HG Metal Manufacturing Ltd v Navaratnam
[2021] NZHC 1920
•28 July 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-1955
[2021] NZHC 1920
BETWEEN HG METAL MANUFACTURING LTD
Applicant
AND
VASHIHARAN NAVARATNAM
First Respondent
SHERINE SANGEETHA NAVARATNAM
Second Respondent
CIV-2020-404-2230 BETWEEN
VASHIHARAN NAVARATNAM
Applicant
AND
HG METAL MANUFACTURING LTD
Respondent
Hearing: 29 March 2021 Counsel:
T B Fitzgerald for plaintiff V Navaratnam in person
Judgment:
28 July 2021
JUDGMENT OF KATZ J
This judgment was delivered by me on 28 July 2021 at 11:30 am pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors: Belly Gully, Barristers and Solicitors, Auckland Copy to: Vashiharan Navaratnam
HG METAL MANUFACTURING LTD v NAVARATNAM [2021] NZHC 1920 [28 July 2021]
Introduction
[1] On 23 April 2020, an arbitrator in Singapore, Mr Wade M. Coriell, delivered an arbitral award (“the Award”) in favour of HG Metal Manufacturing Limited (“HG Metal”). Vashiharan Navaratnam and his wife, Sherine Sangeetha Navaratnam, were ordered to pay HG Metal SGD404,736.10 and USD1,230,187.73, plus interest, pursuant to their obligations as guarantors of the debts of an associated company, Gayathri Steels Pte Ltd (“Gayathri”).
[2] Mr and Mrs Navaratnam now live in New Zealand. HG Metal therefore filed in this Court an application seeking recognition and enforcement of the Award (“the Enforcement Application”) pursuant to art 35 of sch 1 of the Arbitration Act 1996 (“the Act”).
[3] Mr Navaratnam opposes recognition and enforcement of the Award against him.1 The onus is on Mr Navaratnam to establish that one of the grounds for opposing recognition and enforcement set out in art 36 of sch 1 of the Act applies.
Background
[4] Between June 2013 and February 2014, Gayathri placed various sales orders with HG Metal for the supply of steel and steel products. In order to facilitate payment of the sums due under the sales agreements, HG Metal entered into two separate guarantee agreements with Mr and Mrs Navaratnam, Gayathri’s directors. The first guarantee was entered into on or about 24 July 2013 (“the July Guarantee”). The second guarantee was entered into on or about 24 September 2014 (“the September Guarantee”).
The proceeding in the High Court of Singapore
[5] A dispute arose between HG Metal and Gayathri in relation to amounts allegedly owed to HG Metal by Gayathri. HG Metal accordingly issued legal proceedings in the High Court of Singapore against Gayathri, and also Mr and
1 Judgment has already been entered against Mrs Navaratnam, although that is currently under appeal.
Mrs Navaratnam as guarantors.2 HG Metal was successful against Gayathri and the Court entered judgment in the full amount claimed. The pleaded claim against Mr and Mrs Navaratnam (the second and third defendants) was unsuccessful. That claim was based on the July Guarantee. The Court held, however, that the July Guarantee had been superseded by the September Guarantee. Choo Han Teck J concluded that:3
Under the September Guarantee, [Mr and Mrs Navaratnam] would have been jointly and severally liable for the Outstanding Sums. Although counsel for the Plaintiff submitted at trial that the Plaintiff is relying on both the July Guarantee and the September Guarantee, the Plaintiff specifically pleaded in its Reply that it is “not relying on the terms of the September Guarantee” in its Statement of Claim and chose to rely on the July Guarantee instead. Since that is the Plaintiffs claim, I am making no orders against [Mr and Mrs Navaratnam], having found the July Guarantee to have been superseded.
[6] As the September Guarantee had superseded the July Guarantee, HG Metal was prohibited from bringing any claims against Mr and Mrs Navaratnam in the High Court, because the September Guarantee (unlike the July Guarantee) included an arbitration clause.
