By Lee Mei Yong Debbie, Wong Qiao Ling Sharon – ECYT Law LLC
I. INTRODUCTION
1. In this decision, the High Court refused to adjourn enforcement proceedings, despite a pending setting aside application at the seat of arbitration in Denmark. The Plaintiff in this case was granted leave to enforce the arbitral award in Singapore.
I. BACKGROUND FACTS
2. The Plaintiff, a German company, is in the business of providing engines and turbomachinery for marine and stationary applications.
3. The Defendant is a Singaporean subsidiary of I.M. Skaugen SE, a Norwegian company whose core business involves the operation of a fleet of liquefied natural and petroleum gas (“LNPG”) carriers.
4. The parties entered into sale and purchase agreements for four 2-stroke marine diesel engines (the “Engines Contract”) and propellers (the “Propellers Contract”) (collectively, the “Contracts”).
5. Under the Contracts, the Defendant purchased four 2-stroke engines and four propellers to be delivered in two tranches:
(i) In 2008 – Engines 1 and 2, as well as Propellers 1 and 2; and
(ii) In 2009 – Engines 3 and 4, as well as Propellers 3 and 4.
The engines and propellers (i.e. the shipsets) were intended for installation on the Defendant’s LNPG carriers.
6. The Defendant paid for and took delivery of the first two shipsets. However, technical problems arose in relation to the first two shipsets and the Defendant sought to postpone delivery of the remaining shipsets.
II. DIA ARBITRATION
7. The Plaintiff commenced arbitration in the Danish Institute of Arbitration (Case No. E-2230) (the “DIA Arbitration”) to compel the Defendant to perform its outstanding contractual obligations under the Contracts.
8. In the DIA Arbitration, the Plaintiff sought inter alia :
(a) Damages for breach of the Engines Contract; and
(b) That the Defendant to take delivery of Propellers 3 and 4.
9. The Defendant contended that it was not obliged to take delivery of the third and fourth shipsets for the following reasons:
(a) It was fraudulently induced by the Plaintiff to enter into the Contracts. In other words, it would not have agreed to the Contracts had the Plaintiff disclosed its alleged manipulation of fuel consumption tests in relation to the 4-stroke engines;
(b) The Contracts had been terminated by mutual agreement between parties some time in 2012; and
(c) The Contracts were terminated for cause.
10. The Defendant also counterclaimed inter alia for excessive fuel consumption in relation to Engines 1 and 2.
III. DIA FINAL AWARD
11. The three-member tribunal (the “Tribunal”) rendered a Final Award in favour of the Plaintiff (the “DIA Award”). The majority determined inter alia that the Defendant:
(a) Pay the Plaintiff damages in respect of the Engines Contract; and
(b) Take delivery of Propellers 3 and 4 under the Propellers Contract.
12. The Plaintiff applied for an ex parte leave of Court to enforce the DIA Award in Singapore (the “ex parte Leave Order”, pursuant to Section 29 of the International Arbitration Act (Cap. 143A) (“IAA”) and Order 69A of the Rules of Court.
13. The ex parte Leave Order was obtained on 28 June 2018.
IV. POST-AWARD EVENTS
14. The parties engaged in a further dispute over the performance of the DIA Award, which culminated in the Defendant commencing a new arbitration in the Danish Institute of Arbitration on 9 June 2017 against the Plaintiff.
15. On 30 June 2017, the Defendant filed an application in the City Court of Copenhagen (the “Danish Court”) to set aside the DIA Award.
16. The Defendant subsequently took out an application in the Singapore High Court to:
(a) Challenge the enforcement of the DIA Award;
(b) Alternatively, “stay and/or adjourn” the enforcement of the DIA Award pending the determination of the Defendant’s setting aside application in the Danish Court.
V. DECISION OF THE SINGAPORE HIGH COURT
17. The High Court dismissed the Defendant’s application to adjourn the enforcement proceedings and affirmed the ex parte Leave Order. The reasons are set out as follows.
A. SECTION 31(5) OF THE IAA & APPLICABLE TEST
18. As a preliminary point, the High Court took issue with the Defendant’s framing of alternative prayer, which sought a “stay and/or adjournment” if the court decides that the grounds for refusal of enforcement are not satisfied.
19. In the High Court’s opinion, such an approach “effectively ignores the language of s 31(5) of the IAA and gives no regard to the two-stage regime in the enforcement of a foreign award within the meaning of s 27 of the IAA.”
20. There is a marked distinction between the powers of the court:
(a) Before allowing judgment to be entered on the foreign award; and
(b) After entry of judgment and an application to stay an execution order.
21. With reference to the language of s 31(5) of the IAA, after a judgment on the foreign award is affirmed, the enforcing court has no power to adjourn under s 31(5)(a).
22. However, upon further examination of s 31(5), the High Court opined that the section is “permissive” in nature and conferred a “wide statutory discretion” upon the court.
