Arbitration Act (Cap 143A, 1995 Rev Ed),Arbitration clause contained in main contract,Stay of court proceedings,Arbitration,Whether arbitration clause applicable to dispute arising from supplemental agreement,Whether stay mandatory

: On 14 September 1999, the plaintiffs commenced this action making certain claims against the three defendants arising out of a joint venture agreement (`JVA`) and a supplemental agreement (`SA`). The plaintiffs are a company incorporated in the British Virgin Islands. The first defendant is a company incorporated in Singapore, the second defendant resides in Singapore and the third defendant is a company incorporated in New Zealand. The writ of summons was served in Singapore on solicitors acting for all three defendants.

On 6 October 1999, the defendants entered appearance jointly in this action. The next day, they applied by way of SIC 6277/99 for the following:

1 all/any further proceedings by the plaintiffs in this action and/or this action be forthwith stayed on the ground that parties have agreed to international arbitration of any disputes or differences;

2 the defendants and/or each or any of them be granted an injunction against the plaintiffs from commencing any action and/or pursuing any proceedings and/or action in connection with the plaintiffs` alleged claims herein and/or arising out of or in connection with the joint venture agreement and/or supplemental agreement and/or guarantee elsewhere otherwise than by submission of such claims to international arbitration;

3 such further or other order the honourable court deems fit to make; and

4 the costs of and incidental to this application be forthwith paid by the plaintiffs to the defendants.`

I granted an order in terms of prayer 1, made no order in respect of prayer 2 and awarded costs fixed at $4,500 to the defendants. The plaintiffs are appealing against the order staying these proceedings. [The appeal was struck off on the defendants` motion on 24 January 2000.]

The plaintiffs` claim

Under the JVA dated 20 June 1997, the plaintiffs and the first defendant agreed to cooperate for the purpose of establishing and operating a company in New Zealand to purchase and develop certain properties in New Zealand. The vehicle chosen was the third defendant, then known as Quercus Investments Limited, a wholly owned subsidiary of the first defendant and a party to the JVA by virtue of the definition of parties therein. The second defendant was the managing director of the third defendant.

Under the JVA, the plaintiffs would advance NZ$6,600,000 to the first defendant which would use this amount for the purchase of the properties. The first defendant would then have to satisfy certain conditions precedent within six months of the date of the JVA failing which the JVA would be deemed terminated. In such an event, cl 13 read with cl 2.2.1 would apply and the latter provided that the amount advanced shall become immediately repayable upon demand, together with interest calculated from the date the advance was made until full payment. If the conditions precedent were fulfilled, the JVA would become unconditional.

The said NZ$6,600,000 was paid to the first defendant on 20 June 1997. Pursuant to oral agreements between the plaintiffs and the first defendant in September and in November 1997, the plaintiffs paid another two amounts of NZ$2m and NZ$4,110,000 to the first defendant. The plaintiffs had therefore handed over a total of NZ$12,710,000 to the first defendant before 20 December 1997. However, the first defendant breached the JVA by failing to fulfil the conditions precedent by 20 December 1997.

By the SA dated 30 March 1998 made between the plaintiffs, the first defendant and the second defendant, in consideration of the plaintiffs advancing a further amount of NZ$1.8m to the first defendant, the first and second defendants acknowledged receipt of the said sum of NZ$12,710,000, agreed that this sum included an amount of NZ$2m in excess of the consideration payable under the JVA and further agreed to repay to the plaintiffs, in the absence of completion of the JVA whether on grounds of rescission or breach by the first defendant or any reason whatsoever, the said NZ$12,710,000 upon demand together with interest at a specified rate and for specified periods. The first defendant also agreed to repay NZ$1.8m and NZ$2m together with interest out of the proceeds of sale of the interest in the properties receivable by the third defendant or, in any event, within three months from the date of execution of the SA (ie by 30 June 1998) whichever shall occur sooner. The second defendant further agreed to guarantee performance by the first defendant of the terms and conditions of the JVA and the SA and payment of the amounts advanced.

The plaintiffs paid the said additional amount of NZ$1.8m to the first defendant on 27 March 1998 but, in breach of the JVA and the SA, the first defendant again failed to satisfy the conditions precedent set out in the JVA within a reasonable period of time and/or to take any reasonable steps to complete the JVA. Accordingly, the said amounts of NZ$12,710,000 and NZ$1.8m became due and owing to the plaintiffs by the first and second defendants together with interest as provided for in the JVA or the SA. Despite the plaintiffs` demands for repayment, the first and second defendants failed to do so.

The plaintiffs` claim against the third defendant for the said amounts was on the basis that the third defendant was a party to both the JVA and the SA by virtue of the definition of parties in the JVA which included any member in the first defendant`s group of companies. Alternatively, the plaintiffs claimed against the third defendant on the ground that the third defendant had been unjustly enriched at the plaintiffs` expense and held the properties purchased or leased with the plaintiffs` money as constructive trustees for the plaintiffs. It was also averred that the third defendant was a wholly owned subsidiary of the first defendant and was controlled by the second defendant who also controlled the first defendant.

The plaintiffs therefore claimed against all three defendants the said amount of NZ$12,710,000 and NZ$1.8m, contractual interest and costs on an indemnity basis. The plaintiffs further claimed a declaration that the third defendant held the properties bought or leased as constructive trustees for the plaintiffs, an injunction against the disposal of all such properties and an account of profits made by the third defendant from the sale of the said properties.

The defendants` first affidavit

In the first affidavit affirmed by the second defendant in support of SIC 6277/99, the defendants set out cl 16 of the JVA which is in the following terms:

Clause 16 ARBITRATION

If any dispute or difference shall arise between the parties touching any clause matter or thing herein contained or the operation or construction thereof or any matter or thing in any way connected with this agreement or the rights, duties or liabilities of either party under or in connection with this agreement then and in every such case the dispute or difference shall be referred to a single arbitrator in case the parties agree upon one and otherwise to three (3) arbitrators one to be appointed by each party and the third to be appointed by the parties jointly in either case in accordance one to be appointed by each party and the third to be appointed by the parties jointly in either case in accordance with and subject to the provisions of the Malaysian

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