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Grounds publishedDecided 31 Mar 2015
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Court of Appeal

AKN and another v ALC and others and other appeals

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[2015] SGCA 18Case no. Civil Appeals Nos [P], [Q] and [R]

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  1. Sundaresh Menon CJ (delivering the judgment of the court):

  2. Introduction

  3. [1] At the heart of this judgment is the question of the proper relationship between arbitral tribunals and the courts. Before us are three appeals from the decision of the High Court judge (“the Judge”) in AKM v AKN and another and other matters [2014] 4 SLR 245 (“the High Court Judgment”) concerning an arbitral award issued by a three-member arbitral tribunal in an arbitration administered by the Singapore International Arbitration Centre (“the SIAC”). The Judge set aside the arbitral award (“the Award”) in its entirety, primarily on the grounds of one or more breaches of natural justice. He also found that the arbitral tribunal (“the Tribunal”) had acted in excess of its jurisdiction. The claimants in the arbitration, AKN and AKO, have appealed to this court. Their central contention is that the Judge overstepped his bounds by scrutinising the merits of the Award too closely, and further, that he should not have set aside the Award.

  4. Background

  5. [2] To maintain the confidentiality of the arbitration, the Judge used pseudonyms in place of the names of the parties and their related entities. He also converted all sums denominated in local currency into the approximate equivalent in US dollars, and used fictional names for the countries and the products concerned. This device is maintained in this judgment.

  6. The factual context

  7. [3] This case arose from the liquidation of a company in the country of Moria (“the Corporation”). The Corporation was the largest regional producer of a product called Mithril. Its principal production facility was in a city within Moria called Erebor.

  8. [4] The Corporation was heavily indebted to a number of secured creditors (generically referred to hereafter as “Secured Creditors”) as well as to the city of Erebor in respect of unpaid taxes. Those taxes were due in respect of the land on which the Corporation’s principal production facility was situated, the production facility itself and the machinery within the production facility. The liquidator of the Corporation (“the Liquidator”) devised a plan to sell some of the Corporation’s assets (“the Plant Assets”) to AKN and AKO, the appellants in all three appeals before us (collectively referred to hereafter as “the Purchasers”), with the Corporation to retain its remaining assets (“the Retained Assets”).

  9. [5] The Plant Assets comprised the Corporation’s principal production facility in Erebor, and included the land on which the production facility was situated (“the Plant Land Assets”) as well as the machinery and other aspects of the production facility (“the Plant Non-Land Assets”). To give effect to the sale of the Plant Assets, two key agreements were entered into, an asset purchase agreement dated 10 September 2004 (“the APA”) and an omnibus agreement dated 15 October 2004 (“the OMNA”).

  10. The two key agreements

  11. [6] The APA was between the Liquidator, the Secured Creditors listed in Schedule I of the APA, the Corporation’s shareholders and the Purchasers. The Corporation’s shareholders are not parties to the present dispute, and for the purposes of this judgment, they can be discounted as parties to the APA.

  12. [7] Under the APA, the Purchasers agreed to purchase the Plant Assets from the Corporation. Section 2.1 of the APA reads:

  13. [8] The “Closing Date” referred to in s 2.1 was stipulated in s 5.1 of the APA to be 8 October 2004. However, this was eventually rescheduled to 15 October 2004, and it is that date which we shall term the “Closing Date” in this judgment. The Secured Creditors were referred to in s 2.1 because it was contemplated that they would retain their security interests in the Plant Assets. In return for their agreement under s 2.1 to deliver the Plant Assets to the Purchasers “free from and clear of all Liens of any kind”, the Purchasers agreed to issue two notes for their benefit. The terms of these two notes (“the Notes”) were set out in the second key agreement, the OMNA. This was between the Purchasers and the Secured Creditors, with a Morian bank acting as the facility agent. In essence, the Purchasers were to make payments at periodic intervals to the holders of the Notes. The original holders of the Notes were the Secured Creditors who were the original parties to the APA (also referred to hereafter as “Original Secured Creditors” where appropriate to the context).

  14. [9] The OMNA provided, in s 9.04, that the Secured Creditors were entitled to assign all or any portion of their rights and obligations under the OMNA and the Notes. By the time of the arbitral proceedings, a few of the Original Secured Creditors had sold their rights under the Notes to third parties, including the investment funds which are the respondents in Civil Appeal (“CA”) No [P] (“the Funds”). The OMNA contained, in s 9.08(b), a distinct dispute resolution mechanism from the one found in the APA. The APA contained an arbitration agreement in s 10.2, which contemplated disputes being referred to arbitration in Singapore in accordance with the rules of the SIAC. The OMNA, in contrast, contained a non-exclusive jurisdiction clause that pointed to the Morian courts, and did not contain any arbitration agreement.

  15. [10] One of the conditions precedent to the closing of the transactions contemplated under the APA was the approval by the Erebor municipal authorities of a deferred payment scheme for the unpaid taxes that were owed by the Corporation. The Liquidator eventually procured a tax amnesty agreement (“the TAA”) with the Erebor municipal authorities on 13 October 2004. The TAA granted the Corporation relief from paying interest and penalties on all the unpaid taxes it had hitherto incurred, and allowed it to settle the unpaid taxes in eight instalments starting in December 2004 and ending in December 2012. Hence, although the TAA did not secure a waiver of the taxes owed by the Corporation, it did achieve a plan for deferred payment of the taxes to be made without the imposition of any penalties or interest as a result of the deferred payment. The TAA, however, was liable to be revoked if any taxes in relation to the Corporation’s assets, including the Plant Assets, were not paid on time.

  16. [11] Soon after the Closing Date (ie, the revised closing date of 15 October 2004), the relationship between the parties started to sour. The breakdown of the parties’ relationship was triggered by the revocation of the TAA, and that transpired apparently because certain tax liabilities were not paid. These tax liabilities can be broken down into three categories as follows (adopting the same terminology as that used by the Judge):

  17. (a) The first category – “Pre-Closing Taxes” – comprised arrears of taxes that had accrued from 1999 to 15 October 2004 over all of the Corporation’s real property, regardless of whether that real property was comprised in the Plant Assets or in the Retained Assets. The Pre-Closing Taxes were meant to be paid pursuant to the TAA, and were the Liquidator’s responsibility.

  18. (b) The second category of tax liabilities – “Post-Closing Plant Assets Taxes” – comprised current taxes owing on the Plant Assets (both the Plant Land Assets and the Plant Non-Land Assets). Although the Plant Land Assets had been transferred to the Purchasers on the Closing Date, they remained in the Corporation’s name. As such, as far as the Erebor municipal authorities were concerned, the Corporation remained the registered owner and, therefore, the taxpayer responsible for those taxes. The APA was silent as to who was liable for the Post-Closing Plant Assets Taxes. However, from the sequence of events that led up to the revocation of the TAA, it seemed that the Purchasers had undertaken the responsibility of paying those taxes (see the Award at paras 170–192). On the Tribunal’s analysis, the Purchasers had in fact attempted to pay the first instalment of the Post-Closing Plant Assets Taxes, but a portion of their payment was instead allocated to the third category of tax liabilities, the “Post-Closing Retained Assets Taxes” (see the Award at para 191). As a result, there were outstanding Post-Closing Plant Assets Taxes.

  19. (c) As just mentioned, the third category of tax liabilities consisted of the Post-Closing Retained Assets Taxes. These were current taxes payable on the Retained Assets, and were clearly the responsibility of the Liquidator.

