By Deepika Madan
Nature of Matter
Stay of court proceedings
Case Summary
The plaintiff commenced a court action for the repayment of a loan extended to the defendant under a loan agreement. The loan agreement in question was amended by two addenda, which was interconnected with amongst others an amended shareholders’ agreement and a deed of undertaking. The amended shareholders’ agreement contained an arbitration clause.
The plaintiff contended the claim for repayment arose from the defendant’s purported breach of the deed of undertaking, some of which were constituted by the defendant's purported breach of the amended shareholders’ agreement. The issues arising from the purported breaches of the amended shareholders' agreement were, by common consent, to be determined in the conjoined references to arbitration.
The defendant applied for a stay of the court proceedings on the basis that the issues, claims and matters raised in the arbitration were same as that in the suit. They urged a stay of all proceedings in the suit would be the fairest and most efficient way to save judicial resources and time
The issue before the Court in the application therefore concerned the extent of the stay that should be ordered. The plaintiff took the position any stay should only extend to the part of the court action which would also be the subject of the reference to arbitration and there remained a discrete area of the court action which did not overlap with the arbitration. In this instance, the plaintiff contended the matters relating to the breach of the deed of undertaking (the "Clause 2(c) Issues”) were independent of any breach of the amended shareholders’ agreement, in circumstances where the deed of undertaking contained an exclusive jurisdiction clause in favour of the Singapore courts.
Decision
In the absence of any agreement to also refer the Clause 2(c) Issues to arbitration, the basis for a stay would be that it would be a more efficient, expeditious and cost-effective way of dealing with the dispute between the parties for the arbitration to take place first in order to see if the arbitrators make any determination on the Clause 2(c) Issues. If the arbitration does not have that effect, the issues would have to be determined by court. The position would therefore be that unless there is good reason to consider that the arbitrators’ findings would be or could well be determinative of the Clause 2(c) Issues, there would be no good reason for a stay.
On the evidence before the Court, it was clear the Court could determine the discrete Clause 2(c) Issues long before the other areas of dispute would be determined in arbitration. Since the Clause 2(c) Issues would probably have to be determined as discrete points by Court at some stage, it would make sense for them to be dealt with as expeditiously as possible, with the possibility of considerable savings in time and costs, rather than for the suit to be wholly stayed to await the outcome of the arbitration.
The Court therefore ordered a stay in relation to all matters except Clause 2(c) Issues.