The ‘Engedi’

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 25 March 2010
• Neutral Citation: [2010] SGHC 95
• Plaintiff Counsel: Timothy Tan and Gho Sze Kee (AsiaLegal LLC)
• Date: 25 March 2010
• Hearing Date: 25 November 2009,19 November 2009
• Docket Number: Admiralty in Rem No 233 of 2008 (Registrar's Appeal No 296 of 2009)
• Year: 2010
• Citation: [2010] SGHC 95
• Defendant Counsel: Leona Wong (Allen & Gledhill LLP)
• Court: High Court (Singapore)
• Published date: 08 September 2010

Judith Prakash J: Introduction

This was an appeal by Capital Gate Holdings Pte Ltd (“the intervener”) against the assistant registrar’s decision in Summons No 2101 of 2009, granting the application of T.S. Lines Ltd (“the plaintiff”) to stay Admiralty in Rem No 233 of 2008 (“the Action”) in favour of arbitration in London pursuant to s 6 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”). EP Carriers Pte Ltd (“the defendant”) was not a party to the appeal.

Background

On 22 May 2007, the plaintiff as disponent owner entered into a charterparty with the defendant as charterer for the use and hire of the vessel TS BANGKOK. The charterparty provided that disputes arising out of the agreement would be referred to arbitration in London:

CLAUSE 51 – ARBITRATION: BIMCO STANDARD LAW + ARBITRATION CLAUSE 1998

This contract shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this contract shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this clause.

The arbitration shall be conducted in accordance with the London Maritime Arbitration Association (LMAA) terms current at the time when the arbitration proceedings are commenced.

…

A dispute arose between the plaintiff and defendant after a grounding incident on 10 November 2008 that resulted in damage to the TS BANGKOK relating to claims against the plaintiff by the registered owner of TS BANGKOK in respect of which the plaintiff sought an indemnity from the defendant. The plaintiff claimed, in addition, a sum of US$42,753.94 as outstanding charges and expenses under the hire statement. On 2 December 2009, the plaintiff commenced proceedings in rem in respect of those claims against the “EAGLE PRESTIGE” which was a vessel then belonging to the defendant (“the Vessel”). However, in late December 2008, after the issue of the plaintiff’s writ but before it was served, the defendant transferred ownership of the Vessel to the intervener for US$1.00 and “other good and valuable consideration”. The Vessel was renamed the “ENGEDI”. Just before the transfer the vessel was mortgaged to the United Overseas Bank Ltd (“UOB”) and more than US$8m was outstanding under the mortgage. I am given to understand that upon the transfer this mortgage was discharged and subsequently the intervener granted a new mortgage in favour of UOB.

On 17 February 2009, the defendant was placed in provisional liquidation. Notwithstanding the defendant’s insolvency, the plaintiff obtained leave of court on 27 February 2009 to continue with the in rem proceedings and to arrest the Vessel. Its ex parte application for leave was expressly made without prejudice to the plaintiff’s rights to arbitrate. The plaintiff arrested the Vessel on 27 February 2009. The defendant entered appearance on 9 March 2009. Later that same month, on 31 March 2009, the plaintiff filed an application seeking an order that the Vessel be appraised and sold pendente lite (“the Sale Application”).

The intervener obtained leave to intervene on 14 April 2009. On the basis that it was the owner of the Vessel at the time she was arrested, the intervener applied, inter alia, to set aside the arrest (Summons No 1777 of 2009) (“the Setting Aside Application”). While that application succeeded before the assistant registrar, it was overturned on appeal. It is now pending the decision of the Court of Appeal. Meanwhile, on 5 June 2009, the Sale Application was heard and allowed. The Vessel has since been sold for S$2,525,000.00.

