Case Digests

COT v. COU and others and other appeals [2023] SGCA 31

Nature of Matter

 Limits of curial intervention in setting aside applications premised on the absence of a concluded contract

Case Summary

1. The Claimant in an arbitration was a producer and supplier of a valuable advanced technology industrial product (“Modules”) worldwide.
2. At the time of the arbitration, the Respondents were members of the same multinational group of companies (“MNC<>Group”).  Until 2016, the First Respondent (“Shareholding Company”) held 99.99% of the shares in the Second and Third Respondents. The Second Respondent was a special purpose vehicle incorporated for the sole reason of owing and operating an infrastructure project (“Project Company”). The Third Respondent was the engineering, procurement and construction contractor for infrastructure projects of both the MNC Group and for the infrastructure project in question (“EPC Company”).
3. The MNC Group had a procurement company responsible for the centralised sourcing for goods for MNC Group and supplying them to the members of the Group (“Procurement Company”). Such supplies made were at an intragroup markup. The procurement company was neither a party to the arbitration nor the subsequent court proceedings.
4. The Claimant supplied the Modules for the infrastructure project to the Project Company.  This was through chain contracts made between the Procurement Company and the Claimant 2015 to 2016. Under these chain contracts, the Procurement Company sold the Modules to the EPC Company. The EPC Company on-sold the Modules to the Project Company.
5. As at March 2016, there were 3 overdue invoices owing from the Procurement Company to the Claimant. This led to the Claimant suspending further deliveries of the Modules on 13 March 2016.
6. The Claimant, with representatives from the MNC Group as well as the Procurement, Shareholder, Project and EPC Companies, held negotiations between 15 to 18 March 2016 to resolve the dispute. A “non-disposal undertaking” (“NDU”) was drafted as a result. The NDU provided for the Shareholder Company to undertake to the Claimant not to dispose of its shares in the Project Company until payment for the Modules was settled. There were 4 versions of the NDU. Each version of NDU-3 contained an arbitration clause. Only the third version of the NDU (“NDU-3”) was signed by the Shareholder Company.
7. On 18 March 2016, the Claimant released the remaining goods. Partial payments were made of the for the Modules to the Claimants in March 2016 by the Procurement Company. A balance of ₴7.35m remained unpaid. The Claimants started an arbitration claim against all three Respondents in 2017 to recover the unpaid balance.
8. The Arbitral Tribunal found the Respondents liable under a partly written, partly oral “Modules Delivery Agreement” (“MDA”). It found that NDU-3 formed part of the MDA and that the Respondents had agreed to pay the Claimant for all unpaid invoices raised in respect of the Modules, in consideration of which the Claimant release the remaining Modules to allow the project to be completed. 

9. The Respondents applied to set aside the arbitral award, arguing that the Arbitral Tribunal lacked jurisdiction because there was no concluded contract and hence no binding arbitration agreement between them and the Claimant. The Respondents contended that 
   a. There was no valid arbitration agreement between the Respondent and the Claimant;
   b. The Arbitral Tribunal exceeded the scope of its jurisdiction; and 
   c. The Tribunal breached the rules of natural justice.

10. The High Court dismissed the Respondents’ setting aside applications. An appeal was made to the Court of Appeal from the High Court.

The Court of Appeal dismissed the appeal by the Respondents to the arbitration, holding that:-

1. The seat court, in discharging its supervisory role, should strive to uphold arbitral awards. It should take a "generous approach" when reviewing arbitral awards and curial intervention should be minimal, to support and not displace the arbitral process. Two principal considerations undergirded the approach:
   a. The need to uphold finality of the arbitration process to encourage the use of arbitration.
   b. The choice of arbitration meant that parties must accept both the benefits and consequences of their exercise of party autonomy. 

2. When a setting aside application is based on a jurisdictional challenge premised on the absence of a concluded contract, both the seat court and any appellate court above it, undertakes a de novo review. However, it need only concern itself with whether such a contract existed. In doing so, it would consider if the parties conducted themselves in a way which showed they considered themselves bound.

