By Justin Gan

In this issue, we discuss the following three decisions:

1. Ng Tze Chew Diana v Aikco Construction Pte Ltd and another matter [2019] SGHC 258;
2. Ng Tze Chew Diana v Aikco Construction Pte [2019] SGHC 259; and
3. BRQ and another v BRS and another and another matter [2019] SGHC 260.

Ng Tze Chew Diana v Aikco Construction Pte Ltd and another matter [2019] SGHC 258

Nature of Matter

Applications to set aside an arbitral award on the basis that there has been a breach of natural justice.

Case Summary

The applicant hired the respondent as the main contractor for the construction of a two-storey semi-detached house situated in Jalan Sedap. The completion date was scheduled on 25 June 2010, and there was delay - the completion certificate was only issued on 8 March 2011. The applicant also alleged that there were defects that required rectification.

The applicant commenced arbitration in October 2012 in respect of the delay in completion and defects. The respondent counterclaimed for S$135,676.58, being the outstanding sum allegedly owed by the applicant for works carried out and S$54,304 for labour costs.

On 17 July 2017, the sole arbitrator wrote to parties to inform that the award was ready for collection from 25 July 2017. Parties however, did not pay the arbitrator’s outstanding fees – the respondent failed to pay S$48,902.08 as it alleged it was facing financial difficulties and the applicant failed to pay S$9,027.09 to the arbitrator. Finally on 17 May 2018, the arbitrator released the award to the parties even though he had not been paid his outstanding fees and expenses.

The arbitrator awarded the applicant $156.25 of the $89,215.26 claimed for alleged discrepancies between the condition of the house and the construction drawings issued by the architect; $42,979.06 of the $374,305.24 claimed for the alleged costs of rectifying various defects in the works; and rejected the applicant’s claim for loss of rental, loss of value of the property and claim for liquidated damages. The respondent succeeded in its counterclaim for outstanding works and additional labour costs and was awarded $98,797.34. A net sum of $59,558.37 was therefore due from the applicant to the respondent.

On 16 August 2018, the applicant filed an application for the award to be set aside in its entirety on the basis that the arbitrator had failed to decide certain issues submitted to him for his determination and there were various breaches of natural justice by the arbitrator. The applicant later clarified in submissions that she was only seeking to set aside parts of the awards. She was not seeking to set aside the parts of the award that deal with the arbitrator’s determination on the claim of discrepancies between the completed works and the construction drawings as well as the arbitrator’s determination of the respondent’s counterclaim. Instead, she was seeking the setting aside of the rest of the award.

On 7 September 2018, the respondent filed an application for leave to enforce the arbitral award which was granted ex-parte. The applicant then filed a separate application seeking to set aside the order of court granting the respondent leave to enforce the award.

Ruling

The Court dismissed both the applicant’s setting aside applications and found that the applicant’s allegations of breaches of the rules of natural justice were but disguised attempts to challenge the merits of the award.

The Court distilled 5 broad issues to be determined:

1. Did the arbitrator fail to determine the issue of whether the applicant was entitled to general damages for delay (“First Issue”);
2. Did the arbitrator fail to consider submissions before he decided the question of the validity of the delay certificates and the extension of time granted to the respondent (“Second Issue”);
3. Did the arbitrator exhibit apparent bias in the dismissal of the applicant’s claim for loss of value of the property (“Third Issue”);
4. Did the arbitrator exhibit apparent bias in rejecting the evidence of the applicant’s expert witness on the claim for damages for defects (“Fourth Issue”); and
5. Did the arbitrator exhibit apparent bias in rejecting the evidence of the applicant’s expert witness on the issue of quantification of damages for rectification works (“Fifth Issue”).

Applicable principles

There are 2 pillars to natural justice.

First, the arbitrator must be disinterested and unbiased. The test is whether “there are circumstances which would give rise to a reasonable suspicion or apprehension in a fair-minded reasonable person with knowledge of the relevant facts that the tribunal was biased”

Second, the parties must be given adequate notice and opportunity to be heard. The overriding burden is on the applicant seeking to set aside the award to show that a reasonable litigant in his shoes could not have foreseen the possibility of reasoning of the type revealed in the award.

Further, the applicant must also show that the breach of natural justice caused “some actual or real prejudice” meaning that it must, at the very least, have actually altered the final outcome of the arbitral proceedings in some meaningful way.

