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Case Summary
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The Respondent, CWB, is an advisory firm with a focus on real estate investments. The Appellants include a fund management company, CVQ, and subsidiaries of 2 investment funds which CVQ managed.
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Parties entered into two advisory agreements wherein the Respondent was required to provide asset advisory services to CVQ in respect of the two investment funds which it managed (the “Funds”).
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Disputes arose amongst the parties in respect of the unpaid fees (“Fees”) of the CWB and the same was referred to arbitration in Singapore under the auspices of the Singapore International Arbitration Centre.
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In the arbitration, the Appellants contended that the Respondent had breached the advisory agreements. The Appellants also contended that, in respect of one of the Funds, they were not liable to pay the Respondent’s Fee as it was due and payable only if the Fund reached the end of its life.
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In the alternative, the Appellant disputed the quantification of unpaid Fees provided by the Respondent, though it failed to provide its own calculations in this regard.
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The Respondent filed its counterclaim seeking payment of the outstanding Fees.
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In the arbitration, the Arbitral Tribunal (“Tribunal”) decided in favour of the Respondent and dismissed all claims of the Appellants. In the Award, the Tribunal held that the Respondent was not in breach of its obligations under the advisory agreements and was entitled to payment of its outstanding Fees.
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Aggrieved by the Award, the Appellants filed an application under Section 24(b) of the International Arbitration Act 1994 (2020 Rev Ed) (the “IAA”) before the High Court of Singapore inter alia on the ground of breach of the rules of natural justice by the Tribunal. This application was later transferred to the Singapore International Commercial Court (“SICC”).
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In its application before SICC, the Appellants argued that the Tribunal had:
a. breached the rule against bias;
b. breached the fair hearing rule by adopting a chain of reasoning that the parties had no reasonable notice it would adopt;
c. breached the fair hearing rule by not applying its mind to the Appellants’ submissions while solely relying on calculations provided Respondent’s witness in respect of the quantification of unpaid Fees;
d. acted irrationally and capriciously by using contradictory dates in respect of the end of life of the Funds at different points in the Award.
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Separately, the Respondent (i.e., the Award Creditor) filed an enforcement application before the High Court of Singapore seeking permission to enforce the Award which was also transferred to SICC.
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SICC, hearing both applications, refused to set aside the Award and inter alia held that there was no breach of the fair hearing rule by the Tribunal in rendering the Award. Accordingly, the SICC dismissed the Appellants’ application seeking a setting aside of the Award.
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The Appellants filed the present appeal against the decision of SICC before the Singapore Court of Appeal (“SCOA”) on similar grounds and contended that the Tribunal breached the fair hearing rule by failing to apply its mind and/or to give reasons for its decision on essential issues in the Award.
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Additionally, the Appellants contended that the Tribunal has breached the fair hearing rule as:
a. it has failed to consider whether Respondent’s claims were awarded as a debt or as an award for damages; and
b. the Appellants were not given reasonable notice that the Tribunal would decide on the quantum of the Fees due.
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| Ruling |
- In its judgment, the SCOA noted that a breach of the fair hearing rule can arise from a tribunal’s failure to apply its mind to the essential issues arising from the parties’ arguments.
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The Appellants took the position that another aspect of fairness in the proceedings is the need for the tribunal to give reasons for its decision. On the duty of an arbitral tribunal to give reasons, the SCOA made following two important observations:
a. While Article 31(2) of the UNCITRAL Model Law on International Commercial Arbitration places the arbitral tribunal under a general duty to give reasons, it is not settled by case law as to whether a tribunal’s failure to give adequate reasons is, in itself, a reason to set aside an award;
b. It is also not entirely settled what the content of a tribunal’s duty to give reasons is.
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However, the SCOA refrained to settle these issues since the Appellants’ case was ultimately premised on a breach of the rules of natural justice, rather than the Tribunal’s alleged failure to give reasons. The Appellants relied on the Tribunal’s failure to give reasons as demonstrative of the fact that the Tribunal must have failed to apply its mind.
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The SCOA further noted that the scope of a Tribunal’s duty to give reasons differs from that of a judge’s, and it is therefore inappropriate to apply standards applicable to judges in the context of arbitration proceedings as held in TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972.
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On the issue of the tribunal’s failure to apply its mind, the SCOA held as follows:
a. Even if the Tribunal did not refer to the Appellants’ arguments in seriatim, it is plain on the face of the Award that the Tribunal did apply its mind to the essential issues raised by the Appellants and therefore it has not breached the fair hearing rule.
b. As far as the computation of unpaid Fees based on the Respondent’s witness’ evidence is concerned, SCOA noted that the Appellants had repeatedly refused to disclose documents which would have facilitated the calculation of the quantum of the Respondent’s unpaid Fees, or to provide any calculations of their own. Thus, devoid of any alternative calculation, the Tribunal in the Award accepted Respondent’s submission that its witness’s calculations were the best estimates of its claims, as it found that these calculations were the most cogent evidence of loss available.
c. In the SCOA’s opinion, whether the Tribunal was correct to do so was a question on the merits and is not subject to review by the SCOA. The key point here is that once the context to the Tribunal’s reasoning is properly appreciated, it is clear that the Tribunal did apply its mind to the question of whether the conditions for payment of the Fees had been satisfied.
- Accordingly, on this count, the SCOA concluded that there is no basis for saying that the Tribunal had breached the fair hearing rule.
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On the issue of relevant dates for the end of life of the Funds and, in turn, the calculation of the Respondent’s Fees, the SCOA held as follows:
a. That devoid of any alternative calculations from the Appellant, the relevant dates considered by Respondent’s witness were the best estimates available to the Tribunal.
b. The Tribunal’s decision was therefore readily explicable on the facts and does not show that it made inconsistent findings as to the date of the end of life of the Funds, or that it otherwise failed to apply its mind to the issues at hand.
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On the allegation that the Tribunal had failed to consider the Appellants’ objections to the calculations made by the Respondent’s witness, the SCOA held that:
a. The point remains that the Appellants’ responses did not set out any alternative calculations of the Fees.
b. The mere fact that the Tribunal did not expressly refer to the Appellants’ objections in the Award, does not necessarily show that it failed to apply its mind to the correct computation of the Fees.
c. However, even if the Tribunal was mistaken in stating that the Appellants had failed to challenge the Respondent’s witnesses’ calculations, this is at most an error of fact which would not justify setting aside the award.
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On the issue of uncertainty as to whether the Respondent’s claims were awarded as a debt or as an award for damages, the SCOA held that the Appellants had not made this argument before the Tribunal and accordingly, the fact that the Tribunal did not address this argument does not show that it failed to apply its mind to the Appellants’ case.
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On the issue of whether the Tribunal had provided notice to the Appellants while deciding the issue of the quantum of unpaid Fees, the SCOA held that the Tribunal had invited parties to file a further round of closing submissions to quantify the Respondent’s share of Fees with precision. In response, the Appellants indeed filed a further set of closing submissions addressing, among other things, the correct quantification of Fees.
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The SCOA therefore concluded that there is no basis for Appellants to argue that it was not given reasonable notice that the Tribunal would decide on the quantum of the Fees.
Accordingly, the SCOA held that the Tribunal did not breach the rules of natural justice, and dismissed the Appellants’ appeal.
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