The arbitration
[7] Following the release of the High Court’s judgment, Gayathri did not pay the judgment debt. HG Metal’s solicitors wrote to Mr and Mrs Navaratnam demanding payment of the outstanding sums, based on the September Guarantee. Mr and Mrs Navaratnam refused to pay the sums demanded.
[8] HG Metal then commenced arbitral proceedings against Mr and Mrs Navaratnam, in reliance on the September Guarantee.
[9] Mr and Mrs Navaratnam responded by challenging the jurisdiction of the arbitral tribunal (“the Tribunal”), arguing amongst other things that the matter was res judicata on the basis that HG Metal had made the same claims in the High Court proceeding and the High Court had dismissed those claims on their merits.
2 HG Metal Manufacturing Ltd v Gayathri Steels Pte Ltd [2017] SGHC 284.
3 At [14].
[10] The Tribunal dismissed the objection to its jurisdiction, summarising its reasoning as follows:4
In other words, although in oral argument [HG Metal’s] counsel relied on both guarantees, the High Court found based on unequivocal language in [HG Metal’s] reply brief that its claims were based solely on the July Guarantee, and that because that agreement had been superseded by the September Guarantee, those claims under the July Guarantee must be dismissed. The Court did not dismiss any claims under the September Guarantee (which it could not have done in any event given the agreement’s arbitration clause), and in fact went so far as to declare that “[u]nder the September Guarantee, [Mr and Mrs Navaratnam] would have been jointly and severally liable for the Outstanding Sums”.
[11] The Tribunal therefore concluded that the High Court had dismissed HG Metal’s claims under the July Guarantee but not those under the September Guarantee. It followed that the High Court judgment did not bar HG Metal from arbitrating its claims against Mr and Mrs Navaratnam under the September Guarantee, and those claims were not res judicata. Mr Navaratnam’s jurisdictional objection was accordingly dismissed.
[12] As for the merits, the Tribunal found that Mr and Mrs Navaratnam were liable to HG Metal under the September Guarantee, and that by failing to pay the outstanding amounts due to HG Metal, Mr and Mrs Navaratnam had breached the September Guarantee. They were therefore ordered to pay HG Metal SGD404,736.10 and USD1,230,187.73, plus interest.
Recognition and enforcement proceedings in this Court
[13] The proceedings have a somewhat convoluted procedural history in this Court (as set out in various minutes of the Court). In short, HG Metal served, and later filed, the Enforcement Application pursuant to art 35 of sch 1 of the Act. The Enforcement Application was supported by an affidavit attaching duly certified copies of the Award and September Guarantee.
4 HG Metal Manufacturing Ltd v Navaratnam (Award) SIAC ARB253/18/DXC, 23 April 2020 at [54].
[14] Mr Navaratnam opposes the Award being recognised and enforced. The basis for his opposition is largely set out in a document filed by Mr Navaratnam headed “Originating Application to Set Aside Recognition of Arbitration Award under the Arbitration Act 1996” dated 11 November 2020 (the “Application”).5
[15] Mr Navaratnam’s originating application was filed out of time. HG Metal opposes leave being granted to file that application out of time. The delay is relatively short, although I acknowledge that it follows a history of delays by Mr Navaratnam. I am satisfied that it is in the interests of justice that leave be granted and that Mr Navaratnam’s arguments be considered on their merits.
Enforcement of an arbitral award – the law
[16] The recognition and enforcement of arbitral awards in New Zealand is governed by arts 35 and 36 of sch 1 of the Act. Article 35 provides that on application in writing to a court, an arbitral award must be recognised as binding. The party applying for enforcement must supply the original award (or a certified copy) and the original arbitration agreement (or a certified copy), if it was in writing.
[17] There is a general presumption in favour of the enforcement of foreign awards. This presumption accords with the objectives of the New York Convention and is supported by considerations of international comity, respect for the capacities of international tribunals, the need to dissuade forum shopping by unsuccessful parties, and the need for predictability in the resolution of international commercial disputes.6 Article 36 therefore provides only limited (and exhaustive) grounds on which a Court may refuse recognition or enforcement of an arbitral award. An application under art 36 may only be made on the specified grounds.
