AJU v AJT

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 22 August 2011
• Neutral Citation: [2011] SGCA 41
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 125 of 2010
• Published date: 10 October 2011
• Year: 2011
• Hearing Date: 29 November 2010
• Plaintiff Counsel: Chua Sui Tong, Edwin Cheng and Daniel Tan Zi Yan (WongPartnership LLP)
• Defendant Counsel: Dinesh Dhillon, Tay Yong Seng, Felicia Tan, Indulekha Crystal Chitran and Joel Lim Junwei (Allen & Gledhill LLP)
• Subject Matter: Arbitration
• Citation: [2011] SGCA 41

Chan Sek Keong CJ (delivering the judgment of the court): Introduction

This is an appeal by the appellant, [AJU] (“the Appellant”), against the decision of the High Court judge (“the Judge”) in Originating Summons No 230 of 2010 (“OS 230/2010”) setting aside an interim award dated 1 December 2009 issued in its favour (“the Interim Award”) by an arbitral tribunal (“the Tribunal”) in Arbitration No 86 of 2006 (“the Arbitration”), an arbitration held under the auspices of the Singapore International Arbitration Centre (“the SIAC”), on the ground that the Interim Award was contrary to the public policy of Singapore (see AJT v AJU [2010] 4 SLR 649 (“the HC Judgment”)).

The Interim Award was made in relation to a dispute between the Appellant and the respondent, [AJT] (“the Respondent”), as to the validity of an agreement entered into on 4 February 2008 between the Appellant on the one part and the Respondent, its sole shareholder and director (“[O]”) and two companies associated with [O] (viz, “[P]” and “[Q]”) on the other part.¹ Under this agreement (“the Concluding Agreement”), which was governed by Singapore law, upon the fulfilment of certain specified conditions, the Respondent was to terminate the Arbitration, which had been commenced by it against the Appellant.

In the Arbitration, the Respondent had alleged, inter alia, that the Concluding Agreement was illegal because it was: (a) an agreement between the parties to stifle the prosecution in Thailand of forgery and the use of a forged document; (b) contrary to the law of Thailand; and (c) accordingly, contrary to public policy both in Thailand and in Singapore. The Tribunal rejected the Respondent’s argument and decided in the Interim Award that the Concluding Agreement was valid and enforceable. On the Respondent’s application (in OS 230/2010) to set aside the Interim Award, the Judge rejected the Tribunal’s findings and held that the Concluding Agreement was an agreement to stifle the prosecution in Thailand of the aforesaid offences, which were non-compoundable under Thai law, and was illegal both under its governing law (viz, Singapore law) and the law of the place of performance (viz, Thai law). The Judge accordingly set aside the Interim Award under Art 34(2)(b)(ii) of the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”) set out in the First Schedule to the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”).

The Appellant has appealed to this court against the Judge’s decision on the ground that the Judge erred in law in rejecting the Tribunal’s findings and setting aside the Interim Award in the circumstances of this case, and thereby failed to give effect to the principle of finality applicable to arbitral awards.

Background facts The events leading to the Concluding Agreement

The material facts as set out in the Interim Award are as follows. The Arbitration concerned claims brought by the Respondent against the Appellant in respect of an agreement dated 16 July 2003 entered into between [P] and the Appellant (“the Contract”),² which enabled the latter to stage an annual tennis tournament in Bangkok (“the Tennis Tournament”) for a term of five years from 2003 to 2007. Clause 23 of the Contract³ provided that the agreement should be construed and given effect in accordance with the laws of Hong Kong, and that any disputes should be settled by arbitration in Singapore under the rules of arbitration of the United Nations Commission on International Trade Law then in force (“the UNCITRAL Arbitration Rules”). Consequent to disputes arising under the Contract, the Respondent (as the assignee of [P]’s rights under the Contract) served a notice of arbitration on the Appellant by way of a letter dated 21 August 2006. The Tribunal was duly convened and the parties were notified of its constitution on 16 January 2007.

On 21 November 2006, approximately three months after it was served with the notice of arbitration, the Appellant made a complaint of fraud (“the Complaint”) to the Special Prosecutor’s Office of Thailand (“the Thai prosecution authority”) against [O], [P] and [Q]. The Complaint alleged that [O], [P] and [Q] had induced the Appellant to sign the Contract by fraudulently representing that [Q] had the right to organise the Tennis Tournament for five years when it had the right to do so for only three years⁴ ([Q] was the party which had originally been granted the right to organise the Tennis Tournament, but, at [O]’s request, [P] was used instead as the contracting party for the Contract). Together with the Complaint, a forged document purporting to be an agreement by which one [R] Ltd granted [Q] the right to organise the Tennis Tournament for a five-year period from 2003 onwards was forwarded to the Thai prosecution authority for investigation. Pursuant to the Complaint, the Thai prosecution authority commenced investigations against [O], [P] and [Q] on charges of joint fraud, joint forgery and the use of a forged document. For ease of reference, the charge of joint fraud will hereafter be termed “the Fraud Charge”; the charges of joint forgery and the use of a forged document will be termed “the Forgery Charges”; and the charges taken collectively will be termed “the Charges”. It is common ground that under Thai law, fraud is a compoundable offence, whereas forgery and the use of a forged document are non-compoundable offences.