Presently, there are also two other ongoing matters related to the action. On 3 March 2009, following the arrest of the Vessel, UOB lodged a caveat against the release of the Vessel and payment out. UOB claims as mortgagee of the Vessel under the new mortgage granted by the intervener. Its claim exceeds the sale proceeds available. It brought an action on 3 September 2009 seeking judgment against the defendant and the Vessel and a declaration that the Vessel was encumbered by the mortgage securing moneys due to it (Admiralty in Rem No 302 of 2009). The defendant did not enter appearance. The plaintiff intervened in those proceedings on 4 November 2009 and is defending UOB’s claim. The plaintiff disputes the assertion that UOB’s claim as mortgagee ranks above its claim in terms of priority. The plaintiff and the registered owners of the TS BANGKOK are engaged in arbitration proceedings relating to the grounding incident in which that vessel sustained damage.

Proceedings before the assistant registrar

On 5 May 2009, the plaintiff went before the assistant registrar in Summons No 2101 of 2009 seeking an order, inter alia, that all further proceedings in the Action were to be stayed under s 6 of the IAA save for the Sale Application and an application that the intervener provide security for costs of the Setting Aside Application.

In response, it was argued that the stay should not be granted because the plaintiff had not sought leave of court before commencing arbitration proceedings against the insolvent defendant even though s 299(2) of the Companies Act (Cap 50, 2006 Rev Ed) (“the Companies Act”) required that leave be sought. It was also argued that the arbitration agreement was incapable of being performed because its performance would affect the intervener’s rights and as such a stay could not be granted under s 6 of the IAA. Further, the intervener argued that s 6 of the IAA referred to the court’s power to stay the proceedings “so far as the proceedings relate to the matter” and those words could not refer to the in rem action which the interveners were defending. In other words, the court was not obliged to grant a mandatory stay of the in rem action even if it was obliged to grant a mandatory stay of the in personam aspects of the claim.

The assistant registrar did not accept that s 299 of the Companies Act required parties to seek leave before commencing arbitration against a company after the commencement of a creditor’s voluntary winding up. He held that that section only applied to actions and proceedings in a court. The assistant registrar also rejected the submission that there were two separate claims, one in rem and the other in personam. He held that the “matter” to be stayed would include the in rem aspect of the claim as that was not divisible from the in personam aspect. On the basis that the plaintiff had not taken a fresh step in the proceedings in the present Action, and on the basis that the arbitration agreement was neither inoperative nor incapable of being performed, the assistant registrar allowed the application and granted the stay of this action.

The intervener’s appeal

On appeal before me against the assistant registrar’s decision to grant the stay, the intervener reiterated its arguments based on s 299 of the Companies Act and the effect s 6 of the IAA had on the in rem and in personam aspects of the plaintiff’s claim. It also submitted that the appeal ought to be allowed because the parties to the arbitration agreement were different from the parties to the Action and the interveners could not be compelled to arbitrate even though the plaintiff had, belatedly, indicated willingness to let the intervener participate in the London arbitration.

The plaintiff’s/respondent’s case

The plaintiff’s case was that the appeal ought to be dismissed because s 6 of the IAA provided for a mandatory stay except where the arbitration agreement was null and void, inoperative or incapable of being performed. Since the assistant registrar had not found any of those exceptions to exist on the facts, the court could not refuse to grant the stay. It submitted that it did not require leave of court under s 299 of the Companies Act, and in any event, the necessary leave of court had already been obtained when the court allowed it to proceed with the Action even after the defendant went into provisional liquidation. Furthermore, as the plaintiff’s claim was against the defendant and not the interveners, the intervener had no locus standi to defend the claim at arbitration. In any case, the parties to the action were not different from the parties to the arbitration as the intervener’s defences were limited to those available to the defendant.

My decision

After hearing the parties’ arguments, I decided that the appeal ought to be allowed in so far as the proceedings had been stayed. The stay order granted below was set aside. I now state my reasons.

Section 6 of the IAA

Section 6 of the IAA provides: 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. (3) Where a court makes an order under subsection (2), the court may, for the purpose of preserving the rights of parties, make such interim or supplementary orders as it may think fit in relation to any property which is the subject of the dispute to which the order under that subsection relates. (4) Where no party to the proceedings has taken any further step in the...