First Issue

The applicant submitted that while she failed in her claim for contractual liquidated damages resulting from the delay, it was a breach of natural justice for the arbitrator to not have gone on to determine whether there should be an extension of time granted to the respondent for the completion of the works and consequently, consider whether general damages should flow from the same.

The Court found that the applicant’s pleaded case in the arbitration did not include a claim for general damages for delay and it was not an essential issue necessary for the arbitrator to decide. In the absence of a pleaded case for general damages, it cannot be said that the issue of general damages was essential to the resolution of the dispute. In this regard, an arbitrator will only be found to have acted in breach of natural justice for having failed to consider an issue in the dispute before him only if the issue was essential to the resolution of the dispute.

Second Issue

The applicant submitted that there was a breach of natural justice because the arbitrator failed to refer to one set of her submissions in the award even though the arbitrator said that he would do so at an interlocutory hearing. This showed that the arbitrator failed to consider critical issues in the arbitration.

The Court rejected this submission given that the arbitrator did refer to the submissions in his award. Further, both parties had the opportunity to canvass full arguments to the arbitrator and had done so. Many of the applicant’s arguments in the submission also did not have to be dealt with by the arbitrator given that the said arguments would not have made a difference to the arbitrator’s decision. All that is required of the arbitral tribunal is to ensure that the essential issues are dealt with. In determining the essential issues, the arbitral tribunal did not have to deal with every argument canvassed under each of the essential issues.

Third Issue

The applicant’s claim for loss of value was based on the argument that the defects prevented the property from being sold between October 2012 and April 2013 when its market value was between S$6.8m and S$7m. Due to the defects, the 2 offers received were only S$6.187m in October 2012 and S$6.3m in April 2013. The applicant submitted there was a breach of natural justice by the arbitrator not accepting the evidence that was tendered by the applicant as to the value of the property being about S$7m.

First, the applicant relied on a text message sent by a bank officer which stated “Ok max 7m if brand new” as evidence of the market value of the property. The applicant submitted that the arbitrator’s failure to accept the text message as evidence showed double standards because the arbitrator had referred to other pieces of hearsay evidence in his award as evidence of the market value of the property (i.e. an email from another property agent offering S$6.18m for the property). The Court found that the arbitrator’s decision as regards weight to be given to the text message was unimpeachable. Further, the Court found that the arbitrator did not rely on the aforementioned email to determine the value of the property, the arbitrator only made a finding that the applicant had not proven what the value of the property was as there was never any proper valuation report provided by a qualified valuer.

Next, the applicant submitted that the arbitrator demonstrated apparent bias by posing a long series of questions to the applicant’s property valuation expert (“Mr Goh”), showing that he had already made up his mind about the valuation of the property and had shut his mind to Mr Goh’s evidence. The Court did not agree that there was apparent bias given that the questions were mostly raised after the cross-examination of Mr Goh, during re-examination. In particular, the Court highlighted that Mr Goh was allowed to answer fully, including by providing an explanation of relevant factors, and the applicant’s counsel had further re-examined Mr Goh on these points.

Next, the applicant submitted that the arbitrator had preferred his own knowledge over the experience of Mr Goh. The Court did not agree with this submission given that the arbitrator did give reasons for his non-reliance on Mr Goh’s evidence. The Court found that it was appropriate for the arbitrator to consider the appropriate reliance to be placed on Mr Goh’s evidence and the arbitrator was not bound to accept Mr Goh’s evidence just because the respondent did not call an expert to provide expert evidence.

Next, the arbitrator had relied on “a well-known fact” in his award to state that leaving defects in a building unrepaired would cause the defects to deteriorate. The applicant submitted that this point was not advanced by the respondent in the arbitration and therefore did not form part of the respondent’s case. If the arbitrator wanted to rely on this, he should have invited parties to address him on it and the applicant was thus deprived of an opportunity to demonstrate that the arbitrator’s reliance was misplaced. The Court dismissed this submission without hesitation for the following reasons:

1. An arbitrator, like a judge, is entitled to rely on his common sense when determining issues – the “well-known fact” being plainly a matter of common sense;
2. On the facts, this point was raised by the respondent’s building surveyor expert and corroborated by the architect at the arbitration;
3. Further, no prejudice would have arisen even if the arbitrator invited the applicant to address him on the “well-known fact” given that the applicant had in the first place, failed to prove the causative link between her failure to sell the property at her expected price of S$7m and the defects in the property. The arbitrator’s reference to the “well-known fact” in dealing with mitigation was simply irrelevant.

