Convexity Ltd v Phoenixfin Pte Ltd
Jurisdiction | Singapore |
Judge | Andre Maniam JC |
Judgment Date | 19 April 2021 |
Docket Number | Originating Summons No 1158 of 2020 |
Court | High Court (Singapore) |
[2021] SGHC 88
Andre Maniam JC
Originating Summons No 1158 of 2020
General Division of the High Court
Arbitration — Award — Recourse against award — Setting aside — Tribunal dismissing application by respondents in arbitration to amend its pleadings to raise previously unpleaded issue — Tribunal subsequently asking claimant to make submissions on unpleaded issue during oral reply submissions after evidentiary hearing concluded and closing submissions tendered — Tribunal labouring under misapprehension that there had been agreement between parties for late introduction of unpleaded issue and that claimant had agreed to introduction of unpleaded issue — Tribunal failing to engage with claimant's objections to introduction of unpleaded issue — Respondents arguing that tribunal was entitled to introduce unpleaded issue of its own initiative as it raised questions of public policy — Whether tribunal had acted in breach of natural justice — Whether breach of natural justice caused real prejudice to claimant — Whether unpleaded issue raised public policy considerations — Whether tribunal had in fact introduced unpleaded issue of its own initiative — Whether tribunal was entitled to introduce unpleaded issue even if it had not been properly placed before it — Whether award ought to be set aside — Section 24(b) International Arbitration Act (Cap 143A, 2002 Rev Ed)
Held, allowing the setting-aside application:
(1) The burden of proving that a contractual term was a penalty rested on the party asserting this. Since this was a question of fact and law, it had to be pleaded: at [33].
(2) The burden was on the first respondent to prove that the clauses on the Make-Whole Amount and interest were penalty clauses. However, the Penalty Issue was never pleaded. It was not in the first respondent's D&CC and neither did the tribunal allow the Amendment Application: at [32] and [33].
(3) The tribunal's assertion at the 17 June 2020 Oral Reply Hearing that the Penalty Issue had been in issue in the Arbitration as of the 13 May 2020 Teleconference was premised on a non-existent agreement between the parties. Although there was no transcript or contemporaneous record of the 13 May 2020 Teleconference, given that the claimant's counsel had objected to the introduction of unpleaded issues in correspondence leading up to the 13 May 2020 Teleconference, the claimant would not have agreed on 13 May 2020 to the introduction of issues which were unpleaded, irrelevant, and not at issue in the Arbitration. In the setting-aside application, the respondents did not contend that this happened either. The respondents also did not dispute the claimant's account of what transpired at the 13 May 2020 Teleconference, namely, that the claimant's counsel had objected to the Penalty Issue on the ground of it being unpleaded and the claimant had refused to accept that the Penalty Issue would thereafter become a live issue in the Arbitration. The conduct of the first respondent subsequent to the 13 May 2020 Teleconference also showed that it did not thereafter act as if the Penalty Issue were in issue in the Arbitration regardless of the state of the pleadings. This was evident from the Amendment Application filed by the first respondent on 18 May 2020. During the evidentiary hearing, the parties also did not conduct themselves as if the Penalty Issue were in issue in the Arbitration. Thus, until the end of the evidentiary hearing, as far as the parties were concerned, there was no agreement or ruling that the Penalty Issue was in issue in the Arbitration: at [35], [37], [41], [44], [47], [48], [51], [53], [55] and [56].
(4) The tribunal failed to engage with the claimant's subsequent objections to the introduction of the Penalty Issue. In PO 3, despite the claimant's counsel's earlier protestations that the Penalty Issue was not an issue in the Arbitration, the tribunal persisted in saying that the Penalty Issue had been introduced by agreement of the parties. The tribunal also failed to engage with the claimant's objections to the Penalty Issue being introduced into the arbitration: at [63], [70], [73] and [76].
(5) The tribunal's perspective as to how the Penalty Issue came to be introduced into the Arbitration, which was set out in the Award, showed that the tribunal had persisted in its thinking, as stated at the 17 June 2020 Oral Reply Hearing, that the claimant had agreed to the introduction of the Penalty Issue in the Arbitration. Conspicuously, the tribunal also did not refer to the 7 May 2020 E-mail in which the claimant's counsel had objected to the Penalty Issue (among other English law issues identified by the first respondent in its application for Mr M to give expert evidence) as being unpleaded and not at issue in the Arbitration. The Tribunal therefore failed to consider the claimant's objections to the introduction of the Penalty Issue into the Arbitration: at [82], [84] and [85].
