BTN and another v BTP and another

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 16 September 2019
• Neutral Citation: [2019] SGHC 212
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 683 of 2018 and Summons No 2611 of 2018
• Year: 2019
• Published date: 19 September 2019
• Hearing Date: 30 May 2019,21 September 2018,18 March 2019
• Plaintiff Counsel: Philip Jeyaretnam, SC (instructed) and Liew Wey-Ren Colin (Colin Liew LLC)
• Defendant Counsel: Michael Hwang, SC (instructed) and Chew Kei-Jin, Yeo Chuan Tat and Tan Silin, Stephanie (Ascendant Legal LLC)
• Subject Matter: Arbitration,Arbitral Tribunal,Jurisdiction,Award,Recourse against award,Setting aside
• Citation: [2019] SGHC 212

Belinda Ang Saw Ean J: Introduction

In Originating Summons No 683 of 2018 (“OS 683”), the first and second plaintiffs, known henceforth as the Companies, characterise the partial arbitral award dated 30 April 2018 (‘the Partial Award”) as a negative jurisdictional decision and seek a review of the arbitral tribunal’s decision pursuant to s 10(3)(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (the “IAA”). In the alternative, the Companies seek to set aside the Partial Award on a multitude of grounds pursuant to s 24(b) of the IAA and Art 34(2) of the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”) as set out in the First Schedule to the IAA.

The Partial Award was a decision on the legal questions submitted to an eminent three-member tribunal (“the Tribunal”) pursuant to a list of agreed legal issues. In these circumstances, a challenge on a jurisdiction ground is surprising. At the same time, a jurisdictional challenge is not that surprising seeing how any arguments on the legal or factual mistakes made by a tribunal can be reviewed based on a de novo review of the award if the challenger succeeds on the argument that a jurisdictional ground is engaged.

The Singapore courts have time and again cautioned against the creativity of parties in crafting their arguments based on an alleged breach of natural justice (BLC and others v BLB and another [2014] 4 SLR 79 (“BLC v BLB”) at [4] and Coal & Oil Co LLC v GHCL Ltd [2015] 3 SLR 154 (“Coal & Oil”) at [3]). The same caution applies to jurisdictional challenges. A challenger may stretch the concept of jurisdiction in an attempt to shoehorn his dissatisfaction with an arbitral award into a jurisdictional challenge in order to seek a de novo review of a tribunal’s decision.

In this Judgment, the first issue to consider is the allegation that the Partial Award is a ruling on negative jurisdiction. This issue will require a close analysis of the reasoning in the Partial Award on the legal issues pertaining to the termination of the defendants’ employment, identified as the “Construction Issue” and the “Res Judicata Issue” in [20] below. This Judgment will then address the alternative grounds brought by the Companies. It will examine whether the Tribunal had failed to deal with an issue where the determination of that issue is essential to the decision reached in the Partial Award. In this context, an issue is essential where the decision cannot be justified because the particular key issue has not been decided. In this regard, this Judgment will examine whether the arguments now put forth in OS 683 had been put to the Tribunal as issues and in the same terms as are now being ventilated. I will be referring to the complaints in precise terms in due course. Suffice it to say for now that if the Tribunal had dealt with the issue put to it, that is the end of the review for it does not matter for the purposes of s 24(b) of the IAA and Art 34(2) of Model Law that the Tribunal had dealt with it wrongly. The central tenor of the Companies’ case is that they were deprived of the opportunity to present their case in defence to a US$35m claim. This Judgement will examine the facts leading to this deprivation that the Companies complain of to decide whether the circumstances call for an exercise of the court’s power to review the Tribunal’s decision under s 10(3) or to set aside the Partial Award.

Background facts Sale of the second plaintiff by the defendants to the first plaintiff

The defendants were the owners of a group of companies (“the Group”), of which the second plaintiff, BTO, is the principal holding company. BTO is an online travel agency incorporated in Malaysia. On 26 September 2012, the defendants, along with two other owners of the Group entered into a Share and Purchase Agreement (“the SPA”) with the first plaintiff, BTN. BTN is a publicly listed company, incorporated in Mauritius. Pursuant to the SPA, BTN acquired 100% ownership and control of the Group on both the shareholder and board level.

The consideration for the acquisition was made up of two elements: the Guaranteed Minimum Consideration of US$25m and the Earn Out Consideration. The latter element depended on the financial performance of the Group in financial years 2013, 2014 and 2015, calibrated based on the different levels of Earn Out Targets for each financial year as specified in the SPA, up to a maximum amount of US$35m.

