R1 International Pte Ltd v Lonstroff AG

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 14 April 2014
• Neutral Citation: [2014] SGHC 69
• Court: High Court (Singapore)
• Hearing Date: 06 February 2014,26 February 2014
• Docket Number: Originating Summons No 704 of 2013, Summons No 5545 of 2013
• Plaintiff Counsel: Mohamed Ibrahim (Achievers LLC)
• Defendant Counsel: Navin Joseph Lobo and Cassandra Ow (ATMD Bird & Bird LLP)
• Subject Matter: Contract,Contractual terms,Express terms,Incorporation of terms,Arbitration,Interlocutory order or direction,Court's power,Injunctions,Relationship between the Civil Law Act and s 12A of the International Arbitration Act
• Published date: 14 May 2014

Judith Prakash J: Introduction

The plaintiff and the defendant are both business entities and they dealt with each other on a number of transactions under which the plaintiff sold, and the defendant bought, consignments of rubber.

The plaintiff brought these proceedings to obtain a permanent injunction to restrain the defendant from continuing with a law suit filed in the courts of Switzerland. It was able to get an interim injunction to this effect. Having been notified of the interim order, the defendant applied for it to be discharged. The plaintiff then applied for the injunction to be made permanent. The applications were heard together since one was the obverse of the other.

What makes this anti-suit injunction different from the usual one of its kind is that it seeks to permanently restrain foreign court proceedings in favour of arbitration. This raises distinct jurisdictional considerations which are not typically encountered in situations where an anti-suit injunction is sought in support of foreign court proceedings.

While the question of the court’s jurisdiction is intriguing, the defendant argues that it does not need to be considered at all because the contract between the plaintiff and the defendant did not contain any arbitration or jurisdiction clause and the defendant was therefore perfectly entitled to take action in the courts of Switzerland. This is a threshold issue which must be determined first.

Background facts

R1 International Pte Ltd (“R1 International”), the plaintiff, is a Singapore company in the business of wholesale trading and brokering of rubber. It dealt with Lonstroff AG (“Lonstroff”) through its authorised agent, R1 Europe GmbH (“R1 Europe”).

Lonstroff is a Swiss company in the business of processing natural rubber and plastics.

Between 2012 and early 2013, R1 International supplied natural rubber to Lonstroff via R1 Europe. There were five transactions in total. Details of how the orders were placed, the contracting process and delivery of the rubber were given by Andreas Schenker (“Mr Schenker”), Head of Purchasing in Lonstroff. He said that each transaction was negotiated and concluded in a similar manner. First, there were sales negotiations between Lonstroff and R1 Europe via email. Acceptance of R1 International’s offers would be communicated to R1 Europe by telephone. The latter would then send an email to Lonstroff confirming the sale. Subsequently, R1 International would send out a signed sales contract for Lonstroff’s signature but Lonstroff would never sign it.

The first order

The first order was concluded between 24 and 25 January 2012. On 24 January 2012, R1 Europe sent an email to Mr Schenker, thanking him for a contract to purchase 42.32 metric tonnes of rubber from R1 International and stating several terms of the contract. No mention of any arbitration agreement was made in that email.

On 1 February 2012, R1 Europe sent an email to Lonstroff requesting them to sign a sales contract dated 27 January 2012. This contract had been pre-signed by R1 International and included a term stating:

Subject to the terms, conditions and rules (including the arbitration clauses and rules) of the International Rubber Association Contract for technically specified rubber in force at date of contract.

In clause 12(C) of the Index to the International Rubber Association Contract (“IRAC terms”), it is specified that any dispute arising out of the contract shall be settled at the designated centre of arbitration which, in respect of shipments to Europe would be London unless the parties agreed otherwise. Lonstroff did not sign the sales contract, but it accepted delivery of the order on 25 May 2012 and made payment to R1 International on 16 July 2012.

The second order

The second order was concluded on or around 15 August 2012. An email was sent to Lonstroff by R1 Europe, thanking it for the purchase and stating several terms on which the contract was concluded. There was no mention of arbitration as the dispute resolution mechanism or any arbitration agreement in that email.

The order was delivered to and accepted by Lonstroff on 27 August 2012. Four days later, on 31 August 2012, R1 Europe sent an email on behalf of R1 International to Lonstroff with a sales contract dated 16 August pre-signed by R1. This contract contained the same clause referring to the IRAC terms but, immediately below that, also had the following additional clause (“the SICOM arbitration agreement”):

In the event of any arbitration, it will be conducted in Singapore.

