Cvv v Cwb

• Jurisdiction: Singapore
• Judge: Judith Prakash JCA,Steven Chong JCA,Robert French IJ
• Judgment Date: 01 December 2023
• Docket Number: Civil Appeal No 6 of 2023
• Court: Court of Appeal (Singapore)

CVV 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 procedure not in accordance with parties' agreement — Article 34(2)(a)(iv) UNCITRAL Model Law on International Commercial Arbitration

Arbitration — Award — Recourse against award — Setting aside — Tribunal allegedly failing to apply its mind to essential issues — Whether award should be set aside for breach of rules of natural justice — Section 24(b) International Arbitration Act 1994 (2020 Rev Ed)

Held, dismissing the appeal:

(1) The Tribunal had applied its mind to whether the conditions for payment of the Performance Fee under AA1 had been satisfied. The Tribunal accepted the Claimants' submission that they were only supposed to pay the Performance Fee at the end of the life of Fund 1; however, the Tribunal's finding was that the life of Fund 1 had ended. The Tribunal also found that the Performance Fee was payable upon Fund 1 achieving an 8% rate of return, and within 30 business days of CVQ receiving the same from Fund 1. Because of the Claimants' repeated refusals to disclose documents pertaining to the correct computation of the Performance Fee, the Tribunal had assumed in CWB's favour that these conditions were satisfied, such that the Performance Fee was payable to CWB: at [45] to [48] and [53].

(2) The Tribunal had applied its mind to when the life of Fund 1 came to an end. The Tribunal expressly found that the life of Fund 1 ended on 2 September 2020. While the Tribunal accepted Mr B's calculations, which used a different date as the end of life of Fund 1, the Tribunal's decision was made on the basis that Mr B's calculations were the only calculations adduced in the Arbitration and were therefore the best estimates of CWB's claims. It did not show that the Tribunal had failed to apply its mind: at [55] and [56].

(3) The Tribunal did not breach the fair hearing rule in accepting Mr B's calculations of CWB's claims. The objections raised by the Claimants were irrelevant, not put to CWB's witnesses, or did not detract from the fact that the Claimants had not raised any alternative calculations of CWB's claims. The mere fact that the Tribunal did not refer to every one of the Claimants' objections did not mean that it breached the fair hearing rule. Even if the Tribunal was mistaken in stating that the Claimants had failed to challenge Mr B's calculations until the time of closing submissions, this was at most an error of fact which would not justify setting aside the Award: at [59] to [65].

(4) The Tribunal did not fail to consider whether CWB's claims were awarded as a debt or an award for damages. The Claimants did not seek to draw this distinction before the Tribunal, and so it could not be said that the Tribunal had failed to apply its mind to the Claimants' case: at [66] and [67].

(5) The Claimants relied on the same arguments made in support of their submission that the Tribunal had breached the fair hearing rule, to contend that the arbitral procedure was not carried out in accordance with the parties' agreement. Given the court's finding that the Tribunal did not breach the fair hearing rule, this ground was wholly unmeritorious: at [68].

(6) Following the filing of closing submissions, the Tribunal invited the parties to file further submissions addressing any orders that CWB needed to quantify the Performance Fee. In response, the Claimants filed a further set of submissions addressing the correct quantification of the Performance Fee. The Claimants therefore had reasonable notice that the Tribunal would decide on the quantum of the Performance Fee and had a reasonable opportunity to present their case: at [69] and [70].

[Observation: While an arbitral tribunal was under a general duty to give reasons, it was not settled in the case law whether a tribunal's failure to give adequate reasons was itself a reason to set aside an award, or what the content of a tribunal's duty to give reasons was. It was not appropriate to apply standards of reasoning applicable to judges in the context of arbitration proceedings, given that different considerations were at play in a court case as opposed to an arbitration. That said, it was not necessary for the court to pronounce on these issues, because the Claimants' case for setting aside the Award was ultimately premised on a breach of the rules of natural justice, rather than the Tribunal's alleged failure to give reasons: at [32], [33] and [35].]