Fourth Issue

The applicant submitted that she was prevented from presenting her evidence on defective works, in the form of the evidence of her building surveyor expert (“Mr Chin”) as the arbitrator sought to rely on the architect’s evidence. The applicant further submitted that the arbitrator failed to appreciate that the architect was not a neutral party since he had been appointed and paid by the applicant herself.

The Court found that on the facts that it could not be said that the applicant was prevented from presenting her evidence when the arbitrator had actually provided her with an opportunity to remedy the problems with her evidence by providing her with the option of recalling the architect and adducing evidence from him in relation to the claim for defective works. Summarily, the arbitrator was concerned that Mr Chin was not instructed to consider previous correspondence and documents between parties and therefore may not be able to determine whether a complaint of defective work was a defect or whether it was as a result of the architect’s design or an agreed variation. Further, Mr Chin had only inspected the property after certain defects had already been rectified and made good which cast doubt as regards Mr Chin’s evidence on the issue. In the circumstances, the arbitrator informed parties that the architect’s evidence may be relevant to the issue of what was a defective work. The applicant also presented her evidence of the defects through Mr Chin and then decided to present further evidence of the defects through the architect. The Court therefore found that the arbitrator could not have been said to have prevented the applicant from presenting her evidence on defective works.

Further, the Court found that there was no merit in the applicant’s allegation that the arbitrator failed to recognise that the architect was not a neutral witness just because he had been appointed by the applicant. The Court pointed out that this was not a complaint that may be raised by the applicant given that any bias, if any, would be in her favour. The Court also found that it was preposterous to suggest, without any evidence, that a professional man would not testify truthfully just because he had been appointed and paid by that party. In any event, such a criticism would equally apply to Mr Chin, the applicant’s own witness.

Fifth Issue

Finally, on the issue on the arbitrator’s treatment of the applicant’s quantum expert’s (“Mr Teo”) expert evidence. The applicant submitted that the arbitrator exhibited apparent bias against Mr Teo because he did not accept Mr Teo’s evaluation but preferred the respondent’s expert (“Mr Wong”) evidence instead.

On review of the award, the Court found that the respondent had provided concrete examples to show why Mr Wong’s evidence was to be preferred whereas the applicant had only made “sweeping and unsubstantiated remarks” on how Mr Wong’s evidence was arbitrary and inaccurate. The arbitrator therefore had good basis for preferring Mr Wong’s evidence over Mr Teo’s evidence. Further, the Court found that the arbitrator’s assessment and consequent rejection of Mr Teo’s evidence was not cursory and that the arbitrator had set out the submissions made by both parties before coming to a decision on which experts’ view should be preferred.

Even if the applicant’s argument was that the arbitrator had not given sufficient reasons for rejecting Mr Teo’s evidence, the lack of detailed reasons was not a sufficient basis for the court to come to a view that the arbitrator breached the rules of natural justice – natural justice requires that parties should be heard but it does not require that they be given responses on all submissions made.

Ng Tze Chew Diana v Aikco Construction Pte  [2019]  SGHC  259

Nature of Matter

Application under section 50(3) of the Arbitration Act (Cap. 10) (“Act”) for leave to appeal to the High Court on questions of law arising out of an arbitral award.

Case Summary

As above, in Ng Tze Chew Diana v Aikco Construction Pte Ltd and another matter [2019] SGHC 258.

On 14 June 2018 (28 days after receiving the award), the applicant commenced the present proceedings for leave to appeal 13 alleged questions of law arising from the award.

Ruling

The Singapore High Court dismissed the application because it did not grant an extension of time for the applicant to apply for leave to appeal. It also found that the applicant’s application for leave to appeal against the award was, in any event, hopeless and bound to fail.

Construction  of  section  50(3)

The applicant submitted that there was no need to apply for an extension of time given that the words “date of the award” in section 50(3) of the Act should be read to mean the “date when the parties received the award”.

The Court found that the applicant’s construction of section 50(3) of the Act wholly unmeritorious and found that the “date of the award” refers literally to the date which the arbitrator dated the award. The Court referred to Hong Huat Development Co (Pte) Ltd v Hiap Hong & Co Pte Ltd [2000] 1 SLR(R) 510 (“Hong Huat”) (in the context of an earlier iteration of the Act) that an award is made and published when the arbitrator gives notice to the parties that the award is ready for collection. It should be noted that the previous iteration of the Act provided that the notice to appeal had to be served and appeal entered within 21 days after the award was made and published to the parties. The two reasons for this were that is ensures prompt action by the parties and it accords better with the legislative policy underlying the reference to arbitration – i.e. the expeditious resolution of disputes that are subject to arbitration and the need for finality.

