Court of Appeal · Decided 31 July 2008

Carona Holdings Pte Ltd and Others v Go Go Delicacy Pte Ltd

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[2008] SGCA 34Case no. CA 90/2007

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[1] This appeal considers whether a plaintiff is entitled as of right to obtain a judgment in default of defence merely because the defendant fails to file his defence pending the outcome of a stay application premised on a pre-existing agreement to arbitrate. Is a defendant invariably required to file his defence on a “without prejudice” basis or, at the very least, formally apply for an extension of time to file his defence, pending the determination of his application for a stay of proceedings in favour of arbitration? A further conundrum that arises is whether any of these or similar protective measures undertaken by a defendant pending the outcome of such a stay application can constitute a “step in the proceedings” under the Arbitration Act (Cap 10, 2002 Rev Ed) and thereby irretrievably subvert the defendant’s application for a stay. We now turn to the facts of the present case.
[2] The genesis of the present appeal can be stated in brief compass. The first appellant, Carona Holdings Pte Ltd, and Go Go Delicacy Pte Ltd (“the Respondent”) entered into an exclusive franchise agreement (“the Franchise Agreement”) contemplating that in exchange for the payment of fees by the Respondent, the first appellant would provide the know-how in relation to the operation of the franchise, a business centred on the retailing of a special variety of frankfurters known as “Go Go Franks”. Under the terms of the Franchise Agreement,[note: 1] the Respondent was bound to purchase all “operating supplies” from a designated seller, the third appellant. Further, the Franchise Agreement specified, inter alia, at cl 23.13.1[note: 2] that in the event of any disputes between the parties, these were to be resolved by arbitration. The clause stipulated as follows:
[3] Unfortunately, the arrangement soon ran into problems. During negotiations to resolve the differences, the Respondent alleged that while it had observed its side of the bargain, the first appellant neglected to fulfil its obligations under the Franchise Agreement by failing to: (a) provide adequate training; and (b) transfer the tenancy agreement for one of its branches to the Respondent. In addition, the Respondent claimed to have been misled into purchasing numerous items that the fourth and fifth appellants had stipulated as essential for the furnishing of the Respondent’s food outlet.
[4] On 20 March 2007, the Respondent commenced proceedings against the first to the fifth appellants (collectively “the Appellants”) complaining about these breaches. The Appellants were served the writ of summons on 27 March 2007. They entered appearance on 2 April 2007. Counsel for the Appellants then wrote to the Respondent and referred to the arbitration clause in the Franchise Agreement.[note: 3] He requested confirmation that the action would be stayed. Responding on 3 April 2007,[note: 4] counsel for the Respondent noted that while the disputes were embraced by the arbitration clause, he hoped the Appellants would waive the requirement and agree to the matter proceeding in the High Court as it would be “neat and tidy if all parties’ rights and liabilities in this matter can be resolved in this one action rather than having one matter proceeds [sic] by way of arbitration”.[note: 5] He pointed out that all the parties in the matter were not identical. The Appellants did not agree to this and an impasse was thus reached.
[5] On 18 April 2007, the Appellants applied to stay the proceedings pursuant to s 6 of the Arbitration Act. The stay application was fixed for hearing on 2 May 2007. In the meanwhile, the Appellants declined to file their defence. Responding to this, on 20 April 2007, counsel for the Respondent gave 48 hours’ notice to counsel for the Appellants insisting that the defence be filed.[note: 6] On 23 April 2007, counsel for the Appellants replied, stating that the 48-hour notice was inappropriate and misconceived in the light of the pending stay application.[note: 7] The Respondent disagreed and issued a further one-day notice to the Appellants maintaining that their defence be filed and extending the timeline until 24 April 2007. Finally, on 25 April 2007, the Respondent filed an inter partes application requesting for judgment to be entered in default of the defence.
[6] The Respondent’s application for default judgment was fixed to be heard together with the Appellants’ application for a stay of the legal proceedings on 15 June 2007. In a rather puzzling development, both counsel apparently agreed, at the outset, to have the default judgment application heard prior to the stay application. In the result, the assistant registrar who heard the matter granted the Respondent’s application for default judgment. No order was made as to the stay application which was not even heard on the merits. The Appellants appealed.
[7] On appeal, the judge below (“the Judge”) upheld the decision of the assistant registrar and determined that a stay of the proceedings was not appropriate in the circumstances. She noted that while the first appellant was a signatory to the Franchise Agreement, the other four appellants were not bound by the arbitration clause contained therein. The Judge observed quite rightly in Go Go Delicacy Pte Ltd v Carona Holdings Pte Ltd [2008] 1 SLR 161 (“the GD”) at [26]:
[8] As regards whether the default application could be dealt with before the stay application had been disposed of, the Judge reviewed the decisions in Samsung Corp v Chinese Chamber Realty Pte Ltd [2004] 1 SLR 382 (“Samsung Corp”) and Australian Timber Products Pte Ltd v Koh Brothers Building & Civil Engineering Contractor (Pte) Ltd [2005] 1 SLR 168 (“Australian Timber”). Without addressing the issue of whether both decisions were reconcilable, she referred extensively to Australian Timber as it “dealt with a situation similar to this case” (at [33] of the GD). In Australian Timber, Belinda Ang Saw Ean J opined that a pending stay application did not prevent time from running for the service of the defence and a defendant ought to request that the hearing date of the stay application be brought forward or apply for an extension of time to serve the defence pursuant to O 3 r 4 of the Rules of Court (Cap 322, R 5, 2004 Rev Ed) (“the 2004 Rules”), in order to obviate the entry of a default judgment. Ang J held that it must follow as a matter of logic that the filing of an application to extend time to serve the defence would not per se constitute the taking of a “step in the proceedings” within the meaning of s 6(1) of the Arbitration Act.
[9] Adopting the reasoning in Australian Timber, the Judge found that the Appellants ought to have been more proactive. It was insufficient to simply rely on the stay application as a basis for refusing to comply with the 48 hours’ notice. She concluded that there were other alternatives open to the Appellants: (a) the stay application could have included an additional prayer for an order that the Appellants not be compelled to file any defence pending determination of the stay application; (b) the Appellants could have applied to the duty registrar to bring forward the hearing date of the stay application; or (c) they could have applied to postpone the hearing of the default judgment application until after the stay application had been heard. In her opinion, this “would not have done violence to the spirit and effect of the appellate court’s decision in Samsung Corp” and would not, in her view, amount to taking a “step in the proceedings” under the Arbitration Act (see [36] of the GD). She suggested that it was nevertheless still open to the Appellants to file an application to set aside the default judgment.
