Beijing Sinozonto Mining Investment Co Ltd v Goldenray Consortium (Singapore) Pte Ltd

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 14 November 2013
• Neutral Citation: [2013] SGHC 248
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 708 of 2012 (Registrar’s Appeal No 33 of 2013)
• Year: 2013
• Published date: 29 November 2013
• Hearing Date: 14 March 2013,22 July 2013
• Plaintiff Counsel: Sim Chong and Yip Wei Yen (JLC Advisors LLP)
• Defendant Counsel: Christopher Tan, Marcus Foong and Jacqueline Chua (Lee & Lee)
• Subject Matter: Arbitration,Enforcement,Foreign award,New York Convention,Grounds for refusal
• Citation: [2013] SGHC 248

Belinda Ang Saw Ean J: Introduction

Beijing Sinozonto Mining Investment Co Ltd (“BSM”), the applicant in Originating Summons No 708 of 2012 (“OS 708/2012”), successfully obtained an order on 17 August 2012 (“the August Order”) pursuant to an ex parte hearing for leave to enforce an arbitral award (“Award”) in Singapore, which Award was made under the auspices of the China International Economic and Trade Arbitration Commission (“CIETAC”) on 15 February 2012. Within the time prescribed by the August Order, Goldenray Consortium (Singapore) Pte Ltd (“Goldenray”) as the respondent in OS 708/2012 applied by way of Summons No 4709 of 2012 (“SUM 4709/2012”) to set aside the August Order, contending that the court should not give leave to enforce the Award because enforcement would be contrary to the public policy of Singapore, reliance being placed on s 31(4)(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”).

Goldenray’s application was dismissed on 21 January 2013 (“the January 2013 Order”). Goldenray’s appeal against the January 2013 Order vide Registrar’s Appeal No 33 of 2013 (“RA 33/2013”) was dismissed on 22 July 2013 as I was not persuaded that the Award was “fraud-tainted” or “corruption-tainted” such that its enforcement would be contrary to the public policy of Singapore. Goldenray’s claim that BSM procured the Award by fraud or corruption was an unavailing and unsupported assertion in the absence of cogent evidence that BSM committed a fraud that could have influenced the arbitrator’s decision. As matters stood, there was no material to make good Goldenray’s assertions.

Background facts

Sometime in April 2011, BSM and Goldenray agreed to enter into a joint investment to develop a crocodile farm in Chaoyang District, Beijing, People’s Republic of China (“PRC”) known as the Beijing Jinzhan Township Eco Village Project (“the Project”). The company involved in the Project was Beijing Goldenray Eco-Technology Development Co Ltd (“Beijing Goldenray”). Pursuant to the joint investment, BSM and Goldenray each held 45% of the shares in Beijing Goldenray, while the remaining 10% shareholding was held by the Beijing Municipality Chaoyang District Jinzhan Township Shawo Village Economic Cooperative.

The joint investment produced four agreements. They were: The Beijing Goldenray Share Transfer and Loan Agreement dated 5 April 2011 between BSM and Goldenray, with Goldenray’s director, Mr Zhang Shikeng, acting as guarantor of Goldenray. Under this agreement, BSM would, inter alia, contribute working capital in the sum of RMB45m to the joint venture. The Beijing Goldenray Share Transfer Agreement dated 15 April 2011 between BSM and Goldenray. A loan agreement dated 15 April 2011 between BSM and Beijing Goldenray. A loan agreement dated 15 April 2011 between BSM and Goldenray, with Mr Zhang Shikeng acting as guarantor of Goldenray (“the BSM/Goldenray Loan Agreement”), whereby BSM granted to Goldenray a loan of RMB50.2m secured by: a pledge of shares comprising Goldenray’s 45% shareholding in Beijing Goldenray; and a personal guarantee furnished by Goldenray’s director, Mr Zhang Shikeng. Of this loan amount of RMB50.2m, BSM agreed to disburse RMB35.2m to Beijing Goldenray before 18 April 2011, while the remaining RMB15m would be disbursed to Beijing Goldenray before 29 June 2011. Only the first sum of RMB35.2m was disbursed. Goldenray was to repay the loan of RMB35.2m after six months as well as contribute its share of the investment amounting to about RMB10m.¹ BSM later discovered that Goldenray was not in a financial position to resolve its outstanding obligations, including repayment of the RMB35.2m loan just mentioned.

Commencement of arbitration up to the Award Preliminaries and appointment of the arbitrators

Differences arose between BSM and Goldenray under the BSM/Goldenray Loan Agreement, and on 3 August 2011, BSM submitted a Request for Arbitration dated 1 August 2011 under the CIETAC rules, claiming repayment of the loan of RMB35.2m together with interest and legal fees. Prior to taking that step, BSM’s lawyer in Beijing, Mr Zhao Pan, sent Goldenray a letter of demand on 26 July 2011 that, inter alia, requested for further security to be furnished to BSM, failing which Goldenray would have to repay the loan of RMB35.2m under the BSM/Goldenray Loan Agreement.

