Stay of Proceedings granted as Court finds an Agreement to Arbitrate between the Parties

In the case of Cheung Teck Cheong Richard and others v LVND Investments Pte Ltd [2021] SGHC 28, the plaintiffs purchased the shop units developed by the defendant and claimed that the defendant had made fraudulent representations or negligent misrepresentations to the plaintiffs. The sale and purchase agreements between the parties contained the following clause:

‘20A. Mediation 20A.1 The Vendor and Purchase agree that before they refer any dispute or difference relating to this Agreement to arbitration or court proceedings, they shall consider resolving the dispute or difference through mediation at the Singapore Mediation Centre in accordance with its prevailing prescribed forms, rules and procedures.

20A.2 For the avoidance of doubt, this clause shall not amount to a legal obligation on the part of either the Vendor or Purchaser to attempt mediation as a means of resolving their dispute or difference.’

Prior to the commencement of the court proceedings, the plaintiffs had commenced two earlier arbitration proceedings, both of which were terminated. Subsequently, it was argued in the court proceedings that there was no valid arbitration agreement. In any event, any purported arbitration agreement was vitiated by mistake.  

The Decision
The SGHC found that the parties’ course of conduct gave rise to a valid arbitration agreement despite the finding that Clause 20A.1 did not show any intention by the parties to be bound to arbitrate, since it merely required parties to ‘consider mediation’ before referring their dispute ‘to arbitration or court proceedings’. Nevertheless, the court held that the parties had agreed to submit their disputes to Singapore-seated arbitration based on the following:

• The plaintiffs had proposed to arbitrate the disputes and the defendant did not disagree that parties should arbitrate the disputes. The defendant merely objected to (i) SIAC being the administering body, (ii) the application of the SIAC Rules, and (iii) there being a single consolidated arbitration.
  
  
• In the second attempt, the plaintiffs had asserted that the parties had agreed to submit their disputes to an ad hoc arbitration, to which the defendant did not disagree.
  
  
• The court emphasised that a party is not under a duty to respond to a notice of arbitration if its position is that there is no arbitration agreement. However, if there is in fact a response which evinces an intent to participate in the arbitration and which response fails to object to the existence of the arbitration agreement, then it will be deemed that there is an ‘effective arbitration agreement’, pursuant to s.4(6) of the Arbitration Act.
  
  
• This is not an exception to warrant a refusal of a stay. The mere fact the defendants did not agree with the plaintiffs that the SIAC should administer the arbitration(s), that the SIAC Rules applied, or that the arbitrations should be consolidated was not ‘reprehensible’ conduct. Second, the lack of an agreement as to the details regarding the conduct of the putative arbitration was not a factor weighing against a stay. Third, the remedies sought by the plaintiff could be granted in arbitration. Finally, there was no risk of multiplicity of proceedings.

This judgment highlights the importance of a properly drafted multi-tiered dispute resolution clause to avoid unnecessary procedural litigation. It also emphasises that the threshold to refuse a stay under the Arbitration Act is a high one and will only be exercised sparingly.