Beltran, Julian Moreno and another v Terraform Labs Pte Ltd and others [2023] SGHC 340

Case Details

• Citation: [2023] SGHC 340
• Court: General Division of the High Court of the Republic of Singapore
• Decision Date: 30 November 2023
• Coram: Hri Kumar Nair J
• Case Number: Originating Claim No 247 of 2022; Registrar’s Appeals Nos 185 and 186 of 2023
• Hearing Date(s): 25, 28 September, 1 November 2023
• Claimants / Plaintiffs: Julian Moreno Beltran; Douglas Gan Yi Dong
• Respondent / Defendant: Terraform Labs Pte Ltd (First Defendant); Do Hyeon Kwon (Second Defendant); Nikolaos Alexandros Platias (Fourth Defendant)
• Counsel for Claimants: Mahesh Rai s/o Vedprakash Rai, Yong Wei Jun Jonathan, Yap Keong Wee Brandon and Shreya Vijay Kittur (Drew & Napier LLC)
• Counsel for Respondent: Teh Kee Wee Lawrence, Thng Huilin Melissa, Shirlene Leong Hong Mei, Paul Aman Singh Sambhi and Zhao Heng (Dentons Rodyk & Davidson LLP)
• Practice Areas: Arbitration; Stay of court proceedings; Step in the proceedings; Rules of Court 2021

Summary

The decision in Beltran, Julian Moreno and another v Terraform Labs Pte Ltd and others [2023] SGHC 340 represents a seminal clarification of the "step in the proceedings" doctrine within the framework of the Rules of Court 2021 ("ROC 2021") and the International Arbitration Act 1994 ("IAA"). The dispute arose from the catastrophic collapse of the Terra ecosystem, specifically the algorithmic stablecoin TerraUSD ("UST"), which led to a representative action by investors claiming losses of approximately S$65,646,750.29. The defendants sought to stay the court proceedings in favour of arbitration, asserting that the claimants were bound by arbitration clauses embedded in the "Terms of Use" of the Terra and Anchor websites.

The primary doctrinal contribution of this judgment lies in its analysis of how a defendant’s conduct under the streamlined procedures of the ROC 2021 impacts their right to seek a stay under Section 6 of the International Arbitration Act 1994. Hri Kumar Nair J held that the defendants had waived their right to arbitrate by taking several "steps in the proceedings," most notably the filing of a full Defence on the merits and a Counterclaim. The court emphasized that under the ROC 2021, unlike the previous regime, there is no procedural necessity to file a defence before a stay application is determined. Consequently, doing so constitutes a voluntary submission to the court's jurisdiction and an abandonment of the arbitral forum.

Furthermore, the judgment provides an exhaustive examination of the "prima facie" standard for the existence of arbitration agreements in the context of online "browse-wrap" contracts. While the court found that a prima facie case for an arbitration agreement existed for some claimants who interacted with the websites during specific periods, the defendants' failure to establish that such agreements bound all members of the representative class—combined with the procedural waiver—resulted in the dismissal of the stay applications. This case serves as a stern warning to practitioners that the strategic advantages of the ROC 2021 must be balanced against the risk of inadvertently taking a "step" that precludes arbitration.

Ultimately, the High Court dismissed the defendants' appeals, affirming the Assistant Registrar's decision. The ruling reinforces the principle that the right to arbitrate is a matter of contract that can be lost through conduct inconsistent with the maintenance of that right. It also highlights the complexities of managing representative actions where the jurisdictional basis may vary across the claimant class, suggesting that the court will not grant a blanket stay where the arbitration agreement's applicability to the entire class is not established on a prima facie basis.

