SIArb Newsletters

Nature of Matter

Stay of Court Proceedings 

Case Summary

1. The employer engaged the plaintiff for a construction project under a contract which provided for disputes between them to be resolved in arbitration.
2. All of the defendants were involved in the project: 

1. the first defendant is the employer’s country manager of Singapore and regional head of finance;
2. the second defendant is the project’s quantity surveyor, and a representative of the third defendant who is the quantity surveying company engaged by the employer for the project; and
3. the fourth defendant is an architect who is a qualified person, and representative of the fifth defendant who is the architectural firm engaged for the project (collectively the “Architect”).

3. During the project, the Architect issued a schedule of defects to the plaintiff (the “SOD”).
4. In consideration the SOD and the estimated costs of rectifying those defects, the employer called on 3 performance bonds which it had obtained from the plaintiff for the project.
5. The plaintiff tried but failed to recover the sums which the employer had received from the performance bonds, through adjudication and court proceedings between them. The parties eventually settled this.
6. Around January 2018, the plaintiff then commenced arbitration against the employer as it asserted the calls on the performance bonds were wrongful and therefore sought to claim interest on the sum in question. The notice of arbitration, addressed to the employer as respondent, was marked for the attention of, amongst others, the first defendant. In the plaintiff’s Statement of Case in the arbitration, the plaintiff named the second to fifth defendants among the “other parties involved in [the] Project”
7. The employer asserted that the plaintiff could not pursue its claim in relation to the calls on the performance bonds because of the settlement. In any event, the employer also took the position the calls were justified because of the defects, particularly those in the SOD. The employer, accordingly, counterclaimed for the cost of rectifying the outstanding defects, including new defects discovered since the SOD was issued.
8. In the arbitration, the issues between the plaintiff and the employer therefore included:
   1. whether the employer’s calls on the performance bonds were wrongful; and
   2. whether the plaintiff was responsible for the defects in the SOD, and associated rectification costs.
   9. Around October 2020, the plaintiff commenced the suit against the defendants as it asserted that:
   1. the defendants were responsible for the SOD being issued in bad faith and with the intention to cause the plaintiff loss and damage;
   2. the defendants had fabricated and inflated the cost of rectification of defects; and
   3. the defendants had colluded and conspired to cause the employer to make the calls wrongfully.

Accordingly, the plaintiff raised various tortious claims against the defendants such as conspiracy, breach of duties allegedly owed to the plaintiff, deceit and unlawful interference with trade and/or contractual relations. 

11. In the circumstances, there was a question whether the court should exercise its case management powers and stay the court proceedings given the considerable overlap in issues. 

The High Court ruled it would be appropriate to stay the suit as a whole pending the determination of the arbitration:

1. If the plaintiff were to fail in its claim in the arbitration that the employer’s calls on the performance bonds were wrongful, that would be fatal to its claims in the suit.
2. If the plaintiff failed in its claim in the arbitration that the employer’s calls on the performance bonds were wrongful, it could not then procure the opposite outcome from the court, ie, a judgment (in the employer’s absence) that the employer’s calls were wrongful. That would be an impermissible collateral attack on the arbitration award against the plaintiff (which might also become a court judgment in the same terms), and an abuse of process.
3. The first defendant agreed to be bound by the arbitration. This did not, however, satisfy the plaintiff; nor did the plaintiff offer likewise to be bound. In the High Court’s view, this indicated that if the plaintiff were to lose the arbitration, the plaintiff intended nevertheless to try to snatch victory from the jaws of defeat by pressing on with the suit. It appeared the plaintiff might be hoping that it might first win the suit, and then use that to influence the outcome of the arbitration. The plaintiff had, however, agreed with the employer that the disputes which were in issue in the suit, would be resolved in the arbitration between them, and that arbitration was underway.
4. The basis for granting a stay of court proceedings the outcome of which depends on the resolution of a related arbitration stems not from the mere existence of common issues, but from the fact that proper ventilation of the issues in the court proceedings is dependent on the resolution of the related arbitration.

5. In the present case, the plaintiff had agreed with the employer to arbitrate disputes that included the common issues of the calls on the performance bond, defects and rectification, and a stay of the suit would hold the plaintiff to this agreement. This stay would be lifted upon the arbitration being determined, and if the plaintiff succeeded in its claim in the arbitration that the employer’s calls were wrongful, the plaintiff could then proceed against the defendants in the suit. As a practical matter, though, if the plaintiff received from the employer what was awarded in relation to this claim, the plaintiff would not stand to recover any more by pressing on with the suit.

6. The outcome of the arbitration would either have the effect of resolving the suit because it was dispositive of the common issues, or at least pave the way for the suit to be resolved as between the parties. The consequences of the plaintiff losing in the arbitration have been mentioned above. Conversely, if the plaintiff were to win in the arbitration, it might not be open to the defendants (despite them not being parties to the arbitration agreement) to challenge any adverse finding from the arbitration on the common issues – that may amount to an abuse of process, for it would be contrary to the stance of seeking a stay of the suit pending the arbitration. This was particularly so for the first defendant (the applicant for the stay) as she implicitly accepted this, and readily agreed to be bound by the arbitration.