CZQ and another v CZS

• Jurisdiction: Singapore
• Judge: Andre Maniam J
• Judgment Date: 27 October 2023
• Neutral Citation: [2023] SGHC(I) 16
• Court: International Commercial Court (Singapore)
• Docket Number: Originating Application No 4 of 2023
• Hearing Date: 30 August 2023
• Citation: [2023] SGHC(I) 16
• Year: 2023
• Plaintiff Counsel: Poon Kin Mun Kelvin SC, Koh En Da Matthew, David Isidore Tan and Timothy James Chong Wen An (Rajah & Tann Singapore LLP)
• Defendant Counsel: Thio Shen Yi SC, Thara Rubini Gopalan and Nikita Garg (TSMP Law Corporation)
• Subject Matter: Arbitration,Agreement,Condition precedent to arbitration
• Published date: 01 November 2023

Andre Maniam J (delivering the judgment of the court): Introduction

The respondents to an arbitration applied to court under s 10 of the International Arbitration Act 1994 for a determination that the arbitral tribunal had no jurisdiction. The parties in the arbitration were as follows: the first respondent was the Contractor under a construction contract (“the Contract”); the second respondent was the Contractor’s parent company which had guaranteed the Contractor’s performance of the Contract; and the claimant was the Employer under the Contract.

The respondents contended that the tribunal had no jurisdiction because a procedure for amicable settlement prescribed in Sub-Clause 20.5 of the Contract had not been complied with. The tribunal ruled, as a preliminary question, that it had jurisdiction (the “Ruling”). The respondents applied to court for a determination to the contrary, but we agreed with the tribunal that it had jurisdiction. These are our grounds of decision.

Issues

The tribunal decided: that the amicable settlement procedure in Sub-Clause 20.5 of the Contract was not a condition precedent to the commencement of arbitration under Sub-Clause 20.6 (Ruling at [430]–[484]; and that the Sub-Clause 20.5 procedure had factually not been complied with, but this had been caused by the respondents, and so they could not rely on it to challenge the tribunal’s jurisdiction (Ruling at [536]–[554]).

We agreed with the tribunal that the amicable settlement procedure under Sub-Clause 20.5 was not a condition precedent to the commencement of arbitration under Sub-Clause 20.6. Our decision on this issue was sufficient for us to dismiss the respondents’ application.

Background

On 3 February 2020, the claimant commenced two arbitrations, one against each respondent. The two arbitrations were then consolidated into one, to form the subject arbitration.

A three-member tribunal was constituted, comprising Professor Douglas Jones AO (presiding), Mr David Brynmor Thomas KC, and Mr Christopher Lau SC.

As between the claimant and the first respondent, Clause 20 of the Contract addressed the resolution of disputes between them as the Parties to the Contract.

As between the claimant and the second respondent (who was not a party to the Contract, but had guaranteed the first respondent’s performance of it), it was common ground that the guarantee incorporated Clause 3 of the Contract regarding Engineer determinations, and in relation to such determinations, Clause 20 as well.¹ In the arbitration, and before us, the parties proceeded on the basis that the same arguments relating to Clause 20 would apply both to the claimant’s claim against the first respondent, and to the claimant’s claim against the second respondent.

As General Conditions, the Contract incorporated the FIDIC Conditions of Contract for Plant and Design Build (First Edition, 1999) (the “FIDIC Conditions”), as amended by the Conditions of Particular Application (the “Particular Conditions”).

Clause 20 of the Contract (set out below) was based on Clause 20 of the FIDIC Conditions, as amended by the Particular Conditions: CLAUSE 20 CLAIMS, DISPUTE AND ARBITRATION

20.1 – Contractor’s Claims

[Various stipulations concerning the Contractor’s Claims]

20.2 – Appointment of Dispute Adjudication Board

[FIDIC Sub-Clause 20.2 was deleted and replaced with the following]

All references to the Dispute Adjudication Board will not apply and all disputes will be dealt with under Sub-Clause 20.5.

20.5 – Amicable Settlement

[FIDIC Sub-Clause 20.5 was deleted and replaced with the following] (a) If any dispute arises out of or in connection with the Contract, or the execution of Works, including any dispute as to certification, determination, instruction, opinion or valuation of the Engineer, then either Party shall notify the other Party that a formal dispute exists. Representatives of the Parties shall, in good faith, meet within 7 days of the date of the notice to attempt to amicably resolve the dispute, (b) If the representatives of the Parties cannot resolve a dispute within 7 days from the first meeting, 1 or more senior officer(s) from each Party shall meet in person within 14 days from the first meeting of the representatives in an effort to resolve the dispute. If the senior officers of the Parties are unable to resolve the dispute within 7 days from their first meeting, then either Party shall notify the other Party that the dispute will be submitted to arbitration in accordance with Sub-Clause 20.6.

