Re Landau, Toby Thomas QC

• Jurisdiction: Singapore
• Judge: Steven Chong J
• Judgment Date: 28 November 2016
• Neutral Citation: [2016] SGHC 258
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 752 of 2016
• Published date: 01 December 2016
• Year: 2016
• Hearing Date: 09 September 2016
• Plaintiff Counsel: Paul Tan, Rachel Low and Alessa Pang (Rajah & Tann Singapore LLP)
• Defendant Counsel: Daniel Chia, Ker Yanguang and Kenneth Kong (Morgan Lewis Stamford LLC),Jeyendran Jeyapal and Jeanette Justin (Attorney-General's Chambers),Christopher Anand Daniel and Harjean Kaur (Advocatus Law LLP)
• Subject Matter: Legal Profession,Admission,Ad hoc
• Citation: [2016] SGHC 258

Steven Chong J: Introduction

This is an application to admit Mr Toby Thomas Landau QC (“the Applicant”) under s 15 of the Legal Profession Act (Cap 161, 2009 Rev Ed) (“LPA”) to represent China Machine New Energy Corporation (“CMNC”), a company incorporated under the laws of the People’s Republic of China, in Originating Summons No 185 of 2016 (“OS 185”). OS 185 is CMNC’s application to set aside an arbitral award dated 25 November 2015 (“the Award”). The Award was made in favour of Jaguar Energy Guatemala LLC, a corporation incorporated under the laws of Delaware in the United States of America, and AEI Guatemala Jaguar Ltd, a corporation existing under the laws of the Cayman Islands (collectively referred to as “Jaguar”). The Attorney-General supported the Applicant’s application for admission while Jaguar and the Law Society of Singapore opposed it.

In OS 185, CMNC seeks to set aside the Award on any or all of the following grounds:¹ That a breach of the rules of natural justice occurred in connection with the making of the Award by which the rights of CMNC have been prejudiced, pursuant to s 24(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”) and Article 34(2)(a)(ii) of the UNCITRAL Model Law on International Commercial Arbitration set out in the First Schedule of the IAA (“Model Law”). That the arbitral procedure in the arbitration was not in accordance with the agreement of the parties, pursuant to Article 34(2)(a)(iv) of the Model Law. That the Award is in conflict with the public policy of Singapore, pursuant to Article 34(2)(b)(ii) of the Model Law. That the making of the Award was induced by fraud or corruption, pursuant to s 24(a) of the IAA.

In support of this application, CMNC has relied on several atypical arguments it will raise in OS 185. One of those arguments, for example, is that Jaguar took steps to hinder its preparation for the arbitration by engaging in “guerrilla tactics”, and that the tribunal issued unfair procedural orders and interventions in the course of the arbitration, as a result of which it was unable to present its case. This, CMNC argues, constituted a breach of its right to be heard under s 24(b) of the IAA or Article 34(2)(a)(ii) of the Model Law.

In my recent decision in Re Wordsworth, Samuel Sherratt QC [2016] 5 SLR 179 (“Re Wordsworth”), I admitted Mr Wordsworth QC to argue an application to set aside an investor-state arbitration award where the issues were observed (at [3]) to be “predominantly governed by principles of public international law”. I added at [22] that if the only issue in that application involved a “fairly straightforward” due process challenge, “Mr Wordsworth’s application would not pass muster”.

The principal ground relied on by CMNC in OS 185 is that a breach of the rules of natural justice occurred. Would such a due process challenge “pass muster”? Inquiring whether the rules have been breached is necessarily a fact-sensitive exercise. The facts giving rise to such challenges may be fairly straightforward in some cases and more complex in others. But however complex the facts may be, the principles for setting aside an award for breach of natural justice are reasonably well-settled. Further, the inquiry will ultimately be based on the events as they have unfolded in the arbitration. That is largely, if not entirely, assisted by reviewing the record of the arbitration.

In addition to the due process challenge, CMNC has also raised what in its views are novel arguments, including the issue of whether there is a duty implied in the arbitration agreement to arbitrate in good faith. CMNC asserts that such a duty should be implied, a breach of which would justify setting aside the Award on the ground that the arbitral procedure was not in accordance with the agreement of the parties.

It is not uncommon to raise novel legal arguments in the course of court proceedings. But novelty per se should not be confused with complexity. Usually, there must be a factual substratum to support any argument, however novel or complex it may be. In view of the fact that this is an admission application and not the underlying application in OS 185, this judgment will examine the appropriate level of scrutiny that a court should undertake of the “novel” issues in deciding whether it is reasonable, having regard to all the circumstances, to admit an applicant under s 15 of the LPA.

