CUW & 2 Ors v CUZ

Facts

The claimants, CUW, CUX and CUY, and the respondent, CUZ, entered into a Share Subscription Agreement and a Shareholders' Agreement dated 25 February 2013 for a project to provide two power plants in India. CUZ was to invest INR5.64b in CUX in three tranches and made the first two. A condition of the third tranche was a Common Loan Agreement with lenders, to whose draft terms CUZ objected, including a requirement that it be named a promoter. CUZ also issued a Material Adverse Change Notice on 18 April 2016 and objected to a particular contractor doing the balance of project works. On 30 May 2016 the claimants purported to terminate the agreements for repudiatory breach. CUZ began an SIAC arbitration on 22 December 2017, and on 25 July 2018 it accepted what it said was the claimants' repudiation.

In a Partial Award of 20 September 2019 the tribunal rejected CUY's early dismissal application based on cl 14.1 of the subscription agreement, holding that CUZ could sue CUY with the others but enforce an award against him only after CUW and CUX failed to comply. The Final Award of 11 February 2022 found the claimants had wrongfully terminated, that CUZ had affirmed the agreements but validly accepted the claimants' continuing repudiation in July 2018, and held the claimants jointly and severally liable. The claimants applied in Originating Application No 1 of 2022, transferred to the Singapore International Commercial Court, to set aside the Final Award for breach of natural justice.

Issues

1. Whether the tribunal failed to consider the claimants' defence that CUZ, having affirmed the agreements, could not later terminate them
2. Whether the tribunal failed to consider the argument that CUZ's objection to being named a promoter was an afterthought
3. Whether the tribunal failed to consider the claimants' argument that CUZ breached cl 16.5 of the Shareholders' Agreement
4. Whether holding CUY jointly and severally liable was inconsistent with the Partial Award and denied him a hearing

Holding

The Singapore International Commercial Court dismissed the claimants' application to set aside the Final Award on all four natural justice grounds.

Reasoning

Applying Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86, the threshold is high, awards are read generously, and only a clear and virtually inescapable inference that the tribunal failed to consider an essential issue will do; errors of fact or law are not enough.

On affirmation, the acts of affirmation relied on ended with the notice of arbitration in December 2017, and no affirmation was alleged in relation to the continuing breach in June 2018 that CUZ accepted in July 2018. The point, raised late and not properly articulated, could not ground a natural justice complaint; the tribunal's finding of repudiatory breach in 2018 showed it found no affirmation of that breach, and no prejudice was shown.

The afterthought argument was irrelevant once the tribunal found that naming CUZ a promoter conflicted with cl 19.1 of the Shareholders' Agreement; the claimants accepted it had no legal effect such as estoppel or waiver. The tribunal had in any case recorded the argument, and it also found five other loan agreement provisions contrary to the agreements, so the outcome would not have changed.

On cl 16.5, the tribunal expressly considered the argument and rejected it because the claimants had not suggested the chosen contractor could give the required performance guarantee. That was a decision on the merits, not a failure to consider.

There was no inconsistency between the awards. The Partial Award dealt with the order of enforcement under the proviso to cl 14.1, while the Final Award dealt with liability, and cl 14.1 itself made CUY jointly and severally liable. Nothing in the Partial Award suggested otherwise, and the claimants had themselves accepted joint and several liability.

From the judgment