CZT v CZU

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 13 September 2024
• Neutral Citation: [2024] SGCA(I) 6
• Hearing Date: 02 July 2024
• Docket Number: Civil Appeal from the Singapore International Commercial Court No 11 of 2023
• Citation: [2024] SGCA(I) 6
• Court: Court of Appeal (Singapore)
• Year: 2024
• Published date: 13 September 2024

[LawNet Admin Note: The following judgment is displayed as received from source]

James Allsop IJ (delivering the judgment of the Court):Introduction

This is an appeal from orders made by the Singapore International Commercial Court (the “SICC”) constituted by three judges, dismissing an application by the Appellant to set aside an arbitral award made in a dispute between the Appellant (as Respondent in the arbitration) and the Respondent to the appeal (as Claimant in the arbitration), on the ground, relevantly for the appeal, that the Appellant was denied natural justice in the making of the award.

For the reasons that follow, we dismiss the appeal.

The underlying dispute between the parties arose out of a contract underpinning the construction of a certain type of defence equipment (the “Equipment”). We will refer to the Respondent to the appeal, the Claimant in the arbitration, as the “State Party”. The Appellant, the Respondent in the arbitration, was, at all material times, a defence equipment fabricator which designed, manufactured and sold equipment of the type which was the subject of the relevant contracts. We will refer to the Appellant as the “Foreign Constructor”.

The arbitration concerned asserted liability for a defect in the Equipment. By a majority of the three-person arbitral panel (the “Majority”), the tribunal (the “Tribunal”) found the Foreign Constructor liable to the State Party under the relevant code of the State (the “Code”) for damages for the delivery of defective material packages from which the Equipment was constructed.

Central to the Appellant/Foreign Constructor’s claims that it was denied natural justice was how the members of the Majority reached their conclusion that the Respondent/State Party was owed a relevant contractual obligation by the Foreign Constructor that could found a liability in damages under the Code. That central question required the Tribunal to construe and interpret a number of related contractual documents. The asserted failure to afford the Foreign Constructor natural justice arose, it was submitted, from how the members of the Majority dealt with the material before them, including the contractual documents and the parties’ submissions. On the appeal, it was asserted that the Majority (a) failed “to properly consider” critical arguments made by the Foreign Constructor; and (b) arrived at conclusions based on facts and matters that were not pleaded or argued by the parties and beyond what was reasonably to be anticipated by them.

Before discussing the approach of the Majority, the relevant complaints of the Foreign Constructor, and the reasoning of the SICC, it is necessary to set out some factual background.

Factual background

The particular Equipment which was the subject of the dispute was the first piece of equipment in the second phase of the State Party’s defence equipment enhancement programme. This second phase was to involve the construction of several pieces of defence equipment by a constructor of the State concerned (the “Domestic Constructor”). In the first phase of the enhancement programme, a foreign constructor had built the first piece of equipment and delivered it. Thereafter the later pieces of equipment in the first phase were built by a domestic constructor from material packages delivered by the foreign constructor, with technical and advisory assistance of that foreign constructor. The second phase was to adopt this latter model of domestic construction by assembly of material packages delivered by a foreign constructor, with technical and advisory assistance being provided by it.

The contractual arrangements for the Equipment in question involved four contracts. The first was a contract referred to in next, and related, contracts as the “Provisional Contract” (although not so specifically entitled in its own terms) between the Foreign Constructor and the State Party which was entered into before the State Party had chosen the Foreign Constructor as the supplier at a time when there was another possible foreign constructor in contention, and before the State Party had chosen the Domestic Constructor from at least two possible domestic constructors.

The second contract was entitled “Agreement for Transfer of the Provisional Contract to the [Domestic Constructor]” (to which we will refer as the “Transfer Agreement”) between the State Party, the Foreign Constructor (now confirmed as the seller of the material packages and provider of the associated services) and the Domestic Constructor (now confirmed as the domestic constructor), for the transfer of the State Party’s rights arising from the Provisional Contract to the Domestic Constructor and the clarification of what rights and obligations remained with the State Party from the Provisional Contract.

