COURT'S DISCRETION TO GRANT A STAY UNDER S 6 ARBITRATION ACT 2001
This week’s blog covers Crystal-Moveon Technologies Pte Ltd v Moveon Technologies Pte Ltd [2024] SGHC 72, a High Court (the “Court”) case on the court’s discretion to order a stay of an action in favour of arbitration under s 6 of the Arbitration Act 2001.
Previous blog. Followers of our blog may find the name familiar. This is because we had previously blogged about the first instance decision here.
This decision concerns the appeal brought by the defendant against the first instance decision refusing to stay part of the Claimant’s action pursuant to s 6 of the Arbitration Act 2001.
Recap of facts. We will first recap the salient facts.
The Claimant and one Zhejiang Crystal-Optech Co Ltd (“COC”), a public listed company in China, agreed to participate in a joint venture in 2021 ([3]).
The defendant was thus incorporated in Singapore for the purposes of the joint venture ([3]).
On or around 1 June 2022, an Equipment Transfer Agreement (“ETA”) was entered into for the transfer of some units of equipment from the claimant to the defendant ([4]).
The ETA provided for the transfer of two units of “A1350” and one unit of “Hitachi Regulus 8100, FESEM with Hybrid Ion Miller, IM4000Plus and Oxford EDX” (“AH Equipment”) ([4]).
Clause 8.2 of the ETA, which is effectively an arbitration agreement, provided that ([4]):
“8.2. In the process of implementing this contract, if there is any dispute, both parties shall negotiate to resolve it. If the negotiation fails, both parties agree to submit it to the Singapore International Arbitration Centre for settlement. The dispute resolution process does not affect the continued execution of the non-disputed clause.”
The Claimant’s case in the present action. The Claimant’s case was that it was agreed that the Claimant would first incur expenses for and on behalf of the defendant to meet certain deadlines set by the defendant’s clients, and the Claimant would then be reimbursed by the defendant ([5]).
The Claimant therefore sought to recover from the defendant, among others, the capital expenditure incurred in connection with the defendant’s operations (“Capital Expenditure Claim”) ([6]).
As part of the Capital Expenditure Claim, the Claimant claimed for equipment costs amounting to a sum of US$5,910,246.45 and S$959,308.93 (the “Equipment Claims”) ([6] – [7]).
The Claimant claimed that the defendant had agreed to pay these amounts in email correspondence between the parties throughout the period of January to May 2022 ([7]).
In particularising its claims for equipment costs in a table found at Annexure A of its Statement of Claim dated 30 June 2023, two of the items claimed in the Equipment Claim were for the AH Equipment. Hence, the Equipment Claims included claims for the AH Equipment as well ([7]).
It is significant to note that the Claimant did not plead the Equipment Claims as being based on the ETA but on the email correspondence instead ([7]).
Issue. The issues before the Court were ([20]):
Did the dispute (over the Equipment Claims, or more narrowly, the claims over the AH Equipment) between the parties fall within the scope of the arbitration agreement in clause 8.2 of the ETA?
If so, was there “sufficient reason” why the relevant dispute should not be referred to arbitration in accordance with the arbitration agreement?
Whether the dispute fell within the scope of the arbitration agreement. The Court held that the starting point was to take a generous approach in the construction of the scope of arbitration agreement (see [22]), citing Court of Appeal in Rals International Pte Ltd v Cassa di Risparmio di Parma e Piacenza SpA [2016] 5 SLR 455 that the parties, as rational businessmen, would be assumed to have intended all disputes to fall within the scope of the arbitration clause unless shown otherwise (see [22]).
However, the Court noted that this generous approach could be displaced, such as where there are “compelling reasons, commercial or otherwise” that may displace the assumed intention of the parties that the claims are to be arbitrated (see [23]).
AH Equipment. While the Claimant pleaded its case in the present action on an alleged agreement contained in email correspondence between the parties on January to May 2022 and not on the ETA, the Court held that it was clear that the ETA was entered into by the parties to govern the transfer of the AH Equipment (see [28]).
The Court noted that the Claimant did not dispute “the validity of the ETA, the fact that the ETA covers the AH Equipment or the terms of the ETA, especially the arbitration agreement in clause 8.2 of the ETA” (see [28]).
Accordingly, the Court held that the claims for the AH Equipment fall within the scope of the arbitration agreement contained in the ETA.
Other Equipment Claims. As for the other claims for equipment cost, the defendant argued that clause 9.2 of the ETA covered all transfers relating to all other equipment and so the other Equipment Claims are subject to the arbitration agreement as well (see [31]).
