AKN v ALC: Arbitration Award Set Aside for Breach of Natural Justice and Excess of Jurisdiction

The Singapore Court of Appeal heard three appeals from a High Court decision setting aside an arbitral award in its entirety. The High Court Judge had found breaches of natural justice and the arbitral tribunal exceeding its jurisdiction. The case arose from the liquidation of a company in Moria and a dispute over the sale of assets. The Court of Appeal allowed the appeals in part, setting aside portions of the award related to loss of opportunity, Lost Land Claims, and the Purchasers' payment obligations under the Notes, while upholding the setting aside of the award against the Funds.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeals allowed in part.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore Court of Appeal partially sets aside an arbitration award due to breaches of natural justice and the tribunal exceeding its jurisdiction.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
AKNAppellantOtherAppeal allowed in partPartial
ALCRespondentOtherAppeal allowed in partPartial
FundsRespondentOtherAppeal allowedWon
Arbitration Secured CreditorsRespondentOtherAppeal allowed in partPartial
LiquidatorRespondentOtherAppeal allowed in partPartial

3. Judges

Judge NameTitleDelivered Judgment
Sundaresh MenonChief JusticeYes
Andrew Phang Boon LeongJustice of the Court of AppealNo
Steven ChongJudgeNo

4. Counsels

Counsel NameOrganization
Ng Lip ChihRajah & Tann Singapore LLP
Ang Leong HaoRajah & Tann Singapore LLP
Adrian Wong Soon PengRajah & Tann Singapore LLP
Andre Yeap Poh LeongRajah & Tann Singapore LLP
Jansen Chow Chao WuRajah & Tann Singapore LLP
Philip JeyaretnamRodyk & Davidson LLP
Evans Ng Hian PhengRodyk & Davidson LLP
Zhuo JiaxiangDrew & Napier LLC
Davinder SinghDrew & Napier LLC
David FongDrew & Napier LLC
Chan Yong WeiDrew & Napier LLC
Vishal HarnalDrew & Napier LLC
Chan Hock KengWongPartnership LLP
Chong Wan Yee MonicaWongPartnership LLP
Alvin YeoWongPartnership LLP
Lin Wei Qi Wendy LinWongPartnership LLP

4. Facts

  1. The case arose from the liquidation of a company in Moria, the largest regional producer of Mithril.
  2. The Corporation was heavily indebted to secured creditors and the city of Erebor for unpaid taxes.
  3. The Liquidator devised a plan to sell some of the Corporation’s assets (Plant Assets) to AKN and AKO (the Purchasers).
  4. Two key agreements were entered into: an asset purchase agreement (APA) and an omnibus agreement (OMNA).
  5. The APA was between the Liquidator, the Secured Creditors, the Corporation’s shareholders, and the Purchasers.
  6. The OMNA was between the Purchasers and the Secured Creditors, with a Morian bank acting as the facility agent.
  7. A tax amnesty agreement (TAA) was procured with the Erebor municipal authorities, granting relief from interest and penalties on unpaid taxes.
  8. The Purchasers stopped making payments pursuant to the Notes after the revocation of the TAA.
  9. The Purchasers commenced arbitration in Singapore, naming the Liquidator, the Corporation’s shareholders, and the Secured Creditors as respondents.
  10. The Funds purchased the right to receive payments under the Notes on the secondary market.

5. Formal Citations

  1. AKN and another v ALC and others and other appeals, , [2015] SGCA 18

6. Timeline

DateEvent
Asset purchase agreement signed
Omnibus agreement signed
Closing Date
Tax amnesty agreement procured
Purchasers applied for injunction in Morian courts
Morian court dismissed injunction application
Arbitration commenced in Singapore
Injunction granted by assistant registrar
Court of Appeal dismissed appeal against High Court's refusal to set aside interim injunction
Tribunal upheld interim injunction
Substantive hearing of arbitral proceedings commenced
Funds joined arbitral proceedings
Award issued
Further partial award issued
Memorandum of corrections issued
Judgment reserved

7. Legal Issues

  1. Breach of Natural Justice
    • Outcome: The Court of Appeal found that the Tribunal breached natural justice in several instances, leading to the partial setting aside of the award.
    • Category: Procedural
    • Sub-Issues:
      • Failure to consider material contentions
      • Failure to provide opportunity to address issues
  2. Excess of Jurisdiction
    • Outcome: The Court of Appeal found that the Tribunal exceeded its jurisdiction in granting relief related to payment obligations under the Notes and in holding the Funds liable for breaches of the APA.
    • Category: Jurisdictional
    • Sub-Issues:
      • Dealing with matters not subject of submissions
      • Granting relief beyond scope of arbitration agreement
  3. Interpretation of Contractual Obligations
    • Outcome: The Court of Appeal disagreed with the High Court's finding that the Tribunal failed to consider the Liquidator's arguments on whether the TAA qualified the APA.
    • Category: Substantive