[10] Before us, the Appellants submitted that once the stay application had been filed, all timelines under the current Rules of Court (Cap 322, R 5, 2006 Rev Ed) (“the Rules”) ought automatically to come to a standstill. We could not agree with such an extravagant proposition, especially where this could well encourage an unmeritorious defendant to file a frivolous stay application in an effort to stall for more time. Further, and more crucially, such an important consequence ought to be expressly spelt out in the Rules. The Rules are silent on this. Alternatively, the Appellants argued that, as a matter of practice, the stay application should be heard before any application for summary or default judgment. We broadly agreed that this was the correct approach. However, we must add that this view is premised on an applicant diligently pursuing his remedies. We allowed the appeal as we were satisfied that the Appellants had proceeded diligently in filing their stay application and a default judgment should not have been entered in view of the myriad factual controversies that had surfaced. We now give the reasons for our decision.
[11] Section 6 of the Arbitration Act reads as follows:
[12] This court in Lai Swee Lin Linda v AG [2006] 2 SLR 565 broadly expressed the balancing exercise to be undertaken by the courts in addressing procedural tensions (at [4]):
[13] This appeal necessitated an inquiry into first, the nature of a stay application; and second, whether the decisions of Samsung Corp and Australian Timber are indeed irreconcilable and conflicting, as suggested by the respective parties.
[14] Pursuant to the Rules, a defence must be served within 14 days of service of the statement of claim. If a defendant fails to serve a defence, the plaintiff may, upon expiration of the period limited for service of a defence, move to obtain a default final or interlocutory judgment (as the case may be) pursuant to O 19 r 2 or r 3 of the Rules.
[15] Here, the Appellants did not file any defence. Prima facie, the filing of a defence and the filing of a stay application in favour of arbitration are conceptually at odds with one another. There were two main strings to the Appellants’ bow in advancing their procedural stance: first, the Appellants asserted that the question of the stay application had to be dealt with before the timelines in the Rules started to run because this would save time and expense by disposing of the merits of the key question before any consequential questions were addressed. Second, they posited that they could not be compelled to file their defence as the 48 hours’ notice was inherently flawed. Since there was an agreement to arbitrate, no defence need be filed.
[16] On the other hand, the Respondent submitted that there were no legal or procedural rules preventing it from entering default judgment. It contended that parties must remain uncompromisingly filial to the Rules and the timelines set out therein. The Rules, it asserted, did not expressly stipulate the legal consequences of filing such a stay application. It also averred that the mere filing of a stay application could not operate as a stay of the overriding requirement mandating that a defence be filed.
[17] It appears that while both parties relied upon the decisions of Samsung Corp and Australian Timber, their views as to the ramifications of those decisions were wildly divergent. In the circumstances, it would be helpful if we reviewed both decisions closely.
[18] In Samsung Corp, a dispute arose out of a building contract containing a pre-existing agreement to arbitrate in the event of any differences between the parties. The respondents in that case were the developers of a building project while the appellants were the main contractors. The appellants refused to comply with a delay certificate issued in favour of the respondents who brought an action against the appellants to compel payment. Relying on the arbitration clause in the building contract, the appellants entered appearance and immediately applied for a stay in favour of arbitration. At the hearing of the stay application, the assistant registrar, purportedly invoking the inherent powers of the court pursuant to O 92 r 4 of the then Rules of Court (Cap 322, R 5, 1997 Rev Ed) (“the 1997 Rules”), allowed the respondents to file their application for summary judgment under O 14 of the 1997 Rules without any defence having been filed by the appellants. To safeguard the position of the appellants, she also ordered that, notwithstanding the affidavits filed by the appellants to resist the O 14 application, these affidavits should not be viewed as the taking of steps in the proceedings. Further, she granted the appellants’ application that they need not file their defence until the stay application had been fully disposed of. Finally, she ordered that both the stay application and the O 14 application be heard together. Pursuant to these orders, the respondents filed their O 14 application. On appeal, the judge in chambers held that the assistant registrar had erred in invoking the court’s inherent jurisdiction to override the express letter of O 14 r 1. Instead, he was of the view that, first, an O 14 application should only be made after the defence had been filed, but he recognised that it was only logical that the stay application be heard together with the O 14 application. Second, the judge ordered, in what is known as a “compromise order”, that the appellants should file their defence before the stay application was disposed of, with the caveat that the filing of the defence was not to be construed as having taken a step in the proceedings. Third, we noted that the judge recognised that a joint hearing would be beneficial as the O 14 application could be more speedily dealt with and this would go some way towards avoiding duplicity in arguments.
[19] It bears mention that, until late 2002, plaintiffs could apply for summary judgment under O 14 r 1 of the 1997 Rules on the basis that the defendant had no defence to the claim. Such an application could be filed immediately after the defendant entered appearance. However, on 1 December 2002, certain significant amendments to O 14 of the 1997 Rules came into force. Inter alia, O 14 r 1 was amended to read as follows:
It is quite clear that following these amendments, an application for summary judgment under O 14 can only be made after the defendant “has served a defence to the statement of claim”. This has by a side-wind introduced some real practical difficulties, particularly in the context of contracts containing arbitration clauses, where a classical Catch-22 situation has been created; the plaintiff would have to wait for the defendant to file his defence before applying for the summary judgment but, on the other hand, a defendant who wants the dispute resolved by arbitration will not file his defence for fear that by doing so he would be deemed to have taken a step in the proceedings and thereby waived his rights to arbitration under s 6(1) of the Arbitration Act.
[20] On appeal, this court held in Samsung Corp that the compromise order should not have been made by the judge in chambers as it required a defendant to pursue two contradictory courses of action. Chao Hick Tin JA drily noted in Samsung Corp at [24]:
[21] The rationale behind this is immediately apparent. As Woo Bih Li JC took pains to clarify in Yeoh Poh San v Won Siok Wan [2002] 4 SLR 91 (“Yeoh Poh San”) at [24]–[29], compromise orders are not desirable for four primary reasons:
(a) no such compromise orders are granted before the original stay application is heard and the position ought to be the same for appeals on stay applications;
(b) insisting on the filing of a defence would be prejudicial to a defendant who has to meet the merits of the plaintiff’s claim while seeking a stay;
(c) if the defendant succeeds in the appeal, he may never have to meet the plaintiff’s claim on the merits as the plaintiff may thereafter abandon, or even lose his claim in the alternative jurisdiction; and
(d) our courts are not properly seized of such matters if the stay is indeed granted on such a basis.
[22] Adopting this reasoning, this court in Samsung Corp at [18] determined that the solution was not to make a compromise order. Instead, it held:
[23] In this respect, we note that this court in Samsung Corp was essentially stating that the Rules Committee must have been aware of the practice prior to the amendments, of hearing the stay application together with the O 14 application. The intention behind amending the rules must have been, inter alia, to ensure that while a stay application is pending, no O 14 application is made. On that basis, this court concluded that the compromise order did not accord with either the spirit or the intent of s 6(1) of the Arbitration Act.
