Singapore Court Of Appeal Rules On Arbitrability

In Tomolugen Holdings Ltd v Silica Investors Ltd [2015] SGCA 57, the Singapore Court of Appeal affirmed that, when faced with a stay application, the Singapore Courts would only undertake a prima facie review of the validity of an arbitration clause and defer the ultimate question of jurisdiction to the arbitral tribunal.

Background

Silica Investors Ltd ("Silica") was a minority shareholder in a mining exploration company known as AMRG. The majority shareholder in AMRG was Tomolugen Holdings Ltd ("Tomolugen"). In June 2010, Silica purchased its 4.2% stake in AMRG from a subsidiary of Tomolugen through a share sale agreement.

Amongst other things, the share sale agreement entitled Silica to appoint a director to AMRG's board and warranted that AMRG's liabilities would be discharged before completion of the sale. The agreement also contained an arbitration clause, which provided for a SIAC arbitration in relation to "any dispute arising out of or in connection with [it]."

In June of 2013, Silica commenced suit before the Singapore Courts alleging that Tomolugen had conducted the affairs of AMRG in a manner which was oppressive towards it as a minority shareholder of AMRG. Specifically, Silica alleged that AMRG had issued new shares to dilute Silica's stake, and that AMRG had taken actions to frustrate Silica's attempts to participate in the management of AMRG. Silica also claimed that AMRG had executed guarantees and acquired assets for the benefit of Tomolugen and the latter's subsidiaries. Silica sought a host of remedies under section 216 of the Companies Act, including a share buy-out or liquidation of AMRG.

Tomolugen and the other defendants applied for a stay of the court proceedings in favour of arbitration. It argued that a part of Silica's claim was covered by the arbitration clause in the share sale agreement and should be referred to arbitration, and it sought to stay the rest of Silica's claim pending the conclusion of the arbitration.

The High Court had earlier denied the stay application, and Tomolugen appealed.

The Court of Appeal's judgment dealt with three issues.

1. Arbitrability of shareholder oppression dispute

   The Court first had to decide whether the shareholder oppression dispute was arbitrable. It began by noting that there will ordinarily be a presumption of arbitrability whenever a dispute falls within the scope of an arbitration clause. A notable exception to this presumption is a dispute involving an insolvent...