By Justin Gan
In this issue, we discuss the following three decisions:
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:
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:
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:
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:
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
By Lee Mei Yong, Debbie & Wong Qiao Ling Sharon – Millennium Law LLC
I. INTRODUCTION
1. This decision concerned an application commenced in the High Court, requesting inter alia that a Tribunal’s dismissal of an application to strike out a party “be reversed ”, pursuant to s 10(3) of the International Arbitration Act (“IAA”) and/or Article 16(3) of the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”).
2. The matter was then transferred to the Singapore International Commercial Court (“SICC”) and the SICC considered the following issues:
(a) Whether the Tribunal had the jurisdiction to determine the issue of striking out a party in the arbitration proceedings;
(b) Whether the application was brought within the time limited for appeal under the IAA and Model Law; and
(c) Whether the Court is empowered to extend the time limited for appeal under the IAA and Model Law.
II. SUMMARY OF FACTS
3. The Plaintiffs owned through a company and/or managed a business in Cambodia.
4. In 2015, it was agreed that the 1st Defendant, an Australian company, would acquire the business in the following manner:
(a) The business would be transferred to a new company incorporated by the 2nd and 3rd Plaintiffs (the “New Company”); and
(b) Subsequently, the shares in the New Company would then be transferred to the 1st Defendant’s nominee, the 2nd Defendant in the present case, a wholly-owned subsidiary of the 1st Defendant.
5. The parties to the share sale agreement (“SSA”) were:
(a) The 2nd and 3rd Plaintiffs as vendors; and
(b) The 1st Defendant as purchaser.
6. The SSA contained the following salient clauses:
(a) A choice of law clause in favour of the laws of Singapore; and
(b) An arbitration clause providing for settlement of disputes by arbitration in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC”).
7. Pursuant to the sale of shares under the SSA, the 1st Defendant nominated the 2nd Defendant to receive the shares under the SSA through a letter addressed to the 2nd and 3rd Plaintiffs (the “Letter”). The Letter was endorsed by the 2nd Defendant and the 1st and 2nd Plaintiffs, an extract of which is set out below:
“We do hereby irrevocably agree, confirm and declare as follows:-
1. We hereby nominate our wholly owned subsidiary, [the second defendant] to be the registered owner of the Sale Shares and vest unto [the second defendant] all of our rights, title and interest in, under and/or pursuant to [the SSA].
2. We further irrevocably request and authorize you to transfer all the Sale Shares to [the second defendant]…”
[emphasis as underlined]
8. In 2018, the 1st and 2nd Defendants commenced arbitration proceedings against the 2nd and 3rd Plaintiffs for alleged breaches of provisions under the SSA in relation to inter alia non-competition and non-solicitation.
9. There was another arbitration commenced by the New Company, the 3rd Defendant, against the 1st and 2nd Plaintiffs, alleging breaches of a management that was entered concurrently with the SSA.
10. The two arbitration proceedings were consolidated.
III. STRIKING OUT APPLICATION
11. The Plaintiffs asserted that the 1st Defendant was not a proper party to the arbitration by virtue of the transfer of rights, title and interest under the SSA to the 2nd Defendant. For these reasons, the Plaintiffs applied to the Tribunal to strike out the 1st Defendant.
12. The application was dismissed on 8 January 2019. Although the application to the Tribunal was described as an application to strike out rather than a plea that the Tribunal did not have jurisdiction, it was not in dispute that a jurisdictional challenge was raised by the Plaintiffs in conformity with Article 16(2) of the Model Law, and was ruled on as a preliminary question within Article 16(3) and s 10(3) of the IAA.
13. On 22 February 2019, the Plaintiffs brought the present application in the High Court to "reverse" the decision, which was subsequently transferred to the Singapore International Commercial Court (the “Court”).
IV. THE COURT’S DECISION
14. The Court dismissed the Plaintiffs’ application and the reasons are set out below.
A. WHETHER THE TRIBUNAL HAD JURISDICTION TO HEAR AND DETERMINE THE 1ST DEFENDANT’S CLAIMS
15. In reaching its decision, the Court held that the purpose of the Letter was to nominate the 2nd Defendant as the recipient of the shares and nothing in the SSA required or contemplated assignment of the 1st Defendant’s rights as purchaser under the SSA to its subsidiary.
