Suit No 412 of 2016 [2019] SGHC 15

Introduction

This case followed my earlier decision in Gulf Hibiscus Ltd v Rex International Holding Ltd and another [2017] SGHC 210 (“Gulf Hibiscus (Grant of Stay)”), where I affirmed the decision of the learned Assistant Registrar (“the AR”) to grant a stay of court proceedings on the basis of case management. Neither side appealed against my earlier decision.

I subsequently clarified the terms of the order made. On 30 April 2018, I made an order for the lifting of the stay if the parties had not made progress on arbitration or obtained another order of court by the close of business on 31 May 2018. The defendants have since been granted leave by the Court of Appeal to appeal against this decision.

Facts

The parties

The parties were identical to those in Gulf Hibiscus (Grant of Stay). The plaintiff is one of three shareholders of Lime Petroleum PLC (“Lime PLC”), an Isle of Man company. The other shareholders are Rex Middle East Limited (“RME”) and Schroder & Co Banque SA (“Schroder”). The shareholders are hereinafter collectively referred to as “the Shareholders”. The first defendant, Rex International Holding Limited, is the ultimate holding company of RME. The second defendant, Rex International Investments Pte Ltd, is the intermediate holding company of RME, and a wholly owned subsidiary of the first defendant.

Procedural history

The background facts were recounted in Gulf Hibiscus (Grant of Stay) from [2] to [10]. It suffices to note that the plaintiff commenced an action by way of Suit No 412 of 2016 (“S 412/2016”) to sue the defendants in respect of alleged wrongs committed by them and their associated companies in joint ventures between the two sides. The details of these claims are summarised in Gulf Hibiscus (Grant of Stay) at [50]. Running parallel to the action commenced here in Singapore were a number of connected proceedings in foreign jurisdictions (see Gulf Hibiscus (Grant of Stay) at [9]).

The dispute at hand centres on a Shareholders’ Agreement dated 24 October 2011, which also governed the relationship between the plaintiff, RME, Schroder and Lime PLC (“the SHA”). Clause 25.2 of the SHA provides for a tiered dispute resolution procedure, starting first with amicable resolution, then negotiations between a principal officer from each of the Shareholders, and then arbitration under the extant Rules of International Arbitration of the International Chamber of Commerce (“ICC Rules”) (see Gulf Hibiscus (Grant of Stay) at [73]).

The defendants sought a stay of the proceedings in S 412/2016. The AR granted a stay on the basis of the court’s inherent jurisdiction to stay proceedings for case management interests. The plaintiff filed an appeal against the AR’s decision. This appeal formed the subject of Gulf Hibiscus (Grant of Stay), where I affirmed the AR’s decision for S 412/2016 to be stayed with the following conditions: Gulf Hibiscus (Grant of Stay) at [53]:

A hearing was held on 13 November 2017 (“the Clarification Hearing”) where I clarified that the requirements in condition (a) of the stay were conjunctive. The word “and” should replace the word “or”, such that condition (a) would read:

I invited the defendants to make an application for the stay to continue if no further action was taken in the interim.

As it was, the plaintiff applied in April 2018 for the lifting of the stay, on the grounds that the conditions had been met for an application to be made. On 30 April 2018, I ordered for the stay to be lifted at the close of business of 31 May 2018 unless arbitration was commenced or another order of court was granted before then.

I declined to grant the defendants leave to appeal against my decision. On 10 September 2018, the Court of Appeal granted them leave to appeal.

The parties’ cases

The plaintiff’s case

The plaintiff argued that the stay should be lifted due to the non-satisfaction of the events specified in condition (a) of the stay. First, the tiered dispute resolution under cl 25.2 of the SHA had not been triggered within three months of the judgment. The plaintiff interpreted cl 25.2 of the SHA to require the parties to engage in two rounds of negotiations before proceeding to arbitration. Negotiation was to first take place between the parties. If an amicable resolution was not reached, a second round of negotiations would take place between the Associate Director of Schroder, the Managing Director of Hibiscus Petroleum Berhad (“HPB”) and the Chairman of RME.

