Singapore CA Clarifies Decision To Lift Stay Of Proceedings

In our earlier post (see here), we noted the decision of the Singapore High Court to stay proceedings under its inherent jurisdiction.

The stay was subsequently lifted: see Gulf Hibiscus Limited v Rex International Holding & Anor [2019] SGHC 15.

The Singapore Court of Appeal agreed with the judge’s decision to lift the stay but for different reasons: Rex International Holding & Anor v Gulf Hibiscus Limited [2019] SGCA 56. The Court stated [9-11]:

…In our view, the stay should not have been granted in the first place. A claimant has the right to choose its cause of action and to sue the party it wishes to sue, in whichever forum it wishes, subject only to any applicable legal constraint, such as an arbitration agreement: Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2016] 1 SLR 373 (“Tomolugen”) at [187]. While this is not an absolute right, it is nonetheless a fundamental one. Its derogation should only be countenanced if the facts properly give rise to other higher-order concerns that warrant such derogation.

The Respondent has chosen not to sue RME and before us, maintains that it has no claims against RME which are the subject matter of its claims against the Appellants. In other words, the Respondent harbours no intention of commencing any proceedings in any forum against RME in respect of these matters. Indeed, at the material time, it had not sued RME. In these circumstances, we are puzzled as to why the Judge even considered the possibility of such a claim and granted a stay on that basis. On the other hand, the Respondent has chosen to sue the Appellants; there is no arbitration clause that applies to that dispute because the Appellants are not party to the shareholders’ agreement. This is simply not the sort of case that would, to adopt the words we used in Tomolugen, “create a potential case management quandary”: at [140]. With great respect to the Judge, it was ill-conceived to stay the Respondent’s claim against the Appellants, which was not subject to any arbitration agreement, on account of an arbitration agreement between the Respondent and a non-party to the original dispute, RME.”

The question of case management arises where there are overlapping issues that will have to be ventilated before different fora among different parties, some of whom are bound by an arbitration agreement, while others are not. The typical case would be one where there is: (a) some overlap in the parties to the putative arbitration and the parties to the suit; and (b) some overlap in the issues that will be engaged in the putative arbitration and those in the suit. At times, the issue may be complicated where there is an underlap in the remedies that the putative arbitral tribunal may grant as compared to those which the court may grant as was noted in Tomolugen at [140]. The short point is that in order for case management concerns to be relevant at all, there must first be the existence or at least the imminence of separate legal proceedings giving rise to a real risk of overlapping issues. Until such time, it would be premature to consider, let alone grant, a case management stay. We emphasise that when considering whether to grant a case management stay, it is critically important that the court apply its mind to appreciate the nature and extent of the overlaps between the putative arbitration and the court proceedings. Otherwise, the court may find itself, as it did here, ordering a case management stay for no good reason, because it has been distracted by some abstract notion of potential or theoretical overlapping of issues, parties or proceedings. It is, of course, always conceivable that there might appear to be a potential for some sort of overlap where common events involve several different parties. But a court should not stop there. Instead, it must go further and examine precisely which are: (a) the potential fora for the resolution of the dispute; (b) the different parties before each forum; and (c) the issues to be determined before each such forum. The sort of overlap that would attract a case management stay is one where the proper ventilation of the issues in the court proceedings depended on the resolution of the related putative arbitration. In such circumstances, a case management stay would be needed in order to achieve the efficient and fair resolution of the dispute as a whole: Tomolugen at [186].

About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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