(6) By erroneously thinking that the claimant had agreed to the late introduction of the Penalty Issue into the Arbitration and failing to consider the claimant's objections to the same, despite these having been articulated clearly to the tribunal, the tribunal had acted in breach of natural justice. The claimant was denied the opportunity to address its objections to the mind of the tribunal, and the tribunal also did not bring its mind to bear on an important aspect of the dispute before it: at [87] and [88].
(7) The breach of natural justice caused the claimant actual, real prejudice. Had the tribunal considered the claimant's objections, it might have decided not to allow the late introduction of the Penalty issue into the Arbitration, and that would not have been a basis on which to dismiss the claimant's claims. It could reasonably have made a difference to the outcome had the tribunal considered what it had failed to consider: at [89].
(8) The tribunal's persistent failure to engage with the claimant's objections to the Penalty Issue being introduced into the Arbitration did not fall within the range of what a reasonable and fair-minded tribunal might have done, and the parts of the Award affected by the Penalty Issue ought properly to be set aside: at [107].
(9) The respondents' argument that the tribunal introduced the Penalty Issue of its own initiative was premised on the Penalty Issue not being in the Arbitration up to the point of the 17 June 2020 Oral Reply Hearing. That, however, was not the position of the tribunal. The tribunal never regarded the Penalty Issue to have been introduced of its own initiative; instead, it regarded the issue as having been introduced by the agreement of the parties as of 13 May 2020: at [90].
(10) The issue of whether a clause was a penalty did involve public policy considerations. However, where such an issue was not properly before the decision maker, a decision on the issue was susceptible to being set aside. The tribunal had to act fairly in exercising its procedural powers under the SIAC Rules. Article 18 of the Model Law also required that the parties be treated with equality and each party be given a full opportunity of presenting his case, and an award made in breach of Art 18 was susceptible to being asset aside: at [92] and [93].
(11) The fact that a tribunal could take cognisance of public policy as a question of law did not give it licence to act unfairly or in breach of natural justice. The requirement of due process was an essential limitation on the wide autonomy that the tribunal had with respect to procedure: at [94] and [95].
(12) Had the tribunal considered the claimant's objections to the late introduction of the Penalty Issue, it might have decided not to allow the first respondent to introduce the issue, and the tribunal might then have decided against taking the initiative to introduce the issue itself: at [98].
(13) By making the Amendment Application to amend the D&CC to plead, among other things, the Penalty Issue as a defence, the first respondent did not act as if the Penalty Issue was already an issue in the Arbitration. The tribunal's rejection of the Amendment Application to plead the Penalty Issue signalled to the parties to that this was not an issue in the Arbitration. It did not help the respondents to say that there were earlier hints that the tribunal had regarded the Penalty Issue as being in issue in the Arbitration, when neither of the parties understood (or ought reasonably to have understood) those hints: at [100], [103] and [105].
(14) The relevant prejudice suffered by the claimant from the tribunal's failure to consider the claimant's objections to the late introduction of the Penalty Issue was the claimant's loss of the reasonable opportunity to keep the Penalty Issue out of the Arbitration. Had the tribunal considered and accepted those objections, there would be no question of the claimant having to put in further evidence or have its witnesses recalled. Indeed, had the claimant put in further evidence or recalled its witnesses, it might have waived its rights in relation to the tribunal's breach of natural justice: at [106] and [107].
(15) Since the Penalty Issue was never properly introduced into the Arbitration, the tribunal's dismissal of the claimant's claims on the basis of the Penalty Issue was outside the scope of the Arbitration, and this was a further ground justifying the setting aside of the affected parts of the Award: at [111].
(16) The parties had agreed to various matters of procedure in the Arbitration by way of PO 1 and PO 2. The 17 June 2020 Oral Reply Hearing, at which the Penalty Issue had been raised, was intended by the parties to be the last stage of the proceedings, before the issuance of the Award. By that stage, the parties were not expecting any further pleadings, document production, witness statements or oral testimony. What transpired after the 17 June 2020 Oral Reply Hearing...
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