Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 15 March 2010
• Neutral Citation: [2010] SGHC 80
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 1126 of 2009
• Year: 2010
• Published date: 24 March 2010
• Hearing Date: 20 November 2009
• Plaintiff Counsel: Sundaresh Menon SC and Tammy Low (Rajah & Tann LLP)for the plaintiff
• Defendant Counsel: Ravindran Chelliah and Sally Kiang (Chelliah & Kiang)
• Subject Matter: Arbitration,Recourse against award,Award under Arbitration Act
• Citation: [2010] SGHC 80

Andrew Ang J: Introduction

This was an application by Front Row Investment Holdings (Singapore) Pte Ltd (“Front Row”) for an order to set aside part of an award dated 3 July 2009 (“the Award”) of the arbitrator (“the Arbitrator”) in an arbitration involving Daimler South East Asia Pte Ltd (“Daimler”) as claimant, and Front Row as respondent. The part of the Award sought to be set aside was in respect of Front Row’s counterclaim.

The ground upon which the application was founded was that the Arbitrator had breached the rule of natural justice expressed in the Latin maxim audi alteram partem. In particular, the Arbitrator had inexplicably concluded that Front Row relied upon only one of three misrepresentations when there was no basis on which he could have concluded that Front Row had abandoned reliance on the rest.

Section 48(1)(a)(vii) of the Arbitration Act (Cap 10, 2002 Rev Ed) (“the Act”) provides that an arbitral award may be set aside by the High Court if:

a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced; …

The threshold which an applicant under s 48(1)(a)(vii) has to surmount is high. It is particularly so in the present case, given the undoubted calibre and experience of the Arbitrator Nevertheless, after hearing the parties’ submissions and in the absence of any serious attempt by Daimler’s counsel to explain away the Arbitrator’s apparent misapprehension, I allowed Front Row’s application. I now give my reasons. Background The parties

Front Row is a company incorporated in Singapore. It was set up specifically for a joint venture with Daimler. Daimler is also a company incorporated in Singapore. It was previously known as DaimlerChrysler South East Asia Ltd.

The facts

Front Row and Daimler were parties to an agreement dated 15 September 2005 (“the Agreement”) by which they agreed jointly to organise and run a series of races across South East Asia using 35 specially built light-weight Mercedes-AMG SLK 55 cars. This series of races was to be called the “Asian Cup Series”. Under the Agreement, Front Row was responsible for financing the venture whilst Daimler was responsible for organising the Asian Cup Series. As part of Daimler’s obligation to organise the Asian Cup Series, it was to second one of its employees, Mr Thomas Buehler (“Buehler”), to Front Row to act as its general manager.

The background to and terms of the joint venture were reflected in two key documents: A pre-contractual powerpoint presentation titled “Daimler Chrysler Project Asian Cup”, dated 6 July 2005, which Buehler sent to Front Row’s chief executive officer, Mr Daniel Prager (“Prager”), on 26 July 2005. This presentation was a “Concept/Feasibility Study” of the joint venture; and The Agreement, the key terms of which included the following paragraphs¹: 4. The first activity will be the AMG-Mercedes South East Asian Cup Series (hereinafter referred to as “South East Asian Cup Series”. … in which it is envisioned that the partnership would organise up to 20 races per year for two years. Each race weekend would hold two races at the elected location. … 5. It is agreed that Front Row will be the legal entity used to conduct the South East Asian Cup Series. … 6. It is agreed that Front Row or related companies will provide all financing for the venture including the initial purchase of the 35 SLK 55 specially prepared event cars … Front Row will also purchase 2 new Mercedes AMG E55 cars from a related company at cost price. These cars to be used exclusively for promotional and day to day business of running the South East Asian Cup Series. As with the SLK 55s they will be sold at the end of the two year Series.

…

8. [Daimler] will cross-invoice Front Row in respect of Thomas Buehler’s salary package and Thomas Buehler will devote regularly 100% of his time and effort to the running and organisation of the Asian Cup Series. … 9. It is further agreed that [Daimler] will not be required to introduce any financing for this venture and that all the financial risk will be absorbed by Front Row. …

…

10. … It is anticipated that the 35 SLK’s will be sold at the end of the two year period say April 2008 at between 30,000€ and 40,000€ each, the 2 E55 to be sold at market value.

