Exception to Arbitrability in Singapore By Kush Shah and Bhavika Dadlani


L Capital Jones Ltd. (“L Capital”) (Majority Shareholder)
 
Versus
 
Maniach Pte. Ltd. (“Maniach”) (Minority Shareholder)
 
(Jurisdiction: Singapore)
 
Acts/Rules referred:

  1. (Singapore) International Arbitration Act - Section 6 (2002 Ed)
  2. (Singapore) Companies Act (Cap 50, 2006 Rev Ed)
Decided in: 2017
 
Background:

This was an appeal brought by a majority shareholder, L Capital against the Singapore High Court's decision refusing a stay of court proceedings in favour of arbitration on the ground that minority oppression claims were not arbitrable. Maniach, a minority shareholder in the Jones the Grocer group of companies resisted the appeal, arguing that his minority oppression claim against L Capital Jones was not arbitrable.
 
Maniach argued that while the Singapore case of Tomolugen had held that minority oppression claims were generally arbitrable, his case possessed features which raised the public policy exception to arbitrability. The gravamen of his argument was that L Capital had abused court process to place two subsidiaries owned by the group under administration in Singapore, and in Australia to transfer one of the subsidiaries' only asset, its shares, to a third party related to L Capital for no net consideration.
 
Held:

The Singapore Court of Appeal found Maniach's contention without merit and held that the question of an abuse of the judicial process was neither the essence of the present dispute nor a necessary step in proving Maniach's claim. The issue rather was whether there was unfairness in the majority shareholder procuring the transfer of all the shares in the subsidiary to a third party in exchange for extinguishing debts. Maniach had not sought any relief for the alleged abuse of judicial process. Even if the court or tribunal adjudicating the dispute were to find that there was an abuse of process, such a finding would only be incidental to its resolution of the minority oppression dispute. Hence L Capital had succeeded in showing that the dispute was arbitratable.
 
However, the Singapore Court of Appeal found that because L Capital's subsidiary had taken a step in the court proceedings by bringing an application to strike out the minority oppression claim brought by Maniach in Singapore Court of Appeal, the court therefore held that once such step is taken, it would be irrevocable, even if the striking out application was not eventually pursued. The Court concluded that L Capital and its subsidiary’s applications to stay the proceedings in favour of arbitration are therefore dismissed.

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