Case Digests

By  Deepika Madan

Nature of Matter

Appeal to set aside an award

Case Summary

In our December 2019 newsletter, we reported on the High Court's decision to dismiss an application to set aside an arbitral award in BXH v BXI [2019] SGHC 141.

BXH appealed against the dismissal of its setting aside application.

Ruling

There was an issue over whether the inconsistencies found in the dispute resolution provisions in the Distributor Agreement meant an irreconcilable inconsistency such that the court could not give effect to the arbitration clause alone.

The High Court found for a valid arbitration agreement in the first instance. It was held that, so long as the intent to arbitrate was not in doubt, a court would strive to give effect to that intention, preferring an interpretation that would render the clause workable over one that would not. In this regard, the High Court adopted and endorsed the practical solution in the English case of Paul Smith Ltd v H&S International Holding Inc.

When assessing the effect of purportedly inconsistent clauses, the Court of Appeal expressed the view that one should always start with their plain language. Where parties evince a real intention to have matters resolved by arbitration, that intention ought to be given effect. Minor inconsistencies between clauses should not be allowed to detract from the parties’ agreement to arbitrate. Instead, a generous and harmonious interpretation should be given to the purportedly conflicting clauses such as to give effect to the parties’ true intention.

In this instance, the arbitration clause in the Distributor Agreement painstakingly provided for the binding effect of the award on parties, the manner in which the award was to be made, the manner in which the arbitrators were to be appointed, the number of arbitrators, as well as the language of the proceedings. This was in contrast to the conflicting provision which simply provided for the applicability of Singapore law and the jurisdiction of the courts located in Singapore. The Court of Appeal therefore found the case was more akin to the situation in Paul Smith.

Right to arbitrate

There was a series of assignments involving Debt B in the matter. There was therefore an issue whether the right to arbitrate in relation to Debt B was assigned by the respondent to the Factor, and, if so, whether there was a subsequent reassignment of Debt B from the Factor back to the respondent.

On this, the Court of Appeal acknowledged that arbitration agreements would, as a class, be capable of assignment.

Relying on the doctrine of separability, as well as the fact that the arbitration agreement would continue to attach to other rights and obligations arising from the Distributor Agreement, the respondent contended the effect of the assignment of Debt B was that both the respondent and the Factor would simultaneously possess the right to commence arbitration against the appellant. The Court of Appeal did not accept this. It was made clear that “[t]he legal assignment extinguishes the legal cause of action of the assignor against the party liable so that the assignor cannot thereafter himself ask for an award against the party liable”. The fact that there remained an arbitration agreement between the parties with regard to residual rights and obligations in the Distributor Agreement (including, for instance, the obligation for each party to use care and discretion to avoid the disclosure of confidential information) would not change this analysis. An arbitration agreement does not have a purpose or a life independent of the substantive obligations that it attaches to. Once the substantive right to Debt B was assigned, the respondent could no longer arbitrate in relation to Debt B.

On the question whether the right to arbitrate in relation to Debt B involved an issue over the existence or scope of the parties’ arbitration agreement, the Judge in the first instance took the view this was a question relating to the scope of the arbitration agreement between the parties. The Court of Appeal, however, took a differing view. As an arbitration agreement does not have a purpose or a life independent of the substantive obligations that it attaches to, the right to arbitrate cannot be seen in isolation – it must necessarily attach to a specific right. In this instance, the Court of Appeal held that the question concerned the existence of one’s right to arbitrate in relation to Debt B.

Having assigned the right to Debt B to the Factor, the right to arbitrate in relation to that debt would subsist between the appellant and the Factor. The respondent would not be considered as a proper party to the agreement to arbitrate disputes arising over Debt B. There was however a further question whether the respondent, at the relevant time, was able to commence arbitration in relation to Debt B pursuant to a valid arbitration agreement with the appellant given an apparent subsequent reassignment of Debt B from the Factor back to the respondent. On the facts, the Court of Appeal took the view that the right to Debt B was only reassigned to the respondent in April 2017, via a letter, which confirmed that “any rights which [the Factor] may have under the Distributor Agreement between [the respondent] and [the appellant] dated 24 December 2010 and any further rights which it may have had to collect payment from [the appellant] in respect of invoices for [the respondent’s products] have been assigned to [the respondent]". The respondent therefore would not have been a proper party to any arbitration arising out of disputes over Debt B at the time of commencement of the arbitration in 2015 when Debt B was still assigned to the Factor. Accordingly, the arbitral tribunal acted beyond its jurisdiction when determining issues in relation to Debt B, the portion of the award dealing with Debt B would thus be set aside.

