Ckh v Ckg

JurisdictionSingapore
JudgeSundaresh Menon CJ,Judith Prakash JCA,Jonathan Hugh Mance IJ
Judgment Date08 April 2022
CourtCourt of Appeal (Singapore)
Docket NumberCivil Appeal No 42 of 2021 and Summons No 91 of 2021
CKH
and
CKG and another matter

[2022] SGCA(I) 4

Sundaresh Menon CJ, Judith Prakash JCA and Jonathan Hugh Mance IJ

Civil Appeal No 42 of 2021 and Summons No 91 of 2021

Court of Appeal

Arbitration — Award — Recourse against award — Remission — Arbitral tribunal failing to take into account outstanding debt owed by one party to other party — Whether setting aside of arbitral award should be suspended for period to enable arbitral tribunal to correct award by taking claimed debt into account — Article 34(4) UNCITRAL Model Law on International Commercial Arbitration

Arbitration — Award — Recourse against award — Setting aside — Whether party's claim for outstanding debt owed by other party fell within scope of arbitration even though it was not pleaded — Whether arbitral tribunal's failure to take into account this outstanding debt constituted breach of natural justice — Section 24(b) International Arbitration Act (Cap 143A, 2002 Rev Ed) — Article 34(2)(a)(iii) UNCITRAL Model Law on International Commercial Arbitration

Held, dismissing the appeal:

(1) Section 24(b) of the IAA provided that an arbitral award could be set aside if a breach of natural justice occurred in connection with the making of the award by which the rights of any party had been prejudiced. Further, Art 34(2)(a)(iii) of the Model Law empowered the court to set aside an award that dealt with matters beyond the scope of a submission to arbitration. Dealing with matters beyond the scope of a submission and failing to deal with matters within the scope of a submission were opposite sides of a coin, and it was well established that an arbitral tribunal's failure to address an issue submitted to it for decision could constitute a breach of natural justice justifying intervention by the court. The critical issue in this case was therefore whether the Principal Debt, and interest thereon, were matters within the scope of the arbitration if cl 4 of the Minutes did not apply: at [11], [12] and [14].

(2) The pleadings were the first place in which to look for the issues submitted to arbitral decision. In this case, the starting point was that there was no pleading in the arbitration addressing the position regarding the Principal Debt in the event that the Tribunal rejected (as it did) CKG's case that the Principal Debt justified it in either withholding or reducing timber log deliveries under cl 4 of the Minutes. However, matters could arise which were or became within the scope of the issues submitted for arbitral decision even though they were not pleaded. Whether a matter fell within the scope of the agreed reference depended ultimately upon what the parties, viewing the whole position and the course of events objectively and fairly, might be taken to have accepted between themselves and before the Tribunal. The question of what matters were within the scope of the parties' submission to arbitration was answerable by reference to five sources: the parties' pleadings, the agreed list of issues, opening statements, evidence adduced, and closing submissions at the arbitration: at [15] and [16].

(3) Arbitration was consensual, and parties and changing circumstances could lead implicitly as well as expressly to a widening of the scope of an arbitration: at [17].

(4) The primary focus of CKG's case was on justifying its invocation of cl 4 of the Minutes to withhold entirely or to pro rata further deliveries of timber logs, by establishing and relying on the Principal Debt (only the quantum of which was in dispute) in that connection. This could not have excluded consideration of the Principal Debt, and the net financial position taking that into account, if CKG's reliance on cl 4 failed. The rival experts' reports, the experts' joint statement, the parties' pre-hearing list of issues, the slides put in at the hearing by CKH's expert, and CKG's presentations and submissions at the hearing, to which CKH took no exception, all objectively indicated that the net financial position was being treated as being in issue. Viewing the position and course of events objectively, the natural expectation on both sides had to have been (or be taken to have been) that if CKG's reliance on cl 4 of the Minutes failed, CKG's claim to the outstanding Principal Debt would then be brought into account in full as a contra item to any claim by CKH: at [18] to [25].

(5) How a tribunal understood the parties' conduct before it and submissions to it was part of the material from which the court could discern an objective understanding of the submissions and issues before it. The Tribunal itself correctly recognised, in its decision refusing to make an additional award, that CKG had not only raised the issue of its entitlement to the Principal Debt as a defence to CKH's claim for failure of log supply obligations, but also sought a set-off against any damages awarded in substitution of log supply to CKH: at [27].

(6) It followed that the Tribunal's Award was vulnerable to being set aside, if not corrected, since, having rejected CKG's reliance on cl 4 of the Minutes, the Award failed to consider or adjudicate upon the appropriate set-off. However, the matter went further than set-off. In the circumstances, it was incumbent on the Tribunal to treat CKG as having in reality advanced the Principal Debt with interest not merely as a set-off, but as an item to be given full weight, whichever way the balance of account might as a result shift: at [29].

