Ng Huat Foundations Pte Ltd v Samwoh Resources Pte Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 14 March 2006
• Neutral Citation: [2006] SGHC 43
• Court: High Court (Singapore)
• Published date: 21 March 2006
• Year: 2006
• Plaintiff Counsel: Philip Jeyaretnam SC and Ajinderpal Singh (Rodyk & Davidson)
• Defendant Counsel: Quentin Loh SC, Ronald Choo and Corrinne Chia (Rajah & Tann)
• Subject Matter: Arbitration,Award,Whether appeal against award on question of law,Whether the appeal misconceived for being premised on facts not found by the arbitrator
• Citation: [2006] SGHC 43

14 March 2006 Judgment reserved.

Judith Prakash J:

Introduction

1 On 5 May 2005, I gave Ng Huat Foundations Pte Ltd (“NHPL”) leave to appeal on a question of law that arose in the arbitral proceedings between it and Samwoh Resources Pte Ltd (“Samwoh”). The arbitration took place in June and July 2004 before Mr Goh Joon Seng as the single arbitrator (“the Arbitrator”) and the Arbitrator’s award (“the Award”) was issued on 16 December 2004.

2 The appeal proper was heard in November 2005. The following question of law now comes before me for determination:

Whether a party to a joint-venture contract which has accepted the repudiatory breach of the other party is entitled to the entire benefit thereafter of assets of the joint venture including to retain for itself all profits from such assets earned after acceptance of the repudiatory breach.

Background

3 This account of the facts is taken, in large part, from the Award.

4 In late December 2000, the Defence Science & Technology Agency (“DSTA”) acting on behalf of the Ministry of Defence (“Mindef”) called for tenders for quarry-shaping works and disposal of rocks (“the project”). On 31 January 2001, following discussions between one Elvin Koh Oon Bin on behalf of Samwoh and one Tony Ng and his wife, Rosalind Lee, on behalf of NHPL, the parties entered into a document entitled “Prebid Joint Venture Agreement” (“the Prebid Agreement”). It was agreed thereby that they would form a joint venture for the purpose of tendering for the project and, if successful in the tender, executing it. Vis-à-vis Mindef, Samwoh was to be the sole contractor.

5 Samwoh duly submitted its tender. In February 2001, it was learnt that this tender was the most competitive. In anticipation of being awarded the project, in early March 2001, the parties discussed the formation of a joint-venture company. On 23 March 2001, DSTA indicated that the project would be awarded to Samwoh. Shortly thereafter, a company called Gali Batu Quarry (S) Pte Ltd (“Gali Batu”) was incorporated to execute the project.

6 Despite ongoing discussions, the parties could not agree on the terms of the detailed joint-venture agreement for the operation of Gali Batu. By 31 May 2001, when Mindef formally awarded the project to Samwoh, the detailed agreement had still not been settled. To enable the joint venture to commence work on the project, the parties arrived at an interim agreement to each subscribe for 500,000 shares of $1 each in Gali Batu so that it would have $1m to fund the operations pending conclusion of the detailed agreement. The interim agreement was put into effect in July 2001 when the paid-up capital of Gali Batu was raised to $1m.

7 Subsequently, there were disputes between the parties over assertions that NHPL had failed to honour its obligations of equal contribution under the Prebid Agreement and the interim agreement. These went to arbitration at the instance of Samwoh who claimed a declaration that the joint venture between it and NHPL had been terminated due to the repudiatory breaches of NHPL and also that it was entitled to damages to be assessed by the Arbitrator.

8 The Arbitrator held that Samwoh (the claimant in the arbitration) had established that NHPL (the respondent in the arbitration) had breached the Prebid Agreement through its refusal or failure to bear its share of the financial and other obligations relating to the project. There were also numerous acts of bad faith and fraud perpetrated on Samwoh by NHPL through the actions of Rosalind Lee whom the Arbitrator held to be the directing mind of NHPL. The Arbitrator found the breaches to be fundamental and repudiatory. Samwoh accepted the repudiation on 7 March 2002 and the joint venture came to an end on that date. Consequently, Samwoh was entitled to the declaration applied for, namely, that the joint venture under the Prebid Agreement and operating through Gali Batu came to an end on 7 March 2002.

