Koh Bros Building and Civil Engineering Contractor Pte Ltd v Scotts Development (Saraca) Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 21 September 2002
• Date: 21 September 2002
• Docket Number: Originating Motion No 600013 of
• Court: High Court (Singapore)

Koh Bros Building and Civil Engineering Contractor Pte Ltd

Plaintiff

and

Scotts Development (Saraca) Pte Ltd

Defendant

[2002] SGHC 223

Judith Prakash J

Originating Motion No 600013 of 2002

High Court

Arbitration–Arbitral tribunal–Misconduct–Misconduct of arbitrator not necessarily a slur on character–Test for determining misconduct–Basic duty of arbitrator–Whether misconduct amounted to breach of natural justice–Whether misconduct sufficient for arbitrator to be removed–Section 17 (1) Arbitration Act (Cap 10, 1985 Rev Ed)

The respondent (“SD”) employed the applicant (“KB”) as contractors for a building project. Disputes arose when SD withheld payment which KB claimed it was entitled to for work done.

KB then submitted the dispute to arbitration, and later applied for an interim award for the payment (“the application”), to which SD raised certain preliminary objections. The arbitrator decided to hear these objections first before deciding whether to hear the application.

Following the hearing, the arbitrator decided not to hear the application as it required him to hear evidence of all the facts and circumstances such that the award, if rendered, would be final rather than interim (the “decision”).

KB alleged that there was a breach of natural justice and applied for the arbitrator's removal as he had: (a) decided not to hear the application on grounds that went to the merits of the application rather than on the basis of SD's objections; and (b) ruled on the merits of the application by prejudging the issues and not giving KB the right to be heard.

Held, allowing the motion with costs to the applicant:

(1) The test for determining whether an arbitrator had “misconducted” himself was whether, objectively, his conduct in the case was such that the parties no longer had confidence in him and his conduct would make a reasonable person think that there was a real likelihood that he could not, or would not, fairly determine the relevant issues in the arbitration: at [33] and [34].

(2) The arbitrator misconducted the arbitration, and there was a breach of natural justice. First, he based his decision on the point that the application was not suitable for summary determination, which was not within the agreed bases for the hearing. Further, he failed to give KB the chance to make submissions and tender evidence on that point. Second, he had himself decided that all he intended to rule on at the hearing was whether the application ought to be heard by reason of SD's preliminary objections, and his decision did not relate to these objections: at [44] and [45].

(3) The arbitrator had to be removed. The basic duty of an arbitrator was to listen to both sides of the argument and give each side a chance to submit on all the relevant points; his breach of that duty created a doubt as to whether there could be a fair adjudication of the outstanding issues in the arbitration: at [47].

[Observation: Once the arbitrator made it clear that he would not reconsider his decision, KB should have taken out the present application, if it wanted him to be removed. It should not have harangued him or sought to influence his decision by brandishing a Queen's Counsel's opinion in his face as this left a strong impression of bullying: at [49].]

Elissar, The [1984] 2 Lloyd's Rep 84 (folld)

Lian Soon Construction Pte Ltd v Guan Qian Realty Pte Ltd [1999] 1 SLR (R) 1053; [1999] 2 SLR 233 (refd)

Modern Engineering (Bristol) Ltd v C Miskin & Son Ltd [1981] 1 Lloyd's Rep 135; (1980) 15 Build LR 82 (folld)

Tropicon Contractors Pte Ltd v Lojan Properties Pte Ltd [1989] 1 SLR (R) 591; [1989] SLR 610 (refd)

Arbitration Act (Cap 10, 1985 Rev Ed) s 17 (1) (consd)

V K Rajah SC and Simon Cheong (Rajah & Tann) for the applicant

Wong Meng Meng SC, Andre Maniam and Elly Tham (Wong Partnership) for the respondent.

Judgment reserved.

Judith Prakash J

1 Ihave before me an originating motion filed by Koh Bros Building and Civil Engineering Contractor Pte Ltd (“the contractors”) for an order that Mr John Chung be removed as arbitrator in an arbitration between the contractors and Scotts Development (Saraca) Pte Ltd (“the developers”). The application is made pursuant to s 17 (1) of the Arbitration Act (Cap 10) (“the Act”) on the ground that the arbitrator has misconducted himself and/or the arbitration proceedings. It is opposed by the developers but the arbitrator himself has taken no part in the proceedings.

The works and the claims

2 In September 1995, the developers engaged the contractors to construct a housing project at Saraca Road/Begonia Road, Singapore (“the works”). The contract price was $17,861,724.20 as adjusted in accordance with the contract; the contract period was 50 weeks; the original completion date was 18 October 1996 and liquidated damages were payable at $8,000 per day of delay.

3 The works were not completed on time. As such, on 21 October 1996, the architect issued a delay certificate (the “original delay certificate”) in accordance with cl 23 of the contract. This started the clock running for the payment of liquidated damages from 18 October 1996 up to the completion of the works. Thereafter, on three separate occasions, the architect granted extensions of time, totalling 130 days in all, successively extending the completion date.

4 Three termination of delay certificates were issued by the architect to effect the grants of extension of time and three further delay certificates were also issued as the works remained incomplete by the respective extended contract completion dates. By his successive grants of extensions of time, the architect reduced the contractors' liability for liquidated damages by some $1,040,000.

5 In the course of the works, the architect also issued various certificates for payment in favour of the contractors. The developers paid all of these certified sums save for a sum of $1,729,561.80 which they withheld on account of the liquidated damages that had accrued pursuant to the delay certificates.

6 On the face of the architect's certificates as they currently stand, the developers owe the contractors $1,729,561.80 as payment for works done and the contractors in turn owe the developers $4,511,456.68 for liquidated damages up to 4 November 1998.

Recovery proceedings - initial steps

7 The contractors disputed the developers' deduction of $1,729,561.80 and sought to recover that amount. In February 1999, they commenced High Court Suit No 284 of 1999. In this action, they sought a declaration that the original delay certificate, the first two termination of delay certificates and the first two further delay certificates were invalid and that the deduction of liquidated damages by the developers based on those delay certificates was also invalid. They claimed the deducted sum of $1,729,561.80. The contractors applied for summary judgment on their claim and the developers applied for the proceedings to be stayed pending arbitration. The developers also resisted the summary judgment application on the basis that all certificates issued were valid and the sum of $1,729,561.80 had been properly deducted.

8 The assistant registrar granted an order in terms of the contractors' summary judgment application. The developers appealed successfully and the judge set aside the judgment and stayed further proceedings in the action pending arbitration.

9 On 5 April 2000, the contractors gave notice of arbitration. In May 2000, Mr John Chung (whom the contractors had nominated) was appointed as arbitrator. In the arbitration proceedings, the contractors are claiming, amongst other things, additional time to complete the works, damages for loss and expense arising from delays in the works (for which the contractors are alleging the developers and/or their agents were responsible) and outstanding payments for the works. The amounts claimed include the amount of $1,729,561.80 certified due by the architect but withheld on the basis of the delay certificates issued.

Initial proceedings in the arbitration

10 On 21 July 2000, the arbitrator gave directions for the filing of pleadings by the parties. At that time, the contractors were represented by M/s Rajah & Tann whilst the developers were represented by M/s Wong Tan & Molly Lim. The contractors duly filed their points of claim.

11 Some time thereafter, the developers changed lawyers and appointed M/s Wong Partnership as their new solicitors. On 11 April 2001, the developers' points of defence and counterclaim were filed on their behalf by their new solicitors. On reading the points of defence and counterclaim, the contractors took the view that the developers had changed their position on the validity of the termination of delay certificates and the further delay certificates and were...