October 1, 2015
In August 2015, the High Court of Singapore determined the issue of stay of Court proceedings involving a disputed arbitration agreement. The decision turned upon the interpretation of s 6(1) of the International Arbitration Act (“IAA”), and gave clarity on the extent of the Court’s jurisdiction in a stay application when the existence of the arbitration agreement is disputed.
Malini v Knight Capital  SGHC 225: Parties’ Contentions
The Plaintiff sought a declaration that no arbitration agreement had been entered into with the Defendants and a further declaration that all proceedings in the arbitration were a nullity. The Plaintiff also applied for an injunction to restrain the Defendants from continuing with the arbitration proceedings pending a full and final disposal of the action. The Defendants countered by filing a summons for a stay of proceedings in the action pending a full and final determination of the arbitration proceedings.
The Defendants contended that an arbitration agreement existed between the parties to which the IAA applied. The Defendants sought to invoke s 6(2) of the Act under which they maintained that the Court must stay the action and dismiss the Plaintiff’s application for interim injunction. On the other hand, the Plaintiff contended that no such arbitration agreement existed. The signature on the document was alleged to be a forgery.
In her judgment, Judith Prakash J considered how jurisdictional issues are to be dealt with in an application under section 6 of the IAA. The Defendants claimed that the Tribunal had jurisdiction to determine the existence of an arbitration agreement between parties according to the international arbitration regime in place in Singapore. The Plaintiff argued that s 6 only applied where an “arbitration agreement” existed and since it was her contention that no such agreement was made and signed, both parties were not parties to an “arbitration agreement.” Consequently, the Defendants did not have legal basis to apply for a stay of the action.
A further issue considered was the standard of proof required by the Court in determining whether any agreement was in existence. The Defendants contended that the Court needed only to be satisfied on a prima facie basis in order to grant a stay of proceedings. The Plaintiff on the other hand argued that in a situation where one party had denied ever entering into the alleged arbitration agreement (such that the very existence of the agreement was brought to question), the standard of proof required would be the usual civil standard (ie on a balance of probabilities) and should be decided by the Court after a full trial.
International arbitration regime
The Learned Judge considered the international arbitration regime currently in place and emphasised that the role of the Court has been deliberately circumscribed in order to promote the efficiency and speediness of the arbitral process. According to Art 5 of the Model Law, the Court is prohibited from interfering in matters governed by the Model Law save to the extent the Model Law expressly allowed for such intervention. Therefore, the Court in Singapore cannot interfere in the process except as specifically laid out in the Model Law and the IAA.
Judith Prakash J observed that under the regime established by the Model Law, the Court’s consideration of whether an arbitral tribunal had jurisdiction would be subsequent to the tribunal’s own examination of the issue. Her Honour also accepted that the tribunal’s powers with regard to the issue are extensive because of its ability to determine issues relating to the validity of the agreement and the very existence of the agreement.
Principles in UK Law
The Plaintiff contended that if the very existence of the arbitration agreement was in question, it constituted the primary issue which must be decided by the Court first. The principle was illustrated in the UK High Court case of Nigel Peter Albon v Naza Motor Trading  (“Albon”) where Lightman J decided on the issue of whether to grant a stay of court proceedings under s 9(1) of the UK Arbitration Act 1996.
s 9(1) allowed a party to an arbitration agreement against whom legal proceedings are brought to apply for a stay of court proceedings if the legal proceedings were in respect of a matter that the arbitration agreement required to be referred to arbitration. Section 9(4) stated that the “court shall grant a stay unless satisfied that the arbitration agreement is null and void.” Although s 9(1) is not entirely identical to s 6(1) of the IAA, S 9(1) is the UK equivalent of s 6(1).
Of particular significance in the Albon judgment was the following at paragraph 20: “Whilst the doctrine of ‘Kompetenz-Kompetenz’ provides that the arbitral tribunal shall have jurisdiction to determine whether the arbitration agreement was ever concluded, it does not preclude the Court from itself determining that question.”
According to Lightman J, s 9(1) established two threshold requirements. Firstly, that there had been concluded an arbitration agreement. Secondly, the issue in the proceedings was a matter which the arbitration agreement required to be referred to arbitration. Unless the Court was satisfied that both conditions were satisfied, the Court could not grant a stay under s 9(1).
His Lordship held that the UK position was that if there was insufficient evidence before the Court to determine whether an arbitration agreement had been concluded, the grant of a mandatory stay of proceedings under s 9(4) would not be permissible. Jurisdiction to grant a stay under s 9 only arose when the Court found that there was an arbitral agreement in existence. His Lordship subsequently held that he had no jurisdiction to grant a stay under s 9. According to Judith Prakash J in the present case, the likely standard of proof applied in the Albon case was the balance of probabilities.
Relationship between Parallel (UK and Singapore) provisions
In Singapore, the IAA was enacted to incorporate the Model Law which strictly circumscribes court intervention in arbitral proceedings. The IAA applies solely to international arbitrations. Domestic arbitrations are governed by separate legislation. The UK Act, however, applied to both international and domestic arbitrations. While the UK Act was based on the Model Law, the Model Law was not incorporated wholesale. As such, there were significant different features.
Furthermore, s 32 of the UK Act states that the Court may, on the application of a party to arbitral proceedings, determine any question as to the substantive jurisdiction of the tribunal. The presence of such a provision is indicative that a different approach is taken in the UK as regards the Court’s involvement in arbitral proceedings.
Adopting the UK approach entirely would not be appropriate in Singapore. It was sufficient if the party applying for a stay of proceedings established on a prima facie basis that the arbitration agreement existed. The matter would then go to the tribunal to determine whether the existence of the arbitral agreement could be established on the usual civil standard.
Outcome of Decision
On the whole, Judith Prakash J concluded that the Defendants had made out a prima facie case that the Guarantee was signed by the Plaintiff. Her Honour based her decisions on the following:
- The signed copy of the Guarantee was provided to the Defendants by solicitors representing the Plaintiff’s husband PV and the Borrower. The fact that the signed document was provided by a firm of solicitors that was acting for parties who were definitely involved in the transaction gave the Guarantee a proper provenance.
- Second, the Borrower and Husband PV were, obviously, not strangers to the Plaintiff and it would not be irrational or completely abnormal or unusual for her to provide a guarantee for the Borrower’s obligations.
- Third, after the Defendants first indicated to the Plaintiff that there had been an event of default by the Borrower, she did not at that stage deny any knowledge of the transaction or that she had signed the Guarantee. It was not until May 2015, after SIAC 24 was started, that the assertion that she had not signed the Guarantee was made. This was extremely late for such a position to be taken and cast doubt on its truth. The Court also considered that it was only the Plaintiff’s word that she did not sign the Guarantee and she had shown herself to be capable of misrepresenting the true position.
- Further, there was independent evidence that the signature on the Guarantee could be the Plaintiff’s. No independent evidence was adduced to assert that the signature on the Guarantee was not hers.
Impact of Decision
The decision of the High Court is very welcomed. It removes the ambiguity caused by UK case law on how the Courts should approach the question of jurisdictional issues in the context of an application for stay under section 6 of the IAA. It also again reaffirms the Singapore jurisprudence of the primacy of the arbitral tribunal.