CBX and another v CBZ and others

• Court: International Commercial Court (Singapore)
• Judge: Anselmo Reyes IJ
• Judgment Date: 16 July 2020
• Neutral Citation: [2020] SGHC(I) 17
• Citation: [2020] SGHC(I) 17
• Published date: 30 July 2020
• Plaintiff Counsel: Alvin Yeo SC, Lin Weiqi Wendy, Chong Wan Yee Monica, Huang Meizhen Margaret, Kara Quek Tze-Min (WongPartnership LLP)
• Defendant Counsel: Francis Xavier SC, Disa Sim, David Isidore Tan Huang Loong, Kristin Ng (Rajah & Tann LLP)
• Date: 16 July 2020
• Hearing Date: 15 June 2020
• Docket Number: Originating Summons No 1 of 2020
• Subject Matter: Setting aside,Recourse against award,Arbitration,Award

Anselmo Reyes IJ: Introduction

The Plaintiffs apply to set aside parts of two Partial Awards dated 5 June 2019 (the “Phase II Partial Awards”) and the whole of a Final Award (Costs) dated 9 August 2019 (the “Costs Award”). All three awards were by the same tribunal (the “Tribunal”). The relevant parts of the Phase II Partial Awards concern the Tribunal’s decisions that the Plaintiffs should pay the Defendant certain amounts pursuant to the parties’ agreements (the “Remaining Amounts Orders”) and that compound interest should run on those amounts (the “Compound Interest Orders”). The grounds advanced for setting aside the Remaining Amounts and the Compound Interest Orders are that, in coming to its decisions, the Tribunal exceeded its jurisdiction, failed to afford the Plaintiffs a reasonable opportunity to present their case, and contravened Singapore public policy. The ground alleged for setting aside the Costs Award is that it was consequent upon the impugned parts of the Phase II Partial Awards. Thus, if the Remaining Amounts and the Compound Interest Orders are set aside, the Plaintiffs say that the Costs Award must likewise be set aside. The Plaintiffs additionally submit that, in substitution for the Costs Award, I should order that the Defendants pay 100% of the Plaintiffs’ costs of the entire arbitration proceedings. In those proceedings, the Plaintiffs were the Respondents and the Defendants were the Claimants. However, to avoid confusion, I shall refer here to the Claimants in the arbitration proceedings as “the Defendants” and to the Respondents as “the Plaintiffs”. The Phase II Partial Awards are in similar (but not identical) terms. When referring in this judgment to passages in the Phase II Partial Awards, I shall only quote from one award. Unless stated otherwise, it may be assumed that there is an analogous passage in the other award.

By a Sale and Purchase Agreement dated 19 June 2015 (the “CBX SPA”), the 1st Defendant (“CBZ”) agreed to sell, and the 1st Plaintiff (“CBX”) agreed to buy, 49% of the share capital of company [AAA] (“AAA”). By another Sale and Purchase Agreement dated 19 June 2015 (the “CBY SPA”), the 2nd and 3rd Defendants (respectively, “CCA” and “CCB”) agreed to sell, and the 2nd Plaintiff (“CBY”) agreed to buy, 48.94% of the share capital of AAA. I shall refer collectively to the CBX and CBY SPAs as the “SPAs”.

The governing law of the SPAs was Thai law. The SPAs provided for ICC arbitration seated in Singapore in the event of dispute. When the SPAs were executed, AAA held 59.46% of [BBB] (“BBB”). Through various companies, BBB owned three existing projects (the “Existing Projects”) and five developing projects (respectively, “A1”, “A2”, “A3”, “A4” and “A5”; collectively, the “Future Projects”). Mr. [CC] (“CC”) controls the Plaintiffs. Mr. [DD] (“DD”) controls the Defendants. As a result of the SPAs, the Plaintiffs came into control of AAA and BBB.

CBX was to pay a first instalment to CBZ under the CBX SPA. CBY was to pay a first instalment to CCA and CCB under the CBY SPA. The first instalments were due within 60 days after the closing dates of the respective SPAs. By Article 3.1(ii) of the SPAs, subject to a proviso relating to the initial public offering of BBB which is not material to this judgment, the balance of the consideration under the SPAs (the “Remaining Amounts”) was to be paid in tranches within 45 business days of each of the milestone dates identified in Schedule 5 (“Schedule 5”) of the SPAs. The milestone dates were in turn calibrated to the Commercial Operation Dates (“CODs”) for the Future Projects specified in Schedule 4 of the SPAs. The closing date of the CBY SPA was 27 July 2015, while that of the CBX SPA was 24 August 2015. The original deadline for the first instalment under the CBY SPA was 25 September 2014, while that for the first instalment under the CBX SPA was 23 October 2015. The parties, however, discussed the postponement of the deadlines for the first instalment. As became apparent in the arbitration proceedings, the parties differed as to what precisely had been agreed about the postponement of payment.