5 The Application was given a separate CIV number – CIV-2020-404-2230. Mr Navaratnam also filed an “Amended Originating Application to Set Aside Recognition of Arbitration Award under the Arbitration Act 1996” dated 18 November 2020.
6 David AR Williams and Amokura Kawharu Williams and Kawharu on Arbitration (2nd ed, LexisNexis, Wellington, 2017) at [17.1.2] citing Pupuke Service Station Ltd v Caltex Oil NZ Ltd Appeal No 63/94, 16 November 1995 reported as an appendix to Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318 (PC).
[18] In particular, recognition or enforcement of an arbitral award, irrespective of the country in which it was made, may be refused only:
(a)if a party to the arbitration agreement proves it was under some incapacity;7
(b)if the arbitration agreement was invalid under the law to which the parties subjected it or, failing any indication on that question, under the law of the country where the award was made;8
(c)if the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present its case;9
(d)if the award relates to a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission;10
(e)if the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, in the absence of an agreement, was not in accordance with the law of the country where the arbitration took place;11
(f)if the award is not yet binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, the award was made;12 or
(g)if the court finds that:13
(i)the subject matter of the dispute is not capable of settlement by arbitration under the law of New Zealand; or
7 Article 36(1)(a)(i).
8 Article 36(1)(a)(i).
9 Article 36(1)(a)(ii).
10 Article 36(1)(a)(iii).
11 Article 36(1)(a)(iv).
12 Article 36(1)(a)(v).
13 Article 36(1)(b).
(ii)the recognition or enforcement of the award would be contrary to the public policy of New Zealand.
[19] The Court’s jurisdiction under art 36 to refuse recognition or enforcement of an arbitral award is therefore limited in scope. There is no general opportunity to re-litigate the underlying dispute or appeal the merits of the arbitrator’s decision. Rather, the regime set out in the Act is intended to facilitate commercial arbitration by enhancing predictability and expeditiousness, as well as the establishment of a harmonised system of limited recourse against awards and their enforcement.
[20] As noted previously, the onus is on Mr Navaratnam to establish that one of the grounds in art 36 applies, or that this Court lacks jurisdiction for other reasons. Some of the arguments advanced by Mr Navaratnam do not appear to fall in either of these categories. Other arguments are somewhat unclear (which is likely attributable to the challenges of being a self-represented litigant). In broad terms, however, the grounds advanced by Mr Navaratnam appear to be as follows:
(a)various procedural errors were made in respect of the Enforcement Application;
(b)the September Guarantee is invalid because it was entered into under duress;
(c)HG Metal repudiated the arbitration agreement in the September Guarantee by issuing legal proceedings against Mr and Mrs Navaratnam in the Singapore High Court;
(d)a claim under the September Guarantee is res judicata as a result of the decision of the High Court of Singapore;
(e)there were procedural defects in the appointment of the arbitrator; and
(f)the procedure followed in the Tribunal was incorrect and breached the rules of natural justice.
Mr Navaratnam’s procedural complaints in relation to this proceeding
Mr Navaratnam advanced a number of procedural complaints, including that:
(a)HG Metal was not the party that filed the affidavit proving the required matters in art 35(2) of sch 1 of the Act;
(b)HG Metal was not properly identified in the Enforcement Application;
(c)the Award was not properly authenticated or certified; and
(d)Mrs Navaratnam was not served with the Enforcement Application.
[22] The affidavit in support of the Enforcement Application was sworn by HG Metal’s Singaporean solicitor, Mr Chow Jie Ying, rather than an employee of HG Metal. There is no requirement, however, that the supporting affidavit be sworn by a director or employee of the company. The affidavit was clearly filed on behalf of HG Metal, in support of its application. There is no substance to this complaint.
[23] Similarly, the fact that HG Metal used its old address in the initial intituling is irrelevant. This does not invalidate the application. There is no confusion about the identity of HG Metal, or the fact that it was the party who obtained the Award.
[24] The Award has clearly been properly certified. It is sealed on the first page where it says, “Registered in SIAC Registry of Awards as: Award No. 059 of 2020 on 24 April 2020”. Mr Chow has provided expert evidence that this is all that is required as a matter of Singaporean law.
