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Nature of Matter

Setting aside of Arbitral Award; Excess of Jurisdiction, Breach of Natural Justice 

Case Summary

1. Pursuant to a Consultancy Agreement (the “Consultancy Agreement”) entered into between the Respondent and a third-party company (Z Co), Z Co was to provide consultancy services to the Respondent in relation to mergers and acquisition of oil and gas fields around the world in exchange for a “Success Fee”.
2. Z Co would be entitled, subject to certain conditions, to payment of this Success Fee upon its presentation of an “Opportunity” and the Respondent’s completion of an acquisition of an interest in an oil field pursuant to a sale and purchase agreement or a similar document (“SPA”).
3. The Appellant, the Respondent and Z Co subsequently executed a Deed of Novation, pursuant to which the Consultancy Agreement was novated to the Appellant and the Respondent, and its term extended from 31 December 2012 to 31 December 2013. By the Deed of Novation, the Appellant and the Respondent undertook to perform the terms of the agreement as if the Appellant were Z Co.
4. Additionally, the Appellant and Respondent entered into an Assignment, Amended and Restated Consultancy Agreement (the “Amended Agreement”). The terms of the Amended Agreement were, in substance, the same as those of the Consultancy Agreement and, like the Consultancy Agreement, it was to expire at the end of 2013. For the purposes of the award and the CA’s decision, references to the Consultancy Agreement included the Amended Agreement, and vice versa. For the purposes of this case summary, the Consultancy Agreement and the Amended Agreement shall be referred to simply as the “Consultancy Agreement”.
5. The Appellant claimed in the arbitration proceedings that it was entitled to be paid a Success Fee in respect of, inter alia, an Opportunity presented to the Respondent for the acquisition of shares in X Co, an owner-operator of oil fields in Africa (the “X Opportunity”). The X Opportunity did not materialise during the time of the Consultancy Agreement, and the Respondent only signed an agreement to acquire X Co’s shares in 2016, after the expiry of the Consultancy Agreement. The Respondent’s acquisition of X Co’s shares did not involve either Z Co or the Appellant.
6. In its Statement of Claim in the arbitration, the Appellant pleaded that there was an “Agreement” between it and the Respondent comprising the Deed of Novation, the Consultancy Agreement and an oral agreement between the parties’ representatives. The Appellant further pleaded that despite the expiration of the Consultancy Agreement, the Success Fees were still payable because: 
   The Tribunal made various orders including that: 
   1. there was an oral agreement to extend the Consultancy Agreement beyond 31 December 2013;
   2. further and/or in the alternative, there was an implied contract between the parties on the same terms as the Consultancy Agreement; and
   3. in any event, the Respondent was estopped from denying that the Consultancy Agreement was valid by virtue of the fact that the Deed of Novation had expired. 

7. The Tribunal rejected the Appellant’s assertion of an “Agreement” that was partly oral and partly written. It also found that the Respondent was not obliged to extend the duration of the Consultancy Agreement during or after its pendency, nor was there any extension by mutual agreement after 31 December 2013. The Tribunal also considered that there was no implied contract as such would be contrary to the terms of the Consultancy Agreement. 
8. The Tribunal instead treated the parties’ contract as being entirely contained in the Consultancy Agreement and the Deed of Novation and rendered its decision in favour of the Appellant on the basis of its interpretation of those documents and parties’ obligations thereunder, considering pertinently that, inter alia:
   1. The right to recover the Success Fee was not lost as long as a “clear link” to the successful completion of the Opportunity was demonstrated;
   2. It was not necessary for a SPA to be executed or completed before the expiry of the Consultancy Agreement in order to entitle the Appellant to a Success Fee; and
   3. There was no time bar under the relevant provision of the Consultancy Agreement.
9. The Respondent subsequently applied to the Singapore High Court (“HC”) to set aside the Tribunal’s award on the basis that the Tribunal had exceeded its jurisdiction. 
10. The HC allowed the Respondent’s setting aside application, as it was of the view that since the Tribunal found that there was no subsisting agreement after the Consultancy Agreement expired on 31 December 2013, the very premise of the Appellant’s claim had been rejected and that ought to have been the end of its claim. Yet, the Tribunal went on to find that the Appellant could nevertheless claim its Success Fee based on grounds that were nowhere to be found in the Appellant’s Notice of Arbitration, pleadings, or submissions in the arbitration proceedings. It further considered that the Tribunal’s findings on Articles 3.2 (which concerned the effect of the expiration or earlier termination of the Consultancy Agreement) and 12 of the Consultancy Agreement (which concerned the contractual limitation period in which a party may commence proceedings arising from the Consultancy Agreement) were in fact inconsistent with the positions taken by the Appellant on those Articles. These grounds for the Tribunal’s decision were thus “entirely different from [the Appellant’s] case in the arbitration proceedings”, and should therefore be set aside. 
    
