High Court · Decided 29 May 2014

Silica Investors Limited v Tomolugen Holdings Limited and others

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[2014] SGHC 101Case no. Suit No 560 of 2013 (Registrar's Appeals Nos 334, 336, 337 and 341 of 2013)

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Quentin Loh J:
Introduction
[1] These registrar’s appeals raise several issues on the arbitrability of intra-corporate disputes. First, whether minority oppression claims under s 216 of the Companies Act (Cap 50, 2006 Rev Ed) (“the CA”) are arbitrable under Singapore law. Secondly, what principles, if any, should govern a stay application under s 6 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”) where only part of the plaintiff’s claim falls within the scope of the arbitration agreement. Thirdly, whether the Court can exercise its inherent powers of case management to stay proceedings when only some of the parties before it are parties to the arbitration agreement.
The facts
The parties
[2] The plaintiff, Silica Investors Limited (“the Plaintiff”), is the registered shareholder of 3,750,000 shares (representing about 4.2% of all the shares) in the 8th defendant, Auzminerals Resource Group Limited (“AMRG”), a public company limited by shares and incorporated under the laws of Singapore. The Plaintiff became a shareholder of AMRG in July 2010 when it purchased its shares from the 2nd defendant, Lionsgate Holdings Pte Ltd (formerly known as Tomolugen Pte Ltd) (“the 2nd Defendant”), pursuant to a Share Sale Agreement dated 23 June 2010 (“the Share Sale Agreement”) and a Supplemental Agreement dated 5 July 2010 (“the Supplemental Agreement”) entered into between the Plaintiff and the 2nd Defendant.
[3] The 1st defendant, Tomolugen Holdings Limited (“THL”), holds 49,603,397 shares (representing about 55% of all the shares) in AMRG, and is also the sole shareholder of the 2nd Defendant. The 2nd Defendant holds 8,135,001 shares (representing about 9% of all the shares) in AMRG. Together, THL and the 2nd Defendant are the majority and controlling shareholders of AMRG.
[4] The 3rd defendant, Lim Sing Hok Mervyn (“Mervyn Lim”), was a director of the 2nd Defendant and of AMRG, as well as of Solar Silicon Resources Group Pte Ltd (“SSRG”), a wholly-owned subsidiary of AMRG, at different periods of time between 2009 and 2012. He is a registered shareholder of 500,000 shares (representing about 0.56% of all the shares) in AMRG. The 4th defendant, Russell Henry Krause (“Russell Krause”), is a director of AMRG and the managing director of SSRG. He holds 1,375,000 shares (representing about 1.5% of all the shares) in AMRG. The 5th defendant, Young Robert Tancuan (“Robert Young”), is a director of the 2nd Defendant, AMRG, and SSRG. He holds 250,000 shares (representing about 0.28% of all the shares) in AMRG. He is also a director and shareholder of two other companies with shareholdings in AMRG amounting to approximately 2.4% and 1.1% of the total share capital. The 6th defendant, Yong Peng, was previously a director of AMRG and SSRG. He holds 250,000 shares (representing about 0.28% of all the shares) in AMRG.
[5] Finally, the 7th defendant, Roger Thomas May (“Roger May”), is a director of AMRG who was appointed on 29 May 2013. According to the Plaintiff, Roger May was at all material times a “shadow and/or de facto” director of AMRG representing the interests of THL and the 2nd Defendant on the board of directors of AMRG.
The Plaintiff’s pleaded case
[6] The Plaintiff’s action in Suit No 560 of 2013 (“S 560/2013”) is a claim under s 216 of the CA. The writ of summons in S 560/2013 was filed on 21 June 2013. The parties do not dispute that the Plaintiff’s claim in S 560/2013 is founded on four main allegations. They are as follows:
(a) On 15 September 2010, 53,171,040 shares in AMRG were issued to THL (“the Share Issuance”), purportedly as payment for a debt for the transfer of certain mining licenses and exploration permits in the Far North East of Australia (known as “the Solar Silica Assets”) from the predecessor company of the 2nd Defendant and its subsidiaries to SSRG. The Share Issuance had the effect of diluting the Plaintiff’s shareholding in AMRG by more than 50%. The Plaintiff alleges that the alleged debt was fictitious and never existed. In the course of the due diligence conducted by the Plaintiff for the purposes of its investment in AMRG in connection with the Share Sale Agreement, the 2nd Defendant and Roger May warranted and/or represented to it that the Solar Silica Assets had been transferred to SSRG and that SSRG owned the Solar Silica Assets free of liabilities. In particular, by Sch 1, cl 8.3 of the Share Sale Agreement, it was warranted that AMRG and its related corporations, including SSRG, had settled or discharged all their current liabilities. Further, by Sch 1, cl 8.2 of the Share Sale Agreement, it was warranted that the accounts provided to the Plaintiff were “a true and fair view of the state of affairs of AMRG [and its related corporations]”. I will refer to this part of the claim as “the Share Issuance Issue”.
(b) The Plaintiff was wrongfully excluded from participating in the management of AMRG. Under cl 2.5 of the Share Sale Agreement, there was an express or implied understanding between the Plaintiff and the 2nd Defendant and/or a legitimate expectation that the Plaintiff would be involved in the management of AMRG through the appointment of the Plaintiff’s nominee or representative to the board of AMRG. I will refer to this part of the claim as “the Management Participation Issue”.
(c) Certain guarantees were executed by the board of directors of AMRG, under the control and influence of THL, the 2nd Defendant and/or Roger May, for the purposes of securing the obligations of an unrelated entity, Australian Gold Corporation Pte Ltd. This was allegedly to further the personal and/or commercial interest of THL and the 2nd Defendant at the expense of AMRG’s commercial interests.
(d) THL, the 2nd Defendant and Roger May exploited AMRG’s resources for the benefit of their own businesses and/or misled the Plaintiff and/or concealed information as regards the affairs of AMRG.
[7] It is also relevant to note that the Plaintiff is seeking the following reliefs:
(a) An order that THL and/or the 2 Defendant and/or such other parties as the Court may direct, purchase the Plaintiff’s shares in AMRG at a value to be determined by a firm of independent accountants or valuers to be appointed by agreement between the parties, failing which, by the Court, with such directions as may be necessary;
(b) Such orders and directions in the interim as the Court thinks fit to regulate the conduct of the affairs of AMRG;
(c) Alternatively, an order that AMRG be placed under liquidation and a private liquidator be appointed to conduct the liquidation of AMRG, with such liquidator to be appointed by agreement between the parties, failing which, by the Court;
(d) A declaration that, by virtue of the matters pleaded in the Statement of Claim, Mervyn Lim, Russell Krause, Robert Young, Yong Peng and Roger May are liable for breaching their fiduciary duties and/or statutory duties under s 157(1) of the CA;
(e) An order for costs of the proceedings as well as the valuation of the Plaintiff’s shares in AMRG or liquidation of AMRG be borne by THL, the 2nd Defendant, Mervyn Lim, Russell Krause, Robert Young, Yong Peng and Roger May; and
(f) Such further and/or other relief that the Court deems fit.
The stay applications
[8] On 30 July 2013, the 2nd Defendant filed Summons No 3936 of 2013 (“SUM 3936/2013”) for an order that the entire proceedings in S 560/2013 be stayed in favour of arbitration pursuant to s 6(1) of the IAA and/or under the inherent jurisdiction of the Court. The 2nd Defendant referred to cl 12.3 of the Share Sale Agreement (“the Arbitration Clause”) which, it argued, was an agreement for any dispute arising out of or in connection with the Share Sale Agreement to be resolved by arbitration with the Singapore International Arbitration Centre. The Arbitration Clause reads as follows:
[9] On 29 July 2013, THL and Robert Young filed Summons No 3921 of 2013 (“SUM 3921/2013”) for an order that the proceedings against them be stayed pursuant to the inherent jurisdiction of the Court. On the same day, Mervyn Lim filed Summons No 3935 of 2013 (“SUM 3935/2013”) seeking the same. On 31 July 2013, AMRG followed suit by filing Summons No 3983 of 2013 (“SUM 3983/2013”).
The issues
[11] Broadly speaking, the parties agree that there are three issues before me:
(a) Whether the Plaintiff’s claim falls within the scope of the Arbitration Clause;
