Introduction

The case of Rex International Holding Ltd and another v Gulf Hibiscus Ltd [2019] SGCA 59 was an appeal by the appellants against the decision of the High Court judge (the “Judge”) to lift a stay of proceedings previously granted on case management grounds.

The respondents were successfully represented by the team of Tito Isaac & Co LLP consisting of Tito Isaac, Managing Partner, and Hariz Lee. This decision is the latest saga of the Suit which had resulted in two earlier judgments.

Brief Background

The plaintiff-respondent, Gulf Hibiscus Ltd, is one of 3 shareholders of Lime Petroleum PLC (“Lime PLC”). The other shareholders are Rex Middle East Limited (“RME”) and Schroder & Co Banque SA (“Schroder”).

The first defendant-appellant, Rex International Holding Limited, is the ultimate holding company of RME while the second defendant-appellant, Rex International Investments Pte Ltd, is the intermediate holding company of RME, and a wholly owned subsidiary of the first defendant (the two defendants are collectively referred to as the “Defendants”).

The Plaintiff commenced the Suit against the Defendants in respect of alleged wrongs committed by the latter and their associated companies in relation to joint ventures between the two sides. The Defendants thereafter sought a stay of the proceedings on case management grounds, relying on a dispute resolution clause, which provided for arbitration, found in a shareholders’ agreement that had been entered into between RME and the Plaintiff. The Plaintiff had unequivocally stated that it did not wish to commence any arbitration against RME while the Defendants’ were “ready and willing to do all things necessary to enable disputes that arise out of the [shareholders’ agreement] to be resolved expeditiously in accordance with [the arbitration clause]”.

The Defendants successfully obtained a stay on case management grounds before the Assistant Registrar and was upheld by the Judge subsequently on certain conditions. One of the conditions of the stay was the parties were at liberty to apply to the court to lift the stay in the event that an arbitration was not commenced within five months from the date of the order.

Eventually, the Plaintiff successfully applied to lift the stay when no arbitration or other proceedings were brought between RME and the Plaintiff.

The Decision by the Judge

The Defendants’ main contention against the lifting of the stay was that they have complied with the dispute resolution clause. Further, they would be required/compelled to move RME to commence arbitration against the Plaintiff and to pursue a negative case, namely for a declaration of non-liability, if they desired the continuance of the stay.

On the other hand, the Plaintiff’s simply argued that the lifting of the stay was in accordance with the conditions imposed by the Judge and no arbitration has been commenced by the Plaintiff or RME. Further, the lifting of the stay is also a matter of discretion and the Judge had exercised it correctly.

The Judge was of the view that both sides did not move the case along expeditiously and it was incumbent on the party desirous of the stay to commence arbitration. However, the Court was not compelling any party to commence such arbitration but simply setting out the consequences if no arbitration was commenced.

The Court of Appeal’s Decision

The Court of Appeal dismissed the appeal and agreed with the Judge that the continuance of the stay would have stymied the resolution of an already protracted dispute and that the dispute ought to be resolved.

What is perhaps of interest is the Court of Appeal’s remarks that the stay should have not been granted in the first place. The Court of Appeal found that the effect of the stay was to prevent the Plaintiff from pursuing its claim against the Defendants and to require the Plaintiff instead to proceed against RME under the shareholders’ agreement. This would essentially mean that the Plaintiff is compelled to sue RME first, a party it had no desire to sue at all, before it could claim against the Defendants.

The Court of Appeal reiterated that a case management stay arises where there are overlapping issues that will have to be ventilated before different fora among different parties, some of whom are bound by an arbitration agreement, while others are not. It was emphasized there must first be the existence or at least the imminence of separate legal proceedings giving rise to a real risk of overlapping issues. The Court made clear the sort of overlap that would attract a case management stay is one where the proper ventilation of the issues in the court proceedings depended on the resolution of the related putative arbitration.

Takeaways and Conclusion

The reasons stated by the Court of Appeal is somewhat surprising given that neither party argued that the stay was improperly granted in the first place. However, the Court explained that a grant of a stay on case management grounds is part of the court’s exercise of its inherent jurisdiction to manage its own internal processes and thus administrative.

The Court of Appeal’s willingness to consider the propriety of the stay, where no appeal is made against the grant of the same, may be of some significance if a party is ever faced with a case management stay for a limited duration. If the duration of the stay is not lengthy, and considers that there is a good prospect in lifting the stay subsequently, it may be worthwhile allowing the stay to continue and only filing an appeal if the stay is not lifted subsequently. As a party appears not to be precluded from raising the propriety of the stay originally granted, it may be more advantageous to allow the stay to lapse and filing an appeal then rather than appealing the stay at the outset given the costs and timelines involved for hearings before the Court of Appeal.

For more information, please contact:
Mr Hariz Lee, Senior Associate
Litigation & Alternate Dispute Resolution Department
DID: +65 6730 6008 , TEL: +65  6533 0288
EMAIL: [email protected]