By Lee Mei Yong, Debbie & Wong Qiao Ling Sharon – Millennium Law LLC
I. INTRODUCTION
1. This decision concerned an application commenced in the High Court, requesting inter alia that a Tribunal’s dismissal of an application to strike out a party “be reversed ”, pursuant to s 10(3) of the International Arbitration Act (“IAA”) and/or Article 16(3) of the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”).
2. The matter was then transferred to the Singapore International Commercial Court (“SICC”) and the SICC considered the following issues:
(a) Whether the Tribunal had the jurisdiction to determine the issue of striking out a party in the arbitration proceedings;
(b) Whether the application was brought within the time limited for appeal under the IAA and Model Law; and
(c) Whether the Court is empowered to extend the time limited for appeal under the IAA and Model Law.
II. SUMMARY OF FACTS
3. The Plaintiffs owned through a company and/or managed a business in Cambodia.
4. In 2015, it was agreed that the 1st Defendant, an Australian company, would acquire the business in the following manner:
(a) The business would be transferred to a new company incorporated by the 2nd and 3rd Plaintiffs (the “New Company”); and
(b) Subsequently, the shares in the New Company would then be transferred to the 1st Defendant’s nominee, the 2nd Defendant in the present case, a wholly-owned subsidiary of the 1st Defendant.
5. The parties to the share sale agreement (“SSA”) were:
(a) The 2nd and 3rd Plaintiffs as vendors; and
(b) The 1st Defendant as purchaser.
6. The SSA contained the following salient clauses:
(a) A choice of law clause in favour of the laws of Singapore; and
(b) An arbitration clause providing for settlement of disputes by arbitration in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC”).
7. Pursuant to the sale of shares under the SSA, the 1st Defendant nominated the 2nd Defendant to receive the shares under the SSA through a letter addressed to the 2nd and 3rd Plaintiffs (the “Letter”). The Letter was endorsed by the 2nd Defendant and the 1st and 2nd Plaintiffs, an extract of which is set out below:
“We do hereby irrevocably agree, confirm and declare as follows:-
1. We hereby nominate our wholly owned subsidiary, [the second defendant] to be the registered owner of the Sale Shares and vest unto [the second defendant] all of our rights, title and interest in, under and/or pursuant to [the SSA].
2. We further irrevocably request and authorize you to transfer all the Sale Shares to [the second defendant]…”
[emphasis as underlined]
8. In 2018, the 1st and 2nd Defendants commenced arbitration proceedings against the 2nd and 3rd Plaintiffs for alleged breaches of provisions under the SSA in relation to inter alia non-competition and non-solicitation.
9. There was another arbitration commenced by the New Company, the 3rd Defendant, against the 1st and 2nd Plaintiffs, alleging breaches of a management that was entered concurrently with the SSA.
10. The two arbitration proceedings were consolidated.
III. STRIKING OUT APPLICATION
11. The Plaintiffs asserted that the 1st Defendant was not a proper party to the arbitration by virtue of the transfer of rights, title and interest under the SSA to the 2nd Defendant. For these reasons, the Plaintiffs applied to the Tribunal to strike out the 1st Defendant.
12. The application was dismissed on 8 January 2019. Although the application to the Tribunal was described as an application to strike out rather than a plea that the Tribunal did not have jurisdiction, it was not in dispute that a jurisdictional challenge was raised by the Plaintiffs in conformity with Article 16(2) of the Model Law, and was ruled on as a preliminary question within Article 16(3) and s 10(3) of the IAA.
13. On 22 February 2019, the Plaintiffs brought the present application in the High Court to "reverse" the decision, which was subsequently transferred to the Singapore International Commercial Court (the “Court”).
IV. THE COURT’S DECISION
14. The Court dismissed the Plaintiffs’ application and the reasons are set out below.
A. WHETHER THE TRIBUNAL HAD JURISDICTION TO HEAR AND DETERMINE THE 1ST DEFENDANT’S CLAIMS
15. In reaching its decision, the Court held that the purpose of the Letter was to nominate the 2nd Defendant as the recipient of the shares and nothing in the SSA required or contemplated assignment of the 1st Defendant’s rights as purchaser under the SSA to its subsidiary.
16. The 1st Defendant remained subject to its obligations under the SSA and it would not have made sense for the 1st Defendant to purport to assign its rights away while remaining subject to its obligations.
17. The Court also considered Clause 10.5(a) of the SSA, which permitted the assignability of the SSA. However, the Court held that even if the SSA could be assigned, Clause 10.5(a) would not be of particular assistance in confirming if the Letter constituted an assignment of the SSA.
18. Whilst the Plaintiffs claimed that the 1st Defendant should not be party to the arbitration proceedings, it did not deny the Tribunal’s jurisdiction over determining the issue.
B. WHETHER THE APPLICATION WAS BROUGHT WITHIN TIME
19. Article 16(3) of the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”) and Section 10(3) of the International Arbitration Act (“IAA”) provide that a party may apply to the Singapore High Court to appeal against a Tribunal’s ruling on its jurisdiction within 30 days after having received notice of the same.
20. The Email containing the Tribunal’s ruling was sent on 8 January 2019 and the application was brought on 22 February 2019. The Plaintiffs claimed that they had not received the Tribunal’s Email.
21. The Court was not convinced by the Plaintiffs’ justification as there was a history of successful email correspondence between parties and there was a lack of evidence that the Email had not been received.
22. Accordingly, the Court decided that the application was therefore not brought within time.
C. WHETHER THE COURT HAD POWER TO EXTEND TIME
23. It was held that the Court had no power to extend time for the application, as neither the Model Law nor IAA permitted an extension beyond the 30 days.
24. Further, it was held that Clause 7 in Schedule 1 of the Supreme Court Judicature Act (“SCJA”) did not permit the extension of time – it could not be used to revive the right which had been lost.
25. For the reasons above, the extension of time was not granted as it was difficult for the Court to invoke the inherent power to prevent injustice following the lack of explanation as to why the Email was not received.
V. IMPLICATIONS OF BXY v BXX
26. This case serves as a cautionary tale on the assignment of rights and obligations under a contract.
27. Absent clear and express wording in a contract or deed of assignment, it appears that assigning only the rights and not the obligations of an agreement did not make sense – doing so would under usual circumstances lead to the conclusion that the interpretation of any such contract or deed would be done conservatively.
28. This case also reinforces the fact that the Court did not have jurisdiction to grant extensions of time for proceedings governed by the Model Law and IAA, which is consistent with the position previously taken in BXS v BXT [2019] SGHC(I) 10.
Lee Mei Yong, Debbie