DQR & Anor v DQT

10 The first of the four contracts is called the “Tender Teaming Agreement (Unincorporated JV)” (“the Tender Agreement”). The defendant and the second claimant entered into the Tender Agreement in late May 2014. ¹³

11 The first claimant is not a party to the Tender Agreement.

12 The Tender Agreement sets out the terms on which the second claimant and the defendant agreed to cooperate: (a) in preparing their tender for the Project and submitting it to the Principal; and (b) if the tender were successful: (i) in negotiating and entering into the main contract for the Project with the Principal; and (ii) in negotiating and entering into a deed with each other to record the terms on which they would work together as “a single, integrated team” to deliver the Project to the Principal. ¹⁴

13 The second of the four contracts is called the “Design and Construct Deed” (“the D&C Contract”). ¹⁵ The defendant and the second claimant entered into the D&C Contract with the Principal in early December 2014.

14 The first claimant is not a party to the D&C Contract.

15 The preamble to the D&C Contract establishes that the defendant and the second claimant contracted with the Principal jointly as “the Contractor” and as an “unincorporated joint venture”: ¹⁶

16 The D&C Contract obliged the defendant and the second claimant to deliver the Project to the Principal by 22 December 2016 at a fixed price of $242m for both design and construction. ¹⁷ The D&C Contract also obliged the JV to pay the Principal liquidated damages of $40,000 for every day of delay in delivery up to 21 June 2017 and $400,000 for every day of delay in delivery beyond that. ¹⁸

17 The third of the four contracts is called the “Joint Venture Deed” (“the JV Deed”). ¹⁹ The defendant and the second claimant entered into the JV Deed in late August 2015.

18 The first claimant is not a party to the JV Deed.

19 The JV Deed sets out “the basis upon which the Parties [ie, the defendant and the second claimant] will work together as a joint venture to perform their obligations pursuant to the [D&C] Contract”. ²⁰

20 Clause 2 of the JV Deed is headed “Establishment of Joint Venture”. It records that the defendant and the second claimant “hereby constitute an unincorporated fully integrated joint venture to perform: (i) the work and services required by this Deed; and (ii) the work under the [D&C] Contract”. ²¹ Clause 2 goes on to give the JV a name and to oblige the defendant and the second claimant to “use this name in all dealings with any Third Party in so far as it is legally possible to do so”. ²²

21 Four provisions of the JV Deed are relevant for present purposes.

22 First, cl 2.3 of the JV Deed ²³ read with the definition of “Participating Interest” in cl 1.1 of the JV Deed ²⁴ provides that the defendant and the first claimant each have an interest of 50% in the capital of the JV, in the beneficial ownership of the JV, in the profits of the JV and in the losses of the JV, calculated in accordance with and subject to the terms of the JV Deed. ²⁵

23 Second, cl 5 of the JV Deed establishes “the JV Board” as a supra-corporate contractual organ with the power and responsibility to exercise “[o]verall control of the [JV], the business of the [JV] and the granting of powers to represent and bind the Parties with respect to the [JV]” ²⁶ on a “best for Project” basis. ²⁷ The JV Deed stipulates that the JV Board should comprise in the first instance two representatives appointed by the defendant and two representatives appointed by the second claimant. ²⁸

24 Third, cl 7.2 of the JV Deed obliges any party to the Deed who receives “any sums in connection with the [JV], whether from the [Principal] or any other Third Party” to hold those sums on trust for the JV and to pay those sums promptly into one of the “Project Account(s)” opened under cl 7.1 of the JV Deed. ²⁹ In July 2023, the defendant nominated in correspondence a specific Project Account “as the relevant account where any surplus funds in respect of any arbitral award are to be paid.” ³⁰ (see [74] below). I shall refer to this specific account as “the JV Account”. ³¹

25 Finally, cl 13.5 of the JV Deed ³² requires any dispute under the JV Deed to be resolved by arbitration in Singapore under the ICC Rules. ³³

26 My use of the term “the JV” to refer to the unincorporated joint venture between the defendant and the second claimant constituted by the JV Deed is subject to two caveats.

27 The first caveat is that “the JV” is merely a convenient term for referring to the defendant and the second claimant as two distinct legal persons taken together. “The JV” is not, in itself, a legal person who held any rights, owed any duties, earned any profits or suffered any losses in connection with the Project. The intent of the defendant and the second claimant, as formalised and expressly stipulated in the JV Deed, was that their joint venture should be unincorporated. In connection with the Project, therefore, each of the defendant and the second claimant held its rights, owed its duties, stood to earn profits and stood to suffer losses in its individual capacity, ie directly as two distinct legal persons and not mediated by an incorporated joint venture vehicle. That is so whether those rights, duties, profits or losses arose in contract, at common law or under statute.