(b) If the Plaintiff’s claim falls within the scope of the Arbitration Clause, whether a claim under s 216 of the CA is arbitrable; and
(c) If any part of the Plaintiff’s claim is stayed in favour arbitration under s 6 of the IAA, whether this Court should exercise its inherent powers of case management to stay the entire proceedings pending the determination of the arbitration.
Whether the Plaintiff’s claim falls within the scope of the Arbitration Clause
The analytical framework
[12] The 2nd Defendant’s application for a stay of the present proceedings is based on s 6 of the IAA, which reads:
[13] The question, therefore, is whether the proceedings in S 560/2013 involve one or more matters which might be the subject of the Arbitration Clause. If so, then, subject to the issue of arbitrability, s 6(2) of the IAA mandates that the Court stay the proceedings, so far as they relate to the matter or matters which might be the subject of the Arbitration Clause, in favour of arbitration.
[14] The question should be approached as follows:
(a) first, what is the proper characterisation of the Plaintiff’s claim;
(b) secondly, what is the scope of the Arbitration Clause; and,
(c) thirdly, whether the Plaintiff’s claim falls within the scope of the Arbitration Clause.
This was the approach taken by the Court of Appeal in Larsen Oil and Gas Pte Ltd v Petroprod Ltd (in official liquidation in the Cayman Islands and in compulsory liquidation in Singapore) [2011] 3 SLR 414 (“Larsen Oil”) at [7]–[22]. The New South Wales Supreme Court in ACD Tridon Inc v Tridon Australia Pty Ltd and others [2002] NSWSC 896 (“ACD Tridon”) at [99] also followed a similar analytical framework when faced with a similar question under s 7(2)(b) of the International Arbitration Act 1974 (Cth) (“the IAA 1974”).
What is the proper characterisation of the matter in S 560/2013?
[15] I turn first to the proper characterisation of the matter in these proceedings.
[16] The Plaintiff contends that its claim should be characterised by reference to the main issue or essential dispute between the parties, that is, whether the affairs of AMRG have been managed by the 2nd Defendant, under the control and influence of Roger May, together with and/or with the assistance of the other defendants in a manner which is unfairly prejudicial to the Plaintiff’s interests. The Plaintiff explains that it is relying on the Share Sale Agreement only insofar as it forms part of the overall factual matrix which supports its claim under s 216 of the CA.
[17] In contrast, the 2nd Defendant relies on two of the specific allegations made by the Plaintiff in its statement of claim. In particular, the Share Issuance Issue ([6(a)] above) and the Management Participation Issue ([6(b)] above). The 2nd Defendant accepts that the remaining allegations ([6(c)] and [6(d)] above) do not fall within the scope of the Arbitration Clause, and it is not arguing that these parts of the claim should be stayed under s 6 of the IAA.
Test to be adopted
[18] In my judgment, the Court is entitled to ascertain the essential dispute between the parties. However, it should not be a mere issue which falls to be decided in the course of the proceedings. To identify the matter in the proceedings, the Court may consider the pleadings and the underlying basis of the claim. The Court is guided by, but not limited to, the way in which the claim has been framed in the pleadings.
[19] This is, in essence, the Australian approach. It has been adopted in the United Kingdom. The Canadian courts adopt a similar approach. In my judgment, it should be adopted in Singapore as well. It should be noted that s 7(2)(b) of the IAA 1974 is substantially similar to s 9 of the UK Arbitration Act 1996 (c 23) (“the UK AA 1996”) and s 6 of the IAA. There is much to commend and little to detract from a uniform approach in the construction of similar provisions across jurisdictions in international arbitration.
[20] The Australian position can be ascertained from three cases, namely, Flakt Australia Ltd v Wilkins & Davies Construction Co Ltd (1979) 25 ALR 605 (“Flakt”), Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332 (“Tanning Research”), and Recyclers of Australia Pty Ltd and another v Hettinga Equipment Inc and another (2000) 175 ALR 725 (“Recyclers”).
[21] In Flakt, McLelland J found that the term “matter” in s 7(2)(b) of the IAA 1974 did not cover a mere issue (at 613):
[22] Flakt was affirmed by Deane and Gaudron JJ in Tanning Research. Deane and Gaudron JJ further explained that a “matter”, unlike a mere issue, must be capable of being resolved as a discrete controversy (at 351):
[23] In Recyclers, Merkel J considered that the opinion of Deane and Gaudron JJ in Tanning Research stood for the proposition that (at 730):
[24] These cases were cited with approval by the New South Wales Supreme Court in ACD Tridon (at [103]–[106]), where one of the plaintiff’s claims was a minority oppression claim. This case will be considered in greater detail later ([38]–[45] below).
[25] The gist of the Australian approach is well captured in David Joseph QC, Jurisdiction and Arbitration Agreements and their Enforcement (Sweet & Maxwell, 2nd Ed, 2010) (“Jurisdiction and Arbitration Agreements”) at paras 11.15–11.16, where the author explains that:
[26] The author of Jurisdiction and Arbitration Agreements considered that the Australian approach should be adopted in relation to s 9 of the UK AA 1996, which is substantially similar to s 7(2) of the IAA 1974. This was later accepted by Blair J in PT Thiess Contractors Indonesia v PT Kaltim Prima Coal and another [2011] EWHC 1842 (Comm) at [35].
[27] It is also noteworthy that the Canadian courts have adopted a similar approach of looking at the pleadings to ascertain if the matter falls within the scope of the arbitration agreement: see Dalimpex Ltd v Janicki (2003) 228 DLR (4th) 179 at [41] and [43] and Kaverit Steel & Crane Ltd v Kone Corp (1992) 87 DLR (4th) 129 at 135.
[28] A similar position is taken in Robert Merkin and Johanna Hjalmarsson, Singapore Arbitration Legislation: Annotated (Informa, 2009) (“Singapore Arbitration Legislation: Annotated”) at 18, where the authors consider that the term “matter” in s 6 of the IAA refers to the “main issue” rather than “individual aspects of the dispute”. In support of this proposition, the authors cited the Australian cases, ACD Tridon and Recyclers.
[29] Significantly, the Australian approach appears to be consistent with how the Court of Appeal in Larsen Oil characterised the matter in that case with regard to an application to stay proceedings under s 6 of the Arbitration Act (Cap 10, 2002 Rev Ed) (“the AA”).
[30] In Larsen Oil, the parties entered into an agreement which provided that the appellant would provide management services to the respondent and its subsidiaries. As a result of the agreement, the appellant gained control over the finances of the respondent and its subsidiaries. Certain payments were made to the appellants. The respondent was placed under liquidation, and the liquidators brought, inter alia, avoidance claims under the Bankruptcy Act (Cap 20, 2009 Rev Ed) (“the BA”) and the CA against the appellant. The appellant filed a summons applying for a stay under s 6(2) of the AA. At this juncture, it should be noted that while there are some differences between s 6(2) of the AA and s 6(2) of the IAA (eg, the discretion to stay proceedings), the differences are not relevant insofar as the question is one of the proper characterisation of the “matter” before the Court.
[31] The appellant contended that the respondent’s avoidance claims under the BA and CA were founded on the appellant’s alleged breach of the management agreement (at [7]). The appellant relied on the fact that the respondent could only establish its claims by relying on the management agreement. As such, the appellant argued that the claims were “intimately connected” to the management agreement and fell within the scope of the arbitration clause. This was rejected by the Court of Appeal. The Court of Appeal pointed out that there was no allegation of breach of the management agreement in the statement of claim and that the avoidance claims were “entirely independent” of the question of breach (at [9]). Rather, the Court of Appeal held that the claims were founded entirely on the avoidance provisions of the BA and CA, and that the management agreement was only relevant insofar as it “provided some evidence” to support the avoidance claims (at [10]).
