BTN AND ANOTHER V BTP AND ANOTHER [2019] SGHC 212
In the recent decision of BTN and another v BTP and another [2019] SGHC 212 (“BTN v BTP”), the High Court dismissed an application to either review a partial arbitral award under s. 10(3)(b) of the International Arbitration Act (Cap. 143A) (the “IAA”), or in the alternative, to set aside the partial award under s. 24(b) of the IAA and Article 34 of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”). This article will focus on the part of BTN v BTP that deals with s. 10(3)(b) IAA.
I. Background
The Defendants were the owners of a group of companies, of which the second Plaintiff, BTO, was the principal holding company. The Defendants, together with two other owners of the group of companies, had entered into a share and purchase agreement (the “SPA”) with the first Plaintiff, BTN. ([5] BTN v BTP).
Under the SPA, BTN acquired 100% ownership and control of the group of companies ([5] BTN v BTP). The SPA also provided that the Defendants were to be employed by BTO under the respective “Promoter Employment Agreements” (the “PEAs”), which were annexed to the SPA ([7] BTN v BTP).
On 8 January 2014, BTO summarily dismissed the Defendants ([12] BTN v BTP). Subsequently, the Defendants commenced proceedings under section 20 of the Industrial Relations Act 1967 (Act 177) (Malaysia) (the “IRA”), which allows any person employed under a contract of employment to bring a complaint should he be of the view that he was dismissed without just cause or excuse ([13] BTN v BTP).
In due course, the Malaysian Industrial Court (the “MIC”) gave judgment in favour of the Defendants, as, inter alia, “… the Company [i.e., BTO] was absent from day one despite [sic] several notices has [sic] been served… The Company did not show any interest of [sic] the Claimant’s case as until the case is fixed for ex-parte hearing not a single document was filed by the Company. Here the Court is left with no alternative but to rely on the Claimant’s testimony and the documents produced by the Claimant before the Court.…” ([18] BTN v BTP).
In July 2016, the Defendants commenced arbitration proceedings against the Plaintiffs under the SPA. The dispute resolution clause in the SPA was substantially the same as the clauses in the PEAs, which provided that “… any Dispute shall be finally submitted to binding arbitration in accordance with the Arbitration Rules of the Singapore International Arbitration Centre. …” (See [10] read with [20] BTN v BTP; though note [11] BTN v BTP on the governing law and jurisdiction clause in the SPA).
Before the arbitral tribunal (the “Tribunal”), the Defendants argued in respect of issues relating to their dismissal, that those issues were res judicata by virtue of the awards rendered by the MIC (the “Res Judicata Issue”) and further, that a determination under the PEAs that the dismissals were without cause was binding for the purposes of the SPA as a matter of construction of both documents (the “Construction Issue”) ([20] BTN v BTP).
After hearing both parties, the Tribunal issued the Partial Award holding that, amongst others, the determinations by the MIC that the Defendants had been terminated without just cause or excuse was binding and conclusive in respect of the issue of termination without cause under the SPA, and that the doctrine of issue estoppel applied ([27] BTN v BTP).
The Plaintiffs then filed an originating summons to review the Partial Award under s. 10(3)(b) IAA, or alternatively, to set the Partial Award aside pursuant to s. 24(b) IAA and Art. 34(2) Model Law ([28] BTN v BTP).
II. The Jurisdiction Issue
On the jurisdiction issue, which is the challenge under s. 10(3)(b) IAA, in summary, the Plaintiffs argued that the Tribunal had “abdicated the jurisdiction conferred on it by the Parties” because the Tribunal was concerned with whether the MIC Awards were “binding and conclusive” and did not “decide the substance of the dispute over the dismissals” ([38] BTN v BTP).
This was rejected by the Defendants, who, in summary, argued that the Tribunal’s award was not a ruling on jurisdiction. This was because the Tribunal had decided on both the Res Judicata Issue and the Construction Issue, which were both issues of law going to the merits of the dispute ([40] BTN v BTP).