The third contract was the “Supply Contract”, between the Foreign Constructor and the Domestic Constructor, to which the State Party was a signatory as witness, for the delivery of the material packages of necessary components for the construction of the Equipment.

The fourth contract was a domestic contract (the “Domestic Contract”) between the State Party and the Domestic Constructor for the construction and delivery of the Equipment.

Of these four contracts, the Domestic Contract had no relevant importance to the task of construction of the Provisional Contract and the Transfer Agreement undertaken by the Majority, and did not feature in the arguments before the SICC, nor on appeal.

Central to the debate between the parties was the proper construction and interpretation of the Provisional Contract and the Transfer Agreement, and the ascertainment as to whether, after the Transfer Agreement was entered into, the State Party was owed any contractual obligation by the Foreign Constructor breach of which could found a liability in damages under the Code should the material packages be defective (as they were).

The nature of the task performed by the Tribunal about which complaint is made

The feature of the task performed by the Majority about which complaint is now made was how they approached and executed their analysis in reaching their views as to the proper construction of the provisions of the Provisional Contract.

The appreciation of the nature of the task before the Tribunal is not unimportant. The Tribunal’s mandate was to reach a view about the applicable meaning of relevant commercial documents, considering, amongst other relevant matters, how the structure and language of the documents illuminated the meaning to be ascribed to the relevant provisions.

Meaning of words and contractual provisions can strike different people differently. It is rarely, if ever, a process solely of strictly logical thought. Linguistic context and nuance often play a part, even if not expressed. Reasonable minds may differ about weight to be given to different considerations and about the content of meaning to be taken from words in their context. Often these kinds of considerations are difficult to place into express reasoning. Any experienced commercial lawyer familiar with the task of construction of documents would be aware of such matters.

In the resolution of a dispute about meaning of this kind heard before a court or an arbitral tribunal with lawyers representing all parties (as was and is the case here), the parties should have (as they were given here) a full opportunity (subject to the rules of evidence and the relevant principles of construction and interpretation) to place before the court or tribunal all the arguments that they considered relevant to the advancement of their favoured construction. The task of the court or tribunal is to reach its view as to meaning. That may well not be reaching a view based on accepting in whole, or in sufficient part, one side’s submissions. The court or tribunal has the task or mandate to ascribe meaning, and, assisted by the submissions of the parties, is obliged to fulfil that task or mandate by reference to the contractual documents, any admissible evidence and in accordance with applicable legal principles governing the task. It is to be noted that no complaint was made on appeal or before the SICC about the correctness of the Majority’s application of the relevant State’s law to the interpretive task before them.

The importance of these general comments about the nature of the mandate or task performed by the Majority will become clearer in dealing with the Appellant/Foreign Constructor’s arguments that the “rules” of natural justice were infringed by the Majority: ie, that they were treated unfairly.

At this point, it is sufficient to say that it is not necessarily unfair (fairness being the essence of natural justice) for a court or a tribunal to come to its view about the meaning of a provision in a contract by drawing upon parts of the contract or relevant surrounding circumstances that may have been left unaddressed by the parties in what they chose to put to the court or tribunal to persuade the court or tribunal towards their asserted preferred meaning. The possibility of such inheres in the nature of the task or mandate to come to a view about meaning. Whether the parties have been treated unfairly will be evaluated by reference to all the circumstances and the principles attending the obligation to afford natural justice or as it is sometimes called, procedural fairness.

The SICC judgmentThe background facts

At [2]–[10] of its judgment in CZT v CZU [2023] SGHC(I) 22 (the “SICC Judgment”) the SICC set out the background facts. In addition to those to which we have referred, it concisely set out at [3]–[10] the provisions of the Provisional Contract and the Transfer Agreement which identified the issue of construction and other relevant matters (footnotes omitted):3Article 1.1 of the Provisional Contract set out the “main obligations” of the plaintiff...