[32] It is apparent that the Court of Appeal in Larsen Oil identified the essential dispute between the parties as the avoidance claims (at [10]). In doing so, the Court of Appeal considered, inter alia, the pleadings (ie, statement of claim) and the underlying basis of the claims (ie, statutory provisions in the BA and CA). The Court of Appeal observed that the statement of claim did not reveal any allegations of breach of the management agreement, and that, in addition, the nature of avoidance provisions was such that they operated “independent of the nature of the relationship between the parties” (at [9]–[10]). It followed that the “matter” in the proceedings could not possibly have been characterised as the breach of the management agreement.
[33] Here, the 2nd Defendant’s submission that the matters before the Court should be considered by reference to the specific issues, namely, the Share Issuance Issue and the Management Participation Issue, should be rejected for two reasons.
[34] First, the 2nd Defendant was wrong to say that the decision in Premium Nafta Products Ltd v Fili Shipping Co Ltd [2007] 2 CLC 533 (“Premium Nafta”) dilutes or contradicts the reasoning of the Australian cases set out above. The House of Lords in Premium Nafta was concerned with the construction of the arbitration clause, and not the identification of the matter in the proceedings before the Court.
[35] Secondly, the Singapore cases have consistently, albeit implicitly, treated the term “matter” in s 6 of the IAA as referring to the claims in the proceedings (see, eg, Piallo GmbH v Yafriro International Pte Ltd [2013] SGHC 260 (“Piallo”) at [16] (claim on dishonoured cheques); The “Engedi” [2010] 3 SLR 409 at [16]–[20] (in rem claim against the vessel); Giant Light Metal Technology (Kunshan) Co Ltd v Aksa Far East Pte Ltd [2012] SGHCR 2 at [11] (claim for a debt arising from a foreign judgment); The “Titan Unity” [2013] SGHCR 28 at [2] (claim for misdelivery of cargo)). The 2nd Defendant had not cited a single case where the “matter” before the Court was characterised as one of the allegations made in support of a claim.
[36] Accordingly, I consider that the Australian approach for the characterisation of a matter in the proceedings is the correct approach and should be adopted in Singapore. It follows that the “matter” in these proceedings, for the purpose of s 6 of the IAA, should be identified by reference to the essential dispute and not the mere issues that are to be determined in the course of the proceedings.
Application to the facts
[37] In the present case, the matter to be determined is whether the affairs of AMRG were being conducted and managed by the defendants in a manner that is oppressive, ie, commercially unfair or unfairly prejudicial conduct towards the Plaintiff as a minority shareholder. Looking at the pleadings, it becomes obvious that this is the essential dispute between the parties. Minority oppression claims are often made up of an assortment of diverse allegations and grievances. The Share Issuance Issue and the Management Participation Issue, which are allegations made in support of the minority oppression claim, are mere issues to be decided in determining if the Plaintiff’s claim is made out. They are not distinct matters before the Court for the purpose of s 6 of the IAA.
[38] This conclusion is consistent with the position taken by the Australian and Northern Ireland courts in similar cases (see ACD Tridon and Re Wine Inns Ltd and other matters [2000] NIJB 343 (“Wine Inns”)).
[39] In ACD Tridon, the New South Wales Supreme Court had to decide, inter alia, whether a minority oppression claim which was based partly on the provisions of a shareholders’ agreement between parties would constitute a matter that should be stayed for arbitration under s 7(2) of the IAA.
[40] The plaintiff, ACD Tridon (“Tridon”), and the second defendant, Richard Lennox (“Mr Lennox”), were shareholders of the first defendant, Tridon Australia Pty Ltd (“TAPL”). Mr Lennox bought two-thirds of the shares in TAPL from Tridon, and they entered into a shareholders’ agreement, which contained an arbitration clause, and purported to regulate the conduct of TAPL’s affairs for the future. The board of directors of TAPL consisted of Mr and Mrs Lennox, and a nominee of Tridon. Tridon had granted TAPL and its subsidiary, Tridon New Zealand Ltd (“TNZL”), exclusive rights to distribute its products under a distributorship agreement. The distributorship agreement also contained an arbitration clause. The relationship between the parties soured when Tridon amalgamated with a company which had subsidiaries that were in direct competition with TAPL and TNZL. Tridon commenced court proceedings against TAPL, TNZL, and Mr and Mrs Lennox for a number of claims. For the present purposes, I only need to consider the following claims:
(a) claims for access to documents of TAPL (“the Document Access Claims”);
(b) claims that Mr and Mrs Lennox had caused TAPL and TNZL to enter into various transactions which were not in the best interests of TAPL and TNZL, and were designed to further their personal interests (“the Directors’ Misconduct Claims”); and
(c) claims of further conduct amounting to oppression entitling relief under s 233 of the Corporations Act 2001 (Cth) (“the Further Oppression Claims”).
[41] According to Tridon, the Document Access Claims were made pursuant to, inter alia, the provisions of the shareholders’ agreement and s 233(1)(j) of the Corporations Act 2001 on the basis that the failure to allow Tridon to access the records of TAPL was oppressive (at [20]). Likewise, the Directors’ Misconduct Claims were said to amount to breaches of the provisions of the shareholders’ agreement and conduct oppressive of Tridon’s interests as a shareholder of TAPL (at [20]). On the other hand, Tridon considered that the Further Oppression Claims were “purely statutory” and not based on the shareholders’ agreement (at [20]). The defendants applied for the proceedings to be stayed in favour of arbitration pursuant to s 7(2) of the IAA 1974.
[42] For the Further Oppression Claims, Tridon alleged that (a) TNZL, and consequently TAPL, had failed to pay dividends and (b) Mr Lennox caused TAPL to act oppressively in the conduct of the legal proceedings. Unlike the other claims, Tridon considered that these claims were “purely statutory” (at [20]). Austin J disagreed. He noted that cl 11 of the shareholders’ agreement, which was headed “dividend policy”, authorised the retention of certain profits. This, in his view, arguably implied that, except to the extent that retention was authorised, there was a contractual duty upon Mr Lennox and Tridon to cause TAPL to distribute its profits by way of dividends. Hence, Austin J held that there were two discrete matters before the Court, namely, the claim based on the rights and liabilities created by the shareholders’ agreement (ie, breach of contract), and the claim based on the rights and liabilities under the Corporations Act 2001 (ie, minority oppression).
[43] I pause to note that there is some controversy on whether separate claims arising out of the same facts should be considered as one matter or two distinct matters (contrast Recyclers at [21] with Metrocall Inc v Electronic Tracking Systems Pty Ltd [2000] NSWLR 1 at [54] and ACD Tridon at [176]). However, this does not arise in the present case. What is important for the present case is that Austin J (in ACD Tridon) identified the matters by reference to the claims (ie, minority oppression and breach of contract) and not the allegations made in support of the claim (ie, withholding of dividends).
[44] In the Northern Ireland Court of Appeal case of Wine Inns, Carswell LCJ rejected the characterisation of the “matter” before the Court as the series of discrete disputes set out in the petition (at 359). Instead, he considered that there were only two matters, namely, whether it was just and equitable for the company to be wound up under art 102(g) of the Insolvency (Northern Ireland) Order 1989 (SI 1989/2405), and whether the company’s affairs had been conducted in a manner that was unfairly prejudicial to the interests of the respondent, entitling him to the remedies specified in art 454 of the Companies (Northern Ireland) Order 1986 (SI 1986/1032).
[45] In both ACD Tridon and Wine Inns, the matter before the Court was characterised as the minority oppression claim rather than the specific allegations made in support of the claim.
[46] Based on the approach of the above cases, the “matter” in this case is properly characterised as follows: whether the affairs of AMRG were being conducted and managed by the Defendants in a manner that is oppressive to the Plaintiff as a minority shareholder.
What is the scope of the Arbitration Clause?
