Case Summaries

Sun Travels & Tours Pvt Ltd v Hilton International Manage (Maldives) Pvt Ltd

12 February 2019

Case summary

Sun Travels & Tours Pvt Ltd v Hilton International Manage (Maldives) Pvt Ltd

2019 SGCA 10

Civil Appeal No 221 of 2017

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Decision of the Court of Appeal (delivered by Justice Steven Chong):

Outcome: CoA allows appeal against decision ordering a permanent restraint against the respondent relying on a foreign judgment obtained after parties obtained arbitral awards.

 

1          This was an appeal against the decision in Hilton International Manage (Maldives) Pvt Ltd v Sun Travels & Tours Pvt Ltd [2018] SGHC 56. The judge in the court below granted a permanent anti-suit injunction against the appellant (“Sun”) with respect to a judgment obtained in the Maldivian courts, on the ground that the judgment was obtained in breach of the arbitration agreements between the parties (“the Injunctive Order”). The judge also declared that the arbitral awards obtained by the parties were final, valid and binding on them, and declared that Sun’s claim before the Maldivian courts in respect of disputes subject to the arbitration agreements was in breach of the arbitration agreements. The Court of Appeal reversed the decision of the judge in relation to the permanent anti-enforcement injunction and upheld the two declarations granted by the judge.

 

Background to the appeal

2          A dispute between the parties was properly brought before an arbitral tribunal which led to two awards against Sun. The respondent, Hilton International Manage (Maldives) Pvt Ltd (“Hilton”), took various steps to enforce the awards against Sun in the Maldives. Initially, Hilton did not make much headway because there was some confusion as to which court in the Maldives was vested with the jurisdiction to deal with enforcement matters. In the midst of this confusion, Sun commenced an action in the Maldives essentially re-litigating the issues which had already been decided in the arbitration. Instead of immediately applying for anti-suit relief from the seat court, ie, the Singapore court, Hilton sought to challenge the Maldivian action on jurisdictional grounds, and failed. Significantly, the Maldivian court issued a judgment awarding substantial damages to Sun. The findings were, in essence, the complete opposite of the findings by the arbitral tribunal. Hilton had appealed against the judgment, and this appeal was still pending decision at the time the decision of the Court of Appeal was delivered. Notwithstanding the issuance of the judgment, Hilton sought to enforce the awards again, but this time, enforcement was denied on account of the judgment. It was against this background that Hilton sought anti-suit relief and declaratory relief from the Singapore High Court.  

Material Facts

3          Sun was a resort operator that owned the Iru Fushi Beach & Spa Resort in the Maldives (“the Hotel”). Hilton was a Maldivian-incorporated company affiliated with a large hospitality company operating hotels and resorts worldwide. They entered into a management agreement under which Sun agreed to let Hilton manage the Hotel. The management of the Hotel was handed over to Hilton in 2009. Sun became dissatisfied with the performance of the Hotel as managed by Hilton and gave notice in 2013 to Hilton to terminate the management agreement with immediate effect. Hilton accepted the termination on the basis that it was a wrongful repudiation.

4          Subsequently, Hilton commenced arbitration proceedings in May 2013 pursuant to an arbitration agreement in the management agreement, claiming that Sun was not entitled to terminate the management agreement and claimed damages for lost profit and for sums due and owing under the management agreement. In the arbitration, Sun alleged that the revised projections given by Hilton prior to the parties signing the management agreement (“the Revised Projections”) were fraudulent misrepresentations, and that Hilton had breached its obligation to use the skill, effort, care, diligence and expertise reasonably expected of a prudent international operator, as stipulated in the management agreement. Both parties participated in the arbitration until the arbitral tribunal delivered the Partial Award in May 2015. In the Partial Award, the tribunal dismissed Sun’s misrepresentation claims and found that Hilton was not in breach of the management agreement. The tribunal awarded Hilton the sum of US$599,095.66 with interest for its pre-termination claims and £1,051,230.10 for legal and expert’s fees and expenses incurred in the Arbitration. It also awarded Hilton damages and costs of the Arbitration comprising the fees and expenses of the tribunal and the International Chamber of Commerce (“ICC”) administrative expenses (both of which were to be reserved to a further award). Sun refused to participate in the arbitration after the Partial Award was delivered. The tribunal then delivered its Final Award in August 2015 ordering Sun to pay Hilton damages in the sum of US$20,945,000 plus interest, as well as US$342,500 for Hilton’s share of the fees and expenses of the ICC and the tribunal.

5          After the Awards were obtained, proceedings were started in the Maldivian courts. The proceedings initially progressed along two different tracks – the first related to proceedings started by Hilton to enforce the Awards and the second related to a civil action commenced by Sun against Hilton.

6          In December 2015, Hilton commenced enforcement proceedings in the Large Property and Monetary Claims division of the Maldivian Civil Court (“the First Enforcement Proceedings”). Sun resisted Hilton’s application to enforce the Awards, on the ground that the management agreement was void and invalid/illegitimate as it was induced by deceit and misrepresentation. In addition, Sun submitted that the court should award it US$19.2m as damages for fraudulent misrepresentation based on the Revised Projections. In September 2016, the Maldivian court held that the matter was beyond the jurisdiction of the division, and that it should instead be brought directly to the Enforcement Division of the Civil Court.

7          Hilton then proceeded to the Enforcement Division of the Maldivian Civil Court. However, that court also declined jurisdiction in November 2016, on the ground that enforcement proceedings ought to be commenced in the High Court of the Maldives. Hilton appealed against this decision in January 2017, and the appeal was allowed.

