AJU v AJT: Setting Aside Interim Award Based on Illegality of Concluding Agreement

In AJU v AJT, the Singapore Court of Appeal heard an appeal by AJU against the High Court's decision to set aside an interim arbitral award in its favor. The dispute arose from a Concluding Agreement between AJU and AJT, its sole shareholder [O], and two associated companies, [P] and [Q]. The High Court had found the agreement illegal as it was deemed to stifle prosecution of non-compoundable forgery offences in Thailand. The Court of Appeal allowed the appeal, holding that the High Court erred in reopening the Tribunal’s finding of fact that the Concluding Agreement did not require AJU to do anything illegal under Thai law and was therefore not an illegal contract under either Singapore law or Thai law.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal Allowed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

The Singapore Court of Appeal allowed the appeal, holding that the High Court erred in setting aside an interim award based on the alleged illegality of the Concluding Agreement.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
AJUAppellantCorporationAppeal AllowedWon
AJTRespondentCorporationAppeal DismissedLost

3. Judges

Judge NameTitleDelivered Judgment
Chan Sek KeongChief JusticeYes
Andrew Phang Boon LeongJustice of the Court of AppealNo
V K RajahJustice of the Court of AppealNo

4. Counsels

Counsel NameOrganization
Chua Sui TongWongPartnership LLP
Edwin ChengWongPartnership LLP
Daniel Tan Zi YanWongPartnership LLP
Tay Yong SengAllen & Gledhill LLP
Dinesh DhillonAllen & Gledhill LLP
Felicia TanAllen & Gledhill LLP
Joel Lim JunweiAllen & Gledhill LLP
Indulekha Crystal ChitranAllen & Gledhill LLP

4. Facts

  1. The Respondent commenced arbitration against the Appellant in respect of an agreement dated 16 July 2003.
  2. The Appellant made a complaint of fraud to the Special Prosecutor’s Office of Thailand against [O], [P] and [Q].
  3. The Concluding Agreement was entered into on 4 February 2008 between the Appellant and the Respondent, [O], [P] and [Q].
  4. The Appellant withdrew the Complaint made to the Thai prosecution authority.
  5. The Thai prosecution authority issued a cessation order not to prosecute the three alleged offenders with respect to the charges of the joint fraud.
  6. The Thai prosecution authority sent the Appellant a formal non-prosecution order in respect of the Forgery Charges against [O].
  7. The Tribunal decided that the Concluding Agreement was valid and enforceable.

5. Formal Citations

  1. AJU v AJT, Civil Appeal No 125 of 2010, [2011] SGCA 41

6. Timeline

DateEvent
Agreement signed between [P] and the Appellant for staging an annual tennis tournament in Bangkok.
Respondent served a notice of arbitration on the Appellant.
Appellant made a complaint of fraud to the Special Prosecutor’s Office of Thailand against [O], [P] and [Q].
Parties notified of the constitution of the Tribunal.
Concluding Agreement signed between the Appellant and the Respondent, [O], [P] and [Q].
Appellant withdrew the Complaint made to the Thai prosecution authority.
Thai prosecution authority issued a cessation order not to prosecute the three alleged offenders with respect to the charges of the joint fraud.
Thai prosecution authority sent the Appellant a formal non-prosecution order in respect of the Forgery Charges against [O].
Appellant wrote a letter stating that it would not re-open the Charges against them.
[O] replied stating that the Appellant had not complied with its obligations under the Concluding Agreement.
Appellant made an application to the Tribunal to terminate the Arbitration.
Tribunal issued Directions Order No 6 directing the Respondent to apply to the High Court to set aside the Concluding Agreement.
Parties reached agreement to refer the issue of whether the Concluding Agreement should be set aside to the Tribunal for determination.
Interim Award issued in favour of the Appellant.
Respondent applied to the High Court to set aside the Interim Award.
Judgment reserved.
Decision Date

7. Legal Issues

  1. Illegality of Contract
    • Outcome: The Court of Appeal held that the Concluding Agreement was not illegal under either Singapore law or Thai law.
    • Category: Substantive
    • Sub-Issues:
      • Stifling prosecution of non-compoundable offences
      • Violation of public policy
  2. Setting Aside Arbitral Award
    • Outcome: The Court of Appeal held that the High Court erred in reopening the Tribunal’s finding of fact that the Concluding Agreement did not require AJU to do anything illegal under Thai law.
    • Category: Procedural
    • Sub-Issues:
      • Reopening arbitral tribunal's findings of fact
      • Public policy grounds for setting aside