23. Noting that s 31(5) of the IAA “is silent on the test or standard to be satisfied on what amounts to a proper case for adjournment”, the High Court was of the view that, in deciding whether an adjournment of enforcement proceedings should be granted, “a multi-factorial approach to the exercise of its discretion” should be taken.
24. While it was not feasible to comprehensively list all factors for consideration, the enforcing court would have to engage in a balance exercise of factors in favour or against adjournment, bearing in mind that “the court will come down on the side on an outcome that is the most just or least unjust.”
25. In making an application for adjournment of enforcement proceedings, the applicant “must at least show, from the strength of his arguments, that he is demonstrably pursuing a meritorious application in the seat-court.” This is to prevent mala fide applications and delay tactics.
26. While the enforcing court may inquire into the prospective merits of the setting aside application, the enforcing court will not “engage in a detailed assessment of the facts or legal argument of the setting aside proceedings.”
27. The length of adjournment, likely consequences occasioned by the adjournment, and any resulting prejudice are also salient points for the enforcing court’s consideration.
B. DEFENDANT’S APPLICATION FOR ADJOURNMENT
28. Unmeritorious Setting Aside Application. The High Court found that the Defendant’s setting aside application in the Danish Court was unmeritorious.
29. The Defendant’s application to set aside the DIA Award depended on the following grounds:
(a) The Defendant was unable to present its full case;
(b) The Tribunal had violated the parties’ agreed procedure; and
(c) The DIA Award is contrary to the public policy of Denmark.
30. In considering the setting aside application, the Court first observed that, while there was “no expressed requirement for a party to adduce expert opinion on foreign law in a s 31(5)(a) application where foreign law is involved”, it was preferable to adduce expert evidence as the court requires sufficient information on the foreign law in question to assess the strength of the arguments of the challenge before the seat-court.
31. Even though Denmark, like Singapore, has adopted the Model Law, the assistance of an expert opinion remained preferable, especially since one of the grounds in the Defendant’s setting application involved Denmark’s public policy.
32. Notwithstanding the lack of expert evidence, the Court proceeded to consider the setting aside application based on the following grounds:
(a) The grounds raised in the setting aside application under Danish law were likely similar to or premised on those under Article 34 of Model Law;
(b) Since the general principles of Article 34 are well known, the Court took guidance from cases where such principles have been applied in determining the merits of setting aside application.
33. The High Court then went on to conclude that the Defendant’s setting aside application was unmeritorious for the following reasons:
(a) The Defendant’s allegation – that the Tribunal had violated procedural rules by disallowing the Defendant’s counterclaim and related evidence – was unfounded;
(b) In fact, it was “a well-accepted principle of arbitration that a tribunal is a master of its own procedure and has wide discretionary powers to conduct the arbitration in any way it sees fit”;
(c) Subject to due process and the right to be heard, the Tribunal was entitled to reject additional material adduced at the eleventh hour, which would have unduly disrupted or prolonged proceedings;
(d) Accordingly, the Court was not persuaded that the Tribunal’s rejection of the Defendant’s counterclaim and related evidence constituted “a denial of procedural justice”.
34. Delay & Prejudice. The Court held that the Plaintiff would be prejudiced by the adjournment and delay which resulted from the Defendant’s conduct.
35. While the Defendant’s application was heard in the High Court of Singapore, the Defendant’s setting aside application, previously filed in the Danish Court, was being transferred to the High Court of Eastern Denmark.
36. If the transfer were permitted, the Danish proceedings were anticipated to complete only in 2019/2020. In the circumstances, the High Court held that the delay was too long and the adjournment cause prejudice to the Plaintiff.
37. Security. The High Court was convinced that the Defendant was inclined to dissipate assets in anticipation of the outcome of legal proceedings.
38. The Defendant contended that the evidence of dissipation shown by the Plaintiff was insufficient. Instead, such evidence “must be to the degree of a mareva injunction.”
39. This proposition was rejected by the High Court, which held that the crux is that “there is substantial evidence to suggest that enforcement of the award would be more difficult if an adjournment is granted and no security is ordered.”
C. ENFORCEMENT OF DIA AWARD
40. The grounds for the setting aside application were the same grounds for the Defendant’s application to resist enforcement.
41. In rejecting the Defendant’s application, the High Court adopted the same reasoning as above and ordered for an immediate enforcement of the DIA Award.
VI. CONCLUSION
42. This case is the first instance a Singapore Court decided on an adjournment application pending the outcome of a setting aside application in the seat-court.
43. The High Court provided extensive guidance on the relevant test for an application under s 31(5) of the IAA, as well as the standard of proof required to demonstrate a risk of dissipation of assets. Ultimately, the court is inclined to adopt a flexible approach and consider the balance of interests and justice against the factual matrix of each case.
44. The present decision further affirmed the pro-arbitration stance of the Singapore Courts, where an appropriate balance was struck between upholding the finality of an international award and preserving remedies available to an award debtor.