[24] As we have earlier alluded, this issue was revisited in Australian Timber. The crux of that appeal centred on whether a default judgment obtained in an action brought in breach of an arbitration agreement could be later set aside if it was the result of the defendant merely refusing to file its defence pending determination of his stay application. Further, it considered whether such a course of conduct amounted to a “step in the proceedings” under the Arbitration Act. It has not escaped our notice that Ang J sought to distinguish Samsung Corp on its facts (at [12] and [15] of Australian Timber):
[25] Having distinguished Samsung Corp, Ang J concluded, correctly in our view, at [16] that a pending stay application did not stop time running for the service of the defence:
[26] Further, Ang J determined that an act, which would otherwise be regarded as a step in the proceedings, would not be treated as such if the applicant specifically stated that he intended to seek a stay or expressly reserved his right to do so (see [22] of Australian Timber). Pending determination of the stay application, one of the options open to the defendant was to apply for an extension of time to safeguard his position and this should not constitute a “step in the proceedings” within the meaning of s 6(1) of the Arbitration Act (at [23]).
[27] We note that Assoc Prof Lawrence Boo in “Arbitration” (2004) 5 SAL Ann Rev 47 has appraised the views expressed in Samsung Corp and Australian Timber. He observes at paras 3.16–3.17 that although Ang J attempted to distinguish this court’s decision in Samsung Corp by emphasising that it dealt with an application relating to the deferring of the filing of a defence in an O 14 r 1 application, her observation that the 2004 Rules have their own self-contained provisions relating to the service of defence, time extension and default judgment contradicted Chao JA directly in Samsung Corp. In particular, Assoc Prof Boo drew attention to the observation of this court in Samsung Corp (see [22] above).
[28] We note that at paras 3.13 and 3.18, Assoc Prof Boo remarked that both decisions were at odds with each other:
[29] Turning our focus to reviewing both decisions, we cannot agree with Assoc Prof Boo’s conclusion that a question mark has been “unwittingly” introduced. Indeed, in our view, the decisions are plainly not irreconcilable. First, it must be noted that Assoc Prof Boo is a lone voice in arguing that both decisions are inconsistent. Unfortunately, he does not spell out what precisely is so inconsistent about both decisions. Other academics, for example, Asst Prof Warren B Chik in “Recent Developments in Singapore on International Commercial Arbitration” (2005) 9 SYBIL 259 at 269, have commented that both decisions are distinguishable on their facts. Asst Prof Chik does not even begin to suggest that they are ipso facto irreconcilable. Interestingly, Prof Jeffrey Pinsler’s authoritative treatise on civil procedure, Singapore Court Practice 2006 (LexisNexis, 2006) measuredly observes that Australian Timber merely defines what is to be done if a plaintiff decides to file an application for a judgment in default of defence in the face of a pending stay application. He points out quite correctly, in our view, at para 69/2/8 that Samsung Corp “must be read subject to the … observations made” in Australian Timber.
[30] Second, we found that nowhere in the grounds of Samsung Corp does this court go so far as to declare, or even suggest, that all timelines should stop pending the outcome of a stay application.
[31] Third, in our view, Assoc Prof Boo does not give adequate credit to the serious factual differences in the matrices of both cases. The main thrust of Samsung Corp was whether an application for summary judgment could only be made after the defence had been filed. As alluded to previously at [19], prior to the amendments, a plaintiff could apply for summary judgment on the basis that the defendant had no defence to the claim, immediately upon the entry of an appearance by the defendant. Therefore, it is evident that the focus of the decision in Samsung Corp centred on addressing the issue of whether a defendant could be compelled to file his defence so as to enable a plaintiff to file an O 14 application. On the other hand, the plaintiffs in Australian Timber did not apply for summary judgment under O 14 of the 2004 Rules, but for judgment in default of defence under O 19 of the 2004 Rules. A defence is not required to be filed under O 19. Such an application for a default judgment is, in fact, predicated on the absence of a defence. Both cases were therefore, as Asst Prof Chik rightly pointed out, clearly distinguishable on their facts.
[32] Fourth, we are of the opinion that far from suggesting that the timelines in the Rules of Court will stop on the filing of a stay application, Chao JA was in fact alluding to quite the opposite. By observing (at [18] of Samsung Corp) that, in the event of the failure of the stay application, “the court would no doubt make the necessary consequential orders, including setting the time-limit for the filing of Defence”, the court in Samsung Corp confirmed that fidelity to the timelines in the Rules of Court must still be observed. After the merits of the stay application have been found to be wanting, an unsuccessful defendant has to file his defence. The time limits for the filing of the defence can, at the same hearing, be set by the court. In a similar vein, Australian Timber clarifies that the onus lies on the defendant to bring forward the hearing date or apply for an extension of time to serve the defence, if a default judgment is to be avoided.
[33] We would further add that ordinarily a defendant should not be asked or compelled to file his defence while the stay application is pending, as suggested by the decision of Yeoh Poh San ([21] supra). In that case, the plaintiffs commenced proceedings against the defendant who had entered an appearance and unsuccessfully applied for a stay of the proceedings on the basis of forum non conveniens. As the time for filing the defence had expired, the defendant sought an extension of time while the plaintiffs moved to apply for judgment in default of defence. The deputy registrar granted the defendant a compromise order (ie, an extension on the understanding that the plaintiffs were not to regard the filing of the defence as a step in the proceedings). Woo JC held that, first, a plaintiff’s lawyer should not insist on the defendant filing a defence, pending the determination of the stay application, as this would render the appeal nugatory. Should the plaintiff insist on the filing of the defence, the defendant should then seek an extension of time and this would usually be granted so as not to render the appeal futile. Second, Woo JC opined that compromise orders were not to be encouraged. Accordingly, he decided that the defendant was to file her defence within a certain timeframe on the undertaking by counsel for the plaintiffs not to treat this as a submission to the jurisdiction of the Singapore court. He observed at [27]:
[34] The above dictum suggests that Woo JC was clearly mindful of the practical concern of ensuring that prejudice to the defendant would not be caused by making them run two “contradictory courses of actions”. We broadly agree. A defendant should not be compelled to file a defence and made to adopt two contrary courses of action simultaneously. Through the judicious exercise of discretion, the courts can vary timelines in appropriate cases.
[35] In this regard, we found it significant that, in Samsung Corp, Chao JA in fact cited Yeoh Poh San with approval. As noted earlier, one such reason is that until the merits of the stay application had been disposed of, the courts would not, strictly speaking, be decisively seized of the matter. It is apposite to also refer to the views of M Karthigesu JA in The Jarguh Sawit [1998] 1 SLR 648 (at [30] and [34]), a decision that Woo JC had in turn relied on in Yeoh Poh San:
[36] Fifth, if timelines are deemed to be automatically suspended once a stay application is filed, this could cause procedural gridlock by encouraging unmeritorious defendants to file frivolous applications. Clearly, this too is not a desirable outcome.