28 The second caveat is that, even though the JV Deed has contractual effect only from the date of its execution in August 2015, I shall use the term “the JV” as a convenient term to refer to the defendant and the second claimant as two distinct legal persons taken together also during the Tender Period. I do this for two reasons. First, the evidence and the terms of the JV Deed show that the defendant and the second claimant considered themselves to be operating as an unincorporated joint venture even before they entered into the JV Deed. The express parenthetical reference to the “Unincorporated JV” in the full name of the Tender Agreement (see [10] above) suggests as much. Further, it is common ground that the JV Deed governs, as between the defendant and the second claimant, the disposition of any compensation that one of them may recover for losses that it suffered in connection with the Project before it entered into the JV Deed, eg during the Tender Period. Second, as I have pointed out, “the JV” is merely a convenient term for referring to the defendant and the second claimant as two distinct legal persons taken together. Each legal person held its rights, owed its duties, stood to earn its profits and stood to suffer its losses as a distinct legal person just as much before entering into the JV Deed (ie broadly during the Tender Period) as it did after entering into the JV Deed (ie broadly during the Contract Period). It is therefore not legally inaccurate to use the term “the JV” to refer to the defendant and the second claimant as distinct legal persons taken together even before they entered into the JV Deed so long as it is borne in mind that the parties’ legal rights and obligations at any given time are subject to the JV Deed only in accordance with its terms.

29 The fourth and final contract is called the “Services Contract”. ³⁴ The first claimant (as the service provider) entered into the Services Contract in late July 2015 with the defendant and the second claimant, “trading as [the JV]” ³⁵ (as the service recipient).

30 The Services Contract is the only contract underpinning the parties’ cooperation to which all three parties to the arbitration and to this litigation are also contractual parties.

31 Three provisions of the Services Contract are relevant for present purposes.

32 First, the Services Contract obliges the first claimant to provide to the JV during the Contract Period “all design and engineering work required for the D&C Contract Works” ³⁶ at a lump sum price of $2m. ³⁷

33 Second, the Services Contract stipulates that the first defendant’s liability to the JV “arising out of” the Services Contract (whether in contract, tort equity or otherwise) is capped at the lump sum price, ie at $2m. I shall refer to this provision as the “Liability Cap”.

34 Finally, the Services Contract is governed by Ruritanian law and requires all disputes “arising out of, or relating to, or in connection with” the Services Contract to be resolved by arbitration in Singapore before a single arbitrator under the Rules of the International Chamber of Commerce. ³⁸

35 The Arbitration took place under the arbitration agreement in the Services Contract. It is common ground, as well as a significant point for the case advanced by the claimants in this application, that neither party to the JV Deed has to date invoked the arbitration agreement in the JV Deed (see [21] above).

36 By its terms, the Services Contract governs only the services that the first claimant provided to the JV during the Contract Period and not those that it provided during the Tender Period. ³⁹ As I have mentioned (see [5] above), the first claimant provided its services during the Tender Period under a contractual retainer with the Claimants’ Holding Company. ⁴⁰ Despite this difference, however, the nature of the services that the first claimant provided during both the Tender Period and the Contract Period are, for present purposes, broadly the same. I shall therefore refer to these services collectively as “the Services”, regardless of whether they were provided during the Tender Period (during which the first claimant did not owe any contractual obligations to the JV) or during the Contract Period (during which the claimant did owe contractual obligations to the JV under the Servies Contract).

37 The JV ultimately delivered the Project to the Principal in February 2018. ⁴¹ This was over 14 months late. The JV incurred a substantial loss in delivering the Project. The loss included, but was not limited to, $2.1m in liquidated damages that the Principal deducted from the final account for the Project as part of a commercial settlement with the JV. ⁴²

38 The loss on the Project led to a dispute between the parties as to who had caused the loss. The defendant blamed the first claimant and sought compensation for the losses from the first claimant. The first claimant blamed the JV and denied any liability to compensate the defendant for any loss.