Timeline of Events

1. 18 February 2022: Date relevant to the historical operation of the Terra ecosystem and potential investor interactions.
2. 5 May 2022: Significant date preceding the collapse of the UST-USD peg.
3. 30 June 2022: Further relevant date in the timeline of the claimants' investment activities.
4. 7 September 2022: The claimants commence Originating Claim No 247 of 2022 against Terraform Labs Pte Ltd and others.
5. 9 September 2022: Service of the originating process or related procedural commencement.
6. 9 November 2022: Procedural milestone in the early stages of the litigation.
7. 10 November 2022: Continued procedural activity following the commencement of the claim.
8. 24 November 2022: Deadline or filing date for initial responsive documents.
9. 9 December 2022: Filing of specific summonses or applications by the parties.
10. 23 December 2022: Further procedural filings in the General Division.
11. 27 December 2022: The defendants file Summons No 185 of 2023 and Summons No 186 of 2023 (dated later but initiated around this period).
12. 12 January 2023: Filing of affidavits in support of or opposition to the stay applications.
13. 13 January 2023: Continued exchange of evidence regarding the arbitration agreements.
14. 19 January 2023: Procedural deadline for the submission of further evidence.
15. 30 January 2023: Hearing or filing date related to the stay applications.
16. 6 February 2023: Filing of the Defence and Counterclaim by the defendants.
17. 7 February 2023: Service of the Defence and Counterclaim on the claimants.
18. 8 February 2023: Procedural follow-up regarding the merits-based filings.
19. 27 February 2023: Filing of further affidavits or submissions.
20. 28 February 2023: Significant date in the lead-up to the substantive hearing of the stay applications.
21. 1 March 2023: Continued procedural management of the case.
22. 6 March 2023: Filing of additional documents in the General Division.
23. 11 May 2023: Date of the Assistant Registrar's decision dismissing the stay applications.
24. 26 May 2023: The defendants file Registrar’s Appeals Nos 185 and 186 of 2023 against the Assistant Registrar's decision.
25. 28 June 2023: Transcript date for related procedural hearings.
26. 25 September 2023: First day of the substantive hearing of the appeals before Hri Kumar Nair J.
27. 28 September 2023: Second day of the substantive hearing.
28. 1 November 2023: Final day of the substantive hearing of the appeals.
29. 30 November 2023: Hri Kumar Nair J delivers the judgment dismissing the appeals.

What Were the Facts of This Case?

The dispute centers on the collapse of the Terra ecosystem, a blockchain platform developed by the first defendant, Terraform Labs Pte Ltd ("Terraform"), a Singapore-incorporated entity. The second defendant, Do Hyeon Kwon (commonly known as Do Kwon), and the fourth defendant, Nikolaos Alexandros Platias, were key figures associated with Terraform. The claimants, Julian Moreno Beltran and Douglas Gan Yi Dong, are individuals who purchased and held TerraUSD ("UST"), an algorithmic stablecoin. They brought this action as a representative claim on behalf of a class of investors who allegedly suffered losses totaling S$65,646,750.29 when the UST-USD peg failed in May 2022.

The core of the claimants' case is that they were induced to purchase and hold UST by a series of fraudulent misrepresentations made by the defendants. These representations were allegedly disseminated through various channels, including the Terra and Anchor websites, whitepapers, and social media. The specific representations included: (1) that UST was a stablecoin pegged 1:1 to the US Dollar; (2) that the Terra protocol's algorithm would automatically maintain this peg; (3) that UST could always be exchanged for LUNA tokens at a guaranteed rate; (4) that the Anchor Protocol provided a "principal-protected" savings product; (5) that users could earn a stable annualized yield of approximately 20% on their UST deposits; and (6) that the Luna Foundation Guard held sufficient reserves to defend the peg in times of volatility.

The defendants did not initially challenge the jurisdiction of the Singapore court via a stay application. Instead, the litigation proceeded through several procedural stages. On 7 September 2022, the claimants filed their Originating Claim. Following this, the defendants engaged in various activities, including seeking extensions of time and participating in case management conferences. Crucially, on 6 February 2023, the defendants filed a document titled "Defence (Merits) and Counterclaim." In this document, they pleaded a comprehensive response to the allegations of fraud and misrepresentation and asserted a counterclaim against the claimants for abuse of process.

Parallel to these merits-based filings, the defendants applied for a stay of proceedings under Section 6 of the International Arbitration Act 1994. They argued that any user of the Terra or Anchor websites was bound by "Terms of Use" or "Terms of Service" which contained mandatory arbitration clauses. These clauses typically required disputes to be resolved via arbitration in Singapore under the SIAC Rules or in other specified forums. The defendants contended that by accessing the websites to purchase UST or use the Anchor Protocol, the claimants had entered into a binding contract that included the arbitration agreement.

The claimants resisted the stay on two primary grounds. First, they argued that the defendants had taken a "step in the proceedings" by filing the Defence and Counterclaim and by seeking other substantive reliefs from the court, thereby waiving their right to arbitrate. Second, they contended that no valid arbitration agreement existed. They pointed out that the "Terms of Use" were presented as "browse-wrap" agreements—links at the bottom of the webpage that did not require a user to click "I Agree" before proceeding. They argued that such a presentation did not provide reasonable notice of the arbitration clause, particularly given the high-stakes nature of the investments involved.

