The Singapore High Court (SGHC) in the recent decision of Trinity Construction Development v Sinohydro exercised its inherent powers to stay court proceedings commenced by the plaintiff in favour of ongoing arbitration proceedings, in circumstances where there was an ongoing challenge to the arbitral tribunal's jurisdiction.
The court held that while a plaintiff's claims in court would not be struck out simply because there were ongoing arbitration proceedings, the court may exercise its inherent powers of case management to stay the court proceedings. In doing so, the SGHC applied the principles espoused by the Singapore Court of Appeal (SGCA) in its decision of Tomolugen Holdings v Silica Investors, which were most recently reiterated in the SGCA's decision of Rex International Holding v Gulf Hibiscus.
The claim related to two invoices, which the defendant disputed on the basis (amongst other things) that it was not clear who the proper parties to the relevant agreement were.
The plaintiff commenced arbitration proceedings against the defendant. While the defendant filed a response to the notice of arbitration and nominated its arbitrator, it objected to the arbitral tribunal's jurisdiction, on the basis that: (1) there was no arbitration agreement between the parties; and (2) even if such an agreement did exist, the arbitral procedure and composition of the tribunal was not in accordance with the agreement.
Amid concerns over the claims becoming time-barred, the plaintiff concurrently commenced court proceedings for the same claims that it was pursuing in arbitration. The defendant applied to strike out the plaintiff's claims and in the alternative, sought a stay of court proceedings pending the arbitration proceedings.
On the question of striking out the plaintiff's claims, the SGHC held that "as a starting point, parties should be entitled to elect to commence proceedings in any forum they deem fit." The mere fact that court proceedings are commenced when there are ongoing parallel arbitration proceedings would not amount to an abuse of process. The facts suggested that the suit was commenced by the plaintiff to preserve its rights out of concerns relating to the limitation period of its claims, in reaction to the defendant's jurisdictional objections in the arbitral proceedings. The court therefore declined to exercise its powers to strike out the plaintiff's claims.
The defendant also sought to argue that the plaintiff had waived its right to commence court proceedings against the defendant by electing to commence arbitration. However, this argument was rejected by the SGHC, since the court was of the view that the "doctrine of waiver by election [has not been] extended to a choice between different fora to commence proceedings".
The SGHC proceeded to deal with the defendant's submission that a stay of the court proceedings should be granted. It applied the principles set out in Tomolugen Holdings, determining that the court's inherent power to grant a stay of court proceedings in favour of arbitration (as recognised in O 92 r 4 of the Rules of Court) is dependent on a balance between three higher-order concerns:
- a plaintiff's right to choose whom they want to sue and where;
- the court's desire to prevent a plaintiff from circumventing the operation of an arbitration clause; and
- the court's inherent power to manage its processes to prevent an abuse of process.
In striking the balance between these concerns, the court seeks to ensure that the ends of justice are met.
The SGHC also observed that a case management stay may be granted even in situations where there is no arbitration agreement between the parties and/or no ongoing arbitration proceedings.
On the facts, the SGHC chose to exercise its powers to grant a stay of court proceedings in favour of arbitration, for the following reasons.
- The plaintiff's right to choose where they wished to commence action had not been prejudiced since it could always return to the courts after the stay was lifted.
- The plaintiff was under an obligation to arbitrate under the arbitration agreement that it had consistently recognised.
- There was duplicity between the court and arbitration proceedings in terms of the parties, the factual bases, and the claims, which might increase the costs of proceedings.
- Questions raised regarding the arbitral tribunal's jurisdiction are rightfully dealt with by the tribunal itself.
This decision appears to be the first case on stay of litigation proceedings in favour of arbitration since the Rex International decision, where the SGCA declined to grant a stay of court proceedings in favour of yet to be commenced arbitration proceedings. The fact that the SGHC ordered a stay of court proceedings in Trinity Construction, even though there was some dispute as to whether there was even a valid arbitration agreement between the parties, indicates the courts' continued pro-arbitration stance.
That said, parties should be mindful of the following when facing a similar situation as the parties in Trinity Construction:
- Even though the SGHC granted a stay of court proceedings in favour of a defendant that had raised jurisdictional objections in arbitration proceedings, the courts may not always exercise its powers to do so. This is because the jurisdictional objections in arbitration proceedings may lead to delays in the resolution of the disputes between parties, which will go against the objective of ensure justice is served. This has been shown in cases such as A co v D.
- While it is tempting for plaintiffs to initiate parallel proceedings in the courts and in arbitration to hedge their risks against their claims being time-barred, they should bear in mind the risks involved. Not only is there a chance that the court proceedings will be stayed, as was in Trinity Construction, the initiation of court proceedings may be considered a repudiation of the arbitration agreement, and may have adverse consequences on the arbitration proceedings and enforcement of the eventual award, as was the case in Marty v Hualon.
- While the SGHC rejected the defendant's argument on waiver, the question of whether a party to an arbitration agreement may waive its rights to arbitrate remains an open one under Singapore law. The SGCA in Marty Ltd chose to leave this "thorny issue" open to be decided at some future time.