DBO and others v DBP and others

Under a facility agreement dated 26 February 2020, lenders granted a term loan to two borrowers for a construction and development project in the borrowers' home country, with guarantees and security. One borrower also ran a shopping mall there. The COVID-19 pandemic and related government orders hurt sales of units in the project and the mall's income, and the borrowers said they could not repay when the loan matured on 26 March 2021.

The borrowers started an arbitration seated in Singapore under the SIAC Rules, and the guarantors were joined. They claimed the agreement was discharged by frustration because repayment was supposed to come only from unit sales and mall income. The lenders applied for early dismissal under Rule 29.1 of the SIAC Rules on the ground that the claim was manifestly without legal merit. At the hearing the claimants were allowed, without formal amendment, to add an allegation of a collateral contract that repayment would come from those sources. In a partial award dated 30 January 2023 the tribunal granted early dismissal, held the facility agreement valid and enforceable, and found the claimants liable for sums due (leaving aside a penalty clause dispute and default interest).

The borrowers and guarantors (DBO and others) applied in Originating Application No 6 of 2023 to set aside the partial award under s 24 of the International Arbitration Act 1994 and Article 34(2) of the Model Law. The case was transferred to the Singapore International Commercial Court and heard by a panel of three judges.

1. Whether the tribunal had proceeded, with the lenders' agreement, on the basis that the collateral contract existed.
2. Whether the tribunal was bound to assume the collateral contract existed on an early dismissal application.
3. Whether dismissing the collateral contract and frustration case early breached natural justice.
4. Whether the tribunal exceeded its jurisdiction in granting early dismissal.

What was assumed. Read in context, the statements by the tribunal's chairman and the lenders' counsel meant only that the claimants' pleaded facts would be taken as true for the application. Counsel had expressly refused to accept that there was any agreement that the loan was repayable only from particular sources, and the lenders' consent was limited to treating the collateral contract allegation as part of the pleadings without a formal amendment.

No duty to assume the contract. On an early dismissal application the tribunal had to assume the facts pleaded in support of the collateral contract, which it did, but not the existence of the contract itself. CBS v CBP [2021] 1 SLR 935 was different, because there the underlying facts were disputed and the party was denied witness evidence; here the tribunal's reasoning did not depend on any disputed fact. Even if the tribunal should have assumed the contract existed, that would be an error of law, which is not a ground for setting aside.

Natural justice and jurisdiction. The claimants had every opportunity to argue their collateral contract and frustration case, including on conflicting authorities. A dispute over whether the contract existed did not stop the tribunal from finding the claim manifestly untenable, and the tribunal applied the correct test. The applicants' real complaint was disagreement with how the tribunal applied that test, and whether the tribunal was right or wrong is not a ground to challenge an award. Since the pleaded facts were assumed true, no full evidential hearing was needed.

The court dismissed the application to set aside the partial award on 21 August 2023 and gave these grounds later. It ordered the applicants to pay the first to fourth respondents costs fixed at $113,000 and disbursements of $1,670.34. The applicants have appealed.