Silica Investors Ltd v Tomolugen Holdings Ltd

• Judgment Date: 29 May 2014
• Date: 29 May 2014
• Docket Number: Suit No 560 of 2013 (Registrar's Appeals Nos 334, 336, 337 and 341 of 2013)
• Court: High Court (Singapore)

Silica Investors Ltd

Plaintiff

and

Tomolugen Holdings Ltd and others

Defendant

[2014] SGHC 101

Quentin Loh J

Suit No 560 of 2013 (Registrar's Appeals Nos 334, 336, 337 and 341 of 2013)

High Court

Arbitration—Arbitrability and public policy—Statutory claim with remedies that affect third parties or public at large—Minority oppression claim under s 216 Companies Act (Cap 50, 2006 Rev Ed) —Whether arbitrable—Section 216 Companies Act (Cap 50, 2006 Rev Ed)

Arbitration—Stay of court proceedings—Minority oppression claim under s 216 Companies Act (Cap 50, 2006 Rev Ed) —Whether ‘matter’ within scope of arbitration clause—Section 6 International Arbitration Act (Cap 143 A, 2002 Rev Ed) —Section 216 Companies Act (Cap 50, 2006 Rev Ed)

The plaintiff, Silica Investors Limited, entered into a share sale agreement (‘the Share Sale Agreement’) with the second defendant, Lionsgate Holdings Pte Ltd (formerly known as Tomolugen Pte Ltd), for approximately 4.2% of the shares in the eighth defendant, Auzminerals Resource Group Limited. The Share Sale Agreement contained an arbitration clause.

The first and second defendants were together the majority and controlling shareholders, while the third to seventh defendants were the directors and/or shareholders of the eighth defendant. The plaintiff alleged that it had been oppressed as a minority shareholder of the eighth defendant and commenced a minority oppression claim (which comprised four main allegations, namely the issuance of shares as payment for a fictitious debt, the exclusion from participating in management, the execution of guarantees for an unrelated entity and the improper exploitation of resources) pursuant to s 216 of the Companies Act (Cap 50, 2006 Rev Ed) (‘CA’) against the defendants, seeking reliefs which included a buyout order, an order to regulate the conduct of the eighth defendant and/or an order for the winding up of the eighth defendant.

The first, second, third, fifth and eighth defendants applied to stay proceedings under s 6 of the International Arbitration Act (Cap 143 A, 2002 Rev Ed) (‘IAA’) and/or the inherent jurisdiction of the court. The learned assistant registrar refused the stay application, and the first, second, third, fifth and eighth defendants appealed.

Held, dismissing the appeal:

(1) In order to determine if the proceedings involved one or more matters which might be the subject of the arbitration clause under s 6 of the IAA, the court was entitled to ascertain the essential dispute between the parties. However, it should not be a mere issue to be decided in the course of the proceedings. In the present case, the matter to be determined was whether the affairs of the eighth defendant were being conducted and managed by the defendants in a manner that was oppressive to the plaintiff as a minority shareholder: at [18] , [36] , [37] and [46] .

(2) To determine if a matter fell within the scope of an arbitration clause, the court had to consider whether the factual allegations underlying the claim were within the scope of the arbitration clause, regardless of the legal label assigned to the claim. If a sufficient part of the factual allegations underlying the claim related to the contract, then the entire claim had to be treated as falling within the arbitration clause in the contract. The plaintiff's minority oppression claim fell within the scope of the arbitration clause as the underlying factual allegations were so interrelated that they could not be dealt with separately: at [52] , [56] and [58] .

(3) Some statute-based reliefs would invariably affect third parties or the public at large such that they could only be granted by courts in the exercise of their powers conferred upon them by the state. Section 12 (5) of the IAA did not confer upon arbitral tribunals the power to grant all statute-based reliefs available to the High Court. An arbitral tribunal clearly could not exercise the coercive powers of the courts or make awards in rem or bind third parties who were not parties to the arbitration agreement: at [94] to [96] and [111] .

(4) The remedy ordered under s 216 (2) of the CA is invariably linked, usually inextricably, to the nature and extent of the minority oppression claim: at [116] , [119] and [120] .

(5) A statutory claim would not be non-arbitrable merely because it could be redressed or remedied by a statutory-based relief that was only available to the courts. It might well straddle the line between arbitrability and non-arbitrability depending on the facts of the case, the manner in which the claim was framed, and the remedy or relief sought. The minority oppression claim under s 216 of the CA was one of the statutory claims that straddled the line between arbitrability and non-arbitrability. As such, it would not be desirable to lay down a general rule that all minority oppression claims were non-arbitrable: at [113] , [120] and [141] .

(6) Since there were relevant parties who were not parties to the arbitration, like the other shareholders of the eighth defendant, and the plaintiff had asked for remedies that the arbitral tribunal could not grant, including a buyout order, an order to regulate the conduct of the eighth defendant and/or an order for the winding up of the eighth defendant, it followed that the plaintiff's minority oppression claim was not arbitrable: at [143] .

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Arbitration Act (Cap 10, 2002 Rev Ed) ss 6, 6 (2) , 48 (1) (b) (i)

Bankruptcy Act (Cap 20, 2009 Rev Ed)

Companies Act (Cap 50, 2006 Rev Ed) s 216 (consd) ;ss 157 (1) , 216 (1) , 216 (2)

Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) s 73 B

International Arbitration Act (Cap 143 A, 2002 Rev Ed) ss 6, 12 (5) (consd) ;ss 6 (1) , 6 (2) , 11 (1) , 31 (4)

Arbitration Act 1996 (c 23) (UK) s 9

Arbitration Act 1996 (No 99) (NZ) s 12

Companies (Northern Ireland) Order 1986 (SI 1986/1032 (NI 6) ) Art 454

Companies Act 1985 (c 6) (UK) s 459

Companies Act 2006 (c 46) (UK) s 994

Corporations Act 2001 (Cth) ss 233, 233 (1) (j)

Insolvency (Northern Ireland) Order 1989 (SI 1989/2405 (NI 19) ) Art 102 (g)

International Arbitration Act 1974 (Cth) s 7 (2) (b)

Supreme Court Act 1970 (NSW) s 124 (2)

Supreme Court Rules 1970 (NSW) Pt 72 r 2 (1)

Uniform Civil Procedure Rules 2005 (NSW) Pt 20 Div 3 rr 20.13-20.24

Ong Min-Tse Paul (Allen & Gledhill LLP) for the plaintiff

Palmer Michael Anthony and Chew Kiat Jinn (Quahe Woo & Palmer LLC) for the first, fifth and eighth defendants

Sim Kwan Kiat, Avinash Vinayak Pradhan and Chong Kah Kheng (Rajah & Tann LLP) for the seconddefendant

Renganathan Nandakumar and Simren Kaur (RHTLaw Taylor Wessing LLP) for the third defendant.

Judgment reserved.

Quentin Loh J

Introduction

1 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 143 A, 2002 Rev Ed) (‘the IAA’) where only part of the plaintiff's claim falls within the scope of the arbitration...