L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 18 October 2012
• Date: 18 October 2012
• Docket Number: Civil Appeals Nos 17 and 26 of 2012
• Court: Court of Appeal (Singapore)

L W Infrastructure Pte Ltd

Plaintiff

and

Lim Chin San Contractors Pte Ltd and another appeal

Defendant

[2012] SGCA 57

Chan Sek Keong CJ

,

Andrew Phang Boon Leong JA

and

Sundaresh Menon JA

Civil Appeals Nos 17 and 26 of 2012

Court of Appeal

Arbitration—Award—Additional award—Recourse against award—Declaration that additional award be null and void—Arbitrator rendered additional award within three days of request and without response from other party—Whether court could declare additional award a nullity on basis that s 43 (4) Arbitration Act (Cap 10, 2002 Rev Ed) not satisfied—Sections 43 (4), 47 and 48 (1) (a) (v) Arbitration Act (Cap 10, 2002 Rev Ed)

Arbitration—Award—Additional award—Recourse against award—Setting aside—Arbitrator rendered additional award within three days of request and without response from other party—Whether additional award could be set aside for breach of natural justice—Sections 43 (4), 44 and 48 (1) (a) (vii) Arbitration Act (Cap 10, 2002 Rev Ed)

Lim Chin San Contractors Pte Ltd (‘the plaintiff’) was the subcontractor of LWInfrastructure Pte Ltd (‘the defendant’) for a building project. When a dispute arose between them, it was referred to arbitration. After the arbitrator rendered his final award which included a sum of post-award interest in favour of the defendant, the defendant wrote to the arbitrator, copying the plaintiff, to request an additional award of pre-award interest pursuant to s 43 (4) of the Arbitration Act (Cap 10, 2002 Rev Ed) (‘the Act’). The defendant claimed that the issue of pre-award interest had been presented during the arbitration proceedings but was omitted from the award. Three days after the defendant's request, and before receiving any response from the plaintiff, the arbitrator awarded the defendant a further sum of $274,114.61 as pre-award interest. The plaintiff immediately objected and shortly after filed an originating summons in the High Court praying for a declaration that the additional award was a nullity or that it be set aside under s 48 (1) (a) (vii) of the Act.

The High Court judge (‘the Judge’) set aside the additional award under s 48 (1) (a) (vii) of the Act in favour of the plaintiff, but decided against declaring the additional award a nullity. The Judge held that even if s 43 (4) of the Act did not afford a basis for the issuance of the additional award, this was not a ground upon which the court could declare the additional award a nullity. The court therefore had no jurisdiction to make the declaration sought by the plaintiff. However, the Judge held that before the arbitrator could be satisfied that s 43 (4) of the Act applied, both parties should have had the opportunity to be heard on this issue. The Judge held that the audi alteram partem rule of natural justice (ie, a party's right to be heard) had been breached and that prejudice was suffered by the plaintiff. The Judge accordingly set aside the additional award under s 48 (1) (a) (vii) of the Act.

Civil Appeal No 26 of 2012 was filed by the plaintiff against the Judge's decision not to declare the additional award a nullity; while Civil Appeal No 17 of 2012 was filed by the defendant against the Judge's decision to set aside the additional award under s 48 (1) (a) (vii) of the Act.

Held, dismissing the appeals:

(1) Given the clear legislative intent to align domestic arbitration laws with the UNCITRAL Model Law on International Commercial Arbitration (‘the Model Law’), the court was entitled and indeed even required to have regard to the scheme of the International Arbitration Act (Cap 143 A, 2002 Rev Ed) or the Model Law for guidance in the interpretation of the Act, unless a clear departure was provided for in the Act: at [34].

(2) The effect of Art 5 of the Model Law was that in relation to matters governed by the Model Law the power of the court to intervene in arbitration was confined to those instances which were provided for in the Model Law. Any general or residual powers arising from sources other than the Model Law were excluded. This was how s 47 of the Act should be construed as well. In situations expressly regulated by the Act, the courts should only intervene where so provided in the Act: at [36], [38] and [39].

(3) In the present case, the plaintiff's complaint that s 43 (4) of the Act did not apply and that the arbitrator therefore had no basis to render the additional award was precisely a grievance which had been expressly regulated under s 48 (1) (a) (v) of the Act. If the arbitrator was wrong to render the additional award because s 43 (4) of the Act did not in fact empower him to do so, the ‘arbitral procedure’ leading to the issuance of the additional award would be contrary both to ‘the agreement of the parties’ and also ‘the provisions of this Act’. There was therefore no basis for finding that there was any residual or concurrent jurisdiction for the court to make a declaration as to the validity of the additional award: at [40] and [42].