3. The seat court and the appeal court above it need not engage in a comprehensive interpretation exercise as to the terms of the contract and parties’ liability under those terms. Such questions belonged to the merits of the dispute and were to be decided by the Arbitral Tribunal.

4. The Court adopts an objective test to see if the conduct and words of the persons concerned could reasonably be construed to evince an intention to enter into a binding contract. It will consider the entire course of negotiations to determine if there was a single point in time where there was a meeting of minds.

5. On the facts, the Court of Appeal held that:
   a. The purpose of the negotiations in March 2016 which each of the Respondents had taken part in, was to reach an agreement to resolve the dispute. The resulting MDA was an agreement whereby the Claimant was persuaded to release the remaining Modules in exchange for its invoices being paid. NDU-3 was intended to be an appendage to the MDA to provide the Claimant with added assurance that the outstanding invoices would be paid.
   b. NDU-3 was worded such that the Project and EPC Companies, even though non-signatories to the NDU-3, could make payment for the unpaid Claimant invoices. Various rights and obligations pertaining to these two companies were also provided for in NDU-3. The arbitration clause in NDU-3 gave the right to the three Respondents to collectively appoint an arbitrator. Assessment of the conduct of all parties post-negotiations led to the same conclusion.
   c. Since the Respondents were the ones who wanted to enter into the MDA along with the NDU-3 as assurance, it would be disingenuous for them to disavow the existence of the MDA after causing the Claimant to release the Modules.

6. The Court of Appeal held that issues as to the authority to contract was distinct from that of the authority to enter into an arbitration agreement, with the former being for the Arbitral Tribunal to resolve. Hence, a general objection that a party’s representative has no authority to contract would not be entertained as part of a jurisdictional challenge.

7. The Court of Appeal rejected the Respondents’ argument that the Tribunal exceeded the scope of its jurisdiction by finding that the parties entered an MDA with NDU-3 appended though this contention was allegedly unpleaded. The Court rejected the argument, holding that the Claimant’s case in its arbitration notice, the terms of reference of the Tribunal (liberally interpreted) and the Statement of Claim were consistent with the point.

8. The Court of Appeal also rejected the Respondents’ argument that there was any breach of natural justice as that objection on the facts, flowed from the unsuccessful argument that the Tribunal exceeded its jurisdiction.

CVV and others v. CWB [2023] SGHC (1) 11

Nature of Matter

Breach of Natural Justice and Setting aside of Award; Tribunal’s duty to give reasons and breach of fair hearing rule

Case Summary

1. The Respondent, CWB, is an advisory firm with a focus on real estate investments. The Appellants include a fund management company, CVQ, and subsidiaries of 2 investment funds which CVQ managed.

2. Parties entered into two advisory agreements wherein the Respondent was required to provide asset advisory services to CVQ in respect of the two investment funds which it managed (the “Funds”). 

3. Disputes arose amongst the parties in respect of the unpaid fees (“Fees”) of the CWB and the same was referred to arbitration in Singapore under the auspices of the Singapore International Arbitration Centre.

4. In the arbitration, the Appellants contended that the Respondent had breached the advisory agreements. The Appellants also contended that, in respect of one of the Funds, they were not liable to pay the Respondent’s Fee as it was due and payable only if the Fund reached the end of its life.

5. In the alternative, the Appellant disputed the quantification of unpaid Fees provided by the Respondent, though it failed to provide its own calculations in this regard.

6. The Respondent filed its counterclaim seeking payment of the outstanding Fees.

7. In the arbitration, the Arbitral Tribunal (“Tribunal”) decided in favour of the Respondent and dismissed all claims of the Appellants. In the Award, the Tribunal held that the Respondent was not in breach of its obligations under the advisory agreements and was entitled to payment of its outstanding Fees.

8. Aggrieved by the Award, the Appellants filed an application under Section 24(b) of the International Arbitration Act 1994 (2020 Rev Ed) (the “IAA”) before the High Court of Singapore inter alia on the ground of breach of the rules of natural justice by the Tribunal. This application was later transferred to the Singapore International Commercial Court (“SICC”).