11. The Appellant appealed, and the following main issues arose for the Singapore Court of Appeal (“CA”) consideration:
    1. Whether the HC had correctly held that the Tribunal’s findings, including its interpretation of Article 3.2 and 12 of the Consultancy Agreement, were not within the scope of submission to the Tribunal and therefore in excess of its jurisdiction; and
    2. If not, whether there was a breach of natural justice by the Tribunal in the making of the award, such that the setting aside of the impugned portions of the award should nevertheless be upheld. 

12. The CA allowed the Appellant’s appeal, and held that the award should not be set aside.

Excess of Jurisdiction

13. The CA restated the principle that a two-stage inquiry is followed in assessing whether an arbitral award should be set aside for an excess of jurisdiction: (a) first, the court must identify what matters were within the scope of submission to the arbitral tribunal; and (b) second, whether the arbitral award involved such matters, or whether it involved a “new difference … outside the scope of the submission to arbitration and accordingly would have been irrelevant to the issues requiring determination”.
14. It further reiterated that the question of what matters were within the scope of the parties’ submission to arbitration would be answerable by reference to five sources: the parties’ pleadings, the list(s) of issues, opening statements, evidence adduced, and closing submissions at the arbitration. The court should not apply an unduly narrow view of what the issues were: rather, it is to have regard to the totality of what was presented to the tribunal whether by way of evidence, submissions, pleadings or otherwise and consider whether, in the light of all that, these points were live.
15. On the facts, the CA considered that the Tribunal had sufficiently apprised the parties of its provisional thinking as to whether the Appellant was entitled to a Success Fee for an Opportunity which only bore fruit after the expiry of the Consultancy Agreement. This issue was further raised in parties’ second lists of issues, and addressed in the course of cross-examination and in the Appellant’s closing submissions. Accordingly, the Respondent had sufficient opportunity to address these points.
16. The CA also considered that the Tribunal’s findings did not involve a new difference outside the scope of parties’ submission to arbitration. They were premised on the fundamental point raised by the Appellant that the Respondent’s obligation to pay the Success Fee was not constrained by the term limits of the Consultancy Agreement. Notably, the Respondent had argued against this fundamental point in its closing submissions. 

Breach of Natural Justice

17. The Respondent’s contention that the Tribunal had based its decision on matters not submitted or argued before it was rejected by the CA, as the Tribunal had specifically raised for parties’ consideration the grounds on which it premised its award.
18. More importantly, the CA noted that an arbitral tribunal is entitled to derive an alternative case from the parties’ submissions as the basis for its award, as long as parties have an opportunity to address the essential issues which led the tribunal to those conclusions.
19. In this case, while the reasoning eventually adopted by the Tribunal was not pleaded by the Appellant in those precise terms, the CA considered that it was clear that the more general question of the interaction between the payment obligations and the expiry date under the Consultancy Agreement were canvassed before the Tribunal. Furthermore, the chain of reasoning adopted by the Tribunal in arriving at its findings bore sufficient nexus to the parties’ cases.