In <span class="news-text_italic-underline">Low Jun Hong and others v Hong Qi Yu and another [2026] SGHCR 11</span>, the General Division of the Singapore High Court dismissed applications by the former management of a digital asset trading exchange to stay court proceedings in favour of arbitration. The Court held that, as non-parties to the customer service agreement, the defendants could not rely on the arbitration clause under either section 9(1) or section 9(2) of T<span class="news-text_italic-underline">he Contracts (Rights of Third Parties) Act 2001</span>. The decision offers important guidance on the scope of third-party rights to invoke arbitration clauses under Singapore law.
The General Division of the Singapore High Court has dismissed two applications brought by former members of the management of a digital asset trading exchange seeking a stay of court proceedings in favour of arbitration. The exchange's founder had been charged with fraudulent trading and the operating company was later wound up. Acting on behalf of 272 customers, the claimants brought a representative action in court against the founder and his wife, alleging fraudulent misrepresentation and conspiracy.
The defendants sought a stay of those proceedings in favour of arbitration pursuant to the customer service agreement (“<span class="news-text_medium">CSA</span>”) governing the relationship between the exchange and its customers. The CSA contained exclusion of liability clauses, as well as a right of indemnity in favour of the company, its directors, employees and agents.
The defendants relied principally on section 9(1) of <span class="news-text_italic-underline">The Contracts (Rights of Third Parties) Act 2001</span> (“<span class="news-text_medium">CRTPA</span>”), which permits a third party to enforce an arbitration clause where the contract expressly entitles that third party to enforce a substantive contractual term, or where the third party is conferred a benefit by such a term.
The Court applied the approach set out in <span class="news-text_italic-underline">Fortress Value Recovery Fund I LLC v Blue Skye Special Opportunities Fund LP [2013] 1 WLR 3466</span>, a decision cited with approval by the Singapore Court of Appeal in <span class="news-text_italic-underline">VKC v VJZ [2021] 2 SLR 753</span> in the context of exclusive jurisdiction clauses and drew a clear distinction between a third party seeking to enforce a substantive contractual right and a third party seeking merely to rely on a contractual term by way of defence.
Where a third party seeks to enforce a substantive contractual term in its own right (for example, an indemnity), section 9(1) requires that party to pursue that claim through arbitration if the relevant term is subject to an arbitration clause. However, where a third party merely relies on a contractual term as a defence (for example, an exclusion clause), section 9(1) does not convert that procedural qualification into a positive procedural right to insist on arbitration. On this basis, the defendants' attempt to rely on section 9(1) in support of their exclusion clause defence was rejected.
The defendants advanced a further argument, contending that they were entitled, at least on a prima facie level, to rely on the indemnity clause in the CSA, on the basis that the claimants had breached the agreement by commencing proceedings despite having agreed to bear all risk of loss in the value of their digital assets. The Court was not persuaded that this was a sufficiently developed or viable indemnity claim. It noted that the argument had been advanced belatedly, framed in highly tentative language and was unsupported by any evidence of a genuine intention to pursue such a claim. The Court noted in particular that the point had not been properly evidenced in the supporting affidavit, had been raised only in submissions and, further, concerned a loss that had not yet crystallised.
The Court also rejected the defendants' alternative argument under section 9(2) of the CRTPA. On a proper construction of the CSA, the agreement did not entitle the defendants to enforce the arbitration clause in respect of the particular category of dispute at issue.
This decision provides valuable guidance on the proper application of sections 9(1) and 9(2) of the CRTPA in the context of third parties seeking to invoke arbitration clauses. In particular, it clarifies that a non-party relying on a contractual provision purely as a defence, rather than seeking to enforce a substantive right, cannot use that reliance as a basis for compelling arbitration. Parties drafting commercial agreements governed by Singapore law, particularly those involving multi-party structures or platforms with third-party beneficiary provisions, should have careful regard to this distinction.
The decision is also a reminder that clear contractual language is required before a third party will be treated as having a procedural right to insist on arbitration. A carve-out recognising that certain third parties enjoy some contractual benefits is not enough, without more, to give them the benefit of the arbitration clause itself.
<span class="news-text_medium">Case:</span> <span class="news-text_italic-underline">Low Jun Hong and others v Hong Qi Yu and another [2026] SGHCR 11</span> (10 April 2026, DR Teo Guan Siew)
