Hualon Corporation (M) Sdn Bhd ((in Receivership)) Acting by its Receiver and Manager Mr. Duar Tuan Kiat Applicant/Claimant v Marty Ltd Respondent/Defendant

JurisdictionBritish Virgin Islands
JudgeLeon J
Judgment Date08 April 2016
Neutral CitationVG 2016 HC 2,[2016] ECSC J0408-1
CourtHigh Court (British Virgin Islands)
Docket NumberClaim No. BVIHC (COM) 2014/0090
Date08 April 2016
[2016] ECSC J0408-1




Claim No. BVIHC (COM) 2014/0090

Hualon Corporation (M) Sdn Bhd (in receivership) Acting by its Receiver and Manager Mr. Duar Tuan Kiat
Marty Limited

Mr. John Carrington QC and Ms Dian Fahie-deCastro of SABALS Law for Applicant/Claimant

Mr. Paul Dennis QC and Ms. Nadine Whyte of O'Neal Webster for Respondent/Defendant

Claimant applied for stay of its claim pending determination of international arbitration it commenced subsequently against defendant respecting same claims when it became aware of arbitration agreement in corporate charter — Understandable that not aware of it — Delay should not have negative legal consequences or preclude stay—Claimant concerned that resulting judgment in claim would not be recognized in other jurisdictions if litigation pursued in face of arbitration agreement — Application not a tactical maneuver.

Neither mandatory stay provision in Arbitration Act, 2013 (Section 18(1)) / UNCITRAL Model Law in (Article 8(1))) nor in New York Convention (Article II (3)) precludes a claimant (as opposed to a defendant) in court litigation from requesting referral to arbitration and a stay of claimant's claim — New York Convention provision does not contain restriction found in Act / Model Law that request for referral must be not later than when "submitting his first statement on the substance of the dispute" — New York Convention provision prevails over Model Law provision as Model Law is "subject to any agreement in force between this State and any other State or States" [i.e. New York Convention] — Even though Act does not include "subject to" provision, New York Convention still prevails as applying broader referral provision in Convention more consistent with public policy of Territory favouring arbitration — Clear in Act, arbitration jurisprudence, and public commitment of Territory to arbitration as part of its strategic plan, that Territory strongly supports use of arbitration to resolve international commercial and other disputes — Wherever, whenever and to extent possible Court should support that policy in interpretation and application of the Act, New York Convention, its inherent jurisdiction, the CPR, and any other relevant statutes or mles — Provision that most favours arbitration should prevail and be applied — Also applying Convention provision results in Territory complying with its international treaty obligation to all other Convention members.

When court is requested to refer parties to arbitration and stay court proceedings based on an arbitration agreement, a "prima facie approach" to review should be taken the consideration of whether there is an arbitration agreement that applies to the dispute, including whether arbitration agreement is "null and void, inoperative or incapable of being performed", and including any question about scope of arbitration agreement — Not for Court to get into full merits review at referral to arbitration stage.

Held that claim must be stayed under New York Convention and alternatively under Act — Arbitration agreement not "inoperative" under Convention or Act — By taking unexplained substantive step in court litigation, or acting inconsistently with right to arbitrate, with knowledge of an arbitration agreement or with wilful blindness to it, and without preserving right to arbitrate, assessed objectively, a party may be taken to have waived arbitration and elected court litigation — Then arbitration agreement becomes "inoperative" — Role of court, consistent with pro-arbitration policy of jurisdiction, is to do its utmost to hold that an arbitration agreement remains operative and to implement the agreement of the parties to determine their disputes in arbitration — Circumstances alleged to make arbitration agreement inoperative must be carefully scrutinized and narrowly construed — Burden of proof on party alleging waiver — Presumption against waiver — No waiver or election occurred.

Under Act, claimant submitting claim and statement of claim while unaware of arbitration agreement has not actually "submitted first statement on substance of the dispute" at least until defendant joins issue by submitting its defence — Otherwise a claimant's right to request referral and stay would be meaningless.

Court has inherent discretionary power to stay — Not ousted by mandatory stay provisions of Act / Model Law and Convention — Valuable tool to aid implementation of policy favouring arbitration, where staying in favour of arbitration is desirable but not possible under other provisions — For this application, no need to rely on Court's case management powers either directly or as support to inherent jurisdiction — Court would do so, at least for temporary stay, if other grounds supporting mandatory and discretionary stay did not exist.

