Silica Investors Limited v Tomolugen Holdings Limited and others

• Jurisdiction: Singapore
• Judge: Quentin Loh J
• Judgment Date: 29 May 2014
• Neutral Citation: [2014] SGHC 101
• Court: High Court (Singapore)
• Docket Number: Suit No 560 of 2013 (Registrar’s Appeals Nos 334, 336, 337 and 341 of 2013)
• Published date: 30 October 2015
• Year: 2014
• Hearing Date: 30 October 2013
• Plaintiff Counsel: Ong Min-Tse Paul (Allen & Gledhill LLP)
• Defendant Counsel: Palmer Michael Anthony and Chew Kiat Jinn (Quahe Woo & Palmer LLC),Sim Kwan Kiat, Avinash Vinayak Pradhan and Chong Kah Kheng (Rajah & Tann LLP),Renganathan Nandakumar and Simren Kaur (RHTLaw Taylor Wessing LLP)
• Subject Matter: Arbitration,arbitrability and public policy,stay of court proceedings
• Citation: [2014] SGHC 101

Quentin Loh J: Introduction

These registrar’s appeals raise several issues on the arbitrability of intra-corporate disputes. First, whether minority oppression claims under s 216 of the Companies Act (Cap 50, 2006 Rev Ed) (“the CA”) are arbitrable under Singapore law. Secondly, what principles, if any, should govern a stay application under s 6 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”) where only part of the plaintiff’s claim falls within the scope of the arbitration agreement. Thirdly, whether the Court can exercise its inherent powers of case management to stay proceedings when only some of the parties before it are parties to the arbitration agreement.

The facts The parties

The plaintiff, Silica Investors Limited (“the Plaintiff”), is the registered shareholder of 3,750,000 shares (representing about 4.2% of all the shares) in the 8th defendant, Auzminerals Resource Group Limited (“AMRG”), a public company limited by shares and incorporated under the laws of Singapore.¹ The Plaintiff became a shareholder of AMRG in July 2010 when it purchased its shares from the 2nd defendant, Lionsgate Holdings Pte Ltd (formerly known as Tomolugen Pte Ltd) (“the 2nd Defendant”), pursuant to a Share Sale Agreement dated 23 June 2010 (“the Share Sale Agreement”) and a Supplemental Agreement dated 5 July 2010 (“the Supplemental Agreement”) entered into between the Plaintiff and the 2nd Defendant.²

The 1st defendant, Tomolugen Holdings Limited (“THL”), holds 49,603,397 shares (representing about 55% of all the shares) in AMRG, and is also the sole shareholder of the 2nd Defendant.³ The 2nd Defendant holds 8,135,001 shares (representing about 9% of all the shares) in AMRG.⁴ Together, THL and the 2nd Defendant are the majority and controlling shareholders of AMRG.⁵

The 3rd defendant, Lim Sing Hok Mervyn (“Mervyn Lim”), was a director of the 2nd Defendant and of AMRG, as well as of Solar Silicon Resources Group Pte Ltd (“SSRG”), a wholly-owned subsidiary of AMRG, at different periods of time between 2009 and 2012.⁶ He is a registered shareholder of 500,000 shares (representing about 0.56% of all the shares) in AMRG.⁷ The 4th defendant, Russell Henry Krause (“Russell Krause”), is a director of AMRG and the managing director of SSRG. He holds 1,375,000 shares (representing about 1.5% of all the shares) in AMRG.⁸ The 5th defendant, Young Robert Tancuan (“Robert Young”), is a director of the 2nd Defendant, AMRG, and SSRG.⁹ He holds 250,000 shares (representing about 0.28% of all the shares) in AMRG.¹⁰ He is also a director and shareholder of two other companies with shareholdings in AMRG amounting to approximately 2.4% and 1.1% of the total share capital.¹¹ The 6th defendant, Yong Peng, was previously a director of AMRG and SSRG.¹² He holds 250,000 shares (representing about 0.28% of all the shares) in AMRG.¹³

Finally, the 7th defendant, Roger Thomas May (“Roger May”), is a director of AMRG who was appointed on 29 May 2013.¹⁴ According to the Plaintiff, Roger May was at all material times a “shadow and/or de facto” director of AMRG representing the interests of THL and the 2nd Defendant on the board of directors of AMRG.¹⁵

