Court of Appeal explains the deeming effect of Section 4(6) of the Arbitration Act

In Cheung Teck Cheong Richard and others v LVND Investments Pte Ltd [2021] SGCA 77, the Singapore Court of Appeal overturned the High Court’s decision to stay the proceedings in favour of arbitration, finding that there was no arbitration agreement. The facts of the case together with the High Court’s decision are set out in our previous update here 

To recapitulate, the agreement between the parties contained the following dispute resolution clause:

‘20A. Mediation 20A.1 The Vendor and Purchase agree that before they refer any dispute or difference relating to this Agreement to arbitration or court proceedings, they shall consider resolving the dispute or difference through mediation at the Singapore Mediation Centre in accordance with its prevailing prescribed forms, rules and procedures.

Accordingly, the Court of Appeal found that the above clause is not an arbitration agreement within the definition of s. 4(1) of the Arbitration Act, but merely an “obligation to consider mediation” and “does not confer on any party the unilateral right to commence arbitration against the other party without the concurrence of the other party, since the parties have not agreed to arbitration as the binding form of dispute settlement.” Secondly, there was no “unqualified acceptance” by the developer of the purchasers’ offers to arbitrate. Thirdly and most prominently, since there was no arbitration agreement between the parties, s. 4(6) of the Arbitration Act does not apply to deem the existence of an arbitration agreement.

S. 4(6) of the Arbitration Act states that:

“Where in any arbitral or legal proceedings, a party asserts the existence of an arbitration agreement in a pleading, statement of case or any other document in circumstances in which the assertion calls for a reply and the assertion is not denied, there shall be deemed to be an effective arbitration agreement as between the parties to the proceedings.” 

Out of the three requirements for s. 4(6) to apply, the Court of Appeal held that the threshold requirement and second requirement of the existence of an arbitration agreement were not satisfied on the facts. As such, there is no effective arbitration agreement in existence.