In PPF Capital Source v Singh & Anor [2016] EWHC 3097 (Ch), the fact that a company controlled by one of the defendants had begun an arbitration of the same dispute in Hong Kong was not a compelling reason to stay the English proceedings. On the contrary, there were compelling reasons for the proceedings to continue.

PPF Capital Source (PPF) entered into an agreement with Greenmybusiness Limited (GMB) (a company controlled by a Mr Singh) whereby GMB agreed to obtain a $100million standby letter of credit from Barclays Bank. Under the agreement, PPF paid $1.5million to GMB. PPF alleged that it was induced to enter into the agreement as a result of alleged fraudulent misrepresentations said to have been made to it by Mr Singh, and a Mr Patel.

Following service of a detailed letter of claim in July 2015, PPF commenced English court proceedings against Mr Singh and Mr Patel in April 2016. The first defendant, Mr Singh, sought and obtained extensions of time for service of his defence, ultimately expiring on 3 June 2016. On that day, instead of filing a defence, Mr Singh caused GMB to commence arbitration proceedings in Hong Kong and applied for the English proceedings against him to be stayed on the basis that the agreement required disputes between PPF and GMB to be decided by way of arbitration in Hong Kong.

Mr Singh claimed the allegations made against him in the English proceedings were baseless and that they had been put forward solely to evade the arbitration clause in the agreement: GMB (not Mr Singh) was party to the arbitration clause. In the weeks prior to the application being heard, Mr Singh's solicitors came off the record and Mr Singh did not correspond with PPF.

The English court declined to stay the proceedings. Applying Mabey & Johnson Ltd v Danos [2007] EWHC 1094 (Ch) and Reichhold Norway ASA v Goldman Sachs International [2000] 1 W.L.R. 173, the Court considered that it had a discretion to stay proceedings in circumstances where there was: a claim by a claimant against a company and an individual; an arbitration agreement between the claimant and the company alone pursuant to which an arbitration had been commenced; and overlap of subject-matter between the claims against the company and the individual. However, such discretion should not be exercised save in rare and compelling circumstances.

In reaching its decision, the Court stressed that the merits of Mr Singh's defence had no "real bearing on the question of whether there were compelling circumstances which ought to lead [it] to stay [the] claim".

The Court observed that the strongest argument against a stay was as follows: if the proceedings were stayed, and the arbitration was decided in GMB's favour, the English proceedings would be unlikely to be pursued. However, conversely, if the arbitration was decided in PPF's favour, the English court action would proceed. In that event, as Mr Singh was the controlling mind of GMB, it would likely be an abuse of process for him to ask for specific matters decided by the arbitrator to be re-litigated in the English court. Following the arbitration, many of the issues between Mr Singh and PPF would not have to be investigated again. However, this was not true for Mr Patel. Mr Patel was not a party to the arbitration and would not be bound by any award, meaning the case involving him would have to proceed in full in any event and the issues would have to be investigated all over again.

There were a number of other reasons the Court identified why the English proceedings should continue. First, it was not known whether the arbitration in Hong Kong would go ahead. Second, important documents held by Barclays Bank could be more easily obtained by way of third party disclosure in the English proceedings rather than in the context of an arbitration in Hong Kong. Third, the fact that the arbitration was commenced by GMB on the very last day for Mr Singh to serve his defence and after no communication from him about the substance of his case suggested that "the arbitration may well be a tactical manoeuvre to try and simply delay the evil day when this case comes on for trial".

The Court's comments are of particular note to parties engaged in cross-border disputes and the associated jurisdiction battles which often arise, and serve as a reminder that the English courts are unlikely to look favourably on obviously tactical manoeuvres.