[25] Whether or not Mrs Navaratnam was properly served is irrelevant to this proceeding, which is solely against Mr Navaratnam. Further, issues relating to the enforcement of the award against Mrs Navaratnam are currently before the Court of Appeal.
[26] In conclusion, none of the above procedural matters (or any other procedural matters raised by Mr Navaratnam) found a basis for refusing to recognise or enforce the Award.
Should recognition and enforcement of the Award be refused on the basis that the September Guarantee was allegedly entered into under duress?
[27] Mr Navaratnam submitted that the September Guarantee is not valid under Singapore and/or New Zealand law because of a lack of consent (duress) at the time the agreement was entered into.14
[28] The July Guarantee included a provision for penalty interest for late payment, whereas the September Guarantee did not. The September Guarantee was therefore significantly more favourable to the guarantors (Mr and Mrs Navaratnam). Of particular significance for present purposes, the September Guarantee included an arbitration clause.
[29] Mr Navaratnam’s evidence is that the July Guarantee was intended to be an interim guarantee. The subsequent September Guarantee, unlike the July Guarantee, was prepared by a lawyer.
[30] Mr Navaratnam said that he signed the September Guarantee under duress and without the benefit of legal advice because HG Metal would not release a particular shipment of products until the document was signed. Mr Navaratnam referred to an email sent to him on Friday 4 October 2013 by Mr Chih Yuen Foo of HG Metal stating:
As for the guarantee, please come sign the guarantee by today … so that we can release the debar shipment.
[31]Mr Navaratnam responded by email later that same day as follows:
No worries have done. Send us a copy of the guarantee we have signed thanks.
[32] Unfortunately, Mr Navaratnam does not appear to have advanced the duress argument in the arbitration and the parties have accordingly not given evidence or been cross-examined on this issue. Nevertheless, on the evidence before the Court, I am not persuaded that the September Guarantee was signed under duress. On the contrary, the contemporaneous correspondence indicates that Mr Navaratnam entered into it willingly. He may have done so for his own commercial reasons, and in circumstances where he was under some commercial pressure, but that does not amount to legal
14 This ground falls within art 36(1)(a)(i).
duress. This is particularly so in circumstances where the new guarantee was in fact less onerous than the existing guarantee.
[33] Mr Navaratnam has accordingly failed to establish that the September Guarantee is invalid under Singaporean and/or New Zealand law.
Did HG Metal repudiate the arbitration agreement by issuing legal proceedings against Mr and Mrs Navaratnam in the Singapore High Court?
[34] Mr Navaratnam submitted that the September Guarantee is not enforceable against him because HG Metal repudiated the September Guarantee (including the arbitration agreement included within it) by instituting legal proceedings in the Singapore High Court. A related submission was that any issues relating to the September Guarantee are now res judicata, as a result of the High Court judgment. Similar arguments were advanced unsuccessfully in the arbitration.
[35] Mr Navaratnam relied on a decision of the Singapore Court of Appeal in Marty Limited v Hualon Corp (Malaysia) Sdn Bhd.15 In that case the Court noted that like any other contract, an arbitration agreement can be repudiated, giving the innocent party the right to accept the breach and bring the agreement to an end:
[51] … In the context of arbitration agreements, one relevant factor to determine whether the breaching party has repudiatory intent is whether it has an explanation for commencing litigation other than its rejection of the arbitration agreements. If the breaching party can provide a satisfactory explanation, then, as the judge explained, the court would be slow to infer repudiatory intent.
[52] We would emphasise, however, that whether an agreement has been repudiated is an objective inquiry. A repudiatory breach consists of the “manifested intentions” of the breaching party, which a reasonable man in the position of the innocent party would take to indicate that the breaching party no longer intended to perform its contractual obligations…
[53] In the present case … the act of issuing court proceedings does not per se constitute a repudiatory breach of the arbitration agreement. Instead, [counsel for the appellant] argued that the respondent had breached the arbitration clause in a repudiatory fashion because it had commenced the BVI action and also maintain the BVI action for some 10 months without reserving its rights to arbitration or otherwise limiting its claim in the BVI action to ancillary matters.