CBX did not pay the first instalment under the CBX SPA. CBY paid the first instalment under the CBY SPA, partly on 30 November 2015 and partly on 29 December 2015. It did not pay interest for late payment. The Defendants contended that the Plaintiffs were in default due to non-payment or late payment. The Defendants maintained that, in consequence, they could treat the CBX SPA as rescinded. The Defendants further alleged that, not only were the outstanding principal and interest of the first instalments due, but the Remaining Amounts had additionally become accelerated and so immediately payable in full. The Plaintiffs denied that the Defendants were entitled to treat the CBX SPA as rescinded. They argued that the payment dates for the first instalments had been postponed and that the Remaining Amounts had not been accelerated. The Plaintiffs also raised set-offs and counterclaims which it submitted had the effect of reducing or extinguishing any amounts (including the Remaining Amounts) payable to the Defendants. Those set-offs and counterclaims were for damages arising from the Defendants’ wrongful rescission of the SPAs and from the Defendants’ “wrongful attacks” which (the Plaintiffs asserted) had brought about a significant diminution in the commercial value of AAA and BBB.

CBZ commenced arbitration (the “CBX arbitration”) against CBX on 26 January 2016, while CCA and CCB instituted proceedings (the “CBY arbitration”) against CBY on 25 March 2016. Although the two arbitrations were not formally consolidated until shortly before the Costs Award, the Tribunal heard the references together. However, it divided the procedural timetable into a Phase I on liability and a Phase II on damages (respectively, “Phase I” and “Phase II”). On 22 September 2017, the Tribunal issued its Phase I Partial Awards (the “Phase I Partial Awards”) in the two arbitrations.

The Phase I Partial Awards are similar, but not identical. The Tribunal dismissed the Defendants’ claim for rescission of the CBX SPA, as well as the Defendants’ claim for payment of the alleged shortfall in the first instalment due under the CBY SPA. It ordered that the Plaintiffs pay to the Defendants the first instalment under the CBX SPA and 15% annualised compound interest on the first instalments under both SPAs. The Tribunal directed that the Defendants’ claim for accelerated payment of the Remaining Amounts and the Plaintiffs’ set-offs and counterclaims be hived off to Phase II. This was because the Tribunal felt that the parties would benefit from a chance to put in “a full pleading on the issues of liability and damages” after having heard the evidence in Phase I. The costs of Phase I were reserved to Phase II.

The parties submitted further pleadings in the run-up to the Phase II substantive hearing. In their pleadings and submissions, the Defendants (among other contentions) introduced claims for “incidental fraud” and “fraudulent inducement”. The Plaintiffs objected to those claims as falling outside Phase II and outside the Tribunal’s jurisdiction. The Phase II substantive hearing took place on 30 and 31 August, and 1 and 4 September 2018. Afterwards, the parties exchanged several rounds of Post-Hearing Briefs (“Post Hearing Briefs”) (including submissions on costs). Phase II formally closed on 30 May 2019 when the Tribunal forwarded final drafts of the Phase II Partial Awards to the ICC Secretariat following scrutiny by the ICC Court of Arbitration. On 5 June 2019, the Tribunal issued the Phase II Partial Awards. Those ordered that the Plaintiffs pay (a) the Remaining Amounts to the Defendants in accordance with Schedule 5; and (b) 15% interest compounded annually from the date of the Phase II Partial Awards. The latter two determinations are the Remaining Amounts Orders and the Compound Interest Orders mentioned above. The Tribunal dismissed the remainder of the Defendants’ claims (including the Defendants’ fraud allegations) and all of the Plaintiffs’ set-offs and counterclaims.

On 28 June 2019, the Defendants applied to the Tribunal for a correction of the Compound Interest Orders. The Defendants pointed out that, between Phases I and II, the parties’ Thai law experts had revised their opinions on compound interest under Thai law. In Phase I, the Defendants’ expert had thought that it was permissible under Thai law to award 15% annualised compound interest on monies due under loan agreements (including the SPAs). The Tribunal had accepted this evidence in ordering 15% compound interest in its Phase I Partial Awards. But, in the course of Phase II, the parties’ experts had become unanimous that Thai law did not allow interest payable under the SPAs to be compounded at all. Article 12.9 (“SPA Article 12.9”) in the SPAs, which permitted 15% compound interest to be imposed on overdue amounts, was therefore contrary to Thai law in both experts’ view. The Defendants observed in their correction application that, for this reason, in their Phase II Reply Submissions dated 15 July 2018 (the “Phase II Reply”), they had moderated their original prayer for 15% compound interest to one only seeking “15% interest”. The Defendants requested the Tribunal to correct the Phase II Partial Awards accordingly. However, in its Decision (the “Correction Decision”) dated 5 August 2019, the Tribunal declined to do so.

On 9 August 2019, the Tribunal issued the Costs Award covering the costs of Phases I and II of both arbitrations (which had by then been consolidated). The Tribunal ordered the Plaintiffs to pay 66% of the Defendants’ costs of the two arbitrations, together with simple interest of 7.5% per annum from the date of the Costs Award.

Discussion The challenge to the Remaining Amounts Orders Additional background

The Existing and Future...