16. The 1st Defendant remained subject to its obligations under the SSA and it would not have made sense for the 1st Defendant to purport to assign its rights away while remaining subject to its obligations.
17. The Court also considered Clause 10.5(a) of the SSA, which permitted the assignability of the SSA. However, the Court held that even if the SSA could be assigned, Clause 10.5(a) would not be of particular assistance in confirming if the Letter constituted an assignment of the SSA.
18. Whilst the Plaintiffs claimed that the 1st Defendant should not be party to the arbitration proceedings, it did not deny the Tribunal’s jurisdiction over determining the issue.
B. WHETHER THE APPLICATION WAS BROUGHT WITHIN TIME
19. Article 16(3) of the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”) and Section 10(3) of the International Arbitration Act (“IAA”) provide that a party may apply to the Singapore High Court to appeal against a Tribunal’s ruling on its jurisdiction within 30 days after having received notice of the same.
20. The Email containing the Tribunal’s ruling was sent on 8 January 2019 and the application was brought on 22 February 2019. The Plaintiffs claimed that they had not received the Tribunal’s Email.
21. The Court was not convinced by the Plaintiffs’ justification as there was a history of successful email correspondence between parties and there was a lack of evidence that the Email had not been received.
22. Accordingly, the Court decided that the application was therefore not brought within time.
C. WHETHER THE COURT HAD POWER TO EXTEND TIME
23. It was held that the Court had no power to extend time for the application, as neither the Model Law nor IAA permitted an extension beyond the 30 days.
24. Further, it was held that Clause 7 in Schedule 1 of the Supreme Court Judicature Act (“SCJA”) did not permit the extension of time – it could not be used to revive the right which had been lost.
25. For the reasons above, the extension of time was not granted as it was difficult for the Court to invoke the inherent power to prevent injustice following the lack of explanation as to why the Email was not received.
V. IMPLICATIONS OF BXY v BXX
26. This case serves as a cautionary tale on the assignment of rights and obligations under a contract.
27. Absent clear and express wording in a contract or deed of assignment, it appears that assigning only the rights and not the obligations of an agreement did not make sense – doing so would under usual circumstances lead to the conclusion that the interpretation of any such contract or deed would be done conservatively.
28. This case also reinforces the fact that the Court did not have jurisdiction to grant extensions of time for proceedings governed by the Model Law and IAA, which is consistent with the position previously taken in BXS v BXT [2019] SGHC(I) 10.
Lee Mei Yong, Debbie
By Lee Mei Yong, Debbie & Wong Qiao Ling Sharon – Millennium Law LLC
I. INTRODUCTION
1. In BXS v BXT , the Singapore International Commercial Court (“SICC” or the “Court”) issued its first decision on the issue of setting aside an arbitral award.
2. Having considered parties’ arguments, the SICC dismissed the Plaintiff’s application to set aside an arbitral award issued under the Expedited Procedure of the Singapore International Arbitration Centre (“SIAC”) Rules and granted the Defendant’s application to strike out the Plaintiff’s setting aside application.
II. BACKGROUND FACTS
3. The Plaintiff, a Thai-listed company, commenced arbitration against the Defendant, a Mauritius-registered investment company, in relation to an agreement (the “SPA”) involving the sale of the Defendant’s shares in two companies to third-party purchasers.
4. Through novation and merger, the rights and obligations of the purchasers under the SPA came to be vested in the Plaintiff.
5. The SPA, governed by Thai law, contained the following salient clauses:
(a) Clause 10.1(f), which entitled the Plaintiff, as purchaser, to an indemnity from the Defendant against tax claims by the Thai tax authority; and
(b) Clause 8.6, which imposed a time limit on the Defendant’s liability to indemnify the Plaintiff.
6. When the SPA was being negotiated, the parties were aware of a pending case before the Thai Supreme Court, between the Thai tax authority and an unrelated company which, depending on its outcome, could result in additional taxes and accordingly, trigger the Defendant’s indemnity obligation under the SPA provision.
7. The Thai Supreme Court eventually decided the pending case against the taxpayer company and the Thai tax authority demanded that the Plaintiff pay additional taxes .As a result, the Plaintiff sought an indemnity from the Defendant, which the Defendant refused.
