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Doshion Ltd
v
Sembawang Engineers and Constructors Pte Ltd

[2011] SGHC 46

High Court — Originating Summons No 132 of 2011 (Summons No 767 of 2011)

Choo Han Teck J
24 February; 28 February 2011

Arbitration — Arbitral tribunal — Jurisdiction — Alleged existence of settlement

agreement purportedly terminating arbitration — Construing scope of arbitration
clause — Whether existence of such settlement agreement was matter for courts to
determine — UNCITRAL Model Law on International Commercial Arbitration

Facts
The plaintiff was an Indian company and the defendant, a Singaporean
company. A dispute arose from two contracts between them, and arbitration
proceedings were commenced pursuant to an arbitration clause therein. On
24 February 2011, four days before the scheduled start of the arbitration, the
plaintiff applied to stop the arbitration, alleging that there had been an oral
settlement agreement made between the parties on 15 February 2011 that
purportedly terminated the arbitration. The defendants disputed the existence of
the settlement agreement and contended that the right and power to decide
whether there was a settlement agreement lay within the jurisdiction of the
arbitral tribunal.

Held, dismissing the appeal:

(1) Once a dispute arose, including a dispute as to whether there was a dispute
at all, the matter fell into the hands of the arbitrator: at [3].
(2) In construing the scope of the arbitration clause, the purpose of an
arbitration clause was vital. We should start from the assumption that the
parties, as rational businessmen, were likely to have intended any dispute arising
out of the relationship into which they had entered or purported to enter to be
decided by the same tribunal: at [3].
(3) The dispute over the existence of the settlement agreement was a dispute
arising out of the relationship into which the parties had entered and came
within the jurisdiction of the arbitral tribunal. The scope of the arbitration clause
was a matter for the arbitral tribunal to decide as it went to the jurisdiction of the
tribunal: at [4].

Case(s) referred to
Dawes v Treasure & Son Ltd [2010] EWHC 3218 (TCC) (refd)
Fiona Trust & Holding Corp v Privalov [2007] Bus LR 1719; [2007] UKHL 40
(folld)
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Doshion Ltd v
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Legislation referred to
International Arbitration Act (Cap 143A, 2002 Rev Ed) s 3

A Verghis and Sandra Tan (Drew & Napier LLC) for the plaintiff;
Mohan Pillay and Yeo Boon Tat (MPillay) for the defendant.

28 February 2011 Judgment reserved.

Choo Han Teck J:
1 Doshion Limited (“the plaintiff”) is an Indian company and
Sembawang Engineers and Constructors Pte Ltd (“the defendant”) is a
Singaporean company. The plaintiff was the defendant’s subcontractor. A
dispute arose from two subcontracts (“the Sub-Contracts”) between them.
The parties commenced arbitration proceedings (“the Arbitration”) under
the arbitration clause in the Sub-Contracts. The Arbitration was scheduled
for ten days and was to start on Monday, 28 February 2011. On Thursday,
24 February 2011 the plaintiff applied in this Originating Summons to stop
the arbitration, and prayed for:
(a) a declaration that the plaintiff and the defendant had reached a
binding settlement agreement on a “drop hands” basis (“the
Settlement Agreement”) for all disputes in respect of or in connection
with the Arbitration;
(b) a declaration that the Arbitration was terminated pursuant to
the Settlement Agreement; and
(c) an injunction to restrain the defendant from continuing with
the Arbitration.
Counsel for the plaintiff submitted that all disputes in the Arbitration were
settled on 15 February 2011 because the plaintiff had accepted the
defendant’s proposal in the Settlement Agreement (which counsel
conceded was an oral agreement reached between the solicitors for the
parties). As such, counsel argued, the Arbitration should have been
terminated as of that date.
2 The defendant disputed the existence of the Settlement Agreement.
Further, the defendant contended that the right and power to decide
whether there was a Settlement Agreement lay within the jurisdiction of the
arbitral tribunal. The defendant interpreted the plaintiff’s argument to be a
claim that the arbitral tribunal had become functus officio by reason of the
Settlement Agreement. This argument that the arbitral tribunal had become
functus officio amounted to a challenge to the tribunal’s jurisdiction. In
support of this, the defendant relied on the case of Dawes v Treasure & Son
Ltd [2010] EWHC 3218 (TCC) where it was accepted that the issue of
whether an arbitrator is functus officio went to the jurisdiction of the
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arbitrator. In my view, the position of the arbitrator in this case was not
functus when it had not even begun to hear.
3 If there is no dispute between the parties, naturally the arbitration
clause cannot be invoked. However, once a dispute arises, including a
dispute as to whether there is a dispute at all, the matter falls into the hands
of the arbitrator. In construing the scope of the arbitration clause, the
purpose of an arbitration clause is vital. It was said in Fiona Trust &
Holding Corp v Privalov [2007] UKHL 40, that where parties have entered
into a relationship or an agreement which may give rise to disputes, they
will want those disputes to be decided by the tribunal chosen under the
arbitration clause. Where international contracts are concerned, as in the
instant case, the parties will want a quick and efficient adjudication; not risk
delay and, in some cases, partiality, in proceedings before a domestic court.
The court went on to hold:
[7] If one accepts that this is the purpose of an arbitration clause, its
construction must be influenced by whether the parties, as rational
businessmen, were likely to have intended that only some of the questions
arising out of their relationship were to be submitted to arbitration and
others were to be decided by national courts. … If, as appears to be generally
accepted, there is no rational basis upon which businessmen would be likely
to wish to have questions of the validity or enforceability of the contract
decided by one tribunal and questions about its performance decided by
another, one would need to find very clear language before deciding that they
must have had such an intention.
[13] … the construction of an arbitration clause should start from the
assumption that the parties, as rational businessmen, are likely to have
intended any dispute arising out of the relationship into which they have
entered or purported to enter to be decided by the same tribunal.
[emphasis added]

4 Even though the plaintiff might be right to say that the Settlement
Agreement is a independent contract from the Sub-Contracts, the dispute
over the existence of the Settlement Agreement is nevertheless a “dispute
arising out of the relationship into which [the parties] had entered”. Was
there a dispute between the parties, and if so, had it been resolved? These
are questions that go to the root and nature of disputes, and they are thus
part of the arbitrator’s jurisdiction. The reason why the Settlement
Agreement purportedly came into existence was to settle the Arbitration, as
counsel conceded. Whether the Settlement Agreement was a separate
contract unrestrained by an arbitration clause was not the question. Unless
the wording of the arbitration clause in the Sub-Contracts clearly states
otherwise, the determination of the existence of the Settlement Agreement
is for the arbitral tribunal and should not be stolen from its hands by an
injunction obtained in present circumstances. The Sub-Contracts in
question have not been tendered before me, presumably because of the
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Doshion Ltd v
[2011] 3 SLR Sembawang Engineers and Constructors Pte Ltd 121

urgency of the plaintiff’s application. Even so, the scope of the arbitration
clause is a matter for the arbitration tribunal to decide on as it goes to the
jurisdiction of the tribunal. Section 3 of the International Arbitration Act
(Cap 143A) provides that the Model Law shall have the force of law in
Singapore, and Art 16 of the Model Law provides that the arbitral tribunal
may rule on its own jurisdiction.
5 The plaintiff’s application is therefore dismissed. I shall hear the
question of costs at a later date if parties are unable to agree costs.

Reported by Amy Seow Wai Peng.