9. In its application before SICC, the Appellants argued that the Tribunal had:
   a. breached the rule against bias;
   b. breached the fair hearing rule by adopting a chain of reasoning that the parties had no reasonable notice it would adopt;
   c. breached the fair hearing rule by not applying its mind to the Appellants’ submissions while solely relying on calculations provided Respondent’s witness in respect of the quantification of unpaid Fees;
   d. acted irrationally and capriciously by using contradictory dates in respect of the end of life of the Funds at different points in the Award.

10. Separately, the Respondent (i.e., the Award Creditor) filed an enforcement application before the High Court of Singapore seeking permission to enforce the Award which was also transferred to SICC.

11. SICC, hearing both applications, refused to set aside the Award and inter alia held that there was no breach of the fair hearing rule by the Tribunal in rendering the Award. Accordingly, the SICC dismissed the Appellants’ application seeking a setting aside of the Award.

12. The Appellants filed the present appeal against the decision of SICC before the Singapore Court of Appeal (“SCOA”) on similar grounds and contended that the Tribunal breached the fair hearing rule by failing to apply its mind and/or to give reasons for its decision on essential issues in the Award.

13. Additionally, the Appellants contended that the Tribunal has breached the fair hearing rule as:
    a. it has failed to consider whether Respondent’s claims were awarded as a debt or as an award for damages; and
    b. the Appellants were not given reasonable notice that the Tribunal would decide on the quantum of the Fees due.

1. In its judgment, the SCOA noted that a breach of the fair hearing rule can arise from a tribunal’s failure to apply its mind to the essential issues arising from the parties’ arguments.

2. The Appellants took the position that another aspect of fairness in the proceedings is the need for the tribunal to give reasons for its decision. On the duty of an arbitral tribunal to give reasons, the SCOA made following two important observations:
   a. While Article 31(2) of the UNCITRAL Model Law on International Commercial Arbitration places the arbitral tribunal under a general duty to give reasons, it is not settled by case law as to whether a tribunal’s failure to give adequate reasons is, in itself, a reason to set aside an award;
   b. It is also not entirely settled what the content of a tribunal’s duty to give reasons is.

3. However, the SCOA refrained to settle these issues since the Appellants’ case was ultimately premised on a breach of the rules of natural justice, rather than the Tribunal’s alleged failure to give reasons. The Appellants relied on the Tribunal’s failure to give reasons as demonstrative of the fact that the Tribunal must have failed to apply its mind.

4. The SCOA further noted that the scope of a Tribunal’s duty to give reasons differs from that of a judge’s, and it is therefore inappropriate to apply standards applicable to judges in the context of arbitration proceedings as held in TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972.

5. On the issue of the tribunal’s failure to apply its mind, the SCOA held as follows:
   a. Even if the Tribunal did not refer to the Appellants’ arguments in seriatim, it is plain on the face of the Award that the Tribunal did apply its mind to the essential issues raised by the Appellants and therefore it has not breached the fair hearing rule.
   b. As far as the computation of unpaid Fees based on the Respondent’s witness’ evidence is concerned, SCOA noted that the Appellants had repeatedly refused to disclose documents which would have facilitated the calculation of the quantum of the Respondent’s unpaid Fees, or to provide any calculations of their own. Thus, devoid of any alternative calculation, the Tribunal in the Award accepted Respondent’s submission that its witness’s calculations were the best estimates of its claims, as it found that these calculations were the most cogent evidence of loss available.
   c. In the SCOA’s opinion, whether the Tribunal was correct to do so was a question on the merits and is not subject to review by the SCOA. The key point here is that once the context to the Tribunal’s reasoning is properly appreciated, it is clear that the Tribunal did apply its mind to the question of whether the conditions for payment of the Fees had been satisfied.

6. Accordingly, on this count, the SCOA concluded that there is no basis for saying that the Tribunal had breached the fair hearing rule.