III. ARBITRATION PROCEEDINGS
8. The Plaintiff commenced arbitration under the auspices of SIAC against the Defendant, pursuant to Clause 19 of the SPA (the “Arbitration Agreement”).
9. The Arbitration Agreement provided inter alia that the dispute:
(a) “… shall be exclusively and definitively settled by arbitration pursuant to the rules of the Singapore International Arbitration Centre … by three arbitrators appointed according to the Rules ”;
(b) “The language of the arbitration shall be English ”; and
(c) “The place of arbitration shall be Singapore. ”
[emphasis as underlined]
10. In the interest of saving time and costs, the Defendant applied under the Expedited Procedure (the “Expedited Procedure”), pursuant to Rule 5 of the SIAC Arbitration Rules (6th Ed, 2016) (the “2016 Rules”), for the arbitration to be conducted by a sole arbitrator.
11. The Plaintiff was amenable to the Expedited Procedure but objected to the appointment of a sole arbitrator, stressing that the Arbitration Agreement expressly provided for the appointment of three arbitrators.
12. The SIAC President decided that the arbitration would follow the Expedited Procedure conducted by a sole arbitrator.
13. In light of the SIAC President’s decision, the Plaintiff stated that it would proceed with the arbitration but “under protest ”.
14. On 12 June 2018, the Arbitrator issued an award (the “Final Award”) and dismissed the Plaintiff’s claim to be indemnified by the Defendant.
IV. POST-ARBITRATION PROCEEDINGS
15. In late August 2018, the Plaintiff commenced proceedings before the Thai Central Intellectual Property and International Trade Court (the “Thai Court”) to set aside the Final Award.
16. In response, the Defendant applied to the Singapore court for an injunction to restrain the Plaintiff from continuing with the proceedings before the Thai Court.
17. On 9 November 2018, the Plaintiff applied to the Singapore High Court to set aside the Final Award. The application was subsequently transferred to SICC.
18. On 25 March 2019:
(a) The Thai Court dismissed the Plaintiff’s application, on the basis that the Thai Court lacked power to set aside the Final Award; and
(b) The Singapore court had granted a permanent injunction to prevent the Plaintiff from proceeding with its application before the Thai Court or commencing fresh court proceedings in Thailand in connection with disputes arising out of the SPA.
V. ISSUES BEFORE SICC
19. In support of its setting aside application, the Plaintiff relied on the following grounds:
(a) The Final Award was made by a sole arbitrator, instead of by a tribunal of three arbitrators, contrary to the Arbitration Agreement;
(b) The Final Award dealt with matters outside the terms of the submission to arbitration; and
(c) The Final Award is in conflict with Singapore public policy.
20. The Defendant sought to strike out the Plaintiff’s application based on the ground that the Plaintiff’s challenge to the Final Award was brought long after the expiry of the three-month time limit for recourse against an arbitral award imposed by Article 34(3) of the UNCITRAL Model Law (“Model Law”).
21. The following issues were before the SICC:
(a) Whether the Plaintiff was entitled to set aside the Final Award;
(b) Whether an extension of time could be retrospectively granted with respect to the Plaintiff’s setting aside application.
VI. SICC’S FINDINGS
A. WHETHER THE PLAINTIFF WAS ENTITLED TO SET ASIDE THE FINAL AWARD
22. The SICC held that the Plaintiff was not entitled to set aside the Final Award for the following reasons.
(i) Issue of Sole Arbitrator
23. In furtherance of the Plaintiff’s case, the Plaintiff contended that:
(a) “… it had an assurance there would at least be one arbitrator … who would have familiarity with Thai law ”; and
(b) The 2016 Rules “cannot retrospectively amend the substantive right of parties [to have three arbitrators] under the Arbitration Agreement ” as the SIAC Arbitration Rules (4th Ed, 2010) (the “2010 Rules”) were in force at the time the SPA was signed.
24. The SICC found that the Arbitrator Agreement allowed for a sole arbitrator to conduct the arbitration as the 2016 Rules were incorporated by reference into the Arbitration Agreement, which inter alia allowed the parties to avail themselves to the Expedited Procedure and the appointment of a sole arbitrator.
25. As the parties did not indicate any explicit intention for three arbitrators to preside over the dispute in any case, the parties were deemed to have accepted that they would be bound by whatever modifications were made to the SIAC Rules subsequently in force.
