By Tham Wei Chern, Daniel Lee – Fullerton Law Chambers LLC

A. Facts

1. The Plaintiff sought to enforce, in Singapore, a Singapore seated ICC award. The Defendants resisted the enforcement.

2. The arbitration arose out of a transaction in which the Plaintiff bought shares in a company owned by the Defendants. The Plaintiff commenced arbitration proceedings against the Defendants for fraudulent misrepresentation, on the grounds that the Defendants had concealed information on scandals and regulatory breaches, which had reduced the true value of the shares. The Plaintiff was successful in the arbitration and obtained an award in its favour.

3. The Plaintiff then commenced enforcement proceedings in India, in which the Plaintiff largely succeeded, except against certain Defendants that were “minor” (children), at the relevant time.

4. In the present Singapore proceedings, the Defendants raised arguments that were largely similar to the ones they raised in the Indian proceedings, namely:
(a) the Damages awarded and pre-award interest were beyond the Tribunal’s jurisdiction;
(b) the Tribunal had breached rules of natural justice;
(c) the claim was out of time, which meant the Tribunal had no jurisdiction; and
(d) the award against “innocent principals” and certain minor Defendants was against public policy.

5. The Plaintiff asserted that the Defendants were barred from raising the same arguments in the Singapore proceedings, for the following reasons:
(a) Issue estoppel;
(b) the extended doctrine of res judicata ; and
(c) there was waiver by Defendants.
Ultimately, the Court allowed the award to be enforced against all the Defendants, except for the Defendants that were “minors” at the relevant time.

B. Decision

Whether the Defendants’ arguments were barred by issue estoppel

6. The Singapore High Court decided that seat courts cannot be estopped by decisions of other enforcement courts, In the Court’s view, the New York Convention (“NYC”) and IAA recognised that setting-aside/seat courts hold primacy over enforcement courts.

7. The Court also held that, issue estoppel does not arise because there is no identity of issues between enforcement and seat courts as different countries have different public policies.

Whether the Defendants’ arguments barred by extended res judicata

8. The Court held that the doctrine of extended res judicata does not apply in setting-aside proceedings because res judicata  only prevents arguments on substantive merits of a matter from being litigated more than once. A setting-aside court is already prevented from reviewing the merits of an award by the principle of minimal curial intervention, and the extended res judicata is therefore unnecessary.

Whether the Defendants waived their right to raise arguments

9. The Plaintiff argued that the Defendants had waived their right to raise (i) certain public policy objections and (ii) certain jurisdictional objections, based on Art 16(2) of the Model Law.

10. The Court rejected the Plaintiff’s submissions.

11. On (i), the Court held that violations of public policy are too important and fundamental to be waived.

12. On (ii), the Court found that the Defendants had not waived their jurisdictional objections on the facts.

Whether the damages awarded were beyond the Tribunal’s jurisdiction

13. The Defendants argued that the Tribunal awarded damages for loss of opportunity/profits, which were consequential damages and prohibited by the arbitration agreement.

14. The Plaintiff had bought the shares from the Defendants in 2008 and had swapped them in 2015 at a slight gain. The Defendants therefore argue that the Plaintiff did not suffer any loss.

15. The Tribunal felt that the swap price did not reflect the Plaintiff’s true loss, so it applied a “discount rate” to the swap price.

16. The award contained the Tribunal’s remarks about compensating the Plaintiff’s “loss of opportunity” to profit from investing the 2008 purchase price of the shares in other more profitable ventures.

17. The Defendants therefore argued that this was an award for “hypothetical loss of profit” and a prohibited award of consequential damages.

18. The Court disagreed with the Defendants and held that the Tribunal had simply used some infelicitous expressions but was really accounting for the time value of money. The discount rate was simply used to move the value of the 2015 swap price back in time to 2008 so that it could be meaningfully compared against the 2008 purchase price.

Whether pre-award interest was beyond the Tribunal’s jurisdiction

19. The Tribunal: (i) applied the discount rate to reduce the value of the 2015 swap price; (ii) took the difference between that and the 2008 purchase price; and (iii) applied the discount rate again  to the difference as the pre-award interest rate.

20. The Defendants argued that pre-award interest awarded was double counting and prohibited by the arbitration agreement as multiple or punitive damages.

21. The Court held that there was no double counting as the first time the discount rate was applied was to correct the time value of the 2015 swap price. The second application of the discount rate was simply the application of an interest rate to the loss suffered.

Whether the claim was time barred

22. The Defendants argued that claim was time-barred under Indian Law, and that meant that the Tribunal lacked jurisdiction.

23. The Court held that time-limitation is not a jurisdiction issue (under Singapore law).

24. The issue of time bar simply goes to the admissibility of the claim before the Tribunal, which is entirely within the Tribunal’s purview, in contrast to a jurisdictional objection which goes toward the competence of the Tribunal.

Whether the Tribunal breached rules of natural justice

25. The Court held that Tribunal had applied its mind to all the Defendant’s arguments and there was no breach of natural justice. Significantly, in some of their arguments, the Defendants had given the impression that they agreed with the Plaintiff.

Whether the award was against public policy

26. The Defendants argued that it was against public policy to allow the award against (i) the “Innocent Principals” and (ii) the minor Defendants.

27. The Defendants had three main arguments: (i) the Innocent Principals should not be made responsible for Mr BBA’s fraudulent representations as their agent; (ii) it was against the public policy of Singapore protects to allow multi-million-dollar awards against minors; and (iii) the award against both groups was disproportionate to their shareholding and therefore against public policy.

28. The Court reject arguments (i) and (iii) but accepted (ii).

29. On (i), the Court held that the Defendants were simply raising a backdoor appeal to the Tribunal’s finding of fact that the Innocent Principals were bound by Mr BBA’s fraud. This was not permissible.

30. On (ii), the Court decided that under Singapore law (with particular reference to the Singapore Civil Law Act), minors were protected from commercial contracts. There is a clear public policy under Singapore law, to protect minors. Significantly, the minors were 3 to 8 years old in 2008, at the time when the sale was made.