CDM and others v CDP

• Jurisdiction: Singapore
• Judge: S Mohan JC
• Judgment Date: 21 July 2020
• Neutral Citation: [2020] SGHC 141
• Docket Number: Originating Summons 1307 of 2019 and Originating Summons 1124 of 2019 (Summons 5816 of 2019)
• Subject Matter: Enforcement,Principles,Civil Procedure,Arbitration,Award,Singapore award,Costs,Recourse against award,Setting aside
• Published date: 24 July 2020
• Hearing Date: 28 February 2020,05 February 2020,06 February 2020
• Defendant Counsel: Daniel Chia Hsiung Wen, Ker Yanguang (Ke Yanguang) and Annette Liu Jia Ying (Morgan Lewis Stamford LLC)
• Court: High Court (Singapore)
• Plaintiff Counsel: Navinder Singh and Farah Nazura Binte Zainudin (KSCGP Juris LLP)

S Mohan JC: Introduction

In Originating Summons 1307 of 2019 (“OS 1307/2019”), [CDM] (“CDM”), [CDN] (“CDN”) and [CDO] (“CDO”) are the Plaintiff applicants while [CDP] (“CDP”) is the Defendant and vice versa in Originating Summons 1124 of 2019 (“OS 1124/2019”). CDM, CDN and CDO were the respondents in arbitration proceedings seated in Singapore and CDP was the claimant. For consistency and to avoid confusion, I will, throughout these grounds of decision, refer to CDM, CDN and CDO as the “1stPlaintiff”, “2ndPlaintiff” and “3rd Plaintiff” respectively (collectively, the “Plaintiffs”), and to CDP as the “Defendant”.

The applications before me arose out of a contract for, inter alia, the construction of an offshore drilling rig or more precisely, a Self-Erected Tender Rig and Derrick Equipment Set. Disputes arose between the parties in the course of performance of the contract and arbitration proceedings ensued in Singapore. The arbitration proceedings culminated in a partial arbitration award rendered in the Defendant’s favour. The Defendant sought to enforce the award in OS 1124/2019 and in response, the Plaintiffs applied to set it aside in OS 1307/2019. Whether the arbitral tribunal acted in excess of its jurisdiction or breached the rules of natural justice in the making of the award were among the issues that I had to determine.

The Plaintiffs are companies incorporated in Singapore. The Defendant, a shipbuilder, is a company incorporated in the People’s Republic of China.¹ The 1st and 2nd Plaintiffs entered into contracts with the Defendant, under which the Defendant agreed to design, build, launch, equip, commission, test, complete, sell and deliver to each of the 1st and 2nd Plaintiffs a Self-Erected Tender Rig and a Derrick Equipment Set.² The 3rd Plaintiff, which is the holding company of the 1st and 2nd Plaintiffs, ³ issued a Guarantee to the Defendant on behalf of the 1st and 2nd Plaintiffs as security for the performance of the 1st and 2nd Plaintiffs’ obligations under the contracts.⁴

The underlying disputes between the parties arose out of the following agreements (the “Agreements”), the details of which have been anonymised to maintain confidentiality:⁵ a Contract for the Design, Construction and Completion of a Self-Erected Tender Rig and Derrick Equipment Set (“Hull No. X”) between the 1st Plaintiff and the Defendant dated 9 June 2013 as subsequently amended (“Contract X”); a Guarantee furnished to the Defendant by the 3rd Plaintiff on 9 June 2013 in respect of Contract X (“X Guarantee”); a Contract for the Design, Construction and Completion of a Self-Erected Tender Rig and Derrick Equipment Set (“Hull No. Y”) between the 2nd Plaintiff and the Defendant dated 9 June 2013 as subsequently amended (“Contract Y”); and a Guarantee furnished to the Defendant by the 3rd Plaintiff on 9 June 2013 in respect of Contract Y (“Y Guarantee”).

After entering into Contract X, the Defendant and the 1st Plaintiff entered into various addenda. Addendum No. 1 was entered into on 15 April 2014 by the 1st Plaintiff and Defendant. Nothing turns on this addendum. Of relevance to the applications before me was Addendum No. 2 which was entered into by, amongst other parties, the 1st Plaintiff and Defendant on 24 September 2014 (“Contracts Addendum No. 2”). Article 6 of Contracts Addendum No. 2, inter alia, varied the payment terms in Contract X and in particular provided as follows:⁶ 6. Article 18.3 in [Contract X] shall be automatically replaced by and changed to the following:

…

(d) 10% (Ten [percent]) shall be paid upon launching and receipt of invoice issued by the BUILDER. Within 30 banking day before launching, BUILDER shall pay refund guarantee to the BUYER (“Refund Guarantee”) of 10% (Ten percent) of the CONTRACT Price.