8. Remedies Sought

  1. Setting aside of Interim Award

9. Cause of Actions

  • Breach of Contract

10. Practice Areas

  • Arbitration
  • Commercial Litigation

11. Industries

  • No industries specified

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
AJT v AJUHigh CourtYes[2010] 4 SLR 649SingaporeDecision from which this appeal arose.
PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SACourt of AppealYes[2007] 1 SLR(R) 597SingaporeCited for the principle that the court's supervisory power should be exercised only in exceptional cases.
Soleimany v SoleimanyEnglish Court of AppealYes[1999] QB 785EnglandCited for the principle that the court could, in an appropriate case, reopen an arbitral tribunal’s finding on the legality of an underlying contract.
Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd and OthersEnglish Court of AppealYes[2000] 1 QB 288EnglandCited for the principle that the court could, in an appropriate case, reopen an arbitral tribunal’s finding on the legality of an underlying contract.
Corvetina Technology Ltd v Clough Engineering LtdN/AYes(2004) 183 FLR 317N/AAuthority relied on by the Judge in reaching the conclusion that the court could intervene and reopen an arbitral tribunal’s finding on the legality of the underlying contract.
Denmark Skibstekniske Konsulenter A/S I Likvidation (formerly known as Knud E Hansen A/S) v Ultrapolis 3000 Investments Ltd (formerly known as Ultrapolis 3000 Theme Park Investments Ltd)N/AYes[2010] 3 SLR 661SingaporeAuthority relied on by the Judge in reaching the conclusion that the court could intervene and reopen an arbitral tribunal’s finding on the legality of the underlying contract.
Dongwoo Mann+Hummel Co Ltd v Mann+Hummel GmbHN/AYes[2008] 3 SLR(R) 871SingaporeCited by the Respondent for the argument that the court should embark on a detailed analysis of the evidence in order to determine if the case for setting aside the arbitral award on the particular public policy ground invoked has been proved.
Swiss Singapore Overseas Enterprises Pte Ltd v Exim Rajathi India Pvt LtdN/AYes[2010] 1 SLR 573SingaporeCited by the Respondent for the argument that the court should embark on a detailed analysis of the evidence in order to determine if the case for setting aside the arbitral award on the particular public policy ground invoked has been proved.
John Holland Pty Ltd (formerly known as John Holland Construction & Engineering Pty Ltd) v Toyo Engineering Corp (Japan)N/AYes[2001] 1 SLR(R) 443SingaporeCited by the Respondent for the argument that the only precondition to be met is that the objection raised must prima facie be a legitimate public policy ground for setting aside an arbitral award.
Sui Southern Gas Co Ltd v Habibullah Coastal Power Co (Pte) LtdN/AYes[2010] 3 SLR 1SingaporeCited by the Respondent for the argument that the only precondition to be met is that the objection raised must prima facie be a legitimate public policy ground for setting aside an arbitral award.
Dallah Estate and Tourism Holding Company v Ministry of Religious Affairs of the Government of PakistanEnglish Court of AppealYes[2010] 2 WLR 805EnglandCited by the Respondent for the argument that even if the public policy objection in question has already been raised before and decided by the arbitral tribunal, there should be no room for excessive deference to be accorded to the arbitral tribunal’s decision.
Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd and OthersN/AYes[1999] QB 740N/ALeading English case authorities
E D & F Man (Sugar) Ltd v Yani Haryanto (No 2)N/AYes[1991] 1 Lloyd’s Rep 429N/AEnglish case authorities
Re An Arbitration Between Hainan Machinery Import and Export Corp and Donald & McArthy Pte LtdN/AYes[1995] 3 SLR(R) 354SingaporePrevailing approach of our courts is that where enforcement of a foreign arbitral award is resisted on public policy grounds, the public policy objection in question must involve either “exceptional circumstances … which would justify the court in refusing to enforce the award”
Aloe Vera of America, Inc v Asianic Food (S) Pte Ltd and anotherN/AYes[2006] 3 SLR(R) 174SingaporePrevailing approach of our courts is that where enforcement of a foreign arbitral award is resisted on public policy grounds, the public policy objection in question must involve either “exceptional circumstances … which would justify the court in refusing to enforce the award”
Galsworthy Ltd of the Republic of Liberia v Glory Wealth Shipping Pte LtdN/AYes[2011] 1 SLR 727SingaporePrevailing approach of our courts is that where enforcement of a foreign arbitral award is resisted on public policy grounds, the public policy objection in question must involve either “exceptional circumstances … which would justify the court in refusing to enforce the award”
