Silverlink Resorts Ltd v MS First Capital Insurance Ltd

• Judge: Chua Lee Ming J
• Judgment Date: 16 November 2020
• Neutral Citation: [2020] SGHC 251
• Citation: [2020] SGHC 251
• Hearing Date: 10 September 2020,03 September 2020
• Plaintiff Counsel: Nair Suresh Sukumara and Yeow Guan Wei, Joel (PK Wong & Nair LLC)
• Defendant Counsel: Lok Vi Ming SC, Lee Sien Liang, Joseph, Pak Waltan and Qabir Singh Sandhu (LVM Law Chambers LLC)
• Docket Number: Originating Summons No 496 of 2020 (Summons No 2633 of 2020) (Registrar’s Appeal No 185 of 2020)
• Court: High Court (Singapore)
• Published date: 24 November 2020
• Subject Matter: Arbitration,Mandatory stay under International Arbitration Act,Grounds,Carve outs,Interpretation,Agreement,Stay of court proceedings,Scope

Chua Lee Ming J: Introduction

Businessmen should be familiar enough with arbitration by now to realise that arbitration is an alternative mechanism for dispute resolution. One cannot have recourse to both arbitration and the court for the same dispute. It is possible that parties may intend some types of disputes arising from an agreement to be resolved by arbitration and others by litigation in court. Obviously, such clauses need to be very carefully thought through and drafted. The irony is not lost; such dispute resolution clauses tend to lend themselves to dispute over which dispute resolution mechanism should apply. The present case is one such example.

The plaintiff, Silverlink Resorts Limited, is one of the insured parties under an Industrial All Risks Policy (“the Policy”) issued by the defendant, MS First Capital Insurance Limited. The consequences of the COVID-19 pandemic led to the plaintiff making a claim under the Policy. The defendant disputed the claim and the plaintiff filed the present Originating Summons, seeking, among other things, a declaration that the plaintiff has a valid claim under the Policy.

By Summons No 2633 of 2020 (“SUM 2633”), the defendant applied to stay the proceedings in this Originating Summons in favour of arbitration, pursuant to s 6 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”). The learned Assistant Registrar (“AR”) dismissed the application. I heard and dismissed the defendant’s appeal against the AR’s decision.

Background

The plaintiff is a company incorporated in the British Virgin Islands and is the ultimate holding company of a group of companies known as the “Aman Group” that owns and manages luxury hotels in various parts of the world, including the Amanpuri resort in Pansea Beach, Phuket, Thailand (“the Amanpuri”).

The defendant is a company incorporated in Singapore and is in the business of writing and providing non-life insurance.

As stated earlier, the plaintiff was one of the insured parties under the Policy issued by the defendant. On 6 September 2019, the plaintiff renewed the Policy to cover the period from 1 July 2019 to 30 June 2020 (both dates inclusive). The Policy covered various properties under the Aman Group, including the Amanpuri.

The Policy comprised a Renewal Certificate and a set of terms and conditions.ⁱ Section I of the terms and conditions was entitled “Material Loss or Damage” and it dealt with damage to properties covered by the Policy. Section II of the terms and conditions was entitled “Business Interruption” and it dealt with interruption of or interference with the businesses covered by the Policy. The terms and conditions also included a set of General Conditions which were applicable to all Sections of the Policy unless specifically stated to the contrary (“the General Conditions”).ⁱⁱ

On 2 April 2020, in light of the COVID-19 pandemic, the Governor of the Province of Phuket ordered the closure all hotels in Phuket. The Amanpuri had to be closed as a result of this order. In addition, the Civil Aviation Authority of Thailand banned all international flights to Thailand.

Section II of the Policy contained, among other things, the following provisions:

CLOSURE BY PUBLIC AUTHORITIES (LIMIT: USD10,000,000)

Loss resulting from interruption or interference with the Business directly or indirectly arising from closure denial of access or evacuation of the whole or part of the Premises by order of a competent public or civil authority due to the operation of a cause of peril not Excluded by this Policy shall be deemed to be a loss resulting from Damage to property used by the insured at the Premises.

…

CONTINGENT BUSINESS INTERRUPTION (LIMIT: 10% OF INSURED VALUES FOR RESPECTIVE LOCATIONS)

This Policy is extended to cover the actual loss sustained and/or Extra Expenses incurred by the Insured which the Insured would have accounted for on an Accruals Basis during the Indemnity Period resulting from:

Direct physical loss or physical damage

OR

Closure by Public Authorities due to perils insured under this Policy but not necessitating direct physical loss or physical damage

to the following specified locations: a) … b) Phuket International Airport 222 Mai Khao, Thalang, Phuket, Thailand c) … …

The plaintiff therefore made a claim under the Policy based on the hotel closure order by the Governor of the Province of Phuket and the closure of the Phuket International Airport by the Civil Aviation Authority of Thailand.

