Star-Trans Far East Pte Ltd v Norske-Tech Ltd and Others

JudgeKarthigesu JA
Judgment Date21 May 1996
Neutral Citation[1996] SGCA 35
Docket NumberCivil Appeal No 153 of 1994
Date21 May 1996
Published date19 September 2003
Plaintiff CounselMichael Hwang and Vivian Ang (Allen & Gledhill)
Citation[1996] SGCA 35
Defendant CounselMolly Lim and Roland Tong (Wong Tan & Molly Lim)
CourtCourt of Appeal (Singapore)
Subject MatterRight to apply,Civil Procedure,Whether party giving performance guarantee on behalf of one party to main contract entitled to invoke the arbitration clause,Grounds for invoking court's inherent jurisdiction,Arbitration clause contained in main contract only,Stay of proceedings,s 7 Arbitration Act (Cap 10),Arbitration,Stay of court proceedings

Cur Adv Vult

This is an appeal against part of a decision of the High Court granting the first and second respondents` application for a stay of proceedings pending a reference to arbitration and setting aside ex parte orders relating to a bank guarantee issued by Banque Indosuez.

The facts

The material facts are as follows.
The appellants (Star-Trans), a Singapore company, carry on the business of freight forwarders. A written contract (contract 6021) dated 24 February 1993 was entered into between Star-Trans, jointly with the third respondents (Speditor), and the first respondents (Norske-Tech). The purpose of contract 6021 was for Star-Trans and Speditor (described in the contract collectively as the forwarder), to organize ocean carriage of plant and equipment from various parts of the world to the construction site of a proposed pulp and paper mill in Riau, Indonesia. Norske-Tech (described in contract 6021 as the owner) had undertaken the construction of the paper mill.

The second respondents (PT Riau) furnished a performance guarantee (the performance guarantee), contained within a document described as a `supply contract` to secure Norske-Tech`s performance of their obligations under contract 6021.
PT Riau irrevocably guaranteed Norske-Tech`s performance and undertook to pay the forwarder if Norske-Tech should fail to pay them all amounts which were due to be paid by Norske-Tech under contract 6021. The performance guarantee bore the signature of Star-Trans as well as Norske-Tech and PT Riau. However, it was not signed by Speditor even though it was jointly addressed to them.

Two other proceedings were commenced in September 1993, prior to the institution of the present action.
First, Norske-Tech brought S 1864/93 against Star-Trans to obtain urgent delivery of cargo in the possession of Star-Trans under a purported lien over the cargo. Secondly, Star-Trans commenced S 1898/93 against the three respondents to the present action. According to the endorsement of claim, S 1898/93 was a claim for, inter alia, freight, expenses, and charges for services rendered pursuant to contract 6021, and damages for Norske-Tech and PT Riau`s breach of duties under contract 6021, and/or against PT Riau under the performance guarantee.

After the above two actions had been commenced, Star-Trans` solicitors wrote to Norske-Tech`s solicitors on 8 October 1993.
It is best to set out the terms of this fax transmission in full:

We refer to the various proceedings which have been instituted in court over this matter.

As you are aware, in the Contract No 6021 dated 24 February 1993 (the contract) made between our respective clients, there is a provision which requires that all disputes arising out of or in connection with the contract to be referred to arbitration on the terms stated therein.

Hence we are concerned and suggest that both parties should, at this juncture, come to an agreement on the future conduct of this matter.
We propose that the issues relating to demurrage, costs, expenses and the alleged breaches of the contract should be referred to arbitration. As for the present proceedings which have been instituted, these could be stayed or discontinued once all the ancillary matters have been resolved. Further, we would propose that for the purpose of saving of costs, an arbitration in a manner other than under the ICC Rules be agreed between the parties and that this be conducted in Singapore.

We will be obliged if you could take your clients` instructions and revert to us on the aforesaid.

The arbitration clause in contract 6021 reads:

Any disputes arising out of or in connection with this contract shall be finally settled by arbitrators, without recourse to the courts, under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by three arbitrators appointed under such rules. The findings of the arbitrators shall be binding on the parties and enforceable in any court of competent jurisdiction.

This contract shall be governed by and construed in accordance with the laws of England.

The place of arbitration shall be Singapore.

Performance of the contract shall continue during the arbitration proceedings.
No payment due or payable to forwarder by owner shall be withheld on account of pending reference to arbitration.

