Blc v Blb

JurisdictionSingapore
Judgment Date30 July 2014
Date30 July 2014
Docket NumberCivil Appeal No 135 of 2013
CourtCourt of Appeal (Singapore)
BLC and others
Plaintiff
and
BLB and another
Defendant

[2014] SGCA 40

Chao Hick Tin JA

,

Andrew Phang Boon Leong JA

and

Judith Prakash J

Civil Appeal No 135 of 2013

Court of Appeal

Arbitration—Recourse against award—Remission—High Court remitting part of award to newly constituted tribunal for determination—Whether court had power under Art 34 (4) UNCITRAL Model Law on International Commercial Arbitration to remit award to newly constituted tribunal—Article 34 (4) UNCITRAL Model Law on International Commercial Arbitration

Arbitration—Recourse against award—Setting aside—Buyers claiming rectification costs for defective goods—Sellers counterclaiming for monies due on unpaid goods—Arbitrator failing to expressly refer to issues raised in sellers' list of issues—Arbitrator suggesting that buyers' list of issues was used as framework for discussing sellers' counterclaims—Whether arbitrator failed to address mind to sellers' counterclaim in breach of natural justice—Section 24 (b) International Arbitration Act (Cap 143 A, 2002 Rev Ed)

Arbitration—Recourse against award—Setting aside—Sellers alleging arbitrator omitted to deal with issue—Sellers failing to seek redress from tribunal before turning to courts—Whether Art 33 (3) UNCITRAL Model Law on International Commercial Arbitration was applicable—Whether disgruntled parties ought to avail themselves of Art 33 (3) before applying to set aside award—Article 33 (3) UNCITRAL Model Law on International Commercial Arbitration

The appellants (‘the Appellants’) commenced arbitration proceedings against the respondents (‘the Respondents’) following an unsuccessful joint venture. They alleged, inter alia, that the goods manufactured and delivered by the Respondents under the joint venture were defective and claimed rectification costs. On their part, the Respondents counterclaimed for certain amounts, including a sum which the Respondents alleged was owed by the Appellants, inter alia,for goods delivered but not paid for (‘the Disputed Counterclaim’).

Following the evidential phase of the proceedings, the parties submitted separate lists of issues to be tried when they could not agree on a joint list. In his award, the arbitrator found that the goods supplied by the Respondents were defective and allowed the Appellants' claim for rectification costs. The arbitrator also dismissed all of the Respondents' counterclaims, including the Disputed Counterclaim. In the award, the arbitrator set out the Disputed Counterclaim as one of the remedies sought by the Respondents. However, the arbitrator suggested that he had accepted the Appellants' list of issues as a convenient framework to discuss the Respondents' counterclaims. In addition, the arbitrator did not expressly identify two issues relating to the Disputed Counterclaim which featured only in the Respondents' list of issues.

The Respondents commenced High Court proceedings to set aside the entire award, alleging that they had been denied natural justice. The High Court judge (‘the Judge’) found that it was common ground that the defective goods which were the subject of the Appellants' claim for rectification costs (which the Judge referred to as ‘Group A Goods’) were different from the goods that were the subject of the Disputed Counterclaim (which the Judge referred to as ‘Group B Goods’). The Judge observed that the arbitrator did not expressly find that the Respondents were not entitled to the Disputed Counterclaim because the defects in the goods resulted in an abatement in their price or that there were any defects in the Group B Goods. In the Judge's view, the Disputed Counterclaim had to be dealt with independently of the arbitrator's findings on other issues. The Judge concluded that it could not be inferred from the face of the award that the arbitrator had actually considered and dismissed the Disputed Counterclaim. The Judge agreed with the Respondents that the arbitrator had failed to deal with the Disputed Counterclaim because it was likely that he had extensively adopted the Appellants' list of issues and that there had been a denial of natural justice as a result. The Judge did not, however, set aside the entire award. Instead, the Judge set aside the part of the award which dealt with the Disputed Counterclaim and remitted it to a new tribunal for determination. The Judge also observed that this would have been the type of case that Art 33 (3) of the Model Law would have been intended to provide redress for and encouraged parties in future cases of a similar nature to first attempt (if it was possible) to avail themselves of opportunities to seek redress from the tribunal itself before turning to the courts.

