CPU and others v CPX and another matter

JudgeSir Henry Bernard Eder IJ
Judgment Date25 July 2022
Neutral Citation[2022] SGHC(I) 11
CourtInternational Commercial Court (Singapore)
Docket NumberOriginating Summons No 1 of 2022 and Summons No 8 of 2022
Published date29 July 2022
Hearing Date01 April 2022
Plaintiff CounselNakul Dewan (Twenty Essex) (instructed), Clement Julien Tan Tze Ming, Ng Pi Wei and Niranjanaa Ram (Selvam LLC)
Defendant CounselChong Yee Leong and Sheryl Lauren Koh Quanli (Allen & Gledhill LLP)
Subject MatterArbitration,Award,Recourse against award,Setting aside
Citation[2022] SGHC(I) 11
Sir Henry Bernard Eder IJ: Introduction

The main application before the court, SIC/OS 1/2022, is an application by the three applicants under s 24(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (the “Act”) and Art 34(2)(a)(i) of the UNCITRAL Model Law on International Commercial Arbitration as adopted in Singapore (the “Model Law”), to set aside the final award dated 26 July 2021 (the “Award”) issued by the sole arbitrator (the “Arbitrator” or “Tribunal”) in Singapore International Arbitration Centre (“SIAC”) Arbitration No. XX of 20XX (the “Arbitration”), on the following grounds: the applicants were under some incapacity, and the relevant arbitration agreements were not valid under the law to which the parties have subjected it; and there has been a breach of the rules of natural justice due to a failure of the Tribunal to accord a fair hearing to the applicants.

In addition to SIC/OS 1/2022 (the “main application”), it is important to mention that there is (or at least was) a further application, SIC/SUM 8/2022, made on behalf of the applicants shortly before the hearing of the main application, whereby the applicants sought leave of the court to adduce a further affidavit from one Dr P in support of the main application. The respondent objected to the application for leave to adduce such further evidence. In the event, I heard arguments in relation to SIC/SUM 8/2022 on 1 April 2022, immediately prior to the commencement of the hearing of the main application. After considering the arguments raised by the parties, I dismissed the application in SIC/SUM 8/2022 for leave to adduce further evidence. So far as relevant, I give my brief reasons for that decision below. On the same day and after a short adjournment, the applicants then applied to the court to adjourn the hearing of the main application in order to allow them to seek leave of the Court of Appeal to appeal against my decision dismissing SIC/SUM 8/2022 and refusing the applicants leave to adduce further evidence. After hearing further argument, I informed the parties that I refused the application to adjourn the main hearing and that the hearing of the main application should proceed forthwith. With that brief introduction, I turn to consider the issues with regard to the main application.

The first applicant, CPU (“Mr U”) is the father of the second applicant, CPV (“Mr V”). Mr U is a director of the third applicant, CPW, which is a company incorporated under the laws of Ruritania. The respondent is CPX, a company incorporated under the laws of Oceania. The managing director of CPX is one Mr B.

The Arbitration was commenced by CPX (ie, the respondent in the present proceedings) on 3 May 2019 pursuant to Rule 3.1 of the Arbitration Rules of the Singapore International Arbitration Centre (6th Edition, 1 August 2016) (the “SIAC Rules”). The claims advanced by CPX in the Arbitration pertained to various alleged breaches by the applicants of their obligations under a Settlement Agreement and a Supplemental Settlement Contract (both as defined below at [20] and [23], and collectively referred to as the “Contracts”). The Contracts each contained an arbitration agreement (individually, an “Arbitration Agreement” and collectively, the “Arbitration Agreements”). The governing law of the Contracts is the law of the Republic of India (“Indian Law”). The seat of the Arbitration is Singapore.

So far as relevant for present purposes, the applicants sought to resist the respondent’s claims in the Arbitration on, amongst others, the following grounds: the Contracts were void and unenforceable as they had been entered into under duress and coercion; the Contracts were void as the first and second applicants had been of unsound mind when they signed the Contracts; the applicants were not liable to the respondent under the Contracts, as the respondent itself was in breach of certain other agreements referred to as the Preceding Transactions (as defined below at [9]); and the applicants were entitled to set off US$2.5m from the sums claimed by the respondent in the Arbitration.

