BTN and another v BTP and another

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 23 October 2020
• Neutral Citation: [2020] SGCA 105
• Year: 2020
• Date: 23 October 2020
• Published date: 29 October 2020
• Hearing Date: 31 March 2020,21 April 2020
• Plaintiff Counsel: Davinder Singh SC, Fong Cheng Yee David, Gerald Paul Seah Yong Sing and Hanspreet Singh Sachdev (Davinder Singh Chambers LLC)
• Defendant Counsel: Michael Hwang SC, Chan Min Jian (Instructed Counsel) (Michael Hwang Chambers LLC) and Chew Kei-Jin and Tan Silin Stephanie (Ascendant Legal LLC)
• Court: Court of Appeal (Singapore)
• Citation: [2020] SGCA 105
• Docket Number: Civil Appeal No 178 of 2019

Judith Prakash JA (delivering the judgment of the court): Introduction

This appeal concerns the scope of the “public policy” ground for the setting aside of an arbitration award. The appellants before us contend very strongly that an award made against them must be set aside on the public policy ground because it has deprived them of their fundamental and contractual right to defend themselves against the claims of the respondents and further, to make claims against the respondents in turn. In brief, the appellants are aggrieved because the arbitral tribunal before which they appeared held that they were prevented by the doctrine of res judicata from litigating on a vital component of their defence to the respondents’ claim in the arbitration. They say there is nothing more repugnant to the most basic notions of justice than to deny it to one party. That may be so, but whether “denial of justice” is an appropriate way in which to label what happened in the arbitration proceedings is another matter. Litigants affected adversely by the application of the res judicata doctrine, a long-established common law doctrine, often consider themselves to have been unfairly deprived of their right to a hearing.

The appellants, BTN and BTO, had in Originating Summons No 638 of 2018 (“OS 683”) sought the following relief from the High Court: a review of a partial arbitral award dated 30 April 2018 (“the Partial Award”) pursuant to s 10(3)(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”); or in the alternative, a setting aside of the Partial Award on the grounds contained in s 24(b) of the IAA and Art 34(2) of the UNCITRAL Model Law on International Commercial Arbitration 1985 (“Model Law”) as set out in the First Schedule to the IAA.

The High Court judge (“the Judge”) dismissed the appellants’ application and held that the case did not call for an exercise of the court’s power to review the Partial Award under s 10(3) of the IAA or to set it aside pursuant to s 24(b) of the IAA and Art 34(2) of the Model Law. The appellants are dissatisfied with this decision.

On their appeal, the appellants dropped the application for a review and pursued only the setting-aside application. In this regard they raised the same issues that they had canvassed below: that there had been a breach of natural justice which had prejudiced them; that it would be contrary to public policy to enforce the Partial Award, because it had deprived them of the right to put forward their defence to the respondents’ claim and to make their own claims against the respondents; and that the tribunal in the arbitration failed to decide matters contemplated by and/or falling within the submission to arbitration. Like the Judge, we find no merit in their contentions and accordingly dismiss the appeal. Our detailed reasons are set out below.

Facts

The respondents, BTP and BTQ, are individuals. The first appellant, BTN, is a company incorporated in Mauritius. It now owns the second appellant, BTO, a Malaysian company.

Formerly, the respondents were substantial shareholders in two holding companies of which BTO was one. In turn, BTO and the other holding company owned a group of online travel agency companies (“the Group”). BTO is an online travel agency and has its registered office in Malaysia. The dealings between the parties that ultimately led to the dispute before us commenced when the respondents agreed to divest their interests in the Group to the buyer, ie, BTN.

The SPA and PEAs

On 26 September 2012, the respondents and two other beneficial owners of the Group entered into a Share Purchase Agreement (“the SPA”) with BTN.

The SPA provided that: BTN would acquire 100% ownership and control of the Group on both the shareholder and board level from the respondents and the other beneficial owners. The consideration for BTN’s acquisition of the Group comprised two elements: the “Guaranteed Minimum Consideration” of US$25m, which was paid upon completion of the acquisition; and the “Earn Out Consideration” (or “Earn Outs”), which was capped at US$35m, was payable in tranches over three years immediately following the acquisition. The Earn Outs were not guaranteed and depended on the financial performance of the Group in financial years 2013, 2014 and 2015, and were calibrated according to the different levels of “Earn Out Targets” for each financial year as specified in the SPA. The respondents were to be employed by BTO. The employment of the respondents was to be governed by contracts referred to as Promoter Employment Agreements (“PEAs”), unsigned drafts of which were annexed to the SPA.