By Wong Siew Hong, Eldan Law LLP

Nature of Case

This case concerns an application by the Plaintiff to the High Court for leave to appeal against an arbitral award under s 49(3)(b) of the Arbitration Act.

Facts

In 2013, the parties entered into a contract concerning the development of a condominium project at Seletar Road. The Defendant had engaged the Plaintiff as main contractor to carry out building and construction works for the project.

In October 2014, the Defendant terminated the Plaintiff’s employment under the contract and the Plaintiff commenced arbitration proceedings in November 2014. The arbitration proceedings took place from 2014 to 2019 when the tribunal issued its final award.

In all, four partial awards were issued. The application to court concerned the 4th partial award (“the Costs Award”) which dealt with costs of an earlier, quantum phase of the arbi-tration (“the Quantum Award”). The Defendant had made a Calderbank Offer which was more favourable than the Quantum award but it was not accepted by the Plaintiff. The tri-bunal took the Calderbank Offer into account when issuing the Costs Award.

The Plaintiff therefore sought leave to appeal against the Costs Award on the basis a number of questions of law purportedly arose out of it.

The Ruling

The Court reviewed the law on the circumstances where leave would be granted and cited the 5 conditions set out in Ng Tze Chew Diana v Aikco Construction Pte Ltd [2019] SGHC 259, namely:

1. the appeal must be on a question of law (s 49(1) of the Act);
2. the determination of that question will substantially affect the rights of one or more of the parties to the arbitration (s 49(5)(a) of the Act);
3. the question was one which the arbitrator was asked to determine (s49(5)(b) of the Act);
4. 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 (s 49(5)(c) of the Act); and
5. 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 (s 49(5)(d) of the Act).

The Court also bore in mind the overarching principles of finality in arbitration proceedings and party autonomy set out in Holland Leedon Pte Ltd (In Liquidation) v Metalform Asia Pte Ltd [2011] 2 SLR 1086 as well as Ng Chin Siau & Ors v How Kim Chuan [2007] 2 SLR(R) 789, where it was stated that curial intervention should be minimised. Finally, the Court accepted that it should not approach an award with a “meticulous legal eye endeavouring to pick holes, inconsistencies and faults in the award”: Polaris Shipping Co Ltd v Sinoriches Enter-prises Co Ltd [2015] EWHC 3405 (Comm).

The Plaintiff cited 5 grounds in its application but eventually proceeded only with 4. Of these, the Court grouped them into 3 heads.

After considering all 3 heads, the Court dismissed the application.

First, the question as framed by Plaintiff dealt with whether the tribunal necessarily has to penalise a party in costs if that party rejected a Calderbank offer and later failed to obtain a better outcome in the arbitral proceedings. On this, the Court found that the arbitrator was not in fact misled on the law in relation to adverse costs consequences following from an unaccepted Calderbank offer and dismissed this argument.

Second the Court addressed certain questions framed by CKR pertaining to the tribunal’s alleged overreaches of “jurisdiction”. These questions, the Court found, were questions of fact dressed as questions of law and dismissed them. On this point, the Court reiterated that it will be vigilant in guarding against attempts to frame challenges to a tribunal’s findings of fact as question of law.

The third category of questions raised by CKR concerned whether the tribunal can consider the favourability of a Calderbank offer where the offer sought to settle a non-monetary claim that remained pending before another court or tribunal. The Court dismissed this ar-gument on the facts. First, the Court was not convinced that determination of those would have a substantial impact on the rights of the parties. Second, the Court was not satisfied that the tribunal was asked to determine that question. The “non-monetary claim” referred to in the question involved separate proceedings arising from a related action, and was dis-posed of by the Court of Appeal after the issuance of the Costs Award.

