Significant changes in dispute resolution practices in Singapore

Arbitration clauses commonly provide that “all disputes arising out of” the parties’ contract will be settled by arbitration. From time to time, however, parties have sought to avoid arbitration and to bring a claim in court on the basis that the arbitration agreement does not apply because there is actually nothing in dispute. For example, the claimant may assert that its claim is so clear-cut that there is no defence to it, and hence for all intents and purposes, there is no dispute. Another example is where the defendant admits the claim in full—there is therefore no dispute— but cannot pay.

In each of these cases, can the court take cognizance of the matter and render a decision, or must it instead stay the court proceedings in favour of the contractually agreed-upon arbitration process?

The Singapore Court of Appeal in Tjong Very Sumito & Ors v Antig Investments Pte Ltd [2009] SGCA 41 recently affirmed the principles to be considered in relation to an application to stay court proceedings in favour of arbitration. The Court of Appeal also expounded the current judicial philosophy towards international arbitration, which clearly is one of facilitating and promoting arbitration in Singapore.

Sale and Purchase of Shares agreement Provided for Arbitration

The facts may be briefly stated. In this case, the applicant and the respondent were parties to an agreement for the sale and purchase of shares (“Agreement”). The Agreement provided for arbitration in the event of a dispute between the parties.

This Agreement was varied from time to time. One such variation was an agreement that payment by the respondent to a third party would discharge its payment obligations to the applicant under the Agreement. Subsequently, the third party asked for, and the applicant agreed to make, early payment of this sum. The respondent was not told of this early payment, and later asked the applicant to pay it instead of the third party.

The applicant ignored the request and the respondent eventually commenced court proceedings. The applicant then applied to stay the court proceedings on the basis that the matter should be referred to arbitration as agreed in the Agreement, pursuant to section 6(1) of the International Arbitration Act. The issues facing the Court of Appeal were the meaning of the term “dispute” and whether the applicant’s silence meant that it did not dispute the respondent’s claim.

Court Will Ordinarily Find That There Is a Dispute

As noted earlier, if an arbitration agreement provides for arbitration only if disputes exist, then the subject matter of the proceedings would fall outside the terms of the arbitration agreement if there is no dispute. In considering the matter, the Court laid down the steps to be followed when determining whether there is a “dispute” mandatorily referable to arbitration and hence that the court proceedings should be stayed:

• The court will interpret the word “dispute” broadly and will readily find that a dispute exists unless the defendant has unequivocally admitted that the claim is due and payable.

• There is a “dispute” if the defendant expressly asserts that he denies the claim; the court will not assess the merits of this denial.

• The court can also infer that the claim is not admitted from the previous inconclusive discussions between parties, prevarication or even silence:
      ○ There is prevarication where a defendant unequivocally admits the claim, but then later resiles from this admission. In this case, there is a “dispute” over the substantive claim and also whether the defendant can challenge his earlier admission.
      ○ The defendant’s silence, without more, is insufficient to constitute a clear and unequivocal admission since there may be good reasons why a party remains silent.

• If a defendant makes an unequivocal admission extending to both liability and quantum, then there is no “dispute”. The claimant may bring his claim in court but must come armed with compelling evidence of the admission. If that admission is challenged with any semblance of credibility, the court will ordinarily be inclined to decide that a “dispute” has arisen.

Conclusion
This decision makes clear that the situations where a claimant may seek to bring court proceedings in lieu of agreed upon arbitration processes are limited. For practical purposes, the situations where a defendant clearly
and unequivocally admits both liability and quantum of damage but insists on proceeding with arbitration are relatively rare.

The Court of Appeal’s helpful explanation of the current judicial policy clearly affirms that the courts will give effect to parties’ contractual choice of dispute resolution. As emphasized by the Court:

“Courts should therefore be slow to find reasons to assume jurisdiction over a matter that parties have agreed to refer to arbitration. It must also be remembered that the whole thrust of the IAA is geared towards minimizing
court involvement in matters that the parties have agreed to submit to arbitration.”

Contact Partners:
Andre MANIAM
Head – Litigation & Dispute Resolution
Direct: +65 6416 8134
Email: andre.maniam@wongpartnership.com
CHAN Hock Keng
Head – Commercial & Corporate Litigation
Direct: +65 6416 8139
Email: hockkeng.chan@wongpartnership.com