Held, allowing the appeal:

(1) Even though it was common ground in the setting-aside application that there were two different sets of goods (ie, the Group A Goods and the Group B Goods) and that there were no allegations of defectiveness in relation to the Group B Goods, this was, strictly speaking, irrelevant. The parties' pleadings, lists of issues and written submissions before the arbitrator showed that it was common ground before the arbitrator that the issue of payment for the goods which were the subject of the Disputed Counterclaim (ie,the Group B Goods) were inextricably linked to the issues of responsibility for the defectiveness in the goods in general and not only in relation to the Group B Goods: at [56] .

(2) The courts had to be wary of accusations that an arbitrator had failed to consider and deal with an issue that was never before him in the first place. The provisions in the joint venture agreements which the Respondents relied on in the setting-aside application as the contractual basis of the Disputed Counterclaim did not appear once in the pleadings, lists of issues and written submissions before the arbitrator. Further, the Respondents' allegations in the setting-aside application that the Appellants' list of issues was wrong and misleading because it failed to characterise the Disputed Counterclaim as a stand-alone issue were made notwithstanding the fact that this was what the Respondents' own list of issues in the arbitration suggested. The Respondents were seeking to put forward the case they wished they had put forward before the arbitrator and not the case which was actually run: at [4] , [83] and [84] .

(3) An award could not be read like a statute; the ratio of the award ought to be distilled from a reading of the entire award and not of isolated parts. Looking at the award as a whole and having regard to the parties' pleadings, lists of issues and written submissions before the arbitrator, it was clear that the arbitrator did in fact address his mind to the Disputed Counterclaim and did, in fact, render a decision in respect of that particular claim. The Respondents' case theory that the arbitrator had adopted the Appellants' list of issues without any consideration of the Respondents' list was not borne out on a closer analysis of the Appellants', Respondents', as well as the arbitrator's lists of issues. There was no real need for the arbitrator to expressly identify the legal basis of the Disputed Counterclaim in the award if he took the view (as he had to have in light of the Respondents' own case in the arbitration) that the question as to who was responsible for the alleged defects in the goods in general was directly linked to the issue of payment for any goods delivered. In the circumstances, there was no denial of natural justice: at [88] , [90] , [93] , [97] and [98] .

(4) In any event, taking the Respondents' case at its highest, even if the arbitrator decided (erroneously) that the resolution of the issues set out only in the Appellants' list of issues would resolve all disputes between the parties, in the circumstances, the error alleged by the Respondents went merely to the substantive merits of the arbitrator's decision as it consisted in the arbitrator conflating issues of law and/or fact which he ought not to have done. Whilst this might be a serious error of law and/or fact, it did not follow that the Respondents' were denied natural justice: at [101] and [102] .

[Observation: On the Judge's own analysis, the arbitrator had not entirely omitted to deal with the Disputed Counterclaim. Rather, it was a situation in which the arbitrator had breached the rules of natural justice by failing to consider the Respondents' case on the Disputed Counterclaim. In such a situation, it was doubtful that Art 33 (3) could have been invoked to cure the breach of natural justice: at [108] .

Assuming that Art 33 (3) could have been invoked, the question of whether a party should be entitled to ignore Art 33 (3) and instead apply to set aside the entire award under Art 34 arose. On the one hand, it was arguable that a party ought to be penalised if he did not invoke Art 33 (3) before invoking Art 34. If not, Art 33 (3) would be rendered toothless and moribund. On the other hand, the literal language of Art 33 (3) itself and the legislative history of the UNCITRAL Model Law suggested that a party was not obliged to invoke Art 33 (3). It was possible to reconcile the two seemingly opposed positions by recognising that whilst a party was not obliged to invoke Art 33 (3), he took the risk that the court would not, in a setting-aside application, exercise its discretion to set aside any part of the award or invoke the powers of remission under Art 34 (4) of the Model Law. To this end, an applicant's reasons for failing to resort to Art 33 (3) (where applicable) might have an impact upon the exercise of the court's discretion to set aside an award in future cases. However, as this question was not before the court and the court did not have the benefit of parties' argument on this, this question would have to be definitively resolved on a future occasion when it would be necessary to do so: at [109] to [117] .

Although the...

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