A Notice of Arbitration (under Case No F20110372) was sent by the Secretariat of CIETAC to BSM and Goldenray on 19 August 2011 (“the Arbitration”). On 8 October 2011, Mr Xia Jun, Mdm Hu Wanru and Mr Li Yong accepted appointment as arbitrators (“Tribunal”), and a copy of the Notice of Formation of the Arbitral Tribunal and Declaration for Acceptance of Appointment signed by the arbitrators was sent to the parties on the same date. I should mention that Mr Xia Jun was appointed by BSM; Goldenray and Mr Zhang Shikeng appointed Mdm Hu Wanru. The president of the Tribunal, Mr Li Yong, was appointed by the Chairman of CIETAC.

I gathered from reading the terms of the Award that Goldenray submitted its Statement of Defence and Statement of Counterclaim to the Tribunal on 9 October 2011 and its amended Statement of Counterclaim on 22 November 2011; that the Tribunal agreed to accept and hear Goldenray’s counterclaim together with BSM’s claim; and that BSM’s Statement of Defence to the Counterclaim was submitted on 16 December 2011.

On 28 November 2011, CIETAC notified the parties that the Arbitration was fixed for hearing on 18 January 2012.

Attempts at settlement between August and October 2011

Even though BSM submitted its Request for Arbitration on 3 August 2011, the parties nevertheless held settlement discussions without suspending the arbitral process put in motion by BSM. This fact is relevant to the merits of the appeal in RA 33/2013.

Returning to the chronology and narrative of how the relevant events unfolded, Goldenray proposed to BSM on 1 August 2011 that the matter be settled amicably. On 9 August 2011, BSM proffered a draft settlement agreement for Goldenray’s consideration, which agreement touched only on the repayment of the RMB35.2m loan. Goldenray responded on 11 August 2011 with changes, most notably with a proposal to buy over BSM’s entire 45% shareholding in Beijing Goldenray.

Goldenray’s desire to buy out BSM was repeated in an amended draft settlement agreement which Goldenray sent to BSM on 9 October 2011 (“the October draft settlement agreement”). In effect, the October draft settlement agreement concerned two major proposals: (a) that Goldenray would repay BSM the RMB35.2m loan; and (b) that Goldenray would, in addition, purchase BSM’s entire stake in Beijing Goldenray for RMB45m.

BSM was agreeable in principle to the terms of the October draft settlement agreement, and, on 13 October 2011, informed Goldenray that it wanted the settlement agreement to be recorded in an arbitral award. Goldenray disagreed. On 21 November 2011, Goldenray sent a further draft settlement agreement for review but that draft did not accommodate BSM’s condition to record any executed settlement in an arbitral award; it sought, instead, the withdrawal of the Arbitration.² This omission of BSM’s condition was the deal breaker.

The Award

Both BSM and Goldenray were represented by their PRC lawyers, Mr Zhao Pan and Ms Zhang Ying respectively, at the arbitration hearing on 18 January 2012. In the course of the hearing, the Tribunal purportedly asked the PRC lawyers whether they could reach a settlement. The PRC lawyers agreed to try; negotiations on this front then began, and on the same day (viz, 18 January 2012) the PRC lawyers managed to arrive at an in-principle agreement on a settlement which they brought back to their respective clients. Following that, a draft settlement agreement was drawn up by the PRC lawyers. On 20 January 2012, the settlement agreement was signed by the PRC lawyers − Mr Zhao Pan on behalf of BSM, and Ms Zhang Ying on behalf of Goldenray and Mr Zhang Shikeng (“the January 2012 Settlement Agreement”). The recital to the January 2012 Settlement Agreement stated that:³

… [BSM, Goldenray and Mr Zhang Shikeng] agreed to conciliation for the disputes arising from the four aforesaid agreements by the Arbitral Tribunal for No. F20110372, and rendering of the arbitral award in accordance with the terms of the Settlement Agreement.

Slightly less than four weeks later, on 15 February 2012, the Tribunal issued the Award “in accordance with the terms of the … [January 2012] Settlement Agreement and Paragraph 6 of Article 40 of the Arbitration Rules [of CIETAC]”.⁴ Part III of the Award stated that:⁵

Both parties consented to conciliation by the Arbitral Tribunal for the disputes arising from the Beijing Goldenray Eco-Technology Development Co., Ltd. Share Transfer and Loan Agreement, Beijing Goldenray Eco-Technology Development Co., Ltd. Share Transfer Agreement, Loan Agreement, as well as Loan Agreement concluded between [BSM], [Goldenray], [Mr Zhang Shikeng], and third-party Goldenray Eco-Technology Development Co., Ltd. separately on April 5, 2011 and April 15, 2011.

The relevant terms of the Award were as follows:⁶ Goldenray was to pay RMB80.2m to BSM, and the latter was to transfer its 45% shareholding in Beijing Goldenray to the former. I note here that the figure of RM80.2m was derived from adding the repayment of the RMB35.2m loan to the RMB45m consideration for BSM’s 45% stake in Beijing Goldenray. Goldenray was to pay BSM according to the following schedule: RMB3m by 20 February 2012; RMB10m by 31 March 2012; RMB10m by 30 April 2012; RMB20m by 31 May 2012; and RMB37.2m by 30 June 2012. As security for payment, Goldenray would pledge its 45% shareholding in Beijing Goldenray in BSM’s favour (“the Pledge”). Upon full payment of RMB35.2m, BSM would cancel the registration of the Pledge, and upon receipt of RMB45m, transfer the shares...