Singapore High Court Confirms that a Multi-Tier Dispute Resolution Clause Constitutes a Single Arbitration Agreement

Overview

In Ling Kong Henry v Tanglin Club [2018] SGHC 153 (“Tanglin Club”), the High Court confirmed that a multi-tier dispute resolution clause (e.g. a clause providing for conciliation, then mediation and finally, arbitration), constitutes a single arbitration agreement – even if the obligation to arbitrate only takes effect once the prior dispute mechanisms are completed.

The Court also reaffirmed that the discretion to grant a stay under the Arbitration Act (“AA”) should be exercised in a guarded manner that does not diverge too widely from the approach under the International Arbitration Act (“IAA”), and a stay should only be refused if the plaintiff shows “exceptional circumstances” for doing so.

Background facts

The plaintiff sought a declaration from the High Court that the defendant had conducted disciplinary proceedings against the plaintiff in breach of natural justice. The defendant responded by filing an application under section 6 of the AA to stay proceedings on grounds that the court action breached an agreement, under the defendant’s club rules, to arbitrate the dispute. The High Court granted the stay for the reasons below.

High Court’s decision

At the outset, the Court observed that the following requirements must be satisfied before a stay will be granted under section 6 of the AA:

1. The subject matter of the court proceedings is the subject of the arbitration agreement;
2. The party seeking the stay must not have taken any steps in proceedings;
3. There are no sufficient reasons why proceedings should not be stayed; and
4. The party seeking the stay must be ready and willing to take all necessary steps in the arbitration.

On the facts, requirements (b) and (d) were not in dispute. The Court’s findings on requirements (a) and (c) are summarised below.

Requirement (a): The subject matter of the proceedings was the subject of the arbitration agreement

The Court held that Rule 45B of the defendant’s club rules, which formed a binding contract between the defendant and the plaintiff, contained a valid arbitration clause within the meaning of section 4 of the AA:

1. Rule 45B provided for a multi-tier dispute resolution mechanism: first by way of conciliation, followed by mediation, and finally, arbitration. It was not settled under Singapore law whether a multi-tier dispute resolution clause constituted an arbitration agreement:
   1. On one view, the entire multi-tier dispute resolution clause is an arbitration agreement, although the obligation to arbitrate is only invoked when the preconditions to commence arbitration have been fulfilled.
   2. On an alternative view, there is no agreement to arbitrate at the outset, and it only arises after the preconditions to arbitrate have been exhausted.
2. According to the Court, the first view was preferable:
   1. If a dispute resolution clause seeks to avoid resolving a dispute in court by ultimately having a matter proceed to arbitration, that intention should be upheld to protect the bargain struck by the parties.
   2. This applied with equal force to multi-tier dispute resolution clauses which require prior steps (e.g. conciliation, mediation) before arbitration takes place – the parties’ joint wish to avoid court proceedings cannot be frustrated by one party merely filing a court action before such prior steps are completed.
3. This was also the position in the UK[1] and Hong Kong[2], and was consistent with previous Singapore decisions:
   1. In Wilson Taylor Asia Pacific v Dyna-Jet Pte Ltd [2017] 2 SLR 362, the Court of Appeal held that an asymmetric dispute resolution clause constituted a valid arbitration agreement, even if it only entitled one party to compel arbitration and made arbitration of a future dispute optional.
   2. In International Research Corp PLC v Lufthansa Systems [2014] 1 SLR 130, the Court of Appeal did not appear to regard a multi-tier dispute resolution clause as anything other than an arbitration agreement.
4. Rule 45B was therefore an arbitration agreement, even if conciliation and mediation were preconditions to arbitration.

As the subject matter of proceedings fell within Rule 45B, requirement (a) was satisfied.

Requirement (c): There are no sufficient reasons why proceedings should not be stayed

While the Court had the discretion to grant or dismiss a stay application under the AA, the Court noted that it should be “exercised in a guarded manner” that did not diverge too widely from the approach under the IAA, as both regimes were undergirded by similar policy considerations – i.e. to support arbitration as a means of dispute resolution and to preserve party autonomy by giving full effect to the parties’ agreement to arbitrate.

As such, the burden was on the plaintiff to “show sufficient reasons why the matter should not be referred to arbitration”, and the Court would only refuse a stay in “exceptional circumstances.” Since no exceptional circumstances were present in this case, the Court allowed a stay of proceedings pending arbitration under Rule 45B.

Comment

Tanglin Club provides useful judicial authority at the High Court level that a multi-tier dispute resolution clause is not a series of separate dispute resolution agreements, but forms part of a unitary arbitration agreement. The decision builds on similar conclusions drawn by the Assistant Registrar in Heartronics Corporation v EPI Life Pte Ltd [2017] SGHCR 1 (although this case was not referred to in Tanglin Club).

As a matter of Singapore law, this means that the parties are bound by their agreement to ultimately arbitrate their disputes even if the obligation to arbitrate has not yet been invoked and the preconditions to commence arbitration (e.g. conciliation and mediation) are still underway. Any attempt to resolve the dispute through litigation is thus a breach of contract and such proceedings will likely be stayed by the Court pending resolution under the provisions of the multi-tier dispute resolution clause.

[1] Channel Tunnel Group v Balfour Beatty Ltd [1993] 1 All ER 664.

[2] Westco Airconditioning Ltd v Sui Chong Construction & Engineering [1998] 1 HKC 254.