Abstract: In Silica Investors Ltd v Tomolugen Holdings Ltd [2014] SGHC 101], the Singapore High Court considered the principles of arbitrability in the context of a minority oppression claim.
Speedread: The Singapore High Court has held that a minority oppression claim brought by a shareholder against the company and other shareholders was not arbitrable, as the relief would affect third parties to the arbitration agreement. In the court’s view, such claims would not be arbitrable unless all parties that could be affected were parties to the arbitration agreement. (Silica Investors Ltd v Tomolugen Holdings Ltd [2014] SGHC 101.)
Background:
Section 216 of the Singapore Companies Act (Chapter 50) headed “Personal remedies in cases of oppression or injustice” provides the following:
(1) Any member or holder of a debenture of a company or, in the case of a declared company under Part IX, the Minister may apply to the Court for an order under this section on the ground
(a) that the affairs of the company are being conducted or the powers of the directors are being exercised in a manner oppressive to one or more of the members or holders of debentures including himself or in disregard of his or their interests as members, shareholders or holders of debentures of the company; or
(b) that some act of the company has been done or is threatened or that some resolution of the members, holders of debentures or any class of them has been passed or is proposed which unfairly discriminates against or is otherwise prejudicial to one or more of the members or holders of debentures (including himself).
Section 6 of the Singapore International Arbitration Act (Chapter 143A) headed “Enforcement of international arbitration agreement” provides the following:
(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.
Facts: Silica Investors Ltd acquired shares in Auzminerals Group Ltd (AMRG), a Singapore company, through a share sale agreement with Lionsgate Holdings, a subsidiary of Tomolugen, the majority shareholder in AMRG. The share sale agreement provided for arbitration to resolve all disputes. Silica brought an oppression claim before the court against AMRG, as well as Lionsgate, Tomolugen and a number of directors. The defendants applied for a stay of the court proceedings in favour of arbitration.
The issues before the court were:
- Whether Silica’s claim fell within the arbitration agreement.
- If so, whether a minority oppression claim under section 216 of the Companies Act is arbitrable.
Decision: The court found that, while the claim did fall within the widely drafted arbitration agreement, the statute-based remedies provided for in the Companies Act, such as the possibility of winding-up the company, would necessarily have an effect on third parties and could, therefore, only be granted by the court. As a result, the minority oppression claim was not arbitrable. This would likely be the same in most such cases, although the situation could be different, for example, where all shareholders are bound by the arbitration agreement.
Comment: The decision tackles the difficulty posed by arbitration clauses where the dispute has an impact on third parties and provides guidance in this grey area. The factual situation will remain important: the English case of Fulham FC (1987) Ltd v Richards and another [2011] EWCA Civ 855 was distinguished on the basis of the limited relief sought in that case which would have limited impact on third parties to the arbitration clause. This case acts as a reminder that there remain limits on the types of dispute that can be referred to arbitration.
Case: Silica Investors Ltd v Tomolugen Holdings Ltd [2014] SGHC 101.
*A version of this article was originally published by Practical Law Arbitration http://uk.practicallaw.com/country/arbitration