The Plaintiff’s pleaded case

The Plaintiff’s action in Suit No 560 of 2013 (“S 560/2013”) is a claim under s 216 of the CA. The writ of summons in S 560/2013 was filed on 21 June 2013. The parties do not dispute that the Plaintiff’s claim in S 560/2013 is founded on four main allegations. They are as follows: On 15 September 2010, 53,171,040 shares in AMRG were issued to THL (“the Share Issuance”), purportedly as payment for a debt for the transfer of certain mining licenses and exploration permits in the Far North East of Australia (known as “the Solar Silica Assets”) from the predecessor company of the 2nd Defendant and its subsidiaries to SSRG.¹⁶ The Share Issuance had the effect of diluting the Plaintiff’s shareholding in AMRG by more than 50%.¹⁷ The Plaintiff alleges that the alleged debt was fictitious and never existed.¹⁸ In the course of the due diligence conducted by the Plaintiff for the purposes of its investment in AMRG in connection with the Share Sale Agreement, the 2nd Defendant and Roger May warranted and/or represented to it that the Solar Silica Assets had been transferred to SSRG and that SSRG owned the Solar Silica Assets free of liabilities.¹⁹ In particular, by Sch 1, cl 8.3 of the Share Sale Agreement, it was warranted that AMRG and its related corporations, including SSRG, had settled or discharged all their current liabilities.²⁰ Further, by Sch 1, cl 8.2 of the Share Sale Agreement, it was warranted that the accounts provided to the Plaintiff were “a true and fair view of the state of affairs of AMRG [and its related corporations]”.²¹ I will refer to this part of the claim as “the Share Issuance Issue”. The Plaintiff was wrongfully excluded from participating in the management of AMRG. Under cl 2.5 of the Share Sale Agreement, there was an express or implied understanding between the Plaintiff and the 2nd Defendant and/or a legitimate expectation that the Plaintiff would be involved in the management of AMRG through the appointment of the Plaintiff’s nominee or representative to the board of AMRG.²² I will refer to this part of the claim as “the Management Participation Issue”. Certain guarantees were executed by the board of directors of AMRG, under the control and influence of THL, the 2nd Defendant and/or Roger May, for the purposes of securing the obligations of an unrelated entity, Australian Gold Corporation Pte Ltd.²³ This was allegedly to further the personal and/or commercial interest of THL and the 2nd Defendant at the expense of AMRG’s commercial interests.²⁴ THL, the 2nd Defendant and Roger May exploited AMRG’s resources for the benefit of their own businesses and/or misled the Plaintiff and/or concealed information as regards the affairs of AMRG.²⁵

It is also relevant to note that the Plaintiff is seeking the following reliefs: An order that THL and/or the 2nd Defendant and/or such other parties as the Court may direct, purchase the Plaintiff’s shares in AMRG at a value to be determined by a firm of independent accountants or valuers to be appointed by agreement between the parties, failing which, by the Court, with such directions as may be necessary; Such orders and directions in the interim as the Court thinks fit to regulate the conduct of the affairs of AMRG; Alternatively, an order that AMRG be placed under liquidation and a private liquidator be appointed to conduct the liquidation of AMRG, with such liquidator to be appointed by agreement between the parties, failing which, by the Court; A declaration that, by virtue of the matters pleaded in the Statement of Claim, Mervyn Lim, Russell Krause, Robert Young, Yong Peng and Roger May are liable for breaching their fiduciary duties and/or statutory duties under s 157(1) of the CA; An order for costs of the proceedings as well as the valuation of the Plaintiff’s shares in AMRG or liquidation of AMRG be borne by THL, the 2nd Defendant, Mervyn Lim, Russell Krause, Robert Young, Yong Peng and Roger May; and Such further and/or other relief that the Court deems fit.

The stay applications

On 30 July 2013, the 2nd Defendant filed Summons No 3936 of 2013 (“SUM 3936/2013”) for an order that the entire proceedings in S 560/2013 be stayed in favour of arbitration pursuant to s 6(1) of the IAA and/or under the inherent jurisdiction of the Court. The 2nd Defendant referred to cl 12.3 of the Share Sale Agreement (“the Arbitration Clause”) which, it argued, was an agreement for any dispute arising out of or in connection with the Share Sale Agreement to be resolved by arbitration with the Singapore International Arbitration Centre. The Arbitration Clause reads as follows:

Dispute Resolution Without prejudice to any right of the Parties to apply to any competent court for injunctive relief, any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC”) for the time being in force, which rules are deemed to be incorporated by reference in this clause. The tribunal shall consist of one arbitrator to be appointed by the chairman of the SIAC. The language of the arbitration shall be English.

On 29 July 2013, THL and Robert Young filed Summons No 3921 of 2013 (“SUM 3921/2013”) for an order that the proceedings against them be stayed pursuant to the inherent jurisdiction of the Court. On the same day, Mervyn Lim filed Summons No 3935 of 2013 (“SUM 3935/2013”) seeking the same. On 31 July 2013, AMRG followed suit by filing Summons No 3983 of 2013 (“SUM 3983/2013”).

These applications were heard by an Assistant Registrar of the High Court and on 26 September 2013, the applications were dismissed with costs. It is from the Assistant Registrar’s dismissal of the applications that the appeals before me were brought vide Registrar’s Appeals Nos 334, 336, 341 and 337 of 2013 (“RA 334/2013”, “RA 336/2013”, “RA 341/2013” and “RA 337/2013”) respectively.

The issues

Broadly speaking, the parties agree that there are three issues before me: Whether the Plaintiff’s claim falls within the scope of the Arbitration Clause; If the Plaintiff’s claim falls within the scope of the Arbitration Clause, whether a claim under s 216 of the CA is arbitrable; and If any part of the Plaintiff’s claim is stayed in favour arbitration under s 6 of the IAA, whether this Court should exercise its inherent powers of case management to stay the entire proceedings pending the determination of the arbitration.

Whether the Plaintiff’s claim falls within the scope of the Arbitration Clause The analytical framework

The...