CYW v CYX

• Jurisdiction: Singapore
• Judge: Thomas Bathurst IJ
• Judgment Date: 31 May 2023
• Neutral Citation: [2023] SGHC(I) 10
• Court: International Commercial Court (Singapore)
• Docket Number: Originating Application No 3 of 2022
• Hearing Date: 15 March 2023
• Citation: [2023] SGHC(I) 10
• Year: 2023
• Plaintiff Counsel: Suhaimi bin Lazim, Mohamed Hashim H Sirajudeen (Mirandah Law LLP) and Abdul Rohim bin Sarip (A. Rohim Noor Lila LLP)
• Defendant Counsel: Herman Jeremiah, Aw Sze Min, Lee Qiu Li and Tan Yi Xi Joie (Dentons Rodyk & Davidson LLP)
• Published date: 09 June 2023

Thomas Bathurst IJ: Introduction

By HC/OA 491/2022 (“OA 491”) filed on 26 August 2022, the applicant, CYW, sought, among other things, an order that the Final Award dated 16 May 2022, Award No 67 of 2022 (the “Award”) made in an arbitration between CYW and the respondent, CYX, be set aside. The arbitration proceedings were seated in Singapore, administered by the Singapore International Arbitration Centre (the “SIAC”), and conducted in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (6th Ed, 1 August 2016) (the “SIAC Rules”). I will refer generally to the arbitration proceedings between the parties as the “Arbitration”.

OA 491 was initially filed in the General Division of the High Court of the Republic of Singapore. It was subsequently transferred to the Singapore International Commercial Court as SIC/OA 3/2022 (“OA 3”).

In support of its application, CYW relies on s 24(b) of the International Arbitration Act 1994 (2020 Rev Ed) (the “IAA”) and Art 34(2)(a)(ii) of the UNCITRAL Model Law on International Commercial Arbitration as enacted under the First Schedule to the IAA (the “Model Law”).

Facts The parties

CYW is a company incorporated in Indonesia, and a state-owned entity of the Government of Indonesia which at the relevant time effectively held 89.6% of its shares. At the time of the entry into the agreement that forms the subject of the dispute, Mr C and Mr D were directors of CYW.

CYX is the Singapore branch office of Company C, a cooperative situated in the Netherlands offering international banking and financial services.

The dispute forming the subject of the Arbitration

The dispute that formed the subject of the Arbitration between the parties arose out of certain commercial arrangements entered into between: (a) CYW; (b) CYW’s associated company, Company A; and (c) CYX, relating to the purchase of cattle in the state of Queensland in Australia for subsequent slaughter and importation into Indonesia as beef products (the “Beef Programme”). The company designated to supply the cattle was an Australia-incorporated company, Company B.

The background to the transaction giving rise to the dispute is conveniently set out in paras 9–30 of the affidavit of Mr A, the legal manager of CYW, that was filed on behalf of CYW. The relevant background may be summarised as follows.

In November 2017, Mr C, purportedly on behalf of CYW, signed a Sales and Management Service Agreement (the “Sales Management Agreement”) with Company B which provided for terms upon which cattle was to be bought in Australia by Company B, fattened at farms in Queensland, then slaughtered and processed into beef products for subsequent export to Indonesia. The Sales Management Agreement also contemplated a bill exchange facility between Company B and CYX to enable the purchase orders made by CYW under the Sales Management Agreement to be funded.

The arrangement under the Sales Management Agreement contemplated the following steps: CYW would first issue monthly purchase orders setting out the cattle requirements and the delivery date of the corresponding beef products. Second, Company B was to purchase the requested number of cattle from third parties and sell them to CYW. At the same time, Company B would raise a bill of exchange for the purchase and sale of the cattle. The bill of exchange would be drawn by Company B with CYW as drawee and CYX as payee. Company B would then arrange for the slaughter of the cattle and the delivery of the beef products to CYW. At that time, a second bill of exchange would be drawn by Company B with CYW / Company A as drawee and CYX as payee in respect of Company B’s services of fattening and slaughtering the cattle and providing logistical arrangements for the delivery of the beef products to Indonesia. Finally, CYW was required to pay the total amounts set out in each bill of exchange on or before the maturity date in accordance with the facility agreement between Company B and CYX.

On 15 November 2017, Company B entered into a bill purchase facility with CYX pursuant to which CYX was obliged to purchase the bills drawn by Company B under the Sales Management Agreement. The maturity date for the bills was to be no later than 330 days from the purchase date. Company B was also obliged to apply the proceeds obtained from the sale of the bills in fulfilment of its obligations under its agreement with CYW.