[47] What then is the scope of the Arbitration Clause? The proper approach to interpret arbitration clauses was laid down by the Court of Appeal in Larsen Oil. In its view, the scope of an arbitration clause depends on the intention of the parties and it is conceivable that the parties to a contract may agree that all disputes between them should fall within the scope of the arbitration clause (at [11]). Having examined the approaches from various jurisdictions, the Court of Appeal concluded (at [19]) that:
I should note that by “statutory claims”, the Court of Appeal in Larsen Oil was referring only to “private remedial claims” (see Larsen Oil at [20]–[21]).
[48] The Court of Appeal endorsed the view of Lord Hoffmann in Premium Nafta on the starting point when it comes to the construction of arbitration clauses (at [13]):
[49] In the present case, the Arbitration Clause was very widely drafted. It provides that “any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration…” There is no indication that the parties have intended to exclude statutory claims, specifically, claims under s 216 of the CA.
[50] The scope of the Arbitration Clause must be determined in the context of the Share Sale Agreement as a whole. The Share Sale Agreement addresses the role of the Plaintiff in the management of AMRG (Cl 2.5(a) of the Share Sale Agreement), and provides for the listing of SSRG on a recognised stock exchange (Cll 6.3 and 6.4 of the Share Sale Agreement) and exit provisions in the form of “tag along rights” and “drag along rights” if the listing fails (Cl 6A of the Supplemental Agreement). These clauses indicate that the Share Sale Agreement governs not only the transaction of the shares in AMRG, but also, to some extent, the relationship between the Plaintiff and the 2nd Defendant as shareholders of AMRG. It is in this context that the Plaintiff and the 2nd Defendant agreed to have any disputes between them resolved by arbitration.
Whether the matter in S 560/2013 falls within the scope of the Arbitration Clause
[51] Bearing in mind the “matter” in these proceedings and the scope of the Arbitration Clause, I turn to the last step.
[52] To determine if a matter falls within the scope of an arbitration clause, the Court must consider whether the factual allegations underlying the claim are within the scope of the arbitration clause, regardless of the legal label assigned to the claim (see Mitsubishi Motors Corp v Soler Chrysler-Plymouth Inc (1985) 473 US 614 at 622; JJ Ryan & Sons v Rhone Poulenc Textile SA (1988) 863 F2d 315 at 319; Hinson v Jusco Co Ltd (1994) 868 F Supp 145 at 149–150). This must be correct. To say otherwise would imply that non-contractual claims, like a claim in tort or statute, can never be related to the contract and would never fall within the scope of the arbitration clause.
[53] To determine if the factual allegations underlying the claim are within the scope of the arbitration clause, the Court must ascertain the relationship between the factual allegations underlying the claim and the contract that incorporates the arbitration clause. In the present case, the question is whether the factual allegations made in support of the minority oppression claim arise out of or are in connection with the Share Sale Agreement.
[54] According to the Court of Appeal, a matter would fall outside the scope of the arbitration clause only if it was unrelated to the contract that contained the arbitration clause (see Tjong Very Sumito and others v Antig Investments Pte Ltd [2009] 4 SLR(R) 732 (“Tjong Very Sumito”) at [22]–[23] and [69]). However, this does not necessarily mean that the matter would fall within the scope of the arbitration clause if it was in any way related to the contract which contained the arbitration clause. The deeper question, which the Court of Appeal did not elaborate upon in Tjong Very Sumito, is the closeness of the relationship that must be present. Would it be sufficient if the substantive rights and liabilities of the parties under the contract are not invoked per se, but are relied upon as the basis for a claim in tort or statute? What if only part of the claim makes reference to the provisions of the contract?
[55] In the present case, the Plaintiff has referred to some of the provisions in the Share Sale Agreement to establish the extent of his reasonable expectations in asserting the minority oppression claim. Yet, only two out of the four allegations, namely the Share Issuance Issue and the Management Participation Issue, make reference to the provisions in the Share Sale Agreement. Be that as it may, I am of the view that the matter has a sufficiently close connection to the Share Sale Agreement such that it would fall within the scope of the Arbitration Clause.
[56] It is quite clear that the Plaintiff’s claim would fall within the scope of the Arbitration Clause if it was based solely on the Share Issuance Issue and the Management Participation Issue. The fact that the other allegations do not wholly relate to the Share Sale Agreement should not detract from this conclusion. If a sufficient part of the factual allegations underlying the claim relates to the contract, then the entire claim must be treated as falling within the arbitration clause in the contract. This is because “the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal” (see Premium Nafta at [13], cited with approval in Larsen Oil at [13]).
[57] This conclusion is supported, to some extent, by the reasoning in Piallo that parties would have intended to have two separate claims arising out of the “same incident” resolved by the same tribunal, especially if they were so closely connected that the resolution of one would affect the other (at [37]–[49]).
[58] In the present case, the factual allegations underlying the Plaintiff’s minority oppression claim are so interrelated that they cannot be dealt with separately. It is not difficult to accept that parties must have intended for their claim to be resolved by the same tribunal, even if the claim relies partly on factual allegations that might not be directly related to the contract which contains the arbitration clause.
[59] Accordingly, I find that the matter in S 560/2013 rightly falls within the scope of the Arbitration Clause.
Is a claim under s 216 of the CA arbitrable?
Introduction
[60] This matter does not end at the finding that the Plaintiff’s minority oppression claim falls within the scope of the Arbitration Clause. Although s 6(2) of the IAA mandates that the proceedings be stayed in favour of arbitration, the Court is not required to grant a stay of proceedings if the proceedings involve a non-arbitrable claim. In Larsen Oil, the Court of Appeal accepted that the arbitrability of the claim had to be taken into consideration when determining whether to grant a stay under s 6(2) of the AA. Although the view was expressed in relation to the AA, the two reasons given (at [25]–[26]) are equally applicable to the IAA. Looking at s 11(1) of the IAA and Art 34(2)(b)(i) of the UNCITRAL Model Law on International Commercial Arbitration, it is clear that a stay of proceedings under s 6(2) of the IAA cannot be granted in the case of a non-arbitrable claim.
[61] As this issue has not been addressed before in Singapore, it will be useful to consider the approaches adopted by the English, Australian and Canadian courts.
The approaches adopted in the other jurisdictions
England
[62] The current position in England is that a claim under s 994 of the Companies Act 1996 (c 46) (the equivalent of s 216 of the CA) is arbitrable.
[63] The leading case in England on this issue is Fulham Football Club (1987) Ltd v Richards and another [2012] Ch 333 (“Fulham”). The plaintiff, a member of the Football Association Premier League Limited (“FAPL”), alleged that the first defendant, Sir David Richards, the chairman of FAPL, had acted in such a way as to unfairly prejudice the interest of the plaintiff as a member of FAPL. Under the rules of FAPL, the parties are required to have disputes inter se referred to arbitration. Notwithstanding that, the plaintiff brought a claim under s 994 of the Companies Act 1996 in the courts, seeking an injunction restraining the defendant and in the alternative, an order that the defendant should cease to be the chairman FAPL, as well as such other relief “as the Court thinks fit”. The trial judge granted a stay and the plaintiff appealed.
[64] The English Court of Appeal (comprising Rix, Longmore and Patten LJJ) dismissed the appeal. Both Rix and Longmore LJJ agreed with the leading judgment delivered by Patten LJ. The plaintiff unsuccessfully applied to the Supreme Court for leave to appeal.