Clause 9.2 of the ETA stated ([4]):
“9.2. Matters not involved in this contract shall be resolved by signing a written supplementary agreement between the two parties. The supplementary agreement has the same legal effect as this contract.”
The Claimant argued that there was nothing in clause 9.2 which suggested that the ETA was to be extended to any equipment apart from the AH Equipment, and that it was undisputed that the parties did not enter into any “written supplementary agreement” (see [32]).
The Court held that clause 9.2 meant that parties had agreed to sign supplementary written agreements to resolve matters not covered within the ETA and that these agreements would have the same legal effect as the ETA (see [36]).
The Court did not accept the defendant’s arguments that clause 9.2 operated to impose the terms of the ETA onto all transfers of equipment between the parties (see [36]). The Court held that the language of the clause made clear that a signed supplementary written agreement was a prerequisite for the terms of the ETA to apply to the transfer of other equipment (see [36]).
Hence, the subject matter of the ETA did not extend to equipment other than the AH Equipment and the arbitration agreement contained in the ETA only covered the claim for the AH Equipment.
Was there “sufficient reason” why the claim for AH Equipment should not be referred to arbitration? So, should the Court refuse to grant a stay for the claim for AH Equipment and allow the claim to proceed in court?
The burden of demonstrating that there is a “sufficient reason” why the matter should not be referred to arbitration under s 6(2)(a) of the Arbitration Act 2001 falls on the party seeking to persuade the court to refuse a stay (see [41]).
Assuming that the counterparty is ready and willing to arbitrate, the court would only refuse a stay in “exceptional circumstances” and would “generally be slow to exercise its discretion” in allowing the claim (subject to an arbitration agreement) to proceed in court (see [42]).
The Court noted that all the Claimant’s claims in the present action arose in connection with the joint venture between the claimant and COC and that all the equipment were purchased by the Claimant for the defendant (at [49]).
While the claims for the AH Equipment were distinct and subject to the ETA while the other equipment claims were not (see [50]), nonetheless, “the claims remain part of the expenses incurred by the claimant for the purposes of its joint venture with COC, and therefore share a common theme with the broader Equipment Claims and the other claims in OC 421.”
The Court found that if the claims for the AH Equipment were stayed in favour of arbitration while the other claims proceeded in court, there would be an overlap in the factual issues put before a putative arbitral tribunal and those before the court (see [51]). As the Court stated at [51]:
“… The factual issues, which will relate to the context of the joint venture, will almost certainly be very similar and, at least in some respects, the same questions will arise. These will likely include questions surrounding whether the defendant had agreed to reimburse the claimant for the expenses claimed (and how this was expressed) and whether this agreement still subsists. Thus, the evidence to be considered by the court and the putative tribunal will tend to be factually interconnected and duplicative, and the witnesses who are to give evidence will also likely be the same.”
Given this, the Court found that there was a real risk of inconsistent findings where “any … findings in one forum which either party finds unfavourable are likely to be challenged in the other forum, giving rise to a situation where factual issues are liable to be relitigated in a different proceeding” and leading to “an obvious likelihood of disrepute to the administration of justice, potential abuse of process by the parties and overall prejudice to the parties in the resolution of their dispute”. As such, the Court refused to grant a stay and exercised its discretion to allow the claim for the AH Equipment to proceed in court (see [53]).
Significance. So, we now have two decisions (on the same facts) showing when a Singapore Court will refuse to grant a stay in favour of arbitration notwithstanding an arbitration agreement. Having said that, we highlight once again that it is not easy to reach this result.
Another situation when a stay in favour of arbitration may be refused would be if a claim is “undisputed or indisputable“. And this is where the Court’s view may appear to be narrower than the decision below. The decision below opined that an “example” of an “undisputed” claim was one where there was a clear and unqualified admission of the claim by the defendant. The Court at [61] however stated that an “undisputed” claim “requires a clear, unequivocal admission”. By framing it as a requirement, could the Court be said to have limited an undisputed or indisputable claim for the purposes of the exercise of a court’s discretion to refuse a stay to only situations involving a “clear, unequivocal admission“?
It may be queried to what extent there is a difference, especially given that the Court made clear that the issue of whether the claims were “undisputed“ or “indisputable“ was not one which the Court had to consider given the Court’s earlier findings at [57], and the Court at [58] referred to the case of Uni-Navigation Pte Ltd v Wei Loong Shipping Pte Ltd [1992] 3 SLR(R) 595 at [15] where the court cited M J Mustill and S C Boyd, Commercial Arbitration (2nd Ed, 1989) at p 123 with approval.
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