…

13. All branding, promotion will be conducted exclusively by [Daimler] [Daimler’s] interest will be handled on a day to day basis by Thomas Buehler and Wolfgang Huppenbauer. The main board of Front Row will NOT discuss any [Asian Cup] matters. …

[emphasis added]

From the foregoing, it is clear that Front Row’s obligations under the Agreement were to: purchase the cars as specified by Daimler and manufactured by Mercedes-AMG GmbH, a company related to Daimler; and provide the working capital required to fund the running of the Asian Cup Series. On the other hand, Daimler’s obligations under the same were to: organise, brand and promote the Asian Cup Series; organise up to 20 races per year for two years with each race weekend holding two races; and ensure that Buehler will devote 100% of his time and effort to the running and organisation of the Asian Cup Series. The Agreement also provided that all disputes between Front Row and Daimler arising out of or in connection with the Agreement should be settled in Singapore by a single arbitrator applying the Rules of Conciliation and Arbitration of the International Chamber of Commerce (“the ICC Rules”).

Front Row duly purchased the said 35 SLK 55 cars which were specially built for the racing series. However, according to Front Row, Daimler failed to keep its side of the bargain. There was practically no organisation, branding or promotion on Daimler’s part. Daimler only organised three races and none of the races had sufficient participation. The number of participants fell steadily from 15 in the first race, which was half the expected number, to six in the second, and five in the third. In respect of the three failed races, Front Row suffered a total loss of $40,586.53.

According to Front Row, following the failure of the third race, it became apparent to Front Row that the Asian Cup Series was not going to be a success. Consequently, Front Row’s director and shareholder, Mr Yeo Wee Koon (“Yeo”), tried to make the best of the situation by suggesting that Front Row stage a supporting event for the A1 Grand Prix in March 2007 using the SLK 55 cars. However, he was informed by Mercedes-AMG via a letter on 27 March 2007 (“the Letter”) that that was not possible as the SLK 55 cars had not been made for actual racing. They had been developed only for use in “driving training programmes … which [did] not involve the cars competing against each other”.

Shortly after Front Row received the Letter, Buehler stopped working for Front Row. In June 2008, Front Row attempted to sell the cars back to Mercedes-AMG but without success. Front Row was also unable to find any buyer for the cars as they were usable neither on normal roads nor as race cars.

On 22 February 2008, Daimler commenced arbitration proceedings against Front Row, claiming $610,506.06 from Front Row for the sums invoiced as Buehler’s salary under the Agreement (“the Arbitration”). In the Arbitration, Front Row denied liability for the same and asserted, as set out in the Terms of Reference, that Daimler:

… [had] not fulfilled its contractual duties; specifically its duties to organize [sic], brand and promote the AMG-Mercedes South East Asia Cup Series; failed to make any or any reasonable efforts to organise up to 20 races per year for two years with each race weekend holding two races and failed to ensure that Thomas Buehler devoted 100% of his time and effort to the running and organisation of the Asian Cup Series. [emphasis added]

Front Row also brought the counterclaim, based on misrepresentation, against Daimler contending that:

… in order to induce [Front Row] to enter into the Agreement [Daimler] had promised and/or represented and/or is legally responsible for the representations that the SLK AMG cars were appropriate for, had been specially designed and adapted and would be permitted for use in non professional racing to be conducted under the South East Asian Cup Series competitive events, and that 20 races would be organised as the AMG-Mercedes South East Asian Cup Series. Contrary to their promise and/or representation, [Daimler] organised only 3 races and the SLK AMG cars were not appropriate for racing or competitive events. Alternatively, [Daimler was] legally responsible for the consequences of the representations that were false and negligently made and induced [Front Row] to enter into the Agreement. [emphasis added]

Both Daimler’s claim and Front Row’s counterclaim were dismissed by the Arbitrator. In respect of the latter, the Arbitrator noted at para 33 of the Award that Front Row had formulated its counterclaim in the following manner, which he adopted: Whether [Front Row] was induced to enter into the Agreement by one or more representations made by or on behalf of [Daimler].

The Arbitrator then found, at paras 55 and 56 of the Award, that by the time Front Row’s case closed, its case had narrowed to just one representation, which was that: 55. … the event cars could be used for racing, and that this misrepresentation turned out to be false when Mercedes indicated that ‘actual racing’ was not permitted. 56. [Front Row] had ceased to rely on a number of the points pleaded, in particular on [Daimler’s]alleged failure to organise 20 races or the absence of FIA homologation for the event cars. Thus, having asserted that it was induced to enter into the Agreement by reason ofseveral misrepresentations, [Front Row] ended up asserting inducement from asinglealleged misrepresentation....