CJM and others v CJT

JudgeAnselmo Reyes IJ
Judgment Date15 June 2021
Neutral Citation[2021] SGHC(I) 4
Citation[2021] SGHC(I) 4
Hearing Date21 April 2021,07 June 2021
Plaintiff CounselFrancis Xavier s/o Subramaniam Xavier Augustine, Chia Xin Ran Alina and Gani Hui Ying Tracy (Rajah & Tann Singapore LLP)
Defendant CounselVergis S Abraham, Asiyah binte Ahmad Arif and Zhuo Jiaxiang (Providence Law Asia LLC)
Published date18 June 2021
Docket NumberOriginating Summons No 5 of 2021
CourtInternational Commercial Court (Singapore)
Subject MatterSetting aside,Award,Arbitration,Recourse against award
Anselmo Reyes IJ: Introduction

The plaintiffs are shareholders of a company (the “Company”). By their Originating Summons, the plaintiffs seek recourse against two paragraphs of a final award (the “Award”) in a Singapore International Arbitration Centre (“SIAC”) arbitration. Recourse is sought pursuant to Articles 34(2)(a)(ii), 34(2)(a)(iii) and 34(2)(b)(ii) of the UNCITRAL Model Law on International Commercial Arbitration, and s 24(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed). The plaintiffs contend that, by the two paragraphs, the Award wrongly dismissed their claim for an Earn-Out Payment. The Award found in the plaintiffs’ favour on the question of anticipatory breach. But the Award dismissed the plaintiffs’ claim for an Earn-Out Payment due to what the Award said was the failure to show that the breach had caused actual loss. The plaintiffs say that the dismissal was unwarranted because it was premised on a case that the plaintiffs had not been running and on which the plaintiffs had therefore not been given a reasonable opportunity to argue. Following the three-month time limit for applying to set aside the Award, the plaintiffs issued a further Summons, this time to amend their Originating Summons in order to challenge two more paragraphs of the Award. The plaintiffs say that if they are right in their substantive critique of the Award, then logically the two extra paragraphs should also be set aside.


In July 2016 the defendant entered into an agreement (the “Agreement”) to purchase the plaintiffs’ shares in the Company. The defendant thereby acquired 60% of the Company. The Agreement provided for the defendant to purchase the remaining 40% of the Company in five parcels (each consisting of 8% of the Company’s shares) between 2017 and 2021. A fixed sum was payable for each parcel. But the consideration for the final parcel included an additional component known as the “Earn-Out Payment”. The Earn-Out Payment was to be based on the Company’s actual EBITDA in financial year (“FY”) 2021. In essence, the higher the Company’s EBITDA in FY 2021, the higher the Earn-Out Payment. Conversely, if the Company had a negative EBITDA in FY 2021, there would be no Earn-Out Payment.

In November 2017 (that is, well before FY 2021) the plaintiffs commenced the SIAC arbitration for anticipatory breach of the Agreement, alleging (among others) that the defendant had breached its good faith obligation by running down the value of the Company’s business and thereby diminishing its EBITDA for FY 2021 and destroying the Earn-Out Payment. The plaintiffs claimed damages for loss of the Earn-Out Payment. The plaintiffs’ primary case was that damages were to be quantified on the basis of EBITDA for FY 2021 as projected in a Business Plan 2015 (“BP 2015”). The plaintiffs’ expert evidence, for example, assessed damages for loss of the Earn-Out Payment by reference to BP 2015. More specifically, the plaintiffs submitted that BP 2015 contained the parties’ agreed expectations of the Company’s business and reasonably projected the potential future earnings of the Company during the Earn-Out Period. BP 2015 was said by the plaintiffs to be “intricately linked” with the Agreement and the Earn-Out Payment, such that “in the Ordinary Course of Business, Parties expected the Business to operate, grow and perform … to the levels, at the very least, as agreed in [BP 2015]”. The plaintiffs assert that, at no point in the arbitration, did they put forward a case of their loss of Earn-Out Payment being due to the actual failure by the Company to tender for specific projects.

Contrary to the plaintiffs’ position on BP 2015, the Tribunal unanimously concluded in the Award that the defendant had not been involved in the formulation of BP 2015 and so the Agreement had not been predicated on BP 2015. The Tribunal stated that it was “unnecessary to make any conclusive remarks as to whether or not the targets set out in [BP 2015] were reasonable or achievable” with the consequence that BP 2015 was “at most only one element among many others to be considered by [the Tribunal] for purposes of damages … nothing less, nothing more”. The plaintiffs have not sought to set aside this finding.