While the investigations in Thailand into the Charges (“the Thai criminal proceedings”) were ongoing, the Appellant, the Respondent, [O], [P] and [Q] negotiated a settlement that led (as mentioned at [2] above) to the signing of the Concluding Agreement on 4 February 2008 between the Appellant on the one part and the Respondent, [O], [P] and [Q] on the other part. The Concluding Agreement provided, inter alia, as follows: Clause 1 stated that:⁵

In this Agreement, the Closing Date hereof shall be the date that [the Appellant] has received the evidence of withdrawal and/or discontinuation and/or termination of all the Criminal Proceedings … from the public prosecutor [ie, the Thai prosecution authority] or other applicable judicial or government office or official (as the case may be).

The expression “the Criminal Proceedings” was defined in the same clause as, in essence, the Thai criminal proceedings. Clause 3 stated that:⁶

The Agreed Final Settlement Amount [defined in cl 2 as the sum of US$470,000], subject to the other terms and conditions of this Agreement, shall be paid for value on the Closing Date to [the Respondent]’s designated bank account …

Clause 5.3(i) stated that on the closing date as defined in cl 1 (“the Closing Date”), subject to the Respondent’s receipt of the agreed settlement amount of US$470,000 (“the Agreed Final Settlement Amount”), each party to the Concluding Agreement was to:⁷

… take all such steps as are necessary or desirable to simultaneously and irrevocably terminate, withdraw and discontinue all actions, claims and counterclaims as applicable to the respective Parties in the Proceedings [ie, the Arbitration, for the purposes of the present appeal] and in any other form of legal or other action, as well as to vacate any judgments, awards, or enforcements that may have been issued or are subsequently issued …

Clause 8 stated that all the claims between the Appellant on the one part and the Respondent, [O], [P] and [Q] on the other part would be deemed to have been fully settled. The events following the Concluding Agreement

On 7 February 2008, a few days after the Concluding Agreement was signed, the Appellant withdrew the Complaint which it had made to the Thai prosecution authority.⁸ This led the Thai prosecution authority to write a letter dated 7 March 2008 to the Appellant stating that it had decided to issue the following: “a cessation order not to prosecute the three alleged offenders [ie, [O], [P] and [Q]] with respect to the charges of the joint fraud [ie, the Fraud Charge] because the [Appellant] ha[d] withdrawn [the] [C]omplaint”;⁹ and “a non-prosecution opinion not to prosecute [[O]] … with respect to the charges of the joint forgery and use of the forged document [ie, the Forgery Charges]”.¹⁰ A copy of this letter was sent by the Appellant to the Respondent on the same day that it was issued.

Upon receipt of the letter, [O] replied on 10 March 2008 stating that the Appellant was in breach of the Concluding Agreement in failing to make payment of the Agreed Final Settlement Amount on the Closing Date (viz, 7 March 2008) as provided under cll 2 and 3 of the agreement. [O] requested the Appellant to make payment no later than 11 March 2008, which request the Appellant complied with.

On 10 June 2008, the Thai prosecution authority sent the Appellant a formal non-prosecution order in respect of the Forgery Charges against [O] (“the Non-Prosecution Order”) on the ground that “the evidence [was] not enough to prosecute”.¹¹

On 18 June 2008, the Appellant, in an effort to allay the continuing concerns of the Respondent, wrote a letter to the Respondent, [O], [P] and [Q] stating that it would not, “whether now or in the future, re-open, reinitiate, restart or otherwise proceed with any or all [of the Charges]”¹² against them. In the same letter, the Appellant requested the Respondent to withdraw and terminate the Arbitration no later than 25 June 2008.

However, [O] replied on 25 June 2008 stating that the Appellant had not complied with its obligations under the Concluding Agreement as that agreement was meant to bring an end to the Thai criminal proceedings (as defined at [7] above). [O] took the view that the Non-Prosecution Order was insufficient as the Forgery Charges could still be reactivated by the production of additional evidence from either the Appellant or any other party, even if such evidence might be false.¹³

The issue referred to...