When the Act was amended sometime in 2001, the Attorney-General’s Chambers in the Review of Arbitration Laws Report LRRD No 3, 2001 proposed that the phrase “made and published to the parties” should be replaced with “date of the award” to “provide a certain and incontrovertible date for reckoning of time set for appeal”. The Court therefore found that the “date of the award” in section 50(3) of the Act refers literally to the date which the arbitrator dated the award. This is further supported by the contrast with section 48(2) of the Act which provides that a setting aside application may not be made after the expiry of three months from the date “on which the party making the application had received the award”.

Whether an extension of time should be granted

The Court found that all factors weighed heavily against the applicant in granting an extension of time. The Court considered the length of the delay; the reasons for the delay; the prospects of success if time for appealing was extended; and the degree of prejudice suffered by the respondent, if any, should an extension of time be granted.

Length of Delay

There was a substantial delay of over nine and a half months in making the application for leave to appeal given that time would start running from 25 July 2017 (the date of the award) and the last day for the applicant to file her application for leave to appeal was therefore 22 August 2017. On a review of the case law, it was found that 49 days past the statutory time limit was regarded as very substantial. Further, the only substantial extension of time granted in Singapore (of about 3 months) in Hong Huat could be distinguished from the present case as parties there were engaged in settlement negotiations and there was an understanding that time would not begin to run while parties were in the midst of negotiations. Further, in Hong Huat, there was a question of law that could substantially affect a party’s rights and no prejudice would be caused to the other party.

Reasons for Delay

The applicant submitted that she had excusable reasons for the delay – i.e. that it was not reasonable to expect her to pay the S$57,929.17 as she might not be able to recover payment in the event the award was in her favour given that the respondent may be impecunious and the applicant was unable to afford the respondent’s share given that she was no longer employed and she had been unable to sell the property owing to the respondent’s allegedly defective works.

The Court found the onus is on the parties, who are jointly and severally liable for the fees of the arbitrator, to ensure that the terms of the release of the award are promptly complied with so that it has sufficient time within the statutory time limit to file its appeal. This is given that parties were jointly and severally liable to the arbitrator for his fees. If the respondent was unable to make payment, whether for reasons of insolvency or otherwise, the applicant is obliged to make such payment. The applicant had therefore made a deliberate decision not to make the necessary payment to the arbitrator.

Further, the Court found that the applicant’s submission that it was unable to pay the arbitrator’s fees unconvincing as it was contradicted by evidence – i.e. the applicant was in possession of the property in dispute and had refused to accept 2 offers of S$6.18m and S$6.3m as she was of the view her property was worth S$7m.

Chances of appeal succeeding

The Court provided a useful summary of the conditions to be met before leave to appeal will be granted. The appeal must be on a question of law (section 49(1) of the Act); the determination of that question will substantially affect the rights of one or more of the parties to the arbitration (section 49(5)(a) of the Act); the question was one which the arbitrator was asked to determine (section 49(5)(b) of the Act); on the basis of the findings of fact in the award, the decision of the arbitrator on the question is obviously wrong, or the question is one of general public importance and the decision of the arbitral tribunal is at least open to serious doubt (section 49(5)(c) of the Act); and despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the Court to determine the question (section 49(5)(d)) of the Act). In particular, the Court elaborated on what is a question of law – a question of law is distinct from an error of law and relates specifically to a “point of law in controversy” and does not extend to errors in the application of the law.

Of the 13 alleged questions of law submitted by the applicant, the Court found that most of the questions raised were not questions of law and/or would not substantially affect the rights of the parties even if such questions were answered by the Court. The applicant’s application for leave to appeal against the award was therefore hopeless and bound to fail.

Prejudice to respondent

The Court found that there will be a degree of prejudice suffered by the respondent if an extension of time was granted to the applicant to apply for leave to appeal because of the length of delay by the applicant in bringing this application.

As mentioned earlier, one of the legislative policies underlying the reference to arbitration is that parties to arbitration should have autonomy and finality in the determination of disputes as well as the expeditious resolution of the dispute. These principles are reflected in the short time limits for parties to raise challenge to an award and any delay in receiving payment of the sum awarded and any additional expense incurred in enforcing the award would cause irremediable prejudice. Any attempt by the unsuccessful party to challenge the merits of an award must therefore be carefully scrutinised because it delays the successful party’s rights to the fruits of its success.