41 To resolve the parties’ dispute, the defendant commenced litigation against the first claimant in the courts of Ruritania in July 2020. ⁴⁶ The second claimant was not a party to the Ruritanian litigation, whether as a plaintiff or as a co-defendant. ⁴⁷

42 The defendant sought to recover damages from the first claimant in the Ruritanian litigation for the first claimant’s alleged breaches of the non-contractual duties that it owed the defendant in providing the Services during the Tender Period, ie for breaches of duty that occurred before the first claimant entered into the Services Contract with the JV. ⁴⁸ Part of the defendant’s case was that the first claimant’s liability to the defendant for breaches of non-contractual duties owed to the defendant during the Tender Period fell outside the scope of the arbitration agreement in the Services Contract.

43 The first claimant applied to the Ruritanian court for an order staying the Ruritanian litigation so that the underlying dispute between the defendant and the first claimant could be referred to arbitration under the arbitration agreement in the Services Contract. ⁴⁹ The first claimant argued that the arbitration agreement in the Services Contract was wide enough to cover any breaches of any non-contractual duties that the first claimant might have owed to the defendant in providing the Services even during the Tender Period. ⁵⁰

44 In July 2021, the Ruritanian court accepted the first claimant’s argument and stayed the Ruritanian litigation in favour of arbitration. It has since been common ground that the arbitration agreement in the Services Contract is wide enough to encompass both the defendant’s claims against the first claimant for breach of the latter’s non-contractual duties during the Tender Period as well as the defendant’s claims against the first claimant for breach of its contractual duties during the Contract.

48 The defendant’s case in the Arbitration was that the first claimant: (a) owed and had breached its non-contractual duties to the defendant under Ruritanian tort law and consumer protection law in providing the Services during the Tender Period; and (b) had breached its contractual duties to the defendant in providing the Services under the Services Contract during the Contract Period.

49 On liability, the defendant advanced two key points against the first claimant. First, the Services provided during the Tender Period were inadequate. The first claimant’s designs for the Project had underestimated the required quantity of a key structural material by a factor of almost two. The costings for the Project were therefore grossly inaccurate. This caused the price for the Project in the tender and in the D&C Contract to be a loss-making price. Second, the Services provided during the Contract Period were late and continued to be inadequate. The Services were late because of the time the first claimant needed to correct its inadequate designs from the Tender Period. And the Services continued to be inadequate because even the corrected designs were either unbuildable or were unnecessarily over-engineered. ⁵⁶ All of this caused the delay in executing the Project and in delivering it to the Principal.

53 As a result of entering into the D&C Contract at the loss-making price, the JV had lost a total of $100m. This figure is calculated by deducting the total cost that the JV incurred in delivering the Project ($440m) from the total revenue that the JV received in delivering the Project ($340m). ⁶⁰ The defendant’s share of the JV’s loss ⁶¹ on the No-Contract Case calculated in accordance with the JV Deed was therefore 50% of this sum, ie $50m. ⁶²

55 But for the first claimant’s breaches of its non-contractual duties during the Tender Period, the JV would have submitted a different tender and would have entered into a different D&C Contract at a lump sum price that was $17m higher (“the Different Contract Delta”) than the loss-making price actually agreed in the D&C Contract. ⁶³

56 In addition, but for the first claimant’s breaches of its contractual duties during the Contract Period, the JV would have delivered the Project to the Principal on time. ⁶⁴ The first claimant had thereby caused a loss during the Contract Period (“the Contract Period Loss”) ⁶⁵ that comprised five heads: (a) additional time-related costs for critical delay; (b) additional task-related costs caused by working in disrupted conditions; (c) additional direct costs either incurred in paying third parties as a result of the first claimant’s breaches or incurred in order to mitigate the effects of those breaches; (d) the agreed liquidated damages deducted by the Principal; and (e) additional direct costs of building unnecessarily over-engineered structures. ⁶⁶

57 The defendant quantified the total loss on the Different Contract Case as $70m, comprising the Different Contract Delta of $17m plus the Contract Period Loss of $53m. ⁶⁷ The Contract Period Loss of $53m is $1m less than the sum of the five separate heads of Contract Period Loss. This is because there was a $1m overlap embedded in the third and fifth heads of loss. ⁶⁸ If the Tribunal saw fit to award the defendant both the third and the fifth heads of loss, that overlap would have to be eliminated by deducting $1m from the sum of the five heads of loss. ⁶⁹

61 The first claimant’s position in the arbitration was that it did not owe any non-contractual duties to the defendant or breach any such duties during the Tender Period and that it did not breach its contractual duties to the defendant during the Contract Period.

