Cai v Caj

• Jurisdiction: Singapore
• Judge: S Mohan JC
• Judgment Date: 29 January 2021
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 1103 of 2019

CAI

and

CAJ and another

[2021] SGHC 21

S Mohan JC

Originating Summons No 1103 of 2019

General Division of the High Court

Arbitration — Award — Recourse against award — Setting aside — Rules of natural justice — Whether arbitral tribunal had breached natural justice — Article 34(2)(a)(ii) UNCITRAL Model Law on International Commercial Arbitration — Section 24 International Arbitration Act (Cap 143A, 2002 Rev Ed)

Arbitration — Award — Recourse against award — Setting aside — Scope of submission — Whether arbitral tribunal had acted in excess of its jurisdiction — Article 34(2)(a)(iii) UNCITRAL Model Law on International Commercial Arbitration

Held, allowing the application and partially setting aside the Award:

(1) An applicant seeking to set aside an arbitral award for breach of natural justice had to establish: (a) which rule of natural justice was breached; (b) how it was breached; (c) in what way the breach was connected to the making of the award; and (d) how the breach did or could have prejudiced its right: at [66(a)].

(2) There was a Primary NJ Breach on the facts of this case. The breach of natural justice was causally connected to the making of the Award and did occasion prejudice to the Arbitration Claimants: at [154] to [158].

(a) The Arbitration Claimants did not have a fair and reasonable opportunity to respond to the EOT Defence or to present their case in response to it based on the evidence that had already been adduced in the arbitral proceedings. This was for two reasons: at [70].

(b) First, the EOT Defence was a completely new defence that was introduced at an extremely late stage in the arbitral proceedings which, up to that point, had only focused on the Estoppel Defence. The EOT Defence was conceptually and factually distinct to the Estoppel Defence and needed to be dealt with and addressed in a different fashion. Furthermore, even if it was possible for the defendants to advance the EOT Defence based on the exact same evidence relied upon in respect of the Estoppel Defence, this did not aid the defendants' case for two reasons. Firstly, the crux of Art 18 of the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”) was not whether the defendants could advance their EOT Defence, but rather whether the Arbitration Claimants could respond to it. Secondly, the evidence relied upon by the defendants was, in any event, insufficient to ground their EOT Defence, much less a rebuttal of it from the Arbitration Claimants: at [70] and [119].

(c) Second, the Arbitration Claimants could not have predicted or foreseen the raising of the EOT Defence. They were accordingly deprived of a reasonable opportunity to present their case on the EOT Defence because they did not have notice of the case to which they were expected to respond: at [70] and [120].

(d) While the defendants referred to the comments of one of the Tribunal members made on the last day of the oral hearing to argue that they had introduced the EOT Defence upon the invitation of the Tribunal to deal with alternate bases of relief from liquidated damages, the Tribunal did not specifically invite submissions on the EOT Defence, or alternate bases of relief from liquidated damages or authorise the raising of new and hitherto unpleaded defences: at [121] and [122].

(e) The court rejected the defendants' assertion that the Arbitration Claimants' conduct during the Arbitration and the objections they had raised in their closing submissions to the EOT Defence amounted to hedging their position. The Arbitration Claimants had, in their closing submissions for the Arbitration, objected sufficiently clearly and unequivocally to the EOT Defence being raised. Their silence in the period leading up to 10 September 2018 when the Tribunal declared the arbitration proceedings to be closed did not undermine their clear and unequivocal position: at [126] and [136].

(f) In China Machine New Energy Corp v Jaguar Energy Guatemala LLC[2020] 1 SLR 695 (“China Machine”), the Court of Appeal held that a court analysing whether a party had been denied his right to a fair hearing by a tribunal's conduct of the proceedings had to ask itself what a reasonable and fair-minded tribunal might have done bearing in mind the precise factual matrix confronting the tribunal then (at [98]). The arbitral process was dynamic; the fairness of the procedure used could only be judged against what the parties might be taken as having agreed to and expected by what they contemporaneously communicated to the tribunal, and which was conducting the proceedings in real time (at [101]). In the context of a challenge directed at the exercise of the tribunal's procedural discretion, there could not be any non-compliance with natural justice if the complaining party had not informed the tribunal of what, in its view, such compliance required (at [102]): at [145].

