Recent Developments in Singapore Case Law:
Arbitration and Commercial Litigation

In 2015, Singapore’s courts have continued to develop the law in Singapore on arbitration and commercial litigation, which is consonant with its development as an international dispute resolution hub. This article highlights some of these key developments.

Arbitration

Singapore’s courts have maintained their pro-arbitration stance. In R1 International Pte Ltd v Lonstroff AG [2014] 3 SLR 166, the Singapore High Court (“SGHC”) held, in obiter, that a permanent anti-suit injunction could be granted in favour of international arbitration seated in Singapore if there was a valid, binding agreement to refer the dispute to arbitration. However, the SGHC did not make a definitive statement on whether the courts had the power to issue a similar injunction with respect to arbitrations seated outside Singapore. Although this case was appealed, the Singapore Court of Appeal (“SGCA”) did not address this particular point (the SGCA decision was reported as R1 International Pte Ltd v Lonstroff AG [2015] 1 SLR 521).

The Court of Appeal in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2015] SGCA 57 decided that disputes over minority oppression of shareholders or unfairly prejudicial conduct were arbitrable, despite the fact that one of the reliefs that could be granted for such a claim, namely the winding-up of a company, was not something that an arbitrator could grant. This decision reversed an earlier decision of the High Court in Silica Investors Ltd v Tomolugen Holdings Ltd and others [2014] 3 SLR 815, which held that such a claim was not arbitrable due to remedial inadequacy. The Court of Appeal held that the substantive dispute could still be resolved by arbitration, and the parties could thereafter apply to the courts to grant such reliefs that were beyond an arbitrator’s powers.

The Court of Appeal also disagreed with the High Court’s reasoning that the claim was not arbitrable due to procedural complexity, holding that while some complexity would be inevitable when a dispute was heard before two different fora, this did not render the claim non-arbitrable. The Court of Appeal also confirmed that the standard of review of the courts in applications for a stay of proceedings in favour of arbitration would be a prima faciestandard, and provided guidance on how the courts would exercise their inherent power to stay proceedings when only part of a matter had to be stayed in favour of arbitration.

In FirstLink Investments Corp Ltd v GT Payment Pte Ltd and others [2014] SGHCR 12, the SGHC provided some guidance on how it would approach vague arbitration agreements/clauses. Three frequently disputed types of law governing disputes arising from contracts containing arbitration clauses are: the substantive law governing the underlying contract (“Substantive Law”), the law of the seat of the arbitration (“Lex Arbitri”) and the law governing the arbitration agreement/clause itself (“Proper Law”). The SGHC held that where parties had not expressly chosen the Proper Law, the court would ordinarily hold the Proper Law to be the Lex Arbitri. However, the ultimate decision would depend on the facts. This was a bold decision that disagreed with approaches taken by many English decisions (which tend toward the assumption that the Substantive Law would be the Proper Law).

Commercial Litigation

The SGCA clarified the law in Singapore pertaining to the reserve powers of the shareholders of a company in the event of a dysfunctional and deadlocked board of directors (“Board”). In Chan Siew Lee v TYC Investment Pte Ltd [2015] SGCA 40, the SGCA heard appeals against the SGHC’s decision in TYC Investment Pte Ltd v Tay Yun Chwan Henry [2014] 4 SLR 1149. The SGCA upheld the SGHC’s decision that reserve powers may be implied in favour of the shareholders in general meeting if the Board was unwilling or unable to act—for instance, if it was deadlocked. The SGCA clarified that such reserve powers would be implied only if absolutely necessary, i.e., if there was no other way of overcoming the deadlock. The SGCA also laid down criteria that would have to be fulfilled to invoke such shareholders’ reserve powers. Further, the SGCA clarified the interplay between a section 216A derivative action and the reserve powers.

In addition, the SGHC clarified the scope of a liquidator’s statutory powers and upheld a litigation funding arrangement by a company in liquidation. In Re Vanguard Energy Pte Ltd [2015] SGHC 156, a company’s liquidators, on behalf of the company, entered into an arrangement with three individuals to fund the company’s litigation against third parties. Under the arrangement, the three individuals would recoup their outlay of monies out of the fruits of the litigation. The SGHC upheld the arrangement and held that a liquidator was permitted, under her statutory powers, to sell or assign the company’s cause of action and the potential fruits of that cause of action. Such a sale was an exception to the law on maintenance and champerty.

The SGCA has also clarified the contractual principle of non est factum, which allows a contracting party to have the contract declared invalid on the basis that she did not know the meaning and nature of the contract. In Mahidon Nichiar v Dawood Sultan Kamaldin [2015] SGCA 36, the SGCA clarified that there were two requirements for a contracting party to rely on non est factum: First, there must have been a radical difference between what was signed and what the party thought she signed. Second, the party seeking to rely on non est factum must prove that she had not been negligent in signing the contract. When considering whether the second requirement had been fulfilled, the courts would look to several matters, including the level of sophistication of the party, the extent of the solicitor’s duty to explain the nature of the contract (if the party was legally represented) and the actual legal advice given.

Written by Akshay Kothari.

Please contact Akshay Kothari at akothari@selvam.com.sg for more information.

The content of this update is of general interest and is not intended to apply to specific circumstances. The content should not therefore, be regarded as constituting legal advice and should not be relied on as such.