  20. [12] Right from the time of the first instalment payable under the TAA, problems arose and some of the aforesaid tax liabilities were not paid. The TAA was eventually revoked. However, it was unclear what exactly triggered the revocation of the TAA and when exactly the TAA was revoked (whether automatically upon non-payment, or only upon notice from the Erebor municipal authorities).

  21. [13] Upon the revocation of the TAA, the Purchasers stopped making payments pursuant to the Notes. They also applied to the Morian courts on 9 October 2008 for an injunction restraining the Secured Creditors from, amongst other things, declaring that the Purchasers were in default of their payment obligations under the Notes. The Morian court dismissed the application on 10 October 2008. On the same day, the Purchasers commenced arbitration in Singapore. Their notice of arbitration dated 10 October 2008 (“the Notice of Arbitration”) named as respondents the Liquidator, the Corporation’s shareholders and the 24 Secured Creditors listed in Annex 1 of the notice (collectively referred to hereafter as the “Arbitration Secured Creditors” where appropriate to the context). During the arbitration, the parties proceeded on the basis that all the Arbitration Secured Creditors were Original Secured Creditors (as defined at [8] above), even though one of the Arbitration Secured Creditors was not among the Secured Creditors listed in Schedule I to the APA as parties to that agreement (that said, we should also point out that that particular Arbitration Secured Creditor was expressly named as a signatory to the APA). For the purposes of this judgment, we shall likewise regard all the Arbitration Secured Creditors as Original Secured Creditors. As in the case of the APA, the Corporation’s shareholders can be discounted as parties to the arbitration as they took no part in the proceedings.

  22. The arbitration

  23. [14] The crux of the dispute at the arbitration was whether the Liquidator and the Secured Creditors had fulfilled their obligation to deliver the Plant Assets to the Purchasers “free from and clear of all Liens of any kind” pursuant to s 2.1 of the APA. The answer to this depended on whether the statutory liens that arose over those assets from unpaid taxes caused the Liquidator and the Secured Creditors to be in breach of this obligation.

  24. [15] The substantive hearing of the arbitral proceedings commenced on 14 March 2011. The Funds joined the proceedings on 22 March 2011. From that point onwards, the Tribunal treated the Funds as if they were also Secured Creditors and part of the group of Arbitration Secured Creditors. Indeed, when the Tribunal referred to “the Secured Creditors” in the Award, it included the Funds as well.

  25. [16] The Award was issued on 9 May 2012. This was a partial award. It was subsequently amended twice, first by a further partial award dated 15 June 2012 and then by a memorandum of corrections issued on 5 July 2012.

  26. [17] The Purchasers’ main argument at the arbitration was that the Liquidator and the Secured Creditors had failed to pay the Pre-Closing Taxes, which rendered the Plant Assets subject to statutory liens in favour of the Erebor municipal authorities. As such, the Liquidator and the Secured Creditors had breached their obligation under the APA to deliver the Plant Assets to the Purchasers with clean title, free of all encumbrances.

  27. [18] Separately, the Purchasers also claimed that the Secured Creditors had, in breach of s 6.8 of the APA, failed to discharge their obligation to settle certain legal proceedings which were referred to as the “Lost Land Claims” before both the Tribunal and the Judge. Those claims were legal proceedings brought by various third parties, each of whom sought a declaration that he or she was the rightful owner of (among other plots of land) a portion of the Plant Land Assets meant to be delivered to the Purchasers under the APA. On that portion of land (“the Disputed Land”) stood a shop which formed part of the Plant Assets (“the Affected Shop”). A related issue which arose in this regard during the arbitration was which of the Lost Land Claims fell within the scope of the Secured Creditors’ obligation under s 6.8, with the Purchasers and the Secured Creditors disagreeing on this point (amongst others) before the Tribunal.

  28. The Purchasers’ injunction application in Singapore

  29. [19] Having failed to obtain the injunction described at [13] above before the Morian court, the Purchasers sought a similar interim injunction against the Secured Creditors before the Singapore courts. The Purchasers’ application was granted by an assistant registrar on 14 October 2008. The matter was eventually appealed all the way to the Court of Appeal, which, on 11 September 2009, dismissed the appeal against the High Court’s refusal to set aside the interim injunction. The interim injunction was subsequently upheld by the Tribunal on 7 July 2010.

  30. The Tribunal’s decision

  31. [20] The Tribunal generally agreed with the Purchasers’ case. In brief, the Tribunal reasoned in the following manner:

  32. (a) First, the Liquidator and the Secured Creditors (which, as mentioned at [15] above, included the Funds in the context of the Award after they joined the arbitration) had a joint and several obligation to transfer the Plant Assets to the Purchasers free from encumbrances. The statutory liens that arose over those assets as a result of unpaid taxes were among the prohibited encumbrances.

  33. (b) Second, as the aforesaid statutory liens encumbered the Plant Assets, the Liquidator and the Secured Creditors had breached their obligation under the APA to deliver clean title to those assets to the Purchasers.

  34. (c) Third, the Secured Creditors had breached their obligation in relation to the Lost Land Claims, and accordingly, were obliged to indemnify the Purchasers pursuant to s 6.8 of the APA.

  35. (d) Fourth, the Tribunal had the jurisdiction to suspend the Purchasers’ payment obligations under the Notes as those obligations arose under the APA.

  36. [21] The Tribunal awarded the Purchasers US$80m as damages for a lost opportunity to earn profits and about US$23.7m as an indemnity in respect of the Lost Land Claims. It also declared that the Purchasers were entitled to suspend performance of their payment obligations under the Notes without consequence for so long as the Liquidators and the Secured Creditors (including the Funds) remained in breach of their obligation to deliver clean title to the Plant Assets.

  37. The Judge’s decision

  38. [22] The Liquidator, 11 of the Arbitration Secured Creditors and the Funds (collectively, “the Respondents”) applied to the High Court to set aside the whole of the Award primarily on the grounds of: (a) a breach of natural justice pursuant to s 24(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”) read with Art 34(2)(a)(ii) of the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”); and (b) excess of jurisdiction pursuant to Art 34(2)(a)(iii) of the Model Law. These setting-aside applications were brought by way of Originating Summons (“OS”) No [N] (the Funds’ application), OS No [M] (the Arbitration Secured Creditors’ application) and OS No [L] (the Liquidator’s application). We deal in detail below with the substance of the contentions made by the Respondents. In brief, these were presented in the form of arguments that the Tribunal: (a) had failed to consider material contentions put forward by one or more of the Respondents; and/or (b) had considered and addressed issues that had not been raised; and/or (c) had exceeded its jurisdiction.

  39. [23] The Judge dealt with the three setting-aside applications together. He identified seven issues as follows:

  40. (a) Did the Tribunal fail to consider the Liquidator’s arguments, evidence and submissions on whether “ss 2.1 and 7.1 of the APA” (see the High Court Judgment at [90(a)]) were qualified by the TAA (“Issue 1”)? In this regard, we should point out that although the Judge referred to ss 2.1 and 7.1 of the APA in framing Issue 1, that appears to have been an oversight as the relevant provisions are ss 2.1 and 7.2 instead. It is the latter two provisions that we shall refer to in our analysis of the Judge’s decision on Issue 1.

  41. (b) Did the Tribunal fail to consider the Liquidator’s and the Secured Creditors’ arguments, evidence and submissions on whether the Purchasers were responsible for the revocation of the TAA (“Issue 2”)?

  42. (c) Did the Tribunal, in awarding damages to the Purchasers for their loss of an opportunity to earn profits, exceed its powers by dealing with a matter that had not been the subject of submissions before it (“Issue 3”)?