[39] Having considered the approach to be taken in dealing with stay and default judgment applications, a connected issue that inevitably arises is whether an application seeking an extension of time to file a defence constitutes a “step in the proceedings” under the Arbitration Act. The Appellants contended that they could not have applied for an extension of time to file a defence because it would irreparably have jeopardised their stay application. However, the Respondent asserted that Australian Timber stood for the proposition that an application to extend time merely preserved the defendant’s position pending final determination of the stay application and was not to be construed as a voluntary submission to jurisdiction. The Respondent is correct in this.
[40] It would be helpful if we begin by examining the genesis of what constitutes a “step in the proceedings”, first by referring to the English jurisprudence in this area and, subsequently, the position taken by the courts in other jurisdictions. Some two decades ago, Sir Michael J Mustill and Stewart C Boyd in The Law and Practice of Commercial Arbitration in England (Butterworths, 2nd Ed, 1989) (“Mustill and Boyd”) wistfully lamented at p 472 that the reported English cases were difficult to reconcile and provided little guidance on the nature of a “step in the proceedings”. Fortunately, as we shall see, some recent cases have helpfully illuminated this area of practice.
[41] A good starting point of our discussion is s 4 of the Arbitration Act 1889 (c 49) (UK) which provides as follows:
[42] When this provision was re-enacted as s 4(1) of the Arbitration Act 1950 (c 27) (UK) it remained largely unchanged and declared:
[43] In essence, s 4(1) expressly stated that the right to a stay would be lost if any pleadings were delivered or “other steps in the proceedings” were taken. This recognised that a defendant ought to elect, at the earliest possible stage of the court proceedings, whether he desired to be involved in those proceedings or he insisted on arbitration. Once a step was taken, that election would be deemed to have been made in favour of allowing the action to proceed.
[44] The conundrum which the English courts have tried to resolve time and time again is what would constitute an unauthorised step. Indeed, John Sharkey and John Dorter in Commercial Arbitration (The Law Book Company Limited, 1986) observe at p 70 that “something more than mere correspondence or other communications” is necessary to warrant that an unauthorised step has been taken. Some positive conduct consistent with the election of allowing the action to proceed is therefore required. It does indeed appear that the English position on this particular aspect of practice has until quite recently been far from being either certain or unanimous.
[45] We begin our analysis of the English position with the case of Ives & Barker v Willans [1894] 2 Ch 478 where Lindley LJ perceptively noted (at 484), in relation to s 4 of the Arbitration Act 1889, that:
[46] The approach in Ives & Barker v Willans was subsequently adopted by the decision of Zalinoff v Hammond [1898] 2 Ch 92 at 95, where Stirling J added a sheen by saying that a step referred to a “substantive step taken by a party. It may be that a very limited application to the Court—such as taking out a summons for an extension of time would be enough” [emphasis added]. This position was reiterated in The County Theatres and Hotels, Limited v Knowles [1902] 1 KB 480 (“County Theatres”) where a step in the proceedings was held to be “something in the nature of an application to the Court” (at 481). Referring to Ives & Barker v Willans, this stance was echoed by Luxmoore LJ in Lane v Herman [1939] 3 All ER 353 at 356:
[47] In Austin and Whiteley Limited v S Bowley and Son (1913) 108 LT 921, Ridley J opined at 921 that:
[48] The permissible period for seeking a stay “after appearance, and before delivering any pleadings or taking any other steps in the proceedings” was confirmed once again in s 1(1) of the Arbitration Act 1975 (c 3) (UK) which provided:
[49] The meaning of the words “after appearance, and before delivering any pleadings or taking any other steps in the proceedings” in s 1 of the Arbitration Act 1975 were considered in Roussel-Uclaf v G D Searle & Co Ltd and G D Searle & Co [1978] 1 Lloyd’s Rep 225. Graham J’s observations of s 1 (at 231) are particularly pertinent:
[50] It appears that the English courts took into consideration whether there was some “positive act” or essentially, an act which “impliedly affirm[ed] the correctness of the [court] proceedings and the willingness of the defendant to go along with a determination by the Courts of law instead of arbitration”, as observed by Lord Denning MR in Eagle Star Insurance Co Ltd v Yuval Insurance Co Ltd [1978] 1 Lloyd’s Rep 357 (“Eagle Star”) at 361.
[51] More recently, the English position has been helpfully clarified by Potter J’s incisive observations in Blue Flame Mechanical Services Limited v David Lord Engineering Limited (1992) 8 Const LJ 266 (“Blue Flame Mechanical”). He summarised (at 267) the essence of what a “step” in the proceedings, in the light of the Arbitration Act 1975, refers to:
[52] This distillation of the meaning of a “step” suggests that it is to be understood in a practical and commonsensical way. So, for instance, a step which manifests a willingness to submit to the jurisdiction of the court instead of evincing an intention to rely on arbitration ought to be regarded as taking a step in the proceedings. As Prof M Sornarajah incisively points out in “Stay of Litigation Pending Arbitration” (1994) 6 SAcLJ 61 at 73, the single clear rule on this issue is that if the defendant demonstrates a willingness to seek recourse via the gates of litigation, he cannot thereafter rely on the existence of the arbitration and request for a stay. Such an approach is based on a notion of estoppel, as noted in Halvanon Insurance Co Ltd v Companhia de Seguros do Estado de Sao Paulo [1995] LRLR 303 and in Patel v Patel [2000] QB 551.
[53] Prof D Mark Cato in Arbitration Practice and Procedure: Interlocutory and Hearing Problems (LLP, 3rd Ed, 2002) states at p 1351 that this is indeed currently the position under the Arbitration Act 1996 (c 23) (UK). Under this Act, a clear articulation of the English approach is now apparent. Sections 9(3) and 9(4) read as follows:
[54] It is plain that s 9(3) is more explicit in setting out what kind of “step” will undermine a party’s right to a stay, namely, one that “acknowledge[s] the legal proceedings against him” or one that “answer[s] the substantive claim”. Robert Merkin in Arbitration Law (Informa, 1991) at para 8.27 observes that the wording of the Arbitration Act 1996:
The words “to answer the substantive claim” in the latter provision cannot be ignored and should be read conjunctively with the earlier phrase “any step in the proceedings”. Merkin concludes that these words “to answer the substantive claim” serve to narrow the ambit of the meaning of a “step in the proceedings”.
