Convexity Ltd v Phoenixfin Pte Ltd: Setting Aside Arbitration Award Based on Unpleaded Penalty Issue
In Convexity Ltd v Phoenixfin Pte Ltd, the High Court of Singapore considered an application by Convexity Ltd to set aside an arbitration award. The dispute arose from a Services Agreement where Convexity Ltd claimed against Phoenixfin Pte Ltd for breach of contract, with Mek Global Ltd and Phoenixfin Ltd as guarantors. The tribunal dismissed Convexity's claims based on an unpleaded penalty issue. The High Court granted the application in part, setting aside the tribunal's decision on the penalty issue, finding a breach of natural justice and that the tribunal had exceeded the scope of submission to arbitration.
1. Case Overview
1.1 Court
General Division of the High Court1.2 Outcome
Application to set aside the award granted in part.
1.3 Case Type
Arbitration
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Singapore court sets aside an arbitration award where the tribunal decided the case on a penalty issue not properly pleaded or agreed upon by parties.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Phoenixfin Pte Ltd | Respondent | Corporation | Counterclaim Dismissed | Lost | |
| Mek Global Ltd | Respondent | Corporation | Claim Dismissed | Lost | |
| Phoenixfin Ltd | Respondent | Corporation | Claim Dismissed | Lost | |
| Convexity Ltd | Applicant | Corporation | Application to set aside the award granted in part | Partial |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Andre Maniam | Judicial Commissioner | Yes |
4. Counsels
4. Facts
- Convexity Ltd and Phoenixfin Pte Ltd entered into a Services Agreement on 18 December 2018.
- The Services Agreement had an initial term of 24 months with a monthly fee of US$200,000.
- Phoenixfin Pte Ltd purported to terminate the contract on 30 September 2019.
- Convexity Ltd commenced arbitration against Phoenixfin Pte Ltd, Mek Global Ltd, and Phoenixfin Ltd.
- The arbitration was conducted under the expedited procedure of the SIAC Rules.
- The tribunal dismissed Convexity's claims based on the Penalty Issue, which was not pleaded.
- The tribunal erroneously believed that the parties had agreed to the introduction of the Penalty Issue.
5. Formal Citations
- Convexity Ltd v Phoenixfin Pte Ltd and others, Originating Summons No 1158 of 2020, [2021] SGHC 88
6. Timeline
| Date | Event |
|---|---|
| Services Agreement dated | |
| Phoenixfin Pte Ltd purported to terminate the contract | |
| Convexity Ltd commenced arbitration against the respondents | |
| Tribunal constituted | |
| Phoenixfin Pte Ltd circulated a list of witnesses | |
| Claimant's counsel emailed the first respondent's counsel regarding expert witnesses | |
| Agreed List of Issues filed | |
| Phoenixfin Pte Ltd filed an application for Mr M to be called as an expert witness | |
| Convexity Ltd objected to Mr M being an expert witness | |
| Tribunal agreed that Mr M should not give expert evidence | |
| Phoenixfin Pte Ltd applied to amend its Defence and Counterclaim | |
| Convexity Ltd objected to the amendment application | |
| Evidentiary hearing started | |
| Tribunal gave its decision on the Amendment Application | |
| Parties submitted their written closing submissions | |
| Hearing of oral reply submissions | |
| Procedural Order 3 issued | |
| Hearing of oral reply submissions resumed | |
| Final award issued | |
| Hearing date | |
| Judgment date |
7. Legal Issues
- Breach of Natural Justice
- Outcome: The court found that there was a breach of natural justice prejudicing the claimant.
- Category: Procedural
- Sub-Issues:
- Denial of opportunity to address objections to the tribunal
- Failure to bring mind to bear on an important aspect of the dispute
- Scope of Submission to Arbitration
- Outcome: The court found that the tribunal's dismissal of the claimant's claims on the basis of the Penalty Issue was outside the scope of the Arbitration.
- Category: Jurisdictional
- Sub-Issues:
- Decision on matters beyond the scope of the submission to arbitration
- Arbitral Procedure
- Outcome: The court found that the tribunal had acted contrary to the arbitral procedure agreed between the parties.
- Category: Procedural
- Sub-Issues:
- Proceeding contrary to the parties’ agreed procedure
- Enforceability of Penalty Clauses
- Outcome: The court did not make a determination on the enforceability of the penalty clauses, as the issue was improperly introduced into the arbitration.