The SPA contained an arbitration clause requiring arbitration under the rules of the Singapore International Arbitration Centre (“SIAC rules”) and an exclusive jurisdiction clause in favour of the Mauritian courts. The jurisdiction clause was expressly stated to be “subject to” the arbitration clause. The SPA was governed by the law of Mauritius.

In connection with the SPA, BTO entered into separate PEAs with each of the respondents in November 2012, by which BTP and BTQ were employed, respectively, as the Chief Executive Officer and Chief Technology Officer of BTO for three years. Each PEA was signed by the relevant respondent on the one hand and, on the other, by BTO as the employer and BTN as the confirming party. The PEAs were governed by the law of Malaysia.

The PEAs contained arbitration clauses that required disputes to be resolved by arbitration under the SIAC rules and exclusive jurisdiction clauses in favour of the Malaysian courts. As in the SPA, the jurisdiction clause in each PEA was expressly stated to be “subject to” the arbitration clause.

The SPA and PEAs contained materially identical provisions in relation to the termination of the respondents’ employment with BTO. Clause 12.9 of the SPA was entitled “Termination of Employment Without Cause and Impact on Earn Out Consideration Tranche”. It referred to and defined two types of termination: “With Cause” termination and “Without Cause” termination. “With Cause” termination was defined in materially identical terms in cl 12.9.1 of the SPA and cl 15.2.1 of the PEAs, by reference to specified justifications for a With Cause termination. “Without Cause” termination referred to termination for reasons other than those justifying a “With Cause” termination. Clause 15.1.2 of the PEAs stipulated the consequences of a “Without Cause” termination as follows:

If [BTO] terminates the Employment without cause (that is at will for reasons other than as specified in Clause 14.2 below [sic]) ... 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.[2] of the [SPA].

…

[emphasis added]

The effect of cl 12.9.2 of the SPA, as referred to in cl 15.1.2 of the PEAs set out above, read with cl 12.10.1(a) of the SPA, was that: if the dismissals of the respondents were Without Cause, then they would be entitled to a maximum of US$35m in Earn Outs; and if the dismissals of the respondents were With Cause, then they would not be entitled to any Earn Outs.

Upon completion of the sale of the Group, the respondents ceased to be directors of BTO. In their place, three senior executives of BTN were appointed as directors, one Mr K being one of the three. Mr K was also the Group Chief Financial Officer and a director of BTN. It is important to remember that at all times Mr K was a director of both BTO and BTN.

On 8 January 2014, BTO gave notices to the respondents, dismissing them from their posts “pursuant to Clause 15.2.1 of the [PEA] and Clause 12.9.1 of the [SPA]”, citing various grounds of With Cause termination.

The Malaysian Industrial Court proceedings

The respondents took the view that they had been wrongfully dismissed and decided to take action against BTO in this regard by invoking the remedies that Malaysian law makes available to disgruntled employees. On 13 February 2014, the respondents made representations to the Director General of Industrial Relations, Malaysia (the “Director General”), pursuant to the procedure under s 20 of the Industrial Relations Act 1967 (Act 177) (Malaysia) (“IRA”). Under the s 20 IRA procedure, where a workman considers that he has been dismissed without just cause or excuse by his employer, he may make representations to the Director General, who may in turn notify the Malaysian Minister for Industrial Relations. Under s 20(3) of the IRA, the Minister may, if he thinks fit, refer the matter to the Malaysian Industrial Court (“MIC”) to consider and if thought fit make an award.

The Director General then sent letters dated 7 March 2014 to BTO (at its registered address in Malaysia) and the respondents, requesting them to attend a conciliation meeting. An e-mail was sent on the same day to BTO’s manager, one Mr C, and two other BTO employees, inviting them to the conciliation meeting. According to the appellants, Mr C was then the only employee at BTO’s office in Malaysia. All its other employees were based in, and operated out of, Thailand and India. Correspondence to BTO was sent to its registered address and collected from this address by Mr C. He was responsible for keeping BTO’s senior management apprised of this correspondence as well as keeping them aware of all developments in Malaysia.

The conciliation meeting was attended by the respondents and representatives of BTO. Representing BTO were Mr C and Mr K. While Mr K was wearing his BTO hat at that meeting, he still occupied his position on the BTN board. No settlement was reached, and the cases were referred to the MIC on 8 August 2014. The respondents and BTO were copied in these referral letters. From October...