1 January 2021
Arbitration analysis: What is the effect of commencing court proceedings when there is a parallel arbitration commenced on the same claim? In such a case, aside from applying for a stay of the court proceedings, can a party apply for the claim to be struck out? Is an applicant entitled to maintain a stay application in favour of arbitration where the applicant is disputing that it is even a party to that arbitration? These were the questions before the Singapore High Court (SGHC), in relation to a domestic arbitration in the Singapore International Arbitration Centre (SIAC), on an appeal from a decision of the Assistant Registrar rejecting an application to strike out court proceedings. The SGHC dismissed the appeal but granted a stay, on case management grounds, pending resolution of the arbitration, despite the fact that the applicant for the stay was contesting the arbitral tribunal’s jurisdiction.
Shaun Lee, counsel, and Low Zhe Ning, associate, in the dispute resolution group at Bird & Bird ATMD LLP explain the implications of the decision of the SGHC in Trinity Construction Development v Sinohydro.
Trinity Construction Development Pte Ltd v Sinohydro Corp Ltd (Singapore Branch) [2020] SGHC 215
What are the practical implications of this case?
Where there are parallel court and arbitration proceedings between the same parties in respect of similar or identical claims, a party which contests the jurisdiction of the courts must take out a stay application and cannot seek to strike out the court proceedings.
Further, the fact that the applicant for the stay of court proceedings is simultaneously contesting the jurisdiction of the tribunal does not necessarily preclude the court from ordering that the court proceedings be stayed pursuant to its case management powers. In this regard, a stay may be granted pursuant to the court's inherent jurisdiction and as long as it is necessary to serve the ends of justice.
This case highlights the pro-arbitration attitude of the Singapore courts and even to the extent of granting a stay of arbitration to an applicant which had consistently disputed the jurisdiction of the arbitral tribunal. This does cohere with the principle of kompetenz-kompetenz and ensures that the court at least allows the tribunal to determine its own jurisdiction first. As such, even if there is a dispute as to the existence of an arbitration agreement, or whether the parties to the court proceedings are bound by an arbitration agreement, the question ought rightly to be placed before the tribunal first.
What was the background?
On 7 March 2019, the defendant received a statutory letter of demand (SLOD) from the plaintiff for a debt which was purportedly due under two invoices which had been issued in relation to a consulting service agreement (‘the agreement’). The defendant wrote to the plaintiff on 15 March 2019 requesting documents referred to in the SLOD, but did not receive a response. The defendant reiterated its request for documents in a subsequent letter to the plaintiff on 26 March 2019 (‘the 26 March letter’). In the 26 March letter, the defendant disputed the SLOD on the basis that, inter alia, it was unclear who the proper parties to the agreement were. On 2 April 2019, the plaintiff wrote to the defendant rejecting the request for documents and refusing to withdraw the SLOD. On 9 May 2019, the plaintiff repeated its demand for payment. On 23 May 2019, the defendant reiterated its dispute as to the plaintiff's entitlement to payment.
There was no further correspondence between the parties until 1 November 2019 when the defendant received a letter from the plaintiff enclosing a notice of arbitration (NOA). The defendant filed a response to the NOA and the parties appointed their respective arbitrators. Throughout this, the defendant consistently maintained its objection to the tribunal's jurisdiction. The defendant's jurisdictional objection was premised on:
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the lack of an arbitration agreement between the parties, and
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that in any event, the arbitral procedure and composition of the tribunal was not in accordance with that agreement
In the face of the defendant's jurisdictional objections and amid concerns of issues of the limitation period for the claim, the plaintiff wrote to the defendant on 13 January 2020 indicating that it was 'compelled to commence proceedings in the Singapore High Court'.
In the same letter, the plaintiff requested the defendant to choose between arbitration or court proceedings. The defendant, while maintaining its jurisdictional objections to the arbitration, refused to make such an election. The plaintiff thus commenced the Singapore court suit against the defendant on 16 March 2020. There was no dispute that the issues raised in the court proceedings overlapped with those in the arbitral proceedings.
