Singapore - Disputes Round Up 2023

As we come to the close of 2023, we briefly summarise key cases and enforcement decisions in Singapore. 

In technology matters:

• Crypto assets have been recognised as property.
• Companies must take active steps to protect personal data and prevent copyright infringement.
• Startup founders may seek pre-action production of documents to ascertain if they have a claim.

In contracts:

• A substance over form approach will be taken in deciding if a clause is an unenforceable penalty.
• Sanctions clauses will be strictly and objectively construed.
• Expectation damages are ordinarily the damages that may be claimed for contractual breaches.

In alternative dispute resolution:

• A foreign emergency arbitral award can be enforced in Singapore.
• Arbitration records are generally confidential, but not when the arbitration has already been publicised.
• The Court may compel parties to mediate.

1. Crypto assets have been recognised as property.

Building on earlier Singapore decisions reflecting the oft-expressed view in commonwealth jurisdictions that propriety relief (such as injunctions) may be granted for crypto assets, the Singapore High Court has recognised crypto assets as property capable of being held on trust in ByBit Fintech Limited v Ho Kai Xin and others [2023] SGHC 199. In concluding that USDT (a stablecoin commonly known as ‘Tether’) was property capable of being held on constructive trust, the Court held that “the holder of a crypto asset has in principle an incorporeal right of property recognisable by the common law as a thing in action and so enforceable in court”.

The Court’s reasoning suggests that the same conclusion would likely be reached for other types of crypto assets and other types of trusts. While the Court noted that a contractual right to redeem USDT may constitute an “additional thing in action that the holder of a USDT may have”, its presence was not “not necessary” to conclude that the right represented by USDT was itself a thing in action.

2. Companies must take active steps to protect personal data and prevent copyright infringement.

Two decisions by the Singapore High Court and the Personal Data Protection Commission demonstrate the importance of having active controls and processes to ensure that employees protect personal data and do not infringe copyrights.

In Re E-Commerce Enablers Pte Ltd [2023] SGPDPC 6, the Singapore Personal Data Protection Commission held that organisations cannot solely rely on their employees as a security arrangement to protect personal data. Organisations must have processes to ensure that the steps their employees are required to perform are indeed taken, such as independent verification by another checker. The Commission also emphasised that it is insufficient for organisations to blame data breaches on “human error” as their security arrangements need to be sufficiently robust with adequate verifications and checks.

In Siemens Industry Software Inc v Inzign Pte Ltd [2023] SGHC 50, the Singapore High Court held that employers can be held vicariously liable for acts of copyright infringements by their employees, for example when an employee installs an unauthorised version of a software on a laptop belonging to the employer. Vicarious liability cannot be avoided simply by relying on what employees are authorised to do under company policies or employment contracts. Active steps should also be taken to minimise or prevent opportunities for employees to commit copyright infringement. This includes installing technological controls to prevent the installation of unauthorised software or properly supervising and educating employees. 

3. Startup founders may seek pre-action production of documents to ascertain if they have a claim.

In Gillingham James Ian v Fearless Legends Pte Ltd and others [2023] SGHCR 13 (“Gillingham”), pre-action production was ordered against a company to enable a startup founder to cover “critical gaps” in his intended claim.

Gillingham clarifies the scope of the pre-action production regime in Singapore, which remains a useful tool for potential litigants in Singapore. However, any party trying to avail itself to the pre-production regime should also ensure that the documents and information sought must be “material” to the party’s determination of whether there is a viable claim. Further, the party from whom production is sought is entitled to reasonable costs of both the application and complying with the production orders made.

4. A substance over form approach will be taken in deciding if a clause is an unenforceable penalty.

It is trite that a contractual term which is a penalty cannot be enforced. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party.

In Ethoz Capital Ltd v Im8ex Pte Ltd and others [2023] 1 SLR 922, the Court of Appeal held that it would adopt a “substance over form” approach to determine if a clause is an unenforceable penalty. The Court refused to enforce a clause which obliged the borrower to pay all the interest chargeable over the entire 15-year tenor of the loan immediately on default. In determining if a clause is in essence a penalty, the Court would explore factors such as (a) the overall context, (b) particular reasons for the inclusion of the clause and (c) whether the clause was to secure some independent commercial purpose or only to secure compliance with primary obligations. The Court stressed that it is important to analyse the whole contract, and not just the impugned clauses in isolation.

