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Nature of Matter

Setting aside of Arbitral Award

Case Summary

In this appeal, the Appellants sought to reverse the High Court’s refusal to set aside and resist enforcement of the Remedies Award that the Tribunal had issued in favour of the Respondents. The Court of Appeal dismissed the appeal and upheld the High Court’s decision.

Facts:

On 9 September 2011, the Appellants and Respondents entered into a Management Service Agreement (MSA), with the Respondents providing management and services for development of Solaire Casino and to supervise its operation for two periods of 5 years after its construction.

The MSA granted the first respondent, Global Gaming Philippines (“GGAM”), an option to purchase up to 10% of Bloomberry Resort Corporation (BRC)’s shares for US $15M plus 10% of the equity the Appellants had injected into the Solaire Casino project. GGAM exercised its rights and signed an Equity Option Agreement (“EOA”) to purchase the 921,184,056 of shares in BRC (the “Shares”) at PHP 1.67 per share (the “Option”).

Subsequently, GGAM commenced selling its equity stake in BRC as the parties’ relationship soured and the Appellants purported to terminate the MSA.

Between 15 January to 11 March 2014, the Appellants took various steps to secure judicial orders, including an Injunction Order, to stop GGAM from selling the shares. These were opposed by GGAM.

The Liabilities Award

On 20 September 2016, the Tribunal issued a Liabilities Award:

1. The Tribunal rejected the Appellants’ allegations of fraudulent misrepresentation.
2. The Tribunal also rejected the Appellants’ submission that they had been justified in terminating the MSA because of the Respondents’ breaches of contract.
3. The Tribunal held that there was no basis to require the return of the Shares, or to challenge GGAM’s title to the Shares. GGAM could thus exercise its rights in relation to the Shares, including the right to sell them.

In that award, the Tribunal reserved its decision on relief, remedies and costs to the remedies phase of the arbitration.

The Remedies Award

The Tribunal issued the Remedies Award on 27 September 2019. In the Remedies Award, the Tribunal ordered the Appellants to pay the Respondents the following sums: (a) US$85.2m as damages for lost management fees; (b) US$391,224 as damages for pre-termination fees and expenses; (c) US$14,998,052 as costs; and (d) interest.

Further, the Tribunal ordered the Appellants to pay the full value of the Shares based on their value as of 9 December 2014 in exchange for GGAM’s transfer of the Shares to the Appellants. This is referred to in the judgment as the “Payment Component” of the Constructive Remedy.

However, the Tribunal also ordered that should the Appellants fail to comply with the Payment Component, GGAM is entitled to sell the Shares on the market and the Appellants are to direct Prime Metroline Holdings Inc (“PMIH”), majority shareholder of BRC to undertake steps to facilitate the sale of the Shares. This is referred to in the judgment as the “Direction Component” of the Constructive Remedy.

Issues on Appeal:

1. whether the Constructive Remedy should be set aside on the basis that it concerns a matter falling beyond the scope of submission to the Arbitration;
2. whether the Remedies Award should be set aside on the basis that there was a breach of natural justice or because the Tribunal denied the Appellants an opportunity to present their case; and
3. whether the portion of the Remedies Award awarding the Respondents US$85.2m in damages for lost management fees should be set on the basis that its enforcement will be contrary to the public policy of Singapore.

The Court of Appeal found on all 3 issues in favour of the Respondents and dismissed the appeal.

Scope of Submission to Arbitration

The Appellants’ argument on scope of submission was substantively that the Tribunal could not and should not have made any valid order pertaining to the complaint about the subject matter of the EOA – ie, the Shares and the Appellants’ alleged interference in GGAM’s attempts to sell them:

1. first, the issue of the Appellants’ interference with the Shares was simply not within the scope of submission to the Arbitration;
2. second, even if the Tribunal was empowered to award damages for wrongful interference with the Shares, it should not have done so in the form of the Constructive Remedy on the basis that the Tribunal had essentially come up with this unique remedy to aid enforcement of its own order and/or award; and
3. third, there is a punitive element about the Constructive Remedy, which is contrary to the express terms of the Arbitration Clause.

