Car & Cars v Volkswagen: Stay of Proceedings in Favor of Arbitration

Car & Cars Pte Ltd, a Singaporean automobile dealership, sued Volkswagen AG and Volkswagen Group Singapore Pte Ltd in the High Court of Singapore. Volkswagen Group Singapore Pte Ltd applied for a stay of proceedings in favor of arbitration, based on an arbitration agreement in their Termination of Dealership Agreement. The court, presided over by Assistant Registrar Saqib Alam, allowed the application, finding that the International Arbitration Act (IAA) was the governing regime, thus mandating a stay. The court rejected Car & Cars' arguments regarding multiplicity of proceedings.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Application for stay allowed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Application to stay proceedings in favor of arbitration. The court granted the stay, finding the IAA to be the governing regime.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Car & Cars Pte LtdPlaintiffCorporationApplication for stay allowedLostKoh Kia Jeng, Vanessa Yong
Volkswagen AGDefendantCorporation
Volkswagen Group Singapore Pte LtdDefendantCorporationApplication for stay allowedWonChan Kia Pheng, Ang Keng Ling

3. Judges

Judge NameTitleDelivered Judgment
Saqib AlamAssistant RegistrarYes

4. Counsels

Counsel NameOrganization
Koh Kia JengRodyk & Davidson LLP
Vanessa YongRodyk & Davidson LLP
Chan Kia PhengKhattarWong
Ang Keng LingKhattarWong

4. Facts

  1. Car & Cars Pte Ltd and Volkswagen AG entered into an Importer Agreement in May 1999.
  2. The Importer Agreement granted Car & Cars the right to import and distribute Volkswagen products in Singapore.
  3. A Memorandum of Understanding (MOU) was signed on 2 November 2004, outlining terms for transferring the importer role to Volkswagen Group Singapore Pte Ltd.
  4. The MOU was superseded by the 9th December Agreement, terminating the Importer Agreement for Volkswagen passenger cars.
  5. Volkswagen Group Singapore Pte Ltd became the importer of Volkswagen passenger cars on 1 January 2005.
  6. The Dealership Agreement between Car & Cars and Volkswagen Group Singapore Pte Ltd was terminated on 31 January 2007.
  7. Four settlement agreements were entered into to govern the parting of ways, including termination agreements and asset sales.
  8. Volkswagen AG was to pay Car & Cars $1.2m, and Volkswagen Group Singapore Pte Ltd was to pay $800,000 as part of the settlement.
  9. The payments were to be made to Volkswagen Financial Services Singapore Pte Ltd (VFS) to offset Car & Cars' outstanding debt.
  10. Car & Cars paid $3m to VFS after the initial payment delay.
  11. Volkswagen Group Singapore Pte Ltd paid S$800,000 to Car & Cars on 6 February 2007.
  12. Volkswagen AG's S$1.2 million cheque was not delivered until 20 March 2007.
  13. Car & Cars treated Volkswagen AG's late payment as a repudiation of the settlement.
  14. Car & Cars filed Suit 960 of 2008, alleging breach of the Importer Agreement and an agreement for exclusive dealership.

5. Formal Citations

  1. Car & Cars Pte Ltd v Volkswagen AG and Another, Suit 960/2008, SUM 261/2009, [2009] SGHC 77

6. Timeline

DateEvent
Importer Agreement entered into between Car & Cars Pte Ltd and Volkswagen AG.
Memorandum of Understanding entered into between Car & Cars Pte Ltd and Volkswagen AG.
9th December Agreement entered into between Car & Cars Pte Ltd and Volkswagen AG.
Importer Agreement terminated with regard to Volkswagen passenger cars.
Volkswagen Group Singapore Pte Ltd became the importer of Volkswagen passenger cars in Singapore.
Volkswagen Group Singapore Pte Ltd gave Car & Cars Pte Ltd a 12-month notice of termination for the Dealership Agreement.
Dealership Agreement terminated by mutual agreement between Car & Cars Pte Ltd and Volkswagen Group Singapore Pte Ltd.
Importer Agreement terminated by mutual agreement between Car & Cars Pte Ltd and Volkswagen AG.
Termination of Importer Agreement signed.
Termination of Dealership Agreement signed.
Sale of Assets and VW Parts Agreement signed.
Assignment of Lease signed.
Car & Cars Pte Ltd paid $3m to VFS.
Volkswagen Group Singapore Pte Ltd paid S$800,000 to Car & Cars Pte Ltd.
Volkswagen AG gave cheque for the sum of S$1.2million to Car & Cars Pte Ltd.
Suit 960 of 2008 filed.
Decision date.