26. The fact that the 2010 Rules were in force at the time of the signing of the SPA was immaterial, as the 2016 Rules applied when the arbitration was commenced.
(ii) Issue of Arbitrator’s Jurisdiction
27. The Plaintiff also argued that the Arbitrator was not familiar with Thai law, the Final Award was made “without reference to Thai law principles ”, and the Arbitrator erroneously awarded costs in favour of the Defendant.
28. The SICC found that the Arbitrator “made careful (as opposed to merely superficial) reference to Thai law in the Final Award .”
29. In fact, the only point of contention between the Thai law experts respectively appointed by parties was regarding the extent to which pre-contractual negotiations were relevant in interpreting a contract.
30. The Arbitrator preferred the Defendant’s expert evidence and found against the Plaintiff.
31. In this regard, the SICC noted that the Plaintiff was not entitled to challenge the Final Award simply because it disagreed with “the way in which the Arbitrator applied Thai law to the facts.”
32. With reference to the issue of costs, SICC found that:
(a) The Defendant’s claim for “costs ” was covered under the relief pleaded in the Defendant’s Response to Notice of Arbitration, which in any case was lower than what was incurred by the Plaintiff’s lawyers;
(b) During costs submissions, the Plaintiff previously expressly agreed with the Defendant that “the Arbitrator should determine costs on the basis of Singapore law. ”
33. Accordingly, the Plaintiff was prohibited from now alleging that the costs awarded to the Defendant were not claimed and were in excess of the limit permitted by Thai laws.
(iii) Issue of Contravention of Public Policy
34. The Plaintiff relied on the two earlier grounds to allege that the Final Award breached Singapore public policy.
35. As the two earlier grounds were not made out, the SICC dismissed this alleged ground.
B. WHETHER AN EXTENSION OF TIME COULD BE RETROSPECTIVELY GRANTED WITH RESPECT TO THE SETTING ASIDE APPLICATION
36. In considering the issue of whether the Plaintiff’s application was time-barred, the SICC refused to grant the extension of time.
37. While the SICC noted that there was “no consistent international practice as far as the extension of time for setting aside arbitral awards ” was concerned, the SICC was of the view that Article 34(3) of the Model Law prohibited any extension of time.
38. Based on the natural and ordinary meaning of the words contained in Article 34(4) of the Model Law, it is obvious that the phrase in its negative form – “may not be made ” – is indicative of absolute prohibition.
39. Under Section 18 of the Supreme Court of Judicature Act (“SCJA”) and Paragraph 7 of the First Schedule to the SCJA, the SICC possessed the general power to extend procedural timelines.
40. However, the general power was not applicable to the present situation, as Article 34(3) provided a substantive right of action, rather than merely imposing a procedural timeline.
41. In this regard, Paragraph 7 of the First Schedule to the SCJA could not be used “to extend a right of action which has been extinguished by a 'limitation' in some written law.”
42. Additionally, Article 5 of the Model Law, read together with Section 3 of the International Arbitration Act, supports the SICC’s conclusion as the cited provisions expressly prohibit intervention by courts on matters governed by the Model Law. This means that the court could only intervene in arbitration-related matters in limited circumstances permitted by the Model Law.
43. Even if the SICC did possess the power to extend the time limit, the SICC opined that it would not have granted the extension for the following reasons.
(i) Inordinate Delay
44. The Final Award was issued on 12 June 2018. Based on the date of the Final Award, the Plaintiff’s application to set aside should be taken out by 12 September 2018.
45. However, the Plaintiff only made such an application around 9 November 2018, close to two months after the Final Award was issued.
46. The Plaintiff was also unable to provide any good reason for the delay, which further contributed to the SICC ruling against the Plaintiff.
(ii) Prejudice to Defendant
47. While the Defendant did not strongly complain of prejudice, the SICC noted that “a mere lack of prejudice would not by itself justify the grant of an extension ”.
VII. IMPLICATIONS OF BXS v BXT
48. In arriving at its decision, the SICC observed that parties should clearly evince their intention with respect to arbitration rules.
49. In the absence of explicit or express wording to the contrary, institutional arbitration rules are taken to be incorporated by reference into the parties’ arbitration agreement and parties are not allowed to argue otherwise.
