Singapore High Court
The “Engedi”  SGHC 95
Judgment delivered by Judith Prakash J, 25 March 2010  SGHC 95
AsiaLegal LLC for the Appellant/Intervener, Capital Gate Holdings Pte Ltd Allen & Gledhill LLP for the Respondent/Plaintiff, T.S. Lines Ltd
STAY OF IN REM PROCEEDINGS PENDING ARBITRATION IN LONDON: WHETHER STAY OF PROCEEDINGS OUGHT TO BE GRANTED UNDER SECTION 6 OF THE INTERNATIONAL ARBITRATION ACT (‘IAA’) WHERE CURRENT OWNER AND INTERVENER WAS NOT A PARTY TO ARBITRATION AGREEMENT
Note: An appeal against this decision was allowed by the Singapore Court of Appeal on 6 July 2010. No written grounds of decision were rendered.
A stay of in rem proceedings against the vessel could not be granted pursuant to Section 6 of Singapore’s International Arbitration Act (“IAA”) as there was no arbitration agreement between the Plaintiff and the res. The Intervener and current owner of the vessel was not a party to any arbitration agreement with the Plaintiff and could not be forced to litigate in another forum.
The Plaintiff, as disponent owner, entered into a charterparty with EP Carriers Pte Ltd (“the Defendant”) as charterer for the use and hire of the vessel “TS BANGKOK”. The charterparty provided that disputes arising out of the agreement would be referred to arbitration in London.
A grounding incident resulted in damage to the “TS BANGKOK” and the registered owners of the vessel made claims against the Plaintiff, who in turn sought an indemnity from the Defendant. A dispute arose between the Plaintiff and the Defendant in relation to the indemnity.
The Plaintiff commenced proceedings in rem in respect of those claims against the “EAGLE PRESTIGE” which was a vessel then belonging to the Defendant (“the Vessel”). After the issue of the Plaintiff’s writ, the Defendant transferred ownership of the Vessel to the Intervener. The Vessel was renamed the “ENGEDI”.
The Defendant was subsequently placed in provisional liquidation. The Plaintiff obtained leave of court to continue with the in rem proceedings and to arrest the Vessel. The Plaintiff arrested the Vessel and the Defendant entered an appearance in the proceedings. The Intervener, as the owner of the Vessel at the time she was arrested, obtained leave to intervene.
The Plaintiff sought, amongst other matters, an order that all further proceedings in the action were to be stayed under Section 6 of the IAA. This application was allowed by the Assistant Registrar. The Intervener appealed against the Assistant Registrar’s decision to grant the stay. The Defendant was not a party to the appeal.
The key issues in the case was: whether actions in rem fall within the ambit of Section 6 of the IAA.
Section 6 of the IAA provides:-
Enforcement of international arbitration agreement
6. —(1) Notwithstanding Article 8 of the Model Law, where any party to an arbitration agreement to which this Act applies institutes any proceedings in any court against any other party to the agreement in respect of any matter which is the subject of the agreement, any party to the agreement may, at any time after appearance and before delivering any pleading or taking any other step in the proceedings, apply to that court to stay the proceedings so far as the proceedings relate to that matter.
(2) The court to which an application has been made in accordance with subsection (1) shall make an order, upon such terms or conditions as it may think fit, staying the proceedings so far as the proceedings relate to the matter, unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed.
(3) Where a court makes an order under subsection (2), the court may, for the purpose of preserving the rights of parties, make such interim or supplementary orders as it may think fit in relation to any property which is the subject of the dispute to which the order under that subsection relates.
[(4 )and (5) omitted]
Threshold requirements for grant of a stay of proceedings under Section 6 of the IAA.
1. Section 6(1) of the IAA sets out the threshold requirements that must be met before the Court is bound to grant a stay of legal proceedings in favour of international arbitration. These are:
a) An international arbitration agreement must exist.
b) A party to that agreement must institute court proceedings against another party to the same agreement.
c) The proceedings must be in respect of a matter which is the subject of the agreement.
d) The party seeking a stay must have entered appearance in the court proceedings.
e) The party seeking a stay must do so before delivering any pleading or taking any other step in the proceedings.
2. Once these requirements are met, the Court will be obliged to grant a stay unless the arbitration agreement is null and void, inoperative, or incapable of being performed. The stay may be granted subject to such terms or conditions as the Court thinks fit.
Whether actions in rem fall within the ambit of Section 6 of the IAA.
3. The Intervener submitted that the in rem claim was not a matter that was the subject of the arbitration agreement. As such, the Court was not obliged to grant a stay of the in rem claim even if the in personam claim against the Defendant was to be arbitrated in London. The Defendant argued that it was artificial to maintain a distinction between the in rem and in personam claims when doing so would lead to a multiplicity of proceedings.
4. The Court upheld the traditional distinction between in rem and in personam claims. As the in rem claim could not be a matter that was a subject of the arbitration agreement between the Plaintiff and the Defendant, the threshold requirements of Section 6 were not met in this case and the Court was not obliged to grant a stay of proceedings.
a. While an action in personam and an action in rem may involve the same cause of action, the defendants of the respective actions are regarded as different parties.
b. The Singapore Court Appeal had, in Kuo Fen Ching v Dauphin Offshore Egineering & Trading Pte Ltd (1999) rejected the proposition that the owner of the res, as opposed to the res itself, was the defendant to an action in rem.
c. The Court was not obliged to grant a stay of proceedings because there was no arbitration agreement between the Plaintiff and the notional defendant of the in rem action, which was the res.
d. The owner of the res was no longer the Defendant, but the Intervener. As such, the in rem claim was not identical to the in personam claim. Therefore, the in rem claim could not be a matter that was a subject of the arbitration agreement between the Plaintiff and the Defendant falling within the ambit of Section 6 of the IAA.
e. If the Plaintiff and Defendant were to proceed to arbitration, and the in rem action in Singapore was to be stayed, the Intervener would not be able to protect its interest in the matter. The Intervener would not have any rights in the arbitral process except those voluntarily conferred on it by the Plaintiff and the Defendant as the parties to the arbitration agreement.
f. Even if the Plaintiff was prepared to allow the Intervener to participate in the arbitration, the process of arbitration is a consensual one and a party may not be forced to arbitrate against its will. The Intervener had also indicated that it wanted to proceed with litigation in Singapore. The Intervener, as a party to the action in rem only, was not a party to any arbitration agreement with the Plaintiff and could not therefore be forced to litigate/arbitrate in another forum.
g. In any event, the arbitral tribunal would have no jurisdiction to hear the in rem claim.
5. Furthermore, the purpose of the procedure for intervention would be defeated if the Plaintiff was able to exclude the Intervener from participating in the defence of the claim by removing the dispute to arbitration. Section 6 of the IAA was not intended to be used as a means of depriving third parties of their right to protect their interests.
6. Having acted to arrest the Vessel which was owned by the Intervener, the Plaintiff could not then turn around and tell the Intervener that it had no right to participate in the defence because the Plaintiff and the Defendant had an agreement which provided for arbitration in London. Any risk of a multiplicity of proceedings was created by the Plaintiff’s choice to commence an action in rem against a res which may be subject to the rights of others.
7. As the threshold requirements of Section 6 of the IAA had not been met, the Court refused to stay further proceedings in the action.