Zhong Da Chemical Development Company Ltd v Lanco Industries Ltd

• Jurisdiction: Singapore
• Judgment Date: 07 May 2009
• Date: 07 May 2009
• Docket Number: Originating Summons No 1546 of 2008 (Summons No 266 of 2009)
• Court: High Court (Singapore)

Zhong Da Chemical Development Co Ltd

Plaintiff

and

Lanco Industries Ltd

Defendant

[2009] SGHC 112

Judith Prakash J

Originating Summons No 1546 of 2008 (Summons No 266 of 2009)

High Court

Civil Procedure–Costs–Security–Seller repudiating or breaching agreements to sell to buyer–Buyer successfully commencing arbitration against seller–Seller applying to set aside arbitration award–Buyer applying for security for costs–Whether buyer entitled to security for costs

The defendant buyer (“Lanco”), a company incorporated in India, commenced arbitration proceedings at the Singapore International Arbitration Centre (“SIAC”) against the plaintiff seller (“Zhong Da”), a company incorporated in China, for repudiating or breaching contracts agreed between them. Zhong Da challenged SIAC's jurisdiction to hear the arbitration but lost so that costs for the failed jurisdictional challenge were awarded to the Lanco (“the Interim Award”). Subsequently, Lanco also succeeded in the substantive claim and was awarded damages and costs (“the Final Award”). Lanco, thereafter, applied for the Final Award to be recognised in Shanghai. Zhong Da opposed this application. The Shanghai court dismissed the Zhong Da's opposition and held that the Final Award could be recognised and enforce in China. Pursuant thereto, Lanco successfully seized real property belonging to Zhong Da.

On 5 December 2008, Zhong Da applied to set aside the Final Award in the Singapore Court under s 24 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”) on the basis that Lanco had fraudulently induced the making of the Final Award. Lanco denied the allegation and applied for security for costs.

Held, allowing the buyer's application for security for costs:

(1) Unlike other cases, in an application to set aside an arbitration award under the IAA and where circumstances are evenly balanced, it would ordinarily be just to dismiss the application for security. The plaintiff should not be penalised for being ordinarily resident out of jurisdiction: at [13].

(2) Zhong Da's conduct with regard to the arbitration proceedings indicated that it had a propensity to resist paying costs orders made against it: at [16] to [18].

(3) It appeared that it would not be easy for Lanco to enforce, in China, any costs order that it might receive, in Singapore, in its favour: at [19].

(4) An unless order was not appropriate in the present case as Zhong Da had not failed to comply with any court order yet: at [25].

Hytec Information Systems Ltd v Coventry City Council [1997] 1 WLR 1666 (refd)

Jurong Town Corp v Wishing Star Ltd [2004] 2 SLR (R) 427; [2004] 2 SLR 427 (distd)

Ooi Ching Ling Shirley v Just Gems Inc [2002] 2 SLR (R) 738; [2002] 3 SLR 538 (refd)

Porzelack KG v Porzelack (UK) Ltd [1987] 1 WLR 420 (refd)

Syed Mohamed Abdul Muthaliff v Arjan Bhisham Chotrani [1999] 1 SLR (R) 361; [1999] 1 SLR 750 (folld)

Wishing Star Ltd v Jurong Town Corp [2004] 1 SLR (R) 1; [2004] 1 SLR 1 (refd)

Arbitration Act (Cap 10,2002 Rev Ed)s 28 (3)

International Arbitration Act (Cap 143A, 2002Rev Ed)ss 12 (4),24

Rules of Court (Cap 322, R 5, 2006 Rev Ed)O 23r 1 (1) (a) (consd);O 23r 1

Arbitration Act1996 (c 23)s 38 (UK)

Lek Siang Pheng, Tan Teck Wang and Jeannette Lim (Rodyk & Davidson LLP) for the plaintiff

Ang Yong Tong and Linus Ng (Robert Wang & Woo LLC) for the defendant.

Judith Prakash J

1 The plaintiff herein applied under s 24 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”), to set aside an arbitral award on the ground that the making of the award was induced or affected by fraud. The defendant subsequently took out a summons (Summons No 266 of 2009) asking for, inter alia,orders that the plaintiff pay it amounts due under costs orders made in the arbitration proceedings and also for security for costs in the present court proceedings. I dismissed the first part of the application but ordered the plaintiff to provide security for the defendant's costs herein. The plaintiff has appealed. I therefore give my reasons for the grant of security for costs.

Background

2 The plaintiff and the defendant are companies incorporated in China and India respectively. By way of two agreements dated 15 January 2004 and 4 February 2004 (“the Agreements”), the plaintiff agreed to sell 30,000 metric tons of low ash metallurgical coke (“coke”) to the defendant at US$210 per metric ton. A dispute soon arose between them in relation to the sale and, by 5 March 2004, the defendant took the position that the plaintiff had repudiated or breached the Agreements. Subsequently, the defendant took steps to mitigate its loss by entering into fresh contracts with third parties. In particular, the defendant contracted to purchase 20,990 metric tons of coke from one Arkley Commercial AG (“Arkley”) at US$479 per metric ton.

3 On or about 13 December 2004, the defendant commenced arbitration proceedings against the plaintiff at the Singapore International Arbitration Centre (“SIAC”) to recover from the plaintiff the damages the defendant had to bear as a result of the plaintiff's repudiation of the Agreements. The plaintiff challenged SIAC's jurisdiction to arbitrate the dispute but the arbitral tribunal dismissed the challenge and awarded costs for the failed jurisdictional challenge to the plaintiff (“the Interim Award”). Hearings of the substantive claim before the arbitral tribunal took place on 5 and 6 December 2005 in Singapore and on 14 November 2006 in Shanghai. On 30 January 2007, the arbitral tribunal decided in favour of the defendant and awarded the defendant damages in the sum of US$5,037,000, party costs and costs of the arbitration (“the Final Award”). The plaintiff did not, thereafter, pay the defendant any part of the amounts awarded.

4 On 11 May 2007, the defendant filed an application at the First Intermediate People's Court of Shanghai Municipality (“the Shanghai Court”) for recognition of the Final Award. In response, the plaintiff filed an application against the recognition and enforcement of the Final Award in China. The plaintiff's application was dismissed and the Shanghai Court held that the Final Award could be recognised and enforced in China. Accordingly, the defendant applied to have the Final Award enforced...