In Malini Ventura v Knight Capital Pte Ltd [2015] SGHC 225, the Singapore High Court dismissed an application for an interim injunction staying SIAC arbitration proceedings.  The application had been made on the basis that the plaintiff’s signature in an arbitration agreement was forged and, as a consequence, that the arbitration agreement did not exist.

The High Court held that an arbitral tribunal has the first bite at deciding whether or not there is an arbitration agreement and that, under Singapore law, a party needs only show on a prima facie basis that the arbitration agreement existed for the Court to stay proceedings in favour of arbitration.

The judgment re-confirms that the “competence-competence” principle applies under Singapore law and that the Singapore courts will give primacy to an arbitral tribunal to determine its own jurisdiction.

Background

The dispute arose out of a personal guarantee (Guarantee) pursuant to which the plaintiff agreed to guarantee a loan which was granted by the defendants to a Singapore company (Borrower). The Guarantee contained a SIAC arbitration clause.

The Borrower defaulted on a scheduled repayment of the loan and the defendants asked the plaintiff to repay the loan pursuant to the Guarantee.  The plaintiff refused and the defendants commenced SIAC arbitration for repayment of the loan.

The plaintiff asked the tribunal to stay the arbitral proceedings on the basis that no valid arbitration agreement existed.  The tribunal refused.  The plaintiff then filed an application at the Singapore High Court seeking:

  • a declaration that she had not entered in any arbitration agreement with the defendants because the signature on the Guarantee was forged;
  • a declaration that the arbitration proceedings were a nullity and of no effect; and
  • an injunction to restrain the defendants from continuing with the SIAC arbitration.

The plaintiff’s position was that under section 6(1) of the Singapore International Arbitration Act (IAA), where the existence of an arbitration agreement is challenged, and until that challenge is resolved by the court, there can be no “arbitration agreement”.  It is for the court to decide whether there is an arbitration agreement or not.

The defendants, on the other hand, relied on Article 16 of the Model Law, which is part of the IAA , and argued that the tribunal may rule on its own jurisdiction including any objections with respect to the “existence or validity of the arbitration agreement”.  As such, section 6(2) of the IAA makes it clear that a stay must be granted unless the court is satisfied that the arbitration agreement is null and void or incapable of being performed.

The High Court’s decision

The Singapore High Court dismissed the plaintiff’s application and the issue of whether there was a valid arbitration agreement was left for the tribunal to determine.

In so doing, the Court applied the competence-competence principle and held that, pursuant to section 6 of the IAA, article 16 of the Model Law and rule 25.2 of the SIAC Rules, the tribunal had the authority to rule on its own jurisdiction and decide on the existence of an arbitration agreement.

The Court held that, so long as the defendant satisfied the Court on a prima facie basis that an arbitration agreement existed, then the issue would be referred to the tribunal for determination.

The Court thereby departed from a decision of English High Court in Nigel Peter Albon (trading as N A Carriage Co) v. Naza Motor Trading Sdn Bhd & Anor [2007] 2 All ER 1075 (Albon), which held that the court must be satisfied that an arbitration agreement exists on the balance of probabilities. The Singapore High Court distinguished its approach from that in Albon by observing that the IAA incorporates the Model Law, which strictly circumscribes court intervention in arbitral proceedings, by contrast with the English Arbitration Act 1996 (Arbitration Act) which has some significantly different features.  In particular, the Court noted that while section 30 of the Arbitration Act confers a power on an arbitral tribunal to rule on its own substantive jurisdiction, it also allows parties to the arbitration agreement to opt out of this provision.  The Singapore High Court also emphasised that, unlike the Arbitration Act, the IAA deals exclusively with international arbitration and Singapore has separate legislation dealing with domestic arbitration, in which the grounds for court intervention in arbitral proceedings are somewhat wider.  The Court therefore considered that this was indicative of a different approach in the supervision of international arbitration proceedings in Singapore.

The High Court then considered whether the defendants had established on a prime facie basis that the plaintiff had signed the Guarantee.  The Court held the defendants had satisfied the evidentiary threshold as:

  1. the executed version of the Guarantee was forwarded to the defendants’ by solicitors who had acted for the Borrower and the plaintiff’s husband;
  2. the plaintiff  communicated with the defendant regarding the default under the loan and an offer to settle and the Court considered there was no reason for the plaintiff to have such communications if she had no knowledge of the transaction;
  3. the plaintiff did not dispute the existence of the Guarantee or her obligation to pay until after the SIAC arbitration had commenced; and
  4. the defendants had obtained expert evidence of a handwriting expert who opined the signature on the Guarantee was consistent with other signatures of the plaintiff.

The Court then held that as it had satisfied itself on a prima facie basis that an arbitration agreement existed, it must grant the application to stay its own proceedings unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed.  The Court considered that “null and void” in section 6(2) of the IAA means “devoid of legal effect”, which would be the result of the agreement being procured by duress, mistake, fraud or waiver.  It does not apply to a situation in which no agreement had been concluded at all. Further, for an arbitration agreement to be “inoperative”, it must have been concluded but for some reason ceased to have legal effect.  As the Court was satisfied that none of those situations existed, it granted the stay.

Comment

The case clarifies that it is the arbitral tribunal who gets the first bite in determining the existence of an arbitration agreement.  By establishing a low prima facie threshold for the Singapore courts to be satisfied that there is an arbitration agreement, it appears that it would only be in the clearest cases – such as where a party was not named in and had no connection with an alleged arbitration agreement – that the Singapore courts would not refer this issue back to the arbitral tribunal for an initial decision.