CNA v CNB & Anor
1 cases cited
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Practice Areas
Counsel (16)
Bae, Kim & Lee LLC Firm Drew & Napier LLC Firm WongPartnership LLP Firm Yulchon LLC Firm Cavinder Bull Counsel Appellant Chan Hock Keng Counsel Respondent Chen Chi Counsel Respondent Eun Nyung Lee Counsel Respondent Han Gil Lee Counsel Appellant Junwoo Kim (alias Junu Kim) Counsel Appellant Kenneth Sean Teo Hao Jin Counsel Appellant Lea Woon Yee Counsel Appellant Lim Gerui Counsel Appellant Ng Wei Qi Counsel Respondent Tan Jui Yang Benedict Counsel Appellant Tan Yuan Kheng (Chen Yuanqing) Counsel Appellant
Parties (3)
Case Significance
CNA v CNB and another [2024] SGCA(I) 2 was decided by the Singapore Court of Appeal on 16 May 2024, in Civil Appeal No 7 of 2023. The grounds of decision were delivered by Robert French IJ, sitting with Sundaresh Menon CJ and Steven Chong JCA, after the hearing on 14 November 2023. The matter concerned arbitration, specifically arbitral tribunal jurisdiction and recourse against an award by setting aside. The appeal was dismissed at the hearing following the close of oral argument, with the reasons set out in the grounds of decision; the factual background was set out in detail in the Singapore International Commercial Court judgment under appeal, CNA v CNB and another and other matters [2023] SGHC(I) 6. The appellant, CNA, had applied to the SICC to set aside partial awards on liability and costs given on 8 June 2020 and 31 July 2021 by an International Chamber of Commerce ("ICC") Tribunal (the "2017 ICC Tribunal"). The arbitration concerned a dispute arising out of a Software Licensing Agreement dated 29 June 2001 relating to a computer game series. CNA contended, among other things, that the arbitration clause under that agreement, providing for ICC arbitration applying Singapore law, had been superseded by a subsequent extension agreement in 2017. CNA was represented by counsel including Cavinder Bull of Drew & Napier LLC, with the respondents represented by WongPartnership LLP and Yulchon LLC.
Summary
SUPREME COURT OF SINGAPORE
16 May 2024
Case summary
CNA v CNB and another [2024] SGCA(I) 2
Civil Appeal No 7 of 2023
Civil Appeal No 7 of 2023
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Decision of the Court of Appeal (delivered by Justice Robert French):
Outcome: The Court of Appeal dismissed an appeal against the decision of a three-Judge coram of the Singapore International Commercial Court (the “SICC”) made in respect of applications to set aside two arbitration awards (one on liability, and the other on costs).
Pertinent and significant points of the judgment
• The appellant, CNA, had breached its fiduciary duty owed to the first respondent, CNB, in entering into a contract binding on CNB in haste and secrecy. CNA’s actions indicated that it entered into said contract with a purpose of supporting a jurisdictional objection to an arbitration in which CNB stood as an opposing party to CNA: at [46].
• In considering the effect of a dispute resolution clause in a contract entered into after an arbitration has already commenced, the question that arises is whether the language is sufficiently clear to affect the extant arbitration proceedings. The language of the dispute resolution clause in the contract which is the subject of this appeal is not sufficiently explicit to remove the jurisdictional foundation as founded on a prior contract between the parties to the arbitration: at [47]–[48].
Background
1 The appellant, CNA, along with two other parties CND and CNE, applied to the SICC to set aside partial awards on liability and costs against them given on 8 June 2020 and 31 July 2021 by an International Chamber of Commerce (“ICC”) Tribunal (the “2017 ICC Tribunal”). The arbitration concerned a dispute arising out of a Software Licensing Agreement dated 29 June 2001 (the “SLA”) relating to a computer game series.
2 The claimants in the ICC arbitration were CNB and CNC. CNB was a former co-owner of the copyright in the game series with CNA. CNC was CNB’s wholly owned subsidiary. CNC became CNB’s successor in title to the intellectual property rights to the game series. The respondents in the arbitration were CNA, CND and CNE. CND was a wholly owned indirect subsidiary of CNE. CND and CNE were members of a corporate group which is a leading developer, operator and publisher of online games in the PRC.
3 The various parties had entered into agreements from time to time. These agreements included:
a. An Overseas Agreement made on 26 February 2001 between CNA and CNB;
b. The SLA made on 29 June 2001 (see paragraph 1 above) between CNA and CNE’s predecessor and its import agent;
c. A Supplementary Agreement made in 2002 between CNA, CNB and CNE; and
d. An Extension Agreement made on 30 June 2017 between CNA, CND and CNE.
4 On 18 May 2017, CNB commenced the arbitration in issue in this appeal against CND and CNE, alleging breaches of the SLA. CNA was later joined as an additional respondent to this arbitration. The SLA contained an ICC arbitration clause with Singapore law to apply (the “ICC Clause”). The SLA was due to expire on 28 September 2017. However, an Extension Agreement was concluded between CNA, CND and CNE on 30 June 2017. It provided, inter alia, that disputes under the SLA would be governed by the law of the People’s Republic of China (“PRC”) and be arbitrated before the Shanghai International Arbitration Centre (“SHIAC”), seated in Shanghai (the “SHIAC Clause”). CNB was not consulted by CNA about the 2017 Extension Agreement or any of its terms. Specifically, CNA did not consult CNB about the new dispute resolution term. According to CNA, it had the authority to bind CNB / CNC to the 2017 Extension Agreement and the new dispute resolution term therein under an authority established under the Overseas Agreement (see paragraph 3(a) above).
