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Grounds publishedDecided 31 Jul 2014
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High Court

AKM v AKN and another and other matters

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[2014] SGHC 148Case no. Originating Summons No [L]; Originating Summons No [M]; Originating Summons No [N]

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  1. Vinodh Coomaraswamy J:

  2. Introduction

  3. Three applications

  4. [1] By the three applications before me, the plaintiffs seek to set aside an award issued in favour of the defendants by a three-member tribunal in an arbitration administered by the Singapore International Arbitration Centre. I shall refer to the award as a single award, although in truth it comprises a partial award issued on 9 May 2012 as amended by a further partial award issued on 15 June 2012 and as further amended by a memorandum of corrections issued on 5 July 2012.

  5. [2] To maintain the confidentiality attached to the arbitration, the plaintiffs in each application applied for and secured, without objection from the defendants, an order under s 22 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”) that the proceedings in each application be heard otherwise than in open court and that the court’s electronic file in each application be sealed to prevent public inspection. To maintain that confidentiality, I have used pseudonyms in this judgment to refer to the parties and to any names by which they or their arbitration may be identified. I have also converted all sums denominated in local currency into the approximate equivalent in US dollars at a representative exchange rate.

  6. [3] The arbitration arises from the liquidation of a company I shall call the Corporation. The Corporation was the largest regional producer of a product I shall call Mithril. It carried on business in a country I shall call Moria, with its principal production facility in a city I shall call Erebor.

  7. [4] In the course of the Corporation’s liquidation, all of the following parties entered into an Asset Purchase Agreement (“the APA”): (a) the liquidator, (b) the Corporation’s secured creditors, (c) the Corporation’s shareholders and (d) the defendants. Under the APA, the defendants agreed to purchase certain assets from the Corporation. Some of these assets were encumbered with security interests in favour of the Corporation’s creditors. In exchange for these secured creditors’ agreement to the sale, and as part of the consideration for the assets they purchased, the defendants agreed to issue two notes for the benefit of the secured creditors. The terms of the notes were set out in an agreement between the defendants and the secured creditors known as the Omnibus Agreement (“the OMNA”).

  8. [5] At the time the parties entered into the APA, the Corporation owed a large amount of unpaid tax to the municipal authorities of Erebor. One of the conditions precedent to the closing of the transactions under the APA was the approval by the municipal authorities of a deferred payment scheme for this unpaid tax. This condition precedent was eventually satisfied when the liquidator delivered to the defendants what the parties referred to as a “tax amnesty agreement” (or “the TAA”). The TAA was liable to be revoked if any taxes in relation to the Corporation’s assets, including the assets which the defendants purchased under the APA, were not paid on time.

  9. [6] The transactions under the APA closed in 2004. Very soon thereafter, the defendants, the liquidator and the secured creditors of the Corporation became embroiled in disputes with the municipal authorities over the taxes that had to be paid in relation the Corporation’s assets, including assets which the defendants had purchased under the APA. The TAA was eventually revoked in 2006 because of the failure to pay certain taxes on time.

  10. [7] In 2008, the defendants commenced arbitration against a number of entities. In its final incarnation, the defendants’ case in the arbitration was that the liquidator, the secured creditors and the shareholders of the Corporation were in breach of the APA because they had failed to deliver to the defendants clean title to the assets which the defendants had purchased under the APA. The defendants alleged that title was not clean because the assets were subject to a tax lien. The defendants also claimed that the liquidator, the secured creditors and the shareholders were jointly and severally liable to indemnify the defendants for the failure of the secured creditors, in breach of their obligations under the APA, to settle certain property claims (“the Lost Land Claims”).

  11. [8] The tribunal agreed with the defendants. It awarded the defendants US$80m as damages for a lost opportunity to earn profits and an indemnity of about US$23.7m in respect of the Lost Land Claims. It also declared that the defendants were entitled to suspend performance of their payment obligations under the two notes (see [4] above) without consequence for so long as the plaintiffs remained in breach of their obligation to deliver clean title to the assets.

  12. [9] Dissatisfied with the award, the plaintiffs now apply to set it aside on two grounds:

  13. (a) That they were unable to present their case in the arbitration within the meaning of Art 34(2)(a)(ii) of the UNCITRAL Model Law on International Commercial Arbitration 1985 (“the Model Law”) and/or that their rights were prejudiced by a breach of the rules of natural justice in connection with the making of the award within the meaning of s 24(b) of the IAA.

  14. (b) That the award deals with disputes not contemplated by or not falling within the terms of the submission to the arbitration and/or contains decisions on matters beyond the scope of the submission to the arbitration, contrary to Art 34(2)(a)(iii) of the Model Law.

  15. The parties

  16. [10] The plaintiff in Originating Summons No. [L] is the Corporation’s liquidator. The liquidator is represented by a team from WongPartnership LLP led by Mr Alvin Yeo SC.

  17. [11] The plaintiffs in Originating Summons No. [M] are 11 out of 24 secured creditors of the Corporation. For convenience, I shall refer to these 11 parties collectively as “the secured creditors”. They are represented by a team from Drew & Napier LLC led by Mr Davinder Singh SC.

  18. [12] The first to third plaintiffs in Originating Summons No. [N] are three investment funds which purchased on the secondary market the notes issued by the defendants (see [4] above) from some of the original 24 secured creditors of the Corporation. I shall refer to these three parties collectively as “the Funds”. The fourth plaintiff in this originating summons is the sub-custodian and agent for the Funds. These plaintiffs are represented by a team from Rodyk & Davidson LLP led by Mr Philip Jeyaretnam SC.

  19. [13] The two defendants in all three applications are special purpose vehicles incorporated under the laws of Moria. They are subsidiaries of a company I shall call Galaxy, incorporated under the laws of the Isle of Man. The defendants are represented by a team from Rajah & Tann LLP led by Mr Andre Yeap SC.

  20. The parties’ cases in a nutshell and my decision

  21. [14] A number of the plaintiffs’ complaints about the award are common to all of the plaintiffs. The remaining complaints are specific to a particular set of plaintiffs. It suffices for now to list the plaintiffs’ seven principal complaints about the tribunal’s decision without attributing specific complaints to specific plaintiffs:

  22. (a) The tribunal failed to consider the liquidator's submissions, arguments and evidence in support of his case that the obligation to deliver clean title to the assets under the APA was qualified to the extent of the TAA.

  23. (b) The tribunal failed to consider the secured creditors’ and the liquidator’s submissions, arguments and evidence in support of their separate cases that it was the defendants – and not the liquidator – who were responsible for the TAA being revoked.

  24. (c) The tribunal exceeded its jurisdiction by determining that the defendants suffered damage in the form of a loss of an opportunity to earn profits as a result of the plaintiffs’ breaches of the APA.

  25. (d) As an alternative to (c), the secured creditors and the liquidator were unable to present their separate cases on whether the defendants had suffered damage in the form of a loss of an opportunity to earn profits as a result of the plaintiffs’ breaches of the APA.

  26. (e) The tribunal exceeded its jurisdiction by suspending the defendants’ payment obligations under the two notes.

  27. (f) The tribunal failed to consider the secured creditors' submissions, arguments and evidence in support of their case in relation to the Lost Land Claims.

  28. (g) The tribunal exceeded its jurisdiction when it held that the Funds – who were merely purchasers of the notes in the secondary market – were liable to the defendants for breaches of the APA; further and in the alternative, the tribunal did not give the Funds an opportunity to present their case as to why they were not, as mere assignees of the notes, liable under the APA.

