STAY OF PROCEEDINGS UNDER THE ARBITRATION ACT
Often, construction contracts in Singapore are subject to arbitration. It is then frequently assumed that as a result of this, all disputes arising from the contract would be dealt with in arbitration. The recent case of Moveon Technologies Pte Ltd v Crystal-Moveon Technologies Pte Ltd [2024] SGHCR 2 is a reminder that this may not always be the case.
Background. The defendant, Crystal-Moveon Technologies Pte Ltd (“CMT”), was incorporated for a joint venture between Zhejiang Crystal Optech Co Ltd (“COC”) and the claimant, Moveon Technologies Pte Ltd (“MTPL”) sometime in October 2021 ([2]).
MTPL commenced court proceedings against CMT to seek to recover various costs MTPL incurred in connection with the joint venture ([3]). CMT sought a stay of part of MTPL’s claims pursuant to s. 6 of the Arbitration Act 2001 (“AA”) ([5] – [6]).
In this short blog, we focus on two arguments that were raised and discussed.
No dispute referrable to arbitration? One of the arguments (raised by CMT) was that a stay under s. 6 AA was unwarranted as there was no dispute referrable to arbitration ([12]).
In doing so, CMT argued that MTPL had to demonstrate the existence of a prima facie case of dispute, and that it was insufficient for MTPL to simply assert a dispute or to deny the claim and must “back up [the] allegations of a dispute by credible evidence”. This which would necessitate some form of inquiry by the court into the merits of the claim ([12]).
While the learned Assistant Registrar Perry Peh (“AR Peh”) accepted that in the absence of a dispute, the proceedings should not be stayed (see [24] referring to Tjong Very Sumito and others v Antig Investments Pte Ltd [2009] 4 SLR(R) 732 (“Tjong Very Sumito”) at [10] and Multiplex Construction Pty Ltd v Sintal Enterprise Pte Ltd [2005] 2 SLR(R) 530 at [5]), AR Peh disagreed with CMT.
In doing so, AR Peh made the following observations:
Under the International Arbitration Act 1994 (“IAA”), it is sufficient for the party applying for a stay (the “stay applicant”) to merely assert that the stay applicant disputes or denies the case, and the stay applicant is not required to back up any such claim by credible evidence ([25], referring to Tjong Very Sumito).
The same standard applies to the AA ([26]).
Under s. 6 of the AA, the stay applicant only has to demonstrate that the requirement for obtaining a stay are met; the burden is not on the stay applicant to demonstrate the absence of a sufficient reason for the matter to be referred to arbitration - rather, the burden rests on the party resisting the stay ([27]).
Singapore courts have “… given equal weight to the priority of respecting party autonomy and holding parties to their agreements to arbitrate in the context of the AA … and it would be quite incongruous with that for different standards to be applied under the AA and the IAA” ([29]).
The discretion under s. 6 of the AA does not justify adopting a different approach, as “these discretionary powers pertain only to the court’s management of its processes to ensure the efficient and fair resolution of the entire dispute when confronted with overlapping court and domestic arbitration proceedings, and they come to be exercised only after the court concludes that the defendant/stay applicant is prima facie entitled to a stay.“ ([29]).
The court should not assess the merits of validity of the defence as that is something that should be determined in arbitration ([30]).
AR Peh then held at [31] that whether the asserted dispute is “valid or sustainable” is not wholly irrelevant: however, it is a question to be addressed when the court decides whether to exercise its discretion to refuse a stay.
And on the facts of the case, AR Peh found that as the account put forward by CMT in its supporting affidavit for the stay application was “diametrically opposed to that relied upon by MTPL“, this amounted to “an assertion of a dispute or a denial of the claim as put forward by MTPL“ ([46]).
Not stayed. AR Peh then dealt with the factors relevant to showing “sufficient reason” for refusing the grant of a stay at [49] – [59].
And on the facts of the case, AR Peh held that there was no sufficient reason to grant a stay on the facts of the case ([65]).
Why?
AR Peh noted that the claims which CMT sought to stay formed a “singular factual matrix” with the other claims which were not being stayed ([61]).
Given that the claims formed part of the “singular factual matrix”, if those claims were stayed in favour of arbitration, it would give rise to a real risk of inconsistent findings as “evidence given in the putative arbitration and in the court proceedings would inevitably overlap and duplicate each other” ([63]), and this multiplicity of proceedings would prevent the “fair and efficient resolution of the entire dispute” ([63]).
Further, based on the wording of a Clause 9.2 (which states that “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”), it suggested that the parties intended for a single dispute resolution mechanism to be applied to any matters between them, and would not have foreseen that some of the claims would be adjudicate din arbitration and others in court ([65]).
What if the “dispute” raised was so shadowy / unmeritorious that there was “no good reason” for dispute to be stayed in favour of arbitration?
While this was not established on the facts of the case (see [67]), AR Peh held that, if established, this could be a rationale for refusing to grant a stay (see [67]) as if a “stay applicant seeks a stay despite evidently having no sustainable defence to the claimant’s claims, this might well be a case where the stay under s 6 of the AA is sought in an abuse of process, and the grant of such a stay surely would be contrary to the efficient and fair resolution of the dispute as a whole.” (emphasis added in bold)
However, this would be a high standard requiring the party resisting the stay to show that the stay applicant had “no defence” or “no sustainable defence”, and the court must be able to arrive at this on the face of the evidence without having to engage in any elaborate or detailed investigation ([67] – [68]).
Conclusion. So, while a stay under the AA is discretionary (unlike the IAA), it bears noting that it would generally be difficult to obtain a stay under the AA. The stay applicant would only need to assert the existence of a dispute, and the burden would then shift to the party resisting the stay to show why a stay be refused.
Nonetheless, the fact that a stay is discretionary meant that it is not always a foregone conclusion that the dispute would be (or ought to be) referred to arbitration.
So, it bears examining the dispute carefully to see if there exists sufficient reason for the dispute to be dealt with in court instead of being referred to arbitration.
If the stay applicant has no defence to a claim, or if there exists multiplicity of proceedings, these are factors that may potentially result in a stay in favour of arbitration being refused under the AA.
This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. You should not take, nor refrain from taking, actions based on this publication. Chancery Law Corporation is not responsible for, and does not accept any responsibility for, any loss or damage that may arise from any reliance based on this publication.