7. On the issue of relevant dates for the end of life of the Funds and, in turn, the calculation of the Respondent’s Fees, the SCOA held as follows:
   a. That devoid of any alternative calculations from the Appellant, the relevant dates considered by Respondent’s witness were the best estimates available to the Tribunal.
   b. The Tribunal’s decision was therefore readily explicable on the facts and does not show that it made inconsistent findings as to the date of the end of life of the Funds, or that it otherwise failed to apply its mind to the issues at hand.

8. On the allegation that the Tribunal had failed to consider the Appellants’ objections to the calculations made by the Respondent’s witness, the SCOA held that:
   a. The point remains that the Appellants’ responses did not set out any alternative calculations of the Fees.
   b. The mere fact that the Tribunal did not expressly refer to the Appellants’ objections in the Award, does not necessarily show that it failed to apply its mind to the correct computation of the Fees.
   c. However, even if the Tribunal was mistaken in stating that the Appellants had failed to challenge the Respondent’s witnesses’ calculations, this is at most an error of fact which would not justify setting aside the award.

9. On the issue of uncertainty as to whether the Respondent’s claims were awarded as a debt or as an award for damages, the SCOA held that the Appellants had not made this argument before the Tribunal and accordingly, the fact that the Tribunal did not address this argument does not show that it failed to apply its mind to the Appellants’ case.

10. On the issue of whether the Tribunal had provided notice to the Appellants while deciding the issue of the quantum of unpaid Fees, the SCOA held that the Tribunal had invited parties to file a further round of closing submissions to quantify the Respondent’s share of Fees with precision. In response, the Appellants indeed filed a further set of closing submissions addressing, among other things, the correct quantification of Fees.

11. The SCOA therefore concluded that there is no basis for Appellants to argue that it was not given reasonable notice that the Tribunal would decide on the quantum of the Fees.

Accordingly, the SCOA held that the Tribunal did not breach the rules of natural justice, and dismissed the Appellants’ appeal. 

Nature of Matter

Confidentiality of arbitrator deliberations

Case Summary

1. The Plaintiff entered into a contract with the Defendant for supply of certain component packages which the Defendant  alleged were defective.
2. The Defendant thus invoked arbitration proceedings under the Rules of Conciliation and Arbitration of the International Chamber of Commerce (“ICC”) in Singapore.
3. The majority of the Arbitral Tribunal (“Majority”) ultimately ruled in favour of the Defendant and  issued a Final Award which found the Plaintiff is liable to the Defendant for non-performance of  contractual obligations.
4. However, the Minority arbitrator refused to sign the Final Award and instead issued a dissenting opinion raising various allegations against the Majority including “serious procedural misconduct”, “continued misstating of the record”, attempting “to conceal the true ratio decidendi from the Parties”“distortion of the deliberation history”, lack of impartiality, and knowingly stating an incorrect reason for his refusal to sign the Final Award.
5. In reliance on the dissenting opinion, the Plaintiff applied to the Singapore High Court to have the Final Award set aside under the International Arbitration Act 1994 (2020 Revised Edition) inter alia on the grounds that there was breach of natural justice, that the Majority had exceeded parties’ scope of submission to arbitration, that the agreed arbitral procedure of the parties had not been followed, and that the Final Award was against the public policy of Singapore.
6. The Plaintiff also wrote to individual arbitrators and the ICC Secretariat seeking disclosure of the records of Tribunal’s deliberations. This request was denied.
7. The Plaintiff then applied to the Singapore Court seeking production  from the arbitrators of their records of deliberations inter alia on the basis that they are relevant and material to the Plaintiff’s setting aside application. The application came before the Singapore International Commercial Court (“SICC”).
8. The issue before the SICC was whether the Arbitral Tribunal’s deliberations were protected by the implied obligation of confidentiality over arbitration proceedings.