The plaintiff argued that RME had failed to take “all reasonable endeavours to resolve the matter amicably”, as required under cl 25.2 of the SHA, and had in fact obstructed such a resolution. The plaintiff submitted that the obligation to take “all reasonable endeavours” required the defendants to take all reasonable steps which a prudent and determined man would have taken in the circumstances. However, at the first round of negotiations, RME did not take the negotiations seriously. RME did not indicate what disputes were to be discussed at a proposed meeting in its November 2017 correspondence with the plaintiff. In December 2017, it foreclosed the amicable settlement of the dispute, before subsequently asserting that it would be open to explore an amicable resolution. This change of position showed a lack of sincerity.

At the second round of negotiations, the defendants breached cl 25.2 of the SHA by nominating someone other than the Chairman of RME to attend negotiations with the Managing Director of HPB. Although the clear wording of cl 25.2 of the SHA required the Chairman of RME, Karl Lidgren, to attend the meeting, he deliberately made himself unavailable for the meeting in Singapore. The defendants initially proposed that Lidgren’s nominee attend the meeting instead, and only suggested at a very late stage that Lidgren conduct a teleconference. RME’s actions cumulatively demonstrated its failure to take reasonable steps to resolve matters amicably. Conversely, there had been no delays on the plaintiff’s part, and the plaintiff acted reasonably and in good faith in trying to expedite negotiations.

Second, arbitration had not commenced within five months of the judgment. The defendants had no good explanation for this, despite their earlier assurances that they were “willing to do all things necessary” in accordance with cl 25.2 of the SHA. The defendants argued that compelling RME to commence an arbitration would not make commercial sense and would unfairly prejudice them, but as they had failed to raise these concerns at the Clarification Hearing earlier, they were therefore precluded from raising them. The court was in any event functus officio as regards further clarifying this particular issue.

The defendants’ case

The defendants’ first argument was that the conditions for the lifting of the stay had not been met. The Clarification Hearing had made clear that the parties could apply for the stay to be lifted upon the non-happening of two events in condition (a) of the stay: the triggering of cl 25.2 of the SHA and the commencement of arbitration. If one of the events occurred, parties would have no right to apply to lift the stay. RME had issued a notice under cl 25.2 of the SHA on 23 November 2017, ie, within three months from the date of the Gulf Hibiscus (Grant of Stay) judgment, inviting the plaintiff to attend a meeting to attempt to resolve the dispute. The first of the two contemplated events had occurred. The plaintiff was therefore not entitled to apply to lift the stay.

The defendant’s second argument was that the court should not exercise its discretion to lift the stay. The stay had been granted on the basis that the plaintiff’s right to choose whom to sue and where was a first order concern that was subject to the second and third higher-order concerns identified in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2016] 1 SLR 373 (“Tomolugen”). These second and third higher-order concerns were, respectively, the prevention of the plaintiff’s circumvention of the arbitration clause and the court’s inherent jurisdiction over case management. RME had consistently maintained that it would participate in the arbitration commenced by the plaintiff. The mere fact that RME did not commence the arbitration as claimant should not change the basis of the stay. To allow otherwise would effectively permit the plaintiff to circumvent the arbitration agreement or Gulf Hibiscus (Grant of Stay) itself.

My decision

Having considered the affidavits and submissions, I came to the conclusion that both sides had not moved the case along through arbitration as expeditiously as possible. On 30 April 2018, I gave parties notice that the stay would be lifted on 31 May 2018, unless arbitration was commenced by then or another order of court was granted.

This outcome simply flows from the nature of the case management stay. As indicated in Gulf Hibiscus (Grant of Stay) at [92] and [102], the case management stay could not continue indefinitely, given its conditional nature and the liberty of the parties to apply to court to reinstate proceedings if the relevant conditions were met. In any case, the court was entitled to lift the stay in the event of undue delay, through the exercise of its general discretion. I will now set out my reasons for lifting the stay.

The court’s power to lift the stay

The terms granting parties liberty to apply to court to lift the stay

The defendants’ first argument was that condition (a) of the stay had not been met, such that neither party had the right to apply to the court to lift the stay. I do not agree that the conditions of a stay have the effect of precluding a party from seeking relief unless and until the conditions have been met.

It should first be clarified that the court’s discretion to lift the stay is not constrained by or contingent upon the conditions of the stay which gave parties liberty to apply for the lifting of the stay. The liberty granted in conditions (a) and (c) of the stay simply allowed parties to return to court to make an application for the stay to be lifted if the relevant conditions were met. It provided a further assurance that parties need not take a separate process in order to bring the matter back before the court.

