Oei Hong Leong v Goldman Sachs International

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin J
• Judgment Date: 01 July 2014
• Neutral Citation: [2014] SGHC 128
• Plaintiff Counsel: Siraj Omar and Joanna Chew (Premier Law LLC)
• Docket Number: Suit No 834 of 2013, (Registrar’s Appeal No 32 of 2014)
• Date: 01 July 2014
• Hearing Date: 16 April 2014
• Subject Matter: Arbitration,Stay of court proceedings
• Year: 2014
• Citation: [2014] SGHC 128
• Defendant Counsel: Andre Maniam SC, Lim Wei Lee and Daniel Chan (WongPartnership LLP)
• Court: High Court (Singapore)
• Published date: 07 July 2014

Lee Seiu Kin J :

This is an appeal against the decision of the assistant registrar (“AR”) allowing the defendant’s application for a stay of all further proceedings in the action pursuant to s 6 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”). The essential question in this case is which of the competing dispute resolution clauses set out in two different contracts, one favouring arbitration and the other favouring the non-exclusive jurisdiction of the English courts, should this court apply. On 16 April 2014, I heard the parties and I agreed with the AR that the arbitration clauses applied. I therefore dismissed the appeal with costs and now state the grounds for my decision.

The facts

The action has been brought by the plaintiff against the defendant in respect of alleged fraudulent representations made by an employee of its sister company, Goldman Sachs (Asia) LLC (“GSA”). On 14 May 2013, the plaintiff met with two GSA employees regarding investment in currency options involving the Brazilian Real (“BRL”) and the Japanese Yen (“JPY”). It was alleged that one of the two GSA employees made false representations to the plaintiff, viz (a) that BRL was a stable currency because it was anchored to the United States Dollar (“USD”) in the same way that the Hong Kong Dollar was pegged to the USD, (b) that BRL/JPY option trades therefore behaved very similarly to USD/JPY option trades, (c) that BRL/JPY option trades could be executed at any time, and (d) that BRL/JPY option trades were sufficiently liquid to enable the trades to be executed and unwound at any time.¹ The representations were allegedly repeated and/or continued by the GSA employee in subsequent emails to the plaintiff on 15 May 2013.²

Shortly after the receipt of those emails, the plaintiff entered into two BRL/JPY option trades with the defendant as the counterparty.³ Unfortunately for the plaintiff, from 20 May 2013 onwards, the BRL/JPY rate fell significantly. On 17 June 2013, the plaintiff gave instructions to unwind the BRL/JPY option trades, and this was done so at a loss.⁴

The plaintiff then commenced this action on 20 September 2013 to claim compensation for the losses that he had sustained as a result of entering into the BRL/JPY option trades. The defendant, however, applied to stay all further proceedings pursuant to s 6 of the IAA on the basis that the plaintiff’s claims are properly the subject of an arbitration agreement.⁵ The plaintiff disagreed. According to the plaintiff, the arbitration clauses that the defendant referred to are inapplicable to the subject-matter of the dispute, and a non-exclusive jurisdiction clause should apply instead.

At the heart of these proceedings therefore are competing jurisdiction and arbitration clauses in two contracts between the plaintiff and the defendant. The non-exclusive jurisdiction clause is contained in an International Swap Dealers Association Inc (“ISDA”) Master Agreement dated 29 May 2001. The ISDA Master Agreement is a standard agreement made between the plaintiff and the defendant to govern the derivative transactions (including currency options) that they have entered into and/or anticipated entering into. Under cl 13(b) of the ISDA Master Agreement, it is stated that:

Jurisdiction . With respect to any suit, action or proceedings relating to this Agreement (“Proceedings”), each party irrevocably –

(i) submits to the jurisdiction of the English courts if this Agreement is expressed to be governed by English law … Part 4(h) of the Schedule to the ISDA Master Agreement provides for the agreement to be governed by English law. It is common ground that cl 13(b) is a non-exclusive jurisdiction clause in favour of the English courts.