[55] From the cases, certain principles in the English approach are now plainly discernible after several rather unhappy twists and turns. It now seems to be fairly settled that a “step” is deemed to have been taken if the applicant employs court procedures to enable him to defeat or defend those proceedings on their merits and/or the applicant proceeds, from a procedural point of view, beyond a mere acknowledgment of service of process by evincing an unequivocal intention to participate in the court proceedings in preference to arbitration. Accordingly, the courts have held the following acts as steps in the proceedings such as seeking leave to defend or to strike out (Pitchers, Ltd v Plaza (Queensbury), Ltd [1940] 1 All ER 151), attending a summons for directions (County Theatres ([46] supra), Richardson v Le Maitre [1903] 2 Ch 222 and Ochs v Ochs Brothers [1909] 2 Ch 121) and requiring disclosure of documents (Parker, Gaines & Co, Limited v Turpin [1918] 1 KB 358).
[56] For clarity, we may contrast this approach, however, with the position of the English courts when confronted with an applicant who takes a step to answer a substantive claim. A good example of this approach is found in London Central and Suburban Developments Ltd v Gary Banger [1999] ADRLJ 119. After the claimant commenced proceedings for damages for breach of contract, the defendant, without obtaining legal advice, wrote a letter entitled “Defence” to the court and the claimant’s solicitors. The letter set out inside the reasons why his firm had not broken the contract. Judge Thornton QC did not permit a stay of the proceedings as he held that this complied with the formal requirements for filing a defence under the rules of court and thereby constituted a step in the proceedings. However, he noted that, in any event, conduct displayed by a defendant which in substance amounted to an answer to the substantive proceedings could constitute a step in the proceedings. As such, the defendant was quite rightly prevented from relying on the arbitration clause regardless of whether a narrow or wide reading of s 9(3) of the Arbitration Act 1996 was adopted.
[57] In Patel v Patel ([52] supra), Lord Woolf MR determined that an act which would otherwise be regarded as a step in the proceedings would not be treated as such if the applicant had specifically stated that he intended to seek a stay. In that case, the applicant acknowledged service of the respondent’s writ endorsed with a statement of claim and indicated his intention to defend. However, no defence was served, and default judgment was entered in the respondent’s favour. The applicant later applied to set aside the default judgment. In the first supporting affidavit, he sought leave to defend the action and to counterclaim, and referred to the merits of the action. However, in the second affidavit, he appeared to contradict himself by stating an intention to seek a stay. The English Court of Appeal held that he was entitled to a stay. Lord Woolf MR held that the first affidavit was otiose as a successful application to have the judgment set aside would have rendered those applications unnecessary. Hence, on this reasoning, it would be wrong to have deprived the applicant of his right to a stay. Otton LJ decided that the second affidavit expressing the applicant’s wish for a stay overrode the possibility that the act of seeking leave to defend and counterclaim amounted to a step in the proceedings.
[58] This decision was followed subsequently by Capital Trust Investments Ltd v Radio Design TJ AB [2002] 2 All ER 159, where the Court of Appeal considered if the defendant’s application for summary judgment amounted to taking a step in the action so as to deprive him of the right to seek a stay. The court concluded that the application for summary judgment did not amount to taking a “step” because, as Clarke LJ astutely observed at [60]:
[59] Viewed in this light, it appears to us that Mustill and Boyd ([40] supra) are right in observing at p 472 that the English courts are now persuaded in reality by two crucial and practical considerations in assessing whether an applicant has taken a step in the proceedings: firstly, the conduct of the applicant must be such as to demonstrate an election to abandon his right to stay, in favour of allowing the action to proceed; and secondly, the act in question must have the effect of invoking the jurisdiction of the court.
[60] What would then have the effect of invoking the jurisdiction of the court and thereby result in an actual submission to jurisdiction under English law? In Global Multimedia International Ltd v Ara Media Services [2007] 1 All ER (Comm) 1160, Sir Andrew Morritt C elaborated on the test to be applied in considering if there has been an actual submission to jurisdiction (at [27]) as follows:
[61] Having considered the English approach on what would constitute a step in proceedings, we now turn to the question of whether a request for an extension of time would constitute a step in the proceedings under the current English position. Older cases, such as Ford’s Hotel Company, Limited v Bartlett [1896] AC 1 (“Ford’s Hotel”) and Smith & Co v British Marine Mutual Insurance Association [1883] WN 176, seem to suggest that applying for an extension of time ought to be regarded as taking a step in the proceedings.
[62] A good starting point is the decisions of the Court of Appeal and the House of Lords in Ford’s Hotel. In this case, the parties had entered into a building contract containing a clause providing for referral of the matter to arbitration in the event of a dispute. A dispute arose and the defendants applied to the plaintiff on three occasions, and obtained his consent, to an extension of time for delivering their defence. On a fourth attempt, the plaintiff refused to consent to a further extension of time. Following this, the defendants filed an application for a further extension of time for a month and successfully obtained an order extending the time for filing the defence by 14 days. Subsequently, they applied and obtained from the High Court master an order for a stay of proceedings pursuant to the arbitration clause in the contract.
[63] Before the Court of Appeal (see Bartlett v Ford’s House Company [1895] 1 QB 850), the plaintiff appealed on the ground that the defendants had taken a step in the proceedings by applying for an extension of time and were not entitled to a stay of proceedings. The defendants argued, on the other hand, that a “step in the proceedings” referred to some onward movement in the litigation by which the defendant indicated his election that the action should proceed and thereby waived his right to have the matter referred to arbitration.
[64] The Court of Appeal considered whether a request for an extension of time constituted a step in proceedings and drew a distinction between obtaining an extension of time by consent and filing an application for an extension of time. In their view, the latter constituted taking a step in the proceedings because it had the “purpose of invoking the assistance of the Court to enable the defendants to proceed with their defence to the action” (id, at 851). The application for a stay of proceedings was hence delayed. As Rigby LJ noted (id, at 852):
[65] On appeal to the House of Lords, their lordships affirmed the decision of the Court of Appeal and elaborated further on the rationale for s 4 of the Arbitration Act 1889. As Lord Halsbury LC commented in Ford’s Hotel at 5:
[66] In essence, it appears that the Court of Appeal and House of Lords were persuaded that by filing an application for an extension of time, the defendants had manifested their unequivocal intention to proceed with the action as this had been done even at the very last moment without any clear reference to alternative arbitration proceedings. Lord Shand’s observation in Ford’s Hotel at 6 is revealing:
[67] This indicates the view of the courts that the context in which the request for an extension of time was made and the reasons for the defendants’ act of delaying the proceedings by persistently requesting for extensions of time, without clarifying their intentions from the outset, mattered a great deal.
[68] We note, however, the position is that if the reason sought for the extension of time was merely to preserve the applicant’s position in the event the application for a stay was refused, the court nevertheless retained its discretion to grant a stay. This was made clear in London Sack & Bag Co Ltd v Dixon & Lugton, Ltd [1943] 2 All ER 763. Here, the defendant took out a summons asking for the action to be stayed and stated that the plaintiffs and defendants were bound by an agreement to refer their disputes to arbitration. The defendants applied for and obtained an order to extend time to serve their defence until after the hearing of the stay application. MacKinnon LJ held that the defendants could not be said to have taken a step in the action “so as to debar them from pursuing their application to stay the action” (at 767).