The Court also considered and applied the distinction between an error in the application of the law (which does not confer a right of appeal) and a question of law (which does confer a right of appeal) from the longstanding authority of Ahong Construction (S) Pte Ltd v United Boulevard Pte Ltd [1993] 2 SLR(R) 208. On the facts, the Court in dismissing the application, found that the questions posed pertain to the application of the law.

Coda

The Court highlighted the following in the course of its judgment:

• Citing Permasteelisa Pacific Holdings Ltd v Hyundai Engineering & Construction Co Ltd [2005] 2 SLR(R) 270, the Court reiterated that the case law on granting leave to appeal questions of law arising from an arbitral award illustrates that the threshold for the grant of such leave is a high one;
• Beyond the threshold which must be met, s 49 of the AA is clear in setting out the re-quirements before leave to appeal shall be granted. These requirements are cumulative, and all of them must be satisfied before leave to appeal may be granted.
• The Court also cautioned that parties should carefully consider and evaluate offers to settle disputes. They represent an avenue to minimise the costs of litigation, and can save considerable time and resources. It is for this reason that there may be conse-quences when they are unjustifiably ignored; and
• Finally, the Court stated that it will be vigilant in guarding against attempts to frame a challenge to arbitral tribunals’ findings of fact as questions of law.

By Wong Siew Hong, Eldan Law LLP

Nature of Case

Setting aside – Rules of natural justice

Facts

The disputes relate to the construction of a power generation plant in Guatemala. The Appellant is the contractor and the Respondent is the owner. Following delays, the Respondent terminated the contract in January 2014 and commenced arbitral proceedings. The agreement provided for disputes to be referred to a Singapore - seated arbitration under the 1998 Rules of Arbitration of the International Chamber of Commerce.

The agreement provided a 90-day period for the completion of the arbitration. The tribunal was constituted in March 2014, meaning that the arbitration should have been completed by June 2014, or, if extended,, to September 2014.

In May 2014, the parties agreed to amend this timeline. Thereafter, certain procedural orders were issued, including an Attorneys’-Eyes Only (“AEO Regime”) Order, which was modified along the way and eventually lifted. The Appellant also made extensive changes to its team of external counsel and expert witnesses. There was late filing of the of the Appellant’s expert report. Another issue that arose concerned discovery of documents.

Eventually the main evidentiary hearing took place in July 2015 and the tribunal rendered its award in November 2015. The Respondent’s claim was allowed by the tribunal. Meanwhile, the project works were completed in July 2015.

In February 2016, the Appellant filed an Originating Summons (“OS”) to set aside the Tribunal’s award. The OS was dismissed and the Appellant appealed to the Court of Appeal. In the OS, the Appellant had relied on 3 grounds for the setting aside. At the appeal, it relied on one ground viz it was not allowed a full opportunity to respond to the Respondent’s claim.

The Ruling

The Court of Appeal dismissed the appeal. The Court of Appeal held that:

First, the Tribunal did make a determination that there were compelling grounds to impose the AEO Regime, and there was no reason to disturb that determination;

Second, the Judge rightly rejected the Appellant’s submission that the AEO Regime had unjustifiably shifted the burden of proof onto the Appellant. The Court of Appeal held that the Appellant’s submission was misconceived. The question is not whether the AEO Order had adversely impacted CMNC’s preparation of its case but whether the balance struck by the Tribunal in making the AEO Order as a whole is one which was so unfair or unreasonable as to fall outside the range of what a reasonable and fair-minded tribunal might have done in the circumstances. On this, the Court of Appeal found no reason to impeach the Tribunal’s decision.

Third, the Court of Appeal found that the Tribunal did carefully weigh the potential prejudice to CMNC in making the AEO Order and did not accept that the Appellant’s argument that the Tribunal’s management of the discovery was unacceptable or amounted to a breach of natural justice. The Court of Appeal found that the Tribunal was simply doing the best it could in the circumstances to strike a fair balance between the parties’ interests.

