BTN v. BTP (2020) SGCA 105
BTN v. BTP (2020) SGCA 105
BTN v. BTP (2020) SGCA 105
Between
(1) BTN
(2) BTO
… Appellants
And
(1) BTP
(2) BTQ
… Respondents
Between
(1) BTN
(2) BTO
… Plaintiffs
And
(1) BTP
(2) BTQ
… Defendants
JUDGMENT
ii
Introduction
1 This appeal concerns the scope of the “public policy” ground for the
setting aside of an arbitration award. The appellants before us contend very
strongly that an award made against them must be set aside on the public policy
ground because it has deprived them of their fundamental and contractual right
to defend themselves against the claims of the respondents and further, to make
claims against the respondents in turn. In brief, the appellants are aggrieved
because the arbitral tribunal before which they appeared held that they were
prevented by the doctrine of res judicata from litigating on a vital component
of their defence to the respondents’ claim in the arbitration. They say there is
nothing more repugnant to the most basic notions of justice than to deny it to
one party. That may be so, but whether “denial of justice” is an appropriate way
in which to label what happened in the arbitration proceedings is another matter.
4 On their appeal, the appellants dropped the application for a review and
pursued only the setting-aside application. In this regard they raised the same
issues that they had canvassed below: that there had been a breach of natural
justice which had prejudiced them; that it would be contrary to public policy to
enforce the Partial Award, because it had deprived them of the right to put
forward their defence to the respondents’ claim and to make their own claims
against the respondents; and that the tribunal in the arbitration failed to decide
matters contemplated by and/or falling within the submission to arbitration.
Like the Judge, we find no merit in their contentions and accordingly dismiss
the appeal. Our detailed reasons are set out below.
Facts
5 The respondents, BTP and BTQ, are individuals. The first appellant,
BTN, is a company incorporated in Mauritius. It now owns the second appellant,
BTO, a Malaysian company.
(a) BTN would acquire 100% ownership and control of the Group
on both the shareholder and board level from the respondents and the
other beneficial owners.
10 In connection with the SPA, BTO entered into separate PEAs with each
of the respondents in November 2012, by which BTP and BTQ were employed,
respectively, as the Chief Executive Officer and Chief Technology Officer of
BTO for three years. Each PEA was signed by the relevant respondent on the
one hand and, on the other, by BTO as the employer and BTN as the confirming
party. The PEAs were governed by the law of Malaysia.
(b) if the dismissals of the respondents were With Cause, then they
would not be entitled to any Earn Outs.
16 The respondents took the view that they had been wrongfully dismissed
and decided to take action against BTO in this regard by invoking the remedies
that Malaysian law makes available to disgruntled employees. On 13 February
2014, the respondents made representations to the Director General of Industrial
Relations, Malaysia (the “Director General”), pursuant to the procedure under
s 20 of the Industrial Relations Act 1967 (Act 177) (Malaysia) (“IRA”). Under
the s 20 IRA procedure, where a workman considers that he has been dismissed
without just cause or excuse by his employer, he may make representations to
the Director General, who may in turn notify the Malaysian Minister for
Industrial Relations. Under s 20(3) of the IRA, the Minister may, if he thinks
fit, refer the matter to the Malaysian Industrial Court (“MIC”) to consider and
if thought fit make an award.
17 The Director General then sent letters dated 7 March 2014 to BTO (at its
registered address in Malaysia) and the respondents, requesting them to attend
a conciliation meeting. An e-mail was sent on the same day to BTO’s manager,
one Mr C, and two other BTO employees, inviting them to the conciliation
meeting. According to the appellants, Mr C was then the only employee at
BTO’s office in Malaysia. All its other employees were based in, and operated
out of, Thailand and India. Correspondence to BTO was sent to its registered
address and collected from this address by Mr C. He was responsible for
keeping BTO’s senior management apprised of this correspondence as well as
keeping them aware of all developments in Malaysia.
19 Awards against BTO were issued by the MIC on 6 April 2015 and
29 July 2015 in favour of the respondents (“the MIC Awards”). The MIC found
that their dismissals had been “without just cause or excuse” under s 20 of the
IRA, and accordingly awarded them compensatory remedies based on their
monthly salaries. In the MIC Awards, the reasoning was essentially that the
burden of proof was on BTO to justify the respondents’ dismissal. Given that
BTO elected not to appear, the evidence of the respondents on the wrongfulness
23 By two awards dated 1 March 2016, the MIC ordered BTO to pay the
sums ordered under the MIC Awards within 30 days to the respondents.