[69] More recently, in Marzell Investment Ltd v Transtelex Ltd (Court of Appeal (Civil Division), 25 June 1986); [1987] CLY 3099, the parties had been in dispute over service charges under a lease agreement. The plaintiffs made their claim in the county court and the defendants delivered a defence to that claim. Several disputes arose subsequently between both parties and the plaintiffs took out a summons to consolidate the subsisting county court proceedings with the new proceedings in the High Court. The High Court master held that the county court proceedings and the High Court action should be consolidated. The defendants followed by taking out a summons seeking an extension of time to file a defence and sought a stay pending arbitration. The master granted the extension of time. However, after the date for filing their defence passed, the first defendants issued a summons seeking a stay of the High Court proceedings consolidated with the county court claim and also issued a further summons seeking a further extension of time for delivering a defence.
[70] The issue before Master Turner was whether the defendants had taken a step in the proceedings. He held that the defendants’ attendance at the hearing of the summons to consolidate the High Court proceedings with the county court claim did not amount to taking a step in the action. With respect to the summons to extend time to deliver a defence, he concluded that, in the circumstances, the defendants could not have taken a step in the action because the wording of their summons had included a reference to a consideration of applying “for a stay pending arbitration”.
[71] On appeal to the judge in chambers, the master’s decision was reversed on the ground that the defendants had taken steps in the action, firstly, by appearing at the hearing of the summons to consolidate the two sets of proceedings and submitting to the order which was made; and secondly, by issuing the summons for an extension of time. On appeal to the Court of Appeal Stephen Brown LJ observed:
Accordingly, Brown LJ affirmed the judge’s holding and held that the summons for an extension of time constituted a further step in the action.
The approach of the courts in other jurisdictions
[72] It would be apposite at this juncture to briefly consider the approach adopted in other jurisdictions. At the conclusion of the review, we summarise the relevant principles that have been adopted.
Hong Kong
[73] In Halsbury’s Laws of Hong Kong vol 1(2) (LexisNexis, 2003 Reissue), it is noted at para 25.046 that:
[74] Sections 6(2) and 6(3) of the Arbitration Ordinance (Cap 341) (HK) provide as follows:
It appears that the Hong Kong courts have adopted the approach of the English courts. In Winning Godown Ltd v Sam Yu Construction Co [1987] 1 HKC 366 (“Sam Yu”), the defendant applied to resist an application for an interlocutory injunction and to stay proceedings pursuant to s 6(1) of the then Arbitration Ordinance. Section 6(1) of the then Arbitration Ordinance (cited at 368) read as follows:
[75] Citing several of the earlier mentioned English authorities, Deputy Judge Barnett considered the issue of what constituted a step in the proceedings. Although the plaintiff tried to mount the argument that any action on the part of the defendant, aside from acknowledging service and applying for a stay would constitute a step in the proceedings, Barnett DJ was not persuaded, and recognised this would lead to severe practical consequences. We note, in particular, the rationale of the court in reasoning what a “step” in an action is (at 371):
[76] Following from this reasoning, the application for the interlocutory injunction was deemed to go to the merits of the dispute between the parties and, by resisting the injunction, the defendant had taken a step in the proceedings. The stay application was thereby dismissed.
[77] In China Trade Omni Development Centre Ltd v Ramada International Inc [1989] 1 HKC 417, the plaintiffs sued the defendants for breach of a management agreement. After acknowledging service of the writ and indicating their intention to defend, the first defendant applied for a stay. Before making the stay application, the first defendant took out two summonses: first, to strike out the endorsement on the writ; and second, to strike out two of the plaintiffs for want of authority. Affidavits in support were filed, stating that these two applications were made without prejudice to the stay application. The plaintiffs argued, inter alia, that the first defendant had taken a step in the proceedings prior to making the stay application and ought to be barred from applying for a stay.
[78] In the High Court, Deputy Judge Saied agreed with the “acid test” put forth in Sam Yu ([74] supra) and was of the view (at 422) that the crux of the issue was whether there was “a willingness to go to law” and an affirmation of the institution of proceedings (citing Skopos Design Group Ltd v Homelife Nursing Ltd The Times (24 March 1988)). As he observed at 422:
[79] Subsequently, in Euro-America Insurance Ltd v Lite Best Co Ltd [1993] 1 HKC 333 (“Euro-America”), the defendant filed an affidavit in opposition to the plaintiff’s summons for judgment in default to be entered before issuing a summons for a stay. In addition, his counsel appeared at the hearing of the plaintiff’s summons. Kaplan J held that the defendant had taken a step in the action and this barred him from applying for a stay. In contrast, in Jialing (Hong Kong) Co Ltd v JA Moeller (Hong Kong) Ltd [1993] 2 HKC 637 (“Jialing”), the issue was whether the filing of an affidavit seeking leave to defend in opposition to a summons under O 14 of the Rules of the Supreme Court (Cap 4 sub leg) (HK) was a step in the action. Unlike in Euro-America, counsel for the first defendant here did not appear at the O 14 summons to argue the summons before the master but “appeared to have it adjourned until after the determination of a summons, which he told the Master he was about to issue but had not yet issued”(at 640).
[80] The High Court dismissed the summons for a stay on the grounds that first, a step in the action within the meaning of s 6 of the Arbitration Ordinance did not have to be the positive institution of an application to the court. It was sufficient if the defendant concurred in an application by the plaintiff. Kaplan J’s reasoning in Jialing merits quoting in extenso, at 643:
[81] And he elaborated further at 644–645:
Second, where an affidavit was affirmed to defend the O 14 proceedings, this constituted a step in the action, regardless of whether or not there was a subsequent hearing in those proceedings. The fact that the first defendant had not included any reference to the arbitration clause in the affidavit evidenced his election to allow the action to proceed. Accordingly, his stay application could not be acceded to.
Malaysia
[82] We also note with regard to the Malaysian position that several cases illustrate an adoption of the English approach. In Jurumurni Sdn Bhd v PPC Glomac Sdn Bhd [1999] MLJU 398, the defendant applied to stay proceedings pursuant to s 6 of the Arbitration Act 1952 (Act 93) (M’sia). Counsel for the plaintiff submitted that acts by the defendant, such as applying for an extension of time to file its statement of defence and an affidavit in reply, were tantamount to taking steps in the proceedings. Counsel for the defendant argued that the defendant had reserved its position in the matter and that praying for the extension orders should not preclude it from obtaining a stay. Adopting the position in the early English cases, the Kuala Lumpur High Court held that making an application for extension of time to file and serve a defence as well as to file an affidavit in reply were acts that amounted to steps in the proceedings.
