The Singapore Court of Appeal case of L Capital Jones Ltd and
another v Maniach Pte Ltd  SGCA 03 is another nail in the
coffin on the issue of whether minority oppression claims are
Arbitrability of minority oppression claim
This was an appeal brought by a majority shareholder, L Capital
against the Singapore High Court's decision refusing a
stay of court proceedings in favour of arbitration on the ground
that minority oppression claims were not arbitrable. Maniach, a
minority shareholder in the Jones the Grocer group of companies
resisted the appeal, arguing that his minority oppression claim
against L Capital Jones was not arbitrable.
Hence, Maniach argued that while the Singapore case of Tomolugen
had held that minority oppression claims were generally arbitrable,
his case possessed features which raised the public policy
exception to arbitrability. The gravamen of his argument was that L
Capital had abused court process to place two subsidiaries owned by
the group under administration in Singapore, and in Australia to
transfer one of the subsidiaries' only asset, its shares, to a
third party related to L Capital for no net consideration.
The Singapore Court of Appeal found Maniach's contention
without merit and held that the question of an abuse of the
judicial process was neither the essence of the present
dispute nor a necessary step in proving Maniach's claim. The
issue rather was whether there was unfairness in the majority
shareholder procuring the transfer of all the shares in the
subsidiary to a third party in exchange for extinguishing debts.
Maniach had not sought any relief for the alleged abuse of judicial
process. Even if the court or tribunal adjudicating the dispute
were to find that there was an abuse of process, such a finding
would only be incidental to its resolution of the minority
oppression dispute. Hence L Capital had succeeded in showing that
the dispute was arbitratable.
A step in the proceeding
In a twist of fate however, the Singapore Court of Appeal found
that because L Capital's subsidiary had taken a step in the
court proceedings, it was not entitled to stay the proceedings
pursuant to section 6 of the Singapore International Arbitration
Maniach argued that:
L Capital's opposition of Maniach's interim
the application by L Capital's subsidiary to strike out the
minority oppression claim brought by Maniach in the Singapore Court
were steps in the court proceedings.
The Singapore Court found that opposing an interim injunction
did not amount to a step in the proceedings. However, a striking
out application was a step in the proceedings since it invoked
the Singapore Court's jurisdiction to dismiss the claim on the
merits. Once such a step is taken, it would be irrevocable, even if
the striking out application was not eventually pursued. L Capital
and its subsidiary's applications to stay the proceedings in
favour of arbitration were therefore dismissed.
The Singapore Court of Appeal has signaled through this case
that it continues to adopt a pro-arbitration attitude.
Singapore courts will not simply ignore an arbitration agreement to
determine whether it would be appropriate for the courts to issue a
public rebuke against a party for abusing court process, especially
when the rebuke was unrelated to the dispute. Parties involved in
arbitration should take comfort knowing that a shareholder
agreement which contains an arbitration agreement providing for a
Singapore-seated arbitration will be upheld. Last but not
least, a party resisting a suit for claims that are arbitrable
should be careful to distinguish substantive and procedural
remedies, lest its appearance in the court proceedings be construed
as submitting to the jurisdiction of the Singapore court
As a matter of commercial risk management, a small business should consider these steps to avoid any legal confusion.
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