  43. (d) If Issue 3 were answered in the negative, did the Tribunal, in awarding damages to the Purchasers for their loss of an opportunity to earn profits, fail to give the Liquidator and the Secured Creditors an opportunity to address the Tribunal on that question (“Issue 4”)?

  44. (e) Did the Tribunal fail to consider the Secured Creditors’ arguments, evidence and submissions in relation to the Lost Land Claims (“Issue 5”)?

  45. (f) Did the Tribunal act in excess of its jurisdiction in granting the Purchasers relief in respect of their payment obligations under the Notes (“Issue 6”)?

  46. (g) Did the Tribunal act in excess of its jurisdiction or in breach of natural justice in holding the Funds liable, alongside the Arbitration Secured Creditors, for breaches of the APA (“Issue 7”)?

  47. [24] The Judge answered Issue 1 affirmatively, and found that the Award should be set aside in its entirety for that reason alone (see the High Court Judgment at [123]). Nevertheless, the Judge went on to consider the remaining six issues. In short, the Judge answered Issues 2, 3, and 4 affirmatively as well, and stated that he would have set aside the Award in its entirety on any one of those grounds in the alternative. He answered Issue 5 affirmatively, but did not specify whether he would have set aside the whole of the Award on that basis alone (see the High Court Judgment at [242]). He answered Issue 6 affirmatively, and stated that even if he had been wrong on Issues 1 to 5, he would have set aside the relief which the Tribunal granted in relation to the Purchasers’ payment obligations under the Notes (see the High Court Judgment at [265]). He answered Issue 7 in the negative.

  48. The parties to the present appeals

  49. [25] As mentioned earlier, the appellants in all three appeals are the Purchasers, two special purpose vehicles incorporated under the laws of Moria. Since the arbitration, they have been represented by a team of lawyers from Rajah & Tann Singapore LLP (“R&T”) led by Mr Andre Yeap SC (“Mr Yeap”).

  50. [26] The respondents in CA No [P] are the Funds (specifically, they comprise three investment funds and the sub-custodian and agent for these funds). During the arbitration, they were represented by a team from Allen & Gledhill LLP (“A&G”) led by Mr Andrew Yeo. Before the Judge and this court, they were represented by a team from Rodyk & Davidson LLP led by Mr Philip Jeyaretnam SC (“Mr Jeyaretnam”). The Funds are in a unique position among the Respondents as they are challenging the Judge’s determination of Issue 7 pursuant to O 57 r 9A(5) of the Rules of Court (Cap 322, R 5, 2014 Rev Ed).

  51. [27] The respondents in CA No [Q] are the 11 Arbitration Secured Creditors who were the plaintiffs in OS No [M]. During the arbitration, they were represented by the same team from A&G (led by Mr Andrew Yeo) that represented the Funds. Before the Judge and this court, they were represented by a team from Drew & Napier LLC led by Mr Davinder Singh SC.

  52. [28] The respondent in CA No [R] is the Liquidator. Since the arbitration, he has been represented by a team from WongPartnership LLP led by Mr Alvin Yeo SC.

  53. The issues before this court

  54. [29] The broad question before this court is whether the Judge erred in setting aside the Award in its entirety. For convenience, we use the same seven issues identified by the Judge in our own analysis as to whether the Judge erred. The seven issues that we address in these appeals (the “Appeal Issues”) are the following:

  55. (a) Did the Judge err in setting aside the Award based on his finding that the Tribunal failed to consider the Liquidator’s arguments, evidence and submissions on whether ss 2.1 and 7.2 of the APA were qualified by the TAA (“Appeal Issue 1”)?

  56. (b) Did the Judge err in setting aside the Award based on his finding that the Tribunal failed to consider the Liquidator’s and the Secured Creditors’ arguments, evidence and submissions on whether the Purchasers were responsible for the revocation of the TAA (“Appeal Issue 2”)?

  57. (c) Did the Judge err in finding that the Tribunal, in awarding damages to the Purchasers for their loss of an opportunity to earn profits, exceeded its powers by dealing with a matter that had not been the subject of submissions before it (“Appeal Issue 3”)?

  58. (d) Did the Judge err in finding that the Tribunal, in awarding damages to the Purchasers for their loss of an opportunity to earn profits, failed to give the Liquidator and the Secured Creditors an opportunity to address the Tribunal on that question (“Appeal Issue 4”)?

  59. (e) Did the Judge err in finding that the Tribunal failed to consider the Secured Creditors’ arguments, evidence and submissions in relation to the Lost Land Claims (“Appeal Issue 5”)?

  60. (f) Did the Judge err in finding that the Tribunal acted in excess of its jurisdiction in granting the Purchasers relief in respect of their payment obligations under the Notes (“Appeal Issue 6”)?

  61. (g) Did the Judge err in finding that the Tribunal did not act in excess of its jurisdiction or in breach of natural justice in holding the Funds liable, alongside the Arbitration Secured Creditors, for breaches of the APA (“Appeal Issue 7”)?

  62. Summary of our decision

  63. [31] First, we answer Appeal Issues 1 and 2 affirmatively. In our judgment, the Judge erred in dealing with the issues concerning the obligation to deliver clean title to the Plant Assets and the revocation of the TAA. Instead of restricting his inquiry to whether the Tribunal had committed a breach of natural justice in its resolution of these matters, the Judge seemed to us to have engaged with the merits of the underlying dispute. This is impermissible.

  64. [32] Second, we answer Appeal Issue 4 in the negative. We agree with the Judge that the Tribunal acted in breach of natural justice by raising the “loss of opportunity” point at the eleventh hour without hearing arguments and submissions from the parties, especially the Respondents. Our finding on Appeal Issue 4 makes it unnecessary for us to consider or deal with Appeal Issue 3, although we disagree with the Judge on this issue. Further, although we answer Appeal Issue 4 in the negative, we also disagree with the Judge that the effect of a finding of a breach of natural justice on this point in and of itself warrants setting aside the whole of the Award. Rather, the effect of such a breach is confined to invalidating that part of the Award that was directly related to or infected by the breach.

  65. [33] Third, we answer Appeal Issue 5 in the negative. In failing to consider the Secured Creditors’ arguments in relation to the Lost Land Claims, the Tribunal acted in breach of natural justice, and this was to the prejudice of the Secured Creditors. The Judge was correct in this finding. The effect of such a breach is likewise confined to invalidating that part of the Award that was directly related to or infected by the breach.

  66. [34] Fourth, we answer Appeal Issue 6 in the negative. The Purchasers’ payment obligations under the Notes were matters that were carved out of the arbitration agreement in the APA. The Judge was therefore correct to find that the Tribunal exceeded its jurisdiction in granting the Purchasers relief in respect of those obligations.

  67. [35] Fifth, and last, we answer Appeal Issue 7 affirmatively. There is a difference between submitting to the jurisdiction of an arbitral tribunal and altering one’s contractual status and position. In this case, although the Funds joined the arbitral proceedings, they should not have been held liable for breaches of the APA as if they had in fact become Secured Creditors with contractual obligations under the APA.

  68. The law – Setting aside arbitral awards on breach of natural justice grounds

  69. [36] The law on setting aside arbitral awards for breaches of natural justice is reasonably clear. Nevertheless, the three appeals before us present us with the opportunity to restate the proper relationship between arbitral tribunals and the courts, as well as revisit the seminal High Court decision of Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd [2010] SGHC 80 (“Front Row”).