  29. [15] The defendants’ response, in short, is to deny that any of the grounds for setting aside the award have been established. They argue that the tribunal considered and rejected the plaintiffs’ separate cases on these main issues, leaving no basis on which to set aside the award. The defendants also maintain that the tribunal did have the jurisdiction to determine all of the issues which it did. Further, the defendants contend that the Funds submitted themselves to the jurisdiction of the tribunal voluntarily and without qualification, and therefore cannot be heard to complain about the result.

  30. [16] Having considered the parties’ written and oral submissions and the material that the parties have placed before me, I allow all three applications and set aside the award in its entirety. I now set out my reasons.

  31. Background

  32. [17] As I have alluded to above, at the heart of the parties’ dispute is the question of how the existence of unpaid taxes over the Corporation’s property sold to the defendants under the APA affected the parties’ rights and obligations under the APA and, separately, under the notes. Before I deal with that issue, however, it is useful to flesh out the facts in a little more detail.

  33. The Corporation goes into liquidation

  34. [18] In 1999, the Corporation filed a petition with the Securities Commission of Moria (“the Commission”) seeking to suspend payments on its liabilities. At that time, the Corporation operated a plant in Erebor and owned assets in the city of Erebor as well as elsewhere in Moria. Only the Corporation’s plant and assets in Erebor are relevant for present purposes.

  35. [19] The Corporation then owed approximately US$337m to its secured creditors. This debt was secured over certain of the Corporation’s assets by a mortgage trust indenture executed in 1990. The mortgaged assets included the Corporation’s Mithril plant in Erebor as well as the movable equipment and some (but not all) of the real properties which were used directly for the plant’s operations.

  36. [20] In 2000, the Commission declared the Corporation insolvent and placed it in liquidation, in one of the largest liquidations in the history of Moria. Eventually, the liquidator took office and the Corporation’s assets were transferred to him to hold as trustee. In 2001, the liquidator submitted a liquidation plan to the Commission. This plan was subsequently approved in 2003. Under the plan, the liquidator grouped the Corporation’s assets into two categories:

  37. (a) “The Plant Assets” comprising the Corporation’s assets. These are the assets which the defendants eventually acquired under the APA; and

  38. (b) “The Retained Assets” comprising all of the Corporation’s remaining assets.

  39. [21] The Plant Assets were further grouped into two sub-categories:

  40. (a) The Mithril plant, machinery, equipment and other items (“the Plant Non-Land Assets”); and

  41. (b) Four parcels of land on which these assets were situated (“the Plant Land Assets”). These four parcels of land were allocated “ten tax declaration numbers”.

  42. [22] Under the liquidation plan, the secured creditors of the Corporation were to give up their rights under the existing mortgage trust indenture in exchange for a new mortgage indenture. The new indenture was to create security over the same property as the existing indenture but would include two additional parcels of land. In exchange for the new indenture, however, the secured creditors of the Corporation had to accept a discount on their debt and had to waive their right to make claims against the Retained Assets for any shortfall between the undiscounted amount of their debt and the amount they received under the liquidation plan.

  43. [23] The liquidation plan was designed to allow the liquidator to pay off two different sets of creditors. The Plant Assets (ie, the first group of the Corporation’s assets) would be sold as an integral facility to a prospective buyer so that the buyer could resume operations as soon as possible after acquisition. The hope was that a sale in this manner would enable the Plant Assets to fetch a better price in total than if its individual parts were sold separately. The sale proceeds from the Plant Assets would then be applied against the discounted debt due to the Corporation’s secured creditors. The Retained Assets would be sold separately, with the proceeds applied against the unsecured debts of the Corporation.

  44. Galaxy agrees to purchase the Plant Assets

  45. [24] The liquidation plan was eventually approved and the liquidator called a tender for the Plant Assets. Galaxy won the tender in 2003. The liquidator, the secured creditors and the shareholders reached a basic agreement with Galaxy on the terms of the sale of the Plant Assets. The parties were keen to give Galaxy possession of the Plant Assets quickly so that it could begin rehabilitating the plant and resume production as soon as possible. The parties therefore entered into a memorandum of agreement (“the MOA”) on 29 January 2004.

  46. [25] The MOA was intended only to record the basic terms and conditions of the parties’ agreement. The parties planned to enter into a more comprehensive agreement later which was “to be negotiated, executed, and implemented in good faith by the Parties in respect of the … sale and purchase of the … [the Plant Assets], upon substantially the same terms and conditions agreed upon by the Parties [in the MOA]”.

  47. The Memorandum of Agreement

  48. [26] Under s 2.2 of the MOA, Galaxy agreed to acquire the Plant Assets with clean title except as provided in s 4.2(h). Under s 4.2(h), the liquidator represented that the Plant Assets were encumbered by, inter alia, “claims of … the [Lorien]/[Celeborn] group, and the unpaid realty tax due on [the Plant Assets], which may affect clean title over some or all of [the Plant Assets]”. I refer to the separate claims of the Lorien/Celeborn group as “the Lorien Claim” and “the Celeborn Claim”.

  49. [27] Under s 3.2(a) of the MOA, the parties agreed that the consideration for the Plant Assets would be approximately US$300m. That consideration was to take the form of (i) an initial down-payment of an equivalent of US$22m and (ii) the issuance of the two notes for the equivalent of the remaining US$278m, payable by equal instalments over eight years. Under s 3.2(b) of the MOA, the parties agreed that the initial down-payment for the Plant Assets was to be paid to the liquidator who would then pay the secured creditors and shareholders in accordance with an agreement to be executed amongst them. It appears that the terms and conditions of the notes were not yet finalised when the parties executed the MOA, as no pro forma notes were annexed to it.

  50. [28] Under s 5.3(c) of the MOA, the liquidator agreed that “[d]uring the effectivity of [the MOA]” (ie, so long as the MOA remained in place), the liquidator would “apply for the waiver by all appropriate Governmental Authority of all tax liabilities of [the Corporation] affecting any or all of [the Plant Assets], including but not limited to the liability for income and/or real estate taxes”.

  51. [29] Section 9 of the MOA sets out the dispute resolution provisions. It reads as follows:

  52. The legislative body of Erebor passes the Tax Ordinance

  53. [30] When the Corporation filed for insolvency with the Commission in 1999, it owed substantial sums of taxes on its real property, on its plant and on its machinery to the municipal authorities in Erebor. Further taxes continued to accrue during the liquidation: ie, while the liquidation plan was formulated and approved and thereafter. Thus, the Corporation owed real property taxes to Erebor in respect of (i) the Plant Assets that were the subject of the MOA and (ii) the Retained Assets which would remain with the liquidator. In addition, the failure of the Corporation to pay these real property taxes on time meant that a large amount of interest and penalties also continued to accrue on the unpaid taxes.

  54. [31] From the terms and conditions of the MOA described above, it is clear that all of the parties were aware of these tax liabilities. In fact, a few days after the parties signed the MOA, Galaxy asked the liquidator to apply to Erebor to waive the unpaid taxes affecting the Plant Assets or (although this was not strictly an obligation of the liquidator under the MOA) to settle all such unpaid taxes if a waiver could not be obtained.