(g) Reading these three paragraphs in China Machine together, the duty of the complaining party to inform the tribunal of an alleged breach was necessarily contingent on the complaining party first knowing that the tribunal had taken a step in the conduct of the proceedings that the complaining party considered to be a breach of procedural fairness. Only then could the complaining party's duty to give fair intimation to the tribunal arise, and for that party to state what, in its view, compliance with procedural fairness would require. If, at that point, the complaining party did not object, objected equivocally or simply reserved its rights while indicating that it was prepared to continue with the arbitral proceedings, that was when hedging and equivocation could be said to have arisen: at [145].

(h) This, however, was not the case in OS 1103. The Arbitration Claimants had objected, in their closing submissions, to the introduction of the EOT Defence and had specifically mentioned the ground of procedural unfairness. As such, the factual context indicated that the ball was in the Tribunal's court to rule upon the Arbitration Claimants' objection to the EOT Defence. Further, after the Arbitration Claimants' closing submissions were filed, the proceedings for all intents and purposes had come to an end. Thus, it was only if and when the Tribunal had made a ruling on the EOT Defence that either party would be aware of any breach of natural justice or procedural unfairness on the Tribunal's part – that was when the duty to provide fair intimation to the Tribunal would have arisen: at [146].

(i) Viewed through that lens, the breach of natural justice only occurred when the final award had been delivered. It did not occur when the proceedings were declared closed or at any point prior to it simply because at any point along that spectrum, no one knew if the EOT Defence had been allowed or not. Even on the authority of China Machine, the burden was not on the Arbitration Claimants to follow up on its objection and demand a ruling from the Tribunal prior to the close of proceedings. They were entitled to reasonably assume that the EOT Defence would either be disallowed by the Tribunal or, in the alternative, if it was allowed, they would be permitted to respond to it properly so as to remedy any prejudice to the Arbitration Claimants occasioned by allowing the EOT Defence to be introduced at that late stage: at [147].

(j) CAI thus had no opportunity to give any unequivocal intimation to the Tribunal to object to the manner in which the Tribunal proceeded, simply because it was too late to do anything once the Award had been published. The unusual factual circumstances of the Arbitration meant that the principle as distilled at [170] in China Machine, did not quite apply in the context of OS 1103: at [148].

(k) What the Tribunal had done fell outside the range of what a reasonable and fair-minded tribunal might have done in those circumstances: at [155].

(l) The breach of natural justice was causally connected to the making of the Award and did occasion prejudice to the Arbitration Claimants. If the Arbitration Claimants had been given the opportunity to lead further evidence, test the defendants' evidence and tender further legal submissions, this could have reasonably made a difference to the Tribunal's decision to grant the 25-day extension of time, which itself appeared to be based on little more than its professed experience: at [158].

(3) There was a Secondary NJ Breach in the making of the Award. This affected the Award and occasioned prejudice to the Arbitration Claimants as they were unable to present any evidence or submissions targeted at the Tribunal's experience which the Tribunal later relied upon to grant the 25-day extension of time to the defendants: at [176] and [177].

(a) The Tribunal did not have any evidence which directly addressed the issue of the specific length of an extension of time under GC 40. There was no evidence to speak of, whether factual or expert, on how long concurrent repairs to the compressors would take. The only evidence available was how long piecemeal rectification works had taken. The Tribunal acknowledged this at various paragraphs of the Award: at [165].

(b) There was some evidence before the Tribunal in the form of two rectification work schedules and the evidence on the actual time taken to complete the rectification works in a piecemeal fashion on two out of six compressors at a time. However the Tribunal did not actually rely on any of that evidence adduced by the defendants when it granted the 25-day extension of time: at [166] and [167].

(c) The Tribunal stated that it had relied on “all the evidence and its experience in these matters” in arriving at a figure of a 25-day extension of time. As such, a process of elimination would lead to the conclusion that if the Tribunal did not have sufficient “evidence” or, in reality, did not rely on the evidence that it had before it, then a substantial part of the Tribunal's decision-making process had to have...