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In Yau Lee Construction (Singapore) Pte Ltd v Far East Square Pte Ltd and another matter  SGHCR 11, the Singapore High Court considered the issue of whether the entitlement of an employer to seek summary judgment on architect’s certificates under the Articles of Agreement and Conditions of Contract of the Singapore Institute of Architects (“the SIA Conditions”), and the general policy of facilitating cash flow in the construction industry, ought to have an impact on how closely the court considers the quality of the claim and defence in determining the existence of a dispute to be referred to arbitration.
Sections 6(1) and 6(2) of the Arbitration Act (Cap 10, 2002 Rev Ed) (“AA”) provides that:
Stay of legal proceedings
6.—(1) Where any party to an arbitration agreement institutes any proceedings in any court against any other party to the agreement in respect of any matter which is the subject of the agreement, any party to the agreement may, at any time after appearance and before delivering any pleading or taking any other step in the proceedings, apply to that court to stay the proceedings so far as the proceedings relate to that matter.
(2) The court to which an application has been made in accordance with subsection (1) may, if the court is satisfied that —
(a) there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement; and
(b) the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration,
make an order, upon such terms as the court thinks fit, staying the proceedings so far as the proceedings relate to that matter.
The decision of the Court of Appeal in Chin Ivan v H P Construction & Engineering Pte Ltd  3 SLR 124 (“Chin Ivan”) is the leading judgment on the validity of architect’s certificates. The appellant employed the respondent as the main contractor for a building project. After the architect issued two instructions approving certain variation works, including a claim for preliminaries and for an extension of the defects liability period, the respondent raised a payment claim for unpaid work. The architect subsequently issued a progress certificate certifying that $321,383.94 was payable by the appellant to the respondent, and later a final certificate certifying that $720,417.28 was payable to the respondent. The appellant refused to make payment. The respondent then commenced an action in court and the appellant applied for a stay of proceedings under section 6 of the AA, arguing that the architect’s certificates had been procured by fraud. An assistant registrar stayed the proceedings in their entirety and Edmund Leow JC allowed the appeal in part and ordered only a partial stay.
In the case of Kwan Im Tong Chinese Temple v Fong Choon Hung Construction Pte Ltd  1 SLR(R) 401 (“Kwan Im Tong”), the respondent contractors commenced an action against the appellant employers for interim payment certified by an architect. The employers applied for a stay of proceedings pursuant to section 7 of the Arbitration Act (1985 Rev Ed) on the basis that they had a cross-claim for damages for defective works and for liquidated damages for delay in completion. At first instance, Warren Khoo J, sitting on the High Court, took the view that certain principles governing summary judgment were applicable, having “start[ed] with the premise that, the architect having duly certified the interim payment, the contractors are prima facie entitled to summary judgment for the sum certified”. However, the Court of Appeal rejected Khoo J’s approach of deeming the contractors to be prima facie entitled to summary judgment and that it was therefore for the employers to show that they had a bona fide defence was “not consonant with section 7 of the [Arbitration Act (1985 Rev Ed)]”, and took the view that “it is the party resisting the stay of proceedings … who ha[s] the burden of showing that the other party … ha[s] no defence to the claim” [emphasis added].
The dispute between the parties centers on the regime of architect’s certificates in the SIA Conditions, known as the Delay Certificate, Termination of Delay Certificate, Further Delay Certificate and Final Certificate. Specifically, the parties differ on whether and if so, how, a contractor can seek extensions of time for delaying events that occur after the latest date for completion stipulated in a Delay Certificate, but before the date of issuance of that Delay Certificate itself. The difficulty appears to have arisen out of certain amendments introduced in the 6th Edition of the SIA Conditions, such amendments having been intended to prevent architect’s certificates from being invalidated due to lateness.
The parties applied for a stay of the claim and counterclaim respectively pursuant to an arbitration clause in the SIA Conditions. However, they disagree on the approach to be applied to determine whether there is a dispute to be referred to arbitration under section 6 of the AA, in the context of an action commenced for the enforcement of architect’s certificates. The main issue before the High Court was whether the claim and counterclaim ought to be stayed pursuant to section 6 of the AA. In that regard, the only issue in contention is whether there exists a dispute which can properly be referred to arbitration.