8          In April 2017, Hilton recommenced enforcement proceedings in the Maldivian Civil Court (“the second Enforcement Proceedings”). Sun raised the same arguments it had raised in the First Enforcement Proceedings to resist enforcement. The court held in June 2017 (“the June Judgment”) that the enforcement of the Awards “could not be entertained at [the Civil] Court for the time being” because of a Maldivian judgment issued in March 2017 in Sun’s favour against Hilton.

9          Turning to the civil action commenced by Sun, in October 2016, after the Large Property and Monetary Claims division of the Maldivian Civil Court had declined jurisdiction to hear Hilton’s enforcement proceedings, Sun commenced a civil action against Hilton (“the Maldivian Suit”). In the Maldivian Suit, Sun claimed damages against Hilton arising from alleged misrepresentations and breaches of the management agreement. Both claims are similar to those argued by Sun in the arbitration, and the relief sought by Sun is also the same.

10        In January 2017, an oral hearing took place and the Maldivian Civil Court directed that it would determine the procedural and/or jurisdictional matters at the same time as the merits of the case. Hilton repeated its procedural objection in a written statement, and did not deal with the factual allegations. At a further hearing in February 2017, Sun presented arguments on why its claim in the Maldivian Suit should be heard and Hilton restated its procedural objection. In March 2017, the court delivered a three-page written judgment (“the March Judgment”) holding that Sun had made out its case on misrepresentation. Thus, the management agreement was found to be void and unenforceable, and Hilton was to pay Sun damages. This March Judgment was then relied on by the Enforcement Division in its June Judgment to refuse Hilton’s enforcement of the Awards. Hilton appealed the March Judgment, and the appeal was still pending decision at the time the decision of the Court of Appeal was delivered.

11        In July 2017, Hilton filed an application in the Singapore High Court for the following:

(a)        a permanent anti-suit injunction to restrain Sun from taking any steps in reliance on the March Judgment or any decision upholding the March Judgment;

(b)        a declaration that the Awards are final, valid and binding on the parties; and

(c)        a declaration that Sun’s claim in the Maldivian Suit and any consequential proceedings resulting therefrom (including any appeals) are in breach of the arbitration agreement in the management agreement.

12        The Judge decided in Hilton’s favour. The Judge also ordered that nothing in her orders shall prevent Sun from objecting to the recognition and enforcement of the Awards, and stressed that the Injunctive Order did not stop the Maldivian appeal process.

Decision on appeal

13        The Court of Appeal considered the following three issues:

(a)        First, whether the Maldivian Suit could be considered to be bound up with the resisting of enforcement proceedings in the Maldives.

(b)        Secondly, whether the Judge was correct in granting the injunctive relief.

(c)        Thirdly, whether the Judge was correct in granting the declaratory relief.

14        On the first issue, counsel for Sun submitted that both the Maldivian Suit and the enforcement proceedings, at their core, concern the same issue ie, whether it would be contrary to Maldivian public policy to enforce the Awards. Thus, the Maldivian Suit was part of Sun’s resistance to the enforcement of the Awards. This position was rejected by the Court of Appeal.

15        On the second issue of the injunctive relief, the Court of Appeal allowed the appeal, and did not uphold the Injunctive Order, on the basis of Hilton’s delay in bringing the application and the lack of any exceptional circumstances justifying the grant of injunctive relief.

16        With regard to anti-suit injunctions, relief would ordinarily be granted where there is a breach of an arbitration agreement or an exclusive jurisdiction clause, unless there are strong reasons not to. However, the relief must be sought promptly and before foreign proceedings are too far advanced. Even though anti-suit injunctions operate in personam, they nevertheless indirectly interfere with foreign proceedings.

17        Turning to anti-enforcement relief, such relief is sought after a foreign judgment has been obtained. The Court of Appeal held that it calls for special consideration because prima facie undue delay would be implicit from the very nature of the applications for such injunctive relief. It would not be sufficient to simply demonstrate (a) a breach of a legal right or (b) vexatious or oppressive conduct in an anti-enforcement injunction case. Because an anti-enforcement injunction proscribes the enforcement of the foreign judgment on pain of contempt proceedings in the jurisdiction where the injunction is granted, granting an anti-enforcement injunction is comparable to nullifying the foreign judgment or stripping the judgment of any legal effect when only the foreign court can set aside or vary its own judgments. Nevertheless, the Court of Appeal held that anti-enforcement injunctions can be granted where there are exceptional circumstances. These exceptional circumstances are tied to the notion of unconscionability and not exceptional circumstances in the abstract. They include exceptional circumstances of fraud and the lack of knowledge of the foreign proceedings until the delivery of the foreign court judgment.

18        On the facts, by the time Hilton sought anti-enforcement relief from the Singapore High Court, the Maldivian courts had delivered the March Judgment and the June Judgment, and the appeal against the March Judgment was underway. Exceptional circumstances had to be shown to justify an injunction to restrain Sun from relying on the March Judgment. Hilton’s primary argument was that the March Judgment was an “aberration” that took the parties by surprise. The Court of Appeal rejected this submission. The mere fact that Hilton was making jurisdictional objections in the foreign court does not excuse the delay in any way. Hilton could and should have simultaneously sought injunctive relief from the Singapore court, and its failure to do so allowed the Maldivian proceedings to reach an advanced stage. The Court of Appeal also found that Sun could not meaningfully participate in the Maldivian Appeal without seeking to support the March Judgment and seemingly flouting the Injunctive Order at the same time.

19        The Court of Appeal upheld the declarations. The discretion should be exercised in favour of granting the declarations because the declarations had real value: they might be used as a persuasive tool in proceedings in the Maldives. The first declaration reiterated s 19B(1) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) and confirms the finality, validity and binding nature of the Awards. The second declaration would signify that Sun had breached the arbitration agreements by instituting civil proceedings in the Maldivian courts when arbitration awards on the same dispute had already been issued.

This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.

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