[83] In Sanwell Corp v Trans Resources Corp Sdn Bhd [2002] 2 MLJ 625, a dispute arose between the appellant and the first respondent over a contract which contained an arbitration clause. The Malaysian Federal Court elaborated on some examples of what might constitute a “step in the proceedings” at 634–635:
The Federal Court further considered what the phrase “any other steps in the proceedings” in s 6 of the Arbitration Act 1952 referred to and held (at 633) that it must refer to “any other step(s) – other than the initial, the first, the primary or the main step in a sequence or series of steps in any proceedings” [emphasis added] before the court.
[84] More recently, in Malaysian European Production System Sdn Bhd v Zurich Insurance (M) Bhd [2003] 1 MLJ 304, the defendant, through its solicitors, wrote a letter asking the plaintiff for an extension of time to file its defence and, later, applied to stay all proceedings and refer the dispute arising between the parties to arbitration. The issue before the court, inter alia, was whether the defendant had taken a step in the proceedings by asking for an extension of time. The court drew a distinction between asking for an extension of time by applying to court and asking by letter for a time extension by consent between parties. It concluded that only the former would be tantamount to taking a step, adopting the position in Ford’s Hotel ([61] supra).
Canada
[86] This was followed by The Dufferin Paving Co Ltd v The George A Fuller Co of Canada Ltd [1935] OR 21 (“Dufferin Paving Co”) where the plaintiff brought an action to recover from the defendant certain moneys. After receiving the statement of claim, the defendant demanded particulars of the plaintiff’s claim and requested for an extension of time of ten days for delivering its defence. Thereupon the plaintiff gave detailed particulars of its claim but, instead of delivering its statement of defence, the defendant moved to apply for a stay of the action, contending that all matters were to be referred to arbitration under the agreements between both parties. Section 7 of the Arbitration Act, RSO 1927, c 97 (Can), (“the Arbitration Act 1927”) is broadly similar to its English counterpart and reads as follows (cited in Dufferin Paving Co at 25):
[87] The Court of Appeal for Ontario reasoned that the defendant, by stating in its demand for particulars that it required them for the purpose of “drawing its statement of defence”, had “already elected to defend and would defend” (at 24). Mulock CJO opined (ibid):
[88] Hence, the court held that the demand for particulars and an extension of time for defence constituted together a “step in the proceedings” within s 7 of the Arbitration Act 1927. The court distinguished it from a simple request for an extension of time to file a defence, as in Brighton Marine Palace and Pier, Limited v Woodhouse [1893] 2 Ch 486, where asking for time by letter was held not to be a step because it was “done to avoid taking a step in the action, and, therefore, there was no election to proceed with the action” (at 27 of Dufferin Paving Co).
[89] In Raymond v Adrema Limited [1963] 1 OR 305 (“Raymond v Adrema”), the action arose out of a contract of employment containing an agreement to arbitrate in the event of any dispute arising between the parties. The defendant applied for a stay but the plaintiff opposed this on the ground that the defendant had taken another step in the action by moving to set aside an order permitting service of the writ and statement of claim out of the jurisdiction on the ground of want of jurisdiction in the Ontario courts to make the order. Section 7 of the Ontario Arbitrations Act, RSO 1960, (c 18) (Can) is largely similar to s 4(1) of the Arbitration Act 1950 ([42] supra) in the United Kingdom. Looking at past Canadian decisions, Wells J noted at 309 that:
Following from this reasoning, Wells J held that the application brought by the defendant to set aside the order permitting service of the writ of summons and statement of claim on the defendant out of the jurisdiction was not such a step. It was (ibid):
[90] We note that Wells J emphasised that the court would also look at, firstly, whether there was no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement and, secondly, whether the applicant was, at the time when the proceedings were commenced, still ready and willing to do all things necessary for the proper conduct of the arbitration. As such, the defendant was not entitled to a stay since it could not show that it was and remained ready and willing to do all things necessary for the proper conduct of the arbitration.
[91] Subsequent Canadian cases have adopted the approach taken in Raymond v Adrema. In Fathers of Confederation Buildings Trust v Pigott Construction Co Ltd (1974) 44 DLR (3d) 265, a dispute arose between the parties in relation to a building contract. The issue at hand was whether any of the actions taken by the defendant were steps in the proceedings and, therefore, the defendant would be precluded from procuring a stay of proceedings by s 6 of the Arbitration Act, RSPEI 1951, c 12 (Can), essentially similar to s 7 of the Arbitration Act 1927 ([86] supra). The defendant filed a demand for further particulars as well as a notice of motion for an order to strike out the plaintiff’s statement of claim. Citing Ives & Barker v Williams ([45] supra), the Prince Edward Island Supreme Court held that where a party made a demand for particulars in order to guide himself as to whether he would allow the action to proceed in court or avail himself of the provisions of the arbitration clause in the pre-existing agreement to apply for a stay of proceedings, such action by him did not constitute a step in the proceedings. The court emphasised at 273 that:
[92] In Central Investments & Development Corporation v Miller Associates Ltd (1982) Nfld & PEIR 35, the defendant applied for an order staying the proceedings by the plaintiff pursuant to a pre-existing agreement to arbitrate. The plaintiff argued that the defendant had applied for and was granted an extension of time to file his defence and this constituted a step in the proceedings. Unsurprisingly, the defendant responded that such an application was not a step in the proceedings. The court held at 37 that the extension of time was “for the purpose of receiving proper instructions in order to prepare and file a statement of defence, due to the complexity of the case and its many issues”. Therefore, the purpose of requesting an extension of time was to receive proper instructions “only consequent to which could a defence be prepared, or alternatively, such instructions might equally establish to prudent counsel, that no defence was available” (at 38). In a similar vein to Raymond v Adrema, the application for time was held not to advance the matter for trial or put the action in such a condition that it might be dealt with by the court.
[93] Having examined the approaches adopted in various other jurisdictions, such as Hong Kong, Malaysia and Canada, it appears to us that the courts in these jurisdictions appear to quite uniformly take into consideration the circumstances enveloping an act in deciding if it constitutes a step in the proceedings. First, where a party performs or carries out a significant act signifying that it is submitting to the court’s jurisdiction rather than to arbitration to resolve the outstanding issues between the parties, that party will be deemed to have taken a step in the proceedings. Second, the act will be regarded as a step in proceedings if it is a step in furtherance of the action by advancing the hearing of the matter in court in contrast to one that serves to smother the action and stop the proceedings dead in its tracks. Third, where a party does an act with the consent of the other party, this will not amount to taking a step in the proceedings. Finally, the courts usually take the position that parties should not blow hot and cold or equivocate. Instead, they should be decisive about whether they are insisting on arbitration in preference to litigation. Disingenuous reservations will be disregarded. Should a party wish to proceed to arbitration, that party must be ready and willing to do all things necessary for the proper conduct of the arbitration.
