CEF and another v CEH

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 18 July 2022
• Neutral Citation: [2022] SGCA 54
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 153 of 2020
• Published date: 21 July 2022
• Year: 2022
• Hearing Date: 26 January 2022
• Plaintiff Counsel: Tan Chee Meng SC, Chou Sean Yu, Oh Sheng Loong Frank, Wong Zheng Hui Daryl and Seah Ying Ying (WongPartnership LLP)
• Defendant Counsel: Davinder Singh s/o Amar Singh SC, Fong Cheng Yee David, Hanspreet Singh Sachdev and Tanmanjit Singh (Davinder Singh Chambers LLC)
• Subject Matter: Arbitration,Award,Recourse against award,Setting aside
• Citation: [2022] SGCA 54

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

The parties to this appeal were once eagerly engaged in the enterprise of constructing and operating a steel-making plant. Unfortunately, disputes over the construction and production capabilities of the plant arose and the respondent terminated the construction contract. An arbitration proceeding ensued in which the respondent was largely successful. The appellants now raise before us, as they did in the court below, issues of breach of natural justice and, further, challenge the workability and enforceability of the award issued by the tribunal.

Apart from the first appellant, which is incorporated in Narnia, all the parties are companies incorporated in Ruritania. The first appellant is a multinational company which designs, builds, and sells plants for the iron and steel industry. It is the parent of the second appellant. In 2011, the appellants were contracted to design and build a steel-making plant for the respondent.

The respondent manufactures hot-rolled steelcoils and carries on business on the premises of its parent, a major steelmaker in Ruritania (the “Parent”).

The relationship between the parties broke down in 2016 and each started action against the other. This led to a consolidated arbitration (the “Arbitration”) in October 2016. An award was issued in 2019 (the “Award”) and various orders made in favour of the respondent.

The appellants were dissatisfied with the Award and therefore applied to the Singapore High Court to set it aside. They asserted breach of natural justice under s 24(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (the “IAA”) and also invoked various grounds under Art 34(2) of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”). The High Court judge (the “Judge”) dismissed the appellants’ application for the reasons given in CEF and another v CEH [2021] SGHC 114 (the “GD”).

Facts Background

In June 2011, the first appellant entered into a contract (the “Contract”) with the Parent. Under the Contract, the first appellant was to provide engineering equipment and services to design and build a steel-making plant (the “Plant”) on a site in Ruritania (the “Site”) owned by the Parent for a contract price of F$92.7m (“F$” being a pseudonym for the currency used in the contract documents). The material terms of the Contract were as follows: The Plant, once commissioned and fully operational, would be capable of producing approximately 600,000 tonnes of hot-rolled steelcoils per year. This was set out in a document dated 7 May 2011 containing specifications and attached to the Contract (“Technical Specifications”). The first appellant’s scope of supply under the Contract comprised: (i) supplying the engineering for the Plant; (ii) supplying the equipment for the Plant; (iii) supervising the erection of the Plant; (iv) supervising the commissioning of the Plant; and (v) training workers to operate the Plant. The Parent would, inter alia: (i) install the foundations of the Plant; (ii) manufacture and erect the steel building of the Plant; (iii) erect the equipment of the Plant; and (iv) install, start up, operate and maintain the Plant in conformity with, inter alia, the Technical Specifications.

In September 2011, the Parent assigned its rights, title, interest and liabilities under the Contract to the respondent. However, the Parent continued to retain ownership of the Site.

In March 2014, the first appellant supplied the respondent with additional equipment worth F$49,000 and additional services worth approximately F$31,000. This equipment was subsequently used in or incorporated into the Plant. The appellants received no compensation from the respondent for providing these additional services and equipment.

About two months later, in May 2014, the appellants and the respondent entered into a service agreement (“Service Agreement”) whereunder the first appellant assigned to the second appellant the first appellant’s obligation under the Contact to provide supervision and training services to the respondent.

The parties’ dispute and the Arbitration

Unfortunately, there were delays in the construction of the Plant and the completed Plant never achieved its production target. The respondent purported to terminate the Contract. So, in August 2016, the appellants commenced an arbitration against the respondent. Some three weeks later, the respondent commenced its own arbitration against the appellants. In October 2016, the two arbitrations were consolidated into the Arbitration by consent. The claimants and respondent in the Arbitration were the appellants and the respondent, respectively. By November 2016, the Tribunal was constituted comprising Dr Michael Moser (President of the Tribunal), Prof Mauro Bussani and Mr Alan J Thambiayah.

