CZT v CZU

• Jurisdiction: Singapore
• Judge: Chua Lee Ming J
• Judgment Date: 27 November 2023
• Neutral Citation: [2023] SGHC(I) 22
• Court: International Commercial Court (Singapore)
• Docket Number: Originating Summons No 1 of 2023
• Hearing Date: 04 September 2023
• Citation: [2023] SGHC(I) 22
• Year: 2023
• Plaintiff Counsel: Nair Suresh Sukumaran, Tan Tse Hsien, Bryan (Chen Shixian) and Joel Wang Pinwen (PK Wong & Nair LLC)
• Defendant Counsel: Koh Swee Yen SC, Claire Lim, Pang Yi Ching, Alessa and Teo Wei Kiat Samuel (WongPartnership LLP)
• Subject Matter: Arbitration,Award,Recourse against award,Setting aside
• Published date: 28 November 2023

Chua Lee Ming J (delivering the judgment of the court): Introduction

This is an application by the plaintiff to set aside an arbitral award issued by an arbitral tribunal in arbitration proceedings seated in Singapore and conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce 2017 (“ICC Rules 2017”).

Background facts

The plaintiff entered into a contract with the defendant (the “Provisional Contract”) under which the plaintiff contracted to deliver certain component packages that included materials, machinery and equipment (the “Material Packages”) as well as other documentation, designs and services.¹ A third party to be appointed by the defendant (the “Contractor”) was to use the Material Packages to construct certain products for the defendant.

Article 1.1 of the Provisional Contract set out the “main obligations” of the plaintiff and the defendant, which included the following: The plaintiff agreed to “deliver to the [Contractor] … the [Material Packages], out of which the [Contractor] shall, under a separate contract with the [defendant], construct ... and deliver to the [defendant] [certain products]”. The plaintiff agreed to “render training to the [defendant’s] personnel …”. The “[defendant/Contractor]” agreed to “provide the [plaintiff] with all necessary declarations regarding the final destination of the … Material Packages, …”.

Subsequently, the defendant appointed the Contractor. The plaintiff, the defendant and the Contractor then entered into an agreement for the transfer of the defendant’s rights and obligations under the Provisional Contract to the Contractor (the “Transfer Agreement”).²

Article 1 of the Transfer Agreement provided that all rights and obligations of the defendant in the Provisional Contract were unconditionally and irrevocably transferred to the Contractor except those “identified” in an attachment to the agreement (the “Attachment”). Article 2 of the Transfer Agreement provided that the defendant was “completely released from all the contractual obligations and waive[d] all contractual rights stipulated in the Provisional Contract except for those as identified in the Attachment”.

The Attachment set out a table containing two columns. The left-hand column was titled “Article” and the right-hand column was titled “Comments”. The table included the following references to and comments on Art 1.1 of the Provisional Contract:

Article	Comments
1.1	[The Contractor] shall render training to the [defendant] as per Annex …
1.1	The [defendant] shall provide [the Contractor] with all necessary declarations regarding the final destination of the … Material Packages, …

As stated in [3] above, Art 1.1 provided that the plaintiff was to render training to the defendant’s personnel and the defendant/Contractor was to provide the plaintiff with the necessary declarations regarding the final destination.

Article 6 of the Transfer Agreement provided that the Transfer Agreement and the Attachment were incorporated and made part of the Provisional Contract.

Two other contracts were entered into: The plaintiff entered into a contract with the Contractor for the supply of the Material Packages to the Contractor (the “Supply Contract”).³ The defendant entered into a contract with the Contractor for the Contractor to construct certain products for the defendant (the “Domestic Contract”).⁴

The defendant alleged that it subsequently discovered that certain components of the Material Packages were defective. The defendant filed an action in the defendant’s home jurisdiction (“Country D”) against the Contractor and the plaintiff (the “Litigation”). The court found the Contractor liable for 30% of the damages suffered by the defendant. The claim against the plaintiff was dismissed due to lack of jurisdiction because of an arbitration agreement in the Provisional Contract.

The arbitration agreement in the Provisional Contract provided for disputes to be settled by arbitration in Singapore by three arbitrators “in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce”.⁵

The arbitration proceedings

On 25 April 2019, the defendant commenced arbitration proceedings against the plaintiff (the “Arbitration”).⁶ In due course, the arbitration tribunal (the “Tribunal”) was constituted, comprising Professor Douglas Jones AO (“Prof Jones”), Professor Keechang Kim (“Prof Kim”) and Dr Philipp Habegger (“Dr Habegger”). Prof Kim was the defendant’s nominee while Dr Habegger was the plaintiff’s nominee. Prof Jones was appointed by the International Court of Arbitration of the International Chamber of Commerce as President of the Tribunal pursuant to Art 12(2) of the ICC Rules 2017.