Hebei Import & Export Corp v Polytek Engineering Co LtdN/AYes[1999] 2 HKC 205Hong KongPrevailing approach of our courts is that where enforcement of a foreign arbitral award is resisted on public policy grounds, the public policy objection in question must involve either a violation of “the most basic notions of morality and justice”
Windhill Local Board of Health v VintN/AYes(1890) 45 Ch D 351N/ACited for the principle of law that any agreement to stifle the prosecution of a non-compoundable offence would be illegal (and against public policy) as such an agreement would undermine the administration of justice.
Kamini Kumar Basu and others v Birendra Nath Basu and anotherN/AYesAIR 1930 PC 100N/ACited for the principle of law that any agreement to stifle the prosecution of a non-compoundable offence would be illegal (and against public policy) as such an agreement would undermine the administration of justice.
Shripad and another v Sanikatta Co-operative Salt Sale Society and anotherN/AYesAIR 1945 Bombay 82IndiaCited for the principle of law that any agreement to stifle the prosecution of a non-compoundable offence would be illegal (and against public policy) as such an agreement would undermine the administration of justice.
Bhowanipur Banking Corporation, Ltd v Sreemati Durgesh Nandini DassiN/AYesAIR 1941 PC 95N/ACited for the principle of law that any agreement to stifle the prosecution of a non-compoundable offence would be illegal (and against public policy) as such an agreement would undermine the administration of justice.
Ouseph Poulo (since deceased) and after him his legal representatives, and another v The Catholic Union Bank Ltd Head Office, Mala Angadi Vadama Village, Mukundapuram Taluk and othersN/AYesAIR 1965 SC 166N/ACited for the principle of law that any agreement to stifle the prosecution of a non-compoundable offence would be illegal (and against public policy) as such an agreement would undermine the administration of justice.
Ooi Kiah Inn Charles & Anor v Kukuh Maju Industries Sdn Bhd (formerly known as Pembinaan Muncul Hebat Sdn Bhd)N/AYes[1993] 2 MLJ 224N/ACited for the principle of law that any agreement to stifle the prosecution of a non-compoundable offence would be illegal (and against public policy) as such an agreement would undermine the administration of justice.
Teo Yong Seng & Ors v Lim Bweng Tuck & OrsN/AYes[1998] SGHC 70SingaporeCited for the principle of law that any agreement to stifle the prosecution of a non-compoundable offence would be illegal (and against public policy) as such an agreement would undermine the administration of justice.
Peh Teck Quee v Bayerische Landesbank GirozentraleN/AYes[1999] 3 SLR(R) 842SingaporeCited as regards the relationship under Singapore law between contracts involving foreign illegality and the principle of international comity.
Foster v Driscoll and OthersN/AYes[1929] 1 KB 470N/ACited as regards the relationship under Singapore law between contracts involving foreign illegality and the principle of international comity.
Regazzoni v K C Sethia (1944) LtdN/AYes[1958] AC 301N/ACited as regards the relationship under Singapore law between contracts involving foreign illegality and the principle of international comity.
Lemenda Trading Co Ltd v African Middle East Petroleum Co LtdN/AYes[1988] QB 448N/ACited as regards the relationship under Singapore law between contracts involving foreign illegality and the principle of international comity.
Kaufman v GersonN/AYes[1904] 1 KB 591N/ACited as regards the relationship under Singapore law between contracts involving foreign illegality and the principle of international comity.
Strandore Invest A/S and others v Soh Kim WatHigh CourtYes[2010] SGHC 151SingaporeCited for the point that just as parties who have chosen arbitration must live with their arbitrator, ‘good, bad or indifferent,’ our courts may be called upon to enforce ‘bad’ awards from another jurisdiction.
Rockeby biomed Ltd v Alpha Advisory Pte LtdHigh CourtYes[2011] SGHC 155SingaporeHigh Court case which, like the present case, involved an application to set aside an IAA award on the basis of illegality in the underlying contract.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
International Arbitration Act (Cap 143A, 2002 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Concluding Agreement
  • Interim Award
  • Arbitration
  • Public Policy
  • Illegality
  • Non-Prosecution Order
  • Thai Prosecution Authority
  • UNCITRAL Arbitration Rules
  • International Arbitration Act
  • Model Law

15.2 Keywords

  • arbitration
  • contract
  • illegality
  • public policy
  • singapore
  • court of appeal

17. Areas of Law

Area NameRelevance Score
Illegality and public policy90
International Arbitration80
Arbitration75
Contract Law65
Foreign Law50

16. Subjects

  • Arbitration
  • Contract Law
  • Civil Procedure