  55. [32] AKP is a secured creditor of the Corporation and is the first plaintiff in Originating Summons No. [M]. On 13 July 2004, AKP wrote, on behalf of all secured creditors including itself, to the municipal legislative body in Erebor (“the SP”). AKP emphasised to the SP, among other things, the need to provide “a conducive and peaceful investment environment” in order to facilitate the “successful rehabilitation and operation” of [the Corporation’s Mithril plant] which was a crucial pillar of the Erebor economy. AKP therefore asked the SP to grant “a condonation and/or waiver … of the unpaid business and property taxes affecting [the Plant Assets]”.

  56. [33] On 28 July 2004, the liquidator followed up on AKP’s request. Galaxy’s in-house counsel agreed to prepare a draft resolution waiving the Corporation’s unpaid realty taxes. The liquidator hoped that the SP would pass that draft into law.

  57. [34] The draft resolution did not have the desired effect on the SP. In fact, it had quite the opposite effect. On 3 August 2004, the SP passed a resolution requiring Erebor’s city treasurer to levy execution on all of the Corporation’s properties for unpaid taxes. The SP drew the conclusion that the liquidator would have sufficient funds in hand to pay the outstanding real property taxes in full as a result of the sale of the Plant Assets to Galaxy.

  58. [35] On 7 September 2004, the SP had a change of heart. It now passed the Tax Ordinance. The Tax Ordinance enabled Erebor until 31 December 2004 to grant tax relief to taxpayers who were in arrears (such as the Corporation) by waiving accrued interest and penalties on their unpaid real property taxes. Securing that waiver required the principal amount of all unpaid taxes to be paid on 1 December 2004 or at any later time permitted by the city treasurer.

  59. [36] Any taxpayer who obtained tax relief under the Tax Ordinance had to comply with the strict requirements of s 6 of the Tax Ordinance and keep current on all tax falling due during the period of relief. Section 6 provides as follows:

  60. In other words, the taxpayer had to keep up to date with both (i) its current taxes (which were not subject to any tax relief) as well as (ii) its past tax obligations (ie, the unpaid taxes which were the subject of the tax relief). Any failure to make timely payment of either category of taxes would mean that the taxpayer would lose the benefit of the relief granted under the Tax Ordinance.

  61. The Asset Purchase Agreement

  62. [37] On 10 September 2004, three days after the SP passed the Tax Ordinance, the defendants (ie, subsidiaries of Galaxy), the liquidator, the secured creditors and the shareholders formalised the sale and purchase of the Plant Assets under the MOA by entering into the APA.

  63. [38] Section 2.1 of the APA reads:

  64. [39] Under s 3 of the APA, the defendants agreed to pay the purchase price for the Plant Assets to the secured creditors and the liquidator by:

  65. (a) making a US$22m down-payment to the liquidator; and

  66. (b) issuing two zero coupon notes in the aggregate principal amount of US$278m to the secured creditors and to the shareholders. The principal under the notes was payable over a period of eight years. The terms and conditions of these notes were set out in the OMNA (a draft of which was annexed to the APA).

  67. [40] In order to secure its payment obligations, the defendants agreed under s 4 of the APA:(i) to issue stand-by letters of credit (“SLCs”) and (ii) to execute the new mortgage trust indenture (described above at [22]) in favour of the secured creditors.

  68. [41] The security interest created by the new indenture expressly envisaged that the defendants could seek new secured financing to be secured over the same assets pari passu. Thus, under s 4.2(b) of the APA, the defendants were entitled to use the Plant Assets, encumbered under the new indenture, as security for new loans or credit facilities up to US$86m. In addition, that limit of US$86m could be increased by the amount of any payment or prepayment of the purchase price. New lenders would be issued mortgage participation certificates under which their right to repayment would be secured pari passu by the new indenture. In other words, the parties envisaged that the defendants would need additional secured financing to rehabilitate the plant and permitted them to obtain that financing subject to the new lenders standing on the same footing as all other secured creditors in their security rights over the Plant Assets.

  69. [42] At the time of closing, there were several outstanding claims against the Plant Assets. The parties agreed under the APA that the secured creditors should be responsible for settling two of these claims, ie, the Lost Land Claims mentioned in passing above at [7]. This claim will be discussed in greater detail at [213] to [242] below.

  70. [43] Under s 7.2 of the APA, the liquidator made certain representations and warranties to the other parties to the APA about the status of the Plant Assets. The relevant parts of s 7.2 read as follows:

  71. [44] The parties agreed that the warranties and representations above were true and correct as at the date of signing and were deemed to be repeated on the date of closing. I should point out that the above warranties and representations were given against the background of the Tax Ordinance. This is clear from s 7.2(j) of the APA where the liquidator represented that the taxes owing on the Plant Assets for the period prior to closing “will be duly discharged.” Although it is phrased as a representation, the liquidator promised by that provision to discharge these taxes following on or prior to the closing.

  72. [45] The dispute resolution provisions of the APA are central to one of the issues in the applications. I will consider them in greater detail at [243] to [265] below.

  73. The liquidator obtains the Tax Amnesty Agreement

  74. [46] Several conditions precedent set out in s 5.3(b) of the APA had to be satisfied before the defendants came under an obligation to execute the necessary documents to bring about the closing of the transaction. I will go on to discuss some of the relevant conditions precedent later. For the time being I shall focus on s 5.3(b)(iii)(4), which reads:

  75. [47] I ought now to explain the significance of this condition precedent. As mentioned above, the parties signed the APA on 10 September 2004. That was three days after the Tax Ordinance was passed. Closing under the APA was originally scheduled to take place on 8 October 2004. However, the parties were unable to close on that day because this condition precedent had not yet been satisfied. The parties therefore agreed to delay the closing until 15 October 2004.

  76. [48] On 1 October 2004, the liquidator wrote to Erebor’s city mayor to seek relief under the Tax Ordinance from having to pay interest and penalties on the Corporation’s unpaid taxes. The liquidator asked further that the Corporation be allowed to pay its remaining basic real property tax liability by instalments, beyond 1 December 2004.

  77. [49] On 11 October 2004, the defendants wrote to the liquidator, chasing him to obtain “from [the city mayor] a formal letter of settlement, giving effect to [the Tax Ordinance] passed by his council”.

  78. [50] On 13 October 2004, the city treasurer and the city mayor sent the liquidator a crucial letter. This is the letter which the parties have called the TAA (first referred to at [5] above). At that time, the Corporation owed unpaid taxes amounting to about US$4m on all of its properties in Erebor. The TAA granted the Corporation relief from the payment of interest and penalties for these unpaid taxes and permitted the Corporation to settle them in eight equal instalments of an equivalent of US$500,000. Each instalment was to be paid every December between 2004 and 2012 (save for 2005). The TAA therefore covered tax arrears over both the Plant Assets and the Retained Assets. The TAA permitted the Corporation to pay its taxes by instalments rather than requiring a lump sum payment in total discharge. Thus, Erebor did not waive the principal amount of tax liability but simply deferred the payment of unpaid tax to permit the agreed instalment plan and without imposing any penalties or interest as a result of the deferred payment.

  79. [51] The TAA also made it clear that there would be serious consequences if the annual instalments of tax were not paid. As mentioned above, under s 6 of the Tax Ordinance, all deferred tax would become immediately due and demandable together with all penalties and interest that had been previously waived if the taxpayer failed to pay its current liability for any tax or failed to pay an instalment due against its deferred past tax liabilities. Put another way the TAA would be revoked should the current taxes or past taxes on both the Plant Assets and the Retained Assets not be paid on time. Two consequences followed from the revocation of the TAA:

  80. (a) the instalment payments on all previous unpaid taxes would all become due and payable at once; and

  81. (b) the amount of all tax payable on all the Corporation’s properties (that is, the Plant Assets and the Retained Assets) would balloon to include all the interest and penalties previously waived.

