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13 Jul 2018

Whistful thinking: Singapore High Court stays proceedings in favour of multi-tier arbitration agreement

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Introduction

In Ling Kong Henry v Tanglin Club [2018] SGHC 153, the Singapore High Court has affirmed the prevailing common law position that a multi-tier dispute resolution clause constitutes an agreement to arbitrate. The decision also serves as a useful reminder that a party seeking to oppose a stay of proceedings in favour of an arbitration governed by Singapore’s Arbitration Act must show exceptional reasons why the matter should not be referred to arbitration.

The dispute

The Plaintiff, Mr Henry Kong Ling (“Mr Ling”), is a member of the Defendant, Tanglin Club (“the Club”). The Club Rules make provision for disciplinary action to be taken upon complaint by members (“Rule 26”). The Rules also contain a dispute resolution clause dealing with disputes for which no express provision in the Rules has been made (“Rule 45B”).

In February 2017, a group of around 30 club members (“the Bridge Players”) requisitioned for a Special General Meeting (“the SGM”), seeking a members’ resolution that one of the club rooms remains exclusively for card and board games. Prior to the SGM, Mr Ling sent several WhatsApp messages and emails to some club members, urging them to vote against the Bridge Players’ resolution. The Bridge Players failed to secure a majority vote for their proposed resolution in the SGM on 15 March 2017 and had to vacate the club room as a result.

Some of the Bridge Players then complained to the Club, asserting that Mr Ling had sent offensive and disrespectful messages. The Club enquired into these complaints and took disciplinary proceedings against Mr Ling in accordance with Rule 26. On 31 August 2017, the Club issued a letter of reprimand to Mr Ling.

On 19 January 2018, Mr Ling filed an originating summon for a declaration that the Club has breached the rules of natural justice and fairness in its conduct of the disciplinary proceedings. On 2 February 2018, the Club filed an application for Mr Ling’s claimed to be stayed under section 6 of the Arbitration Act, on the ground that Rule 45B is an agreement to arbitrate Mr Ling’s dispute.

Is a multi-tier dispute resolution clause an agreement to arbitrate?

The Court noted that Rule 45B employs a multi-tier dispute resolution mechanism: first by way of conciliation, followed by meditation, and then finally, arbitration. There are two prevailing conceptual perspectives as to whether a multi-tier dispute resolution clause constitutes an agreement to arbitrate. The first perspective is that the entire multi-tier resolution clause is an agreement to arbitrate. The second perspective is that there is no agreement to arbitrate at the outset. Instead, the agreement is limited to the first tier dispute resolution forum chosen by the parties and the agreement to arbitrate only arises after the preconditions have been exhausted.

The Court found that English, Hong Kong, and local authorities were consistent in regarding multi-tier dispute resolution clauses to constitute agreements to arbitrate, the underlying rationale being that if a dispute resolution clause seeks to avoid litigation by ultimately having a matter adjudicated by arbitration, this intention ought to be upheld. This must apply with equal force to clauses which include conciliatory steps as a preface.

Accordingly, the Court held that although it required conciliation and mediation steps to be taken as preconditions to arbitrate, Rule 45B was nevertheless an agreement to arbitrate.

The Court’s discretion to refuse a stay

Under the Arbitration Act, the Court has a discretion whether or not to grant a stay in favour of arbitration (unlike the International Arbitration Act, where such a stay is mandatory). The Court highlighted two policy considerations in exercising its discretion. Mr Ling argued that the Court ought not to exercise its discretion to stay the proceedings for three reasons: first, that the Societies Act mandated the court’s intervention; second, that there were technical impediments to the use of Rule 45B; and third, reasons of natural justice. The Court rejected all three of Mr Ling’s contentions.

The Court highlighted Singapore’s strong policy in favour of arbitration as a useful and efficient alternative dispute resolution. It also emphasised the need to preserve party autonomy by giving full effect to parties’ agreement to arbitrate. Importantly, the burden is on the plaintiff to show exceptional reasons why the matter should not be referred to arbitration, and why the court should refuse a stay. Accordingly, the Court allowed the appeal and ordered Mr Ling’s claim against the Club be stayed in favour of the procedure provided by Rule 45B.

A copy of the judgment can be found here.

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Stephenson Harwood LLP is licensed to operate as a foreign law practice in Singapore. Where advice on Singapore law is required, we will refer the matter to and work with our Alliance partner, Virtus Law LLP, where necessary.

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