Parties should therefore be very careful in engaging in “clever drafting” (i.e. drafting which is intended to obscure the true nature of a provision) to circumvent the penalty doctrine.

5. Sanctions clauses will be strictly and objectively construed.

Economic sanctions are geopolitical instruments but in construing sanctions clauses, geopolitical considerations ought to “recede to the backdrop”.

In Kuvera Resources Pte Ltd v JPMorgan Chase Bank, N.A. [2023] SGCA 28, the Court of Appeal found that the respondent was not entitled to invoke the sanctions clause to deny payment under two letters of credit. The Court stressed that the principles governing contractual interpretation must take centre stage and the sanctions clause must be construed objectively and strictly. Specifically, the respondent’s “risk-based” approach (i.e. in that the respondent would rather be sued than be found to have breached US sanctions) fell short of establishing that there was an applicable restriction under the letters of credit.

6. Expectation damages are ordinarily the damages that may be claimed for contractual breaches.

In Lim Shu Ming and anor v Koh Chew Chee and anor [2023] 1 SLR 1477, it was held that expectation damages are ordinarily the damages that a plaintiff is entitled to claim. Reliance damages would be available (in lieu of expectation damages) if it is impossible, or at least extremely difficult for a plaintiff to prove his expectation damages in the usual way or if his contract was not for profit. The Court emphasised that it does not have a wide discretion to grant reliance damages and that parties must put forth evidence to establish the quantum of their alleged lost profits.

7. A foreign emergency arbitral award can be enforced in Singapore.

The Singapore High Court confirmed in CVG v CVH [2023] 3 SLR 1559 (“CVG”) that a foreign award issued by an emergency arbitrator can be enforced in Singapore. While the Court in CVG ultimately declined to enforce the interim award because of procedural irregularities, it clarified that on a purposive interpretation of section 27 of the International Arbitration Act 1994 (“IAA”), the term “arbitral award” includes awards by emergency arbitrators. Consequently, section 29 of the IAA applies to allow enforcement in Singapore of interim awards issued by emergency arbitrators.

8. Arbitration records are generally confidential, but not when the arbitration has already been publicised.

It is generally accepted that arbitration proceedings are confidential, whether expressly by rules or implied obligation of law.

This applies equally to arbitrators’ records of deliberations, as found in CZT v CZU [2023] SGHC(I) 11 (“CZT”). In CZT, a disgruntled party sought disclosure of arbitrators’ records of deliberation to support its application to set aside an award. The party had sought to rely on a dissenting award which made broad allegations of misconduct by the majority. However, the dissent did not explain or substantiate any of the allegations. The Court therefore found that such allegations, even if made by a co-arbitrator, cannot be sufficient to invoke this exception to compel production of the arbitrators’ deliberations.

While the Court acknowledged that there may be circumstances which warrant the production of records of deliberations, it must take a “very compelling case”, and “involve allegations that are very serious in nature”, with “real prospects of succeeding” in order to invoke the exception.

In another decision concerning confidentiality in arbitration generally, the Singapore Court of Appeal declined to grant a sealing order for arbitration-related proceedings. In The Republic of India v Deutsche Telekom AG [2023] SLR 77, it was found that confidentiality of the underlying arbitration had been lost through publicity in the media and through social media. While the Court recognised that court proceedings relating to arbitration matters were presumptively private as a starting point, the Court should not be made to “go through an empty exercise to protect confidentiality when there was nothing left to protect”; if the information in question was already known to the public at large, it would be “unrealistic and pointless” to seek to deal with it as though it were confidential.

9. The Court may compel parties to mediate.

It is perhaps uncontroversial that a contractual provision stating that parties “shall refer” a dispute to mediation should be complied with. In Maxx Engineering Works Pte Ltd v PQ Builders Pte Ltd [2023] SGHC 71, the Singapore High Court held that it was just and equitable to order specific performance of an obligation to mediate as, among other things, damages would have been an inadequate and unsuitable substitute for the obligation to mediate.

This article is produced by our Singapore office, Bird & Bird ATMD LLP. It does not constitute as legal advice and is intended to provide general information only. Information in this article is accurate as of 21 December 2023.