In addition, Mr C purported to execute on behalf of CYW a security deed dated 16 November 2017 (the “Security Deed”) to secure any moneys due from CYW to CYX. Under the Security Deed, as security for all moneys payable to CYX, CYW granted CYX a fixed charge over all livestock purchased by CYW from Company B and any products or proceeds derived from their sale.

From January to August 2018, Company B issued 21 invoices and bills of exchange for an aggregate amount of USD16,661,227.61. Fourteen of the bills were accepted by Mr C purportedly on behalf of CYW for amounts totalling USD13,355,381.29.

Following the removal of Mr C and Mr D from their position as directors of CYW by way of a shareholders’ resolution dated 28 June 2018, CYW refused to accept the remaining bills. On 31 October 2018, CYX, in the exercise of its powers under the Security Deed, appointed receivers and managers of the livestock and its proceeds. The receivers thereafter seized and sold the livestock subject to the Sale Management Agreement. The amount apparently realised by the receivers totalled USD5,105,679.

In the Arbitration, CYW denied that it was liable to pay the accepted bills. CYW claimed that the Security Deed was invalid because CYW lacked the capacity to enter into the Security Deed or to accept the accepted bills. It also claimed that Mr C had no authority to enter into the Security Deed on CYW’s behalf. It sought declarations that the Security Deed and the related contracts were void and invalid, as well as consequential damages arising from CYX’s alleged failure to practice prudential banking or conduct due diligence as required by Indonesian law.

CYX, by counterclaim, sought to enforce the Security Deed and counterclaimed for the amount unpaid on the accepted bills, on the basis that CYW had capacity, and Mr C was authorised, to enter into the Security Deed and accept the bills. Alternatively, it claimed for damages flowing from misrepresentations of Mr C’s authority. CYX also resisted CYW’s claim on the basis that CYX was not subject to Indonesian banking laws and had conducted sufficient due diligence.

Two other matters should be noted. First, clause 18.1 of the Security Deed stated that the document was governed by the laws of Queensland. Second, in addition to the Arbitration, the subject of the present proceedings, on 19 December 2018, Company B issued a notice of arbitration against CYW and Company A, seeking damages for alleged breaches of the Sales Management Agreement. A dispute as to the jurisdiction of the arbitrator to determine these proceedings remains unresolved.

The procedural course of the Arbitration

CYW’s complaints in the present application are based primarily on the two orders made by the Tribunal on 3 July 2021 in its Procedural Order No 2 (“PO No 2”). The first of these orders was that CYW was to submit its “witness statements and expert report by 7 July 2021” and any witness statement or expert report not filed by that date would not be admitted into the Arbitration. The second order was that CYW was to submit English language translations of all exhibits and legal authorities upon which it relied by 7 July 2021. The order provided that any later translated or untranslated exhibits and legal authorities would be excluded from the Arbitration.

In considering whether the effect of these orders was to deny CYW of natural justice, it is necessary to consider the procedural course of the Arbitration in some detail.

The Arbitration was commenced by a notice of arbitration filed by CYW as claimant with the SIAC on 3 February 2020 (the “Notice of Arbitration”). The response to the Notice of Arbitration was filed by CYX on 14 February 2020. Following constitution of the arbitral tribunal (the “Tribunal”), a preliminary meeting was convened by the Tribunal on 2 July 2020.

On 6 July 2020, the Tribunal issued Procedural Order No 1 (“PO No 1”). The procedural directions given at that time relevantly provided for CYW to submit its Statement of Claim (“SOC”) together with all supporting documents including factual exhibits, written witness statements and legal authorities within ten weeks from the date of PO No 1, namely, 14 September 2020. On 20 July 2020, the Tribunal issued a procedural timetable setting out the dates by which various documents were to be submitted (which was agreed to by the parties on 28 July 2020) (the “Procedural Timetable”). Two days later, on 22 July 2020, the Tribunal set down the hearing on the merits for five days commencing on 6 September 2021.

On 9 September 2020, CYW sought an extension of time of two weeks up to 28 September 2020 to file its SOC and supporting documents. That extension was granted, and CYW submitted its SOC dated 14 September 2020 on 28 September 2020.

As the Tribunal pointed out in its Award at para 27, paras 89 and 90 of PO No 1 stipulated that any exhibit or legal authority, which was not in English, had to be translated within five days of the documents being submitted. Nearly two weeks after submitting the SOC, CYW sought an extension of time until 23 October 2020 to provide English language translations of the exhibits and legal authorities in its SOC, stating that an extension was required due to the volume of the documents. The Tribunal noted that the extension was granted but ultimately, the translations were not provided by 23 October 2020. The Tribunal further stated that no explanation for the failure was offered....