50. The present case also elucidated the Singapore position on the nature of time bars with respect to setting aside of arbitral awards and confirmed that time bars should be strictly observed and complied with.
51. This proposition is consistent with Singapore’s position on the finality and conclusiveness of the arbitral process, which is espoused in various previous High Court decisions declining to set aside arbitral awards.
By Wynne Tay - MPillay
This High Court decision concerns an application by the plaintiff for an injunction to restrain the defendant from bringing winding up proceedings against the plaintiff on the ground that the contract between the parties obliged them to proceed to arbitration to resolve their disputes. The Court granted the injunction. An appeal by the defendant against the High Court's decision on this application is currently outstanding.
This decision is interesting because it is the latest in a series of High Court decisions considering the applicable standard for an injunction in such circumstances. Unfortunately, the High Court has not been entirely consistent in its approach. It is thus hoped that the Court of Appeal in this case will provide much needed clarity on this issue. This summary will focus on the High Court's observations on the applicable standard.
Background facts
The plaintiff and the defendant entered into a contract for the sale and purchase of crude oil (the "Contract"). The Contract was expressly governed by English law and contained an arbitration agreement for disputes to be referred to arbitration in London.
The plaintiff's case is that the Contract was part of an arrangement with a third party ("BWX") where the plaintiff was to act as an intermediary between the defendant and BWX. Under this arrangement, the plaintiff's role was to pay the defendant upon payment by BWX.
It later transpired that BWX failed to make payment to the plaintiff upon delivery of the cargo. The plaintiff also failed to pay the defendant under the Contract.
The defendant refused to accept any proposed repayment schedule and sent payment reminders to the plaintiff. On the other hand, the plaintiff and BWX entered into a settlement agreement, providing for payment in four instalments (the "Settlement Agreement").
About a month later after the Settlement Agreement, the defendant served a statutory demand on the plaintiff. The plaintiff responded to the statutory demand disputing the debt claim and requesting that the dispute be referred to arbitration. Subsequently, the plaintiff filed the present originating summons to set aside the statutory demand and to ask for an injunction to restrain winding up proceedings.
In the meantime, BWX breached the Settlement Agreement by failing to pay the first instalment. Upon the plaintiff's demand, BMX still failed to make payment or make any offer to secure or compound debt to the satisfaction of the plaintiff. The plaintiff thereafter filed a winding up application against BMX which was being stayed at the time the High Court heard the application.
Injunction application
Applicable standard
In the present application, the High Court had to determine the standard for determining whether an injunction should be granted to restrain the winding up proceedings.
The plaintiff argued that the standard should be whether there is a bona fide prima facie dispute that is subject to an arbitration agreement. The defendant, on the other hand, contended that the applicable standard should be that of a triable issue which is the standard generally used for an injunction to restrain winding up proceedings. In other words, the standard contended by the defendant would require the court to examine affidavit evidence in considering whether an arguable case could be made meriting the holding of a trial of the issues.
The Court agreed with the plaintiff and held that "the existence of a bona fide prima facie dispute was sufficient for the court to grant the injunction sought" in the present circumstances: see [22].
The Court first noted this will be more consistent with the "central principle of party autonomy" highlighted in the Court of Appeal decision of Vinmar Overseas (Singapore) Pte Ltd v PTT International Trading Pte Ltd [2018] 2 SLR 1271. This will align with the law governing exclusive jurisdiction clauses, forum non convenience and International Arbitration Act applications where the merits of the defence are irrelevant to the issue of stay: see [34].
The principle of party autonomy was relevant to the present case where parties had previously agreed to arbitrate disputes between them. Indeed, the Court stated that "[a] creditor who wishes to file winding up proceedings knowing that the debt which is its premise is the subject of a dispute which was earlier agreed to be arbitrated would be misusing judicial facilities if good reason to renege upon his contractual bargain is absent." Accordingly, where there is a bona fide prima facie dispute that is subject to an arbitration agreement, the Court would grant an injunction to restrain the plaintiff from commencing winding up proceedings: see [35].
Application of standard on the facts
In considering whether the plaintiff met the standard in the present case for an injunction to be granted, the Court noted that it would decline to grant the injunction if the plaintiff is guilty of abuse of process. In this regard, the courts' threshold for abusive conduct is very high and would only occur in exceptional situations. One of such situations would be where there has been a clear and unequivocal admission as to both the liability and quantum of claim but an injunction is sought for no reason other than its alleged inability to pay: see [39].
