CBX and another v CBZ and others

• Judge: Judith Prakash JCA
• Judgment Date: 21 June 2021
• Neutral Citation: [2021] SGCA(I) 3
• Citation: [2021] SGCA(I) 3
• Court: Court of Appeal (Singapore)
• Published date: 23 June 2021
• Docket Number: Civil Appeal No 136 of 2020
• Plaintiff Counsel: Lin Weiqi Wendy, Chong Wan Yee Monica (Zhang Wanyu), Huang Meizhen Margaret, and Kara Quek Tze-Min (WongPartnership LLP)
• Defendant Counsel: Francis Xavier s/o Subramaniam Xavier Augustine SC, Sim Jek Sok Disa, David Isidore Tan Huang Loong, Kristin Ng Wei Ting, and Tay Bok Chong Alvin (Rajah & Tann Singapore LLP)
• Subject Matter: Arbitration,Award,Recourse against award,Setting aside,Costs,Awarded
• Hearing Date: 05 February 2021

Jonathan Mance IJ (delivering the judgment of the court): Introduction

The Court has before it two related appeals from a judgment of the Singapore International Commercial Court dated 16 July 2020. CA/CA 136/2020 (“CA 136”) arises from the decision of the International Judge (“the Judge”) regarding the validity of two arbitration awards. CA/CA 197/2020 (“CA 197”) arises from the Judge’s order for costs regarding the proceedings before him leading to that decision. This judgment addresses the issues arising in and from appeal CA 136, and a separate judgment delivered by Prakash JCA addresses the issues in appeal CA 197. The complex background can usefully be found in the opening paragraphs of the judgment below, which was published as CBX and another v CBZ and others [2020] SGHC(I) 17. For present purposes, some simplification is appropriate. We will largely adopt the acronyms used in the Judge’s judgment.

The parties’ disputes arise from two sale and purchase agreements (which the Court will call “SPA I” and “SPA II”) dated 19 June 2015 and governed by Thai law. The SPAs were for the sale and purchase of, respectively, 49% and 48.94% interests in company AAA, which in turn owned 59.46% of company BBB, which through various “project companies” owned eight windfarm projects (three existing and five in progress and incomplete at the time when the SPAs were entered into) in Thailand. SPA I was between company CBZ as seller and CBX as buyer. SPA II was between two companies, CCA and CCB, as sellers and company CBY as buyer. For ease of reference, I will refer collectively to the sellers as the “Sellers”, and to the buyers as the “Buyers”.

The SPAs each made provision for there to be ICC arbitration seated in Singapore in the event of any dispute (Clause 12.14). Disputes arose which gave rise in June 2016 to two arbitrations (the “arbitrations”), heard together by the same arbitral tribunal (the “Tribunal”), in which the Sellers under the two SPAs (respondents before the Judge and on the present appeals) claimed various forms of relief against the Buyers (applicants below and appellants now). The arbitrations led to two Phase I Partial Awards dated 22 September 2017, two Phase II Partial Awards dated 5 June 2019 and to a Final Award (Costs) (the “Costs Award”) dated 9 August 2019.¹

The Buyers’ applications to the Judge were to set aside parts of the Phase II Partial Awards dated 5 June 2019 and, consequentially, the whole of the Final Award (Costs). The relevant parts of the Phase II Partial Awards consist of the Tribunal’s decisions, first, that the Buyers pay the Sellers certain amounts described as the “Remaining Amounts” and, second, that interest should run on those amounts at the rate of 15% compounded annually from the date of the Awards until payment.

The Remaining Amounts had originally been claimed in the arbitrations on the basis that their due dates had been accelerated by reason of the Buyers’ defaults or conduct. What the Tribunal actually ordered by [329(g)] and [281(f)] of the Phase II Partial Awards arising out of SPA I and SPA II respectively, was that the Buyers make payment in accordance with Clause 3.1(ii) of the SPAs. That involved payments in respect of each of the five incomplete windfarm projects in three tranches as set out in Schedule 5 to the SPAs. Schedule 5 of SPA I will serve as an example:

