Bzw v Bzv

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ,Judith Prakash JCA,Steven Chong JCA
• Judgment Date: 12 January 2022
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 1 of 2020

BZW and another

and

BZV

[2022] SGCA 1

Sundaresh Menon CJ, Judith Prakash JCA and Steven Chong JCA

Civil Appeal No 1 of 2020

Court of Appeal

Arbitration — Award — Recourse against award — Setting aside — Tribunal failing to consider essential issues and not relying on chain of reasoning with nexus to parties' arguments — Whether breach of natural justice occasioned — Section 24(b) International Arbitration Act (Cap 143A, 2002 Rev Ed)

Arbitration — Award — Remission — Multiple errors and disregard of errors — Whether matter should be remitted to tribunal — Article 34(4) UNCITRAL Model Law on International Commercial Arbitration

Civil Procedure — Originating processes — Accompanying affidavit for application to set aside award not filed within three months — Whether application filed within time — Article 34(3) UNCITRAL Model Law on International Commercial Arbitration — Order 69A r 2 Rules of Court (2014 Rev Ed)

Held, dismissing the appeal:

(1) What amounted to an “application” within the meaning of Art 34(3) of the Model Law was deliberately left to be governed by the procedural law of each jurisdiction. Order 69A r 2 of the Rules of Court (2014 Rev Ed) (“the Rules”) only required a setting-aside application under s 24 of the Act or Art 34(2) of the Model Law to be made by an originating summons within three months from the date of receipt by the applicant of the award or the corrected award. There was nothing in O 69A r 2 that required an affidavit to be filed at the same time as the originating summons, only that the affidavit had to be served with the originating summons under O 69A r 2(4A)(d). While the application had to state the grounds, the grounds did not refer to all the evidence that was being put forward in support of the application. A brief statement in the originating summons identifying the sub-articles of Art 34(2) of the Model Law and s 24 of the Act were sufficient to identify the grounds on which the application was made: at [39] to [51].

(2) While generally speaking an assertion of a breach of the fair hearing rule did not require the degree of study of the Award and the record that the Judge undertook, the allegations that the impugned portions of the Award had no nexus to the parties' cases as actually presented to the Tribunal, required such an exercise. And, although it was accepted that a court would not interfere even if it regarded a tribunal as having made mistakes of facts or law, the present case of manifest incoherence in the Award went far beyond that principle. A manifestly incoherent decision showed that the tribunal had not understood or dealt with the case at hand and meant that the parties had not been accorded a fair hearing. In the Award, the Tribunal did very little, if anything, to connect the proverbial dots and the analysis of evidence was thin: at [52] to [58].

(3) All four elements of the test set out in John Holland Pty Ltd v Toyo Engineering Corp (Japan)[2001] 1 SLR(R) 443 at [18] were satisfied. The specific rule of natural justice that was breached was correctly identified as being the fair hearing rule. Specifically, two types of breaches of the fair hearing rule were relevant: (a) the Tribunal's failure to apply its mind to the essential issues arising from the parties' arguments; and (b) the absence of a sufficient nexus between the Tribunal's chain of reasoning and the parties' arguments: at [60] and [61].

(4) With regard to the Delay Claim, the only defence that could have had a nexus to the Tribunal's chain of reasoning was the prevention principle. In this regard, however, the Tribunal did not deal with the issues of whether: (a) there was a mechanism in the contract for the appellants to claim an extension of time arising from the act of prevention; and (b) whether the act of prevention caused the delay. These were essential issues and the Tribunal failed to apply its mind to them: at [61(a)].

(5) With regard to the Rating Claim, the Tribunal adopted a chain of reasoning that had no nexus with any of the appellants' three defences. In relation to estoppel, the Tribunal's only relevant factual finding was that the appellants' representative Mr Tan had provided documents showing that IP23 generators were fit for purpose. This finding was made after the Tribunal had corrected its original error where it had mistaken Mr Tan as being the respondent's representative. Once the Tribunal did so, however, the element of representation on the part of the promisor required for estoppel could not be established. In relation to the defence that there was no breach of contract, the Tribunal found that the pleadings and evidence pointed to the conclusion that the parties understood that the vessel's generators had to be upgraded from IP23 to IP44. This could only mean that the Tribunal was rejecting the defence that the appellants were not in breach of contract in delivering the vessel with IP23-rated generators. Confusingly, the Tribunal then stated that there was no breach because the respondent had confirmed that IP23 was fit for purpose. But it was never the appellants' case in the Arbitration that they were not in breach of the contract because the respondent had confirmed that IP23 was fit for purpose. Even if the generators had been fit for purpose, such a finding had no nexus to the issue before the Tribunal as to whether the installation of generators with IP23 rating was in breach of a contractual obligation to deliver generators with an IP44 rating: at [61(b)].