As regards the subsequent clarification of the conditions of the stay, the original order at [53] of Gulf Hibiscus (Grant of Stay) was probably not crafted as clearly as it should have been. However, and in any event, my clarification at the Clarification Hearing was not appealed against, nor, if there was any doubt as to whether an appeal was immediately available, was any application made for leave to appeal to be granted.

The court’s general discretion to lift the stay

Regardless of whether the conditions of the stay were met, the court retains the general discretion to lift the stay. Granting liberty to the parties to apply to the court to lift the stay did not preclude the court from exercising its inherent power to manage its processes to “ensure the efficient and fair resolution of disputes”: see Gulf Hibiscus (Grant of Stay) at [62], citing Tomolugen at [188]. The court’s general discretion to lift the stay also flows from the fact that the stay was imposed in the exercise of the court’s selfsame case management powers. Such discretion could be exercised even if the conditions of the stay were not met, though one would expect that the circumstances in such a situation would be rather exceptional.

As a case management stay is imposed by the court pending a particular determination or outcome, the court does not become functus officio after the stay is granted. As such, a stay is not circumscribed by the conditions explicitly laid down at the time of its imposition. Matters arising after a stay has been granted may affect its continued operation, and may be material for the court’s consideration. Accordingly, even if the liberty provisions were not triggered on the facts, eg, if the defendants were found to have triggered the tiered dispute resolution under cl 25.2 of the SHA, the court was still entitled in its general discretion to consider lifting the stay if evidence was brought concerning issues that arose due to the continuation of the stay.

This position is further supported by the discussion in Tomolugen, where the Court of Appeal considered various jurisdictions’ approaches to the exercise of the court’s inherent power to stay or manage court proceedings. At [186], the Court of Appeal concluded:

I interpreted the approach mandated in Tomolugen as aimed at achieving efficient and fair outcomes. For present purposes, two relevant principles emerge. First, the court’s power to stay proceedings derives from its role in ensuring the proper resolution of the overall dispute. This power is inherent: it derives from the court’s role as “final arbiter”, and does not derive from statute. Second, the scope of the court’s power to make suitable orders to that end is determined by the circumstances; there are no a priori bright-line rules applicable in all situations.

As I understood it, the parties did not take issue with the existence of the court’s general discretion to lift the stay. However, and in any case, the conditions of the stay only restricted the parties’ liberty to apply to the court to lift the stay, and did not delimit the circumstances in which the court could actually lift the stay. Accordingly, even if I was wrong about the existence of the court’s general discretion to lift a stay that it previously granted, I was not precluded from lifting the stay in the present case due to the specific terms of the order I had made in Gulf Hibiscus (Grant of Stay).

The exercise of the court’s discretion to lift the stay

Having established the court’s power to lift the stay, the question that then arises is whether the court should exercise its discretion to lift the stay in the present circumstances.

The stay was granted in the exercise of case management powers to “control and manage proceedings between the parties for a fair and efficient administration of justice”: Gulf Hibiscus (Grant of Stay) at [59]. In the exercise of these case management powers, the court’s concern is to determine the best and most appropriate course of action for the efficient, just and fair disposal of the matters before it, taking into account other proceedings, including alternative dispute resolution proceedings, that are either ongoing or available to the parties. The court must take a robust approach in these assessments, as there is no a priori guidance that can determine the best outcome in a particular case.

Which factors are relevant in such an assessment would depend on the precise circumstances; it would not be fruitful to attempt an exhaustive listing. As noted in Tomolugen at [188], whether measures taken by the court are appropriate on a stay application are dependent on the circumstances, but “the balance that is struck must ultimately serve the ends of justice”. At [188], the Court of Appeal also referred to the set of factors considered by Venning J at [56] in Danone Asia Pacific Holdings Pte Ltd and others v Fonterra Co-operative Group Limited [2014] NZHC 1681 as providing the following “comprehensive (although by no means exhaustive) and instructive guide” for courts deciding applications to stay court proceedings whose outcome depends on the resolution of a related arbitration:

It follows that whether the lifting of such a stay is appropriate would also be dependent on the circumstances. As a general rule, where the granted stay is conditional, the parties’ compliance with the stipulated conditions would be a material consideration. However, in addition, the court would need to assess whether the stay continues to achieve its purpose of ensuring that a dispute is resolved efficiently and fairly. To my mind, where the resolution of the dispute in question is in fact stymied by the continuation of the stay, the court can and should reconsider the terms of the stay. It is not in the interests of justice that case management stays remain indefinitely or for prolonged periods of time. Disputes ought to be resolved one way or another. The spectre of Charles Dickens’ Jarndyce v Jarndyce must be kept at bay.