The Court of Appeal noted that the AEO Regime was lifted almost four months before the main evidentiary hearing. The Court of Appeal also rejected the Appellant’s arguments that its expert’s preparations had been seriously affected by the AEO Regime, noting that the parties had agreed to certain timelines.

As a statement of general principle, the Court of Appeal declared that if a party intends to contend that there has been a fatal failure in the process of the arbitration, then there must be fair intimation to the tribunal that the complaining party intends to take that point at the appropriate time if the tribunal insists on proceeding. The complaining party, at the very least, should seek to suspend the proceedings until the breach has been satisfactorily remedied. The complaining party cannot simply “reserve” its position until after the award to see how the result turns out before deciding whether or not to take the point. The Court of Appeal noted that it is a contradiction in terms for a party to claim that proceedings had been irretrievably tainted by a breach of natural justice, when at the material time it presented itself as a party ready, able and willing to carry on to the award.

In conclusion, the Court of Appeal saw no basis upon which to interfere with the Judge’s decision to dismiss the application to set aside, and therefore dismissed the appeal.

By  Wong Siew Hong, Eldan Law LLP

Nature of Case

Setting Aside – Bias

Facts

The Plaintiffs had applied to set aside a Partial Award (the “ICC Award”) dated 30 April 2019 issued by a tribunal (the “Tribunal”) of three arbitrators in an ICC Arbitration (the “ICC Arbitration”).

Two grounds were cited for the setting aside:

The first ground (the “put option ground”) arises from the Tribunal’s decision to award reliefs under two put options in a shareholders’ agreement. According to the Plaintiffs, by the ICC Award the Tribunal ordered alternative reliefs.

The second ground (the “bias ground”) arises from the conduct of a Tribunal member. The complaint is that the member was said to have made belated and only partial disclosures of a co-counsel relationship that he negotiated and entered into with the Defendant’s legal representatives in the ICC Arbitration while the ICC Award was still being drafted and finalised.

The Ruling

On the first “put option” ground, the Plaintiffs raised 2 main points to support their assertion that the put option reliefs purportedly awarded by the Tribunal were in excess of jurisdiction and should be set aside under section 3(1) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (the “IAA”) read with Article 34(2)(a)(iii) of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”) viz (i) the ICC Award was neither final nor complete in that it entirely failed to resolve the parties’ dispute, as the Tribunal left it to a supervising or enforcing court to determine quantum-related matters, and (ii) the Tribunal, by the ICC award, purported to confer upon itself the power to alter its decision ex post facto, if its order regarding the quantum related matters should be set aside or refused enforcement for any reason notwithstanding the Tribunal had became functus upon rendering the ICC Award.

The Court held that the Plaintiffs’ two points are in essence the same argument expressed in different ways and the Court rejected the Plaintiff’s arguments. The Court found there was nothing incomplete or lacking in finality, “circular ,” “contingent” or “unworkable” about the ICC Award in question . Instead, the pragmatic manner adopted by the Tribunal did not have the result of making the ICC Award something that would be unconventional, indeterminate or impermissible. Indeed, the Court took the view that "the dispositive of the ICC Award took what might appear at first blush to be a convoluted form, not because the Tribunal was arrogating to itself the power to alter its decision depending upon post-award events" but purely due to the way in which the contract clauses in question were drafted. Accordingly, the Court concluded that there was no basis for setting aside the ICC Award on the first ground.

On the second “bias” ground, the Court held that the test for apparent bias in arbitration proceedings is analogous to that applicable in court proceedings, namely, a test of reasonable suspicion. That test involves an assessment of 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 may be biased and that a fair hearing may not be possible as a result. On the facts, the Court did not accept that there had been deliberate (or any) insufficient disclosure by the tribunal member. The Court concluded that it had not found the Plaintiffs’ tendentious reading of what the tribunal member wrote as any basis for inferring bad faith on the part of the tribunal.

The Court therefore dismissed the application.