  82. [52] It is not disputed that the liquidator’s delivery of the TAA to the defendants satisfied the condition precedent in s 5.3(b)(iii)(4) of the APA (see [46] above).

  83. The close of the transaction

  84. [53] The closing took place as rescheduled on 15 October 2004. At closing, the parties executed and delivered several documents which have significance for the parties’ dispute.

  85. The parties execute the Omnibus Agreement and the defendants issue the notes

  86. [54] First, the defendants and the secured creditors (but not the liquidator) entered into the OMNA which sets out the terms and conditions upon which the secured creditors agreed to accept the notes.

  87. [55] I make the following observations about the OMNA:

  88. (a) The OMNA provided a mechanism for the defendants to “set off from time to time any claims it may have against any [secured creditor of the Corporation]” against the amount that each secured creditor was due under the notes: s 4.01(a) of the OMNA.

  89. (b) Pursuant to s 6.01(e) of the OMNA, the defendants undertook that so long as the notes remained outstanding, it would duly pay all tax levied on its properties:

  90. (c) The OMNA provided at s 9.04 that the secured creditors were entitled to assign all or any portion of their rights and obligations under the OMNA or under any other “Relevant Document”. That term was defined to include the notes, the SLCs, the new mortgage indenture and other documents required or otherwise contemplated to be executed pursuant to the OMNA.

  91. (d) The OMNA contained a distinct dispute-resolution mechanism from the one in the APA. I shall describe this further at [248].

  92. [56] The defendants issued the two notes on the same day, 15 October 2004. They are described as the Tranche A note and the Tranche B note.

  93. Other documents executed or delivered at closing

  94. [57] Second, the liquidator, the secured creditors and the shareholders agreed formally to amend a Purchase Price Sharing Agreement (“the PPSA”) which they had previously executed on 10 September 2004. The PPSA regulated the manner in which the interested stakeholders would share in the payments made by the defendants and was one of the conditions precedent required by the defendants before closing could take place. Under the amendment to the PPSA, the parties agreed that the liquidator could use part of the defendants’ initial down-payment of about US$22m to pay the first of the eight instalments due to Erebor under the TAA.

  95. [58] Third, by a letter dated 15 October 2004, the secured creditors agreed to guarantee the instalment payments under the TAA:

  96. [59] The liquidator maintains that he gave this letter to the defendants in order to satisfy his obligation under the condition precedent to closing in s 5.3(b)(iii)(6) of the APA. Indeed, the liquidator maintains that this was the only document the defendants asked for to satisfy that condition precedent. Section 5.3(b)(iii)(6) reads:

  97. [60] Fourth, the liquidator’s legal counsel issued a legal opinion for the benefit of the defendants which stated its opinion that “[a]t Closing, full legal and valid ownership of, and to, [the Plant Assets] shall be transferred and conveyed to [the defendants], free from and clear of all claims, liens and encumbrances, except as previously disclosed”. This legal opinion addressed the condition precedent at s 5.3(b)(iii)(8) of the APA which required:

  98. Disputes over the unpaid realty taxes after closing

  99. [61] Three different categories of taxes were due to Erebor which are relevant for present purposes.

  100. [62] The first category of taxes I shall refer to as the “Pre-Closing Taxes”. These taxes consisted of the arrears of the taxes accrued from 1999 to 15 October 2004, the closing date, over all of the Corporation’s real property. The Pre-Closing Taxes therefore related to all of the Corporation’s real property, whether that real property was comprised in the Plant Assets or in the Retained Assets. The Pre-Closing Taxes remained the responsibility of the liquidator despite closing pursuant to his warranty and representation in s 7.2(j) of the APA that “all such liabilities will be duly discharged by [the liquidator]”.

  101. [63] The second category of taxes I shall refer to as the “Post-Closing Plant Asset Taxes”. These taxes comprised amongst other things, (i) ten tax declaration numbers over the four parcels of land which formed the Plant Land Assets; and (ii) real property taxes over Plant Non-Land Assets. I observe at this point that even though the Plant Land Assets were transferred to the defendants at closing, title could not immediately be registered in the defendants’ name. The Plant Land Assets thus remained registered in the Corporation’s name even after closing. As far as Erebor’s municipal authorities were concerned, therefore, the Corporation remained the registered owner and therefore the taxpayer responsible for the Post-Closing Plant Asset Taxes. Further, unlike the Pre-Closing Taxes, the APA was silent as to who was liable for the Post-Closing Plant Asset Taxes.

  102. [64] The third category of taxes I shall refer to as the “Post-Closing Retained Assets Taxes”. These taxes were payable on the Retained Assets (ie, all of the Corporation’s assets which were not sold to the defendants) which remained in the name of and administered by the liquidator.

  103. [65] In early 2005, the liquidator and the secured creditors became embroiled in disputes with Erebor over the taxes that were payable in respect of the Plant Assets and the Retained Assets as well as the defendants’ application for various tax exemptions. I will touch on this in greater detail later in this judgment. For now, it suffices to note that there were two main disputes:

  104. (a) The first related to the first instalment of the Pre-Closing Taxes (the first category of relevant taxes) which had been paid by the secured creditors of the Corporation on behalf of the liquidator in December 2004.

  105. (b) The second related to the payment of the Post-Closing Plant Assets Taxes (the second category of relevant taxes).

  106. As a result of these disputes, Erebor eventually revoked the TAA, with disastrous consequences for the parties’ transaction.

  107. [66] In 2005 and 2006, the defendants, the liquidator and the secured creditors entered into negotiations with Erebor concerning the outstanding taxes over the Plant Assets. Those efforts were unsuccessful. In November 2006, Erebor declared that it intended to conduct a public auction of the Plant Assets in order to satisfy the tax arrears. The liquidator made an urgent application to the Commission and secured an order on 30 November 2006 enjoining the city treasurer from proceeding with the auction. As a result, the auction was forestalled.

  108. [67] On 14 October 2008, the city treasurer applied to the Commission for permission to conduct a forced sale of the Plant Assets. By an order dated 17 November 2008 made pursuant to an application by the liquidator, the Commission denied the city treasurer’s application.

  109. The Funds purchase the notes on the secondary market

  110. [68] While all this was going on, through a number of transactions between 2005 and 2008, the Funds purchased in the secondary market the right to receive payments under the notes. They currently hold 22.2254% of the Tranche A note and 17.7804% of the Tranche B note.

  111. Events leading up to the commencement of arbitration

  112. [69] The defendants paid the first two instalments under the terms of the notes in 2006 and 2007. However, shortly before it was due to pay the third instalment under the notes on 15 October 2008, it filed an application before a Morian court on 9 October 2008 seeking an injunction restraining AKP (the first plaintiff in Originating Summons No [M] and the facility agent of the notes for the secured creditors) from:

  113. (a) issuing a certification that the payment due under the APA and OMNA has not been received;

  114. (b) declaring the defendants to be in default under the APA and OMNA; and

  115. (c) encashing one of the SLCs.

  116. AKP opposed the defendants’ application for an injunction. On 10 October 2008, the Morian court dismissed the defendants’ application. On the same day, the defendants commenced the arbitration.

