LawFlash

Staying Proceedings in Favour of Minority Oppression Claims in Arbitration

February 01, 2017

The Court of Appeal of Singapore confirms arbitrability of minority oppression claims and clarifies position on cross-appeals.

The Court of Appeal of Singapore has reaffirmed what constitutes a step in proceedings for the purpose of determining an application to stay court proceedings in favour of arbitration, and that minority oppression claims are generally arbitrable. The court also overturned earlier authority by holding that respondents to an appeal may challenge a trial judge’s findings without cross-appealing the decision.

Background

The case of L Capital Jones Ltd and another v Maniach Pte Ltd [1] concerned a claim for minority oppression by the plaintiff Maniach Pte Ltd against the defendants L Capital Jones Ltd and Jones the Grocer Group Holdings Pte Ltd—seeking relief under section 216 of the Companies Act. The defendants sought a stay of those proceedings in favour of arbitration pursuant to section 6 of the International Arbitration Act. The defendants asserted that they had not taken a step in the court proceedings and were therefore entitled to make the application for a stay. The High Court of Singapore held that the defendants had not taken a step in the proceedings but dismissed the application on the sole basis that minority oppression claims are not arbitrable.

However, shortly after the High Court’s judgment, the Court of Appeal found in an unrelated case[2] that minority oppression claims are generally arbitrable. The defendants therefore appealed the High Court’s decision. No cross-appeal was filed by the plaintiff with respect to the finding that the defendants had not taken a step in the proceedings.

Court of Appeal Decision

The Court of Appeal held that the minority oppression claims advanced by the plaintiff were arbitrable and that the proceedings would ordinarily have been stayed, rejecting the argument that the oppression claim in question was non-arbitrable because it was supposedly founded on “the abuse of court process in that the court process was used as an instrument of minority shareholder oppression”. The court found that the real question in the case was whether the defendants’ conduct was oppressive, rather than whether there was an abuse of process.

However, the Court of Appeal disagreed with the High Court’s finding that the defendants had not taken a step in the proceedings. Although the plaintiff had not cross-appealed on this point, the Court of Appeal held that the plaintiff was entitled to seek to affirm the High Court’s decision on this basis. In reaching this decision, the Court of Appeal departed from an earlier case (Lim Eng Hock Peter v Lin Jian Wei and another and another appeal )[3] in which the court held that a respondent could not raise a point ruled against it on appeal if that point was not the subject of a cross-appeal. On the facts, the Court of Appeal found that the second appellant had taken a step in the proceedings by filing a striking out application on the merits, and that this step in the proceedings was also taken by the first appellant because the factual circumstances pointed to the conclusion that the second appellant was a nominal defendant directed by the first appellant.

Accordingly, the Court of Appeal dismissed the appeal.

Takeaways

The Court of Appeal’s decision adds to the body of Singapore jurisprudence that minority oppression claims are generally arbitrable, and that the courts will stay proceedings for such a claim where the parties have agreed to arbitrate. The court also further reaffirmed earlier case law that where a party has taken a step in court proceedings (such as the filing of an application to strike out a claim on the merits), that party may not then apply for such a stay. Finally, the case is notable for overturning the previous procedural position in relation to the circumstances when a respondent is required to file a cross-appeal.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact the author, Daniel Chia, a solicitor of Morgan Lewis Stamford LLC, a Singapore law corporation affiliated ‎with Morgan Lewis & Bockius LLP.


[1] [2017] SGCA 3

[2] See Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2016] 1 SLR 373

[3] [2010] 4 SLR 331