  70. [37] A critical foundational principle in arbitration is that the parties choose their adjudicators. Central to this is the notion of party autonomy. Just as the parties enjoy many of the benefits of party autonomy, so too must they accept the consequences of the choices they have made. The courts do not and must not interfere in the merits of an arbitral award and, in the process, bail out parties who have made choices that they might come to regret, or offer them a second chance to canvass the merits of their respective cases. This important proscription is reflected in the policy of minimal curial intervention in arbitral proceedings, a mainstay of the Model Law and the IAA (see BLC and others v BLB and another [2014] 4 SLR 79 (“BLC”) at [51]–[53]).

  71. [38] In particular, there is no right of appeal from arbitral awards. That is not to say that the courts can never intervene. However, the grounds for curial intervention are narrowly circumscribed, and generally concern process failures that are unfair and prejudice the parties or instances where the arbitral tribunal has made a decision that is beyond the scope of the arbitration agreement. It follows that, from the courts’ perspective, the parties to an arbitration do not have a right to a “correct” decision from the arbitral tribunal that can be vindicated by the courts. Instead, they only have a right to a decision that is within the ambit of their consent to have their dispute arbitrated, and that is arrived at following a fair process.

  72. [39] In the light of their limited role in arbitral proceedings, the courts must resist the temptation to engage with what is substantially an appeal on the legal merits of an arbitral award, but which, through the ingenuity of counsel, may be disguised and presented as a challenge to process failures during the arbitration. A prime example of this would be a challenge based on an alleged breach of natural justice. When examining such a challenge, it is important that the court assesses the real nature of the complaint. Among the arguments commonly raised in support of breach of natural justice challenges are these:

  73. (a) that the arbitral tribunal misunderstood the case presented and so did not apply its mind to the actual case of the aggrieved party;

  74. (b) that the arbitral tribunal did not mention the arguments raised by the aggrieved party and so must have failed to consider the latter’s actual case; and

  75. (c) that the arbitral tribunal must have overlooked a part of the aggrieved party’s case because it did not engage with the merits of that part of the latter’s case.

  76. Although such arguments may be commonly raised, more often than not, they do not, in fact, amount to breaches of natural justice.

  77. Revisiting Front Row

  78. [40] The decision of the High Court in Front Row was extensively relied on by the Respondents before the Judge. To understand the true significance and breadth of the case, it is necessary to examine the facts in some detail.

  79. [41] In Front Row, the parties were Front Row Investment Holdings (Singapore) Pte Ltd (“Front Row”) and Daimler South East Asia Pte Ltd (“Daimler”). Pursuant to an agreement dated 15 September 2005, Front Row and Daimler agreed to jointly organise and run a series of races across Southeast Asia using 35 specially-built SLK AMG cars. A dispute subsequently arose. Daimler commenced arbitration against Front Row claiming $610,506.06. Front Row denied liability and mounted a counterclaim for misrepresentation. Front Row’s pleaded case on misrepresentation included the following alleged representations (see Front Row at [12]):

  80. (a) that 20 races would be organised; and

  81. (b) that the SLK AMG cars were appropriate for racing or competitive events.

  82. [42] The arbitrator found that Front Row (see Front Row at [14]):

  83. [43] Based on his finding that Front Row’s case of misrepresentation had narrowed to one single pleaded representation, the arbitrator took the view that the “key question” in the arbitration was the race-worthiness of the cars. The arbitrator eventually found that there was no misrepresentation on that basis, and Front Row hence failed in its counterclaim.

  84. [44] Front Row applied to the High Court to set aside that portion of the arbitral award dealing with its counterclaim. It argued that the arbitrator had breached a rule of natural justice as he had reached his decision under the erroneous impression that Front Row had abandoned its arguments relating to its other pleaded representations apart from that relating to the race-worthiness of the cars. After considering a line of Australian cases brought by plaintiffs seeking to impugn determinations made by adjudicators of claims under the New South Wales Building and Construction Industry Security of Payment Act 1999 (Act 46 of 1999), the High Court judge gleaned the principle that there would be a breach of natural justice where the arbitrator disregarded the submissions made by a party, or had regard to them in only the most superficial sense without making any attempt to understand them and thereby failed to deal with them substantively (see Front Row at [37]). Applying that principle to the facts before him, the judge found that the arbitrator’s mistaken impression that Front Row had abandoned a part of its case meant that he never in fact considered Front Row’s submissions on the other pleaded representations and this amounted to a breach of natural justice (see Front Row at [46]).

  85. [45] It will immediately be evident that the facts in Front Row were unique. There was no real dispute that the arbitrator had failed to consider Front Row’s other pleaded representations because of his mistaken belief that they had been abandoned. The fact of the arbitrator’s mistake was irrelevant except to evince clearly that he had not considered the other pleaded representations at all.

  86. [46] To fail to consider an important issue that has been pleaded in an arbitration is a breach of natural justice because in such a case, the arbitrator would not have brought his mind to bear on an important aspect of the dispute before him. Consideration of the pleaded issues is an essential feature of the rule of natural justice that is encapsulated in the Latin adage, audi alteram partem (see also Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86 (“Soh Beng Tee”) at [43], citing Gas & Fuel Corporation of Victoria v Wood Hall Ltd & Leonard Pipeline Contractors Ltd [1978] VR 385 at 386). Front Row is useful in so far as it demonstrates what must be shown to make out a breach of natural justice on the basis that the arbitrator failed to consider an important pleaded issue. It will usually be a matter of inference rather than of explicit indication that the arbitrator wholly missed one or more important pleaded issues. However, the inference – that the arbitrator indeed failed to consider an important pleaded issue – if it is to be drawn at all, must be shown to be clear and virtually inescapable. If the facts are also consistent with the arbitrator simply having misunderstood the aggrieved party’s case, or having been mistaken as to the law, or having chosen not to deal with a point pleaded by the aggrieved party because he thought it unnecessary (notwithstanding that this view may have been formed based on a misunderstanding of the aggrieved party’s case), then the inference that the arbitrator did not apply his mind at all to the dispute before him (or to an important aspect of that dispute) and so acted in breach of natural justice should not be drawn.

  87. [47] Front Row was recently considered in AQU v AQV [2015] SGHC 26 (“AQU”), where the High Court judge distilled the very principles which we have just enunciated above (see AQU at [30]–[35]). The judge in AQU also considered the High Court decision of TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 (“TMM”), and reiterated the proposition that no party to an arbitration had a right to expect the arbitral tribunal to accept its arguments, regardless of how strong and credible it perceived those arguments to be (see AQU at [35], citing TMM at [94]). This principle is important because it points to an important distinction between, on the one hand, an arbitral tribunal’s decision to reject an argument (whether implicitly or otherwise, whether rightly or wrongly, and whether or not as a result of its failure to comprehend the argument and so to appreciate its merits), and, on the other hand, the arbitral tribunal’s failure to even consider that argument. Only the latter amounts to a breach of natural justice; the former is an error of law, not a breach of natural justice.

  88. [48] If the first hurdle of establishing a breach of natural justice is crossed, then two remaining issues arise, namely, whether there was a causal nexus between the breach and the arbitral award, and whether the breach prejudiced the aggrieved party’s rights (see Soh Beng Tee at [29], citing John Holland Pty Ltd v Toyo Engineering Corp (Japan) [2001] 1 SLR(R) 443 at [18]). With these principles in mind, we analyse the Appeal Issues in detail.

  89. Our structural approach to the Appeal Issues

  90. [49] In considering each Appeal Issue, we propose first to revisit briefly the relevant facts and the Tribunal’s findings, before coming to the Judge’s analysis, and then why we differ from or agree with the Judge. We reiterate that our role in this process is not to analyse the merits of the underlying dispute between the parties (see also BLC at [53]). That responsibility lay within the province of the Tribunal. Where we consider the facts and arguments that were raised before the Tribunal, we do so purely to provide the context against which to consider the arguments relating to the Respondents’ setting-aside applications.