62 It alleged that the true reason for the delay in delivering the Project was, amongst other things, the JV’s “dysfunctional” management and the failures of the JVs other contractors. ⁷³

63 In the event that the Tribunal nevertheless held the first claimant liable to pay damages to the defendant, the first claimant asked the Tribunal to award only 50% of those damages to the defendant, on the basis that the defendant was entitled to recover only 50% of its loss on the Project, with the second claimant being entitled to the remaining 50%. ⁷⁴

66 Despite having nothing to advance or defend in the Arbitration, the second claimant took the opportunity to file two rounds of memorials, ⁷⁸ to file a prehearing brief, ⁷⁹ to present an oral opening statement, ⁸⁰ to lead evidence from three witnesses of fact ⁸¹ and to file two rounds of post-hearing written closing submissions. ⁸² Its stated reason for doing so was because it “acknowledged its function as being one which seeks to assist the Tribunal by providing it with a more complete factual and documentary record regarding the issues in dispute” ⁸³ . The defendant submitted to the Tribunal that the second claimant was leading its evidence in the Arbitration “to serve…some collateral purpose that has yet to be revealed”, ⁸⁴ thereby suggesting that the second claimant’s real purpose was not to assist the Tribunal but to assist its related corporation, the first claimant. The Tribunal, in making its award on the costs the Arbitration, accepted ⁸⁵ that the first claimant’s case had indeed been supported by the second claimant on certain aspects. ⁸⁶

(a) The defendant’s case was that it had suffered a personal Project loss of $50m. It asked the Tribunal to assess the damages payable by the first claimant in that amount and, further, asked Tribunal to order the first claimant to pay those damages directly to the defendant, with only the damages awarded that exceeded that sum to be paid into the JV Account.

(b) The damages as assessed by the Tribunal were below $50m. Therefore, the Tribunal did not have to consider this aspect of the defendant’s case. Whatever disputes remained between the defendant and the second claimant over where the damages should be paid were all disputes under the JV Deed. The Tribunal therefore had no jurisdiction over those disputes.

(c) The only claimant in the Arbitration was the defendant. The Tribunal would therefore make an award in the usual form, which does not specify the means of payment, in the defendant’s favour.

79 The Tribunal set out its reasoning on this final issue as follows: ¹⁰⁰

80 The Tribunal therefore made the following substantive dispositive orders in the penultimate paragraph of the Award: ¹⁰¹

(a) The first claimant shall pay the defendant $12m, being:

(i) damages of $10m for its Tender Period claims “representing the direct losses that [the defendant] suffered by entering into a loss-making contract (the D&C Contract)”; ¹⁰² and

(ii) damages of $2m for the defendant’s Contract Period claims “representing the losses suffered on the Project by reason of the breaches of the Services Contract”. ¹⁰³

(b) The first claimant was to pay this sum of $12m directly to the defendant. ¹⁰⁴

81 The claimants seek to set the Award aside on only one ground: that the Award dealt with a dispute beyond the scope of the submission to arbitration under Art 34(2)(a)(iii) of the Model Law.

82 The parties are on common ground as to the applicable law. Art 34(2)(a)(iii) of the Model Law provides that the court may set aside an award if it “deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration”.

83 The court approaches an application of this nature de novo and considers first what was the scope of the submission to arbitration and second whether the tribunal dealt with issues outside that scope (AKN and another v ALC and others and other appeals [2015] 3 SLR 488 at [112]; CBX and another v CBZ and others [2022] 1 SLR 47 (“CBX”) at [11].

84 If a tribunal makes a finding in excess of jurisdiction, any other findings that are linked to the impugned finding or that flow from the impugned finding will also be set aside: CBX at [74]; GD Midea Air Conditioning Equipment Co Ltd v Tornado Consumer Goods Ltd and another matter [2018] 4 SLR 271 at [72]-[76].

85 The claimants’ submission is that the Tribunal made two key findings in the Award that necessarily required a consideration of the terms of the JV Deed and were therefore in excess of its jurisdiction (“the Relevant Findings”): ¹⁰⁵

86 This submission proceeds on a fundamental misapprehension of what the Tribunal decided in the Award. The Tribunal made express in its Award that it was acutely aware that all questions arising under the JV Deed were completely outside its jurisdiction. It therefore rejected the attempts of the claimants as well as the attempts of the defendant to have the Tribunal decide issues in dispute between the parties under any provision of the JV Deed.