By a majority, the Tribunal found in the plaintiffs’ favour that the defendant had breached its obligation under the Agreement to grow the Company’s business in good faith. However, by a different majority (the “Damages Majority”), the Tribunal held that the plaintiffs had failed to discharge the burden of proof in relation to the causation and quantification of actual loss. The Damages Majority was of the view that, under the governing law of the Agreement, the plaintiffs needed to establish that (a) there were specific tender opportunities that fell within the scope of the Company’s qualifications, (b) the Company had reasonable prospects of being awarded contracts in respect of those tender opportunities, and (c) the profit margins resulting from those contracts would generate positive EBITDA for the Company in FY 2021 and enable the plaintiffs to receive an Earn-Out Payment. The Damages Majority held instead that the plaintiffs (a) had failed to substantiate the existence of particular projects for which the Company would have been eligible to tender, (b) had not shown that the Company possessed the qualifications (whether singly or jointly with others) to bid for such projects as might have been available, and (c) had not shown that the Company’s failure to pursue any such tender opportunities resulted in a negative EBITDA which destroyed the prospects of an Earn-Out Payment. The Damages Majority concluded that the plaintiffs had failed to show that the defendant’s anticipatory breach had occasioned loss of the Earn-Out Payment. The Tribunal thus dismissed the plaintiffs’ claim for the same. It is this outcome that the plaintiffs seek to set aside by their application.

Discussion Did the Damages Majority dismiss the plaintiffs’ case on a basis not before it?

I will assume, in the plaintiffs’ favour, that they are correct that all four paragraphs against which recourse is sought are logically connected with each other. Given that premise, in this section I will examine the validity of the substantive grounds upon which it is claimed that the four paragraphs should fall.

Plaintiffs’ case

The plaintiffs observe that, in reaching its conclusion, the Damages Majority focused on certain documents (identified as exhibits C-384 to C-395 (collectively, the “exhibits”)) tendered by the plaintiffs after the evidentiary hearing. In gist, the plaintiffs submit that the Damages Majority found that the exhibits were insufficient to establish (a) the Company’s eligibility to tender for specific projects, (b) the prices at which the Company could have tendered for such projects, (c) the likely profit margins from such projects, and (d) the likelihood that such projects would have contributed positively to the Company’s EBITDA in FY 2021. For this reason, the Damages Majority was of the opinion that the plaintiffs had failed to establish causation between the defendant’s anticipatory breach and loss of Earn-Out Payment.

The plaintiffs submit that the Damages Majority’s conclusion was “wholly misplaced”, because in reasoning as it did the Damages Majority was deciding an issue that was not before the Tribunal. The plaintiffs say that their case in respect of the Earn-Out Payment was not premised on actual loss consequent upon the Company’s failure to secure any particular tender projects among those identified in the exhibits. The plaintiffs claim to have tendered the exhibits for the limited purpose of rebutting fresh materials in the defendant’s expert evidence which suggested that the Company’s business had no market or growth potential domestically or internationally. The plaintiffs say that, as they had not put forward the exhibits for the purpose of establishing actual loss of EBITDA due to the failure to take up specific tender opportunities or projects, it is hardly remarkable that they did not provide particulars or evidence substantiating a link between the tender opportunities mentioned in the exhibits (especially C-395) and the loss of Earn-Out Payment.

The plaintiffs bolster their argument by reference to the chronology underlying the tender of the exhibits. The day before the evidentiary hearing, the defendant’s damages expert filed presentation slides introducing fresh materials. The Tribunal allowed in the fresh materials. But it directed that the plaintiffs could file documents “to rebut the new factual references” in the fresh materials. It was purely in response to this direction that the plaintiffs claim to have submitted the exhibits. They did this to show, in rebuttal of the fresh materials, that as a matter of generality there were market opportunities available to grow the Company’s business at home and abroad. They did not adduce the exhibits to establish a failure by the defendant to tender for specific projects during the Earn-Out Period. The plaintiffs stress that, in actuality, the Tribunal’s direction enabling them to file additional documents explicitly restricted the purpose of anything filed to the rebuttal of the fresh materials. The plaintiffs point out that, since they had only tendered the exhibits after the evidentiary hearing, they were unable to file witness statements to provide factual or expert evidence on the exhibits or cross-examine the defendant’s witnesses on the same.

The plaintiffs note that the Tribunal rejected the admission of an exhibit C-396 on the basis that the plaintiffs had “failed to establish why these [C-396] documents are material”. Exhibit C-396 consisted of over 20,000 pages of tender documents for the 51 sample projects which were identified in exhibit C-395 and for which (according to the plaintiffs) the Company could have tendered. The...

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1 cases
  • CJM and others v CJT
    • Singapore
    • International Commercial Court (Singapore)
    • 27 Agosto 2021
    ...Reyes IJ: Introduction In CJM and others v CJT [2021] SGHC(I) 4 I dismissed the plaintiffs’ application to set aside an arbitral award (including a Summons to amend the Originating Summons filed by the plaintiffs). At the end of my judgment, I directed that the parties file written submissi......

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