In this regard, I did not find that the Privy Council decision in Hermes One was relevant: crucially, it was not concerned with the lifting of a stay. The case concerned the interpretation of an arbitration clause providing that, in the event of an unresolved dispute, “any party may submit the dispute to binding arbitration”. The issue was thus: where such a clause applied, were parties entitled to a stay without having commenced arbitration? Lords Mance and Clarke’s observations that submission to arbitration did not require the actual commencement of arbitration would indeed be a pertinent consideration in determining applications for the imposition of a stay in some circumstances. However, different considerations could come into play in the court’s exercise of the discretion to lift such a stay. Furthermore, the clear wording of condition (a) of the present stay required arbitration to be “commenced”, not merely that parties submit to arbitration.

In the present case, part of what the plaintiff raised was pertinent. There was an absence of progress in the case since the original order was made in 2017. Given that the dispute relates to matters that arose in 2015, this state of affairs was of some concern. The concern that the grant of a stay might unduly delay proceedings was raised in Gulf Hibiscus (Grant of Stay) at [102], where I stated clearly that the defendants should move RME to commence arbitration against the plaintiff, or risk having the stay lifted:

Accordingly, I did not find, and did not have to find, that there was such conduct on the part of the defendants as to amount to a lack of reasonable effort to arrive at an amicable resolution, as argued by the plaintiff. The upshot was that progress on the matter between the parties had, whatever the cause, essentially ground to a halt, and the dispute remains hanging. The stay should be lifted, if only to allow for the just and fair disposal of these longstanding matters.

I had sympathy for the defendants’ arguments. The court would not generally wish to compel a party to commence suit or pursue dispute resolution proceedings. An arbitration agreement upheld by the court only prescribes a particular form of dispute resolution, arbitration in such an instance trumping litigation. That is the general position. But the present situation was not a run-of-the-mill case. The difficulty here was that the defendants were not party to the arbitration mechanism under cl 25.2 of the SHA: only RME, their subsidiary, was party to the SHA. The fact that the defendants were not party to an arbitration agreement with the plaintiff was discussed in Gulf Hibiscus (Grant of Stay) at [54]-[60] and [102]. Leaving the stay in place for a prolonged period essentially left the plaintiff with only the choice to arbitrate vis-à-vis RME. On the other hand, the defendants themselves apparently had little incentive to procure arbitration on the part of their associate companies. They argued that they should not be put to the expense of doing so, given that it was the plaintiff’s dispute, and that they would essentially have to put forward a negative case.

Considering that the overriding objective was one of ensuring the resolution of an extant dispute, the better course to my mind was to lift the stay if no progress was made. Accordingly, that was my order.

My decision no doubt had the effect of compelling the defendant to choose between initiating arbitration proceedings or continuing the civil suit in S 412/2016. The defendants would seem content to leave things as they were: they are the defendants after all. However, while I had some sympathy for the defendants’ stance, I could not continue the stay indefinitely, given the context of the specific case, namely, that the defendants themselves were not directly parties to an arbitration agreement with the plaintiff. Although the defendants could have moved RME to initiate arbitration against the plaintiff (see Gulf Hibiscus (Grant of Stay) at [102]), it had not done so. Seeing as the plaintiff also did not initiate arbitration against RME, and given that no progress was made under cl 25.2 of the SHA, the lifting of the stay will enable the proceedings in S 412/2016 to continue.

Specific orders made

As I anticipated that the parties would take various steps to proceed to arbitration or to recommence the civil suit in S 412/2016, I did not order an immediate lifting of the stay on 30 April 2018, but allowed parties until the close of business on 31 May 2018 to commence arbitration or to obtain a fresh court order for the continuation of the stay. As the latter events did not occur, the stay was lifted on 31 May 2018.

Conclusion

The plaintiff’s application to the court to lift the stay in S 412/2016 was thus granted. The Court of Appeal has granted the defendants leave to appeal against this decision.