Therein, it was also stated that at the 17 February 2016 hearing, BTO’s counsel
had initially requested an adjournment of the hearing. After hearing the
respondents’ grounds for objecting to the adjournment, namely, that the time to
file judicial review applications against the MIC Awards had long lapsed,
BTO’s counsel agreed that there was no point in having the adjournment and
conceded that any adjournment would further delay proceedings.
24 On 21 April 2016, BTO wrote to the President of the MIC (copying the
respondents’ solicitors) to inform the MIC that BTO had complied with the MIC
Awards and effected full payment as required. BTO also conveyed its apologies
for its absence at the MIC proceedings and explained that “the fact of the said
proceedings have [sic] been inexplicably withheld from [BTO], [which was] an
internal/domestic issue which [BTO was] currently addressing”.
26 In the arbitration proceedings, the appellants took the position that the
dismissals were With Cause and put forward various bases in support of this.
Apart from defending the claim, the appellants also filed a counterclaim against
the respondents. The respondents responded that issues dealing with cause of
termination were res judicata by virtue of the MIC Awards (“the Res Judicata
Issue”) and that as a matter of construction of the SPA and the PEAs, a
determination under the PEAs by the MIC that the dismissals were without
cause was binding for the purposes of the SPA (“the Construction Issue”).
27 In a procedural order issued on 13 March 2017, the Tribunal set out the
timetable for the arbitration, which included timelines for the filing of pleadings
and the production of documents. It also fixed the hearing dates of the
arbitration as being from 6 December 2017 to 8 December 2017. In early
November 2017, certain events occurred as a result of which the respondents
applied for an adjournment of the hearing. On 27 November 2017, the Tribunal
informed the parties that it was inclined to adjourn the hearing on evidentiary
issues but was willing to proceed with a hearing on legal issues alone if the
parties were agreeable. The evidentiary hearing was formally adjourned on
28 November. Thereafter, parties were able to agree on the legal issues, and on
29 November 2017, the Tribunal issued Procedural Order No 5 setting out the
agreed list of legal issues as follows:
10
28 The Tribunal further explained in its Partial Award that the hearing was
meant to “hear discrete issues on points of law insofar that they could be entirely
divorced from factual matters”, and it had become apparent that “there were
potentially determinative points of law capable of resolution in this way, that
the parties were aware of those points of law and were fully prepared to argue
them”.
11
33 On the Res Judicata Issue, the Tribunal held that both the appellants
were prevented from arguing that the respondents were terminated With Cause
under the SPA and PEAs by the doctrine of issue estoppel under Singapore law,
as the question of whether this had occurred was essentially the same as the
issue that the MIC had already determined.
34 The effect of the Partial Award was that the appellants would not be able
to adduce evidence in the arbitration proceedings to make out their assertion
that the respondents were terminated With Cause. The appellants therefore filed
OS 683 on 1 June 2018, seeking the following:
12
(iv) Art 34(2)(b)(ii) of the Model Law, on the basis that the
Partial Award was in conflict with the public policy of
Singapore;
(c) in the further alternative, a setting aside of the Partial Award with
respect to BTN only.
13
Decision below
36 In brief, the Judge held that the Partial Award was not a ruling on
jurisdiction, because neither the Construction Issue nor the Res Judicata Issue
was a jurisdictional issue (Judgment at [45], [52], [78] and [79]). The Judge held
that there was no breach of natural justice, nor did the Tribunal breach the
parties’ agreed arbitral procedure, nor did it exceed its jurisdiction (Judgment at
[92]–[99]). All that occurred was that there was a disagreement before the
Tribunal between the parties as to the ambit of the requirement of identity of
subject matter, and the Tribunal had preferred the respondents’ position on issue
estoppel (Judgment at [101]–[102]). The Tribunal was tasked with determining
whether the findings of the MIC were contractually binding and had res judicata
effect, and the Tribunal decided the very matters submitted to it – the
Construction Issue and the Res Judicata Issue (Judgment at [108]). The Judge
held that the Partial Award was not contrary to the public policy of Singapore,
as the appellants were not prevented from having their case heard and there was
no wrongdoing on the part of the respondents in commencing proceedings in
the MIC (Judgment at [116] and [117]). The argument that the Partial Award
should be set aside with respect to BTN was also rejected (Judgment at [119]).