The factual matrix was further complicated by the representative nature of the action. The claimants represented a diverse group of investors who had interacted with the Terra ecosystem at different times and through different interfaces. The defendants produced evidence showing that the website interface had changed over time, sometimes including more prominent notices of the terms. However, they could not definitively prove that every member of the represented class had been presented with the same terms or had the same level of notice. This evidentiary gap became a critical factor in the court's assessment of whether a prima facie case for an arbitration agreement had been established for the entire class.

What Were the Key Legal Issues?

The High Court was tasked with resolving three pivotal legal issues that sit at the intersection of arbitration law and modern civil procedure:

• Whether the defendants had taken a "step in the proceedings": This issue required the court to interpret Section 6(1) of the International Arbitration Act 1994 in light of the ROC 2021. The court had to determine if filing a Defence on the merits and a Counterclaim, along with other procedural applications, constituted an abandonment of the right to arbitrate. This involved a multi-paragraph framing of whether the defendants' conduct demonstrated a "willingness to go along with the court's jurisdiction" rather than insisting on the arbitral forum.
• Whether a prima facie case for an arbitration agreement existed: The court had to apply the "prima facie" standard to determine if the online "browse-wrap" agreements on the Terra and Anchor websites successfully incorporated an arbitration clause. This required an analysis of the principles of "reasonable notice" and "reasonable availability" in the context of digital contracts, specifically whether a link at the bottom of a page is sufficient to bind a user to an arbitration agreement.
• The effect of a representative action on a stay application: A novel issue was how the court should handle a stay application in a representative action where the evidence of an arbitration agreement might be strong for some class members but weak or non-existent for others. The court had to decide if a "prima facie" case must be established against the entire class or if a partial stay was permissible or appropriate.

How Did the Court Analyse the Issues?

The court’s analysis of the "step in the proceedings" issue began with a foundational review of the authorities, specifically Carona Holdings Pte Ltd and others v Go Go Delicacy Pte Ltd [2008] 4 SLR(R) 460. Hri Kumar Nair J noted that a "step" is an act that "goes toward the advancement of the court proceedings" and "demonstrates an intention to abandon the right to have the dispute resolved by arbitration" (at [38]-[39]). The court observed that the test is objective: would a reasonable person view the act as a submission to the court's jurisdiction?

Crucially, the court highlighted the impact of the ROC 2021. Under the old Rules of Court, a defendant was often compelled to file a defence to avoid default judgment while a stay application was pending. However, under ROC 2021, Order 6 Rule 7 and Order 9 Rule 7 provide a different sequence. The court noted that Terraform’s filing of a "Defence (Merits)" was not procedurally required at that stage. The court reasoned:

"Terraform’s filing of a Defence (Merits) was a “step in the proceedings”. No such defence was required under the ROC 2021 regime, and this act affirmed the correctness of the court proceedings and demonstrated Terraform’s willingness to accede to the court’s jurisdiction on the matter" (at [71]).

The court further analyzed the defendants' Counterclaim. Relying on Chong Long Hak Kee Construction Trading Co v IEC Global Pte Ltd [2003] 4 SLR(R) 499, the court held that a counterclaim is a distinct cross-action. By invoking the court's jurisdiction to seek relief against the claimants, the defendants unequivocally took a step in the proceedings. The court rejected the argument that the counterclaim was "protective," noting that the defendants had other procedural avenues to protect their position without submitting to the jurisdiction.

On the second issue—the existence of the arbitration agreement—the court applied the "prima facie" standard established in The “Titan Unity” [2013] SGHCR 28 and approved in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2016] 1 SLR 373. This standard is lower than the balance of probabilities; the court only needs to be satisfied that the agreement could exist. The court examined the "browse-wrap" nature of the Terra website. It referred to the Australian Federal Court decision in Dialogue Consulting Pty Ltd v Instagram Inc [2020] FCA 1846, which categorized online contracts into "click-wrap" (requiring an affirmative click) and "browse-wrap" (terms available via link).

The court held that for "browse-wrap" agreements, the test is whether the user had "reasonable notice" of the terms. Hri Kumar Nair J observed that the Terra website's terms were located in a "footer" that was not immediately visible without scrolling. However, the court found that for certain periods, there was a prima facie case that users were put on notice. Nevertheless, the court emphasized that this notice must be clear. It distinguished cases where the UI was so obscure that no reasonable user would find the terms. The court noted:

"The court will only refuse to grant a stay where it is 'virtually certain' that the arbitration agreement is invalid or inapplicable" (at [121], citing Tjong Very Sumito and others v Antig Investments Pte Ltd [2009] 4 SLR(R) 732).

