High Court Judgement: Jumeirah Management Services (Maldives) v SPH

 
Summary

A case concerning the courts’ powers in granting interim injunction order in court actions related to arbitral proceedings, in which the High Court of the Maldives held that the Court has the same powers as the arbitral tribunal to render interim orders in such cases related to arbitral proceedings.¹

 
Factual Background

1. On 18 February 2008, a resort management contract was entered between SPH Pvt Ltd (“SPH”) and Jumeirah International LLC, whereby SPH as the sub leaseholder transferred the management rights of Jumeirah Vittaveli – a tourist resort developed at K. Bolifushi, to Jumeirah International LLC.
2. On 26 February 2011, the rights and obligations of Jumeirah International LLC were transferred to Jumeirah Management Services (Maldives) Pvt Ltd (“Jumeirah”), under a novation agreement entered between the two parties.
3. On 31 May 2020, SPH sent Jumeirah a notice of termination of the management contract and entered into a management contract with another party on 1 June 2020.²
4. In accordance with the arbitration agreement between Jumeirah and SPH, Jumeirah submitted an arbitration case³ to the Singapore International Arbitration Centre (SIAC), contending that the termination notice was invalid as it was served with the intention of terminating the management contract in violation of the management contract.
5. Despite the ongoing arbitration case at SIAC, SPH continued with the enforcement of the notice.

 
Procedural History

1. Jumeirah filed for an interim injunction pending a decision at the arbitral proceedings, under Section 45 of the Arbitration Act (Law Number 10/2013) and clause 40.9 of the management contract, whereby, the High Court was to:
   • prohibit SPH from doing anything causing any irreparable damage to the rights of Jumeirah under the management contract;⁴
   • issue a freezing order against SPH, ensuring that the management rights of Jumeirah are secured;⁵
   • issue a preservation order to preserve the status quo and the management rights of Jumeirah.⁶
2. In response, SPH countered with a procedural issue, contending that the matter was beyond the jurisdiction of the High Court, on the grounds that:
   • the application for the interim injunction constitutes an abuse of court process considering that case⁷ initially submitted at the High Court by Jumeirah on the same subject matter was dismissed by the High Court upon Jumeirah’s request for dismissal;
   • the High Court has not formulated its own procedures on interim measures in relation to international arbitral proceedings as envisaged in Section 45(b) of the Arbitration Act; and
   • Though an arbitration case has been registered at the SIAC by Jumeirah, the hearings in the case have yet not started and so there is no ongoing arbitration case at the SIAC.

 
Legal Issue(s)

1. When does a court have the power to issue an interim order in relation to an action or a matter in the court related to arbitral proceedings?
2. To what extent does the court have the power to impose interim measures in court actions related to arbitral proceedings?
3. What are the factors to consider in granting interim orders (in court actions related to arbitral proceedings)?
   

 
Holding(s)

In a unanimous decision, the High Court held:

1. against SPH on all three procedural grounds; and
2. to grant the interim order, on all three pleadings (see above) by Jumeirah, pending decision of the arbitral tribunal.

 
Reasoning(s)

1. Reasons for the High Court to determine against SPH in all three procedural grounds are as follows:
   • Contrary to the contention of SPH, Jumeirah’s reason for the request to dismiss the initial case was because the arbitral proceedings reached its conclusion before the High Court could deliver its judgment in the case. Following the dismissal of the initial case, Jumeirah applied for an interim injunction in this case for a second time, when a second arbitration case⁸ was filed at the SIAC. Hence, Jumeirah’s application for interim relief in this current case does not constitute an abuse of the court process.
   • There not being a High Court’s procedure as envisaged by Section 45(b) of the Arbitration Act is not a reason for the Court to strip Jumeirah of its rights under the Section 45 of the Arbitration Act.
   • The arbitration agreement between the parties provides for disputes to be resolved in accordance with SIAC Rules on Arbitration. Rule 3.3 of SICA Rules 2016 provides that, “[t]he date of receipt of the complete Notice of Arbitration by the Registrar shall be deemed to be the date of commencement of the arbitration.”. Hence, the arbitration case submitted by Jumeirah against SPH and registered at the SIAC has to be considered to be an ongoing arbitration case.
     
2. In determining whether the High Court has the authority to provide interim relief in relation to arbitral proceedings, it has to be determined whether the arbitral tribunal (in this case the SIAC) has the power to take interim measures in arbitral proceedings. In that, subsection 12(1) International Arbitration Act (Singapore), rule 30 of the SIAC Rules 2016 expressly provides for the power of the arbitral tribunal to make interim orders.
3. Same as any other case on interim injunctions, in determining whether an interim injunction must be granted in this case, courts must apply the test of the balance of convenience in that whether the balance of convenience lays in favour of granting the interim order and the three-part test laid down by the Supreme Court in Nexbis r v ACC⁹ as follows:
   • A prima facie likelihood of success on the merits or a presumption of a sound legal basis (fumus boni juris);
   • A risk of imminent and irreparable damage (periculum in mora);
   • Legal capacity to apply for an injunction (capacity).
4. On whether Jumeirah passes the first limb of the test, the High Court considered that as there is an ongoing arbitral case on the merits of the current case. Further, the Court also considered the conduct of SPH in terminating the management contract that lacks good faith by trying to show that the status quo has changed through fictitious arrangements with what seems to be a non-existing third party and the prompt actions taken by Jumeirah to assert the rights under the management contract. The Justices of the Court also noted that as SPH terminated the management contract for a reason that was beyond Jumeirah’s control, the good faith of SPH in such termination is questionable. Hence, based on this analysis, the conclusion reached was that fumus boni juris is sufficiently established in the current case.
5. On whether there is a risk of imminent and irreparable damage, the Justices opined that as SPH has claimed to have already entered into a management contract to replace Jumeirah, there is a risk of imminent and irreparable harm and damage should an interim injunction order not be made.
   As to the capacity of Jumeirah to file for an interim injunction, the Justices were of the opinion that Jumeiah does in fact have the capacity in this case. The reason being the interim injunction, in this case, is in relation to the arbitration case submitted to the SIAC in accordance with Clause 40.7 of the management contract between Jumeirah and SPH.
   On the question of where the balance of convenience lies in the current case, the Justices concluded that since SPH failed to show that the company will be able to cover costs for damages in the substantive case and as there is a prima facie likelihood that Jumeirah will succeed on the merits, the balance of convenience is in favour of Jumeirah.
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References