8. Remedies Sought

  1. Damages
  2. Indemnity
  3. Declaration of entitlement to suspend payment obligations
  4. Restraint from declaring default

9. Cause of Actions

  • Breach of Contract
  • Failure to deliver clean title
  • Failure to settle claims

10. Practice Areas

  • Commercial Litigation
  • Arbitration

11. Industries

  • No industries specified

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
AKM v AKN and another and other mattersHigh CourtYes[2014] 4 SLR 245SingaporeThe High Court decision that was appealed from, concerning the setting aside of the arbitral award.
BLC and others v BLB and anotherCourt of AppealYes[2014] 4 SLR 79SingaporeCited for the principle of minimal curial intervention in arbitral proceedings.
Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte LtdHigh CourtYes[2010] SGHC 80SingaporeExtensively discussed and revisited for its principles on setting aside arbitral awards for breach of natural justice.
Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte LtdHigh CourtYes[2007] 3 SLR(R) 86SingaporeCited for the principle that consideration of pleaded issues is an essential feature of natural justice.
Gas & Fuel Corporation of Victoria v Wood Hall Ltd & Leonard Pipeline Contractors LtdSupreme Court of VictoriaYes[1978] VR 385AustraliaCited in Soh Beng Tee for the principle that consideration of pleaded issues is an essential feature of natural justice.
AQU v AQVHigh CourtYes[2015] SGHC 26SingaporeConsidered Front Row and distilled its principles on breach of natural justice.
TMM Division Maritima SA de CV v Pacific Richfield Marine Pte LtdHigh CourtYes[2013] 4 SLR 972SingaporeReiterated the proposition that no party to an arbitration has a right to expect the arbitral tribunal to accept its arguments.
John Holland Pty Ltd v Toyo Engineering Corp (Japan)High CourtYes[2001] 1 SLR(R) 443SingaporeCited in Soh Beng Tee for the principle that there must be a causal nexus between the breach of natural justice and the arbitral award, and that the breach prejudiced the aggrieved party's rights.
PT Prima International Development v Kempinski Hotels SA and other appealsCourt of AppealYes[2012] 4 SLR 98SingaporeDistinguished from the present case regarding the issue of whether the arbitral tribunal exceeded its jurisdiction by dealing with a matter that had not been the subject of submissions.
CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBKCourt of AppealYes[2011] 4 SLR 305SingaporeCited for the distinction between the erroneous exercise of an available power and the purported exercise of a power which the arbitral tribunal did not possess.
Lesotho Highlands Development Authority v Impregilo SpA and othersHouse of LordsYes[2006] 1 AC 221United KingdomCited for the distinction between the erroneous exercise of an available power and the purported exercise of a power which the arbitral tribunal did not possess.
Anisminic Ltd v Foreign Compensation CommissionHouse of LordsYes[1969] 2 AC 147United KingdomMentioned in passing regarding the powers of the court in public law and arbitration law.
AQZ v ARAHigh CourtYes[2015] SGHC 49SingaporeCited for the principle that the court undertakes a de novo hearing when dealing with arguments relating to the jurisdiction of the arbitral tribunal.
PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and others and another appealCourt of AppealYes[2014] 1 SLR 372SingaporeCited for the principle that the court undertakes a de novo hearing when dealing with arguments relating to the jurisdiction of the arbitral tribunal.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
International Arbitration ActSingapore
UNCITRAL Model Law on International Commercial ArbitrationN/A
Rules of Court (Cap 322, R 5, 2014 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Arbitration
  • Breach of Natural Justice
  • Excess of Jurisdiction
  • Asset Purchase Agreement
  • Omnibus Agreement
  • Tax Amnesty Agreement
  • Secured Creditors
  • Plant Assets
  • Lost Land Claims
  • Notes
  • Clean Title
  • Loss of Opportunity

15.2 Keywords

  • arbitration
  • breach of natural justice
  • excess of jurisdiction
  • contract law
  • Singapore
  • court of appeal

17. Areas of Law

Area NameRelevance Score
Arbitration75
International Arbitration Act70
Contract Law65
Natural justice60
Commercial Disputes60
Breach of Contract50
Company Law30

16. Subjects

  • Arbitration
  • Contract Law
  • Civil Procedure
  • Jurisdiction