(6) The breaches of natural justice were connected to the making of the Award. There were only two possibilities as to the chain of reasoning by which the Tribunal arrived at its decision to dismiss the Delay Claim and the Rating Claim: either the Tribunal dismissed the claims because it adopted the appellants' prevention principle and estoppel defences or the Tribunal dismissed the claims for reasons other than those defences. If the Tribunal dismissed the claims because it adopted the appellants' defences, then the connection between the breaches of natural justice and the Award was clear: the Tribunal did not apply its mind to causation as regards the prevention principle or to representation as regards the estoppel defence. If the Tribunal dismissed the claims for reasons other than those defences, then the connection between the breach of the fair hearing rule and the Tribunal's dismissal of both claims was arguably clearer, because nothing remained in the Award that supported the dismissal of the respondent's claims: at [62].

(7) The breaches of natural justice prejudiced the respondent's rights. A breach of natural justice caused a party to suffer actual or real prejudice if complying with the rules of natural justice could reasonably have made a difference to the outcome of the arbitration. The prejudice arising from the failure to consider submissions which arguably could have succeeded was sufficient: at [63].

(8) It was inappropriate to remit the Award to the Tribunal for several reasons. First, the breach did not involve a single isolated or stand-alone issue. Second, there was a real risk that even a competent and respectable arbitral tribunal whose act or omissions were held to amount to serious irregularity would be subconsciously tempted to achieve the same result as before. It would have been embarrassing for the Tribunal to free itself from all previous ideas and redetermine the same issues. This point gained force from the majority's attempt to deny the obvious effect which their error had on their chain of reasoning. In addition, the majority's earlier disregard of this point which the dissenting arbitrator had highlighted was inexplicable and had to have impacted the parties' confidence in the remission process. Third, a substantial time had elapsed since the Tribunal heard the evidence and submissions. There was no benefit to the parties in terms of time and cost savings since the Tribunal would in any event have to spend considerable time and costs in reviewing the evidence again: at [64] to [70].

Case(s) referred to

ABC Co v XYZ Co Ltd [2003] 3 SLR(R) 546; [2003] 3 SLR 546 (distd)

AKN v ALC [2015] 3 SLR 488, CA (refd)

AKN v ALC [2016] 1 SLR 966, CA (refd)

ASG v ASH [2016] 5 SLR 54 (refd)

BLC v BLB [2014] 4 SLR 79 (refd)

John Holland Pty Ltd v Toyo Engineering Corp (Japan) [2001] 1 SLR(R) 443; [2001] 2 SLR 262 (folld)

JVL Agro Industries Ltd v Agritrade International Pte Ltd [2016] 4 SLR 768 (folld)

L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125 (refd)

Lovell Partnerships (Northern) Ltd v A W Construction plc (1996) 81 BLR 83 (folld)

Secretary of State for the Home Department v Raytheon Systems Ltd [2015] 159 ConLR 168 (folld)

SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2010] 1 SLR 733 (refd)

Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86; [2007] 3 SLR 86 (refd)

TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 (folld)

Facts

The respondent entered into a contract with the appellants, two associated companies, for the latter to construct and deliver a vessel to the respondent. Disputes arose over delays in construction as well as the quality of the generators in the vessel eventually delivered. In the arbitration (“the Arbitration”), the respondent pursued two claims against the appellants: (a) a claim for liquidated damages for delay in delivery (“the Delay Claim”); and (b) a claim in damages for installation of contractually inadequately rated generators (“the Rating Claim”). In the arbitral award dated 25 October 2018 (“the Award”), the tribunal (“Tribunal”) dismissed both the Delay Claim and Rating Claim. The Tribunal also dismissed the appellants' counterclaim. Subsequently, the respondent commenced Originating Summons No 488 of 2019 to set aside the Award under s 24(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the Act”) and...