37 In this appeal, the appellants argue that the Judge erred in dismissing
their application to set aside the Partial Award. The appellants contend that:
14
(c) the Tribunal’s decision on the Res Judicata Issue meant that it
had failed to decide matters contemplated by and/or falling within the
submission to arbitration.
In the alternative, the appellants argue that the Partial Award should be set aside
only against BTN, given that BTN was not a party to the MIC proceedings. The
appellants are aggrieved because the MIC proceedings were determined in the
absence of BTO, and BTN was never a party to those proceedings. They feel
shut out and disregarded. While one may sympathise with such reactions, the
issues have to be determined as a matter of law alone. Further, as we will see, it
was not the case that the appellants had no opportunity at all at the time when
the MIC proceedings were afoot to put a spoke in the respondents’ wheel and
hold them to their contractual obligations.
38 On the other hand, the respondents argue that the appeal is effectively
an attempt to reverse the Tribunal’s findings on the substantive legal merits of
the case under the guise of public policy, breach of natural justice or infra petita
arguments.
39 Article 34(2) of the Model Law, which is given the force of law in
Singapore by s 3(1) of the IAA, provides exhaustive grounds for setting aside
arbitration awards. The relevant provisions are as follows:
15
40 The grounds provided by Art 34(2) of the Model Law are augmented by
s 24 of the IAA. Section 24(b) reads:
16
Our decision
44 On appeal, the appellants first argue that there was a breach of natural
justice because the Tribunal based its decision regarding both the Construction
17
Issue and the Res Judicata Issue on factual matters, even though both parties
had agreed that disputed matters of fact would not be taken into account by the
Tribunal and that the arbitration was to be a “non-evidentiary hearing”.
45 In our judgment, the Judge did nor err in holding that the Tribunal did
not base its decision on facts in dispute, and there was accordingly no breach of
any rule of natural justice in this regard. The parties had agreed to the arbitration
hearing being a “non-evidentiary hearing” to resolve only legal issues, but had
simultaneously tasked the Tribunal to determine “all issues necessary to resolve
whether the findings of the [MIC] are binding on both [appellants]” [emphasis
added] (see [27] above).
18
Whether the Tribunal premised its decision on the Res Judicata Issue on
matters not in issue
48 For context, the Tribunal had held that Singapore law applied to the
question of res judicata in the arbitration, and the applicable four-part test
included the requirement that there be identity of subject matter. The
respondents had argued that this requirement was fulfilled because the issue of
Without Cause termination under the PEAs and SPA was necessarily
determined in the MIC proceedings, as the very question before the MIC under
s 20 of the IRA was whether the respondents had been dismissed without just
cause. The appellants argued that the requirement was not met, because the
issues must be identical. There was no identity of issue because the MIC’s
decision was based on a provision in the IRA, which was distinct from the
termination clauses under the PEAs and the SPA. In its decision, the Tribunal
considered that the concept of “issue identity” to be too narrow and “preferred
to follow the Singapore High Court in BNX v BOE [and another matter [2017]
SGHC 289] in using ‘subject matter identity’”. On this basis, the Tribunal
concluded that the subject matter in both sets of proceedings was in essence the
same.
49 We agree with the Judge that there was no breach of natural justice in
this regard. While it might be that the parties were agreed that the test for issue
19
Whether BTO did not have the opportunity to present its case
50 Lastly, the appellants argue that there was a breach of natural justice
because BTO did not have an opportunity to present its case before the MIC and
the Tribunal, and both the appellants were unable to defend themselves against
the respondents’ claims for the Earn Outs. We do not agree.