Case(s) referred to

BZW v BZV [2022] 1 SLR 1080 (folld)

Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd [2010] SGHC 80 (refd)

L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125 (folld)

Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86; [2007] 3 SLR 86 (folld)

Thong Ah Fat v PP [2012] 1 SLR 676 (refd)

TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 (not folld)

Westport Insurance Corp v Gordian Runoff Ltd [2011] HCA 37 (folld)

Facts

The fourth appellant, CVQ, was the fund manager of two Singapore-incorporated funds, “Fund 1” and “Fund 2”, which each had various subsidiaries incorporated in Ruritania. Fund 2's subsidiary was the seventh appellant, CVR (the “Fund 2 Subsidiary”), while the remaining appellants were subsidiaries of Fund 1 (collectively, the “Fund 1 Subsidiaries”). The respondent, CWB, was an advisory firm incorporated in Ruritania.

In 2016 and 2018, CVQ engaged CWB as its asset advisor pursuant to two advisory agreements. Under the first advisory agreement (“AA1”), CVQ engaged CWB as its asset advisor in relation to assets owned by Fund 1. In return, CVQ agreed to pay CWB fees comprising 50% of the management fee and 50% of the performance fee that CVQ was to receive from Fund 1 in its capacity as fund manager. The two components of CWB's fees were respectively referred to as the “Management Fee” and the “Performance Fee”. Under the second advisory agreement (“AA2”), CVQ engaged CWB as its asset advisor in relation to assets owned by Fund 2, and likewise agreed to pay CWB a Management Fee and a Performance Fee (ie, 50% of the management fee and 50% of the performance fee that CVQ was to receive 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.

By October 2018, there was growing distrust and tension between the parties. AA2 was subsequently terminated with effect from 20 June 2019, while AA1 was terminated with effect from 23 June 2019.

In March 2020, CVQ, along with the Fund 1 Subsidiaries and the Fund 2 Subsidiary (collectively, the “Claimants”), commenced arbitration proceedings against CWB for various alleged breaches of AA1 and AA2 (the “Arbitration”). In response, CWB brought counterclaims seeking payment of, among other things: (a) the Performance Fee under AA1; (b) the Management Fee under AA1 from 1 January 2019 to 23 June 2019 (the “Pre-Termination Management Fee”); and (c) the Management Fee under AA1 from 23 June 2019 to the end of the life of Fund 1 (the “Post-Termination Management Fee”).

In June 2022, the arbitral tribunal (the “Tribunal”) issued its final award (the “Award”), dismissing the Claimants' claims and allowing CWB's counterclaims. The Claimants subsequently applied in SIC/OA 2/2022 (“SIC 2”) to set aside the Award on the basis that the Tribunal had breached the rules of natural justice. Separately, CWB obtained permission to enforce the Award in Singapore vide SIC/OA 4/2022. The Claimants then filed HC/SUM 4149/2022 (“SUM 4149”) to set aside the order granting permission.

A judge of the Singapore International Commercial Court (“SICC”) (the “Judge”) dismissed SIC 2 and SUM 4149. The Claimants subsequently filed CA/CAS 6/2023 appealing against the Judge's decision.

On appeal, the Claimants submitted that the Tribunal had breached the fair hearing rule by failing to apply its mind and/or to give reasons for its decision on essential issues in the Award. The Claimants contended that this manifested in four aspects of the Tribunal's decision: (a) its failure to consider whether the conditions for payment of the Performance Fee under AA1 had been satisfied; (b) its omission to make any finding on whether the life of Fund 1 had come to an end, or alternatively, its use of inconsistent dates as the end of the life of Fund 1; (c) its acceptance of the calculations of CWB's Head of Finance (“Mr B”) of the quantum of the Performance Fee, the Pre-Termination Management Fee and the Post-Termination Management Fee; and (d) its failure to consider whether CWB's claims were awarded as a debt or as an award for damages.

The Claimants further contended that the arbitral procedure was not carried out in accordance with the parties' agreement and that the Award should be set aside on this basis. Finally, they submitted that they had no reasonable notice that the Tribunal would decide on the quantum of the Performance Fee, in breach of the fair hearing rule.

Legislation referred to

International Arbitration Act 1994 (2020 Rev Ed) ss 24, 24(b)

N Sreenivasan SC, Tan Kai Ning ClaireandWah Kai Lin Kelly (K&L Gates Straits Law LLC) for the appellants;

Chan Tai-Hui Jason SC, Kek Meng Soon Kelvin, Toh Jia YiandAlisa Toh Qian Wen (Allen & Gledhill LLP) for the respondent.

1 December 2023

Judgment reserved.

Steven Chong JCA (delivering the judgment of the court):

Introduction

1 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...