[65] Before the English Court of Appeal, the plaintiff argued that arbitration was a consensual dispute resolution process and would not be suitable in a “dispute in which the interests and representations of third parties need to be taken into account or where the appropriate relief is an order which creates rights in rem or affects the public at large” (at [39]). In particular, it argued that a minority oppression claim was a “class remedy which requires the Court to have regard to the interests of other shareholders and perhaps even creditors particularly in formulating the relief to be granted”, analogous to winding up (at [51]).
[66] However, this was not accepted by the English Court of Appeal. In particular, Patten LJ considered that the limit on the power of the arbitrator to make orders affecting non-parties was not necessarily determinative of whether the subject matter of the dispute was itself arbitrable (at [40]). It was necessary, in his view, to ascertain in each case whether the matter engaged third party rights or involved public interest such that it could not be determined by arbitration.
[67] It is noteworthy that the relief sought in Fulham was limited, ie, an injunction or order for the defendant to resign. Even though the claim included the prayer for “relief as the court shall think fit”, there was no possibility of a buy-out or winding up orders on the facts of the case (at [46]–[48]). It followed, Patten LJ reasoned, that the plaintiff’s argument could not turn on the precise relief sought. Rather, he found that “any unfair prejudice claim under s 944 attracts a degree of state intervention and public interest such as to make it inappropriate for disposal by anything other than judicial process” (at [50]).
[68] In determining the extent to which an unfair prejudice claim was arbitrable, Patten LJ distinguished between the underlying issue in the dispute and the remedy sought. He considered that (at [77]):
[69] Further, Patten LJ explained that (at [61]):
[70] Patten LJ went on further to say, in obiter dicta, that the arbitration agreement would “operate as an agreement not to present a winding up petition unless and until the underlying dispute has been determined in the arbitration” (at [83]). In his view, the arbitrator could “decide whether the complaint of unfair prejudice was made out and whether it would be appropriate for winding up proceedings to take place or whether the complainant should be limited to some lesser remedy” and even “give directions for the conduct of the company’s affairs” (at [83]). In such instances, the party would then be entitled to seek such relief from the Court under s 994. He also suggested that it would be possible for non-parties (who might be affected by the relief granted) to air their views before the arbitrators (at [83]). Ultimately, he found, these “jurisdictional limitations” were no more than “practical consequences” of choosing arbitration, and did not influence whether the subject-matter is arbitrable (at [84]).
[71] I should also address the earlier decision of Exeter City Association Football Club Ltd v Football Conference Ltd and another [2004] 1 WLR 2910 (“Exeter City”), where the judge came to a different conclusion on this issue.
[72] In Exeter City, the petitioner, Exeter City AFC Ltd, filed a petition for relief under s 459 of the Companies Act 1985 (the equivalent of s 216 of the CA) alleging that the affairs of the first respondent, Football Conference Ltd (in which it was a shareholder), were being conducted in a manner unfairly prejudicial to it. The first respondent applied for a stay of the proceedings under s 9 of the UK AA 1996 by reason of the arbitration clause in r K of the Rules of the Association to which both parties were members and by which both have agreed to be bound. The stay application before HHJ Weeks QC (sitting as a Judge of the High Court) raised the question of whether an action for unfair prejudice under s 459 of the Companies Act 1985 was arbitrable. HHJ Weeks QC held that it was not.
[73] HHJ Weeks QC considered that the right to apply for relief under s 459 was an inalienable right. He explained (at [21]–[23]):
[74] However, Patten LJ did not agree with the reasoning of HHJ Weeks QC, and Exeter City was overruled in Fulham (at [78]). I note that Exeter City was cited by the Court of Appeal in Larsen Oil (at [39]). The Court of Appeal did not comment on the position taken by HHJ Weeks QC as it was not in issue there, but merely opined that Exeter City was not a useful case for its purposes because it did not provide guidelines as to how the determination of whether a claim was arbitrable should be made.
Australia
[75] The current position in Australia is that a minority oppression claim is arbitrable, insofar as the remedies sought are inter partes and not in rem.
[76] To appreciate the Australian position on the arbitrability of a minority oppression claim, it would be pertinent to first consider the decision of A Best Floor Sanding Pty Ltd v Skyer Australia Pty Ltd [1999] VSC 170 (“Skyer”), where the Victoria Supreme Court held that the issue of winding up was not arbitrable.
[77] The parties, A Best Floor Sanding Pty Ltd (“ABFS”) and Skyer Australia Pty Ltd (“SAPL”), entered into a joint venture to merge their businesses. A new corporate entity, Harvest Building Products (“HBP”), was formed as a result. Some disputes arose and SAPL issued an application for a contributory’s winding up of HBP. ABFS then applied to have the winding up application stayed on the ground that the dispute between the parties was subject to the arbitration clause in the joint venture agreement.
[78] Warran J refused to grant the stay on the basis that the arbitration clause in the joint venture agreement was “null and void” because it had the effect of obviating the statutory regime for the winding up of a company. In particular, Warran J stated (at [13]) that:
[79] Further, he highlighted (at [15]) that:
[80] This approach taken by Warran J was doubted by the New South Wales Supreme Court in ACD Tridon where Austin J concluded that, as a matter of construction, the minority oppression claims fell outside the scope of the arbitration clauses. However, he went on to make several observations on the arbitrability of minority oppression claims.
[81] Austin J accepted that the position in Australia was that statutory claims might be arbitrable (at [181]). However, the arbitrability of statutory claims was subject to limitations. One of the limitations was identified as the types of remedies that an arbitrator can award. Austin J cited Sir Michael Mustill and Stewart Boyd, Law and Practice of Commercial Arbitration in England (Butterworths, 2nd Ed, 1989) (“Mustill & Boyd”) for this proposition (at pp 149–150):
[82] Austin J opined that the decision in Skyer was “partly based on public policy considerations surrounding the process of winding up a company pursuant to court order”, supported by the fact that “a winding up order operates to affect the rights of third parties, not merely the rights of the parties to the arbitration clause” (at [191]).
[83] However, Austin J did not think that it necessarily followed that all questions arising out of the Corporations Act would be non-arbitrable. He pointed out that the statutory powers of the Court under the Corporations Act were comparable to the powers of the Court under general law, except for the power to order winding up (at [193]).
[84] Significantly, Austin J went on to say in obiter dicta that (at [194]):
Austin J was thus drawing a distinction between inter partes and in rem remedies (see also Perry Herzfeld, “Prudent Anticipation? The Arbitration of Public Company Shareholder Disputes” (2008) 24 Arbitration International 297 (“Prudent Anticipation”) at p 324). I agree that a distinction must be drawn and will comment on this in greater detail below.
Canada
[85] The case law in Canada is split on whether a minority oppression claim is arbitrable.
[86] On the one hand, there are cases where the courts have considered that minority oppression claims were arbitrable and that the arbitral tribunals had the power to grant all the remedy or relief available to the courts (see Kints v Kints [1998] OJ No 3244 (“Kints”) and Tremblay v Acier Leroux [2004] RJQ 839 (“Tremblay”)).
[87] In Kints, a decision of the Ontario Court of Justice, the issue was whether a stay should be granted in favour of arbitration with regard to the minority oppression claim. Heeney J held that the minority oppression claim fell within the scope of the arbitration clause. Significantly, he opined that the applicant was not prejudiced by the decision to grant a stay of proceedings as “arbitration is a level playing field, and the arbitrator has the power to make virtually any award that this Court could make” (at [26]).