51 In the present case, it cannot be said that BTO “could not reasonably
have known” that it should make submissions at the MIC proceedings on the
reasons for the respondents’ termination, given the valid service of the various
notices. What went wrong in regard to the MIC proceedings was an internal
matter for BTO – procedurally the opportunity was afforded by the MIC but not
utilised by BTO. Even if there had been a breach of natural justice at the level
of the MIC proceedings, which we do not accept, such breach would not
constitute ground for setting aside the Partial Award. Section 24(b) of the IAA
requires there to have been a breach of natural justice “in connection with the
making of the award” [emphasis added]. That means that the breach must have
been in relation to the arbitration proceedings before the Tribunal, not the MIC
proceedings. An alleged breach of natural justice at the MIC proceedings and
its effect on the Res Judicata Issue, if any, could and should have been brought
up before the Tribunal. It has no place here.
20
53 The appellants also attempt to align the present case with that of CRW
Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR
305 (“CRW Joint Operation”). In our view, that case is distinguishable from the
present. To briefly summarise the facts of CRW Joint Operation, it involved a
dispute that arose out of a contract that was governed by the 1999 FIDIC
Conditions of Contract for Construction (1st Ed, 1999) (“FIDIC Conditions”).
Clause 20.6 of the FIDIC Conditions provided that “[u]nless settled amicably,
any dispute in respect of which the [board]’s decision (if any) has not become
final and binding shall be finally settled by international arbitration” [emphasis
added]. The dispute was referred to a dispute adjudication board in accordance
with the FIDIC Conditions. The board decided that the defendant owed the sum
of US$17m to the claimant. The defendant filed a notice of dissatisfaction, and
parties were not able to comply with the board decision. The claimant
commenced arbitration for the purpose of enforcing the board decision. The
tribunal held that the claimant was entitled to immediate payment, and that the
defendant was not entitled to request that the tribunal reverse the board’s
decision. The defendant thereafter sought to set aside the award in the Singapore
21
courts. The award was set aside by the High Court, and this court dismissed the
appeal.
55 In sum, the appellants failed to establish that the proceedings before the
Tribunal constituted a breach of natural justice. We go on to explain why
upholding the Partial Award would not be contrary to public policy.
22
56 The public policy ground for setting aside provided by Art 34(2) of the
Model Law is a narrow one. This court has held that the ground should only
succeed in cases where upholding or enforcing the arbitral award would “shock
the conscience”, or be “clearly injurious to the public good or … wholly
offensive to the ordinary reasonable and fully informed member of the public”,
or violate “the forum’s most basic notion of morality and justice”: PT Asuransi
Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597
(“PT Asuransi”) at [59]. In this respect, we reiterate that the doctrine of res
judicata has long been part of the law of Singapore and its invocation in cases
brought in the Singapore courts is not unusual. Accordingly, a decision based
on res judicata principles can never in itself be described as shocking the
conscience or wholly offensive to informed members of the public. Recognising
this, the appellants aim their attack at erroneous applications of the doctrine.
Importantly, however, the general principle is that even if an arbitral tribunal’s
findings of law and/or fact are wrong, such errors would not per se engage the
public policy of Singapore: AJU v AJT [2011] 4 SLR 739 at [66]; PT Asuransi
at [57].
(a) First, because the appellants were not aware of the MIC
proceedings, the effect of the Tribunal’s decision that the MIC awards
have preclusive effect is that the appellants have been deprived of their
right to defend themselves and/or make claims in respect of whether the
respondents’ termination was “With Cause” under the SPA.
23
(b) Second, the appellants claim that because the respondents were
in breach of the arbitration agreements in the PEAs in seeking recourse
from the MIC, upholding the Partial Award would mean that the
respondents would be allowed to take advantage of their breach and this
would be contrary to public policy.
58 At the outset, we note again that the various notices of the MIC
proceedings were validly served on BTO at its registered address and were
received by Mr C. Indeed, the appellants do not dispute this. Instead, the
appellants’ argument is that BTO’s directors and senior management were
unaware of these notices because Mr C had failed to relay the messages to them
until it was too late. It was only on 16 February 2016 that Mr C informed BTO’s
senior management about the MIC notices, letters of demand and the notices of
non-compliance proceedings. According to the appellants, Mr C had concealed
the notices from BTO’s senior management. The appellants had placed evidence
before the Tribunal that Mr C’s failure to bring these notices to BTO’s senior
management resulted in his employment being terminated following an internal
inquiry into his misconduct, and the respondents had not challenged the truth of
such evidence. As a result of Mr C’s misconduct and the Tribunal’s decision on
the Res Judicata Issue, the appellants argue that they were effectively deprived
of the right to defend themselves against the respondents’ claim by showing that
their termination was “With Cause” under the SPA.
