Singapore Court of Appeal bars claims which were brought in earlier arbitration proceedings

The Facts

The appellant (the Seller) entered into a Sale and Purchase Agreement (SPA) with a corporate entity (the Buyer) for the sale of his shares in a company. Part of the sale price for the shares was to be determined by a valuation exercise. To carrying out this valuation exercise, the parties agreed to appoint the respondent (Phoenix) as the independent human resource consultant, on the condition that Phoenix provide a declaration of no conflict of interest. Consequently, Phoenix issued a declaration of no conflict of interest to the Buyer and the Seller.

The arbitration proceedings between the Seller and the Buyer

Phoenix issued seven market pricing and compensation data reports (the Phoenix Reports). The Seller and the Buyer disagreed on the figures to be adopted from the Phoenix Reports to determine the valuation of the shares. The Seller then referred the dispute with the Buyer to arbitration proceedings. Phoenix was neither a party to the arbitration agreement nor the arbitration proceedings.

In the arbitration, the Tribunal accepted the median market benchmark in the Phoenix Reports, i.e. the position advanced by the Buyer’s expert in its First Partial Award.  The Seller then unsuccessfully applied to set aside certain findings in the Tribunal’s First Partial Award. The Seller appealed the High Court’s decision.

While the appeal was pending, the Seller made an application in the arbitration raising allegations of corruption against Phoenix and/or the Buyer and asked the Tribunal to determine whether it was safe to rely on the Phoenix Reports (the Corruption Application).  The Seller sought to argue that Phoenix lacked independence, and the Buyer deliberately concealed this fact by misleading the Tribunal and the Seller.  Ultimately, the Tribunal rejected the Corruption Application, finding that “any such allegation could and ought reasonably to have been raised at the evidentiary hearing before the [First] Partial Award was issued”. The Seller did not seek to set aside the Tribunal’s decision in this respect. 

The commencement of Suit 885 before the Singapore Court

The Settlement

On or around June 2024 and sometime after Suit 885 was dismissed, it was disclosed that the Seller and the Buyer had reached a settlement (Settlement).  As a result of the Settlement, all arbitration and court proceedings between the Seller and the Buyer were discontinued or terminated.

The SGCA Decision

The SGCA dismissed the appeal, finding:

• The extended doctrine applies to situations of claims and/or issues which were not raised earlier but which could and ought to have been raised in the previous action (whether in court or arbitration). When undertaking an inquiry as to whether the extended doctrine applies, the court has a higher degree of flexibility as compared to situations of cause of action or issue estoppel.
• The extended doctrine can apply to situations where (a) there is no identity of parties and (b) where the earlier proceedings are in arbitration and the later proceedings are before a competent court.
• Where the prior proceedings were arbitral proceedings, the invoking party would need to show that the claims fall within the scope of the arbitration agreement, and if so, the other party would need to explain why those claims could not have been brought in the arbitration either because they were outside the scope of the arbitration agreement or that there was a good reason for not pursuing them in the arbitration.
• On the facts, the issue of Phoenix’s declared independence could and ought to have been raised in the arbitration. While the Seller sought to argue that he relied on fresh evidence obtained by way of discovery in Suit 885, the fresh evidence was essentially just more evidence in aid of the same point. The fresh evidence arose from evidence which the Seller first had sight of during the arbitration. If the Seller had considered that he would require more evidence to support his point, he could have subpoenaed the relevant witness from Phoenix to produce the relevant documents and/or information in the arbitration. Further, the evidence showed that the Seller made the considered and calculated decision not to pursue the issue of Phoenix’s lack of independence evidentially in the arbitration by obtaining direct evidence from Phoenix, and the Seller must therefore be bound by the consequences of this decision.
• In addition, Suit 885 was an abuse of process, as the Seller had advance substantially the same allegations against Phoenix to attack Phoenix’s independence after it failed in the Corruption Application. The appeal was also an abuse of process, and the Settlement made this clear. Through the Settlement, the Seller accepted that he had received everything he was entitled to under the SPA. However, this completely undermined the claim in Suit 885 which was predicated on the case theory that the Seller had suffered a loss in that he had received less than what he was otherwise entitled to under the SPA because of Phoenix’s conduct. Further and in any event, the Seller’s failure to establish his loss was fatal to his tortious claims against Phoenix.

Key takeaways

• In litigation (whether in court or in an arbitration), judgment calls are often made on which issues/claims to pursue or not to pursue. This landmark decision warns that if a strategic decision has been made not to pursue an issue evidentially in court or in an arbitration, a party will be bound by the consequences of this decision and cannot subsequently seek to revisit or unwind this decision in a different set of proceedings.
• The extended doctrine of res judicata can apply even if there is no identity or parties or if the earlier proceedings are in arbitration and the later proceedings are before a court. Where the prior proceedings are in arbitration, the extended doctrine of res judicata can apply to preclude a party from re-litigating an issue or claim against a non-party to the arbitration which could and ought to have been raised in the arbitration.

Ascendant Legal successfully acted for the defendant/respondent in proceedings before the Singapore High Court and the Court of Appeal to stave off the claimant/appellant’s claims. Indemnity costs were awarded to the defendant/respondent in both the High Court and Court of Appeal proceedings.