What the High Court found. The High Court found that s. 10(3)(b) IAA only applies if the Tribunal has ruled that it had no jurisdiction. Therefore, the key issue was whether the Partial Award was a ruling on jurisdiction ([44] BTN v BTP).
For ease of reference, subsection 10(3)(b) of the IAA is set out below:
(3) If the arbitral tribunal rules —
(a) on a plea as a preliminary question that it has jurisdiction; or
(b) on a plea at any stage of the arbitral proceedings that it has
no jurisdiction,
any party may, within 30 days after having received notice of that
ruling, apply to the High Court to decide the matter.
Holding that the Partial Award was not a ruling on jurisdiction, the High Court found that neither the Res Judicata Issue nor the Construction Issue were jurisdictional issues ([45] BTN v BTP) (though the High Court also gave an alternative ground for this finding).
In this regard, on the Construction Issue, the essence of the High Court’s reasoning is summarised in [52] BTN v BTP, where the High Court held thus:
“it is clear that the Tribunal decided on the substantive merits of the legal dispute between the parties, as encapsulated by the legal question in Procedural Order No 5: “whether the decisions of the Malaysian Industrial Court are binding as a matter of contract on a proper interpretation of the SPA and PEAs”. The construction of the parties’ contracts was clearly within the jurisdiction of the Tribunal. There was nothing said about the jurisdiction of the Tribunal to hear this issue. The Tribunal exercised its jurisdiction in deciding the construction of the contracts; it is not a case of the Tribunal abdicating its jurisdiction. If anything, any errors in contractual construction are errors of law and fact and such errors are not subject to review.”
As for the Res Judicata Issue, the High Court held that the concept of res judicata as stated in The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd (nTan Corporate Advisory Pte Ltd and others, other parties) and another appeal [2015] 5 SLR 1104 (“TT International”) applies to arbitrations, and that the “effect of application of res judicata would be the same in court proceedings and in arbitral proceedings” ([61] BTN v BTP).
The High Court then held that the Tribunal did decide on res judicata, and that “The very decision of the Tribunal hinged on the implicit understanding that it had jurisdiction to address the Res Judicata Issue…” ([62] BTN v BTP). This is because, as elaborated at [64] BTN v BTP, the High Court held that “… the doctrine of res judicata falls within the concept of admissibility of claim: it takes aim at the claim, and not at the defect of the improper forum. … Thus, a res judicata objection is conceptually not a jurisdictional objection, but an admissibility objection…”
Nonetheless, we note that the High Court was careful to caveat the above by highlighting that “… there may be instances where the doctrine of res judicata is correctly classified as a jurisdiction challenge… This may occur when the doctrine is directly linked to the consent of the parties, because party consent lies at the core of an arbitral tribunal’s jurisdiction. …” (See [67] BTN v BTP).
III. Observations of BTN v BTP
In BTN v BTP, the High Court started its judgment by stating at [3] that “The Singapore courts have time and again cautioned against the creativity of parties in crafting their arguments based on an alleged breach of natural justice….the same caution applies to jurisdictional challenges.”
Parties should take heed of this caution, as it is clear that the Singapore Courts will be careful to ensure that the Parties are held to their bargain if they have agreed to arbitrate a dispute, and will not likely grant relief from a Tribunal’s decision.
However, perhaps the more interesting (though, perhaps not novel) issue is the High Court’s reasoning on res judicata. We note that the High Court had supported its reasoning with reference to multiple authorities, including foreign case law (see, e.g., [66] BTN v BTP).
Careful thought should therefore be given as to whether a res judicata argument can and should be run in arbitration, especially where a tribunal has decided upon an issue in dispute. If such an argument on res judicata succeeds before an arbitral tribunal, then per BTN v BTP, the arbitral tribunal’s decision is not a ruling on jurisdiction (subject to the reservations made by BTN v BTP as to special instances wherein res judicata is correctly classified as a jurisdictional challenge) with all the implications that flows from it.
Tags: International Arbitration Act; UNCITRAL Model Law on International Commercial Arbitration; Setting aside; Arbitral awards; Res Judicata; Abdicate Jurisdiction
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