The Tribunal published the Award on 26 July 2021. In the Award, the Arbitrator determined, amongst other things, that: The applicants had failed to discharge their burden of proving on a balance of probabilities that: (i) they had executed the Contracts under duress and coercion; and (ii) that they were of unsound mind at the time of executing the Contracts. Therefore, the Contracts were valid and enforceable. The Tribunal had no jurisdiction to examine and adjudicate on any disputes between the parties that related to a period prior to the Settlement Contract, including the Preceding Transactions. The applicants had breached their obligations under the Contracts and were therefore jointly and severally liable to pay the respondent damages in the sums of US$10m, US$2,283,333 and S$1,407,558, together with simple interest on such sums accruing at the rate of 2% per month payable from 7 March 2018 until full payment. The applicants had not discharged their burden of proving that US$2.5m should be set off.

As set out in the applicants’ written submissions, the grounds relied upon in support of their application to set aside the Award are as follows: The Tribunal exceeded its jurisdiction as the Arbitration Agreements under the Contracts were invalid under Indian Law, due to the presence of coercion and/or duress exercised upon the first and second applicants. Further, the first and second applicants suffered mental illnesses that affected their ability to make a rational decision in the face of such coercion and/or duress. There was a breach of the rules of natural justice as the Tribunal had refused to allow the applicants to adduce further evidence in the form of two expert medical reports prepared by Dr P, detailing the mental illnesses suffered by the first and second applicants (the “Medical Reports”). This resulted in the Tribunal making a finding of fact against the applicants on the basis that insufficient medical evidence, including expert medical evidence, had been led by the applicants. There was a breach of the rules of natural justice as the Tribunal had failed to invite submissions on what the applicable law was, in relation to the question of whether the Tribunal had jurisdiction to adjudge issues arising out of the Preceding Transactions (as defined below). This led to the Tribunal applying the wrong law when coming to its conclusion on its jurisdiction. There was a breach of the rules of natural justice as the Tribunal had refused to allow the applicants to join ABC Ltd (“ABC”), the respondent’s nominee and a key party mentioned in the Settlement Contract, to the Arbitration. ABC was vital to the applicants’ claim that it was entitled to set off US$2.5m against the sums claimed by the respondent, and the applicants needed to cross-examine ABC. However, the Tribunal did not allow ABC’s joinder and then proceeded to find against the applicants on the basis that insufficient evidence had been adduced as to the applicants’ right to set off US$2.5m against the sums claimed by the respondent.

Summary of applicants’ case as to relevant background

The admissibility, relevance and substance of the evidence adduced on behalf of the applicants in support of the present application was at least in part a matter of dispute between the parties. At this stage, it is sufficient to state that I bear well in mind the limited role of the court in considering an application to set aside an award on grounds of an alleged breach of natural justice. Nonetheless, I note that it was an important part of the applicants’ case that to the extent that questions of jurisdiction are involved, this is a de novo hearing. So far as relevant, I consider these points further below. However, without prejudice to my conclusions with regard thereto, I summarise below what the applicants say is the relevant background, which I take largely from the affidavits and written submissions filed on behalf of the applicants.

The Preceding Transactions

Sometime towards the end of 2012, the first applicant was introduced to Mr B by a mutual friend. The introduction was done on the basis that Mr B was keen to be a strategic partner and investor in the third applicant’s (ie, CPW’s) business. During this meeting, Mr B represented to the first applicant that he had the expertise to raise funds, particularly in the Southeast Asia region, as well as Bangladesh, and that he desired to make an investment of up to US$10m in the third applicant’s business. Mr B further represented that he had contacts with companies, institutions and individuals who would be willing to invest in the third applicant’s business. Thereafter, the third applicant and the respondent entered into the following contracts and agreements: a memorandum of understanding dated 29 December 2012 (the “First MOU”); the Binding Heads of Terms dated 10 January 2013 (the “BHOT”); a memorandum of understanding dated 20 January 2013 (the “Second MOU”); and a joint venture agreement dated 22 January 2013 (the “JVA”), which contemplated the formation of a joint venture company known as CPW Singapore Ltd (“CPW Singapore”); (collectively, the “Preceding Transactions”). According to the applicants, these Preceding Transactions are vital to the culmination of the dispute between the parties as they relate closely to the dispute before the Tribunal.

Under the First MOU, the respondent had two obligations: to invest US$10m in the third applicant; and to bring in a further US$200m as an additional investment in the third applicant by 31 March 2013.

The obligation to invest US$10m in the third applicant was formalised by way of the BHOT on 10 January 2013. Under the terms of the BHOT, the third applicant was liable to pay the respondent an assured annual return of 8% on its...

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