 

BRQ and another v BRS and another and another matter  [2019]  SGHC  260

Nature of Matter

Applications to set aside arbitral award on the basis that there had been a breach of natural justice and that the tribunal had exceeded its jurisdiction.

Case Summary

The second claimant carried on work on a hydroelectric power plant (“Project”) between 2007 and 2010 in Lemuria. By the end of 2011, it ran out of funds. The respondents, its controlling shareholders at the time, could not inject more funds into the second claimant. The first claimant thus became the external investor to fund the Project. There are two relevant contracts to the dispute - the Securities Purchase Agreement (“SPA”) dated 2012 and the Bulk Power Transmission Agreement (“BPTA”) dated 2009.

Under the SPA, the first claimant agreed to buy the entire share capital of the second claimant from the respondents. The payments to be made were based on the express assumption that the Project would be certified by the first claimant’s engineer as being fully operational and therefore able to supply electricity to generate revenue (“Wet Commissioning”) by 31 March 2013. Further, the first claimant agreed to pay $5.1m of the purchase consideration directly to the second claimant, to be recorded in the second claimant’s books as a loan due from the second claimant to the respondent (“SSL”). If the wet commissioning date was after 31 March 2013, the first claimant was entitled to require the respondent to cede control of the Project to the first claimant. If the first claimant did exercise this right, it was obliged to undertake the completion of the Project in the most prudent and cost effective manner.

Under the BPTA dated 2009, the second claimant executed the BPTA with the company which runs the power grid in Lemuria (“Grid Company”). The second claimant agreed to pay transmission charges to the Grid Company in exchange for access to its power grid for 25 years. Access to the Grid Company was necessary for the second claimant to transmit electricity generated by the Project to consumers and earn revenue. Accordingly, the SPA obliged the respondent to indemnify the second claimant for any transmission charges which the second claimant became obliged to pay the Grid Company on or before the Wet Commissioning.

The Project failed to achieve Wet Commissioning by 13 March 2013. From November 2013, the first claimant began to oversee the Project more closely. In March 2014, the first claimant issued a takeover notice to the respondent pursuant to the SPA and took full control of the Project. The first claimant began addressing defects of the Project. Part of the Project was eventually wet commissioned on 31 October 2015 (“Wet Commissioning Date”). The Project as a whole, however, never achieved Wet Commissioning and was abandoned when the penstock ruptured.

The claimants commenced arbitration and sought to recover the following: (a) the entire Cost Overrun up to the Wet Commissioning Date for $70.8m (“Cost Overrun”); and (b) the transmission charges which the second claimant paid to the Grid Company under the BPTA up to the Wet Commissioning Date for $13.7m (“BPTA Charges”).<

The tribunal found the respondent liable to the claimants for the Cost Overrun and the BPTA charges. However, the tribunal did not award the claimants the full sums claimed as the respondent’s liability on both claims terminated on 30 June 2014, before the Wet Commissioning Date. The respondent was liable to pay $17.3m for the Cost Overrun and $5.5m for the transmission charges, and the respondent’s counterclaim for the SSL was rejected.

The claimants applied on 30 April 2018 to set aside the following findings of the award: the tribunal’s finding that the respondent is not liable to indemnify the claimants for the Cost Overrun and the BPTA Charges from 1 July 2014 to 31 October 2015, and the tribunal’s rejection as the consequence of these findings.

The respondent applied on 22 June 2018 to set aside the findings of the award under Articles 34(2)(a)(ii) and 34(2)(a)(iii) of the Model Law and s 24(b) of the International Arbitration Act that the respondent be liable to pay for the Cost Overrun and the BPTA Charges and the rejection of the respondent’s counterclaim of the SSL.

Both applications were dismissed and both parties have appealed against the dismissal of the applications.

Ruling

RESPONDENT’S APPLICATION TO SET ASIDE THE AWARD

The Singapore High Court dismissed the respondent’s application to set aside the award.

The Claimants’ Preliminary Argument

The claimants’ preliminary argument against the respondent’s application was that the application was made after the three month time limit under Article 34(3) of the Model Law. The Court concluded that the respondent’s setting aside application had been brought within time on the facts.

Whether a request under Article 33 of the Model Law must be genuine

Article 34(3) requires an aggrieved party to apply to set aside an award within a three month period. This three month period commences on either the date which parties receive the award or the date which the tribunal disposes of a request for correction under Article 33.

