Ignorance Is Not Always Bliss: A Case Study Of Marty Limited v Hualon Corporation (M'sia) Sdn Bhd

Introduction

The case of Marty Limited v Hualon Corporation (Malaysia) Sdn Bhd (receiver and manager appointed) [2018] SGCA 63 was an appeal by the Appellant (Marty) against the decision of the Singapore High Court (the High Court) in BMO v BMP [2017] SGHC 127 which held that a sole arbitrator (the Tribunal) had jurisdiction over a dispute referred by the Respondent (Hualon) to arbitration (the Arbitration).

The question for the Singapore Court of Appeal (the Court of Appeal) was whether there was still a binding arbitration agreement between the parties, notwithstanding that Hualon had commenced litigation in respect of a dispute which should properly have been arbitrated.

Marty was successfully represented by Senior Counsel Philip Jeyaretnam, Paras Lalwani, Chua Weilin, Tan Ting Wei and Alexander Choo of Dentons Rodyk & Davidson LLP. The Dentons team took over the matter after the initial challenge to jurisdiction had failed before the Tribunal, and ultimately persuaded the Court of Appeal to find that Hualon had indeed repudiated the arbitration agreement.

The case turned on whether Hualon, when it had earlier commenced proceedings in the British Virgin Islands, had known of the existence of the arbitration agreement on which it later relied to commence arbitration. Hualon claimed it had commenced court proceedings in ignorance of the arbitration agreement, and so should not be considered to have repudiated that arbitration agreement. However, its claim depended on asserting that the contract in which the arbitration agreement was contained was invalid, as having been entered into without authority. The Dentons team, upon taking on the matter, identified the inconsistency between relying on an arbitration agreement and disclaiming the parent contract, and pressed Hualon to make a choice - to reprobate or approbate. If Hualon approbated, then, the argument went, it could not claim ignorance, while if it reprobated, it could not rely on the arbitration agreement.

Eventually, before the Court of Appeal, Hualon was forced to make an unequivocal choice. It approbated the parent contract, and then following from that was held to have repudiated the arbitration agreement contained in it.

Brief Facts

Prior to commencing the Arbitration, Hualon sued Marty and its two former directors and shareholders, Mr Oung Da Ming and Mr Oung Yu-Ming (the Oung Brothers), in the British Virgin Islands (the BVI Litigation) for breaches of statutory and fiduciary duties in effecting a series of share transfers in 1999, 2007 and 2008 (the...