Decision / Issues:
The Singapore High Court granted an overall stay of court proceedings and held that the entirety of the dispute between the parties is to be referred to arbitration.
Whether the claim is undisputed or indisputable
In determining whether there is a dispute to be referred to arbitration in the context of a stay application under section 6 of the AA, the operative question is whether the claim can be said to be undisputed or indisputable.
Beginning with the preliminary question of burden of proof, the Court held that as the applicant for a stay, the onus is on the defendant to demonstrate the existence of a “prima facie case of disputes”. Where irregularities in the architect’s certificates are alleged by the defendant, the defendant cannot succeed in establishing a prima facie case of disputes merely by raising mere allegations; he must back this up by credible evidence.
Once the defendant sets up a prima facie case of a dispute, the burden shifts to the plaintiff to satisfy the court that there is “sufficient reason why the matter should not be referred in accordance with the arbitration agreement” under section 6(2)(a) of the AA, and why the court should instead assume jurisdiction.
The issue in contention is whether the entitlement of an employer to seek a summary judgment on architect’s certificates under the SIA Conditions and the general policy of facilitating cash flow in the construction industry ought to have an impact on how the court considers the quality of the claim and defence in determining the existence of a dispute to be referred to arbitration.
In this regard, the Plaintiff submits that the burden lies on the Defendant to satisfy the court of the existence of such a dispute if it is to succeed in its stay application, and it must do so by establishing a “prima facie defence” and not merely the existence of a “prima facie dispute”. Crucially, the Plaintiff suggests that the temporary finality of architect’s certificates, which provides the basis for enforcement of such certificates by way of summary judgment, should be factored into the determination of the standard to be met by the applicant for a stay. It argues that if the temporary finality of such a certificate could be “displaced easily by a mere assertion that there is a prima facie dispute as to whether there was fraud, improper pressure or interference or whether the certificate was issued in accordance with the [SIA Conditions], that would seriously undermine the contractual intention of according temporary finality to the architect’s certificate in the first place”. To give effect to such contractual intention, the Plaintiff reasons, the approach to determine whether to stay an action in which the enforcement of architect’s certificates is sought by way of summary judgment should likewise be the test for summary judgment, i.e. a “prima facie defence or triable issue”. On the other hand, the Defendant argued that the applicable test is only whether it is able to show the existence of a “prima facie dispute”. The Defendant relies heavily on the decision of the Court of Appeal in Kwan Im Tong which, in the Defendant’s view, stands for the proposition that “the relevant test for a stay application [is] the test of prima facie dispute”. The Defendant goes further to argue that the test of “prima facie defence” is of no relevance to an application for a stay in favour of arbitration.
Having carefully considered the various issues, the Court granted a stay of proceedings in favour of arbitration.
The Court found that the Defendant has established a “prima facie case of disputes”, and the Defendant’s arguments do not consist of “mere allegations”. The burden therefore shifts to the Plaintiff to satisfy the Court that its claim is either undisputed or indisputable such that there is “sufficient reason” under section 6(2)(a) of the AA to warrant a refusal of a stay.
The Court did not accept the Plaintiff’s argument, however, and was of the view that the Plaintiff’s position was not only plainly inconsistent with existing case law, but also unsupported by the general policy reason (i.e., to preserve cash flow in the construction industry and minimise disruptions for contractors) that it puts forward to justify the application of the summary judgment standard to determine if there is a dispute to be referred to arbitration. The Plaintiff’s argument confuses a question of jurisdiction with a question of merits and ignores the fact that an employer’s entitlement to enforce architect’s certificates by way of summary judgment ultimately arises out of an agreement between the parties of which an arbitration clause is also part. The Court also found that the Plaintiff’s position that the Defendant is to show a “prima facie defence” cannot be accepted because it impermissibly reverses the burden of proof.
This decision underlines the importance of not confusing a situation in which the defendant disputes the claim on grounds which the plaintiff is very likely indeed to overcome, with the situation in which the defendant is not really raising any dispute at all. While summary judgment principles aid the court with determining whether a claim should be immediately allowed in very obvious cases, applications for a stay such as the present one relate to a larger issue of jurisdiction. Therefore it did not appear entirely safe to determine the issue of whether the parties should be bound by their agreement to arbitrate, with reference to principles established to deal with very obvious claims with no defence.