The respondent submitted that the second limb of Article 34(3) of the Model Law applies to its application and the three month time limit therefore commenced on 23 March 2018, i.e. its application was filed within the three month time limit.

The claimants stated that State of Arunachal Pradesh v Damani Construction Co (2007) 10 SCC 742 (“Damani”) is authority for the proposition that only a genuine request under Article 33 would trigger a postponement of the time limit of Article 34(3) of the Model Law.

The Court held that Damani could not be followed in Singapore. The court agreed with the reasoning in Todd Petroleum Mining Co Ltd v Shell (Petroleum Mining) Co Ltd [2015] 2 NZLR 180, which held that Article 34(3) of the Model Law does not require a request under Article 33 to satisfy a qualitative test for it to trigger a postponement, as it is inconsistent with the language of Article 34(3) which speaks only of a request being “disposed of”, and further, adding a qualitative requirement would bring about uncertainties, as an applicant party would not know whether it has made a request in terms of that article until the tribunal determines its application. The Court also found that the uncertainty of such a qualitative test would lead to potential wasted time and costs. Further, the drafters of Article 34(3) were aware of the risk of abuse of the qualitative test, but considered it a constrained risk and accepted that risk in the current drafting of Article 34(3).

Accordingly, the Court rejected the claimants’ argument that only a genuine request under Article 33 triggers postponement under Article 34. Whether a request is made under Article 33 is purely a matter of form and does not depend on evaluating the substance of the request by applying any qualitative test.

Whether a request under Article 33 of the Model Law must be material

The claimants relied on Daewoo Shipbuilding & Marine Company Ltd v Songa Offshore Equinox Ltd and anor [2018] EWHC 538 (Comm) (“Daewoo Shipbuilding”) to argue that the second limb of Article 34(3) applied only where the request under Article 33 of the Model Law is material to the setting aside application.

The Court found that Daewoo Shipbuilding was distinguishable and did not assist the claimants. Daewoo Shipbuilding interpreted the provisions of the English Arbitration Act, which differed from the Model Law. Under the English Arbitration Act, the commencement of the time limit is not generally postponed by an application to correct the award. However, under the Model Law, the commencement of the time limit for challenging an award is postponed by every application to correct an award. Whilst corrections under the English Arbitration Act requires any correction sought to be material before postponement, the Model Law postpones the commencement of the time limit for any and every type of request under Article 33.

Accordingly, the Court also rejected the claimants’ argument that the request must be material to the setting aside application.

Applicable principles in relation to breach of natural justice

To set aside an arbitral award for breach of natural justice, the four requirements in Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86 (“Soh Beng Tee”) must be established: (a) the act of natural justice which was breached; (b) how it was breached; (c) in what way the breach was connected to making the award; and (d) how the breach prejudiced the party’s rights.

Applicable principles in relation to a tribunal acting in excess of its jurisdiction

To set aside an arbitral award under Article 34(2)(a)(iii) of the Model Law, the Court must determine first, what matters were within the scope of submission to the arbitral tribunal and second, whether the arbitral award involved such matters or whether it involved “a new difference… outside the scope of the submission to arbitration and accordingly… irrelevant to the issues requiring determination”.

The respondent’s application

The court distilled the following issues to be determined on the respondent’s application:

1. On the Cost Overrun Claim:
   1. Did the tribunal act in breach of natural justice by failing to address the respondent’s argument that certain correspondence was inadmissible (“First Issue”);
   2. Did the tribunal act in breach of natural justice or in excess of jurisdiction by finding the respondent liable for the Cost Overrun even though it was not in breach of the SPA (“Second Issue”);
   3. Did the tribunal act in breach of natural justice by failing to consider the respondent’s arguments and evidence on the transmission line works? In the alternative, was the respondent deprived of an opportunity to present its case on whether other components of the Cost Overrun claim were time-dependent (“Third Issue”); and
   4. Did the tribunal act in breach of natural justice or in excess of jurisdiction in finding that the SSL the respondent’s liability for Cost Overrun (“Fourth Issue”)
2. On the BPTA Charges claim: did the tribunal act in breach of natural justice by failing to consider the respondent’s argument that the claim was unsupported by evidence (“Fifth Issue”)
3. Did the tribunal act in breach of natural justice by awarding pre-award interest from 4 July 2014 when the claimants themselves sought pre-award interest only from a later date (“Sixth Issue”)

The First Issue

The respondent submitted that the correspondence between the respondent and first claimant between May 2013 and March 2014 was covered by without prejudice privilege and was therefore inadmissible. The tribunal had thus breached the rules of natural justice by relying on this correspondence without addressing the respondent’s objection to admissibility.

