By Fayth Kuah
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Nature of Matter |
Stay of Court Proceedings – Validity of settlement agreement containing arbitration clause |
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Case Summary |
This is an appeal against the decision of a High Court Judge (“the Judge”) who ordered a stay of court proceedings between the parties, as there was a related issue between the same parties that had been submitted to arbitration. The appellant (PUBG) commenced an action against 5 respondents in the High Court alleging copyright infringement and passing off. Between September and November 2018, timelines in the court proceedings were suspended to allow the parties to reach a settlement, of which on 14 November 2018, the appellant offered settlement on certain terms by signing and sending a proposed settlement agreement to the respondents by email. On 12 April 2019, the respondents countersigned the settlement agreement and returned it by email to the appellant’s solicitors. However, the appellant’s solicitors responded on 16 April 2019, protesting that the offer contained in the settlement agreement was no longer capable of being accepted. The appellant therefore disputed that a valid settlement was concluded and wished to prosecute the proceedings it commenced in court. In response to the situation, the respondents commenced arbitration against the appellant to determine the validity of settlement as the purported settlement agreement contained an arbitration clause. On 30 April 2019, the respondents applied for a stay of the court proceedings on case management grounds, pending the resolution of the arbitration. The key issue in the arbitration was the validity of the settlement agreement. The Judge in the first instance decided court proceedings should be stayed pending the resolution of the arbitration. |
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Ruling |
Issue: Whether the Judge was correct to determine and order for stay of court proceedings The applicable principles on which a court should exercise its inherent power to stay court proceedings is found in Tomolugen Holdings Ltd and anor v Silica Investors Ltd and or appeals [2016] 1 SLR 373 (“Tomolugen”), which observed that it is ultimately for the court to take the lead in facilitating a fair and efficient resolution of the dispute. The grant of a case management stay of proceedings where a related arbitration is ongoing, is a balance between three “higher-order concerns”, namely: (1) Preserving the plaintiff’s right to choose whom to sue and where; (2) Upholding agreements to arbitrate; and (3) Preventing an abuse of process Further, it was observed that the inherent power to stay court proceedings where related issues involving some or all of the same parties are also subject to an arbitration agreement must be exercised with due sensitivity and regard to the facts and in particular, the nature of the overlapping issue. Applying the above principles to the present case, the assessment is whether there a valid settlement that has the effect of compromising the underlying claims. If so, the court proceedings cannot proceed. If on the other hand, there is no valid settlement, then the court proceedings must proceed. Consequently, the validity of the settlement agreement must be resolved first, and the only remaining question is which forum to do so. The appellant has not raised the validity of the settlement agreement in the court proceedings. The precise question concerning the validity of the settlement agreement had been put forth by the respondents in the arbitration proceeding as they took the position there was a valid arbitration agreement in the purported settlement agreement, of which the tribunal had been empanelled and would in due course give its award after hearing the parties. Conclusion |