The Singapore Court of Appeal has overturned the High Court’s decision in Maniach Pte Ltd v L Capital Jones Ltd and another  SGHC 6 (see our earlier article), which concerned a dispute between the shareholders of the international gourmet food business, Jones the Grocer.
At first instance, L Capital Jones, the majority shareholder, applied for orders that court proceedings concerning a minority shareholder oppression claim be stayed and instead be settled through arbitration, as its shareholder agreement with Maniach contained an arbitration agreement. The High Court rejected this application and held that a statutory minority shareholder oppression claim was not arbitrable and that such action must be pursued through the courts.
Unusually, a five-judge bench of the Court of Appeal was appointed, underscoring the significance of the point. The judgment, delivered by Chief Justice Sundaresh Menon, overturned the High Court’s decision and held that minority oppression claims are generally arbitrable. However, the Court of Appeal also held that L Capital Jones had lost its opportunity to request a stay of the court proceedings because it had already taken a “step” in the proceedings as one of its subsidiaries applied to strike out the proceedings on L Capital Jones’ behalf.
Revisiting the arbitrability of minority oppression claims
The Court of Appeal said that the appeal gave it “the opportunity to revisit the question of the arbitrability of minority oppression claims with particular reference to whether there is a public policy exception to the general rules stated in our decision in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals  1 SLR 373 (“Tomolugen”) that minority oppression claims are generally arbitrable.”
Although Maniach accepted that the Court of Appeal’s decision in Tomolugen had settled the position that minority oppression claims are generally arbitrable, it submitted that its specific oppression claim was not arbitrable because it raised issues of public policy. Maniach argued that L Capital Jones had abused the judicial process by bringing administration proceedings in bad faith and for the collateral purpose of oppressing Maniach as a minority shareholder.
The Court of Appeal disagreed and held that Maniach could not rely on the integrity of the judicial process as a reason for claiming that there were public policy considerations militating against arbitrating the present dispute. It said “the court will not ignore an arbitration agreement just because it wishes to determine whether it would be appropriate for it to issue a public rebuke against the Appellants for abusing the process of the court, especially where such rebuke would relate to matters that had no legal relevance to the dispute before it.”
The Court of Appeal was also satisfied that nothing in the dispute engaged concerns that would render the dispute non-arbitrable, and that the minority oppression dispute fell within the scope of the arbitration agreement.
The question of a stay
The Court of Appeal also agreed with the view taken by the High Court that an application to strike out the proceedings on the merits would ordinarily be a step in the proceedings and sufficient to preclude an applicant from applying for a stay. It found that L Capital Jones had taken a step in the proceedings and “[o]nce such a step is taken, it will generally be irrevocable“.
The Court was also convinced of this finding, despite it being an affiliate of L Capital Jones which had taken a step in the proceedings, rather than L Capital Jones itself. It considered that “[i]f not for the fact that the Appellants had taken a step in the proceedings, the matter should have been submitted for arbitration.”
This is typically good news from the Singapore courts for arbitration. At a time when shareholder disputes are a hot topic, it is now settled that there is in general no public policy element in statutory minority oppression claims which would prevent them from being arbitrated. The case is also a practical reminder that parties should be careful to ensure that any steps taken in parallel court proceedings do not prejudice their ability to submit a dispute to arbitration.