SUPREME COURT OF SINGAPORE
24 June 2024
Case summary
DBO and others v DBP and others [2024] SGCA(I) 4
Civil Appeal No 9 of 2023
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Grounds of Decision of the Court of Appeal (comprising Sundaresh Menon CJ, Steven Chong JCA, David Neuberger IJ) (delivered by David Neuberger IJ):
Outcome: The Court of Appeal (the “CA”) dismissed an appeal against the decision of a three-Judge coram of the Singapore International Commercial Court (the “SICC”) made in respect of an application set aside a partial arbitration award.
Background
1 This was an appeal against a decision of the SICC in DBO and others v DBP and others [2023] SGHC(I) 21, dismissing the application of [DBO], [DBQ], [DBS] and [DBU] (the “Appellants”) to set aside a Partial Arbitration Award dated 30 January 2023 (the “Award”), whereby an arbitral tribunal (the “Tribunal”) dismissed a claim brought by the Appellants and [DBW]) against [DBP], [DBR], [DBT], and [DBV] (the “Respondents”) pursuant to Rule 29.1 of the Rules of the Singapore International Arbitration Centre (the “SIAC”).
Facts
2 By a Facility Agreement (the “Agreement”) made on 26 February 2020, [DBR], [DBT] and [DBV] granted a loan facility (the “Loan”) for US$200m to [DBO] and [DBQ] (the “Borrowers”). [DBP] was the Security Agent, and [DBS] and [DBU] (and [DBW]) were guarantors of the Borrowers. The Loan was taken for the purposes of carrying out the development of a project (the “Project”).
3 During 2020, the COVID-19 pandemic (the “Pandemic”) and consequential government orders (the “Orders”) restricting movement and business activities adversely affected sales of units in the Project as well as the 2nd Appellant’s rental income from the Mall. The Appellants claimed that, as a result of the Pandemic and the Orders, they were unable to repay the Loan when it matured in March 2021.
4 The Appellants commenced arbitration proceedings on 6 December 2021, contending that the Agreement had been discharged by frustration so that the Respondents had no rights under the Agreement. On 18 October 2022, the Respondents applied for early dismissal under Rule 29.1 of the SIAC Rules (“Rule 29.1”) seeking, among other things, an order dismissing the Appellants’ claim that the Agreement had been discharged by frustration, and of their other claims and defences.
5 The Tribunal heard oral submissions on the AED at a hearing which took place on 16 December 2022 (the “Hearing”).
6 During the Hearing, the Appellants sought to add to the arguments raised in their pleaded case by raising a contention (referred to in the Award as “the amendment”) that there was an oral collateral contract to the effect that the funds for repaying the sums due under the Agreement would come from the sales of units in the Project and the income from the Mall (the “Collateral Contract”). The Respondents did not object to the Appellants’ reliance on the amendment in addition to their pleaded case.
7 The Tribunal found that the Appellants’ contention that the Agreement had been discharged by frustration was manifestly without legal merit. The Appellants’ claim and defence that the Agreement had been discharged by frustration, and that, consequently, the Respondents had no rights under the Agreement or the related security documents, were dismissed.
8 The Appellants applied to the General Division of the High Court to set aside the Award. The application was subsequently transferred to the SICC. The Appellants contended that the Tribunal breached the rules of natural justice and exceeded its jurisdiction because, inter alia, the Tribunal failed to assume the existence of the Collateral Contract despite: (a) having proceeded with the hearing on the basis that it would be assumed that the Collateral Contract existed, and the arbitration respondents having acknowledged that the hearing would proceed on this basis; (b) the arbitration respondents having agreed to assume the truth of the case that repayment of the Agreement would only be from the proceeds of rental and sale; and (c) the Tribunal being bound to assume the existence of the Collateral Contract. The Respondents resisted the setting-aside application.
9 The SICC dismissed the application to set aside the Award. The SICC rejected the Appellant’s contention that the Tribunal had “proceeded on the basis that the existence of the Collateral Contract would be assumed”. The SICC also found that the Respondents did not agree that the existence of the Collateral Contract would be assumed.
10 The Appellants appealed the SICC decision, contending that the Award should be set aside pursuant to s 24 of the International Arbitration Act 1994 (2020 Rev Ed) and Article 34(2) of the UNCITRAL Model Law on International Commercial Arbitration. The Appellant’s case was founded on one central contention, namely that; for the purposes of the AED Hearing, the Tribunal and the Respondents had accepted that a Collateral Contract existed, and that the Tribunal was therefore bound to find that, if the proceedings went to a full hearing, there would be a factual dispute as to whether there was an oral agreement between the parties that the Loan would only be repaid, and interest on the Loan would only be paid, out of sums received from the Project or from the Mall. Once it was accepted that there was a dispute as to whether there was such a Collateral Contract, Rule 29.1 could not have been properly invoked by the Respondents, and the AED should have been dismissed.
Decision on appeal
11 The court agreed that the Tribunal and the Respondents had accepted, for the purpose of the AED, that a Collateral Contract existed: at [29].
12 However, the terms of the Collateral Contract as identified by counsel for the Appellants at the Hearing did not go so far as the Appellants suggested, in that they did not give rise to an agreement that the Loan would be serviced and repaid only out of the proceeds of the Project and the rents from the Mall. Those terms may well have given rise to an agreement that those proceeds and rents would be so used, respectively, to repay and service the Loan, but it did not cut across the proposition that, if those proceeds and rents were not so used or were insufficient, the Respondents, in reliance on the plain terms of the Agreement, could look to the Appellants to pay what was so due: at [31] and [32].
13 The Tribunal was right to conclude that the amendment and Collateral Contract did not enable the Appellants to defeat the AED any more than its pleaded case did: at [48].
14 The Court of Appeal dismissed the appeal: at [1].
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.