7. Legal Issues

  1. Stay of Proceedings in Favor of Arbitration
    • Outcome: The court granted the stay, finding that the International Arbitration Act (IAA) was the governing regime, thus mandating a stay.
    • Category: Procedural
    • Related Cases:
      • [1998] 3 SLR 670
      • [2005] 4 SLR 646
      • [2008] 2 SLR 565
  2. Applicability of International Arbitration Act versus Arbitration Act
    • Outcome: The court determined that the International Arbitration Act (IAA) applied because the parties had agreed to arbitration under the Rules of the Singapore International Arbitration Centre (SIAC), and the SIAC Rules in force at the time of submission to arbitration (SIAC Rules 2007) designated the IAA as the governing law.
    • Category: Procedural
    • Related Cases:
      • [2003] SGHC 292
      • [2004] 4 SLR 19
  3. Multiplicity of Proceedings as Grounds for Refusing a Stay
    • Outcome: The court found that there was no risk of inconsistent findings and that the plaintiff had framed its claim in a way that created an illusion of multiplicity of proceedings. The court held that there was no reason to refuse a stay on these grounds.
    • Category: Procedural
    • Related Cases:
      • [1964] 1 WLR 633
      • [1981] WL 187862
      • [1987] 71 ALR 125
      • [2007] Y.J No. 16
      • [2003] B.C.J No. 512

8. Remedies Sought

  1. Loss and damages arising from the breach of the Importer Agreement
  2. Loss and damages arising from the breach of an agreement to appoint the plaintiff as exclusive/sole dealer