The SICC dismissed the Plaintiff’s Production Application and held that:

1. While there is no express statutory provision on this, the confidentiality of arbitrators’ deliberations, like the confidentiality of arbitration proceedings, exists as an implied obligation in law.
2. In this regard, the default position is that arbitrators’ records of deliberations are confidential and are therefore protected against production orders.
3. The policy reasons for this default position are that:-
   1. Confidentiality is a necessary pre-requisite for frank discussion between the arbitrators;
   2. Freedom from outside scrutiny enables the arbitrators to reflect on the evidence without restriction, to draw conclusions untrammelled by any subsequent disclosure of their thought processes, and, where they are so inclined, to change these conclusions on further reflection without fear of subsequent criticism or of the need for subsequent explanation;
   3. The duty on the tribunal to keep deliberations confidential protects the tribunal from outside influence;
   4. The rule helps to minimise spurious annulment or enforcement challenges based on matters raised in deliberations or differences between the deliberations and the final award and is thereby critical to the integrity and efficacy of the whole arbitral process.
4. However, there are certain exceptions to this default position which  only apply in the very rarest of cases where:-
   1. The challenge is to what may be described as the essential process rather than the substance of the deliberations;

   2.  The facts and circumstances are such that the interests of justice in ordering the production of records of deliberations outweigh the policy reasons for protecting the confidentiality of deliberations. Such cases must involve allegations of a very serious nature which have real prospects of succeeding.

5. On the facts of the case,  the exceptions were found not to apply because:-
   1. An allegation of breach of the fair hearing rule is not sufficient per se to displace the protection of the confidentiality of deliberations. Such  allegations can be decided based on the arbitration record.

   2. The mere fact of changes  made to draft awards is not evidence of impropriety. The reasons for the Final Award were those that the Majority chose to give to justify their findings , and they stand or fall on their own merit.

   3. The SICC considered that a lack of impartiality could constitute an exception to the default position, but declined to come to a definitive conclusion on this as the Plaintiff had not shown that its allegations had any real prospects of succeeding.

Nature of Matter

Arbitration Agreement; 

Winding Up Proceedings – Standing

Case Summary

1. The Claimant, Founder Group (Hong Kong) Limited ("Founder”) was a Hong Kong based company contracted to sell and deliver copper cathodes to the Defendant Singapore JHC Co Pte Ltd (“JHC”), a Singaporean wholesale trader dealing primarily in metals and metal products.
2. The parties’ agreement for the sale of copper cathodes was governed by three contracts that each contained an arbitration clause, obliging the parties to submit any controversy or claim to the China International Economic and Trade Arbitration Commission, Beijing (“CIETAC”) for arbitration which shall be conducted in Beijing.

3. In liquidation, the liquidators of Founder took the view that JHC owed Founder US$47.43 million due to three contracts and the invoices issued to JHC under them, for the sale and purchase of copper cathodes. The sum of US$47.43 million was also consistently reflected in audited financial statements over the years 2016 to 2020. JHC disputed this debt - the liquidators of Foundersent two letters of demand to JHC which were not complied with.  

4. Despite the arbitration clauses, Founder did not institute arbitral proceedings and instead made a winding up application in the Singapore courts.

5. The Singapore High Court had to decide whether Founder had the standing of a creditor to pursue the winding up. 

The Singapore High Court dismissed Founder’s winding up application for lack of standing.

1. Where a debt is alleged to arise from a contract containing an arbitration clause, the approach to be taken in insolvency proceedings is that prescribed in the Court of Appeal case of AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co) [2020] 1 SLR 1158 (“AnAn”).
2. On the AnAn approach, the Court deems the Claimant to lack standing and will not order a winding up but instead, order a stay or dismiss the application if (Anan at [40]):
   1. There is an arbitration agreement that is prima facie valid;

   2. There is a dispute or cross claim by the debtor company that prima facie falls within the scope of the arbitration agreement; and

   3. Upon consideration of factors extraneous to the merits of the dispute in respect of the debt and any counterclaim, there has been no abuse of process by the debtor such as where the debtor had previously admitted both liability and quantum of the debt but disputes it for no reason other than the inability to pay. 

3. Where all three requirements above are met, the Court will ordinarily dismiss the winding up application unless a stay is warranted.
4. Nevertheless, the Court will stay instead of dismissing the application if (Anan at [111]):

   1. there are legitimate concerns to the solvency of the debtor company; and

   2. the debtor company has not raised any triable issues. 

5. Applying the AnAn approach, the Singapore High Court dismissed Founder’s winding up application.