Maybank Kim Eng Securities Pte Ltd v Lim Keng Yong and another

• Jurisdiction: Singapore
• Judge: Steven Chong J
• Judgment Date: 20 April 2016
• Neutral Citation: [2016] SGHC 68
• Citation: [2016] SGHC 68
• Docket Number: Suit No 979 of 2015 (Registrar’s Appeal No 62 of 2016)
• Published date: 23 April 2016
• Hearing Date: 09 March 2016
• Plaintiff Counsel: Alvin Yeo, SC, Chua Sui Tong and Reka Mohan (WongPartnership LLP)
• Date: 20 April 2016
• Defendant Counsel: Ng Lip Chih and Jennifer Sia (NLC Law Asia LLC)
• Court: High Court (Singapore)
• Subject Matter: Stay of court proceedings,Arbitration

Steven Chong J: Introduction

The appellant commenced the present action against the first and second respondents for outstanding trading losses amounting to just over S$8m.¹ The claim against the first respondent is brought under contracts for difference (“CFDs”) governed by the appellant’s General Terms and Conditions (“the General Terms and Conditions”) and its Terms and Conditions for Trading in CFDs (“the CFD Terms and Conditions”) while the claim against the second respondent, who is the husband and remisier of the first respondent, is under a Trading Representative’s Indemnity (“the Indemnity”) included in the remisier’s agreement (“the Remisier’s Agreement”) between the appellant and the second respondent. Although the claims against both respondents are made under different contracts, they are for the same amount and for essentially the same losses arising from the CFDs.

The claims are, however, subject to different dispute resolution clauses. Any dispute under the CFD Terms and Conditions is subject to “arbitration in Singapore in accordance with the UNCITRAL Arbitration Rules as at present in force”² while any dispute arising under the Indemnity is subject to the “non-exclusive jurisdiction of the Courts of Singapore”.³ Both dispute resolution clauses are standard clauses of the appellant’s contracts; thus the inference is that the appellant must have known and intended that different forums govern the disputes arising under the different contracts.

The commencement of the present action against the first respondent is therefore prima facie in breach of the arbitration clause. As the dispute under the CFD Terms and Conditions is governed by the Arbitration Act (Cap 10, 2002 Rev Ed) (“the AA”), the appellant acknowledged that it has the burden to demonstrate sufficient reason why a stay of proceedings should not be ordered under s 6 of the AA. In the court below, the main argument advanced by the appellant to discharge this burden was that, since the claim against the second respondent is not subject to arbitration, the stay in respect of the claim against the first respondent should be refused to avoid multiplicity of proceedings with the attendant risks of inconsistent findings. It seems to me that any multiplicity of proceedings is the direct result of the appellant’s own corporate policy to have different dispute resolution clauses to govern disputes under different contracts. The effect of this submission, if accepted, is that on every occasion when trading losses are incurred and a remisier is involved (which is not uncommon), leading to claims under different contracts, the court should invariably displace the arbitration clause in favour of court proceedings to avoid multiplicity of proceedings. However, there is another way to avoid the very mischief which the appellant has put into play: the court can stay both proceedings pending the outcome of the arbitration between the appellant and the first respondent, which is contractually provided for under the CFD Terms and Conditions. It therefore came as no surprise to me that the Assistant Registrar (“the AR”) not only ordered the stay against the first respondent but also invoked the court’s case management powers developed by the Court of Appeal in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2016] 1 SLR 373 (“Tomolugen Holdings Ltd”) to stay the proceedings against the second respondent pending the outcome of the arbitration proceedings between the appellant and the first respondent.

When the appeal came before me, the appellant, after some prevarication and in recognition of the difficulties in demonstrating any sufficient reason for refusing a stay under s 6 of the AA, elected to abandon the appeal against the first respondent. At the same time, the appellant’s counsel informed the court that it had no current instructions to commence any arbitration proceedings against the first respondent. This was clearly a tactical decision to aid the appellant’s argument that the claim against the second respondent, which is not subject to arbitration, should not be stayed since there will no longer be any pending arbitration proceedings between the first respondent and the appellant running in parallel with the court proceedings against the second respondent.