  91. Appeal Issue 1: Did the Judge err in setting aside the Award based on his finding that the Tribunal failed to consider the Liquidator’s arguments, evidence and submissions on whether ss 2.1 and 7.2 of the APA were qualified by the TAA?

  92. [50] Where Appeal Issue 1 is concerned, the fundamental question that the Tribunal had to grapple with was what exactly s 2.1 of the APA obliged the Liquidator (and the Secured Creditors) to do. On the face of s 2.1, the obligation was clear – to deliver clean title to the Plant Assets to the Purchasers by the Closing Date. This is further reinforced in selected portions of s 7.2 of the APA, which read:

  93. [51] However, based on the sequence of events that preceded the signing of the APA, it seemed that all the parties were aware that there were unpaid taxes in relation to all the assets of the Corporation, including the Plant Assets.

  94. [52] Furthermore, s 5.3(b)(iii)(4) of the APA expressly listed the delivery by the Liquidator to the Purchasers of “[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]” as one of the conditions precedent to the completion of the transactions contemplated under the APA. It was undisputed by the parties that the TAA constituted this agreement.

  95. [53] On the one hand, it could be argued, based on a literal reading of ss 2.1 and 7.2 of the APA, that the obligation of the Liquidator (and the Secured Creditors) under the APA was to deliver clean title to the Plant Assets without qualification. In as much as taxes remained unpaid at the Closing Date, the Plant Assets were subject to statutory liens arising from those unpaid taxes. On this basis, clean title was not delivered to the Purchasers, and the Liquidator (and the Secured Creditors) had therefore breached the obligation under s 2.1.

  96. [54] On the other hand, based on the events preceding the signing of the APA, and in particular, the parties’ awareness of the TAA, the condition precedent to closing in s 5.3(b)(iii)(4) and the fact that the parties accepted that the TAA fulfilled that condition precedent, it could be argued that the TAA qualified the obligation of the Liquidator (and the Secured Creditors) to deliver clean title to the Plant Assets by excluding any requirement for such title to be free also of any statutory liens arising from the unpaid taxes that were the subject of the TAA.

  97. [55] Even if we have simplified the two opposing arguments somewhat, it has to be said that they were not points of extreme complexity. The Tribunal preferred the former view, namely, that the Liquidator (and the Secured Creditors) had an obligation to deliver clean title to the Plant Assets without qualification. The Liquidator argued before the Judge that the Tribunal, in taking that view, had committed a breach of natural justice as it had failed to consider his submissions on whether the TAA qualified the APA. The Judge dealt with this argument in the following manner:

  98. (a) The relevant rule of natural justice was the right to be heard. Specifically, an arbitral tribunal could not disregard submissions made by a party without considering them on their merits.

  99. (b) This rule was breached in the arbitration because the Tribunal did not even consider the Liquidator’s submissions on whether the TAA qualified his obligation under the APA to deliver clean title to the Plant Assets. The Liquidator’s submissions, in essence, were that “clean title” did not mean a title which was free of the statutory liens that arose as a result of the unpaid taxes.

  100. (c) The breach was connected to the making of the Award, in that the Tribunal ignored the aforesaid submissions of the Liquidator. The Tribunal took the view that there was “not a shred of contemporaneous evidence” that the parties thought that the TAA had amended the APA (see the Award at para 296). This was despite, for instance, the acknowledgement by all the parties that the unpaid taxes in question would be paid in instalments until 2012, and that the delivery of the TAA to the Purchasers satisfied the condition precedent in s 5.3(b)(iii)(4) of the APA. Further, not only did the Tribunal disregard those pieces of evidence, it also mischaracterised the Liquidator’s case as being that “the TAA had the effect of postponing his obligation to deliver clean title until after the payment of the last instalment under the TAA in December 2012” (“the Liquidator’s Secondary Argument”). This characterisation of the Liquidator’s case was based on the Purchasers’ submissions, and the Liquidator denied that that was his case. Instead, the Liquidator’s case was actually that based on a collective reading of the APA and the TAA, the warranties which he had provided in s 7.2 of the APA – including the warranties as to delivering clean title to the Plant Assets – had been qualified to the extent of the TAA (“the Liquidator’s Primary Argument”). As such, in rejecting the Liquidator’s Secondary Argument, the Tribunal was “rejecting an argument that was never made to it, … thereby ignoring the arguments that were made to it” (see the High Court Judgment at [122]).

  101. (d) The Judge noted that the parties did not dispute that prejudice would result in a breach of natural justice (see the High Court Judgment at [95]), and as such, did not elaborate further on this point.

  102. [56] There were conceivably two arguments before the Tribunal on the effect of the TAA on the Liquidator’s (and the Secured Creditors’) obligation under the APA to deliver clean title to the Plant Assets to the Purchasers: the Liquidator’s Secondary Argument (which the Liquidator claimed he did not even make) and the Liquidator’s Primary Argument. The Judge found that the Tribunal had not engaged the latter, had mischaracterised the latter as the former and had engaged that instead. The Tribunal was hence found to have been attacking a straw man, and this was considered by the Judge to be a breach of natural justice.

  103. [57] In our judgment, it is plain that the Tribunal did attempt to engage the Liquidator’s Primary Argument. The Tribunal did so after it rejected the notion that the TAA discharged or amended “an agreement as comprehensive as the APA” on the grounds that there was “not a shred of contemporaneous evidence” to that effect (see the Award at para 296). In this regard, the Tribunal first considered the expert evidence on the effect of statutory liens (see the Award at paras 315–321). It then noted:

  104. [58] The Tribunal subsequently dismissed the Liquidator’s Primary Argument, pointing out that “[n]one of the parties to the APA would have been able to achieve its respective aims if the [Plant Assets] had been encumbered by a lien in favour of [Erebor]” (see the Award at para 351). In short, the Tribunal concluded that it was a critical requirement of the APA that the Plant Assets had to be unencumbered even by statutory liens. The Tribunal’s reasoning was that (see the Award at para 350):

  105. The Judge ruled that this reasoning was not only wrong, but also contradicted the Tribunal’s own factual narrative, which showed that it was possible for the Purchasers to obtain the necessary tax clearances and thereby mortgage the Plant Land Assets (among other Plant Assets) notwithstanding the statutory liens (see the High Court Judgment at [102]).

  106. [59] With respect, poor reasoning on the part of an arbitral tribunal is not a ground to set aside an arbitral award; even a misunderstanding of the arguments put forward by a party is not such a ground. As noted by this court in BLC at [86], the court “is not required to carry out a hypercritical or excessively syntactical analysis of what the arbitrator has written” when considering whether an arbitral award should be set aside for breach of natural justice. Neither should it approach an arbitral award with a “meticulous legal eye endeavouring to pick holes, inconsistencies and faults … with the objective of upsetting or frustrating the process of arbitration” (likewise at [86] of BLC). Taking these considerations into account, we find no breach of natural justice as there is no basis for concluding that the Tribunal did not consider the Liquidator’s Primary Argument. Accordingly, we answer Appeal Issue 1 affirmatively.

  107. [60] There is a further point. It was simply impossible, given the context of the arbitration, to draw the inference that the Tribunal had failed to apply its mind to the Liquidator’s Primary Argument. Both Mr Alvin Yeo (counsel for the Liquidator) and the Judge embarked on a detailed and exceedingly fine analysis to make good the contention that the inference to be drawn in the circumstances was that the Tribunal had overlooked that argument. But, in our judgment, based just on the points raised by Mr Alvin Yeo and canvassed by the Judge, it was at least equally plausible that the Tribunal had simply misunderstood the Liquidator’s Primary Argument, or had chosen to spend more time addressing the Liquidator’s Secondary Argument because it considered that argument to be more deserving of closer scrutiny. In such circumstances, there was no basis for drawing the inference that Mr Alvin Yeo urged us to draw.