[Emphasis added in bold italics]

Lonstroff did not sign the sales contract.

There were three other orders that were made after the first and second orders. In each case, R1 International sent out a sales contract containing the IRAC clause and the SICOM arbitration clause.

The dispute

The dispute arose from the second order. On 20 September 2012, Lonstroff emailed R1 Europe, complaining about the smell of the rubber supplied and alleging that R1 had breached the contract because the goods emitted a foul smell that made them unsuitable for Lonstroff’s use. Lonstroff threatened legal proceedings when R1 International refused to offset payment against the cost of delivery.

Procedural history and issues

Lonstroff commenced legal proceedings against R1 International in Switzerland on 28 March 2013. On 2 July 2013, R1 International requested the Singapore Commodity Exchange (“SICOM”) to set up an arbitration tribunal to resolve the dispute. SICOM replied on 17 July 2013 and stated that they would only consider the request when it was confirmed that Swiss proceedings had been suspended and that both parties agreed to refer the dispute to it.

R1 International then filed these proceedings on 5 August 2013, to obtain an anti-suit injunction preventing Lonstroff from continuing legal proceedings in the Commercial Court of Canton of Aargovia in breach of the SICOM arbitration agreement. An interim order to this effect was made which Lonstroff then applied to discharge.

The ensuing hearing before me dealt with the applications of both parties since the issues they raised were the same. Three issues were canvassed during the hearing: Whether the contract between the parties provided for disputes to be submitted to arbitration; If so, whether this court can grant a permanent anti-suit injunctions supporting international arbitration either under s 12A(2) read with s 12(1)(i) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”) or under any other power; and In either case, when should the power be exercised.

Did the contract for the second order contain an arbitration clause?

Mr Mohamed, counsel for R1 International, initially advanced his case on the proposition that the SICOM arbitration agreement was part of the contract for the second order on the basis of trade custom. His alternative case was that at least the IRAC term providing for arbitration in London was part of the contract having been incorporated in it by a previous course of dealing.

Incorporation by trade custom

Turning to the plaintiff’s grounds, Mr Mohamed first submitted that the SICOM arbitration agreement was incorporated by trade custom. He relied on the evidence of Oh Kian Chew (“Mr Oh”), the plaintiff’s Head of Global Trading, and that of the president of the board of directors of R1 Europe, Mr Lorenzo Pietro Paolo Dufour (“Mr Dufour”). The effect of their evidence is that the rubber trade is a very mature trade and it is a trade custom for the majority of international rubber traders to conclude contracts based on IRAC terms. Lonstroff’s immediate past supplier, Wurfbain BV, had also used IRAC terms in its dealings with Lonstroff and stipulated for Singapore arbitration. This latter evidence came from Mr Dufour who exhibited a copy of Wurfain BV’s standard form contract to his affidavit.

Citing Louis Dreyfus Commodities Asia Pte Ltd v Govind Rubber Limited (Arbitration Petition No 174 of 2012), Mr Mohamed then requested the court to take judicial notice of this fact and find the SICOM arbitration agreement incorporated via trade custom. He cited Zheng Yu Shan v Lian Beng Construction (1988) Pte Ltd [2009] 2 SLR(R) 587 (“Zheng Yu Shan”) at 599 in further support.

Mr Lobo, counsel for Lonstroff, objected and contended that there was insufficient evidence before the court that all contracts for the sale and purchase of rubber incorporated IRAC terms. Moreover, all that had been alleged was that Lonstroff had had a previous supplier who dealt on IRAC terms. This was not supported by evidence.

In my view, on the facts of this case, Zheng Yu Shan is not applicable. The court can only take judicial notice of facts which are clearly established such that they are beyond reasonable dispute or of specific facts which are capable of being immediately and accurately shown to exist by authoritative sources. I cannot take judicial notice of any practice in the rubber trade which is not something I or any ordinary layman who was not involved in the rubber trade would have ordinarily been aware.

Accordingly, the trade practice has to be proved. In this, R1 International has failed. The only evidence came from Mr Oh and Mr Dufour, the latter being R1 International’s agent and therefore not an independent party. The standard form contract of Wurfbain BV was of little probative value as it was not shown that Lonstroff bought from Wurfbain BV on these terms. Mr Schenker’s evidence was that Lonstroff had never been shown the IRAC terms nor had these been mentioned in the course of negotiations. In any case, Lonstroff is not an international rubber trader but an end user of the product so it is believable that it may not be aware of the practice of international rubber traders even if one exists.

Counsel has neither adduced evidence on the prevalence of IRAC terms in the...