9. Cause of Actions

  • Breach of Contract

10. Practice Areas

  • Arbitration
  • Commercial Litigation

11. Industries

  • Automobile

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Coop International Pte Ltd v Ebel SAHigh CourtYes[1998] 3 SLR 670SingaporeCited for the principle that a stay of proceedings is mandatory under Section 6 of the IAA if the arbitration agreement is valid.
Dalian Hualiang Enterprise Group Co Ltd v Louis Dreyfus Asia Pte LtdHigh CourtYes[2005] 4 SLR 646SingaporeCited for the principle that a stay of proceedings is mandatory under Section 6 of the IAA if the arbitration agreement is valid.
NCC International AB v Alliance Concrete Singapore Pte LtdCourt of AppealYes[2008] 2 SLR 565SingaporeCited for the principle that the court would play a relatively more interventionist role in domestic arbitration as compared to international arbitration.
Taunton-Collins v CromieCourt of AppealNo[1964] 1 WLR 633England and WalesCited for the principle that multiplicity of proceedings is a ground for refusing a stay of proceedings.
Berkshire Senior Citizens Housing Association Limited v. McCarthy E Fitt Limited and National Westminster Bank Ltd (Trustees of the Estate of Anthony Cripps, Deceased)Court of Appeal (Civil Division)No[1981] WL 187862England and WalesCited for the principle that multiplicity of proceedings is a ground for refusing a stay of proceedings.
Bond Corporation Pty Ltd v Theiss Contractors Pty Ltd and OthersFederal Court of AustraliaNo[1987] 71 ALR 125AustraliaCited for the principle that multiplicity of proceedings is a ground for refusing a stay of proceedings.
Yukon Energy v Chant ConstructionYukon Territory Supreme CourtNo[2007] Y.J No. 16CanadaCited for the principle that multiplicity of proceedings is a ground for refusing a stay of proceedings.
Dawson (City) v TSL Contractors LtdBritish Columbia Court of AppealNo[2003] B.C.J No. 512CanadaCited for the principle that multiplicity of proceedings is a ground for refusing a stay of proceedings.
Bulk Oil (Zug) A.G v Trans-Asiatic Oil Ltd SAN/ANo[1973] 1 Lloyd’s Rep 129N/ACited for the principle that the court will grant a stay of the counterclaim only, noting that although the most sensible course would be to have all the disputes determined by the same tribunal, he noted that the plaintiffs had themselves created the risk of multiplicity and inconsistent decisions by entering into two contracts with the defendants, with related subject matter but different jurisdiction clauses.
Palmers Corrosion Control Ltd v Tyne Dock Engineering LtdN/ANo[1997] APP.L.R 11/20N/ACited for the principle that a stay was refused on the facts.
Tasmanian Pulp & Forest Holdings Ltd v Woodhall LtdSupreme Court (Full Court) of TasmaniaNo[1971] Tas SR 330AustraliaCited for the principle that the issues raised by the plaintiff against the builders were very closely connected with the resolution of issues between the engineers and the builders; meaning, once responsibility was determined as between the engineers and the builders, resolution of the issues between the mill owner and the engineers would be materially affected. For these reasons, the court did not grant a stay.
Morrison v Inmode Developments Pty LtdSupreme Court of VictoriaNo1990 WL 1035578AustraliaCited for the proposition that if the plaintiff frames its claim in a way to avoid arbitration, the parties should not be made to pursue their claim in court instead.
Sunway Damansara Sdn Bhd v Malaysia National Insurance Bhd & AnorHigh CourtYes[2008] 3 MLJ 872MalaysiaCited for the principle that the High Court granted a stay of proceedings in favour of arbitration because the court found that the multiplicity of proceedings was induced by the plaintiff’s own action.
Yee Hong Pte Ltd v Tan Chye Hee Andrew (Ho Bee Development Pte Ltd, Third Party)High CourtYes[2005] 4 SLR 398SingaporeCited for the High Court has stayed proceedings in favour of arbitration despite the risk of multiplicity of proceedings stating “that justice would be best served if the three parties proceeded to arbitration to determine their respective claims, defences and counterclaims if any”
Jurong Engineering Ltd v Black & Veatch Singapore Pte LtdHigh CourtYes[2003] SGHC 292SingaporeCited for the principle that the parties had agreed to submit to an SIAC arbitration, and generally, to the most appropriate institutional rules existing at the time of the submission, regardless of whether those rules were in existence at the time of the Contract.
Black and Veatch Singapore Pte Ltd v Jurong Engineering LtdCourt of AppealYes[2004] 4 SLR 19SingaporeCited for the rationale behind applying the rules which were in place at the time the dispute was submitted for arbitration.
Bunge SA v Kruse (No.2)N/AYes[1979] 1 Lloyd’s Rep 279N/ACited for the principle that there was a prima facie inference that where the rules contained mainly procedural provisions, then the rules in force at the time of commencement of arbitration would be the ones that applied to the arbitration. However, if the rules contained mainly substantive provisions, then those in force as at the date the contract was entered into would apply.
Peter Cremer v Granaria BVN/AYes[1981] 2 Lloyd’s Rep 583N/ACited for the principle that it cannot be expected that arbitrators in any particular case should have to look at the date of the contract, ascertain the relevant procedure for arbitrations which were in force as at the date and then, regardless of the fact that new procedures, which may or may not be fundamental, may have been introduced and applicable and keing [sic: being] applied at the date when the arbitrators were appointed, go back to and apply the old procedure in force as at the date when the contract was made.
Dalian Hualiang Enterprise Group v Louis Dreyfus Asia Pte LtdHigh CourtNo[2005] 4 SLR 646SingaporeCited for the principle that the arbitration clause contained in one contract did not apply to the claims arising from another contract.
Tjong Very Sumito and Others v Antig Investments Pte LtdHigh CourtNo[2008] SGHC 202SingaporeCited for a discussion on the issue of head agreements and supplemental agreements.
The Pine HillN/AYes[1958] 2 Lloyd's Rep. 146N/ACited for the principle that it is most undesirable that there should be two proceedings in two separate tribunals to decide the same questions of fact.
W Bruce Ltd v J StrongN/AYes[1951] 2 KB 447N/ACited for the principle that the ultimate question is whether it would be just to hold the parties to the agreement.
The JadeN/AYes[1976] 1 All ER 441N/ACited for the principle that there was a real risk of a lay arbitrator and a judge reaching different conclusions.
Well Hoped Ltd & Anor v Nippon Yusen Kaisha & AnorHong Kong High CourtNo[1982] 1 HKC 155Hong KongCited for the principle that it was generally undesirable to have separate proceedings, but in this case, the issues to be determined were different and did not overlap.
Prestige Pools International Ltd v Yan Oi Tong Ltd & AnorHong Kong High CourtNo[1985] 2 HKC 116Hong KongCited for the principle that in this case there was a “real risk of a lay arbitrator and a judge reaching different conclusions” and that “all the parties [were] going to be in difficulty if this hearing [was] split into two”
Perez v John Mercer & SonsEnglish Court of AppealYes[1922] 10 LIL Rep 584England and WalesCited for the principle that the clause in question, which was similarly general, read: All disputes to be referred to the Tribunal of Arbitration of the Manchester Chamber of Commerce, to be determined in accordance with the rules of the Tribunal. Were the rules which existed at the time of the contract or those which existed at the time of submission to arbitration to apply? The court construed the clause to read “according to the rules for the time being of the Tribunal”, as opposed to the rules which already existed at the time of the Contract.

13. Applicable Rules

Rule Name
Rule 32 of the Arbitration Rules of the Singapore International Arbitration Centre, SIAC Rules (3rd Edition, 1 July 2007)

14. Applicable Statutes

Statute NameJurisdiction
International Arbitration Act (Cap 143A, 2002 Rev Ed)Singapore
Arbitration Act (Cap 10, 2002 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Arbitration
  • Stay of Proceedings
  • International Arbitration Act
  • Arbitration Act
  • Singapore International Arbitration Centre
  • Rules of the Singapore International Arbitration Centre
  • Termination of Dealership Agreement
  • Importer Agreement
  • Repudiation
  • Global Settlement
  • Multiplicity of Proceedings

15.2 Keywords

  • arbitration
  • stay of proceedings
  • international arbitration act
  • singapore
  • contract law
  • volkswagen

16. Subjects

  • Arbitration
  • Contract Law
  • Civil Procedure

17. Areas of Law

  • Arbitration Law
  • Contract Law
  • Civil Procedure