Background

The underlying dispute concerned a Lump-Sum, Turnkey Engineering, Procurement, and Construction Contract (“EPC Contract”), dated 29 March 2008. Under the EPC Contract, CMNC was to construct a power generation plant in Guatemala for Jaguar for the approximate sum of US$450m. The sum was to be paid progressively to CMNC by way of milestone payments.²

On 13 November 2009, CMNC and Jaguar amended the EPC Contract to allow Jaguar to issue debit notes to CMNC in place of the milestone payments which would fall due under the EPC Contract. On the same day, CMNC and Jaguar entered into a deferred payment security agreement (“DPSA”). This provided that the debit notes would be secured by Jaguar granting CMNC security interests over its collateral assets.³ Under the DPSA, Jaguar had an obligation to provide evidence of the security interests and to perfect them. Jaguar began issuing debit notes on 15 November 2010 and eventually issued a total of 61 debit notes amounting to approximately US$129m.⁴

The EPC Contract and the DPSA are both governed by New York law and provide for disputes to be resolved by arbitration according to the 1988 Rules of Arbitration of the International Chamber of Commerce (“the ICC Rules”).⁵ The seat of arbitration is stated to be Singapore.

I will briefly set out the parties’ legal dispute over the EPC Contract and DPSA as well as their conflicting accounts of the procedural history of the arbitration.

According to CMNC, Jaguar refused to perfect certain security interests in October or November 2013, as required by the DPSA. CMNC made a formal demand in October 2013 for Jaguar to fully evidence and perfect the security interests within 30 days or, in the alternative, pay all the milestone payments which had accrued under the EPC Contract.⁶ Jaguar did not comply with this demand. CMNC therefore declared an event of default under the DPSA and, pursuant to a letter dated 28 November 2013, took possession of the securities granted to it, including Jaguar’s rights under the EPC Contract and the power generation plant.⁷

CMNC says Jaguar purported to terminate the EPC Contract on 14 December 2013⁸ even though it had no right to do so given that CMNC had taken over its rights under the EPC Contract.⁹

CMNC alleges, further, that (a) beginning in October 2013, Jaguar employed security guards at the project site to prevent CMNC employees from removing documents and equipment; and (b) in December 2013, Jaguar evicted CMNC employees from the living quarters on the project site and prevented any re-entry with the threat of violence. ¹⁰ These acts show that Jaguar had started impeding CMNC’s preparation for the arbitration even before Jaguar formally commenced the arbitration on 28 January 2014.¹¹ Jaguar then continued to employ guerrilla tactics to impede CMNC’s preparation of its case throughout the procedural history of the arbitration.¹² These guerrilla tactics included, for example, Jaguar’s procuring the detention of CMNC’s Chinese employees in Guatemala on the basis that they were illegal immigrants, which affected CMNC’s ability to prepare its witness statements, and Jaguar’s theft of CMNC’s hard disks containing important project documents from the employees’ living quarters.

According to Jaguar, throughout the first half of 2013, CMNC was consistently behind schedule on the project.¹³ By 11 October 2013, it decided to put CMNC on notice that it was not fulfilling its obligations under the EPC Contract.¹⁴ Jaguar issued a number of notices of default to CMNC.¹⁵ On 14 December 2013, Jaguar notified CMNC that the EPC Contract and the DPSA were terminated.¹⁶

Jaguar alleges that the so-called “guerrilla tactics” CMNC accuses it of were simply steps to ensure the completion of the project; they did not and were not intended to affect the arbitration.¹⁷ Jaguar alleges that it did not forcefully take over the project site on 15 December 2013, and that it was in fact CMNC which refused to accept termination of the EPC Contract, threatened Jaguar with violence, and took steps to hinder Jaguar’s completion of the project.¹⁸ Jaguar alleges that CMNC engaged in procedural gamesmanship by repeatedly changing its legal and expert teams and repeatedly asking for extensions of time from the arbitral tribunal to meet procedural deadlines, in some cases even after those deadlines had passed.¹⁹

The arbitration

Jaguar commenced arbitration on or about 28 January 2014. This was pursuant to the ICC Rules.²⁰

Jaguar sought a declaration that it had validly terminated the EPC Contract and damages comprising, among other things, liquidated damages resulting from delays caused by CMNC. It also sought a declaration that the DPSA was terminated, the security interests thereunder were extinguished, and the outstanding debit notes were cancelled.²¹

CMNC sought, among other things, declarations that Jaguar’s failure to evidence and perfect the security interests constituted a material breach of the DPSA, that Jaguar’s purported termination of the EPC Contract and the DPSA was invalid and without legal basis, and that CMNC was entitled to extensions of time for the scheduled taking-over dates and additional payments as the tribunal thought appropriate.²²

A three-member arbitral tribunal was constituted. The arbitration hearings took place on various dates between April 2014 and July 2015 in London, Singapore, Toronto, Hong Kong, and Dublin.²³

In the Award rendered on 25 November 2015, the...