In exercising inherent jurisdiction on claimant's application, discretion should take account of all relevant circumstances including (but not necessarily limited to) (1) reason there was not a resort to arbitration initially, (2) stage of court proceedings and steps taken in proceedings by applicant for stay, (3) whether arbitration encompasses or can encompass all disputes in court litigation, (4) other actions or omissions of applicant for stay that would indicate waiver of arbitration or election to resolve disputes in court, (5) reasons, proper or improper, that applicant wants claims determined in arbitration, (6) public policy favouring arbitration, (7) prejudice to party opposing stay and whether may be compensated for in costs, and (8) conduct of party opposing stay that contributed to applicant for stay resorting to court or not knowing of arbitration agreement — Having regard to all factors, and in all the circumstances, Court would grant stay to allow parties to arbitrate arbitral tribunal's jurisdiction — If jurisdiction found by arbitral tribunal, stay to become permanent.

Hearsay permitted in affidavits in certain circumstances — Must specify information or belief and set out source — Generally hearsay not best practice — Goes to weight given to that evidence — Not as compelling for solicitors to swear, based on instmctions, lengthy affidavit dealing with contentious or complex matters — Circumstances where urgency, nature of evidence or practicalities make it necessary, or efficient and adequately effective — Better and more effective evidentiary practice to provide first-hand knowledge where contentious evidence, particularly if going to heart of issue, unless compliance impossible or impractical.


Leon J [Ag] : The Claimant applies for a stay of this Claim, which it commenced on 22 July 2014 in respect of disputes between itself and the Defendant ("Disputes"), pending determination of an arbitration that it commenced against the Defendant on 10 March 2015 ("Arbitration") under the Rules of the Singapore International Arbitration Centre ("SIAC") in Singapore.


The Claimant asserts that it commenced the Arbitration after it came to the Claimant's attention in about mid-February 2015, in circumstances described below, that the revised Charter ("Revised Charter") of Hualon Corporation Vietnam, a limited liability company incorporated under the Law of Vietnam that is central to the Disputes, contains an arbitration clause providing for SIAC arbitration ("Arbitration Clause").


The Arbitration Clause in the Revised Charter reads as follows:

Article 22: Settlement of Disputes

  • 1. Disputes between Members of the Company and between Members with the Company shall be firstly resolved through negotiations and conciliation.

  • 2. In the case the Members cannot negotiate and conciliate, the dispute may be entered into the [SIAC] for settlement under the rules of the SIAC. The decision of the arbitrator shall be final and binding. 1


The Claimant disputes in the Claim, and in the Arbitration, that the Revised Charter was validly revised, as explained below.


The Claimant sought in the Arbitration a determination by the arbitral tribunal of the arbitral tribunal's jurisdiction to determine the Disputes. Particularly for jurisdictional questions, arbitration clauses contained in agreements are treated as independent and separate contracts. 2


The issue raised in the Arbitration regarding the arbitral tribunal's jurisdiction is an issue for the arbitral tribunal, at least at first instance, subject to the limited role of

this Court on this application in determining whether to refer the parties to arbitration and stay the Claim, as explained below.

Central to this application are first, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention")3 which was extended to the Territory of the Virgin Islands on 25 May 2014, and second, the Arbitration Act, 2013 ("Act") which incorporates, with some variations and enhancements, the UNCITRAL Model Law on International Commercial Arbitration ("Model Law").4


The Court needs to determine on this application, in the circumstances described below, whether,

    for reasons explained below, it is required to stay the Claim, or alternatively, 2. if it has inherent or other jurisdiction to grant a discretionary stay of the Claim, it should do so,

(a) while the arbitral tribunal determines in the Arbitration its jurisdiction respecting the Disputes, and (b) if the arbitral tribunal determines that is has jurisdiction, to leave it to the arbitral tribunal to determine in the Arbitration the Disputes.


In order to make the first of these determinations (paragraph [8] 1 above), this Court will need to determine 5 whether the Arbitration Clause can be relied upon by the Claimant in the circumstances. That is, the Court will need to determine, on the

applicable standard of...

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