CVV and others v CWB

JurisdictionSingapore
JudgeJudith Prakash JCA
Judgment Date01 December 2023
Neutral Citation[2023] SGCA(I) 9
Hearing Date11 October 2023
Docket NumberCivil Appeal No 6 of 2023
Citation[2023] SGCA(I) 9
CourtCourt of Appeal (Singapore)
Year2023
Published date01 December 2023
[LawNet Admin Note: The following judgment is displayed as received from source]
Steven Chong JCA (delivering the judgment of the court): Introduction

Arbitration has emerged as a popular and attractive mode for the resolution of complex commercial disputes. One of the key virtues of arbitration is in the finality of the arbitral award. However, it appears that the benefit of finality is only appreciated by the winning party because dissatisfied parties are increasingly seeking the court’s assistance and intervention to set aside arbitral awards. This is so notwithstanding that curial intervention is only warranted on the limited grounds exhaustively prescribed under the International Arbitration Act 1994 (2020 Rev Ed) (the “IAA”).

One of the prescribed grounds is where a breach of the rules of natural justice has occurred in connection with the making of the award. From a brief survey of Singapore cases, a significant majority of such applications have been unsuccessful because those challenges were found in substance to have engaged the merits of the award. When a dissatisfied party relies on an alleged breach of the rules of natural justice, it is crucial to bear in mind that the typical grounds on which a litigant may challenge a judgment are quite different and distinct from those which apply in the context of an arbitral award. The failure to properly appreciate this vital distinction is usually the reason why the challenge is ultimately unsuccessful.

This appeal arose from a decision of a judge of the Singapore International Commercial Court (the “Judge”) refusing to set aside an arbitral award for, inter alia, a breach of the rules of natural justice. Like many such similar applications, we find that the alleged breach of natural justice in the present appeal is in essence a challenge based on the merits of the award. For better or for worse, parties in an arbitration must accept the consequences of their choice of the arbitral tribunal as regards the merits of the award, irrespective of the degree of their dissatisfaction with the outcome in the award.

The material facts The parties

We have largely adopted the same redacted names as those used in the judgment below. The fourth appellant, CVQ, is a fund management company incorporated in Singapore. It is the fund manager of two Singapore-incorporated funds, “Fund 1” and “Fund 2”.

Fund 1 and Fund 2 each have various subsidiaries that are incorporated in Ruritania. Fund 2’s subsidiary is the seventh appellant, CVR (the “Fund 2 Subsidiary”), while the remaining appellants are subsidiaries of Fund 1 (collectively, the “Fund 1 Subsidiaries”).

The respondent, CWB, was incorporated in Ruritania sometime in 2015 and is an advisory firm with a focus on real estate investments.

As we explain further below, the present dispute arose out of CVQ’s engagement of CWB as an asset advisor for Fund 1 and Fund 2. More specifically, CWB claimed that CVQ had failed to pay fees that were due to it for its services as an asset advisor, and that dispute was subsequently referred to arbitration.

Background to the dispute

In or around December 2015, CWB approached CVQ with an opportunity to acquire a portfolio of real estate assets (the “Fund 1 Portfolio”). On 24 March 2016, CVQ incorporated Fund 1 to raise capital from investors to acquire the Fund 1 Portfolio. On 25 August 2016, Fund 1 issued a private placement memorandum (the “Fund 1 PPM”) to potential investors. Shortly thereafter, Fund 1 acquired the Fund 1 Portfolio through the Fund 1 Subsidiaries.

Subsequently, CVQ entered into the following agreements: On 5 September 2016, CVQ and CWB entered into an advisory agreement (“AA1”), under which CVQ engaged CWB as its asset advisor in relation to the Fund 1 Portfolio. In return, CVQ was to pay CWB an advisory fee, which comprised 50% of the management fee and 50% of the performance fee that CVQ would receive from Fund 1 in its capacity as fund manager. The two components of CWB’s advisory fee are respectively referred to as the “Management Fee” and the “Performance Fee”. On 1 March 2018, CVQ, CWB and the Fund 1 Subsidiaries entered into an addendum, by which the parties agreed that the advisory fee under AA1 could be paid by the Fund 1 Subsidiaries directly to CWB.

Separately, in February 2018, CWB approached CVQ with another investment opportunity to acquire a real estate asset. CVQ proceeded to acquire this real estate asset through Fund 2. On 31 August 2018, CVQ, CWB and the Fund 2 Subsidiary entered into another advisory agreement (“AA2”), under which CWB was engaged as the asset advisor for Fund 2. Similar to the arrangement under AA1, CVQ was to pay CWB an advisory fee comprising a Management Fee and a Performance Fee, meaning that CVQ would pay CWB 50% of the management fee and 50% of the performance fee that it received from Fund 2 in its capacity as fund manager.