(7) The Judge's decision was therefore correct on all central aspects, and the setting aside of the Award should be suspended for a period to enable the Tribunal to correct its Award by considering and taking into account CKG's claim to the Principal Debt and interest thereon: at [30].

(8) The only variation to be made related to the Judge's prospective order to the effect that, if the Tribunal was unable to eliminate the grounds for setting aside the Award, then certain sections of the Award should be set aside. The right order in this context should not be anticipated, but should be left over for consideration once the Tribunal had responded to the Judge's order that the setting aside of the Award be suspended for the Tribunal to consider and take into account CKG's claim to the Principal Debt and interest thereon: at [31].

(9) CKH's application for leave to adduce further evidence related to a parallel arbitration before the Indonesian National Board of Arbitration, which had been commenced by CKG's affiliate to recover from CKH the same taxes, levies and freight as were said to constitute the Principal Debt. While the precise relationships between the parties and agreements involved were currently obscure, tribunals and courts had, at the enforcement stage, powers which should avoid any risk of injustice arising from double recovery against CKH. In any event, no legal basis or mechanism had been suggested by virtue of which the court could or should refrain from addressing the issues actually before it in the ordinary course: at [32].

Case(s) referred to

AKN v ALC [2015] 3 SLR 488 (folld)

CBX v CBZ [2022] 1 SLR 47 (folld)

CDM v CDP [2021] 2 SLR 235 (folld)

CIM v CIN [2021] 4 SLR 1176 (folld)

Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd [2010] SGHC 80 (folld)

PT Prima International Development v Kempinski Hotels SA [2012] 4 SLR 98 (refd)

Facts

The appellant (“CKH”) sold its timber concession interests in Indonesia to the respondent (“CKG”) in exchange for US$8m and a three-year supply of round logs for use in CKH's plywood factory. The parties concluded a master agreement to this effect, to which were annexed various further agreements. Within a few years, CKH had accumulated a substantial outstanding debt, and the parties reached an agreement recorded in signed meeting minutes (“the Minutes”). After CKH failed to make payments as agreed, and CKG made reduced log deliveries – with each side attributing its own failure to the other's – CKG wrote to CKH claiming to treat CKH's outstanding indebtedness as a basis, under cl 4 of the Minutes, for eliminating both any shortfall in log deliveries up to that date and any future obligation to deliver logs after that date.

CKH commenced arbitration proceedings in Singapore, claiming substantial damages for CKG's failure to supply it with timber logs under an agreement that had been annexed to the parties' master agreement. CKG maintained its claim to treat CKH's outstanding indebtedness as discharging it from all past and future liability to deliver logs.

The arbitral tribunal (“the Tribunal”), in its award (“the Award”), accepted CKH's submission (raised only in its Reply to Statement of Defence and Defence to Counterclaims) that CKG's obligation to deliver quantities of logs operated independently of any payments it might or might not make in the relevant period, and that, even thereafter, it was incumbent on CKG to have attempted to settle any outstanding claim in an amicable manner under cl 4 of the Minutes before ceasing or reducing any round log supply. Accordingly, the Tribunal held CKG liable for damages for failure to supply the logs in appropriate quantities. However, the Tribunal did not give CKG credit for, or make any award in relation to, CKH's outstanding debt relating to taxes, levies and freight claimed by CKG (“the Principal Debt”), on which CKG had relied when invoking cl 4 of the Minutes. On this basis, CKG applied to the Tribunal for an additional award in its favour in respect of the Principal...

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3 cases
  • COT v COU and others and other appeals
    • Singapore
    • Court of Appeal (Singapore)
    • 11 October 2023
    ...statements, evidence adduced, and closing submissions (CDM and another v CDP [2021] 2 SLR 235 at [18]). In CKH v CKG and another matter [2022] 2 SLR 1, this court made clear at [16] that the exercise of determining whether a matter falls or has come within the scope of the agreed reference ......
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    ...[101] [2007] 4 All ER 951. [102] [2011] 1 AC 763. [103] 572 US 25 (2014). [104] [2011] 4 SLR 305. [105] [2022] 1 SLR 47 at [11]. [106] [2022] 2 SLR 1 at [107] [2019] 1 SLR 263 at [65]-[79]. [108] [2011] 1 HKLRD 707 at [21]-[22]. [109] [2012] 4 SLR 98 at [28]-[29]. [110] [2020] 2 SLR 453 at ......
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    ...that the failure by an arbitral tribunal to address an issue submitted to it for decision can constitute a breach of the fair hearing rule: CKH v CKG and another matter [2022] 2 SLR 1 (“CKH”) at [12], citing Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd......

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