  108. [61] We further note that the Judge was, in any case, incorrect to set aside the whole of the Award on the basis of his finding on Issue 1 alone. Those portions of the Award unrelated to Issue 1, for instance, those portions relating to the Lost Land Claims, should not have been affected by the Judge’s finding on Issue 1 even if we had upheld it. Given our finding on Appeal Issue 1, however, this is now academic.

  109. Appeal Issue 2: Did the Judge err in setting aside the Award based on his finding that the Tribunal failed to consider the Liquidator’s and the Secured Creditors’ arguments, evidence and submissions on whether the Purchasers were responsible for the revocation of the TAA?

  110. [62] The focus of Appeal Issue 2 is on what triggered the Erebor municipal authorities’ revocation of the TAA. The Judge found (in relation to Issue 2) that the Tribunal had ignored certain arguments made by the Liquidator as to who was to blame for the revocation of the TAA, and therefore, the Award should be set aside in its entirety (see the High Court Judgment at [154]). In the circumstances, he saw no reason to consider the Secured Creditors’ arguments on Issue 2.

  111. [63] Before us, the Secured Creditors adopted the Liquidator’s arguments, and also added a further ground on which to uphold the Judge’s decision on Issue 2 – namely, that the Tribunal had disregarded an argument that was distinct to the Secured Creditors, and that was not and could not have been raised by the Liquidator. This distinct argument related to s 6.01(e) of the OMNA, which stated that the Purchasers were liable to pay and discharge all taxes in relation to the Plant Assets. With s 6.01(e) of the OMNA as the starting point, the Secured Creditors argued that the Purchasers, in having failed to pay certain taxes over the Plant Assets, had triggered the revocation of the TAA.

  112. [64] In the Award, the Tribunal did refer to s 6.01(e) of the OMNA, but seemed (perhaps mistakenly) to have thought that it was the Liquidator who relied on that provision. The Tribunal hence stated (see the Award at para 247):

  113. It does appear from this extract that the Tribunal attributed an argument made by the Secured Creditors to the Liquidator, and then discredited that argument on the basis that it had been put forward by the wrong party. Even though this may have been unsatisfactory reasoning on the Tribunal’s part, it does not assist the Secured Creditors’ case on Appeal Issue 2 for two reasons.

  114. [65] First, this seems in essence to have been a case of the Tribunal having gotten into a muddle on the facts, the law and the arguments. This is not a sufficient ground to set aside the Award. Second, and perhaps more crucially, in the Tribunal’s analysis, it was not the fact of the revocation of the TAA that gave rise to the breach of the obligation to deliver clean title to the Plant Assets to the Purchasers. It was simply the fact that taxes remained unpaid – which in turn gave rise to statutory liens over the Plant Assets; those statutory liens in themselves were considered to be impermissible encumbrances. In fact, the Tribunal only discussed the “TAA and its revocation” as part of the background to the parties’ dispute (see the Award at paras 148–249). In its conclusion on the matter, the Tribunal made it clear that regardless of why the TAA was revoked, the statutory liens had already been in place over the Plant Assets at the time the APA was signed, and the Purchasers had not waived their right to clean title (free even of such liens) under the APA by reason of their knowing of the existence of the TAA (see the Award at para 249).

  115. [66] It might well seem a contradiction in terms that the parties would stipulate as a condition precedent to completion that the TAA be procured, which, on its terms, contemplated a continuing obligation to pay outstanding taxes (albeit on a deferred basis), and also contemplate that the existence of any outstanding taxes giving rise to a statutory lien would be a breach of the fundamental obligation to deliver clean title. But, this was what the Tribunal decided and there is no room to appeal to the court against such a holding.

  116. [67] Based on the Tribunal’s conclusion that the TAA did not alter the obligation owed by the Liquidator and the Secured Creditors to transfer clean title to the Plant Assets to the Purchasers on the Closing Date, on the Tribunal’s analysis, this obligation had been breached from the onset. Hence, even if the Tribunal had failed to consider the Liquidator’s and/or the Secured Creditors’ arguments on the revocation of the TAA or had wrongly attributed the arguments of one party to the other party, and even if this had amounted to a breach of natural justice, it was unlikely to materially affect the conclusion which the Tribunal reached on its analysis of the APA, namely, that the Liquidator and the Secured Creditors had breached the obligation to deliver clean title to the Plant Assets under the APA.

  117. [68] For these reasons, we do not agree with the Judge that there was a breach of natural justice which prejudiced the Liquidator and the Secured Creditors, and accordingly, also do not consider that there is any basis for setting aside the Award on this ground. We therefore answer Appeal Issue 2 affirmatively.

  118. Appeal Issue 3: Did the Judge err in finding that the Tribunal, in awarding damages to the Purchasers for their loss of an opportunity to earn profits, exceeded its powers by dealing with a matter that had not been the subject of submissions before it?

  119. [69] Appeal Issues 3 and 4 concern the Tribunal’s re-characterisation of the Purchasers’ claim from a claim for loss of profits to one for loss of an opportunity to earn profits. In the Notice of Arbitration, the Purchasers prayed for, among other things, “damages”. Throughout the arbitration, the parties proceeded on the basis that the Purchasers’ claim was for actual loss of profits (see the Award at para 433). In fact, the Purchasers quantified this loss at US$368.6m. The Tribunal concluded that the Purchasers “cannot prove any actual loss” (see the Award at para 445), but then took it upon itself to re-characterise the Purchasers’ claim as one for loss of an opportunity to earn profits. The idea of loss of such an opportunity was raised by the Tribunal only on 21 October 2011, the last day of the 20-day arbitral hearing. The relevant exchange (from 11.40am to 11.45am) bears setting out in some detail:

  120. [70] The Judge found that the Tribunal had acted in excess of its jurisdiction in awarding the Purchasers damages for loss of an opportunity to earn profits, and that this warranted setting aside the Award in its entirety (see the High Court Judgment at [200]). He reasoned as follows:

  121. (a) First, a generic prayer for “damages”, such as that in the Notice of Arbitration, was not broad enough to include damages for loss characterised as a lost opportunity to earn profits.

  122. (b) Second, the Tribunal had, all throughout the proceedings, understood the Purchasers’ claim to be one for loss of profits.

  123. (c) Third, notwithstanding the aforesaid understanding, the Tribunal took it upon itself to re-characterise the Purchasers’ claim as one for loss of an opportunity to earn profits.

  124. [71] The Judge also considered whether “loss of an opportunity to earn profits” was substantially different from “loss of profits”. After analysing the difference between the two concepts (see the High Court Judgment at [183]–[188]), he concluded that, amongst other things, a “loss of profits” claim was binary in nature in that it was “an all or nothing claim [for] damages” (see the High Court Judgment at [194]), whereas a “loss of opportunity” claim was not. As such, in defending against a “loss of profits” claim, as the Liquidator and the Secured Creditors did before the Tribunal, an “all or nothing” defence was warranted. In contrast, in defending against a “loss of opportunity” claim, evidence and submissions directed towards ascertaining the quantum of the chance lost were crucial.