The respondents, who had no prior notice of the appellant’s decision to drop the appeal against the first respondent, were understandably taken by surprise. After taking instructions from the respondents following this development, the respondents’ counsel informed the court that the first respondent would initiate arbitration proceedings against the appellant under the CFD Terms and Conditions within 14 days of the hearing even if the appellant did not do so. Hence the issue of multiplicity of proceedings prima facie remains alive.

The respondents accept that there is no legal impediment to the appellant abandoning its appeal against the first respondent and focussing only against the second respondent. That is not to say that there is no ramification arising from this change in position, the impact of which will be examined below. In the final analysis, did this change materially improve the appellant’s appeal against the stay in favour of the second respondent? After reviewing the parties’ submissions, the affidavit evidence before the court and the governing legal principles, I arrived at the conclusion that the appeal as against the second respondent should nonetheless be dismissed. As it was suggested by the appellant that the case management powers developed in Tomolugen Holdings Ltd should not be exercised in this case because, inter alia, it concerns an arbitration under the AA rather than under the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”), this judgment will explain why such powers, if the circumstances warrant their exercise, can equally be invoked in the context of a domestic arbitration under the AA.

Background to the dispute

The appellant, Maybank Kim Eng Securities Ltd, is a securities brokerage incorporated in Singapore with which the first respondent, Wendy Lim Keng Yong, maintains a CFD account (“the CFD account”).⁴ According to the appellant, the CFD account was opened in 2011.⁵ The account permitted her to enter into over-the-counter CFDs with the appellant; these are derivative contracts that allow the account holder to speculate on, and make a profit or loss from, the price movements of an underlying reference security without actually owning that security. As noted above, the CFDs entered into between the appellant and the first respondents were governed by the appellant’s General Terms and Conditions as well as its CFD Terms and Conditions.

The second respondent, William Lye Hoi Fong, was appointed as a remisier by the appellant pursuant to the Remisier Agreement dated 29 January 2015.⁶ The agreement permitted him to trade and deal in financial instruments, including CFDs. It also included the Indemnity, the terms of which will be examined further below. As stated above, he was appointed by the appellant as the trading representative of his wife, the first respondent, in respect of the CFD account.⁷

The claims arise from a series of CFD transactions which the first respondent entered into with the appellant in July 2015 (“the CFD transactions”) with 216,600 shares in Apple Inc and 105,000 shares in Baidu Inc as the underlying securities.⁸ These shares, which are listed on the NASDAQ stock exchange, started falling in value in the second half of August 2015 due to a global stock market selloff. On 24 August 2015, or “Black Monday” as it was infamously termed by commentators, there was a sharp drop in the value of the underlying securities and the appellant proceeded to close out the CFD transactions at the prevailing market prices.⁹ As a consequence of the closing out, the CFD account reflected substantial trading losses which the appellant claims exceeded US$10m.¹⁰

The key dispute arising from these facts is whether the closing out of the CFD transactions on 24 August 2015 was authorised by either or both of the respondents. If so, there is a secondary question as to the quantum of trading losses incurred on the CFD account.

The appellant claims that it acted on the respondents’ express instructions, and that the respondents are liable for the losses incurred on the CFD account. Therefore, taking into account certain alleged rights of set off which the appellant says it has against both respondents¹¹ and a payment of $157,189.88 made to it by the first respondent on 17 September 2015,¹² the appellant claims the balance sum of S$8,079,664.75 from the first respondent under the General Terms and Conditions and the CFD Terms and Conditions.¹³ Significantly, the appellant claims this same amount from the second respondent under the Indemnity. The respondents, however, take the position that the first respondent is only liable for the sum of $157,189.88 which she had already paid the appellant on 17 September 2015, and that neither of them is liable for the losses arising from the closing out of the CFD transactions on 24 August 2015 as this was effected without their consent or authorisation.

As I stated in my introduction, the claims are subject to different dispute resolution agreements although they are essentially for the same losses. It is common ground that the appellant’s claim against the first respondent is prima facie in breach of the arbitration agreement which is part of the multi-tiered dispute mechanism stipulated in cl 32 of the CFD Terms and Conditions,¹⁴ and that this agreement is a domestic arbitration agreement governed by the AA. The parties also agree that the appellant’s claim against the second respondent falls within the non-exclusive jurisdiction agreement in favour of the Singapore courts, found at cl 15 of the Indemnity.¹⁵

Parties’...