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Nature of Matter

Setting Aside of Arbitral Award – Whether setting aside application was made within the three-month time limit: MAL Arts.33-34

Setting Aside of Arbitral Award – Whether there is breach of natural justice

Case Summary

The facts of this matter can be found in our December 2019 newsletter where we reported on the High Court decision in BRQ and Anor v BRS and Anor [2019] SGHC 260. 

Briefly, the Tribunal issued a final award ("Award") that was in substance in BRQ's favour (“Buyer”). However, the Tribunal limited BRS’s liability (“Seller”) with respect to certain time-dependent components to 30 June 2014 ("the Cut-Off Date"), as opposed to the Actual Completion Date. On this issue, the Tribunal considered that the Project could have been completed on the Cut-Off Date if the Buyer had undertaken the construction and commissioning of the Project in the most prudent and cost-effective manner.

Both the Seller and the Buyer were dissatisfied with various aspects of the Award, and they each filed separate Originating Summonses to set aside portions of the Award, on the bases that the Tribunal had either acted in breach of natural justice and/or in excess of its jurisdiction. Both setting aside applications were dismissed by the judge in the first instance. The parties appealed against the dismissal of their respective application.

The Court of Appeal dismissed the Seller's appeal but allowed the Buyer's appeal. 

Seller’s Appeal 

There was a preliminary issue whether the Seller's setting aside application was filed out of time. 

The Buyer took the position that the Seller's setting aside application was filed out of time. In this case, the Parties had received the Award on 31 January 2018 but the Seller only filed its setting-aside application on 22 June 2018, which exceeded the three-month time limit to file a setting-aside application. The Seller contended that it had made a correction request to the Tribunal ("the Correction Request") on 1 March 2018, which the Tribunal dismissed on 23 March 2018. Therefore, the three-month time limit would only run from 23 March 2018.

Although the Buyer accepted that the Seller had filed a request for correction, the Buyer however took the position that the Correction Request was not in substance an actual request for correction under Article 33 of the Model Law which would have triggered an extension of the time limit to apply to set aside the Award. The Seller disagreed, and argued that it was the form of the request that mattered, not the substance. 

The Court of Appeal held that the Seller’s setting aside application was not filed in time. In coming to this decision, the Court of Appeal explained that the substance of Article 33 of the Model Law must be met, if an Article 33 request is to trigger an extension of time under Article 34. In this instance, the Court of Appeal formed the view that the Seller's requests, were in fact, attempts to review the Tribunal's decision on the substantive merits of the case, and not matters properly under the Article 33 "slip rule".

The Court of Appeal also pointed out that the Tribunal had dismissed the Seller's Correction Request on 23 March 2018 which was before the expiry of the three month period. Given that the Seller had received the Award on 31 January 2018, the Seller could have filed its setting aside application by 31 April 2018 to avoid any argument that their application was filed out of time.

Given the above sufficed to dispose of the Seller’s setting-aside application, the grounds raised by the Seller in support of its setting-aside application were accordingly academic.

Buyer’s Appeal

In the Award, the Tribunal had considered that the Cut-Off Date should be 30 June 2014 because the Tribunal formed the view that the most prudent and cost-effective measure was for the Buyer to simply repair the penstock by patching and re-welding its cracked areas ("the Rewelding Method"). Instead, the Buyer decided to reline the penstock with a different grade of steel ("the Relining Method"). The Tribunal concluded that if the Buyer had proceeded with the Rewelding Method, the Project should have been completed by 30 June 2014.

The Buyer however raised the following objections:

1. The Tribunal purportedly failed to consider unchallenged evidence that the Relining Method was the most reasonable, prudent and cost-effective manner and not the Rewelding Method ("the Relining Method evidence");
2. Second, the Tribunal purportedly failed to consider evidence that the transmission line (which is separate from the penstock) also had several design flaws. This led to delays in the transmission line works, which were only completed on 17 October 2015. Therefore, the Project could not have completed before 30 June 2014 because the transmission line works needed to be completed as well ("the Transmission Line evidence").

The Buyer accordingly alleged that the fair hearing rule was breached in that the Tribunal did not consider all important issues.

In relation to the Relining Method Evidence, the Court of Appeal considered that while the Tribunal did not expressly mention certain evidence in the Award, the Tribunal had relied on the Buyer's own evidence to arrive at its conclusion that the most prudent and cost-effective manner for correcting the penstock issue.

The Court of Appeal held that the Tribunal failed to consider whether explicitly or implicitly if the Buyer's argument relating to the delay caused by the transmission line works was a separate reason for the Project not meeting its Projected Completion Date. This amounted to a breach of natural justice, which had caused real and actual prejudice to the Buyer because the Tribunal had cut off the Buyer’s recovery at only 30 June 2014. Had the Tribunal considered the Buyer's argument that the delay caused by the transmission line works was an alternate and independent source of delay, the Tribunal might have arrived at a different Cut-Off Date.

Separately, the Seller argued that the Buyer could no longer challenge the Award, since the Buyer had already commenced enforcement proceedings for part of the Award. The Buyer therefore could not approbate and reprobate. The Court of Appeal disagreed. In its view, there was no inconsistency. The Buyer was enforcing the benefit of the Award, and at the same time seeking to expand the benefit of the Award (by challenging the Tribunal's decision on the cut-off date for its recovery).

In the circumstances, the Court of Appeal directed that Award be remitted to the Tribunal to consider whether the transmission line delays would have affected the Cut-Off Date.