15 Marty Limited v Hualon Corp (Malaysia) Sdn Bhd [2018] SGCA 63.
[54] We pause to observe that … it is strongly arguable that the commencement of court proceedings is itself a prima facie repudiation of the arbitration agreement. This is because parties who enter into a contract containing an arbitration clause can reasonably expect that disputes arising out of the underlying contract would be resolved by arbitration and indeed have a contractual obligation to do so. Thus, where court proceedings are commenced without an accompanying explanation or qualification and the relief sought will resolve the dispute on the merits, the defending party in the court proceedings is entitled to take the view that the party who commenced those proceedings (“the claimant”) no longer intends to abide by the arbitration clause. It would, however, still be opened to the complainant to displace this prima facie conclusion by furnishing an explanation for commencement of the court proceedings … but in the absence of any explanation or qualification, the commencement of court proceedings in the face of an arbitration clause is, in our view, sufficient to constitute a prima facie repudiation of the arbitration agreement.
(emphasis original)
[36] The Singapore Court of Appeal’s observations in Marty Limited v Hualon Corp do not assist Mr Navaratnam, however, because HG Metal did not commence court proceedings seeking to enforce the September Guarantee. Rather, as the Singapore High Court found, HG Metal commenced proceedings seeking to enforce the July Guarantee. The fact that it issued proceedings based on a document (the July Guarantee) that the High Court later found to have been no longer in force (but which would have been subject to the High Court’s jurisdiction if it had been) does not constitute a repudiation of the September Guarantee or the arbitration agreement included within it.
[37] Even if (contrary to my view) HG Metal had repudiated the arbitration agreement by bringing proceedings in the Singapore High Court, that repudiation was clearly not accepted by Mr and Mrs Navaratnam. They could have done this, for example, by consenting to the issues relating to the September Guarantee being determined by the High Court, rather than through arbitration. They did not do so.
[38]Mr Navaratnam relied in particular on the following passage in the Marty
case:16
Where a party has two methods of dispute resolution open to him, his reliance on one to resolve a dispute on the merits signifies that he does not intend to rely on the other to resolve the same dispute.
16 Marty Limited v Hualon Corp (Malaysia) Sdn Bhd [2018] SGCA at [55].
[39] Mr Navaratnam submitted that HG Metal had two methods of dispute resolution open to it in relation to the September Guarantee, and had elected to pursue court proceedings rather than arbitral proceedings. It is clear, however, that HG Metal did not have two methods of dispute resolution open to it in relation to any issues arising under the September Guarantee. Rather, only one method of dispute resolution was available to it – arbitration. The High Court had no jurisdiction to resolve issues relating to the September Guarantee, due to the arbitration clause. Further, as Choo Han Teck J made clear, with reference to HG Metal’s pleadings, the September Guarantee was not before the High Court. Rather, the High Court’s decision concerned a different guarantee, the July Guarantee.
[40] There is no merit in this ground of opposition to recognition and enforcement of the Award.
Were there procedural defects in the appointment of the Tribunal?
[41] Mr Navaratnam submitted that the arbitrator was not validly appointed in accordance with the procedures of the Singapore International Arbitration Centre, as notified to the parties in a letter dated 11 September 2018. In particular, that letter states that appointment of an arbitrator will be subject to receipt of deposits. However, an arbitrator was appointed before the parties had paid the required deposits.
[42] I accept HG Metal’s submission that there is nothing in this point. The requirement that deposits be paid in advance of an arbitration is for the protection of the Tribunal, not the parties. The fact that the Singapore International Arbitration Centre appears to have been willing to waive that requirement in this case does not in any way invalidate the appointment of the arbitrator. There is no prospect that any miscarriage of justice could have arisen as a result of the arbitrator being appointed before the deposits for his fees were paid.
Did the Tribunal process breach natural justice?
[43] Mr Navaratnam submitted that the Tribunal breached the rules of natural justice in making the Award.
