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Nature of Matter

Case Summary

1. The plaintiff, BZV, contracted to buy a vessel from the defendants, BZW, under a shipbuilding contract.
2. Disputes arose and the plaintiff pursued two claims against the defendants in arbitration: (i) a claim for liquidated damages for delay in delivery (“Delay Claim”), and (ii) a claim in damages for installation of incorrect generators (“Incorrect Generators Claim”).
3. In its award, the arbitral tribunal dismissed both of the plaintiff’s claims (“Award”).
4. The plaintiff applied to the Singapore High Court to set aside the Award (in part), under IAA, s 24(b) and Article 34(2)(a)(iii) of the Model Law.
5. The defendants, in turn, argued that (i) the plaintiff’s setting aside application was filed out of time pursuant to Article 34(3) of the Model Law and, (ii) even if the plaintiff had established grounds for setting aside the Award, the High Court judge should suspend the setting aside application and remit the Award to the tribunal pursuant to Article 34(4) of the Model Law to allow the tribunal to eliminate the grounds for setting aside.

1. The High Court found in favour of the plaintiff and set aside the award. 

1st Issue – Timing of the Setting Aside Application

2. As a preliminary point, the defendants argued that the plaintiff’s setting aside application was filed out of time as, even though the plaintiff’s Originating Summons (“OS”) was filed within the 3-month time-limit under Article 34(3) of the Model Law, the plaintiff’s supporting affidavit was filed well outside this time-limit. The defendant argued that the plaintiff’s “application” was incomplete when it filed the OS alone.
3. The High Court judge held that there was nothing in Article 34(3) of the Model Law and/or O. 69A, r.2(4) of the Rules of Court which rendered the plaintiff’s application out of time or precluded the plaintiff from relying on the grounds set out in its supporting affidavit. The High Court judge therefore rejected the defendants’ argument that the plaintiff’s application was made out of time. [24 – 47]

2nd Issue – IAA, s 24(b), Breach of Natural Justice 

4. The first ground relied on by the plaintiff to set aside the Award was IAA, s 24(b), i.e. that there had been a breach of natural justice.
5. The High Court judge held that, in order to succeed on IAA, s 24(b), the elements identified in John Holland Pty Ltd v Toyo Engineering Corp (Japan) [2001] 1 SLR(R) 443 would have to be established:

1. Which rule of natural justice was breached; 
2. How was it breached;
3. In what way the breach was connected to the making of the award;
4. How the breach prejudiced the plaintiff’s rights.

6. In relation to elements (a) and (b) above the High Court judge held that there had been a breach of the fair hearing rule as:

1. In relation to the plaintiff’s Delay Claim, the tribunal had not applied its mind to whether the plaintiff’s preventive act had caused the defendants to be unable to deliver the vessel on time. Beyond an ‘implicit acknowledgment’ that causation was relevant, “the tribunal … failed completely to identify for determination, let alone apply its mind to determine … the issue of causation.” [130 – 151] 
2. In relation to the plaintiff’s Incorrect Generators Claim, the court found that the tribunal did not rely on a chain of reasoning with a nexus to the defendants’ defences in arriving at its decision to dismiss this claim. [152 – 205]

7. In relation to element (c) above, the court held that the tribunal’s breach of natural justice on both claims was “casually connected to the making of the award”. [206 – 210]
8. In relation to element (d) above, the court held that if the tribunal had applied its mind to parties’ cases and the essential issues arising from parties’ arguments on those cases, it could certainly have found in favour of the plaintiff on both the Delay Claim and the Incorrect Generators Claim. The tribunal’s breach of natural justice therefore caused real prejudice to the plaintiff. [211 – 213]
9. Accordingly, the court held that the plaintiff’s application under IAA, s 24(b) succeeded.

3rd Issue – Art 34(2)(a)(iii) Model Law

10. The court held that it was not necessary to analyse the plaintiff’s application under Article 34(2)(a)(iii) Model Law separately as:

1. The plaintiff’s application under IAA, s 24(b) was successful, and already disposed of the matter [215]; and
2. In any case, the plaintiff’s attack under this alternate ground relied on the very same facts and raised the very same core concerns as its attack under IAA, s 24(b). [216]

4th Issue – Remission under Art 34(4) Model Law

11. The defendants argued that, even if the plaintiff’s grounds for setting aside were established, the High Court judge should exercise its discretion to suspend the setting aside application and remit the Award to the tribunal pursuant to Article 34(4) of the Model Law to allow the tribunal to eliminate the grounds for setting aside.
12. However, the High Court judge refused to exercise its discretion to remit the Award for two reasons:

1. First the tribunal’s breaches of natural justice were “fundamental and deeply woven into the analytical exercise which the tribunal undertook”. In order to eliminate the ground for setting aside on this, the tribunal would have to undertake de novo its entire analytical task which was not the purpose of remission. [222]
2. Second, the purpose of remission is to afford the party who has established a ground for setting aside a genuine opportunity to persuade the tribunal to arrive at a different result and not to give the tribunal a further opportunity to formulate ex pose facto rationalisations for its original decision. However, in this case, the High Court judge held that, based on the tribunal’s prior conduct, remission was unlikely to allow the plaintiff a genuine opportunity to persuade the tribunal to arrive at a different result. [223 – 224]