The SPA also stipulated that the defendants had to be employed by BTO. The employments of the defendants (“the Employees”) were governed by the respective Promoter Employment Agreements (“PEAs”), unsigned versions of which had been annexed to the SPA. Pursuant to the PEAs signed in November 2012, BTP, the first defendant, was employed as the Chief Executive Officer and BTQ, the second defendant, as the Chief Technical Officer. The PEAs were signed by the respective employees, and BTO as the employer and BTN as the confirming party. Both the SPA and PEAs contained materially identical provisions as to the Employees’ “With Cause” and “Without Cause” termination. Clause 15.1.2 in both PEAs, governing without-cause termination, stated:

If the Company terminates the Employment without cause (that is at will for reasons other than as specified in Clause 14.2 [sic] below) ... the Employee shall, only be entitled to receive (1) Remuneration which has accrued but has not been paid up to the date of termination … (2) severance pay ... and (3) such payments as may be expressly specified as payable upon ‘Without Cause’ termination under Clause 12.9.3 of the Share Purchase Agreement.

…

[emphasis added]

The Company referred to in the PEAs was BTO, and the reference to cl 12.9.3 of the SPA should be a reference to cl 12.9.2 instead, and this is not disputed. Clause 12.9.2 of the SPA provides that the consequence of a without-cause termination was that BTN was to pay the Employees an amount equal to 100% of the Earn Out Consideration Tranche that would have been payable to them for the unpaid term of the Earn Out Period, assuming achievement of a percentage level of Earn Out Targets equal to 100% for the remaining financial years in the Earn Out Period. This means that on the facts, if the dismissals of the Employees were without cause, then they would be entitled to US$35m. Whereas if the dismissals were with cause, then they would not be entitled to any Earn Out Consideration.

Without-cause termination was termination for reasons other than those justifying a with-cause termination. With-cause termination was defined in cl 12.9.1 of the SPA and cl 15.2.1 of the PEAs. The relevant grounds for with-cause termination in the PEAs (mirroring the grounds set out at cl 12.9.1 of the SPA) were as follows: 15.2 Termination of Employment of the Promoter by the Company With Cause (“ With Cause ”) 15.2.1 The Company shall be entitled at any time to terminate the Employment with cause by summary notice and the termination shall be effective on and from the date of such notice of termination of Employment, (A) if the Employee:-

…

(v) in the performance of his duties under the Transaction Documents and/or this Agreement or otherwise, commits any act of gross misconduct or gross negligence or wilful insubordination; or (vi) has committed an act of willful [sic] damage/willful [sic] omission to commit an act which has resulted in material loss or damage to the Company and/or [Group] entity; (vii) has ... behaved in a manner that is materially detrimental to the interests of the Company and/or other [Group] entity; (viii) where in any Finance Year (as defined in the Share Purchase Agreement) during the Earn Out Period (except in respect of any Financial Year where, inter alia, the Company and the Employee have jointly determined that a Force Majeure Event (as defined in the Share Purchase Agreement) has accrued and, inter alia, the Employee, has issued a Force Majeure Notice in respect of that Financial Year) the Employee have not achieved in respect of the Business: (1) 50% or above of the Earn Out Target (as defined in the Share Purchase Agreement) …; or (2) a positive EBITDA; and

within 90 (ninety) days of the Audited Accounts for the Business for the relevant Financial Year being adopted in accordance with the Share Purchase Agreement the Company has terminated the employment of the Employee;

…

EBITDA was defined in the SPA as “earnings (positive or negative) from operations of the [Group], in relation to the Business before interest, tax, depreciation and ammortisation for a Financial Year, determined on the basis of the Audited Accounts”.

The dispute resolution clause (cl 18.4) and the jurisdiction clause (cl 18.5.1) in the PEAs were as follows: 18.4 Dispute Resolution 18.4.1 If any dispute, controversy or claim between the Parties arises out of or in connection with this Agreement, including the breach, termination or invalidity thereof (“Dispute”), the Parties shall use all reasonable endeavours to negotiate with a view to resolving the Dispute amicably. Specifically it is agreed that in respect of any warranty claim or claim for breach of contract or agreement or breach of other clause hereunder which is capable of remedy, subject to the same not prejudicing in any manner the non defaulting Party, the non defaulting Party shall give an opportunity to the defaulting party, to remedy such breach, at no cost to such non defaulting Party in an immediate basis and in any event within 30 (thirty) Business Days from the date of notification by the non-defaulting Party. In the event the concerned Parties are unable to resolve the Dispute amicably within 30 (thirty) days (or such other extended period as may be mutually agreed to in writing by the Parties), any Party (“Claimant”) may refer the Dispute to arbitration by issuing to the other...