[44] The relevant procedural background is set out in the Award. For present purposes, the key procedural aspects are that:
(a)Mr Navaratnam filed an application for early dismissal of HG Metal’s claim on the basis that the claims were manifestly without legal merit and the Tribunal manifestly lacked jurisdiction. Mr Navaratnam requested the Tribunal to determine the application on the papers, which it did. It dismissed the application.
(b)The Tribunal then sought input from the parties on the procedure and schedule for the substantive arbitration. HG Metal provided input, but Mr and Mrs Navaratnam did not, despite several follow up requests.
(c)The Tribunal then issued a decision setting out the proposed procedure, including a timetable for various documents to be filed.
(d)HG Metal then filed its statement of claim and Mr Navaratnam filed his response to the statement of claim, which the Tribunal took to be his statement of defence.
(e)HG Metal sought leave to file a reply. Comments were sought from Mr and Mrs Navaratnam but were not forthcoming. Leave was granted.
(f)On 24 May, 11 June, and 8 July 2019 the Tribunal invited Mr and Mrs Navaratnam to file a rejoinder if they wished to do so. They did not respond to the Tribunal’s communications, nor did they file a rejoinder.
(g)After various communications between the parties and the Tribunal, the Tribunal scheduled an oral hearing by telephone for 30 August 2019. Because of technical difficulties, that hearing was unable to proceed as scheduled.
(h)On 2 September 2019, the Tribunal wrote to the parties seeking agreement on a rescheduled date and time for an oral hearing by telephone.
(i)On 6 September 2019, Mr Navaratnam requested that no oral hearing take place and that any further communications occur via email “to save everyone the hassle”.
(j)On 9 September 2019, after HG Metal stated that it did not object, the Tribunal granted Mr Navaratnam’s request and stated that the “remainder of the procedure would be conducted in writing only”. The Tribunal also stated in that email that:
The Tribunal will prepare and circulate its questions to the parties for written response.
(k)Subsequently on 9 October 2019, the Tribunal emailed the parties advising that:
Having reviewed the case file, the Tribunal does not have any questions for the parties at this time, and is in the process of completing the Award.
(l)On 20 November 2019, the Tribunal further emailed the parties stating that:
The Tribunal is preparing to issue its final award, and will close the proceeding a bit in advance of doing so. Before taking either of those steps, however, I offer all parties the opportunity to provide any final submissions that they wish to provide, in writing, no later than next Friday, 29 November
2019.
To be clear, the Tribunal is not asking for any final submissions, but rather providing the opportunity to all parties to provide them on any issues that they may feel require further discussion.
(emphasis original)
(m)Neither party filed further submissions and, on 3 February 2020, the Tribunal formally closed the arbitration proceedings. The Award was delivered on 23 April 2020.
[45] Mr Navaratnam submitted that the Tribunal breached natural justice by not providing the parties with written questions, when it had indicated it would so.
[46] There is no merit in this argument. If the Tribunal did not have any matters that required clarification (as appears to have been the case) then there was nothing to be achieved by asking the parties written questions. The Tribunal informed the parties that, having reviewed the file, it did not have any questions. Subsequently, an opportunity was provided to the parties to provide any further written submissions they wished to provide. The parties elected not to file any further submissions.
[47] The process followed was fair and comprehensive. Mr Navaratnam was provided with a full opportunity to present his case to the Tribunal. There was no breach of the rules of natural justice. It follows that enforcing the Award would not be contrary to public policy.
Result
[48]Mr Navaratnam’s Application is dismissed.
[49] HG Metal’s Enforcement Application is granted. The Registrar is directed to enter the Award as a judgment against Mr Navaratnam.
[50] My preliminary view is that, as the successful party, HG Metal is entitled to an award of costs on a 2B scale basis. As I have not heard fully from the parties on costs issues, however, leave is reserved to file memoranda if costs cannot be agreed. Any memorandum on behalf of HG Metal is to be filed and served by 18 August 2021. Any response from Mr Navaratnam is to be filed and served by 25 August 2021.
Katz J
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