The Court held that it was not a clear or virtually inescapable inference that the tribunal failed to apply its mind to the respondent’s argument that the correspondence was inadmissible. The issue of admissibility was not presented as an important point to consider in the arbitration. Whilst the respondent did object to the admission nine times, such objection was provided without elaboration. Accordingly, the court found that both parties did not regard the admissibility to be of great importance, and inferred that the tribunal made a decision to admit the correspondence without seeing a need to articulate its reasons.

Accordingly, the Court rejected the respondent’s submission that the tribunal, by reason of its silence on the point in the award, failed entirely to apply its mind to the issue of admissibility. The Court found that even if the tribunal did fail to consider the respondent’s objections, no prejudice was found as the respondent failed to show that the tribunal would not have found the respondent liable for the cost overrun. The tribunal only referred to the correspondence in determining the extent of the respondent’s liability of the Cost Overrun. As such, liability of the respondent was established purely on the interpretation of the SPA and the correspondence was immaterial in the tribunal’s findings for liability.

The Second Issue

The respondent submitted that the claimant, on the last day of oral submissions, changed their case by stating that the respondent’s obligation to bear the Cost Overrun was absolute and unconditional, which the tribunal accepted as an issue to be determined. The respondent alleged that as a result, it was denied the opportunity to respond to this new case.

The court found that the respondent was not denied a reasonable opportunity to respond. The pleadings showed that the claimants, from the early stages of arbitration, took the position that the respondent’s liability for the Cost Overrun arose directly from its express obligation to indemnify the claimants. The claimants thus pleaded the breaches of the SPA only to explain the incurrence of the Cost Overrun, and not as precedent for the respondent’s liability for the Cost Overrun. The respondents were found to have understood the true nature of the claimant’s case, thus explaining why the respondent’s defence provided that it could not be liable for the Cost Overrun unless it was in breach of the SPA.

Further, the respondents were found to have four months between the conclusion of oral submissions and the close of written submissions to develop and present a response on the Cost Overrun liability, and thus, the parties could have easily dealt with the issue in written submissions or sought directions from the tribunal to hear on the substance of the issue. In addition, the court found that the tribunal did not exceed its jurisdiction – the tribunal was found to have correctly apprehended the true basis of the claimant’s case on why it was entitled to recover Cost Overrun from the respondent.

Accordingly, the court held that the respondent was not deprived of a reasonable opportunity to respond to the case made out by the claimants.

The Third Issue

The tribunal limited the respondent’s liability up to 30 June 2014 which was the date the Project would have achieved Wet Commissioning if the claimants completed the Project in the most prudent and cost effective manner. The tribunal quantified the recoverable Cost Overrun by breaking it down into four components, and made adjustments to the first two to reflect the costs incurred up to 30 June 2014. The tribunal allowed the fourth component in full, even though parts of the costs of the fourth component were incurred after 30 June 2014.

The respondent argued that in not making any adjustments to the fourth component, the tribunal failed to give the respondent a reasonable opportunity to address whether any aspect of it was time dependent.

The Court found that there was no breach of natural justice as the tribunal is not required to invite submissions on every point necessary in its decision. Further, the tribunal is entitled to come to his own conclusions from the primary facts placed before him, and is not expected to consult parties on his thinking process before finalising his award. The Court further held that even without arguments on whether each component was time dependent, the full extent of the evidence on the components were presented before the tribunal.

As regards the tribunal’s failure to consider a specific element of the fourth component, the respondent submitted that it made extensive submissions to the tribunal on why it could not be held liable for the said costs but the tribunal failed to apply its mind to any of the respondent’s submissions on the issue.

The Court found that the respondent ran an all or nothing defence to the claim and did not advance any alternative challenge to the costs. Further, the tribunal had used the same components of the Cost Overrun to calculate the Project Cost, in turn showing that the tribunal had implicitly rejected the respondent’s defence on the said costs. The tribunal is also not required to acknowledge expressly all of the arguments which a party has made.

The Fourth Issue

The tribunal found that the respondent was not entitled to recover the SSL. The respondent contended that such a finding was in breach of natural justice or in excess of jurisdiction because it reached that conclusion on a line of reasoning argued by neither party.