On 19 October 1993, Norske-Tech`s solicitors wrote to enquire whether Speditor would be similarly inclined to refer the matter to arbitration.
As far as Star-Trans were concerned, the proposed arbitration could proceed without Speditor being made a party to the arbitration proceedings. By another fax dated 27 October 1993, Star-Trans` solicitors informed the solicitors for Norske-Tech that Speditor had indicated that they were `not interested in the dispute` and they had only been made a nominal party by Star-Trans. Norske-Tech`s solicitors responded with another fax dated 1 November 1993 informing Star-Trans` solicitors that Norske-Tech would be holding Speditor jointly liable together with Star-Trans for any loss or damage suffered by reason of Star-Trans` non-performance of their obligations under contract 6021. Norske-Tech intimated that they would make Speditor a party to the arbitration proceedings even if Star-Trans did not intend to do so. Finally, Norske-Tech`s solicitors maintained that their clients` instructions were to refer their claims against Star-Trans and Speditor to arbitration `pursuant to the terms of [contract 6021], namely, under the ICC Rules`.

Norske-Tech`s solicitors wrote to Star-Trans` solicitors on 8 March 1994, notifying them that Professor Peter Wetterstein of Finland had been nominated as an arbitrator.
Star-Trans were not agreeable to the appointment of a foreign arbitrator. There was apparently nothing in the ICC Rules to prevent the appointment of a foreign arbitrator. Star-Trans` solicitors thus responded on 17 March 1994 requesting an explanation for the arbitrator`s `special qualifications that necessitate his appointment over that of a resident of Singapore`. Norske-Tech`s solicitors replied on 21 March 1994. They stated that the reason for their choice of Professor Wetterstein would be apparent once the request for arbitration was forwarded to Star-Trans` solicitors. They also opined that Star-Trans` apparent objection to their choice of arbitrator was on the ground of costs only, and that, in any case, it was not for Star-Trans to dictate who Norske-Tech`s arbitrator should be. No further correspondence ensued. Star-Trans issued the writ in the present action (S 660/94) on 25 April 1994.

The present action (S 660/94)

Star-Trans` writ in S 660/94 was indorsed with the following principal claims and reliefs.
First, Star-Trans sought to claim freight, expenses, charges for services rendered, interest and all other sums payable by Norske-Tech/PT Riau in connection with contract 6021, as well as damages for breaches of Norske-Tech/PT Riau`s duties under the contract, and all sums payable by PT Riau under the performance guarantee, which are not the subject matter of Suit No 1898 of 1993. In addition, Star-Trans sought a declaration that Norske-Tech/PT Riau were `not entitled to invoke and/or encash and/or howsoever call, demand, or make any request for payment on the Banker`s Guarantee No 1530-0243-59 dated 8 March 1993 for US$200,000 issued by Banque Indosuez (the BI Guarantee) naming Norske-Tech as beneficiaries`. Star-Trans later obtained an ex parte injunction restraining Norske-Tech/PT Riau from calling on or dealing with the BI Guarantee.

Norske-Tech/PT Riau applied to stay all further proceedings in the present action on the ground that Star-Trans had agreed to submit the disputes between them to arbitration, and to set aside the ex parte injunction relating to the BI Guarantee.
The High Court granted both these applications. Star-Trans have appealed against only the first order for a stay of proceedings, and the consequential order for them to pay Norske-Tech/PT Riau the costs of the application.

The High Court`s judgment is reported at [1995] 3 SLR 631 .

The appeal

The main issues that arise on appeal have been characterized by Star-Trans` counsel as follows:

(i) whether Norske-Tech/PT Riau have satisfied the requirements for a stay of proceedings under s 7 of the Arbitration Act (Cap 10) (the Act); and

(ii) whether the court ought, in exercising its discretion or under its inherent jurisdiction, to stay the proceedings.

(1) The arguments in relation to PT Riau specifically

(i) PT Riau as an additional party to contract 6021

The learned judge held that under the performance guarantee, PT Riau were implicitly made an additional party to contract 6021.
The judge opined:

[The performance guarantee] is not a guarantee in the usual sense of the expression because the word guarantee is used in a wide sense. Additionally, it imposes liabilities and confers rights on [PT Riau]. It is not a novation because [Norske-Tech] are not discharged from their liability. Under the performance guarantee [PT Riau] acquire [Norske-Tech`s] rights and assume their liabilities while [Norske-Tech`s] rights and liabilities continue their parallel existence. The true effect of the performance guarantee therefore is to implicitly make [PT Riau] an additional party to the contract. Their liabilities and rights were joint and several ... Accordingly [PT Riau] are entitled to call on [Star-Trans] for an arbitration and are obliged to submit to arbitration if asked to do so by [Star-Trans].

The learned judge found that this construction was fortified by the fact that PT Riau had joined forces with Norske-Tech to assert their rights under the contract in S 1898/93.
Star-Trans raised no objection on the ground that PT Riau had no such rights.

Counsel for Star-Trans submitted that the performance guarantee did not implicitly make PT Riau a party to contract 6021.
PT Riau specifically did not wish to be a party to...

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