In brief, the defendant claimed against the plaintiff for damages suffered by the defendant as a result of the plaintiff’s failure to perform its obligations, including its obligation to deliver the Material Packages free from any defect.

The Provisional Contract was governed by the laws of Country D. Under Art X of the relevant Code (the “Code”) in Country D, the defendant was entitled to claim damages against the plaintiff in respect of the defective Material Packages. However, the defendant could rely on Art X only if it had the right to delivery of the Material Packages and this right remained with the defendant after the Transfer Agreement was executed.

The issues in the Arbitration that are relevant to the present proceedings were whether: the defendant had a right to delivery of the Material Packages under Art 1.1 of the Provisional Contract; and if so, whether the right to delivery under Art 1.1 of the Provisional Contract remained with the defendant or whether it was transferred to the Contractor pursuant to the Transfer Agreement.

The defendant argued in the Arbitration that: The obligation under Art 1.1 of the Provisional Contract to deliver the Material Packages to the Contractor was an obligation to physically deliver the Material Packages to the Contractor and an obligation to supply the Material Packages free of defects to the defendant.⁷ As the Contractor was not initially a party to the Provisional Contact, the delivery obligation must have been understood as owed to the defendant prior to the execution of the Transfer Agreement.⁸ The rights and obligations “as identified” in the Attachment remained with the defendant. This “identification” was done by listing Articles in the left-hand column of the Attachment.⁹

On the other hand, the plaintiff argued that: It was clear from Art 1.1 of the Provisional Contract that the plaintiff was to deliver the Material Packages to the Contractor.¹⁰ The defendant was not entitled to any right to delivery of the Material Packages. The Provisional Contract did not create any effective rights or obligations until the Contractor was appointed, at which point the plaintiff’s delivery obligations were owed to the Contractor.¹¹ In any event, only the obligations listed under the “Comments” column in the table in the Attachment remained with the defendant. Thus, the only rights and obligations under Art 1.1 of the Provisional Contract that remained with the defendant were those relating to training and the certificates of final destination (see [6] above).¹² The intent was to transfer rights and obligations to the Contractor.¹³ The defendant’s submissions contradicted those that it made in the Litigation, in which the defendant had denied that the main rights under the Provisional Contract remained with the defendant.¹⁴

No claims were made in the Arbitration with respect to the Domestic Contract. The Contractor’s entitlement (if any) under the Supply Contract or any other contract was also not in issue in the Arbitration.

The Final Award and Dissent

On 20 September 2021, the ICC sent the final award (the “Final Award”)¹⁵ dated 14 September 2021 to the parties.¹⁶ The Final Award was a majority award by Prof Jones and Prof Kim (the “Majority”). The Majority concluded that the defendant had a valid claim against the plaintiff for breach of contract under the Provisional Contract with respect to the plaintiff’s delivery of defective Material Packages, which constituted incomplete performance under Art X of the Code.¹⁷ The Majority ordered the plaintiff to pay the defendant damages, interests and costs.¹⁸

In brief, the Majority found that: At the time that the Provisional Contract was entered into, the plaintiff’s obligations under the Provisional Contract, including delivery of the Material Packages to the Contractor, were owed to the defendant.¹⁹ The phrase “deliver to the [Contractor]” in Art 1.1 of the Provisional Contract referred to a physical location of delivery, and must have referred to rights and obligations between the defendant and the plaintiff. Pursuant to the Transfer Agreement, the rights and obligations that remained with the defendant were identified in the Attachment by listing the Articles in the left-hand column of the table in the Attachment.²⁰ The Comments clarified ambiguous aspects of the Articles that were identified. Based on the words of the Transfer Agreement and Attachment, the logical meaning was that the rights and obligations in Art 1.1 of the Provisional Contract, as identified in the left-hand column of the table in the Attachment, remained with the Claimant.²¹

The Majority’s reasons for its interpretation of the Transfer Agreement included the following: The interpretation was consistent with the wording of Art 1.1 of the Provisional Contract and the Supply Contract.²² If the rights and obligations of the defendant were transferred by virtue of the Transfer Agreement, one would have expected the wording of Art 1.1 to change from the Provisional Contract to the Supply Contract. Instead, Art 1.1 of the Supply Contract retained the...