[88] A similar conclusion was reached in the Quebec Court of Appeal decision of Tremblay. The Court faced the issue of whether an arbitration clause in a shareholders’ agreement had the effect of ousting the jurisdiction of the Court to decide a minority oppression claim seeking injunctive relief and damages. It held that a minority oppression claim was arbitrable. In arriving at this outcome, the Court relied on the decision of Desputeaux v Éditions Chouette (1987) Inc [2003] 1 SCR 178 (“Desputeaux”), where LaBel J analysed the approach that courts should take in determining whether a particular subject matter was one of public order which would preclude it from being arbitrable. LaBel J, in Desputeaux, observed (at [51]) that non-arbitrability was based on the objective of preserving “certain values that are considered to be fundamental in a legal system”. Applying Desputeaux, the Court in Tremblay concluded that a minority oppression claim was arbitrable (at [35]) as:
[89] For the reasons that I will explain later, I do not agree that arbitral tribunals have the power to grant all the remedies or reliefs that are available to the courts. It follows that this approach cannot be adopted in Singapore.
[90] On the other hand, there are courts in Canada that have adopted a two-stage procedure whereby the Court would allow the tribunal to first decide on the question of oppression, and if the tribunal found there was oppression, then the case could be taken back to Court (see ABOP LLC v Qtrade Canada Inc (2007) 284 DLR (4th) 171 (“ABOP”)) This is, to some extent, similar to the approach in Fulham.
[91] In ABOP, the British Columbia Court of Appeal agreed with the trial judge that the dispute should be dealt with by arbitration. This was notwithstanding that both the trial judge and Court of Appeal agreed that the minority oppression claim was a “court matter” and “within the exclusive jurisdiction of the court” (at [12] and [26]). In order to do so, the British Columbia Court of Appeal accepted that:
[92] It is interesting to note that the British Columbia Court of Appeal did not adequately address the observations of the Northern Ireland Court of Appeal in Wines Inn that there would be “complexity and inconvenience” in following such a procedure. The British Columbia Court of Appeal merely stated that procedural complexity “cannot form the basis for the determination of this case” and there was no reason not to give effect to the parties’ wishes to arbitrate their disputes (at [24]). In its view, the involvement of the Court might be delayed, but its jurisdiction would not be ousted.
[93] ABOP had since been followed by Myers J in 1462560 Ontario Inc v 636381 BC Ltd (2011) BCSC 886 at [10]–[13].
The approach in Singapore
Arbitrability of statutory claims and remedies
[94] The inherent consensual nature of arbitration, resting on an agreement between the parties, necessarily limits its application to third parties. Consistent with this theory is the confidential nature of arbitration – it only involves the parties to the agreement; the public and third parties are not entitled to witness the proceedings nor are they, subject to certain exceptions, entitled to the documents generated by the process. In theory, the decision of the arbitral tribunal can only bind the parties to the arbitration agreement. In practice, however, the effects and ramifications of arbitral awards can affect third parties but that occurs incidentally as a result of the effect of the award on the parties to the arbitration agreement. What an arbitral tribunal has no power to do is to make orders that are binding on “third parties”, putting to one side the grey area in Dallah-type situations (Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2011] 1 AC 763 was a case where an arbitral tribunal, sitting in Paris, found that the respondent, the Government of Pakistan, was a “true party” to an arbitration agreement notwithstanding that it was within an agreement made between the appellant and the Awami Hajj Trust. The appellant failed to obtain enforcement of the award before the English High Court, Court of Appeal and the Supreme Court).
[95] Unlike an order for damages, which is essentially inter partes and can be granted by the arbitral tribunal pursuant to its power derived from the consent of the parties to the arbitration, there are some statute-based reliefs that would invariably affect third parties or the public at large such that they can only be granted by the courts in the exercise of their powers conferred upon them by the state. Examples include a judgment in rem against a vessel under the admiralty jurisdiction of the Court and an order to wind up a company under the CA.
[96] The decisions in rem have always been within the remit of the national courts, resting on constitutional or statutory powers and backed by coercive powers, and they take effect, with rare exceptions, within the jurisdiction of the national courts and not extra-territorially. In the Review of Arbitration Laws, LRRD No 3/2001 by the Review of Arbitration Act Committee, which was set up in 1997, section 2.37.17 states:
[97] In Larsen Oil, as I have noted earlier ([30]–[31] above), the liquidator sought to avoid certain payments made under insolvency based on the avoidance provisions. It was argued that the avoidance claims should have been stayed in favour of arbitration given that there was an arbitration agreement between the parties. The Court of Appeal refused to grant the stay of proceedings under s 6 of the IAA. In this regard, the Court of Appeal opined (at [46]) that:
This is because the focus of avoidance provisions was to address situations which adversely impacted the interests of third parties, ie, creditors, which had to be protected. The Court of Appeal stated (at [30]) that insolvency and bankruptcy law were areas replete with public policy considerations that were too important to be settled by parties privately through the arbitral process.
[98] However, the Court of Appeal in Larsen Oil drew a distinction between claims that arose only upon the onset of insolvency and disputes that stemmed from pre-insolvency rights and obligations; the latter were generally suitable for the arbitral process. For instance, the amount due to a party from the subsequently insolvent company could be determined by arbitration as the proof of debt process did not create new rights in the creditors or destroy old ones (see Larsen Oil at [51], citing Wight and others v Eckhardt Marine GmbH [2004] 1 AC 147).
[99] The Court of Appeal in Larsen Oil pointed out that the concept of arbitrability was dealt with in ss 11 and 31(4) of the IAA and in s 48(1)(b)(i) of the AA, and noted that the drafters of the IAA and AA regarded the question of arbitrability as being subject to public interest considerations. However, the Court of Appeal noted that these provisions did not provide any guideline as to the type of claims that were or were not arbitrable. In the words of the Court of Appeal in Larsen Oil (at [44]):
The Court held it was ultimately for the “courts to shape the contours of the arbitrability exception” (at [24]).
[100] The Court of Appeal in an earlier decision had also confirmed, albeit obiter, that an arbitral tribunal had no power to grant an order for winding up; in its view, winding up was a relief that could only be granted by the courts (see Four Pillars Enterprises Co Ltd v Beiersdorf Aktiengesellschaft [1999] 1 SLR(R) 382 (“Four Pillars”) at [23]). In a case commentary, Michael Hwang SC and Rajesh Muttath, “The Singapore Court of Appeal refuses to stay winding up proceedings in favour of arbitration” (2001) 19 ASA Bulletin 380, the authors referred to the inherent limits of an arbitrator’s power and observed that:
[101] This view is well supported by other academic commentators. According to the authors of Mustill & Boyd (at pp 149–150):
[102] Similarly, Gary Born, International Commercial Arbitration (Kluwer Law International, 3rd Ed, 2009) (“International Commercial Arbitration”) at p 768 states that:
[103] Whilst I completely agree with the obiter dicta of the Court of Appeal (in Four Pillars) and the views expressed by the academic commentators, I notice that the oft-overlooked s 12(5) of the IAA appears to point in another direction. Specifically, s 12(5) of the IAA provides that the arbitral tribunal “may award any remedy or relief that could have been ordered by the High Court if the dispute had been the subject of civil proceedings in that Court” [emphasis added].