The arbitration clauses, on the other hand, are contained in a Goldman Sachs Private Wealth Management Client Agreement Pack (“Account Agreement Pack”). The Account Agreement Pack is made between the plaintiff and four Goldman Sachs entities, namely (a) GSA, (b) the defendant, (c) Goldman Sachs & Co, and (d) Goldman Sachs Bank (Europe) PLC. It was described, in a cover letter from GSA to the plaintiff dated 9 September 2011, as “[including] the applicable agreements for the various Goldman Sachs entities that may provide services to [the plaintiff], [describing] the roles and responsibilities of each entity that provides services to [the plaintiff] and [constituting] legally binding terms of business”. The plaintiff and the defendant accept that the pertinent arbitration clauses are cl 13.3 of Part D and/or cl 12.3 of Part E of the Account Agreement Pack, which state almost identically that:

Any dispute arising out of or connected with the Agreement, between [the plaintiff] and [GSA/the defendant] and/or you and any Third Party Beneficiary … shall be referred to and finally be resolved by arbitration with its seat in England conducted in English by three arbitrators pursuant to the LCIA Rules …

The only difference between the two arbitration clauses is that cl 13.3 of Part D pertains to GSA, and cl 12.3 of Part E pertains to the defendant.

As mentioned, there was a cover letter to the Account Agreement Pack that the plaintiff received. It notified the plaintiff that:

… the [Account Agreement Pack] will supersede all the prior account agreements (including addenda and supplements thereto) in relation to your Account (whether included in the Old Pack or otherwise). For the avoidance of doubt, any prior specific security arrangements (including cross-collateralisation documents or trading arrangements (including ISDA documentation) in connection with your Account, however, shall remain effective. [emphasis added]

On 27 March 2012, the plaintiff signed and returned an acknowledgement receipt containing a similar statement:

… the [Account Agreement Pack] … shall supersede all the prior account agreements (including addenda and supplements thereto) in relation to your Account whether included in the Old Pack (as defined in the Letter) or otherwise, save for any prior specific security arrangements including cross-collateralisation documents or trading arrangements including ISDA documentation in connection with your Account(s) … which will continue to be effective … [emphasis added]

It was about a year after the signing of the acknowledgment receipt that the plaintiff met with the two employees from GSA and the aforesaid events leading to the present dispute unfolded.

The decision below

Faced with two potentially applicable agreements, the AR stated that the correct approach for the courts was to consider the terms of the agreements in their respective contexts to determine if the parties only intended one and not the other to apply to their dispute.⁶ This would involve an ascertainment of which agreement is at the commercial centre of the dispute or where the centre of gravity of the dispute is.⁷

The AR determined that the Account Agreement Pack was at the commercial centre of the dispute based on the following factors: (a) the alleged fraudulent misrepresentations were made in the course of the plaintiff’s private banking relationship with GSA, which is governed by the Account Agreement Pack,⁸ (b) the plaintiff would need to rely on clauses in the Account Agreement Pack to demonstrate that the GSA employees were acting as agents for the defendant, and (c) the defendant would need to rely on clauses in the Account Agreement Pack to defend against the plaintiff’s claims.⁹ Furthermore, the AR found that the parties could not have reasonably intended for fragmentation in the resolution of disputes, as would be the case if the same alleged misrepresentations were being litigated against various Goldman Sachs entities in multiple jurisdictions.¹⁰

In these circumstances, the AR found that parties intended for the arbitration clauses in the Account Agreement Pack to apply. A stay of proceedings in favour of arbitration was accordingly ordered.

The parties’ submissions

The plaintiff was dissatisfied with the AR’s decision and appealed before me. The plaintiff’s primary case is that the ISDA Master Agreement is at the commercial centre of his claims and not the Account Agreement Pack. The plaintiff submitted that the supporting factors are as follows:¹¹ the transactions that lie at the heart of the plaintiff’s claims are the two BRL/JPY option trades, and the BRL/JPY option trades are undoubtedly subject to the ISDA Master Agreement; the ISDA Master Agreement is specifically tailored to reflect the relationship of the parties in respect of derivative transactions, whereas the Account Agreement Pack is an umbrella document relating to a whole range of services that Goldman Sachs entities (not just the defendant) may provide the plaintiff; and the cover letter and acknowledgement receipt clearly reflects the parties’ intention that the earlier ISDA Master Agreement is to co-exist with the later Account Agreement Pack and, that being so, the parties are ad idem that: any dispute relating to the ISDA Master Agreement would be resolved in accordance with the non-exclusive jurisdiction clause in the ISDA Master Agreement; and all other disputes would be resolved in accordance with the applicable arbitration clauses in the Account Agreement Pack.

I note, at this juncture, that the plaintiff’s last point does not assist him in showing that the present dispute relates to the ISDA Master Agreement and that therefore the non-exclusive jurisdiction clause in the ISDA Master Agreement should apply. The plaintiff had not gone as far as to say that the implication of the later Account Agreement Pack expressed as not superseding the earlier ISDA Master Agreement was that the ISDA Master Agreement prevailed over the Account Agreement Pack. In fact, the plaintiff rightly conceded that the parties’ intention was only for the ISDA Master Agreement to continue in force....