  125. [72] An example of an arbitral tribunal acting in excess of its jurisdiction under Art 34(2)(a)(iii) of the Model Law is when it makes an arbitral award that neither party requested. As we stated in PT Prima International Development v Kempinski Hotels SA and other appeals [2012] 4 SLR 98 (“Kempinski”) at [34]:

  126. In order to set aside an arbitral award on the grounds of excess of jurisdiction, the court must further be satisfied that the aggrieved party has suffered actual or real prejudice (see CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR 305 (“CRW”) at [33]).

  127. [73] In CRW, we noted (at [33]) the distinction between the “erroneous exercise by an arbitral tribunal of an available power vested in it (which would amount to no more than a mere error of law)” and the “purported exercise by the arbitral tribunal of a power which it did not possess”. This distinction had earlier been enunciated by Lord Steyn in the House of Lords decision of Lesotho Highlands Development Authority v Impregilo SpA and others [2006] 1 AC 221 (at [25]) as follows:

  128. [74] In our judgment, the Tribunal’s approach in this case was not indicative of its acting in excess of its jurisdiction. Returning to the summary of the Judge’s analysis at [70] above, in our judgment, the Judge erred at the first step when he held that a generic claim for damages was not broad enough to encompass a claim that might be characterised as one for loss of a chance. A generic claim for damages is nothing more than a particular manner of asserting a right to damages. We agree with the second and third steps in the Judge’s reasoning; but, as shall shortly become apparent, these go to issues such as fair process, notice and natural justice, rather than to jurisdiction. The point can be tested in this way: had the Purchasers brought an application to amend their claim from one for lost profits to one for loss of a chance to earn profits, then it cannot be doubted that the Tribunal would have had the discretionary jurisdiction to permit this amendment, subject to giving due opportunity to the Respondents affected by the amendment to make consequential amendments in their respective cases and their evidence. We emphasise “discretionary jurisdiction” to make it clear that it would, of course, also have been open to the Tribunal not to permit the amendment if it thought it inappropriate. For these reasons, we answer Appeal Issue 3 affirmatively, although, for the reasons set out in the next section, nothing turns on this.

  129. Appeal Issue 4: Did the Judge err in finding that the Tribunal, in awarding damages to the Purchasers for their loss of an opportunity to earn profits, failed to give the Liquidator and the Secured Creditors an opportunity to address the Tribunal on that question?

  130. [75] As mentioned above, the potential of the Purchasers’ claim resting on the loss of a chance or an opportunity to earn profits was only raised by the Tribunal on the final day of the arbitral proceedings. The Tribunal then went on to suggest that were it to proceed on a “loss of chance” analysis, it would need help to determine the quantum of the chance lost (see the exchange between the Tribunal and Mr Yeap quoted above at [69]). However, the parties were never given the opportunity to address the Tribunal on that point. The extent of the parties’ “submissions” on that point was their exchange with the Tribunal extracted above. The Award followed and the relevant portion of the Award reads as follows:

  131. [76] The Tribunal reached this conclusion of loss of a 55% chance (which was then translated to a monetary award of US$80m) without any apparent analysis or consideration over and above its “slightly better than even” approximation, and without any submissions having been sought or made on the quantum of the chance lost. Moreover, despite being cognisant of the fact that the Secured Creditors’ expert had not addressed this matter at all, the Tribunal never gave an opportunity for any of the Respondents, let alone the Secured Creditors, to adduce further evidence on the matter.

  132. [77] The Purchasers argued that the situation in the present appeals was similar to that in Kempinski. There, one of the issues was whether the arbitral award should have been set aside because the arbitral tribunal made a finding on a certain matter – the “New Management Contract” – that had not been pleaded. We found (at [51]) that:

  133. [78] In our judgment, the situation presented in the current appeals is completely different and the Purchasers’ reliance on Kempinski is therefore unfounded. During the arbitration, the Secured Creditors and the Liquidator did not have ample notice of the “loss of opportunity” claim. It was raised at the eleventh hour. Not only was the Tribunal apparently uncertain of and ill-equipped to deal with the quantum of the opportunity allegedly lost, it also did not request further arguments on the point.

  134. [79] In the circumstances, not only did the Secured Creditors and the Liquidator lack ample notice of the “loss of opportunity” claim, the Tribunal was also never furnished with extensive submissions or expert evidence on the “loss of opportunity” point. This was despite the fact that the Tribunal, as it had indicated to the parties, was alive to the need for such submissions and evidence. The analogy with Kempinski therefore completely fails.

  135. [80] For these reasons, we answer Appeal Issue 4 in the negative. However, we must qualify our affirmation of this part of the Judge’s decision. The Judge held that this breach of natural justice alone would warrant setting aside the Award in its entirety. In our judgment, this is wrong. Only those portions of the Award relating to the “loss of opportunity” claim that were in fact affected by the breach of natural justice, namely, the award of damages of US$80m, should be set aside as a result of this breach.

  136. Appeal Issue 5: Did the Judge err in finding that the Tribunal failed to consider the Secured Creditors’ arguments, evidence and submissions in relation to the Lost Land Claims?

  137. [81] To recapitulate, in the court below, Issue 5 centred on the obligation of the Secured Creditors to settle the Lost Land Claims. These claims were so labelled before the Tribunal and the Judge because they related to (among other plots of land) the Disputed Land, which the Purchasers should have obtained under the APA, but which was the subject of competing claims by various third parties.

  138. The relevant provision

  139. [82] The Secured Creditors’ obligation to settle the Lost Land Claims was contained in s 6.8 of the APA, which reads:

  140. The various Lost Land Claims

  141. The “Claims for Settlement”

  142. [83] As can be seen from [82] above, reading s 6.8 of the APA on its face, the only Lost Land Claims covered by that provision were “the Claims for Settlement … more particularly described in Part A of Schedule VI [to the APA]”. Part A of Schedule VI defined those “Claims for Settlement” as claims brought by two third parties, Lorien and Celeborn, as follows:

  143. It should be noted that the Corporation was party to both of the “Claims for Settlement” defined in Part A of Schedule VI to the APA (“the two defined ‘Claims for Settlement’”).

  144. Other claims

  145. [84] In addition to the two defined “Claims for Settlement” brought by Lorien and Celeborn, an individual named Mdm Vaire separately filed proceedings in the Morian courts in 1998 claiming that she – and not Celeborn – was the true heir and, hence, the true owner of (among other plots of land) the Disputed Land. It will be noted that Mdm Vaire’s claim was not one of the two defined “Claims for Settlement” (see [82]–[83] above), even though it was already in progress at the time the APA was entered into. Mdm Vaire’s claim was opposed by Lorien and Celeborn. The Morian court found in favour of Mdm Vaire. Lorien and Celeborn each filed a petition for review before the Morian Supreme Court in 2007.

  146. [85] Separately, the government of Moria commenced two sets of proceedings relating to (among other plots of land) the Disputed Land. The first was brought to “expropriate” the Disputed Land. Those proceedings were originally filed on 15 August 1983 by the Mithril Authority, an entity created to strengthen the Mithril industry in Moria, with a view to obtaining the Disputed Land for use by the Corporation. At that time, the Corporation was owned and controlled by the government of Moria (through the Mithril Authority). The Mithril Authority’s case was dismissed as the Morian court found that the Mithril Authority lacked the requisite standing. The Morian government was allowed to substitute itself as the claimant in place of the Mithril Authority, but eventually, its case too was dismissed by the Morian court in October 2005. The Morian government filed a petition for review before the Morian Supreme Court in 2006.