[104] Unfortunately, the Law Reform Committee, Singapore Academy of Law, Report of the Law Reform Sub-Committee on Review of Arbitration Laws (August 1993) (Chairman: Thean Lip Ping) (“1993 Report”) does not assist in the interpretation of s 12(5) of the IAA. The 1993 Report recommended that “the power of arbitrators to grant civil reliefs based on certain statutes” should not be characterised as contrary to public policy (at [28]). This was reflected as s 11(1) of the Draft International Arbitration Bill (“Draft Bill”), which read:
It did not specify if it was intended to cover all statute-based reliefs including those that might have an effect on third parties or the general public. In any event, it was deleted from the final bill as there were concerns that “this sub-clause may overly restrict the power of the court to set aside awards on public policy grounds” (see para 4(b) of the “Supplementary Note on Bill” which prefaces the 1993 Report).
[105] It would appear that the wording of s 12(5) of the IAA was inspired by the New Zealand, Law Commission, Arbitration (NZLC R20, 1991) (President: Sir Kenneth Keith KBE) (“1991 Report”) and that may provide some indication on its purpose and ambit. Section 12(1) of the New Zealand Arbitration Act 1996 (Act No 99 of 1996) (“NZ AA 1996”) is similar to s 12(5) of the IAA:
[106] The discussion in the 1991 Report on s 12 of the NZ AA 1996 (which was s 10 of the New Zealand draft Bill) is instructive:
[107] Notably, the NZ AA 1996 provides in s 12(2) that “[n]othing in this section affects the application of section 10 or article 34(2)(b) or article 36(1)(b) of Schedule 1.” It expressly states that the power of the arbitral tribunal is subject to the restrictions of arbitrability and public policy. While there is no equivalent provision in the IAA, the position in my view must be the same. As noted earlier ([104] above), s 11(1) of the Draft Bill was removed because the Law Reform Commission was concerned with unduly restricting the considerations of arbitrability and public policy.
[108] In addition, the judicial pronouncements from New Zealand provide assistance on the construction of s 12(5) of the IAA. Although the power of the arbitral tribunal under s 12(1) of the NZ AA 1996 may be broad, it is not without limitation (see General Distributors Ltd v Casata Ltd [2006] 2 NZLR 721 at [49]–[51] and Raukura Moana Fisheries Ltd v The Ship “Irina Zharkikh” [2001] 2 NZLR 801 (“Raukura Moana”) at [45]–[47]).
[109] In particular, Young J in Raukura Moana considered (at [45]–[47]) that:
[110] Young J also pointed out the possibility that “the inability of an arbitrator to make an award in rem meant that the present claims by the plaintiff were not properly justiciable by way of arbitration” (at [48]–[51]). However, this point was not considered or developed further.
[111] In my judgment, s 12(5) of the IAA clearly cannot be construed as conferring upon arbitral tribunals the power to grant all statute-based remedies or reliefs available to the High Court. It has a more limited purpose, (see [106] above), and an arbitral tribunal clearly cannot exercise the coercive powers of the courts or make awards in rem or bind third parties who are not parties to the arbitration agreement.
Statutory claims that straddle the line between arbitrability and non-arbitrability
[112] From the foregoing authorities, it is clear that some statutory claims and/or remedies are solely within the purview of the courts, eg, winding up of a company, granting a judgment in rem in admiralty matters, avoidance claims, bankruptcy and matrimonial matters, and criminal prosecutions.
[113] However, just because a statutory claim may be redressed or remedied by an order that is only available to the courts, that does not mean the claim is automatically rendered non-arbitrable. It may well straddle the line between arbitrability and non-arbitrability depending on the facts of the case, the manner in which the claim is framed, and the remedy or relief sought.
[114] This is well-illustrated in Larsen Oil, where the Court of Appeal observed, in relation to the claim based on s 73B of the Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) (“CLPA”), that it “is one that may straddle both a company’s pre-insolvency state of affairs, as well as its descent into the insolvency regime” (at [55]). As noted above , the Court of Appeal drew a distinction between “disputes involving an insolvent company that stem from its pre-insolvency rights and obligations, and those that arise only upon the onset of insolvency due to the operation of the insolvency regime” (at [45]–[46]). It was considered that only the latter is treated as non-arbitrable per se (at [46]). It follows that a claim under s 73B of the CLPA is one that may or may not be arbitrable, depending on whether the company was insolvent at the material time. This is apparent from the illustrations given by the Court of Appeal (at [55]–[56]):
Indeed, the Court of Appeal went on to say (at [57]) that the s 73B CLPA claim by Petroprod was “based on the insolvency” at the material time. On this basis, the Court of Appeal held (at [58]) that the s 73B CLPA claim was “in fact an insolvency claim that is non-arbitrable”.
Minority oppression claims under s 216 of the CA
[115] To ascertain the arbitrability of a minority oppression claim in Singapore, it is necessary to examine, in some detail, ss 216(1) and (2) of the CA:
[116] From a plain reading of s 216(2) of the CA, it is clear that the order must be made “with a view to bringing to an end or remedying the matters complained of”. Consequently, the nature and extent of the minority oppression would affect the type of remedy that the Court may impose under s 216 of the CA. In this sense, the remedy or relief to be granted for a minority oppression claim under s 216(2) of the CA is inextricably linked to the claim in s 216(1).
[117] This view is consistent with the decision in Kumagai Gumi Co Ltd v Zenecon Pte Ltd and other appeals [1995] 2 SLR(R) 304, where the Court of Appeal stated (at [71]) that:
[118] Similarly, the Court of Appeal in Low Peng Boon v Low Janie and others and other appeals [1999] 1 SLR(R) 337 noted (at [55]) that:
[119] According to Walter Woon on Company Law (Tan Cheng Han, SC gen ed) (Sweet & Maxwell Asia, Revised 3rd Ed, 2009) at 5.96, s 216(2) of the CA gives the Court “the power to ‘make such order as it thinks fit’, a wide discretion that allows the court to tailor the order to remedy the mischief complained of”.
[120] The remedy ordered under s 216(2) of the CA is invariably linked, usually inextricably, to the nature and extent of the commercial unfairness or unfair prejudice itself. It must follow that the arbitrability of the remedy sought could affect the arbitrability of the claim. In light of the broad remedial powers conferred upon the courts under s 216(2) of the CA, some of which cannot be made by the arbitral tribunal, it would appear that the minority oppression claim is one of those statutory claims that straddles the line between arbitrability and non-arbitrability.
What should the Singapore approach be?
[121] The authorities surveyed above indicate the following approaches to a claim under s 216 of the CA:
(a) first, adopt the two-stage approach in ABOP by leaving the arbitral tribunal to make all the necessary findings of fact and whether there has been unfair prejudice or commercial unfairness and where the tribunal finds there was oppression, then the oppressed minority shareholder can carry on with the minority oppression claim before the Court and it is for the Court to make the appropriate orders, including winding up;
(b) secondly, adopt a broad reading of Fulham and allow all minority oppression claims to go for arbitration; if the arbitral tribunal is of the view that a winding up or buy-out order is appropriate, then the parties can go to Court to obtain the necessary orders, but if not, the award takes effect in the normal way; in the former case, the Court adopts the findings and remedies proposed by the arbitrator and merely proceeds to enforce the same by making the appropriate orders, eg, a winding up or buy-out order or cancel or vary a resolution; and
(c) thirdly, if there are more than two shareholders and only some shareholders are bound by the arbitration agreement, then the Court should allow those shareholders bound by an arbitration agreement to proceed to arbitration and in the exercise of the Court’s inherent powers of case management, stay all the proceedings in relation to those shareholders not bound by the arbitration agreement until the award is made and only then proceed with the s 216 claim in Court; and