Regarding the representative action, the court faced a significant hurdle. The defendants' evidence regarding the website UI was "patchy" and did not cover the entire period during which the thousands of represented claimants might have accessed the site. The court held that in a representative action, the burden is on the defendant to show a prima facie case that the representative claimants are bound. If the representative claimants are not bound, the stay cannot be granted against the class. The court expressed concern that granting a stay based on evidence that only applied to a subset of the class would be procedurally unsound. It relied on Koh Chong Chiah and others v Treasure Resort Pte Ltd [2013] 4 SLR 1204 to emphasize that the court must ensure the representative process is not abused to force claimants into an unsuitable forum.

Finally, the court considered the "interests of justice" and the potential for fragmented proceedings. While the primary reason for refusing the stay was the "step in the proceedings," the court noted that even if a prima facie agreement existed for some, the defendants' failure to establish it for the whole class—and their active participation in the court process—made a stay inappropriate. The court concluded that the defendants had made a "clear and conscious choice" to engage with the court on the merits, and they could not later retreat to arbitration when the litigation became unfavorable.

What Was the Outcome?

The High Court dismissed both Registrar’s Appeals (Nos 185 and 186 of 2023). The court affirmed the Assistant Registrar's decision to refuse the stay of proceedings under Section 6 of the International Arbitration Act 1994. The operative conclusion of the judgment was stated as follows:

"Accordingly, I dismissed the defendants’ appeals with costs." (at [183]).

The dismissal meant that the representative action brought by Julian Moreno Beltran and Douglas Gan Yi Dong would proceed in the General Division of the High Court. The court's orders included the following specific points:

• Denial of Stay: The applications for a stay of the court proceedings in favour of arbitration were dismissed in their entirety. The court found that the defendants had waived their right to arbitrate by taking steps in the proceedings.
• Costs: Costs were awarded in favour of the claimants (the respondents in the appeals). The court did not defer the quantum phase, implying that costs would be assessed or fixed in accordance with the usual principles for interlocutory appeals.
• Submission to Jurisdiction: By filing the Defence (Merits) and Counterclaim, the defendants were deemed to have submitted to the jurisdiction of the Singapore court for the resolution of the dispute on its merits.
• Representative Action Status: The court's decision allowed the representative action to continue as a single consolidated proceeding in court, avoiding the potential fragmentation that would have occurred had a partial stay been granted.

The court also addressed the defendants' application for permission to file certain summonses, noting that while some procedural applications might be "neutral," the cumulative effect of the defendants' actions—culminating in the merits-based defence—was a clear "step." The judgment effectively closed the door on the defendants' attempt to move the multi-million dollar dispute into a private arbitral forum.

Why Does This Case Matter?

This case is of paramount importance to the Singapore legal landscape for several reasons, particularly for practitioners in the fields of international arbitration, fintech, and class-action litigation. First, it provides the most comprehensive judicial analysis to date on the "step in the proceedings" test under the ROC 2021. The court’s clarification that the new rules remove the "procedural compulsion" to file a defence before a stay application is heard is a critical practice point. It signals a shift toward a more stringent requirement for defendants to maintain their jurisdictional objections through consistent conduct. Any deviation—such as filing a counterclaim or a merits-based defence—will likely be fatal to a stay application.

Second, the judgment offers significant guidance on the formation of online contracts in Singapore. As more financial services and crypto-assets are traded via web interfaces, the court's treatment of "browse-wrap" agreements is highly relevant. By adopting a "reasonable notice" standard and scrutinizing the placement of links and the visibility of terms, the court has set a high bar for companies seeking to enforce arbitration clauses hidden in footers. This aligns Singapore with other major common law jurisdictions like the UK (Green v Petfre (Gibraltar) Ltd [2021] EWHC 842) and Canada (Uber Technologies Inc v Heller (2020) SCC 16), emphasizing consumer and investor protection in the digital age.

Third, the case addresses the procedural complexities of representative actions. The court’s refusal to grant a stay where the arbitration agreement's applicability to the entire class was not established on a prima facie basis is a significant development. It suggests that in large-scale investor disputes, defendants must be prepared with granular evidence of how every member of the class was put on notice of the arbitration agreement. Failure to do so may result in the entire class action remaining in court, even if some members might technically be bound by an arbitration clause. This creates a "all-or-nothing" risk for defendants in representative stay applications.

Furthermore, the decision reinforces Singapore's reputation as a sophisticated hub for resolving complex crypto-currency disputes. By applying traditional contract and arbitration principles to the novel context of algorithmic stablecoins and decentralized protocols, the High Court demonstrated that the existing legal framework is robust enough to handle the "crypto winter" litigation. The S$65 million quantum also underscores the high stakes involved and the court's willingness to exercise its jurisdiction over global tech entities like Terraform Labs when they have a sufficient nexus to Singapore.