  147. [86] The second set of proceedings brought by the Morian government was for the cancellation of certain certificates of title and reversion against the predecessor of Celeborn (Celeborn’s mother), who was represented by Celeborn, the alleged heir. Those proceedings were filed on 12 October 2004. Lorien and Mdm Vaire were also involved in those proceedings. The Morian government’s argument was that the certificates of title concerned had been issued to implement a decision by the Morian court, which decision, properly considered, did not cover the entire area set out in the certificates. The certificates were hence over-encompassing. The Morian government’s claim was dismissed by the Morian court, and it similarly filed a petition for review before the Morian Supreme Court in 2006.

  148. [87] The above four matters, along with three other matters that concerned (among other plots of land) the Disputed Land, were heard together by the Morian Supreme Court. On 7 July 2010, it issued a judgment that upheld Mdm Vaire’s claim to the Disputed Land. It dismissed Lorien’s and Celeborn’s petitions for review for lack of merit. At the same time, it also granted the Morian government’s petitions for review and reinstated both the expropriation as well as the reversionary proceedings.

  149. The disputed matters before the Tribunal

  150. [88] Before the Tribunal, the Purchasers argued that the Secured Creditors had not performed their obligation under s 6.8 of the APA to settle the Lost Land Claims and sought an indemnity from them. In response, the Secured Creditors’ submitted as follows:

  151. (a) Given the decision of the Morian Supreme Court on 7 July 2010 in favour of Mdm Vaire (“the Morian Supreme Court’s 7 July 2010 judgment”), Celeborn and Lorien no longer had any claim to the Disputed Land. Therefore, there were no claims for the Secured Creditors to settle pursuant to s 6.8 of the APA, which did not include any obligation to settle Mdm Vaire’s claim or any other Lost Land Claims.

  152. (b) Even if s 6.8 covered the obligation to settle Mdm Vaire’s claim, the Purchasers’ allegation of a breach of s 6.8 was premature as the Secured Creditors had until “the expiration of [the] APA” to discharge any such obligation. The APA did not expire until the “full payment and discharge of all the obligations of the [Purchasers]”, and that had not transpired yet. The expiration of the APA was provided for in s 8.1 of the APA, which reads:

  153. [89] As we see it, there were three pertinent questions before the Tribunal:

  154. (a) First, what was the ambit of the Secured Creditors’ obligation under s 6.8? In particular, did it extend to procuring a settlement of other Lost Land Claims (especially Mdm Vaire’s claim) in addition to the two defined “Claims for Settlement”?

  155. (b) Second, arising from question (a) above, what was the size of the plot of land covered by the Secured Creditors’ obligation under s 6.8 of the APA? The Purchasers initially claimed that the size of the plot of land concerned was 9.5 hectares, but subsequently took the position that it was 6.05 hectares, with an alleged value of US$23.7m. These figures may be contrasted with the figure of 3.4071 hectares that was stated in the APA (see s 6.8 read with Part A of Schedule VI). The Secured Creditors took the position that the size of the land in question was 3.4071 hectares, valued at around US$16,300.

  156. (c) Third, what was the point in time by which the Secured Creditors had to fulfil their obligation under s 6.8? The Secured Creditors argued before the Tribunal that even if they were obliged under s 6.8 to procure a settlement of other Lost Land Claims (in particular, Mdm Vaire’s claim) in addition to the two defined “Claims for Settlement” (which they denied, as we shall elaborate on below), that obligation had yet to fall due as they had until “the expiration of [the] APA” to settle those claims. For that reason, they argued that the Purchasers’ claim for an indemnity based on s 6.8 was premature.

  157. [90] On 21 October 2011, Mr Andrew Yeo (counsel for the Secured Creditors) addressed the Tribunal on the Secured Creditors’ case in respect of the Lost Land Claims. It is important to note the context of that exchange between Mr Andrew Yeo and the Tribunal. It took place during Mr Andrew Yeo’s reply to the closing submissions of Mr Yeap (counsel for the Purchasers), and it appears to have been the subject of much confusion. The exchange went as follows (from 3.17pm to 3.20pm on 21 October 2011):

  158. [91] “SP-06” in the above extract was a reference to the Disputed Land. Mr Andrew Yeo appeared to be saying that notwithstanding the Morian Supreme Court’s 7 July 2010 judgment, the Purchasers were still in a position to get title to (among other plots of land) the Disputed Land. The Tribunal eventually found that the Secured Creditors had failed to perform their obligation under s 6.8 of the APA and agreed with the Purchasers’ quantification of their indemnity claim, awarding them an indemnity of approximately US$23.7m. The relevant portions of the Award read as follows:

  159. [92] The Tribunal characterised the Secured Creditors’ position as being that the Purchasers’ indemnity claim was “dead” because a phrase to that effect had been used by Mr Andrew Yeo in his exchange with the Tribunal on 20 October 2011 at around 4.33pm. The relevant portion reads:

  160. [93] The Tribunal appeared to have thought that because the Secured Creditors (through Mr Andrew Yeo) had said that the Purchasers’ indemnity claim was “dead”, this meant that the Secured Creditors accepted that they would not be able to transfer title to the Disputed Land to the Purchasers in any event, not even by 15 October 2012 (eight years after the Closing Date), which the Tribunal thought was the maximum extent of the time permitted to the Secured Creditors to perform their obligation under s 6.8. In the premises, the Tribunal held, the Secured Creditors could not mount an argument that the Purchasers’ indemnity claim was premature. This appears to be the effect of para 477 of the Award, which we have reproduced above, and as we shall shortly see, this, significantly, was also the position of Mr Yeap (counsel for the Purchasers).

  161. The Secured Creditors’ case before the Judge

  162. [94] Before the Judge, the Secured Creditors argued that the Tribunal was mistaken in thinking that they had conceded that they would not, in any event, be able to settle the Lost Land Claims which fell within the ambit of their obligation under s 6.8 of the APA. The Secured Creditors’ submissions were as follows:

  163. (a) As was clear from para 477 of the Award, the Tribunal found that the Secured Creditors had until 15 October 2012 to settle the Lost Land Claims covered by s 6.8.

  164. (b) However, the Tribunal concluded that: (i) there was “no prospect” of the Secured Creditors being able to procure the settlement by that time; and (ii) that position was accepted by the Secured Creditors in view of Mr Andrew Yeo’s contention that the Purchasers’ claim for an indemnity was “dead”.

  165. [95] The Secured Creditors argued that the Tribunal was mistaken in concluding that they had conceded that they would not be able to fulfil their obligation under s 6.8 of the APA in any event. Rather, their contention that the Purchasers’ indemnity claim was “dead” went to a wholly different point: they were saying that because of the Morian Supreme Court’s 7 July 2010 judgment upholding Mdm Vaire’s claim, the two defined “Claims for Settlement” were “dead”, and therefore, there was nothing under s 6.8 for them to indemnify the Purchasers against as Mdm Vaire’s claim was not one of the claims listed in Part A of Schedule VI to the APA. If the Tribunal did not accept this, the Secured Creditors’ second or fall-back argument was that the time for performance of their obligation under s 6.8 had yet to lapse in any event. Hence, it was central to the Secured Creditors’ case that performance of their obligation was not yet due, and the suggestion that they had conceded that they would not be able to perform the obligation within the time available for performance was directly contrary to this. The Secured Creditors argued that because the Tribunal mistakenly thought they had conceded that they would not, in any event, be able to resolve those Lost Land Claims which fell within the ambit of their obligation under s 6.8 and proceeded on that erroneous basis, this constituted a breach of natural justice in the vein of Front Row.

  166. [96] The Judge agreed with the Secured Creditors. He found that the Tribunal had breached the rules of natural justice to the prejudice of the Secured Creditors (see the High Court Judgment at [242]).

  167. The Purchasers’ case on appeal

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