Schedule 5

Purchase Price

Name of Project Company	Remaining Amounts (US$)
Milestone Dates:	COD	1 Year Post COD	2 Years Post COD	Total
Company “FKW”		-	-	-	22,890,000
Company “KR2”		-	-	-	18,400,000
Company “WTB”		-	-	-	28,180,000
Company “T1”		34,330,000	10,560,000	10,560,000	58,960,000
Company “T2”		35,040,000	10,780,000	10,780,000	60,180,000
Company “T3”		33,790,000	10,400,000	10,400,000	58,040,000
Company “T4”		28,320,000	8,710,000	8.710,000	48,640,000
Company “NKS”		27,770,000	8,550,000	8,550,000	47,710,000
Total		159,250,000	49,000,000	49,000,000	343,000,000

The tranches relating to the five projects in progress were due for payment within 45 days of three dates in successive years, the first such date being the project’s Commercial Operation Date (“COD”), the second a year post-COD and the third two years post-COD. At the time when the arbitrations were begun, the hearing took place, and post-hearing briefs (“PHBs”) were exchanged in October/November 2018, none of the payment dates for any of the tranches had been reached. However, by the date of the Phase II Partial Awards, 5 June 2019, the payment dates for the first tranches had been passed. The Tribunal’s orders for payment of the tranches in accordance with Schedule 5 were therefore made on the basis that the first tranches of the Remaining Amounts were already due, and the second and third tranches would in the ordinary course become due, independently of any acceleration. However, it referred to all the payments under Schedule 5 as having “now become due and payable, from the date of the Partial Award with interest”, and the compound interest on them which it awarded (as set out in the next paragraph) was ordered to run “as from the date of this Partial Award”. This could, on the face of it, itself be problematic, even in the absence of any other objection to the Tribunal’s approach, in circumstances where the last two tranches were not on any view due until 1 and 2 years post-COD. But it is unnecessary to go further into that here, in view of the decision the Court has reached on the other issues which were argued.

In addition to the orders for payment of part of the Remaining Amounts, the Tribunal by its Phase II Partial Awards also awarded Compound Interest on those amounts. The awards of Compound Interest were made under the terms of Clause 12.9 of the SPAs. They were made following what the Tribunal later described as a “regrettable oversight” on its part, since the parties had in fact agreed that compounding was unlawful and unenforceable under Thai law, and had informed the Tribunal accordingly during the proceedings leading up to the issue of the Phase II Partial Awards.

The applications to set aside were made on the grounds that, as regards the relevant parts of the Phase II Partial Awards, the Tribunal (a) exceeded its jurisdiction; (b) failed to afford the Buyers a reasonable opportunity to present their case; and/or (c) contravened Singapore public policy. As regards the Costs Award, its setting aside was sought on the basis that it cannot stand if the relevant parts of the Phase II Partial Awards, on which it was predicated, are set aside in whole or part.

The Judge dismissed the applications. He held that the Tribunal had jurisdiction over claims to the Remaining Amounts existing independently of any claims for accelerated payment of the sums due. He held that, although the Buyers had in fact commenced another ICC arbitration (referred to as “the ALRO arbitration”) to establish that the Remaining Amounts could not and would not fall due on what would otherwise be their relevant payment dates, they had neglected to make clear to the present Tribunal the nature and grounds of such relief, and had therefore not suffered any undue prejudice or failure of natural justice. As for compound interest, he held that (a) the Tribunal had the (procedural) power to award compound interest under the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”); (b) the Buyers had had a reasonable opportunity to present their case; and (c) what had happened was a wrong exercise of an undoubted power, the risk of an error of this sort being “a routine hazard of arbitration”. He further held that the illegality of compounding interest under Thai law was not the type of “palpable and indisputable” illegality which could, under either the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”) appended to the IAA or the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), make the award of compound interest contrary to Singapore public policy. The Buyers now appeal these conclusions, as well as the Judge’s orders as to costs.

The Legal Framework

The relevant legal framework is found in Article 34 of the Model Law, which provides: (1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this Article. (2) An arbitral award may be set aside by the court specified in Article 6 only if: (a) the party making the application furnishes proof that:

…

(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; …

As indicated in PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597 at [40], Article 34(2)(a)(iii) involves a two-stage process: first, identification of the scope of the submission to arbitration and, second, consideration of whether the award involved matters within the scope or a “new...