59 In our view, the appellants’ allegation that they “did not know” of the
MIC proceedings is irrelevant. As the respondents point out, no fewer than eight
24
notices relating to the MIC proceedings were properly served on BTO, and the
proceedings were repeatedly adjourned to ensure that BTO had the opportunity
to attend the hearings. BTO’s failure to present its defence at the MIC
proceedings was a direct result of its own internal arrangements, and therefore
could not be a ground for challenging the validity of the MIC Awards. In fact,
the appellants did not challenge the validity of the MIC Awards in the arbitration
proceedings before the Tribunal. On this footing, the substance of the
MIC Awards was examined by the Tribunal. The Tribunal examined the facts
and concluded that the MIC Awards were decisions on the merits. As per the
agreed list of issues, the Tribunal further decided that the MIC’s findings were
binding, both as a matter of contractual interpretation and of res judicata, in
respect of both the appellants. There is no allegation that the appellants were
prevented from presenting their respective cases on the Construction and
Res Judicata Issues before the Tribunal. The merits of a tribunal’s decision are
ordinarily irrelevant to whether its award should be set aside. The appellants
cannot now refuse to accept the legal outcome of the Tribunal’s determination.
60 At the hearing of this appeal, the appellants further argued that there was
“sufficient material before the Tribunal” that “cr[ied] out for an inquiry” into
the circumstances behind BTO’s non-appearance at the MIC proceedings.
According to the appellants, the Tribunal’s failure to conduct such an inquiry
before it decided the Res Judicata Issue meant that the appellants were deprived
of their right to defend themselves, because the result of the inquiry would have
had a bearing on Tribunal’s decision on the Res Judicata Issue. The appellants
argued that to enforce the Tribunal’s award, which flowed from this series of
events, would be contrary to public policy.
61 In our view, if the circumstances indeed “cried out” for a factual inquiry,
then surely the onus was on the appellants to make the argument before the
25
Tribunal that the Res Judicata Issue could not be determined until that inquiry
had been conducted. The appellants, however, did not do so. Instead, they
agreed that the hearing to determine the issues as agreed in Procedural Order
No 5 would be a non-evidentiary hearing. The Tribunal had done precisely what
was intended by disposing of the agreed issues without taking further evidence.
There is therefore no basis on which the appellants can complain about the
Tribunal’s failure to conduct a factual inquiry into the circumstances behind
BTO’s non-appearance at the MIC proceedings.
26
The possibility of the respondents getting an MIC Award in their favour, which
would thereafter be foisted upon a subsequent arbitration, was therefore clearly
on the appellants’ minds. It was open to the appellants, at that stage, to have
invoked the arbitration process. They did not do so. They neither commenced
arbitration proceedings themselves nor sought to restrain the further conduct of
the MIC proceedings, a course which was open to BTO. As the Tribunal held,
the mandatory nature of the relevant arbitration clause was conditional on one
party actually invoking it. Since the arbitration clauses were not invoked by
either of the appellants, the respondents’ actions in bringing proceedings under
the IRA in Malaysia could not thereafter be impugned. The appellants therefore
cannot complain that there was something suspicious or improper about the
bringing of the MIC proceedings. In this connection, it is worth reiterating that
at all material times, Mr K was on the board of BTN. Although his letter to the
conciliator was sent on behalf of BTO, there is no reason to believe that the
BTN board was unaware of the respondents’ alleged breach of the arbitration
clauses. Both BTN and BTO were fully capable of putting in train action to
ensure that the disputes were diverted to resolution by arbitration instead of in
the MIC.
27
65 At the hearing, the appellants made the argument that as a matter of law,
a party may seek to challenge an award on the ground that the award is contrary
to public policy, if that award rests on an error of law by reason of which error
the tribunal considered that it was not able to exercise its mandate and determine
the merits of either party’s position. In the context of this appeal, a tenet of the
appellants’ argument is that erroneous applications of the res judicata doctrine
by arbitral tribunals are such errors of law.
28
In contrast to a tribunal’s decisions of law and fact which are not ordinarily open
for review, a tribunal’s decision on jurisdiction is subject to de novo independent
review by the courts.