There may also be exceptional circumstances under which winding up proceedings will have to continue despite there being an arbitration agreement. For example, where independent persons are urgently required to investigate potentially misappropriated assets that were missing from the company, or there is a substantial suspicion of fraudulent preferences, or there is a need to engage the statutory avoidance provisions: see [40].
In the present case, the defendant contended that the injunction application should be dismissed for abuse of process because the plaintiff had:-
a. denying that it owed the defendant the debt;
b. commencing winding up proceedings against BWX despite maintaining that it did not owe the defendant for the same; and
c. initially refusing to present the affidavit that it filed in support of the winding up application against BWX.
The Court rejected all of the arguments.
On the issue of admission, the Court found that the plaintiff had consistently maintained that its liability was conditional upon payment by BWX first. There was thus no admission by the plaintiff arising out of the parties' correspondence: see [42-47].
The Court also found that there was no inconsistency in the plaintiff's assertion of its rights so there could be no waiver by election. In particular, the Court noted that the winding-up claim against BWX was premised on the Settlement Agreement and not a claim for price under the contract between the plaintiff and BWX for the delivery of the cargo. Further, the steps taken by the plaintiff against BWX did not at any point in time amount to an unequivocal representation that it would waive any rights it possessed: see [50].
Similarly, on the issue of approbation and reprobation, the Court found that the plaintiff had not taken inconsistent positions in the winding-up application against BWX and the present application: see [51-52].
Finally, the Court rejected the argument that the plaintiff had acted inequitably as it was unable to find that the plaintiff's conduct "reflected a depravity in the legal as well as moral sense": see [53].
Accordingly, the Court found there was no abuse of process by the plaintiff and granted the injunction to restrain the defendant from commencing winding up proceedings.
By Wynne Tay - MPillay
The Singapore Court of Appeal in this case allowed an appeal against the High Court's decision which refused to set aside an award (the "Award") issued in an arbitration administered under the auspices of the Singapore International Arbitration Centre ("SIAC").
In coming to its decision, the Court of Appeal discussed and set out important principles governing, amongst others:-
These issues will be discussed in more detail below.
Background facts
The appellant ("RALL") is a Sri Lankan company owned by the Government of Sri Lanka and specialises in providing security and risk management services. The respondent ("AGMS"), which is also a Sri Lankan company, is in the business of providing maritime security services to vessels at risk of piracy. The parties formed a private-public partnership to carry out certain projects between March 2011 and October 2013 for which they entered into six separate agreements. These six agreements were subsequently incorporated into a master agreement dated 27 January 2014 (the "Master Agreement").
The Master Agreement provided for Sri Lankan law to be the governing law and for the disputes to be settled by arbitration in Singapore in accordance with the rules of SIAC.
Disputes arose between the parties and AGMS commenced arbitration proceedings against RALL for breach of the Master Agreement. The Notice of Arbitration dated 8 April 2015 (the "NOA") was sent to RALL but RALL did not file any response by the deadline.
RALL then wrote to SIAC seeking a three-month extension of time to respond to the NOA. The extension was granted but RALL still failed to file a response. The proceedings thereafter proceeded without RALL's participation until RALL wrote to SIAC again to seek a further extension of time but this was not granted.
Afterwards, RALL wrote to SIAC stating that the dispute between the parties was beyond the scope of submission to arbitration and that the arbitration proceeding was in conflict with Sri Lankan public policy. The parties then engaged in discussions in an attempt to resolve the dispute while the arbitration continued.
On 12 November 2015, RALL's attorney wrote to SIAC stating that AGMS agreed to withdraw the proceedings under a memorandum of understanding dated 20 October 2015 (the "MOU"). However, three days later, AGMS wrote to the Tribunal saying that there was no longer any settlement and asked the Tribunal to grant an interim injunction to prevent RALL from terminating the Master Agreement.
The Tribunal heard the application without any participation from RALL. The Tribunal eventually concluded that the arbitration ought to proceed but it did not grant the interim injunction (the "Order").
The arbitration then proceeded without RALL's participation although RALL wrote to SIAC twice enquiring about the status of the arbitration. The Tribunal eventually rendered a final award in favour of AGMS (the "Award").