5 The 2017 ICC Tribunal issued its First Partial Award on liability on 8 June 2020 holding, inter alia, that the 2017 Extension Agreement was invalid as CNA had breached its fiduciary duties and its duty to consult in entering into the 2017 Extension Agreement, and thus, CNB and CNC were not bound by CNA’s renewal of the SLA and the 2017 Extension Agreement was voidable. The 2017 ICC Tribunal also held that CNA, CND and CNE were liable for unlawfully conspiring to injure CNB and CNC by amending the dispute resolution and governing law clause via the 2017 Extension Agreement. The 2017 ICC Tribunal issued a Second Partial Award on 31 July 2021 in which it awarded CNB and CNC US$2.79m for legal costs and expenses in the liability phase and US$381,622 for interim relief applications.
6 CNA, CND and CNE applied to the SICC to set aside the First Partial Award and the Second Partial Award. They contended, inter alia, that the ICC Clause had been superseded by the subsequent Extension Agreement in 2017 with its new SHIAC Clause. CNB and CNC resisted the setting-aside applications. The SICC dismissed the applications to set aside the First Partial Award and the Second Partial Award. The SICC concluded that CNA’s authority to bind CNB in relation to CND / CNE was established by and contained in the 2002 Supplementary Agreement (see paragraph 3(c) above). The tripartite relationship established by the 2002 Supplementary Agreement was governed by Singapore law, and, on the facts of this case, CNA owed CNB fiduciary and equitable duties in relation to the exercise of its power to alter CNB’s legal relations with CND / CNE. In entering into the 2017 Extension Agreement, CNA acted in haste and secrecy at CND’s / CNE’s instigation because CND / CNE wanted to rely on the change in the dispute resolution clause as a jurisdictional objection. This was a breach of CNA's fiduciary duty and CNB was entitled to and did avoid the 2017 Extension Agreement. Consequently, the ICC Clause remained operative, and the 2017 ICC Tribunal did not cease to have jurisdiction over the disputes referred to it.
7 CNA appealed the SICC’s decision, contending that First and Second Partial Awards should be set aside under Art 34(2)(a)(i) and/or (ii) of the UNCITRAL Model Law on International Commercial Arbitration, as enacted in the International Arbitration Act 1994 (2020 Rev Ed). CNA argued that the 2017 ICC Tribunal had no jurisdiction to determine the question in the present arbitration because the ICC Clause, which purportedly gave it jurisdiction, had been superseded by the SHIAC Clause. CNA argued that its authority to bind CNB / CNC was established under the Overseas Agreement made on 26 February 2001 which had pre-dated the 2002 Supplementary Agreement. That authority was said to be governed by Korean law. It was contended that under Korean law, the 2017 Extension Agreement and the SHIAC Clause were valid, even if CNA breached duties owed to CNB and CNC in executing the 2017 Extension Agreement. CNB / CNC resisted by, inter alia, taking up the issue of CNA's authority to execute the 2017 Extension Agreement. On CNB’s / CNC’s case, the SICC was correct in deciding that the 2002 Supplementary Agreement (governed by Singapore law, with associated fiduciary and equitable duties) was the source of CNA's authority to execute the 2017 Extension Agreement.
Decision
8 CNA was in breach of its fiduciary duty to CNB in entering into the 2017 Extension Agreement. The source of its fiduciary obligations to CNB was to be found in the relationship between them established by the 2002 Supplementary Agreement. The haste and secrecy with which CNA acted in entering into the 2017 Extension Agreement in the circumstances found by the SICC indicated a purpose of supporting a jurisdictional objection to the 2017 ICC arbitration: at [46].
9 In considering the effect of the dispute resolution clause in the 2017 Extension Agreement, it was necessary to have in mind that the 2017 ICC arbitration had already been commenced when the 2017 Extension Agreement was executed. The question this raises is whether the language of clause 2 of the 2017 Extension Agreement is sufficiently clear to affect arbitration proceedings that had already been commenced prior to that: at [47].
10 As a matter of construction, the language of the dispute resolution clause in the 2017 Extension Agreement was not apt to remove the jurisdictional foundation previously agreed in the SLA between the parties to the 2017 ICC arbitration. To affect an arbitration that was already afoot, clause 2 would have needed to be explicit in its terms; but that was not done. Hence, even if CNA had not breached its fiduciary obligations to CNB, CNA could not have succeeded on the jurisdictional challenge based on the new dispute resolution provision: at [48].
11 The Court of Appeal dismissed the appeal: at [49].
This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.
What was CNA v CNB and another [2024] SGCA(I) 2 about?
It was a Singapore Court of Appeal decision dated 16 May 2024 concerning arbitration. The appellant CNA had sought to set aside partial ICC awards on liability and costs from 8 June 2020 and 31 July 2021, arguing the arbitration clause had been superseded by a 2017 extension agreement.
What was the outcome of CNA v CNB and another [2024] SGCA(I) 2?
The Court of Appeal dismissed the appeal at the hearing following the close of oral argument, with Robert French IJ delivering the grounds of decision on 16 May 2024. The appeal challenged the SICC judgment in CNA v CNB and another and other matters [2023] SGHC(I) 6.
Statutes Cited
Cases Cited (1)
SG (1)
[2023] SGHC(I) 6
Referenced in
Statutes interpreted in this judgment
Legal concepts & references
Judgment
Read the full judgment on the official Singapore Courts portal.
Read on eLitigationSource: eLitigation ([2024] SGCA(I) 2)