(d) fourthly, adopt an approach analogous to Exeter City that all minority oppression claims under s 216 of the CA are, as a matter of public policy, non-arbitrable.
[122] Each one of the above approaches can run into great practical and legal difficulties and result in unsatisfactory outcomes and conflicts.
[124] In the second approach, a broad reading of Fulham, many of the same problems that have been identified above at [123] will also arise. Moreover, there might be other shareholders who are not bound by the arbitration agreement and disagree with the recommendation of the arbitral tribunal to, for example, remove the chairman in Fulham. These other shareholders may think that the Sir David is a wonderful chairman and disagree with his removal.
[125] Fulham thus has its detractors. In Harry McVea, “Section 994 of the Companies Act 2006 and the Primacy of Contract” (2012) 75 MLR 1123 at p 1132, the author writes:
[126] I am also not convinced that a broad reading of Fulham, given the unique facts of that case, should be applied as a general rule. As I have noted earlier ([67] above), there was no possibility of a buy-out or winding up orders on the facts of Fulham nor were they asked for. In Wendy Kennett, “Arbitration of Intra-Corporate Disputes” (2013) 55 Int JLM 333 at p 353, the author observed that:
[127] Accordingly, with respect, I have serious doubts whether a broad reading of the Fulham approach should be adopted in Singapore. That decision was probably correct on its unique facts with the issue being whether the chairman acted in breach of the Football Association and FAPL rules and the remedy sought being the prevention of the chairman from acting in a certain manner or termination of his chairmanship. There was no evidence of the other member clubs intervening in the court proceedings or objecting to the termination of his chairmanship. Further, FAPL was unique, as were its shareholders. In fact, a careful reading of the Fulham judgment shows that Patten LJ recognised some limitations (see Fulham at [65]–[66] and the excerpts set out at [68] and [69] above). I therefore do not read the ruling in Fulham as necessarily endorsing a rule of general application.
[128] One of the key difficulties surrounding the arbitrability of minority oppression claims is the non-availability of winding up and the other remedies that only a Court can make. This has been highlighted by academic commentators. In Michael J Duffy, “Shareholders Agreements and Shareholders’ Remedies: Contract Versus Statute?” (2008) 20 Bond Law Review 1, the author, having examined both Skyer and ACD Tridon, noted (at p 11) that:
[129] In Prudent Anticipation, the author distilled some common threads from the cases that addressed the arbitrability of minority oppression claims (at p 324):
[130] As against these views, there are academic commentaries from Canada in support of the view that minority oppression claims should be arbitrable. In Byron Shaw, “The Arbitrability of Oppression Claims” (2011) 69 The Advocate 21, the author argued (at p 26) that:
[131] A similar, albeit more balanced view, was expressed in Rebecca Huang, “Shareholder Dispute: Arbitrator’s Power to Grant Statutory Oppression Remedy” (2010) 36 The Advocates’ Quarterly 457 at p 468:
[132] I acknowledge the possibility that if there are only two shareholders in a joint venture company with an arbitration agreement, or where all the shareholders are bound by an arbitration clause, then perhaps a minority oppression claim can be hived off to an arbitral tribunal for it to make findings as to whether there was any oppression. This would be in keeping with the “generous” construction of arbitration clauses laid down by the Court of Appeal in Larsen Oil. In such an instance, the arbitral tribunal would leave the choice of the remedy or appropriate order to the Court. Even then, there is the problem of whether the arbitral tribunal should also recommend what remedy would, in its view, be most appropriate. As I have discussed earlier ([123] above), there is a possibility that the Court may disagree with the arbitral tribunal – can the Court then impose the remedy it considers appropriate with a view to bringing to an end or remedying the matters complained of? There might also be other difficulties, eg, a possible impact or concern about the solvency of the company and the interests of creditors that was not surfaced at the arbitration proceedings. Even if these difficulties are put to one side, what exactly is being sought for the purpose of enforcement if the arbitral tribunal had only made recommendations? For the reasons set out above, I have my doubts if an arbitral tribunal can and should make a declaration that the claimant is entitled to ask a Court to wind up the company or order a buy-out upon specified terms.
[133] The third approach available to the Court, as set out at [121(c)], also has its problems when applied to the present case. Significantly, the Plaintiff and the 2nd Defendant are the only parties who are bound by the Arbitration Clause. The other defendants, especially the individuals, are implicated in the pleadings as having played a part in oppressing the Plaintiff. In Fulham, Patten LJ opined that the other shareholders could also be heard in the arbitration. That may well be in some cases, but it is equally, if not more likely, possible in such situations that the other shareholders would refuse to do so for tactical reasons (I hasten to emphasise that I make no such finding or nor take such a view on the facts of this case but raise this as a general hypothetical possibility). I doubt if these parties can be compelled to attend as witnesses, be asked to state their case, give their evidence (both documentary and oral) and thereafter be bound by the arbitral award. The arbitration may well proceed with only hearing the parties to the arbitration agreement and on that evidence, the arbitral tribunal has to reach a view and make its award. In the meantime, the Court may wish to exercise its inherent powers of case management and stay proceedings until the arbitral award is made (see Shanghai Construction (Group) General Co. Singapore Branch v Tan Poo Seng [2012] SGHCR 10, citing Reichhold Norway ASA and another v Goldman Sachs International [1999] CLC 486, upheld on appeal, [2000] 1 WLR 173). With the benefit of the award, the Court then proceeds to hear the rest of the parties and the full panoply of evidence. What if, on hearing all the witnesses and evidence, some of which was not placed before the arbitral tribunal, the Court comes to a different conclusion either on its finding of oppression or the recommended remedy? It is settled law in Singapore that the courts do not re-open findings of fact of an arbitral tribunal and they can only set aside or refuse to enforce awards on limited grounds.
[134] It is possible for the Court to stay the proceedings for the parties with an arbitration agreement and send them off to arbitration, and at the same time, proceed to hear the other parties who are not bound by the arbitration agreement. This will require the plaintiff to proceed on two fronts or coerce the other parties to join in the arbitration. None of these solutions are satisfactory and at an early stage, the Court is unlikely to be able to assess what each party’s approach will be as the dispute unfolds and develops.
[135] At this juncture, I should mention a useful procedural rule under Part 72 of the Supreme Court Rules 1970 (NSW) (“the NSW SCR 1970”), which we do not have in Singapore.

The judgment continues past this page. Read the rest at eLitigation.

Silica Investors Limited v Tomolugen Holdings Limited and others

Laws this judgment relies on

Grounds of decision

Introduction

The facts

The parties

The Plaintiff’s pleaded case

The stay applications

The issues

Whether the Plaintiff’s claim falls within the scope of the Arbitration Clause

The analytical framework

What is the proper characterisation of the matter in S 560/2013?

Test to be adopted

Application to the facts

What is the scope of the Arbitration Clause?

Whether the matter in S 560/2013 falls within the scope of the Arbitration Clause

Is a claim under s 216 of the CA arbitrable?

Introduction

The approaches adopted in the other jurisdictions

England

Australia

Canada

The approach in Singapore

Arbitrability of statutory claims and remedies

Statutory claims that straddle the line between arbitrability and non-arbitrability

Minority oppression claims under s 216 of the CA

What should the Singapore approach be?