RALL commenced proceedings to set aside the Award in the High Court on the following grounds:
The High Court dismissed the application . This decision was covered in the June 2018 edition of the SIArb Newsletter.
RALL appealed the High Court's decision on the jurisdictional challenge and public policy challenge.
Jurisdictional challenge
The High Court held that RALL was precluded under s 10(3) of the IAA and Art 16(3) of the Model Law from applying to set aside the Award on the basis of a jurisdictional objection as RALL failed to challenge the Order within 30 days of receiving notice of the ruling that was set out in the Order.
In the appeal, RALL contended that it was not so precluded as the Tribunal did not rule on its jurisdiction and merely directed the parties to continue with the proceedings in the Order. Even if the preclusion was engaged in the present case, RALL took the position that it did not apply to a non-participating party to an arbitration, like itself.
The Court of Appeal first observed that it was not necessary for RALL to file a formal objection on the jurisdiction of the Tribunal in order to engage Art 16(3) of the Model Law because the tribunal may on its own volition raise and decide issues of jurisdiction without waiting for a formal objection: see [56].
On the facts, the Court of Appeal found that RALL's letter of 12 November 2015 was essentially stating that the Tribunal had no mandate because there had been a settlement agreement and it was therefore "an unorthodox challenge to the jurisdiction or mandate of the Tribunal". Consequently, Art 16(3) of the Model Law was engaged: see [57].
The Court of Appeal further found that the Tribunal was fully aware of RALL's jurisdictional objection set out in the 12 November letter. Consequently, by holding that the MOU had not been implemented and that the arbitration should proceed, the Tribunal "clearly asserted its jurisdiction to deal with the matter". The Order was therefore a ruling on jurisdiction which fell within Art 16(3) of the Model Law: see [59].
The Court of Appeal then went on to hold that Art 16(3) of the Model Law and s 10 of the IAA do not preclude a non-participating respondent in an arbitration with a valid objection to the tribunal's jurisdiction from raising that objection as a ground to set aside such tribunal's award: see [75].
In this regard, the Court of Appeal observed that such non-participating respondents could not be held responsible for wastage of resources where the claimant chooses to continue with the proceedings because the respondent would be "exercising his undoubted right to be undisturbed by the arbitration". Therefore, the claimant takes the risk of wasted costs in such a situation: see [76].
Further, it was noted that to find a preclusive effect of Art 16(3) of the Model Law against a non-participating party would mean "putting an 'innocent' respondent to the additional cost of having to defend against enforcement of the award in, potentially, many jurisdictions as he would not have been able to procure the setting aside of the award by the supervisory court". Therefore, a justifiably non-participating party should be entitled to avail himself of all remedies the law gives him when faced with an award: see [77].
On the facts, the Court of Appeal found that RALL was a non-participating party having taken a clear stand from the point of entry into the MOU that the arbitration should be stopped because the settlement had resolved the dispute. The subsequent letters from RALL to SIAC were merely to inform SIAC of the facts and to ask for information on what was going on, all of which RALL was perfectly entitled to do even if it did not want to participate in the proceedings: see [79].
The Court of Appeal also found that the effect of the MOU was to settle the dispute between the parties. There was thus no longer a dispute before the Tribunal to be decided on. Consequently, the Award had to be set aside for containing decisions on matters outside the scope of submission to arbitration within the meaning of Art 34(2)(a)(iii) of the Model Law: see [92].
Public policy challenge
Having decided in favour of RALL on the jurisdictional challenge, the Court of Appeal was strictly speaking not required to deal with the public policy challenge but nonetheless still made some observations in this regard.
The Court of Appeal agreed with the High Court in rejecting the argument that the Award was induced or affected by fraud or corruption as RALL's allegations of fraud or corruption related to the underlying contract and not the Award itself: see [98].
On the contention that the Award was against Singapore public policy, the Court of Appeal held that RALL had to first establish the Master Agreement and the other agreements were illegal under their governing law. This was an issue for the Tribunal to decide and the Tribunal did not find any sign of illegality or that the agreements were contrary to public policy. Therefore, the parties are bound by the Tribunal's binding. Further, the parties had affirmed the agreements by the MOU so RALL was not entitled to now declare the agreements to be illegal and unenforceable: see [100-101].
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