  117. Procedural skirmishes leading to a temporary injunction

  118. [70] The parties then engaged in two years of procedural skirmishes in the Singapore courts which culminated in the defendants securing an interim injunction which (i) restrained the secured creditors from declaring the defendants to be in default under the APA, the notes and the OMNA, (ii) restrained the secured creditors from declaring the purchase price or the unpaid principal under the notes to be due and payable and (iii) suspended the defendants’ payment obligations under the notes and its obligation to provide further security by way of further SLCs. The Singapore Court of Appeal also directed that any future applications to vary or discharge the interim injunction be heard by the tribunal rather than by the courts.

  119. [71] On 7 July 2010, the tribunal upheld the interim injunction but made it clear that AKP (as the facility agent for the secured creditors) was free to contend during the substantive hearing that the tribunal did not have the jurisdiction to impose a permanent injunction to equivalent effect.

  120. The arbitration

  121. [72] In the arbitration, the defendants’ position on the substantive dispute was that the liquidator and the secured creditors’ failure to pay the Pre-Closing Taxes (ie, the first category of taxes) rendered the Plant Assets subject to a statutory lien in favour of Erebor. As a result, the defendants claimed that the liquidator and the secured creditors had breached their obligations under the APA to deliver the Plant Assets with clean title and had also breached a number of related representations and warranties given in the APA (some of these provision have already been canvassed above).

  122. [73] The defendants also claimed that the liquidator:

  123. (a) failed to specify to the city treasurer that the first instalment payment under the TAA was to be applied to the unpaid taxes in relation to the Plant Assets (ie, the assets that were transferred to the defendants) and not to the Retained Assets; and

  124. (b) failed to comply with the TAA by failing to pay the Post-Closing Retained Assets Taxes (the third category of taxes; see [64] above), which led to the revocation of the TAA.

  125. [74] As a result, the defendants claimed that the Plant Assets remained encumbered and that the relevant authorities refused to issue the requisite tax clearances to the defendants. This in turn meant that title to the Plant Assets was not clean. The lack of clean title, according to the defendants, meant that it was unable to obtain loans from banks to finance the modernisation and rehabilitation works which the Plant Assets needed, ultimately causing the defendants to lose substantial profits.

  126. [75] Separately, the defendants also claimed that the secured creditors had, in breach of the APA, failed to settle two civil claims in respect of a plot of land which formed part of the Plant Land Assets (the Lost Land Claims referred to at [7] above). The defendants sought to be indemnified against the consequences of this breach.

  127. [76] As a result of all of this, the defendants claimed in the arbitration the following relief:

  128. (a) A declaration that the liquidator, the secured creditors and shareholders were in breach of the APA in that they had failed to pay accrued taxes on the Plant Assets or failed to deliver them free of encumbrances.

  129. (b) An order that the defendants’ obligations to pay any instalments falling due under the APA, the notes, and to provide any further SLC or any SLC of increased value, be suspended, deferred and/or postponed until the liquidator and the secured creditors deliver the Plant Assets with clean title.

  130. (c) An order that the liquidator and the secured creditors be restrained and/or enjoined from declaring the defendants in default for non-payment of “the next instalment of the Purchase Price falling due on and the provision of the New SLC on 15 October 2008”.

  131. (d) Damages.

  132. The tribunal’s decision

  133. [77] The tribunal found in favour of the defendants in its award. In summary, it held that: (i) the liquidator and the secured creditors had a joint and several obligation to transfer the Plant Assets to the defendants free from any encumbrances, which included tax liens; (ii) the tax lien which encumbered the Plant Assets meant that the liquidator was in breach of its warranty and representation under the APA to deliver clean title to the Plant Assets on closing or soon after closing; (iii) the secured creditors were jointly and severally liable with the liquidator for this breach of the APA; (iv) the secured creditors were in breach of their obligation to settle the Lost Land Claims and accordingly were obliged to indemnify the defendants against it; and (v) the tribunal had the jurisdiction to suspend the defendants’ obligations under the APA to make payment and provide further security and therefore to enjoin the secured creditors from declaring the defendants in default of those obligations (which are in fact found under the notes and the OMNA).

  134. [78] As a result, the tribunal granted the defendants relief which includes the following:

  135. (a) It awarded the defendants US$80m in damages representing compensation for an opportunity to earn profits which it lost as a result of the liquidator’s failure to transfer clean title to the Plant Assets.

  136. (b) It awarded the defendants the equivalent of about US$23.7m by way of an indemnity in respect of the Lost Land Claims.

  137. (c) It granted the relief sought by the defendants at [76(b)] and [76(c)] above in respect of its payment and security obligations under the notes and the OMNA.

  138. (1) The liquidator and the secured creditors were jointly and severally obliged under the APA to sell the Plant Assets to the defendants

  139. [79] I pause at this point briefly to consider the tribunal’s reasons for awarding the defendants US$80m in damages.

  140. [80] After reviewing the provisions of the APA and the mechanics of the sale which it contemplated, the tribunal concluded that the liquidator and the secured creditors were jointly and severally obliged under the APA to sell the Plant Assets to the defendants.

  141. (2) The liquidator was in breach of the warranty and representation to deliver clean title to the Plant Assets

  142. [81] The tribunal concluded that the liquidator had an obligation to transfer clean title to the Plant Assets and that this obligation was not qualified in any way by the TAA.

  143. [82] In particular, the tribunal rejected the possibility that the TAA qualified the obligation of the liquidator and of the secured creditors under the TAA to deliver clean title to the Plant Assets because what the defendants required commercially was unencumbered title to the Plant Assets which it could use as security for future borrowing.

  144. [83] In the tribunal’s view, the surest (and possibly the only) way in which the liquidator and the secured creditors could have obtained title capable of being transferred to the defendants free from encumbrances (that is, clean title) was by paying all taxes due as at 31 December 2004 using the initial down-payment. They had failed to do this because of the way in which they had agreed under the PPSA to deal with the down-payment. The tribunal held that whatever the parties to the PPSA had agreed under that agreement was none of the defendants’ concern since it was not a party to it.

  145. (3) The defendants lost the opportunity to earn increased profits

  146. [84] After finding that the liquidator had breached his obligations under the APA and that the liquidator and the secured creditors were jointly and severally liable for this breach, the tribunal then turned to deal with the issue of damages. It took the view that although the defendants’ claim was advanced as a claim for profits actually lost, the claim was “better considered as a claim for the loss of an opportunity to make increased profits”. The tribunal therefore considered the defendants’ damages claim on that basis. The tribunal then split on the quantum of the ultimate damage suffered by the defendants. The majority held that it was a loss of an opportunity to earn profits of US$140m. The minority concluded that it was the loss of an opportunity to earn profits of US$95.616m. The tribunal attached a probability of 55% to this opportunity. The majority therefore used its figure to assess the compensation for this lost opportunity as 55% of US$140m, or US$80m.

  147. The plaintiffs’ complaints

  148. [85] The liquidator’s case in his application is as follows:

  149. (a) The tribunal breached the rules of natural justice or the liquidator was unable to present his case on the following matters:

  150. (i) whether the liquidator’s obligation under ss 2.1 and 7.2 of the APA was qualified by the TAA;

  151. (ii) whether the defendants were responsible for the payment of the Post-Closing Taxes in 2005 and caused the TAA to be revoked; and

  152. (iii) whether the defendants suffered damage characterised as the loss of an opportunity to earn profits.

  153. (b) The issue of the loss of an opportunity to earn profits was never submitted to the tribunal for determination and the tribunal had thus exceeded the scope of its jurisdiction.