29
69 As this court explained in BBA v BAZ at [76], the “tribunal versus claim”
test applies for the purpose of distinguishing whether an issue goes towards
jurisdiction or admissibility. This court elaborated as follows (at [77]–[79]):
30
[emphasis in original]
31
We agree with the Judge below that this statement of principle is applicable to
decisions made by arbitral tribunals on issues of res judicata as well, as the
nature of a res judicata challenge is the same in both court proceedings and in
arbitral proceedings. Furthermore, as explained by Gretta Walters in “Fitting a
Square Peg into a Round Hole: Do Res Judicata Challenges in International
Arbitration Constitute Jurisdictional or Admissibility Problems?” (2012) 29(6)
Journal of International Arbitration 651 (“Walters”) at 672 and 675, as a matter
of logic, where a party alleges that a dispute has already been resolved and
should not be reheard, the party is not attempting to get the dispute resolved in
a different forum; rather the party does not want the claim (or part thereof) to
be resolved in any forum. In sum, a decision on the issue of res judicata is one
of admissibility, and the courts cannot review it on its merits.
32
out in PT Asuransi at [59] (see above at [56]). Parties are simply being held to
the decision of the tribunal they chose for the resolution of disputes between
them. In the present case, the Res Judicata Issue was even explicitly and
specifically set out in a list of agreed issues for the tribunal’s determination in
Procedural Order No 5. In holding that the MIC Awards had res judicata effect,
the tribunal was not “delegat[ing] or reserve[ing] matters submitted to it to
another to decide”, contrary to the appellants’ assertion, but was deciding the
very issue it had been tasked to adjudicate on.
74 We note that there are several foreign cases, which the appellants rely
on in their arguments, which appear to have diverged from this approach. The
first case relied on is the decision of BGH, Beschluss vom 11. Oktober 2018 –
I ZB 9/18 – OLG Köln (“I ZB 9/18”); In brief, I ZB 9/18 concerned two
consecutive arbitration proceedings. In the first set of arbitration proceedings,
the tribunal had stated in its award that the claimant had no commission claims
against the defendant for January 2011 until 10 July 2013. The claimant had,
however, actually withdrawn part of its claim in relation to the period of
1 January to 10 July 2013 prior to the award being issued. At the second
arbitration filed by the claimant against the defendant, the claimant sought
approval of the audit for business transactions from 1 January 2012 onwards.
The second tribunal’s award granted the claim from 11 July 2013 until the award
was rendered, but held that since the commission payment claims for 1 January
to 10 July 2013 had been dismissed by the first tribunal, then a claim for an
audit (directed at establishing the amount of the claim) would no longer be
considered. The claimant sought a setting aside of the second tribunal’s award,
in so far as it rejected the application for an audit for the period from 1 January
to 10 July 2013, as it was wrong to have disregarded the claimant’s withdrawal
of the claims in respect of 1 January to 10 July 2013 and to hold that the claims
33
for that period had been determined by the first tribunal. The court, in holding
that the second tribunal had erred in ascribing res judicata effect to the first
tribunal’s award, stated at [15]:
(2) The principle that the clear disregard of the legal validity
of another decision by an arbitral tribunal violates public policy,
is not only given when it wrongly fails to take into account the
binding effect of a final judgment or a final arbitral award within
the limits of § 1055 of the German Code of Civil Procedure, but
also in the opposite case here, where an arbitral tribunal, in
disregard of the effects of res judicata, wrongly considers itself
bound by an earlier award. Only in this way can it be prevented
that a party bound to an arbitration agreement is denied access
to effective protection by the law by denying the party the
substantive assessment of an arbitration claim with the
erroneous view that this claim has already otherwise been
finally decided.
34
78 In sum, the Partial Award is not contrary to public policy and should not
be set aside on this basis.
79 Finally, the appellants argue on appeal that in holding that the MIC
Awards precluded the appellants from raising the issue of With Cause
termination in the arbitration, the Tribunal abdicated its duty to decide that
issue.
35
findings of the MIC were contractually binding and had res judicata effect. The
Tribunal determined these issues, according to the parties’ agreement. There
can be no complaint by the appellants at this stage.
Conclusion
81 We are therefore satisfied that the grounds for setting aside of the Partial
Award are not met. The appeal is dismissed.
36