BXH v. BXI

At a glance

Parties

BXH (appellant; respondent in the arbitration) v. BXI (respondent; claimant in the arbitration)

Case no.

[2020] SGCA 28, Civil Appeal No 142 of 2018

Court

Court of Appeal of the Republic of Singapore

Underlying award(s)

SIAC award of 28 July 2017 by a sole arbitrator; High Court decision BXH v BXI [2019] SGHC 141

Forum and rules

Setting aside under Art 34(2)(a) of the UNCITRAL Model Law; SIAC arbitration under the 2013 SIAC Rules, seated in Singapore

Treaty

Arbitration clause (cl 25.9) of the Distributor Agreement

Court

Sundaresh Menon CJ, Steven Chong JA (delivering the judgment), Belinda Ang Saw Ean J

Sector

Consumer goods distribution; factoring

Outcome

Appeal allowed in part: the award is set aside under Art 34(2)(a)(i) of the Model Law to the extent it dealt with Debt B (invoices assigned to the Factor).

Amount

Debt B invoices: Debt 1B US$20.38m and Debt 2B US$7.07m; Debt 1A (US$8.95m) is not affected. Costs of the appeal: $50,000 to the appellant, and the costs order below is reversed.

The dispute

BXI, a consumer goods maker and wholly-owned subsidiary of a Singapore Parent Company, took over the Parent Company's Distributor Agreement with BXH, its Russian distributor, under an Assignment and Novation Agreement of 25 January 2013. BXI then sold many of its invoices to BXH to a Factor under a Participation Agreement. Further agreements followed: a Debt Transfer Agreement and an Open Debt Agreement with a Russian Corporation, and a Buy Back Agreement of 23 April 2015 between BXI and the Factor. BXI began SIAC arbitration in October 2015. BXH refused to take part, and a sole arbitrator ruled for BXI on 28 July 2017. BXH's application to set the award aside was dismissed by the High Court. On appeal BXH argued that: the arbitration clause was defeated by a conflicting Singapore court jurisdiction clause; the novation to BXI was not validly notified; BXI had no right to arbitrate over the factored debts (Debt B) when it began the arbitration; and Debt 2B had been novated to the Russian Corporation.

Key holdings

1. The arbitration clause (cl 25.9) and the clause giving jurisdiction to the Singapore courts (cl 25.8) are not irreconcilable. Following the Paul Smith approach, the parties meant substantive disputes to go to arbitration and the courts to exercise only supervisory jurisdiction. ¶¶ 59–62
2. The Parent Company's email of 14 December 2012 was valid contractual notice under cl 1 of the Assignment and Novation Agreement, even though it was sent before that agreement was signed. The right to arbitrate was therefore validly novated to BXI. ¶¶ 67–69
3. When BXI assigned Debt B to the Factor, the right to arbitrate disputes over that debt passed to the Factor. The assignor and assignee cannot hold it at the same time. Whether BXI could arbitrate over Debt B is a question of the existence of an arbitration agreement under Art 34(2)(a)(i), not of its scope under Art 34(2)(a)(iii). On this point the Court departed from the Judge. ¶¶ 74–91
4. The Buy Back Agreement did not reassign Debt B to BXI. It dealt with discharging BXI's with-recourse obligations, and the Judge gave too much weight to extrinsic evidence of the Factor's exit from Russia. Debt B was reassigned only in April 2017, by the Factor's 2017 letter. ¶¶ 95–109
5. The principle from Jarguh Sawit that an assignment vests a cause of action retrospectively does not apply to arbitration, which rests on consent. When the arbitration began in 2015, BXI was not a proper party to any arbitration over Debt B; there was an agreement to arbitrate only Debt 1A. ¶¶ 125–138
6. Under s 4(8) of the Civil Law Act, notice of an assignment may be given by the assignor or by the assignee. A debtor that receives notice from the assignee may ask for proof of the assignment. ¶¶ 144–151
7. Debt 2B was not finally novated to the Russian Corporation; BXH's obligation revived when the Russian Corporation failed to pay. The Vienna arbitration clause in the Gold Plan Agreement did not apply. The award is set aside in part as to Debt B, and BXI pays costs of $50,000. ¶¶ 159–166

Procedural history

1. 1 October 2015BXI issued its notice of arbitration. BXH responded on 16 October 2015 and objected to jurisdiction.
2. 22 April 2016SIAC constituted the tribunal: BXI's nominee became sole arbitrator after BXH failed to appoint an arbitrator.
3. 4 May 2017SIAC dismissed BXH's challenge to the arbitrator. The evidential hearing was held on 16–17 May 2017.
4. 28 July 2017The sole arbitrator issued the award.
5. 2019High Court dismissed BXH's application to set aside the award (BXH v BXI [2019] SGHC 141).
6. 21 January 2020Court of Appeal hearing.
7. 2 April 2020Court of Appeal allowed the appeal in part and set aside the award as to Debt B.

Tribunal, counsel and experts

Decided by

• Sundaresh Menon Judge, Court of Appeal of Singapore
• Steven Chong Judge, Court of Appeal of Singapore (delivered the judgment)
• Belinda Ang Saw Ean Judge, Court of Appeal of Singapore

For the claimant

MPillay

For the respondent

Drew & Napier LLC

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Keywords

• set-aside
• Model Law Article 34(2)(a)(i)
• existence of arbitration agreement
• scope of arbitration agreement
• assignment of arbitration agreement
• novation
• factoring
• notice of assignment
• retrospective vesting
• Jarguh Sawit
• Paul Smith approach
• jurisdiction clause and arbitration clause
• SIAC
• distribution agreement
• Russia
• New York Convention Article V(1)(a)
• partial setting aside
• consent

Summary generated with AI from the published documents — refer to the award for the authoritative text.