Both AA1 and AA2 provided that the governing law of the respective agreements was Singapore law, and that disputes were to be resolved by arbitration in Singapore, as follows: This Agreement shall be construed in accordance with the laws of Singapore. Any dispute arising out of or in connection with this Agreement including any question regarding its existence, validity or termination shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre for the time being in force which rules are deemed to be incorporated by reference into this Clause. A Party may require any other dispute between the same parties concerning any other agreement relating to the advisory services which is also expressed to be subject to arbitration in accordance with the Arbitration Rules of the Singapore International Arbitration Centre to be resolved in the same arbitration as the dispute concerning this Agreement, provided that the Tribunal considers it reasonable to accede to that requirement in the circumstances. The Tribunal shall consist of one (1) arbitrator to be appointed by the Singapore Arbitration Centre. All arbitration proceedings shall be in the English language. The decision of the arbitrator shall be final and binding on all the Parties. The seat of arbitration shall be Singapore.

By October 2018, there was growing distrust and tension between the parties. On 19 March 2019, CWB issued a demand to two of the Fund 1 Subsidiaries for payment of advisory fees that were outstanding under AA1. On the same day, CWB served CVQ with a notice of termination of AA2. CVQ accepted CWB’s notice of termination of AA2 on 27 March 2019. The effective date of termination of AA2 was 20 June 2019.

As for AA1, CVQ served notice of termination of AA1 to CWB on 22 March 2019 and in turn the Fund 1 Subsidiaries served notice of termination of AA1 to CWB on 5 April 2019. The effective date of termination of AA1 was 23 June 2019.

On 12 March 2020, CVQ, along with the Fund 1 Subsidiaries and the Fund 2 Subsidiary (collectively, the “Claimants”), commenced arbitration proceedings with the Singapore International Arbitration Centre against CWB for various alleged breaches of AA1 and AA2 (the “Arbitration”). In response, CWB brought counterclaims seeking, among other things, payment of outstanding advisory fees comprising (a) the Management Fee and Performance Fee under AA1; and (b) the Management Fee under AA2.

The Claimants disputed that they were liable to pay any outstanding fees under AA1 and AA2. In relation to AA1, the Claimants’ position was that those fees were only due when Fund 1 reached the end of its life, and that had not occurred. In the alternative, the Claimants took issue with the quantum of fees that CWB claimed were owed to it and how those amounts should be computed. Notably, while the Claimants raised various objections to the calculations adduced by CWB, the Claimants themselves did not provide their own calculations of the amounts owed to CWB.

The arbitral tribunal’s decision

On 20 June 2022, the arbitral tribunal (the “Tribunal”) issued its final award (the “Award”). A memorandum of corrections to the Award was subsequently issued on 19 July 2022. In the Award, the Tribunal dismissed all the Claimants’ claims and allowed CWB’s counterclaims. Briefly, the Tribunal found that CWB had not breached its obligations under AA1 and AA2 and was entitled to payment of its outstanding advisory fees. In determining the amounts due to CWB under AA1, the Tribunal adopted the calculations that were adduced by CWB at the evidentiary hearing through its Head of Finance (“Mr B”). Consequently, the Tribunal ordered CVQ to pay CWB the following sums (Award at para 495):

Description Amount payable to CWB
Management Fee under AA1 for 1 January 2019 to 23 June 2019 (being the effective date of termination for AA1, see [13] above) (the “Pre-Termination Management Fee”) US$313,734
Management Fee under AA1 for 23 June 2019 to the end of the life of Fund 1 (the “Post-Termination Management Fee”) US$1,193,674
Performance Fee under AA1 US$1.01m

Further, the Tribunal found that CWB was entitled to be paid the Management Fee under AA2, in the sum of US$97,424.32 plus interest.

Summary of proceedings below

On 20 July 2022, the Claimants filed HC/OA 366/2022 in the General Division of the High Court of Singapore, to set aside the Award. HC/OA 366/2022 was subsequently transferred to the Singapore International Commercial Court and renamed SIC/OA 2/2022 (“SIC 2”).

In SIC 2, the Claimants contended that the Award should be set aside in its entirety under s 24(b) of the IAA as it was issued in breach of the rules of natural justice. In particular, the Claimants’ arguments were that: The Tribunal breached the rule against bias. The Tribunal breached the fair hearing rule in finding that CWB was...

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1 cases
  • Cvv v Cwb
    • Singapore
    • Court of Appeal (Singapore)
    • 1 Diciembre 2023
    ...and others and CWB [2023] SGCA(I) 9 Judith Prakash JCA, Steven Chong JCA and Robert French IJ Civil Appeal No 6 of 2023 Court of Appeal Arbitration — Award — Recourse against award — Setting aside — Tribunal allegedly failing to apply its mind to essential issues — Whether arbitral procedur......
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