[94] In our view, an application for an extension of time to file a defence plainly does not constitute a “step in the proceedings” under s 6(1) of the Arbitration Act. First, as mentioned earlier, we agree with the views of Woo JC expressed in Yeoh Poh San ([21] supra) that, where a plaintiff’s solicitor insists on the filing of the defence notwithstanding the pending application or an appeal therefrom, the defendant’s solicitors should then promptly apply for an extension of time to file the defence pending the outcome of the appeal. A pragmatic approach is warranted when assessing the procedural act in question. We are not impressed by some of the older English cases that appear to place an undue premium on procedural subtleties rather than on the substance of the issue at hand. In our view, it would be a mistake to place too much emphasis on the means adopted rather than on the ends of an application to stay which is to challenge the appropriateness of the court’s jurisdiction and to bring an immediate closure to the pending court proceedings. We should add that citing isolated decisions from other jurisdictions will usually not be helpful in resolving the competing tensions that are almost invariably present in assessing this issue. Each case should be approached and resolved on the basis of principle rather than merely precedent.
[95] This brings us to the case of Ford’s Hotel ([61] supra) where both the English Court of Appeal and House of Lords decided that a request for an extension of time constituted a step in the proceedings. As alluded to earlier, the defendants in Ford’s Hotel thrice obtained the plaintiff’s consent for further time to deliver their defence, and upon their fourth request being refused, took out a summons and obtained an order for a further 14 days. The taking out of the summons was held to be a step in the proceedings by the House of Lords because “[t]he proceeding of presenting such a summons and supporting it before the master … implied a statement to the effect that the appellants were to defend the action” (per Lord Shand at 6). With respect, while that case is not directly relevant on the facts before us and can be distinguished, we are of the view, after mature reflection, that the approach postulated is archaic, inconsonant with common sense and ought not to be followed in Singapore. An application for an extension of time is not in itself tantamount to an unequivocal submission to jurisdiction. It is not so plainly “done with the intention of electing to litigate, rather than stand on the right to arbitrate” (see the quote from Blue Flame Mechanical at [51] above). We hasten to add that, if it is indeed plain that the purpose of asking for an extension of time is not, in the final analysis, bona fide for the purposes of staying the proceedings pending arbitration, the court in the exercise of its discretion can either refuse the extension of time or dismiss the stay application.
[96] When is a party regarded as having submitted to the jurisdiction of the Singapore courts? This was most recently addressed in Republic of Philippines v Maler Foundation [2008] 2 SLR 857 (“Republic of Philippines”) and it offers some useful insights. Though this is not a case involving a contest on the applicability of an arbitration clause, it is nevertheless instructive as it clarified the meaning of what a “step in the proceedings” meant in a not altogether dissimilar statutory context. The appeal arose from competing claims to a sum of money (“the Funds”) which formed part of a larger pool of assets originally held in the Swiss bank accounts of the first to fifth respondents. These assets were allegedly ill-gotten gains accumulated by the late Ferdinand E Marcos during his term as President of the Republic of the Philippines. At the appellant’s request, the Swiss courts issued several freezing orders against the assets pending legal proceedings in the Philippines to determine their ownership. In 1997, the freezing orders were varied and the assets were released to Philippine National Bank (“PNB”) to hold the moneys in reputable banks as an escrow agent until a competent court could make a final and enforceable decision as to their ownership. PNB deposited the assets with various banks in Singapore, with the Funds placed in an account with WestLB AG, Singapore (“WLB”). In 2003, following an order by the Supreme Court of the Philippines that the assets be forfeited to the appellant (“the Forfeiture Order”), PNB instructed WLB to release the Funds to it. However, WLB did not do so as prior to the due date for the release of the Funds it received competing claims to the Funds.
[97] WLB then commenced interpleader proceedings to determine the ownership of the Funds. The appellant was later added as a defendant to the interpleader proceedings. It took out an application for the interpleader proceedings to be stayed, contending that it owned and/or had an interest in the Funds by virtue of the Forfeiture Order and was entitled as a sovereign nation to assert state immunity in respect of the Funds pursuant to s 3 of the State Immunity Act (Cap 313, 1985 Rev Ed). The appellant prayed for the following orders (see Republic of Philippines at [20]):
The respondents, on the other hand, disputed the legal effect of the Forfeiture Order under Singapore law and resisted the stay application, arguing that the Forfeiture Order did not give the appellant a sufficient interest in the Funds to assert state immunity and that the appellant had already submitted to the jurisdiction of the Singapore courts.
[98] At first instance, Kan Ting Chiu J dismissed the stay application on the ground that the appellant had submitted to the jurisdiction of the Singapore courts through its own conduct by including a specific prayer in the stay application for the Funds to be released to it (“Prayer 2”), as well as through the acts of its agent, PNB (see WestLB AG v Philippine National Bank [2007] 1 SLR 967). Hence, by filing written submissions in the interpleader proceedings and claiming a beneficial interest in the Funds, Kan J held that PNB was trying the appellant’s claim and thereby submitting to the jurisdiction of the Singapore courts and could no longer invoke state immunity.
[99] On appeal, the appellant contended that Kan J was wrong in holding Prayer 2 to be a step in the proceedings when its objective in the stay application was to assert state immunity. This court upheld the decision at first instance and found that the appellant had submitted to the jurisdiction of the Singapore courts as Prayer 2 was a step in the proceedings since it demonstrated the appellant’s unequivocal, clear and consistent intention to submit to jurisdiction. The appellant had indicated it would proceed with Prayer 2 even if the stay application succeeded and this suggested that the appellant had always intended to invoke the jurisdiction of the Singapore courts to release the Funds to it and that Prayer 2 was not merely a request for an order consequential to a stay order. As Chan Sek Keong CJ noted at [80]:
It is plain that the appellant was attempting to have its cake and eat it. This is of course legally impermissible. The case is a useful illustration of the point that a party applying for a stay should not blow hot and cold.
[100] Second, we wish to reiterate that in ascertaining what a step in the proceedings is, the context in which a request for an extension of time is sought is germane in assessing if it constitutes a step – indeed, the background forms the canvass against which the application for an extension of time is to be assessed. The application for extension of time to file a defence is merely an acknowledgment by a defendant that the court has transient jurisdiction over the parties. As such, an application actually makes it abundantly clear to the opposing party and the court that the defendant does not intend to defend the action in court pending the outcome of its application for a stay. This, to us, is such a plain proposition that we remain puzzled as to why the courts have equivocated on this issue for so long.

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Carona Holdings Pte Ltd and Others v Go Go Delicacy Pte Ltd

Laws this judgment relies on

Grounds of decision

The approach of the courts in other jurisdictions

Hong Kong

Malaysia

Canada