  154. As a result, the liquidator contends that the tribunal’s award should be set aside in its entirety. In the alternative, the liquidator contends that the tribunal’s award of damages in the sum of US$80m should be set aside.

  155. [86] The secured creditors advance a case in their application which is similar to that advanced by the liquidator at [85(a)(ii)], [85(a)(iii)] and [85(b)] above:

  156. (a) The tribunal breached the rules of natural justice by not giving the secured creditors a fair hearing on the issue of whether the defendants were responsible for the TAA being revoked.

  157. (b) The tribunal awarded damages for the loss of an opportunity to earn profits in circumstances where the defendants had never submitted any such claim to arbitration and where the tribunal failed to afford the secured creditors the opportunity to address the tribunal on this point.

  158. The secured creditors argue that the award should be set aside in its entirety on these grounds.

  159. [87] In addition, the secured creditors argue the award should be set aside in its entirety on the basis that the tribunal did not give the secured creditors a fair hearing on the Lost Land Claims.

  160. [88] Further, the secured creditors advance an additional point which is unique to their position: they argue that the tribunal acted in excess of its jurisdiction by assuming jurisdiction in relation to matters under, and in granting relief under and in respect of, the OMNA and the notes. These matters fell outside the ambit of the parties’ arbitration agreement under the APA. As a result, the parts of the award which restrain the secured creditors from calling an event of default under the notes should be set aside.

  161. [89] The Funds in their application adopt these arguments of the secured creditors and of the liquidator. In addition, they argue that even though they voluntarily applied to be joined as a party to the arbitration, the defendants never sought to claim that the Funds, as assignees of rights under the notes and/or the OMNA in the secondary market, were liable under the APA. By determining that the Funds are jointly and severally liable along with the secured creditor to the defendants under the APA, the tribunal dealt with an issue or dispute that was not contemplated by the submission to arbitration and/or the tribunal breached the rules of natural justice by making its determination against the Funds without first giving them an opportunity to be heard or to present their case on why they should not be liable. Accordingly, the award should be set aside on against the Funds on the basis of an excess of jurisdiction or on natural justice grounds.

  162. Issues to be decided

  163. [90] The argument above can be distilled into a total of seven issues for determination. The following five issues were common to all three applications:

  164. (a) Did the tribunal fail to consider the liquidator’s arguments, evidence and submissions on whether the ss 2.1 and 7.1 of the APA were qualified by the TAA (“Issue 1”)?

  165. (b) Did the tribunal fail to consider the liquidator’s and the secured creditors’ arguments, evidence and submissions on the issue of whether the defendants were responsible for the revocation of the TAA (“Issue 2”)?

  166. (c) Did the tribunal, in awarding damages to the defendants for their loss of an opportunity to earn profits, exceed its powers by dealing with a matter that had not been submitted to it (“Issue 3”)?

  167. (d) In the alternative to Issue 3, did the tribunal, in awarding damages to the defendants for its loss of an opportunity to earn profits fail to give the liquidator and secured creditors an opportunity to address the tribunal on that question (“Issue 4”)?

  168. (e) Did the tribunal fail to consider the secured creditors’ arguments, evidence and submissions in relation to the Lost Land Claim (“Issue 5”)?

  169. [91] The secured creditors’ and the Funds’ applications raise a separate issue which is common to them, that is, did the tribunal act in excess of its jurisdiction contrary to Art 34(2)(b)(iii) of the Model Law by granting relief under and in respect of the OMNA and the notes (“Issue 6”)?

  170. [92] The Funds’ application raises one further issue, unique to the Funds. That is whether the tribunal acted in excess of its jurisdiction or in breach of natural justice by holding the Funds, as assignees under the OMNA and the notes, liable alongside the rest of the secured creditors for breaches of the APA (“Issue 7”).

  171. [93] I now deal with the issues in turn.

  172. Issue 1: Did the tribunal fail to consider the liquidator’s arguments, evidence and submissions on whether the ss 2.1 and 7.1 of the APA were qualified by the TAA?

  173. [94] A party applying to set aside an award on the basis that it has been denied natural justice must identify: (a) the relevant rule of natural justice; (b) how that rule was breached; (c) how the breach was connected to the making of the award; and (d) how the breach prejudiced his rights: see Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86 (“Soh Beng Tee”) at [29] and L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd and another appeal [2013] 1 SLR 125 (“L W Infrastructure”) at [48].

  174. [95] The liquidator says that the relevant rule of natural justice is the right to be heard. Encompassed within this rule is the sub-rule that an arbitral tribunal cannot disregard submissions or arguments made by a party without considering them on their merits. The defendants do not challenge this proposition. I accept it as correct. The parties do not dispute that if this sub-rule was breached then this would have caused the liquidator and the secured creditors to have suffered prejudice. Further, the defendants do not suggest that I ought to remit this issue to the tribunal if I find that there was a breach of natural justice. Instead, both sides’ submissions rest on whether this sub-rule was breached at all.

  175. The liquidator’s submissions

  176. [96] Before the tribunal, the liquidator’s main defence on the issue of liability was that the TAA qualified his obligation under the APA to deliver clean title to the Plant Assets. The liquidator’s evidence and submissions in support of this position before the tribunal can be summarised as follows:

  177. (a) The APA and the documents delivered pursuant to the conditions precedent to closing must be read collectively.

  178. (b) All the parties knew from the outset and agreed that Pre-Closing Taxes would be paid in eight annual instalments from 2004 to 2012 (except for 2005).

  179. (c) It was a condition precedent to closing under s 5.3(b)(iii)(4) of the APA that the liquidator deliver to the defendants (in form and substance reasonably satisfactory to the defendants and their counsel) “[a] copy of the agreement duly signed by the appropriate Governmental Authority approving a deferred payment scheme for the unpaid realty taxes affecting [the Plant Assets]”. It is not disputed that this condition precedent was fulfilled when the liquidator delivered the TAA to the defendants (see [52] above).

  180. (d) It was a condition precedent to closing under s 5.3(b)(iii)(6) of the APA that the liquidator deliver to the defendants any such documents as “[the defendants] may reasonably require from [the liquidator] prior to Closing Date to give [the defendants] full, good, legal, valid and valuable title to [the Plant Assets] and to enable [the defendants] to become registered owner thereof free from and clear of all claims, Liens, and encumbrances”. The only document that the defendants asked for pursuant to this condition precedent (and which the liquidator duly delivered) was a guarantee from the secured creditors that the TAA instalments would be paid on time, provided the defendants promptly paid their instalments under the notes on time (see [59] above).

  181. (e) The defendants were represented by one of the top law firms in Moria in negotiating the APA and hence must have received legal advice on the Tax Ordinance, the TAA and the other closing documents. Mr Y (one of the defendants’ witnesses) confirmed during cross-examination that it was the defendants’ lawyers who advised him that the defendants should be able to obtain registered title to the land which formed part of the Plant Assets within about two months from closing (thereby allowing them to mortgage the land to raise financing).

  182. (f) The actions of the defendants prior to the commencement of the arbitration in 2008 were entirely consistent with the belief that the Pre-Closing Taxes (which would otherwise give rise to a tax lien) were to be dealt with exclusively in accordance with the TAA. In fact, the defendants’ own Morian law expert, Justice A, expressed a similar view:

  183. [97] Counsel for the liquidator Mr Yeo points out that the award does not, on its face, address any of the six points above. From this, Mr Yeo invites me to draw the inference that the tribunal had either improperly disregarded or at the very least failed to engage with the liquidator’s submissions, arguments and evidence in reaching its decision.

