JULIAN MORENO BELTRAN & Anor v TERRAFORM LABS PTE. LTD. & 3 Ors

Facts

Julian Moreno Beltran and Douglas Gan Yi Dong brought a representative action, Originating Claim No 247 of 2022, on behalf of themselves and 375 others who bought the algorithmic stablecoin TerraUSD (UST) issued by Terraform Labs Pte Ltd. They sued Terraform, its co-founder Kwon Do Hyeong, Nikolaos Alexandros Platias and Luna Foundation Guard Ltd, alleging misrepresentations about UST's stability and the Anchor Protocol's yields, and claimed US$65,646,750.29 after UST's value plummeted in May 2022. The Terra and Anchor websites contained terms providing for SIAC arbitration.

Terraform filed a defence on the merits and a counterclaim, with reservations that this was not a submission to jurisdiction. When directed to file its jurisdictional challenge, it instead sought permission to file an omnibus summons seeking further particulars, production of the representative action agreements, and striking out or stay on several grounds. That summons was rejected, and Terraform later applied for a stay in favour of arbitration, with the other defendants seeking case management stays. An Assistant Registrar dismissed the stay applications, and the defendants appealed in HC/RA 185/2023 and HC/RA 186/2023.

Issues

1. Whether Terraform took a step in the proceedings under s 6(1) of the International Arbitration Act 1994 in the context of the Rules of Court 2021.
2. Whether Terraform showed a prima facie case of a valid arbitration agreement with the claimants through terms on the Terra and Anchor websites.
3. Whether a representative action may proceed where only some represented claimants may be bound by an arbitration agreement.

Holding

Hri Kumar Nair J dismissed both appeals with costs. Terraform's appeal failed because it had taken steps in the proceedings, and the other defendants' case management stays, which depended on Terraform obtaining an arbitration stay, fell with it.

Reasoning

A step in the proceedings is an act showing an intention that the court action should proceed, judged objectively and practically, as stated in Carona Holdings. Under the Rules of Court 2021, a defendant contesting jurisdiction need only file a Defence (Jurisdiction), which is not a submission to jurisdiction, and the challenge must be dealt with first. There was therefore no longer any reason to file a defence on the merits with a reservation, and reservations in pleadings are no longer relevant. Terraform's defence on the merits, and especially its counterclaim, were steps. Its omnibus summons confirmed this: some of the particulars sought went to the merits of the contract, deceit and conspiracy claims and to quantum, and the striking-out grounds and the request for the representative action agreements invited the court to exercise jurisdiction. The wording of the summons showed these were not fall-back applications to an arbitration stay.

Although this disposed of the appeals, the judge disagreed with the Assistant Registrar on the second issue. Under the low prima facie standard in Tomolugen, a stay is refused only where the arbitration clause is clearly invalid or inapplicable. Because the claimants pleaded that they read the Terra white paper and other parts of the website, it was at least arguable that they had notice of the terms of use hyperlink, which was a matter for the tribunal. Those who connected wallets on the Anchor site saw a pop-up stating that connecting meant accepting its terms, which was strong evidence of notice for later purchases.

The judge also observed that party autonomy requires the court to assess each claimant's position individually, so a representative action cannot be used to circumvent arbitration agreements. He left the wider policy questions for a future case.

From the judgment