The Court of Appeal rejected the Appellants’ arguments:

1. In the Court’s view, it was plain that the issue of the Shares, and the Appellants’ alleged interference with the Shares, was a point that was put before the Tribunal. The Tribunal considered the arguments mounted by the parties and came to a decision. Elaborating further, it was the Court’s view that from the very beginning of the Arbitration, the Shares and indeed the Respondents’ right to deal with them were a live issue that was the subject of dispute before the Tribunal. The Court therefore answered the question of whether the Tribunal possessed jurisdiction in respect of the dispute involving the Shares – and the interference therewith – firmly in the affirmative.
2. Still on the scope of submission issue, the Appellants argued that the Tribunal had overreached as the Direction Component of the Constructive had impermissibly affects the rights of a third party and non-party to the Arbitration, PMHI. 
   The Court also rejected this argument. Among other reasons, the Court found that the Tribunal did not make any orders that purport to bind PMHI (as a third party and a non-party to the Arbitration). No order was made against PMHI. The Direction Component of the Constructive Remedy specifically obliges the Appellants to take various steps and if necessary, for the Appellants to direct “their agent and controlling shareholder to cooperate”.
3. The Court also rejected the Appellants’ argument that the purpose of the Constructive Remedy was to aid the Tribunal in enforcing its own orders.
   In the Court’s view, the Tribunal’s reasoning in imposing the Constructive Remedy demonstrated a clear compensatory methodology employed in awarding damages to the respondents for their losses arising from the appellants’ interference with the Shares. The Tribunal’s decision was grounded quite clearly in an obligation under domestic Philippine law on the facts.
4. Finally, the Court rejected the Appellants’ argument that in ordering a buyout, the Tribunal was seeking to seeking to punish the Appellants for non-compliance with its earlier orders, and this was punitive, which was disallowed by the terms of the MSA.
   In the Court’s view, the remedy was compensatory in nature, and the appellants’ true grievance lies in the Tribunal’s decision to value the Shares as of 9 December 2014. But this was eminently within the exclusive domain of Tribunal, such matters being findings of fact

Breach of Natural Justice

The Appellants’ argument that the Remedies Award ought to be set aside for a breach of natural justice was two-fold:

1. that the Tribunal refused to consider evidence material to remedies on the basis that it could not revisit liability; and
2. that the respondents (and their counsel in the Arbitration) had concealed documents, and evidence of GGAM’s corrupt conduct at the Solaire Casino, and thus deprived the Appellants of the opportunity to present their case.

Both arguments were rejected by the Court:

1. On the facts, the Court was of the view that Appellants had adequate opportunity to present their case.
2. Also on the facts, there was no procedural fraud of the kind alleged by the Appellants had been established in relation to the relevant document collection or production for the Arbitration. The argument made before the Court here had considerable overlap with an earlier attempt by the Appellants to set aside and to resist enforcement of the Liability Award, which the Court had rejected.

Public policy of Singapore

The Appellants’ argument here was that as the Remedies Award was interpreted by the Judge as a net or post-tax figure, compliance with the Remedies Award would be “contrary to the Tribunal’s decision and would require Bloomberry to violate Philippine tax laws”.

The Court of Appeal rejected this argument. In the Court’s view, the Tribunal had specifically addressed their mind to the issue of the withholding tax. Having regard to the wording of the MSA, the Tribunal concluded, in clear and unequivocal terms, that any damages to be awarded in respect of the management fees arising out the breach of the MSA would be a pre-tax figure.

Nothing in the Remedies Award is remotely suggestive of its enforcement being contrary to the public policy of Singapore. On the facts, avoiding any non-compliance with Philippine tax law is wholly within the control of the appellants – their duties and obligations, if any, remain entirely unaffected by the Tribunal’s award of damages in the Remedies Award.

The Singapore Court of Appeal dismissed the appeal.