9 In paras 60 to 64 of the Award, the Arbitrator considered NHPL’s claim to have an interest in the project on the ground that it was an asset of the joint venture. He noted that NHPL had relied on the dicta of Ferris J in the English decision of The European Strategic Bureau Ltd v Technomark Consulting Services Ltd (20 June 1995) (Chancery Division) (unreported) (“the ESB case”). The Arbitrator considered that dicta to be obiter and that it only addressed the “guilty venturer’s” entitlement to his share in the profits of the joint venture but did not address that party’s liability to the co-venturer in the event of ultimate loss. In the Arbitrator’s opinion, if that dicta standing alone were to be followed, it would be better for any venturer to walk off the project leaving all the responsibility and risk to the co-venturer. The Arbitrator declined to apply the dicta. He held that NHPL did not have any interest in the profits earned from the project after the termination of the venture. It is that holding that NHPL seeks to challenge in this appeal.

The appeal

The arguments of the parties

10 The Arbitrator awarded damages to Samwoh for NHPL’s breach. He also acknowledged that an account needed to be taken of the joint venture because NHPL was entitled to 50% of the profits. However, he imposed a cut-off date, namely, the date of termination, on the account. On appeal, it was NHPL’s submission that there should not have been such a cut-off date since the benefit of the DSTA contract was an asset of the joint venture. It argued that the Arbitrator should have followed the ESB case.

11 The relevant passage of the judgment in the ESB case is as follows:

I have to say, however, that I do not think the result would have been very different even if ESB had been in breach of duty and Technomark had lawfully determined the joint venture. The way that I analyse the position is as follows. GDRU entered into a contract with Technomark for the performance by Technomark of certain services. GDRU was content that Technomark should make its own arrangements for the participation of ESB in the provision of these services, the only restriction being that the remuneration of ESB was to be the responsibility of Technomark. By entering into the joint venture with ESB Technomark made the benefit of the GDRU contract an asset of the joint venture. That asset had not been fully exploited when the joint venture came to an end. The grounds upon which the joint venture was brought to an end and the responsibility for its termination are immaterial to the ownership of the property of the venture. In the absence of the clearest possible stipulation to that effect, even the most extreme misconduct on the part of one venturer could not cause the benefit of the GDRU contract to cease to be the property of the joint venture or give the “innocent” venturer the right to confiscate the interest of the “guilty” venturer. After the determination of the joint venture its property has to be realised for the benefit of the co-venturers and distributed in accordance with their rights under the joint venture agreement. The obvious way of realising the asset consisting of the benefit of the GDRU assignment was to complete that assignment, which Technomark was able to do. Had the joint venture come to an end by reason of default on the part of ESB Technomark would probably have been entitled to claim a special allowance for the value of its services in bringing the GDRU assignment to fruition, although no claim to such an allowance was advanced in these proceedings. Subject to such allowance the fruits of the GDRU assignment would, in my judgment, be divisible between the co-venturers in accordance with their interests in the venture, in this case equal shares.

12 The argument put forward on behalf of NHPL was that the ESB case provided a definitive answer to the question of law raised in the appeal. Applying the proposition set out by Ferris J it was clear that:

(a) Samwoh, by entering into the Prebid Agreement with NHPL, had made the project an asset of the joint venture.

(b) In the absence of clear stipulations in the Prebid Agreement, even the most extreme misconduct on the part of NHPL could not cause the benefit of the project to cease to be the property of the joint venture or give Samwoh the right to confiscate NHPL’s interests in the project.

(c) Following from the above, after determination of the joint venture, the joint venturers’ property and assets,...