20.6 – Arbitration

[FIDIC Sub-Clause 20.6 was amended to the following]

Unless settled amicably, any dispute shall be finally settled by international arbitration.

Unless otherwise agreed by both Parties: (a) the dispute shall be finally settled under the Rules of Arbitration of the Singapore International Arbitration Centre, (b) unless the parties otherwise agree, the dispute shall be settled by one arbitrator appointed in accordance with these Rules, (c) the arbitration shall be conducted in the language for communications defined in Sub-Clause 1.4 [Law and Language]. (d) The seat of arbitration will be Singapore, and (e) The arbitration will be confidential.

The arbitrator(s) shall have full power to open up, review and revise any certificate, determination, instruction, opinion or valuation of the Engineer, and any decision of the DAB, relevant to the dispute. Nothing shall disqualify the Engineer from being called as a witness and giving evidence before the arbitrator(s) on any matter whatsoever relevant to the dispute.

Neither Party shall be limited in the proceedings before the arbitrator(s) to the evidence or arguments previously put before the DAB to obtain its decision or to the reasons for dissatisfaction given in its notice of dissatisfaction. Any decision of the DAB shall be admissible in evidence in the arbitration.

Arbitration may be commenced prior to or after completion of the Works. The obligations of the Parties, the Engineer and the DAB shall not be altered by reason of any arbitration being conducted during the progress of the Works.

20.9 – Continuity

Despite the existence of a Dispute, the parties must continue to perform their obligations under the Contract.

20.10 – Injunctive or Urgent Relief

Nothing in Clause 20 prejudices either Party’s right to institute proceedings to seek injunctive relief or urgent declaratory relief in a competent Brunei court in respect of a Dispute under Clause 20 or any other matter arising under the Contract.

Findings Overview

The respondents contended that, as a matter of contractual interpretation, compliance with Sub-Clause 20.5 was a condition precedent to the commencement of arbitration under Sub-Clause 20.6.

We concluded (and so had the tribunal), that compliance with Sub-Clause 20.5 was not a condition precedent to the commencement of arbitration under Sub-Clause 20.6. We deal with the respondents’ submissions on Sub-Clauses 20.6, 20.5 and 20.2 in turn, but emphasise that our decision was arrived at on a construction of Clause 20 as a whole, rather than by looking at individual Sub-Clauses in isolation.

Clear expression of conditions precedent

As a general principle, clear words are necessary to create a condition precedent to the commencement of arbitration. The authorities the tribunal reviewed are consistent on this (Ruling at [460]–[474]).

In this regard, counsel for the respondents acknowledged that: a condition precedent would normally be expressed in clear words; counsel had not seen any authority where the courts had found a condition precedent without clear words; and there were no clear words in Sub-Clause 20.5 or Sub-Clause 20.6 making compliance with Sub-Clause 20.5 a condition precedent to the commencement of arbitration under Sub-Clause 20.6.

Those concessions by counsel reflected the state of the relevant authorities, and the language of Sub-Clauses 20.5 and 20.6.

The following authorities are instructive in this regard: Halifax Financial Services Limited v Intuitive Systems Limited [1999] 1 All ER (Comm) 303 at 307 where McKinnon J stated, “There is no express provision making compliance with cl 33 a condition precedent to legal proceedings” (Ruling at [461]); International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd [2013] 1 SLR 973 (“Lufthansa (HC)”) at [100] where the High Court endorsed the parties’ common premise that Clause 37.2 was a condition precedent to the commencement of arbitration under Clause 37.3, noting that Clause 37.2 provided for the reference of disputes to mediation, and Clause 37.3 then referred to Clause 37.2 in providing for the arbitration of disputes “which cannot be settled by mediation pursuant to Clause 37.2” (Ruling at [461]); International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd [2014] 1 SLR 130 (“Lufthansa (CA)”) at [54] where the Court of Appeal agreed that the steps set out in Clause 37.2 were conditions precedent to any reference to arbitration pursuant to Clause 37.3, stating that it was significant that the arbitration clause itself in Clause 37.3 referred only to “disputes…which cannot be settled by mediation pursuant to Clause 37.2” (Ruling at [461]); Emirates Trading Agency LLC v Prime Mineral Exports Private Ltd [2014] EWHC 2104 (“Emirates”) where cl 11.1 provided that if any dispute or claim should arise, “the Parties shall first seek to resolve the dispute or claim by friendly discussion…If no solution can be arrived at in between the Parties for a continuous period of 4 (four) weeks then the non-defaulting party can invoke the arbitration clause and refer the disputes to arbitration” [emphasis added] (Ruling at [467]– [469]); Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2246 (TCC) (“Ohpen”) where Clause 11.1 provided that “The Parties will first...