87 All that the Tribunal did was to make a finding that the damages it awarded for the Tender Period loss and for the Contract Period loss was personal to the defendant on the evidence presented in the Arbitration and for the purposes of the Arbitration. In that context, and only in that context, the Tribunal accepted that the defendant had proven that it was entitled to an award in the sum of $12m and was entitled to have that sum paid directly to it by the first claimant.

88 The position taken by the second claimant left the Tribunal with no alternative but to make this finding. That is because only the defendant led any evidence in the Arbitration of any loss arising from the first claimant’s breaches of duty. The second claimant led no evidence at all in the Arbitration, let alone any evidence that it had suffered any loss, whether caused by the first claimant or otherwise. And the second claimant sought from the Tribunal no award of any damages against the first claimant, or indeed any other party, for any such loss. Its only claim was against the defendant, and even then it was a claim only for any damages that might be awarded in the Arbitration to be paid into the JV Account. That claim was disputed by the defendant. That dispute is clearly a dispute under, and only under, the JV Deed. It is not a dispute under the Services Contract.

89 As a result, the Tribunal had before it an Arbitration in which it had made a finding that: (a) the first claimant was in breach of its duties, both during the Tender Period and the Contract Period; and (b) that the defendant had proven that those breaches of duty had caused $12m loss on the Project. What was the Tribunal then to do in order to conclude the Arbitration? It could not award that loss jointly to the defendant and the second claimant. That was simply because the second claimant had deliberately chosen to adduce no evidence and to make no claim that it had suffered any loss. The Tribunal could not order the first claimant to pay the damages into the JV Account. That was simply because the dispute between the defendant and the claimants over whether the defendant was obliged to account for the damages or to pay the damages into the JV Account was a dispute under cl 7.2 of the JV Deed and therefore outside the scope of the Tribunal’s jurisdiction.

90 It is clear from paragraphs 2044 to 2049 of the Award (see [79] above) that the Tribunal made no finding that the sum that the first claimant was ordered to pay the defendant was compensation to the defendant for the defendant’s “personal loss” in any absolute sense. Quite rightly, the Tribunal considered that any dispute over whether, and if so to what extent, that loss was “personal” to the first claimant in any absolute sense or whether the second claimant had any participating interest in the damages awarded was a dispute to be resolved under the arbitration under the JV Deed and not in an arbitration under the Services Contract.

91 It is true that the defendant argued in the Arbitration that it was entitled to claim any sum below the Threshold Amount as its personal loss on the basis that $50m represented the defendant’s maximum theoretical loss. It is also true that the defendant argued that the increase in the tender price was a loss that was personal to the defendant because it was a loss incurred outside the JV Project Accounts. But the Tribunal did not order the first claimant to pay the $12m directly to the defendant because the Tribunal accepted either of these arguments. The Tribunal nowhere ordered the first claimant to pay the $12m in damages directly to the defendant because the Tribunal accepted that any loss below $50m was ipso facto the defendant’s personal loss. The Tribunal nowhere accepted the defendant’s argument that the increase in the tender price was a loss outside the JV Project Accounts.

92 Instead, the Tribunal made clear that it ordered the first claimant to pay the damages of $12m directly to the defendant because, and only because: (a) there was only one claimant in the Arbitration making a claim for compensation against the first claimant; (b) the second claimant made no claim in the Arbitration for any compensation from anyone; (c) whether the second claimant was entitled to any part of the damages and whether the defendant was obliged to account to the JV for the damages or to pay the damages into the Project Account were all disputes under, and entirely under, the JV Deed; and (d) the usual form of award in an arbitration where only one claimant sought damages for only one respondent was an award requiring that respondent to pay the damages directly to that claimant.

93 It may be that in any future arbitration under the JV Deed, the second claimant will find itself precluded from arguing that the damages that the Tribunal awarded in the Arbitration are not entirely the defendant’s personal loss arising from the Project or that the second claimant nevertheless has a participating interest in the damages. But that will not be because the Tribunal made any absolute finding to that effect in the Arbitration sufficient to bind the second claimant in this hypothetical future arbitration. That will be because of the position that the second claimant chose to take in the Arbitration, presumably on legal advice, not to join the defendant in the Arbitration in advancing a positive case, and adducing evidence to support that positive case, against the first claimant in relation to the first claimant’ breaches of duty during the Tender Period and the Contract Period as well as in relation to the quantum of loss that those breaches of duty had occasioned to each of the first claimant and the second claimant during each of those periods.

94 For these reasons, I have dismissed the claimants’ application with costs.