However, the defendant rejected the plaintiff’s claim on the ground that “in order for a claim to be admitted under Section II, a claim must have been made and accepted by Insurers under the corresponding Section I of the [Policy] for material damage loss”. It concluded that as “there was no material damage whatsoever to any of the insured properties at the risk premises and/or other interested locations in this instance”, the plaintiff’s claims were hence not admissible.ⁱⁱⁱ

On 29 May, the plaintiff commenced the present proceedings seeking the following: 1. A declaration that under the terms of the [Policy], it is not necessary for the Plaintiff to establish an admissible claim under Section I of the [Policy] for property damage before a claim may be admitted under Section II of the Policy for business interruption; 2. Consequently, a declaration that the Plaintiff has a valid clam under the [Policy] for business interruption suffered in respect of [the Amanpuri].

On 2 July 2020, the defendant filed SUM 2633 seeking to stay the present proceedings in favour of arbitration.

The issue

The defendant’s application was made under s 6 of the IAA which states as follows:

Enforcement of international arbitration agreement

6.—(1) Notwithstanding Article 8 of the Model Law, where any party to an arbitration agreement to which this Act applies institutes any proceedings in any court against any other party to the agreement in respect of any matter which is the subject of the agreement, any party to the agreement may, at any time after appearance and before delivering any pleading or taking any other step in the proceedings, apply to that court to stay the proceedings so far as the proceedings relate to that matter. (2) The court to which an application has been made in accordance with subsection (1) shall make an order upon such terms or conditions as it may think fit, staying the proceedings so far as the proceedings relate to the matter, unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed.

…

It is well established that a court hearing such a stay application should grant a stay in favour of arbitration if the applicant is able to establish a prima facie case that: there is a valid arbitration agreement between the parties to the court proceedings; the dispute in the court proceedings (or any part thereof) falls within the scope of the arbitration agreement; and the arbitration agreement is not null and void, inoperative or incapable or being performed. See Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2016] 1 SLR 373 (“Tomolugen”) at [63].

In the present case, the General Conditions provided for mediation, arbitration as well as the jurisdiction of the courts in Singapore. Clauses 10, 11 and 13 of the General Conditions provided as follows:^iv 10. Mediation (a) In the event of any dispute, controversy or claim arising out of or relating to this Policy or the breach, termination or invalidity thereof (‘the dispute”), arising between the two parties in connection with this Policy, the parties agree to meet in good faith to resolve the dispute before commencing any Arbitration proceedings. (b) If the dispute is not resolved within twenty one (21) days of commencement of the discussions described in (a) above, the parties agree to attempt to settle the dispute by mediation and to comply with the provisions outlined in (c) below. (c) The parties will commence the mediation process by agreeing a mediator. Should they be unable to agree the identity of a mediator within fourteen (14) days, or if the mediator agreed upon is unable or unwilling to act, the parties shall unless mutually agreed, use the best practice within the jurisdiction of this Policy to mediate the dispute. 11. Arbitration

Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, which is not settled pursuant to the Mediation General Condition within sixty (60) days of commencement of the discussions described in the Mediation General Condition (a) above, shall be referred to arbitration and the parties shall unless otherwise mutually agreed, use the best practice within the jurisdiction of this Policy to have the dispute arbitrated before legal action is commenced.

…

13. Jurisdiction

Should any dispute arise between the Insured and the Insurers regarding the interpretation or the application of this Policy the Insurers will, at the request of the Insured, submit to the jurisdiction of any competent Court in Singapore. Such a dispute shall be determined in accordance with the practical applicable to such Court and in accordance with the laws of Singapore.

[emphasis added]

The Renewal Certificate included the following provision:

Choice of Law and Jurisdiction : In the event of any dispute over interpretation of this Policy: Law : Singapore Jurisdiction : Courts of Singapore

[emphasis added]

Clause 11 (the “Arbitration Clause”) was expressed to apply to “any dispute arising out of or in connection with” the Policy which was not settled pursuant to cl 10 (the “Mediation Clause”). Clause 13 (the “Jurisdiction Clause”) was expressed to apply to “any dispute … regarding the...