The defendant appealed against the assistant registrar's dismissal of its application for the suit to be struck out. The assistant registrar considered that the appropriate course of action was for the defendant to have applied for a stay of proceedings but since the defendant had not done so, the court could not grant the same. On appeal, the defendant argued that:
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the plaintiff's statement of claim should be struck out and proceedings be dismissed, and
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alternatively, that a stay of proceedings should be granted pursuant to the court's inherent jurisdiction
The grounds relied on by the defendant in its striking-out application were:
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that the plaintiff's statement of claim was frivolous or vexatious under the Rules of Court (ROC), Order 18, rule 19(1)(b) and ROC, Order 18, rule 19(1)(d)
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that the suit should be dismissed under ROC, Order 92, rule 4 as it was an abuse of court process, and
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that the suit should be dismissed for multiplicity of proceedings under section 18(2) read with paragraph 9 of the First Schedule of the Supreme Court of Judicature Act (SCJA)
What did the court decide?
The SGHC dismissed the appeal in part—the striking-out application was dismissed, but a stay of court proceedings pending resolution of the arbitration between the parties was granted.
The striking-out application
First, the court noted that the grounds relied on by the defendant were not distinct and shared a degree of overlap, such that a finding in each of the grounds raised would have a further effect on the subsequent grounds.
The test for striking out and dismissal is well established—the court should only invoke the power to strike out where it is plain and obvious that the plaintiff does not have a cause of action, ie that it is impossible, not just improbable, for the claim to succeed. In considering whether a claim is frivolous or vexatious, the court can, in addition to the pleadings, have regard to the history of the matter and the correspondence exchanged between the parties. Meanwhile, an abuse of process refers to instances where the court's machinery is used improperly or not bona fide.
On the facts, the court held that the suit was not frivolous or vexatious since the claim was based on sums which were arguably due and payable from invoices under the agreement. Though the defendant had consistently disputed the plaintiff's claim, it had failed to show that the claims were obviously unsustainable. On the contrary, the court opined that the defendant's general course of action indicated that the plaintiff had, at minimum, a proper cause of action.
That the matter before the court mirrored the arbitration proceedings did not render the court action an abuse of process since parties were entitled to commence proceedings in any forum they deemed fit. The mere fact of bringing the court action where there are parallel arbitration proceedings cannot be said to amount to an abuse of process so as to be liable to striking out, otherwise, the stay provisions under Singapore lex arbitri would be entirely otiose.
The court also reasoned that the plaintiff's commencement of the court proceedings was intended to preserve its rights due to concerns of a potential time bar on its claims. Given the defendant's consistent and persistent objections, it was natural for the plaintiff to look to other methods or fora for dispute resolution. Moreover, though the tribunal may, in dealing with the jurisdictional objections, invariably have to deal with issues relating to the substantive dispute, this does not resolve the substantive dispute itself.
The doctrine of waiver by election does not extend to a choice between different fora to commence proceedings.
Further, since the court was minded to grant a stay, there would not be a multiplicity of proceedings. In any event, the plaintiff had notified the SIAC of its election and intention to resolve the dispute by way of court proceedings. As such, the defendant's argument on section 18(2) read with paragraph 9 of the First Schedule of the SCJA failed.
The stay application
The court observed that although the defendant, which was applying for a stay of proceedings, had taken the position that it was not a party to the arbitration and therefore could not rely on section 6 of the Arbitration Act for that purpose, a stay could nonetheless be granted in respect of proceedings between parties who were not bound by an arbitration agreement. This is so, even if there is the possibility of the non-existence of an arbitration agreement. In this regard, a defendant may seek a stay so long as it is necessary to serve the ends of justice.
On the facts, a stay was granted pursuant to the court's inherent powers of case management and in accordance with the Tomolugen principles for a case management stay (as per Tomolugen Holdings Ltd & Anor v Silica Investors Ltd & other appeals [2015] SGCA 57 (not reported by LexisNexis® UK)).
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first, a stay of proceedings will not prejudice the plaintiff, which had only turned to the courts due to the defendant's jurisdictional objections and the plaintiff's legitimate concerns regarding the limitation period
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second, the plaintiff was willing and consistently recognised its obligation to arbitrate
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third, the identical parties, duplication of factual bases and claim, presented a risk of inconsistent findings and increased corollary costs
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finally, the questions of jurisdiction should rightly be dealt with by the tribunal itself—an avenue which was still available since the arbitration proceedings had not been discontinued but only held in abeyance pursuant to the plaintiff's request to the SIAC
Case details
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Court: Singapore High Court
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Judge: Lee Seiu Kin J
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Date of judgment: 7 October 2020
This article was first published on LexisPSL linked here.