…

However (c), (d) and (e) is subject that [Defendant] shows the following commitments: (1) Quality of workmanship and system in conformance with the CONTRACT. (2) Mutual cooperativeness between [Defendant] and Owner and Owner’s site teams. (3) Commit on schedule as per Annex 1. (4) Launching subject to prior approval by CLASS, Owner and [Defendant] collectively as per CONTRACT. (5) [Contract X] payment amendments shall come into effect after [Defendant] placing the order of DES and Main Crane for [Hull No. Y] …

Disputes arose in relation to the Agreements and the Defendant commenced arbitration in Singapore, in accordance with the arbitration provisions in the Agreements, under the auspices of the Singapore International Arbitration Centre (“SIAC”) and its rules (the “Arbitration”).⁷ Following an oral hearing and parties submitting written closing submissions, the Tribunal rendered a Final Partial Award (“the Award”) in the Defendant’s favour on 15 August 2019. The Award dealt with the claims and counterclaims made under both Contract X and Contract Y.

OS 1307/2019 was filed by the Plaintiffs on 18 October 2019, essentially seeking an order that the Award be set aside. Whilst Prayer 3(a) of OS 1307/2019 prayed for the Award to be “reversed and/or wholly set aside”, counsel for the Plaintiffs, Mr Navinder Singh, confirmed in his submissions that the challenge by his clients was confined only to that part of the Award relating to the Defendant’s claim under Contract X and the X Guarantee. Contract X and the X Guarantee only involved the 1st and 3rd Plaintiffs. That the challenge was so limited was also apparent from the affidavit filed by the Plaintiffs in support of OS 1307/2019,⁸ and was also a point made by counsel for the Defendant, Mr Daniel Chia.⁹ Therefore, the present grounds only concern that part of the Award pertaining to the Defendant’s claim under Contract X and the X Guarantee. In light of this, hereafter, all references to the Plaintiffs will exclude the 2nd Plaintiff. The 2nd Plaintiff was only a party to Contract Y, in respect of which the Award is not being challenged.

In OS 1124/2019, the Defendant applied for leave to enforce the Award as a judgment of this court. An order (HC/ORC 6180/2019) was made ex parte on 9 September 2019 granting the Defendant leave (the “Leave Order”). Subsequent thereto, orders were also made on the back of various applications filed by the Defendant (a) ordering the Plaintiffs to produce books or documents and to allow the Defendant to examine the Plaintiffs’ officers (HC/ORC 7550/2019) and (b) ordering a Garnishee bank to pay to the Defendant any debts due from the Garnishee to the Plaintiffs (HC/ORC 7548/2019) (collectively, the “Enforcement Orders”).

In SUM 5816/2019 filed in OS 1124/2019 by the Plaintiffs on 19 November 2019, the Plaintiffs applied, inter alia, for a stay of enforcement of the Award and any further proceedings in relation to such enforcement, and/or for a stay of execution of the Leave Order and Enforcement Orders pending the disposal of OS 1307/2019 (collectively, the “Stay Application”).

As foreshadowed at [7], in OS 1307/2019, the Plaintiffs applied to set aside the Award pursuant to the provisions of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the Act”) (the “Setting Aside Application”). The Plaintiffs relied on the following grounds:¹⁰ that the Award was made in excess of the Tribunal’s jurisdiction, in breach of Article 34(2)(a)(iii) of the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”) as set out in the First Schedule (“Sch 1”) to the Act; and that the Award was made in breach of the Plaintiffs’ right to present its case, in violation of Article 34(2)(a)(ii) of the Model Law and/or in breach of the rules of natural justice, in violation of s 24(b) of the Act.

I heard the parties on both OS 1307/2019 and the Stay Application on 5 and 6 February 2020. I dismissed the Stay Application on 6 February 2020 and reserved my decision on OS 1307/2019 and the issue of the costs of the Stay Application pending my decision on OS 1307/2019. On 28 February 2020, I delivered oral grounds for my decision in OS 1307/2019 and dismissed it. After hearing parties, I awarded costs of OS 1307/2019 and of the Stay Application to the Defendant on the standard basis and fixed those costs. The Plaintiffs have since appealed against my decisions in OS 1307/2019 and the Stay Application. These are the full grounds of my decision.

Summary of factual background to the Defendant’s claim and the Award

I take most of the background facts from the Award. In summary, the Defendant as the builder of Hull No. X claimed that it had fulfilled all the conditions for payment under Article 6(d) of Contracts Addendum No. 2 (see [5] above) and was therefore entitled to payment of a Fourth Instalment in respect of the construction of Hull No. X.¹¹ The Fourth Instalment amounted to US$13.9 million.¹² The Plaintiffs, on the other hand, contended that they were not liable to pay the Defendant as the Defendant had failed to fulfill the conditions precedent necessary for liability on the part of the Plaintiffs to arise. The Plaintiffs further contended that the Defendant was itself in breach of its contractual obligations to complete and deliver Hull No. X to the 1st Plaintiff, and that this gave rise to a counterclaim against the Defendant.¹³

Under Contract X (and specifically under Article 6(d) of Contracts Addendum No. 2), the Defendant was required to, inter alia, launch Hull No. X as one of the conditions to obtain payment of the Fourth Instalment.¹⁴ It is undisputed that on 20 January 2015, the Defendant purported to launch Hull No. X into the water.¹⁵ On the same day, the 1st Plaintiffs’ project manager emailed the Defendant stating, inter alia, that they “[did] not consider the floating as launching”.¹⁶ Whether that launch was proper or valid and whether prior approval had been given by the 1st Plaintiff for the launch (which was another condition under Article 6(d) of Contracts Addendum No. 2) were matters that were...