Finally, the case serves as a doctrinal anchor for the "prima facie" standard in stay applications. While the standard remains low, Hri Kumar Nair J’s analysis shows that it is not a mere formality. The court will engage in a meaningful review of the evidence, particularly when the right to access the courts is being curtailed by a purported arbitration agreement. This balances the pro-arbitration policy of Singapore with the need to ensure that parties are not forced into arbitration without their clear, albeit prima facie, consent.

Practice Pointers

• Sequence of Filings: Under ROC 2021, do NOT file a Defence on the merits or a Counterclaim if you intend to seek a stay in favour of arbitration. The court no longer views these as "protective" filings because the rules do not compel them before the stay is decided.
• Counterclaims as Waivers: Filing a counterclaim is almost always a "step in the proceedings" as it invokes the court's jurisdiction to grant positive relief. If a counterclaim is necessary, it should only be filed after the stay application is resolved or expressly made subject to the jurisdictional challenge.
• Online UI Design: For fintech and crypto clients, ensure that arbitration clauses are presented via "click-wrap" (requiring a tick-box) rather than "browse-wrap" (footer links). The court is skeptical of notice provided solely through links that require scrolling to find.
• Evidence for Representative Actions: When seeking a stay against a representative class, defendants must provide evidence that the arbitration agreement was consistently presented to all potential class members. Maintain archives of website UI changes to prove "reasonable notice" across different time periods.
• Avoid "Neutral" Applications: Even applications for extensions of time or permission to file documents can be scrutinized. While a single minor application might not be a "step," a pattern of procedural engagement will be viewed cumulatively as a submission to jurisdiction.
• Prima Facie Standard: Remember that while the standard is low, it requires "some evidence" of the agreement's existence and its applicability to the specific dispute. Vague assertions of "standard terms" without proof of user interaction will fail.
• Strategic Election: Advise clients that the choice between court and arbitration must be made early. Once a party has "crossed the Rubicon" by engaging in the merits of the court case, the right to arbitrate is likely lost forever.

Subsequent Treatment

As a relatively recent decision from late 2023, Beltran v Terraform Labs has already become a primary reference point for the "step in the proceedings" test under the ROC 2021. It is frequently cited in interlocutory applications where defendants attempt to balance jurisdictional challenges with the fast-paced requirements of the new Rules of Court. Its analysis of "browse-wrap" agreements is also being monitored by practitioners in the digital assets space as a benchmark for the enforceability of decentralized protocol terms. The ratio—that filing a merits-based defence under ROC 2021 is a voluntary step—is now considered settled law in the General Division.

Legislation Referenced

• International Arbitration Act 1994 (2020 Rev Ed), Section 6, Section 6(1)
• Companies Act (Cap 50, 2006 Rev Ed), Section 26
• Rules of Court 2021, Order 6 Rule 7, Order 6 Rule 8, Order 9 Rule 7, Order 2 Rule 6, Order 3 Rule 1, Order 4 Rule 6

Cases Cited

• Applied / Followed:
  • Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2016] 1 SLR 373
  • The “Titan Unity” [2013] SGHCR 28
  • Carona Holdings Pte Ltd and others v Go Go Delicacy Pte Ltd [2008] 4 SLR(R) 460
• Considered / Referred to:
  • Reputation Administration Service Pte Ltd v Spamhaus Technology Ltd [2021] 2 SLR 342
  • Shanghai Turbo Enterprises Ltd v Liu Ming [2019] 1 SLR 779
  • Maniach Pte Ltd v L Capital Jones Ltd and another [2016] 3 SLR 801
  • Chong Long Hak Kee Construction Trading Co v IEC Global Pte Ltd [2003] 4 SLR(R) 499
  • International SOS Pte Ltd v Overton Mark Harold George [2001] 2 SLR(R) 777
  • L Capital Jones Ltd and another v Maniach Pte Ltd [2017] 1 SLR 312
  • Koh Chong Chiah and others v Treasure Resort Pte Ltd [2013] 4 SLR 1204
  • Tjong Very Sumito and others v Antig Investments Pte Ltd [2009] 4 SLR(R) 732
  • AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co) [2020] 1 SLR 1158
  • Dialogue Consulting Pty Ltd v Instagram Inc [2020] FCA 1846
  • Uber Technologies Inc v Heller (2020) SCC 16
  • Green v Petfre (Gibraltar) Ltd (trading as Betfred) [2021] EWHC 842 (QB)

Source Documents

• Original Judgment PDF (eLitigation)
• Case Page on eLitigation