Jiangsu Hantong Ship Heavy Industry Co Ltd formerly known as Hantong Ship Machinery Equipment (Tongzhou) Co Ltd and Another v Sevan Pte Ltd

Tan Lee Meng J:

[1] The appellant, Jiangsu Hantong Ship Heavy Industry Co Ltd (“Hantong”), owns a shipyard in China. The defendant, Sevan Pte Ltd, is a company within a Norwegian offshore maritime group (collectively referred to as “Sevan”). Hantong, which instituted Suit No 961 of 2008 against Sevan Pte Ltd to recover monies owed to it, appealed against the decision of Assistant Registrar Lim Jian Yi (“AR Lim”) to stay the proceedings in this suit in favour of arbitration proceedings in London.

[2] On 27 May 2006, Hantong and Sevan entered into a contract, under which the former agreed to build a vessel called “Hull 21” for the latter (“the contract”). Under the contract, Sevan was required to make progress payments for the construction of Hull 21 within 5 banking days following its receipt of Hantong’s invoices.

[3] Hantong, which contended that by 12 December 2008, Sevan owed it USD 2,854,829.50 with respect to progress payments that were due for the construction of Hull 21, instituted legal proceedings in the High Court (“the proceedings”) to recover the amount due to it.

[4] Sevan responded by applying for the proceedings to be stayed in favour of arbitration proceedings in London in accordance with clause 34 of the contract, which provides as follows:

[5] Hantong, which opposed a stay of the proceedings, argued that clause 34 of the contract did not come into the picture as there is no “dispute” between the parties to be referred to arbitration.

[6] On 1 April 2009, AR Lim ordered a stay of the proceedings. Hantong appealed against AR Lim’s decision.

[7] At the outset, reference may be made to s 6 of the International Arbitration Act (Cap 143A, 2002, Rev Ed) (“IAA”), which provides as follows:

[8] As there is no allegation that the arbitration agreement is null and void, inoperative or incapable of being performed, what is in issue is whether or not there is a “dispute” between the parties to warrant a stay of the proceedings.

[9] Hantong, which insisted that it has no dispute with Sevan, claimed that Sevan had already admitted liability for the sum claimed by it and that Sevan’s counterclaim has no merit.

[10] To determine whether there is a dispute for the purpose of an application for a stay of proceedings under the IAA, it is immaterial that the defence or counterclaim of the party seeking a stay appears to be weak. In Dalian Hualiang Enterprise Group Co Ltd v Louis Dreyfus Asia Pte Ltd [2005] 4 SLR 646, Woo Bih Li J stressed at [75] that “if the defendant at least makes a positive assertion that he is disputing the claim… then there is a dispute even though it can be easily demonstrated that he is wrong.”

[11] In Tjong Very Sumito and Ors v Antig Investments Pte Ltd [2009] SGCA 41(“Tjong”), V K Rajah JA, who delivered the judgment of the Court of Appeal, reiterated at [29] that as the whole thrust of the IAA is geared towards minimizing court involvement in matters that the parties had agreed to submit to arbitration, concurrent arbitration and court proceedings are to be avoided unless it is for the purpose of lending curial assistance to the arbitral process. He added at [69] that in line with the prevailing philosophy of judicial non-intervention in arbitration, the court will interpret the word “dispute” broadly and will “readily find that a dispute exists unless the defendant has unequivocally admitted that the claim is due and payable”. V K Rajah JA referred to Hayter v Nelson Home Insurance Co [1990] 2 Lloyd’s Rep 265, where Saville J explained as follows:

[12] Although Lord Saville’s illustration was offered before the 1996 English Arbitration Act came into force, it remains relevant today for an elucidation of what is a dispute for the purpose of staying court proceedings in favour of arbitration.

[13] In the present case, Sevan’s director, Mr Ragnar Boe, stated in his affidavit as follows at [12]:

[14] Broadly speaking, Sevan alleged that Hantong committed a number of breaches, in respect of which it made cross-claims. It contended, among other things, that Hantong is professionally and technically ill-equipped to perform its obligations and commitments under the contract and that Hantong’s delayed performance of its obligations gives rise to claims for liquidated damages.

[15] Sevan also denied having admitted liability for the amounts stated in Hantong’s invoices. Hantong had relied on, among other things, the minutes of a meeting on 2 December 2008 and some correspondence between the parties to show that Sevan never expressly challenged its demand for payment of the invoiced sums. Hantong also pointed out that Sevan had asked for more time to settle the invoiced amounts. However, Sevan submitted that the minutes of the meeting of 2 December 2008 had merely recorded Hantong’s view and not any admission of liability on its part. As for the correspondence referred to by Hantong, Sevan pointed out that it had been exchanged in the context of commercial negotiations to resolve the dispute between the parties amicably. Furthermore, Sevan had not had the benefit of legal advice at the material time.

[16] It is noteworthy that in Tjong (supra, [11]), V K Rajah JA stressed at [61] that, generally speaking, the court should not be astute in searching for an admission of a claim, and would ordinarily be inclined to find that a claim is not admitted in all but the clearest of cases. This is not one of the “clearest of cases” where it can be said that the defendant had unequivocally accepted that the amount claimed is owed to the plaintiff.