- Category: Substantive
8. Remedies Sought
- Monetary Damages
- Interest
9. Cause of Actions
- Breach of Contract
10. Practice Areas
- Arbitration
- Commercial Litigation
11. Industries
- No industries specified
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Lombard North Central plc v European Skyjets Ltd (in liquidation) and another | High Court of Justice | Yes | [2020] EWHC 679 (QB) | England and Wales | Cited for the principle that the burden of proving a contractual term is a penalty rests on the party asserting this and that this is a question of fact and law that must be pleaded. |
| Banner Investments Pte Ltd v Hoe Seng Metal Fabrication & Engineers (S) Pte Ltd | Court of Appeal | Yes | [1996] 3 SLR(R) 244 | Singapore | Cited for the principle that the burden of proving that a contractual term is a penalty rests on the party asserting this and that this is a question of fact and law that must be pleaded. Also, cited as an example where the appellate court set aside the first instance decision that was based on the unpleaded point that the liquidated damages clauses there were penalties. |
| Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd | High Court | Yes | [2010] SGHC 80 | Singapore | Cited for the principle that disregarding contentions of a party on the stated basis that the party had ceased to rely on them, when in fact the party had not, is a breach of natural justice. |
| AKN and another v ALC and others and other appeals | Court of Appeal | Yes | [2015] 3 SLR 488 | Singapore | Cited for the principle that disregarding contentions of a party on the stated basis that the party had ceased to rely on them, when in fact the party had not, is a breach of natural justice. |
| Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd | High Court | Yes | [2007] 3 SLR(R) 86 | Singapore | Cited for the principle that a breach of natural justice caused the claimant actual, real prejudice if it could reasonably have made a difference to the outcome had the tribunal considered what it had failed to consider. |
| L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd and another appeal | High Court | Yes | [2013] 1 SLR 125 | Singapore | Cited for the principle that a breach of natural justice caused the claimant actual, real prejudice if it could reasonably have made a difference to the outcome had the tribunal considered what it had failed to consider. |
| PT Prima International Development v Kempinski Hotels SA and other appeals | Court of Appeal | Yes | [2012] 4 SLR 98 | Singapore | Cited for the proposition that a tribunal can take cognisance of public policy as a question of law if it becomes aware of the issue in the course of hearing the evidence presented during the arbitral proceedings. |
| China Machine New Energy Corp v Jaguar Energy Guatemala LLC and another | Court of Appeal | Yes | [2020] 1 SLR 695 | Singapore | Cited for the principle that an award made in proceedings where Art 18 of the Model Law has been breached is susceptible to being set aside and that the requirement of due process is an essential limitation on the wide autonomy that the parties and the tribunal otherwise have with respect to procedure. |
| CAI v CAJ and another | High Court | Yes | [2021] SGHC 21 | Singapore | Cited on fairness in relation to a tribunal’s exercise of powers under Art 23(4) of the 2012 Rules of the International Court of Arbitration of the International Chamber of Commerce. |
| Anwar Siraj and another v Ting Kang Chung and another | High Court | Yes | [2003] 2 SLR(R) 287 | Singapore | Cited for the principle that an arbitrator is master of his own procedure and has a wide discretionary power to conduct the arbitration proceedings in the way he sees fit, so long as what he is doing is not manifestly unfair or contrary to natural justice. |
| Cavendish Square Holding BV v El Makdessi and another appeal | Unknown | Yes | [2016] 2 All ER 519 | England and Wales | Cited for the principle that the issue of whether a clause is a penalty does involve public policy considerations. |
| Denka Advantech Pte Ltd and another v Seraya Energy Pte Ltd and another and other appeals | Court of Appeal | Yes | [2020] SGCA 119 | Singapore | Cited for the principle that the issue of whether a clause is a penalty does involve public policy considerations. |
13. Applicable Rules
| Rule Name |
|---|
| SIAC Rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| International Arbitration Act (Cap 143A, 2002 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Make-Whole Amount
- Penalty Issue
- Services Agreement
- Expedited Arbitration
- SIAC Rules
- Amendment Application
- Confidentiality Relief
15.2 Keywords
- arbitration
- setting aside
- penalty clause
- breach of natural justice
- singapore
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Recourse against award | 90 |
| Setting aside | 90 |
| Arbitration | 90 |
| Natural justice | 60 |
| Contract Law | 50 |
| Breach of Contract | 40 |
| Contractual terms | 30 |
| Interpretation of contractual terms | 20 |
16. Subjects
- Arbitration
- Contract Law
- Civil Procedure