The Arbitration was commenced under both the Contract and the Service Agreement. Art 26.1 of the Contract provided that it was governed by Singapore law, while Art 26.2 of the Contract provided that any dispute arising from or in connection with the Contract was to be arbitrated in Singapore under the Rules of Arbitration of the International Chamber of Commerce (“ICC Rules”). Article 6.2 of the Service Agreement incorporated Art 26 of the Contract.

On 3 January 2017, in accordance with Art 23 of the ICC Rules, the parties and the Tribunal signed the terms of reference (“Terms of Reference”) setting out the parties’ claims in the Arbitration.

Based on the Terms of Reference, the reliefs sought by the appellants in the Arbitration included the following:

…

c) [a declaration] that the Contract and the Service Agreement were unlawfully terminated by [the respondent] and such unlawful terminations [amounted] to repudiation of both contracts;

…

f) [a declaration] that [the] Respondent breached the Contract and the Service Agreement and [an] order [for the] Respondent to pay to [the appellants] all losses, damages (including reputational damages), extra-costs and expenses, with interest, resulting from [the] Respondent’s breaches and repudiation of the Contract and the Service Agreement, respectively, whose amount [was] to be quantified at the proper stage of [the] proceedings;

…

The respondent, for its part, stated in the Terms of Reference that it was seeking the following reliefs: (a) Rescission of the Contract and the Service Agreement; (b) Repayment of all sums paid by [the Parent] and/or [the respondent] to [the appellants] under the Contract and the Service Agreement; (c) Damages for misrepresentation under section 2(1) of the Misrepresentation Act (Cap. 390), to be assessed; (d) In the alternative to (a) to (c) above: (i) Damages for [the first appellant’s] breaches of the Contract and the Service Agreement, to be assessed; and (ii) Damages for [the second appellant’s] breaches of the Service Agreement, to be assessed; (e) Pre-award interest; (f) Post-award interest; (g) the full Costs of [the] arbitration (as defined under Article 37(1) of the ICC Rules); and (h) Any other determination(s)/order(s)/relief(s) that the arbitral tribunal [deemed] fit in the circumstances.

The Award

On 28 November 2019, the Tribunal issued the Award. The majority of the Tribunal found that the respondent had been induced to enter into the Contract by the appellants’ misrepresentations, and that the respondent was therefore entitled to rescission of both the Contract and the Service Agreement. The Tribunal made various orders including the following: The appellants were to pay the respondent the contract price of F$92.7m, less F$15m (to account for two loans which the first appellant had previously extended to the respondent) and F$54.5m (to account for the respondent’s use of the Plant after it had been completed and the diminution in value of the Plant) (the “Repayment Order”). The respondent was to “transfer the title to the Plant, including the additional equipment installed” to the appellants in return for payment under the Repayment Order (the “Transfer Order”). In this connection, the Tribunal noted that “[w]hile [the appellants] did not request the transfer of title to the Plant in their request for relief, such transfer of the title is the natural (i.e. legal) consequence of the rescission of the Contract, as specifically acknowledged by [the respondent] and not challenged by [the appellants]”. The appellants were to pay the respondent sums denominated in Ruritanian currency totalling R$176,245,250 as damages under the Misrepresentation Act (Cap 390, 1994 Rev Ed) (the “Misrepresentation Act”) to compensate the respondent for five heads of loss and/or expenses which it would not have incurred but for the first appellant’s misrepresentations (the “Damages Order”). The Tribunal only permitted the respondent to recover 25% of the damages it had sought under each of the five heads as it found the respondent’s evidence of the quantum of the loss it had suffered under each head to be deficient. It should be noted that the Co-Arbitrator Prof Mauro Bussani disagreed with and dissented from certain findings and conclusions of the majority of the Tribunal on the respective liability of the parties as well as the quantum of relief awarded by the majority.

Arguments and the decision below

On 25 February 2020, the appellants applied to the High Court to set aside the Award.

Transfer Order

The bulk of the appellants’ submissions before the Judge was directed at setting aside the Transfer Order. They submitted that: First, the Transfer Order should be set aside under Art 34(2)(a)(iv) of the Model Law, on the basis that it was “uncertain, ambiguous and/or not enforceable”, and therefore in breach of the parties’ arbitration agreement, the arbitral rules, and/or the Model Law. Second, the Transfer Order should be set aside...