The Court found that the finding was within the tribunal’s jurisdiction, as the finding, whilst not put forward by either party, was reached on the evidence submitted to the tribunal. Further, the tribunal had already made the primary finding that the respondent’s right to recover the SSL was extinguished under the SPA as it failed to comply with the Cost Overrun notice issued in October 2013. There was thus no prejudice to the respondent either.

The Fifth Issue

The respondent submitted that had the tribunal applied its mind to its arguments on the inadequate evidence provided by the claimants, it would have found that the table provided by the claimants lacked proper supporting invoices and there was no evidence to support the claimants’ claim from $3.3m in BPTA Charges before February 2014.

The Court rejected the respondent’s grounds on the basis that the tribunal did expressly analyse the evidence supporting the BPTA Charges claim. The tribunal’s chain of reasoning further made clear that it did consider the sufficiency of the claimant’s evidence. As such, the respondent’s argument for the lack of considerations on the sufficiency of the claimant’s evidence was rejected.

The Sixth Issue

The respondent argued that the tribunal acted in breach of natural justice by awarding the claimants pre-award interest on the Cost Overrun claim, on the basis that the tribunal’s choice of 4 July 2014 as the date on which pre-award interest commenced was not argued by either party.

The Court rejected this argument on the basis that pre-award interest is in the discretion of the tribunal under s. 20(1) of the International Arbitration Act. Further, the Court found that the date 4 July 2014 had legal significance as it was the date on which the claimants sent legal notice of the Cost Overrun and the BPTA Charges claims to the respondent. Accordingly, it had a rational connection to the dispute before the tribunal.

Conclusion on the respondent’s application

All of the respondent’s challenges to the tribunal’s decision were rejected by the Court, and as such, the respondent’s setting aside application was dismissed.

CLAIMANTS’ APPLICATION TO SET ASIDE THE AWARD

The Court considered the following issues in the claimants’ application:

1. The tribunal failed to consider the claimants’ evidence and arguments that their methods for repairing the penstock were entirely appropriate based on the following aspects:
   1. A risk assessment by the claiman’s’ senior management and an expert report which concluded that re-lining was the most prudent and cost effective method of rectifying the defects and completing the Project (“Rectifying Penstock Defects”)
   2. The respondent’s original design for the penstock was inadequate (“Unfeasibility of the Original Penstock Design”)
   3. The time taken to complete other critical components of the project meant that it could not have been Wet Commission by 30 June 2014 (“Other Components of the Project”)
2. In the tribunal’s finding that the project would have been wet commissioned by 30 June 2014, the tribunal adopted a chain of reasoning that the claimants could not have foreseen and had no opportunity to redress (“Opportunity to be heard on the Project Completion Date”)

Rectifying Penstock Defects

The Court held that the tribunal saw no need to engage with the claimants’ evidence on what the tribunal saw to be an irrelevant point. Further, the court found that the tribunal did consider the evidence contended – for instance, the tribunal cited the expert report in its award.

There was also no prejudice suffered by the claimants.

Unfeasibility of the Original Penstock Design

The Court held that there was no clear and virtually inescapable inference that the tribunal had overlooked this evidence. There was an implicit rejection of the claimant’s argument that relining the penstock was a necessary expense to achieve wet commissioning and that therefore the respondent should be liable for it.

Other Components of the Project

The claimants pointed to evidence showing that there were also other defects being rectified concurrently with the penstock, which would have delayed the Wet Commissioning Date beyond 30 June 2014, which the tribunal failed to make reference to.

The Court held that the tribunal’s failure to engage with the evidence on the time needed to rectify the other components had to be understood in the entire context of the Project. Some of the other components, such as the transmission line works, were the obligation of the first respondent, and not the second respondent. The Court found that even if there was an error on this, it is a mere error of fact or law, which would not amount to a breach of natural justice.

Opportunity to be heard on the Project Completion Date

The claimants argued that the tribunal’s finding on the Project being completed by 30 June 2014 was one which it could not have expected and had no opportunity to address.

The Court dismissed this ground on the basis that this deprivation of chance would go against the claimant’s argument above of the lack of consideration of the evidence provided. Further, the tribunal’s calculation of three to four months was based on the claimants’ own evidence.

Thus, if the relevant evidence was already before the tribunal, there could be no argument that a party is deprived of the chance to present new material that could have made a difference to the tribunal’s award.

Conclusion on claimants’ setting aside application

The court rejected all of the claimants’ allegations of a breach of natural justice in the tribunal’s decision to limit the claimants’ recovery on the basis that the Wet Commissioning Date should have been achieved by 30 June 2014, and dismissed the claimants’ application in its entirety