  184. The defendants’ submissions

  185. [98] Counsel for the defendants Mr Yeap does not deny that the award does not deal with these points expressly. However, he submits that the natural and appropriate inference is that the tribunal duly considered all the evidence, arguments and submissions and simply preferred the defendants’ over the liquidator’s. There is therefore no breach of natural justice. For this proposition, Mr Yeap relies on four passages from the award which I will now consider in greater detail.

  186. Analysis of the tribunal’s decision

  187. (1) The tribunal says that it considered the liquidator’s submissions

  188. [99] The first passage is paragraph 390 of the award where the tribunal expressly states that it has considered the liquidator’s submissions:

  189. [100] This passage contains a general statement by the tribunal that it has considered the liquidator’s submissions. That cannot in itself resolve the issue of whether the tribunal actually did so. The central inquiry is whether the award reflects that the tribunal applied its mind to the arguments put forward by the liquidator. In my view, a fundamental problem with this passage is that it shows that a misunderstanding of the liquidator’s defence. This is an important point to which I shall return shortly.

  190. (2) The tribunal assumed that the defendants would be unable to obtain secured financing so long as the TAA was in place

  191. [101] The second passage is paragraphs 348 to 351 of the award. In those paragraphs, the tribunal construes the provisions of the APA in light of its commercial context and concludes that the liquidator’s case (which it understood as suggesting that the TAA had the effect of deferring the transfer of clean title to the Plant Assets for eight years) did not make “commercial sense” and “ignore[d] the other provisions of the APA that envisaged [the defendants] being able to raise finance by mortgaging the land”:

  192. [102] The tribunal assumed that the defendants would be unable to mortgage the land so long as instalment payments under the TAA were outstanding. This assumption contradicted the tribunal’s own factual narrative which clearly showed that the opposite was true: that it was possible for the defendants to obtain the necessary tax clearances (and so obtain clean title over the land and thereby mortgage the land) without waiting for the last instalment payment under the TAA to be made in 2012.

  193. [103] For example, the tribunal acknowledged at paragraph 207 of the award that Erebor issued an incomplete tax clearance certificate for the relevant parcels of land based on the tax received from the first instalment payment of the TAA:

  194. [104] Paragraph 209 of the award showed that the tribunal was aware that even the defendants believed that it was possible to obtain the necessary tax clearances before 2012:

  195. [105] In fact, at paragraphs 216 and 217 of the award, the tribunal describes one of the defendants’ attempts to obtain tax clearances for all ten tax declarations so that it could execute the new indenture (as well as start the process of mortgaging the land to raise its own financing):

  196. [106] Mr Yeap submits that it was the liquidator’s own case that the TAA prevented the defendants from mortgaging its land until 2012. In support he relies on the following exchange between the liquidator and the tribunal:

  197. [107] With respect to Mr Yeap, this was not an accurate representation of the liquidator’s case at all. The above exchange took place in the middle the liquidator being cross-examined about the very separate topic of how the very first instalment paid under the TAA ought to have been applied. Further, this line of questioning was initiated not by Mr Yeap himself but by one of the arbitrators. This can be seen from the exchange below which preceded the exchange above:

  198. [108] It was also clear from the liquidator’s cross-examination the next day that the liquidator did not think that there was a problem in securing the necessary tax clearances (thereby allowing the defendants to mortgage the land) even though the TAA was still in effect:

  199. [109] The tribunal’s misunderstanding of the liquidator’s case seems to have been reinforced by the defendants’ written submissions to the tribunal. The defendants summarised those submissions as follows before me (I have taken the liberty of numbering the sentences for ease of reference):

  200. These submissions are confusing and confused. Sentence (1) was not in dispute. Sentence (2) was entirely consistent with the liquidator’s case. In fact, sentence (2) directly contradicts the defendants’ own position (as I understand it) that the liquidator’s obligations under the APA to deliver clean title to the Plant Assets was unqualified. Sentence (3) was (and is) a mischaracterisation of the liquidator’s case.

  201. [110] I accept that if the tribunal had considered both parties’ submissions and preferred the defendants’ submissions over those of the liquidator then that must be the end of the matter. I accept also that there would be no breach of natural justice if the tribunal had considered but simply misunderstood the liquidator’s submissions.

  202. [111] What is troubling here is that the line of reasoning adopted by the tribunal does not suggest that it had even considered the liquidator’s submissions. In fact, it is puzzling that the tribunal at paragraph 296 of the award states that there was “not a shred of contemporaneous evidence” in favour of the liquidator’s position (despite the material already described above):

  203. (3) The tribunal’s discussion of the background to the TAA

  204. [112] The third passage which Mr Yeap relies on is paragraphs 352 to 357 of the award. Here, the tribunal pointed out that the historical background to s 5.3(b)(iii)(4) of the APA was important because it was instructive to remember how the TAA became a condition precedent in the APA. The tribunal first recalled that under s 5.3(c) of the MOA entered into in January 2004, the liquidator’s obligation in relation to the Corporation’s outstanding tax liabilities was to:

  205. [113] The tribunal next recalled that, and I have already mentioned at [31] above, a few days after signing the MOA, the defendants asked the liquidator to apply to Erebor for a waiver of unpaid taxes affecting the Plant Assets or to settle those unpaid taxes if a waiver could not be obtained.

  206. [114] The tribunal then recalls at paragraphs 355 and 356 of the award the events which I have described at [33] to [35] above. The SP did not adopt the draft resolution prepared by the liquidator and the defendants to waive the unpaid taxes but instead passed on 3 August 2004 a resolution requiring the city treasurer to levy execution on all of the Corporation’s properties. However, by 7 September 2004, the SP changed its mind and passed the Tax Ordinance.

  207. [115] Having described the historical background, the tribunal then concludes at paragraph 357 of the award:

  208. [116] The tribunal’s analysis is odd, to say the least. It does not seem to appreciate that the very background it described at length militated against its own conclusion. The tribunal construed s 5.3(c) of the MOA as being consistent with the unqualified obligation of the liquidator to deliver unencumbered land to the defendants. In doing so, it conflated the obligation of the liquidator to apply for a waiver of the unpaid taxes with the requirement to obtain the waiver. (Incidentally, the liquidator did in fact apply for the waiver so this condition precedent would have been fulfilled had it been imported into the APA).

  209. [117] Having conflated the obligations, the tribunal assumed that regardless of the eventual terms which the parties were to negotiate and agree in the APA, it must remain a requirement under the APA that a waiver be obtained in respect of the unpaid taxes or that these unpaid taxes should be settled. Again the tribunal appeared to have reached this conclusion without engaging with the submissions of the liquidator on this point.

  210. [118] The APA was entered into on 10 September 2004, that is, three days after the SP enacted the Tax Ordinance. By this time, the defendants knew that the Pre-Closing Taxes were not waived and could not be waived. If the defendants wanted the liquidator to pay all unpaid realty taxes prior to closing, the defendants could have attempted to negotiate a condition precedent in the APA to that effect. If the liquidator balked, the defendants had the option of terminating the MOA and walking away from the transaction at the expiry of the exclusivity period (which incidentally was also on 10 September 2004) on the basis that the venture had become no longer commercially viable.

  211. [119] The defendants did not do so. Instead, they signed the APA on the last day of the exclusivity period under the MOA (ie, 10 September 2004) without importing s 5.3(c) of the MOA into the APA. In other words, the defendants decided that it was in their commercial interest to compromise by requiring the liquidator to do no more than deliver the TAA under s 5.3(b)(iii)(4) of the APA.