(4) In determining for the purposes of s 48 (1) (a) (vii) of the Act whether there was ‘prejudice’ when the rules of natural justice had been breached, it was never in the interest of the court, much less its role, to assume the function of the arbitral tribunal. The real inquiry was whether the breach of natural justice was merely technical and inconsequential or whether as a result of the breach, the arbitrator was denied the benefit of arguments or evidence that had a real as opposed to a fanciful chance of making a difference to his deliberations. The test was thus whether the material could reasonably have made a difference to the arbitrator, rather than whether it would necessarily have done so: at [54].

(5) In the present case, there were two different questions in respect of which the plaintiff could have expected to be afforded a reasonable opportunity to be heard: (a)firstly, whether the requirements of s 43 (4) of the Act were met - ie, whether pre-award interest was a presented claim that had been omitted from the final award (‘the jurisdictional question’); and (b)secondly, if the requirements of s 43 (4) of the Act were met, whether pre-award interest should be awarded, and if so, to what extent (‘the substantive question’): at [58].

(6) The ‘notice requirement’ in Art 33 (3) of the Model Law and s 43 (4) of the Act (ie, ‘with notice to the other party’) was included on the premise that embedded within it was the requirement that the ‘other party’ be afforded the opportunity to respond to the requesting party's request for an additional award. The ‘other party’ (ie, the plaintiff in the present case) should therefore have been given a reasonable opportunity to be heard on the jurisdictional question - ie,on the applicability of s 43 (4) of the Act - prior to the arbitrator coming to his decision: at [68] and [74].

(7) Article 33 (3) of the Model Law was deliberately drafted so as to allow tribunals to make additional awards on claims that might well require further hearings or evidence, as well as claims that might not require further hearings or evidence, as long as the claim had been presented as part of the tribunal's mandate. It should not be interpreted as excluding the opportunity for evidence to be led or hearings to be held on the substantive question if the tribunal deemed that this was necessary: at [70] and [73].

(8) In the present case, the short time given for the plaintiff to respond after the defendant had submitted its request to the arbitrator was unreasonable and a breach of the plaintiff's right to be heard on the jurisdictional question had therefore occurred: at [75] and [76].

(9) The ‘prejudice’ which had to be demonstrated was conceptually distinct from the fact of the breach. The two arguments on the jurisdictional question which the plaintiff could have submitted before the arbitrator were: (a)firstly, that the claim for pre-award interest was ‘not presented’ by the defendant (‘the first argument’); and (b)secondly, that the claim for pre-award interest was ‘not omitted’ by the arbitrator (‘the second argument’): at [78].

(10) Since the defendant's claim for interest in its ‘Points of Claims’ was definitely wide enough to cover pre-award interest, no actual or real prejudice could be shown to have been suffered by the plaintiff in having been deprived of the right to advance the first argument as it could not reasonably have made any difference to the outcome: at [80] and [81].

(11) However, the plaintiff suffered prejudice in being denied the opportunity to present the second argument as it could reasonably have made a difference to the outcome. This was because the final award could be construed as the arbitrator having decided to confine his award to post-award interest only, such that the rendering of the additional award would in effect be a varying of the final award contrary to s 44 (2) of the Act: at [87] and [88].

(12) The plaintiff was also not given the opportunity to be heard at all on the substantive question, and did suffer prejudice because the arguments the plaintiff might have made (ie, whether the period of pre-award interest should have been reduced) could reasonably have affected the outcome of the arbitrator's decision. The Judge's decision to set aside the additional award was therefore affirmed: at [90] to [93].

Denmark Skibstekniske Konsulenter A/S I Likvidation v Ultrapolis 3000 Investments Ltd [2010] 3 SLR 661 (refd)

Lim Chin San Contractors Pte Ltd v L W Infrastructure Pte Ltd [2012] 2 SLR 1040 (refd)

L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2011] 4 SLR 477 (refd)

Mitsui Engineering & Shipbuilding Co Ltd v Easton Graham Rush [2004] 2 SLR (R) 14; [2004] 2 SLR 14 (refd)

PTA suransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR (R) 597; [2007] 1 SLR 597 (refd)

Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR (R) 86; [2007] 3...