  212. [120] However, as I have mentioned above, showing that the tribunal erred in its reasoning does not establish a breach of natural justice. I am, however, satisfied that the liquidator has established that the tribunal disregarded his evidence and submissions on this point. In the circumstances, it was simply inexplicable that the tribunal did not even engage with the liquidator’s argument that the Tax Ordinance and the TAA must have been in the contemplation of all parties when they entered into the TAA.

  213. (4) The tribunal’s discussion of the secured creditors’ witnesses’ evidence

  214. [121] The fourth passage which Mr Yeap relies on is paragraph 358 (which has to be read together with paragraph 359) of the award:

  215. [122] Mr Yeap points to this passage as proof that the tribunal simply preferred the defendants’ case. I disagree. As I have mentioned above, it was never the liquidator’s case that the TAA varied his obligations under the APA to acknowledge contractually that the defendants could not mortgage the land to raise additional financing until the last instalment of the TAA was paid in 2012. If anything, this passage shows that the tribunal had reached its conclusion by rejecting an argument that was never made to it, and thereby ignoring the arguments that were made to it.

  216. Conclusion on Issue 1

  217. [123] In light of the above, I am satisfied that the liquidator was denied natural justice and that the award should be set aside in its entirety for this reason alone.

  218. Issue 2: Did the tribunal fail to consider the liquidator’s and the secured creditors’ arguments, evidence and submissions on the issue of whether the defendants were responsible for the revocation of the TAA?

  219. The liquidator’s and the secured creditors’ submissions

  220. [124] The liquidator’s case was that the revocation of the TAA was caused (or primarily caused) by the defendants. As a result, the defendants had only themselves to blame for any loss suffered as a result of being unable to obtain clean title to the Plant Assets. In other words, the defendants’ actions broke the chain of causation between any breach of the APA and any loss which the defendants suffered. The liquidator’s evidence and submissions in support of this position before the tribunal can be summarised as follows:

  221. (a) By purchasing the Plant Assets, the defendants had purchased not only the Plant Land Assets but also the Plant Non-Land Assets.

  222. (b) The defendants accepted that it was responsible for the payment of Post-Closing Plant Asset Taxes (the second category of taxes which were due on both Plant Land Assets and Plant Non-Land Assets; see [63] above). This was confirmed by a key concession during the cross-examination of one of the defendants’ witnesses, Mr X:

  223. (c) At the relevant time, the defendants were liaising with Erebor to obtain a tax exemption for Post-Closing Plant Assets Taxes in relation to the Plant Assets but were ultimately unsuccessful.

  224. (d) The defendants failed to pay any of the Post-Closing Plant Asset Taxes in relation to the Plant Non-Land Assets in 2005. The defendants also did not pay the sum of about US$51,500 which it said represented the 2005 Post-Closing Plant Asset Taxes in relation to the Plant Land Assets;

  225. (e) In the circumstances, the revocation of the TAA was caused (or primarily caused) by the defendants’ own breaches and so they could not rely on their own breach(es) or blame the liquidator for the revocation of the TAA.

  226. [125] Mr Yeo argues that the tribunal ignored the undisputed facts and the defendants’ concessions and did not actively consider the liquidator’s submissions and arguments. In doing so, Mr Yeo submits that the tribunal decided this issue for reasons of its own and thereby breached the rules of natural justice.

  227. [126] The secured creditors’ case before the tribunal in summary was that the defendants were under a contractual obligation under s 6.01(e) of the OMNA to pay the Post-Closing Plant Assets Taxes (see [55(b)] above). It was therefore the defendants’ failure to pay the Post-Closing Plant Asset Taxes that had caused the TAA to be revoked. Alternatively, the secured creditors argued that they should not be held liable jointly with the liquidator for any of his breaches of the TAA.

  228. [127] Before me, counsel for the secured creditors Mr Singh argues that the tribunal’s reasoning in the award shows that when it dealt with s 6.01(e) of the OMNA, it failed to appreciate that the liquidator and the secured creditors stood in a different position as against the defendants. On that basis, he argues that the tribunal did not expressly or implicitly deal with the secured creditor’s separate arguments in this regard and thereby breached the rules of natural justice.

  229. The defendants’ submissions

  230. [128] Mr Yeap points to four separate passages in the award to show that the tribunal more than adequately dealt with the issue of revocation and that there was therefore no breach of the rules of natural justice. I shall deal with each of them in turn.

  231. Analysis of the tribunal’s decision

  232. (1) The tribunal’s remarks that revocation of the TAA was a “hotly contested” issue

  233. [129] Mr Yeap first points to paragraph 148 of the award where the tribunal referred to the reasons for the revocation of the TAA as a “hotly contested” issue:

  234. Mr Yeap argues that this showed that the tribunal was fully aware of the revocation issue and the submissions advanced by both parties.

  235. [130] As I have already said, the mere fact that the tribunal acknowledges that an issue is live does not necessarily mean that the tribunal has engaged with the submissions and arguments of both sides on that issue.

  236. [131] It is pertinent that the tribunal in this passage says that “the Liquidator, who was joined by the Secured Creditors in this submission, contended that the reason for the revocation was that [the defendants] failed to pay the taxes due on the parcels of land transferred to it during 2005” [emphasis added]. With respect, this misstates the liquidator’s (and the secured creditors’) position. It is not disputed that the liquidator’s position in the arbitration was that the defendants had failed to pay taxes to settle the Post-Closing Plant Taxes in 2005. But this failure includes not only the taxes due on the parcels of land (ie, Plant Land Assets) but also the taxes due on the Plant Non-Land Assets. It is also undisputed that the liquidator repeatedly stated his position in the arbitration. The tribunal’s error in this regard is consistent with Mr Yeo’s submission that it had no actual regard for the submissions made by the liquidator. It was also consistent with Mr Singh’s submission that the tribunal had simply dealt with the liquidator and the secured creditors as if they were a single entity, thereby depriving the secured creditors of their right to have their separate submissions considered in light of their separate position.

  237. [132] Further, this passage (as well as the tribunal’s main analysis of this issue) appears in the part of the award where the tribunal is discussing the chronology of events. I found this rather curious. It was not at all clear whether the tribunal truly appreciated how the issue of revocation was relevant in light of its own finding that the secured creditors and the liquidator were in breach of the APA from the very outset because the TAA did not have the effect of removing the statutory liens over the Plant Assets.

  238. [133] When I pressed Mr Yeap on this point in oral submissions, he took the position that the tribunal’s analysis of this issue was completely irrelevant to the issue of the US$80m in damages it awarded to the defendants, but was relevant only to the issue of who was responsible for paying the penalties and interest on the unpaid back taxes, when those penalties and interest became payable upon the revocation of the TAA. In my view, this made the location of the tribunal’s analysis of this issue within the context of its entire award even more curious.

  239. [134] In any event, as we shall see below, even though the tribunal ostensibly recognised the importance of the issue to the parties, the award does not actually analyse (i) the liquidator’s submissions and the evidence put forward or (ii) the secured creditors’ submissions on this point at all.

  240. (2) The tribunal accepted the liquidator’s purported concession that he was liable for the current taxes in 2005

  241. [135] Mr Yeap next relies on paragraphs 227 to 248 of the award where he says the tribunal determined that it was the liquidator who was responsible for the TAA being revoked and shows that the tribunal simply preferred the defendants’ evidence, arguments and submissions over the liquidator’s.

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