L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd and another appeal

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 18 October 2012
• Neutral Citation: [2012] SGCA 57
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeals Nos 17 and 26 of 2012
• Published date: 14 November 2012
• Year: 2012
• Hearing Date: 16 August 2012
• Plaintiff Counsel: Mr Tan Liam Beng and Ms Eng Cia Ai (Drew & Napier LLC)
• Defendant Counsel: Mr Chia Swee Chye Kelvin (Samuel Seow Law Corporation)
• Subject Matter: Arbitration,Award
• Citation: [2012] SGCA 57

Sundaresh Menon JA (delivering the judgment of the court): Introduction

There are two appeals before us arising out of the judgment of the High Court Judge (“the Judge”) in Lim Chin San Contractors Pte Ltd v L W Infrastructure Pte Ltd [2012] 2 SLR 1040 (“the Judgment”). One appeal (Civil Appeal No. 26 of 2012 (“CA 26/2012”)) was filed by Lim Chin San Contractors Pte Ltd (“the Plaintiff”) while the other (Civil Appeal No. 17 of 2012 (“CA 17/2012”)) was filed by L W Infrastructure Pte Ltd (“the Defendant”).

These appeals raise a number of important questions concerning the law of arbitration. Just what do the rules of natural justice require of an arbitrator? To what extent do these rules apply even to ancillary applications? And what is the threshold a party must cross if it is to obtain any relief even assuming it can show that an arbitrator has failed to observe the rules of natural justice? We are also presented with the occasion to consider the extent to which the Court retains any supervisory powers over arbitration beyond the expressly provided avenues for recourse that are spelt out in the relevant legislation.

Facts

The Plaintiff was the Defendant’s sub-contractor for a building project. The Plaintiff failed to complete certain works by the agreed completion date, and the Defendant subsequently terminated the sub-contract. This gave rise to a dispute between them.

That dispute was referred to arbitration before an arbitrator, one Mr Johnny Tan Cheng Hye (“the Arbitrator”), pursuant to a notice of arbitration served on 22 June 2004 by the Defendant on the Plaintiff. In the arbitral proceedings, the Defendant was the claimant while the Plaintiff was the respondent. It was not disputed that the Arbitration Act (Cap 10, 2002 Rev Ed) (“the Act”) governed the proceedings.

The Arbitrator rendered his final award (“the Final Award”) on 29 June 2010. The Plaintiff was awarded the sum of $341,391.10 with simple interest at the rate of 5.33% per annum from the date of the award.¹ Both parties were dissatisfied with the Arbitrator’s decision and appealed against it on questions of law arising out of the Final Award. The High Court dismissed the Plaintiff’s appeal and substantially allowed the Defendant’s appeal and the Final Award was remitted to the Arbitrator for his reconsideration and final disposal (see LW Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2011] 4 SLR 477).

Following this, the Arbitrator rendered his Supplementary Award No 2 (Remitted Issues) on 21 September 2011 (“the Second Supplementary Award”), under which the Defendant was awarded the sum of $945,000 by way of liquidated damages.² In satisfaction of this sum, the Plaintiff was ordered to pay the Defendant the sum of $603,608.90, after setting off the sum of $341,391.10 that had earlier been found to be due to the Plaintiff under the Final Award.³

The Arbitrator expressly dealt with interest in the Second Supplementary Award, and as he had done in the Final Award, he awarded the successful party (ie, the Defendant) interest at the rate of 5.33% per annum on the sum of $603,608.90 from the date of the Second Supplementary Award. In short, on both occasions, only post-award interest was awarded. The relevant portion of the Second Supplementary Award states:⁴

Award FOR THE REASONS GIVEN ABOVE,

I ORDER and AWARD that:

I. The [Plaintiff] do pay the [Defendant] the sum of S$603,608.90 (this sum includes the sum of S$341,391.10 awarded to the [Plaintiff] in the earlier Award); II. The [Plaintiff] pay the [Defendant] simple interest at the rate of 5.33% p.a. on the sum of S$603,608.90 from the date of this Supplementary Award; III. Costs of the reference and costs of the arbitration shall be fully borne by the [Plaintiff]. Such costs if not agreed to be taxed.

[emphasis in original]

On 17 October 2011, almost four weeks after the issuance of the Second Supplementary Award, the Defendant’s solicitors wrote a letter to the Arbitrator (copied to the Plaintiff’s solicitors) requesting an additional award for “pre-award interest”. The relevant portion of the letter is set out below:⁵ 2. The [Defendant] had made a claim for interest to be paid by the [Plaintiff]. This is prayed for in the Points of Claim (Amendment No. 3). The claim for interest, as prayed for by the [Defendant] would include both pre-award as well as post-award interest. 3. However, we note that the Tribunal had omitted from the Supplementary Award No. 2 (Remitted Issues) the award of pre-award interest on the sum of $603,608.90 to the [Defendant]. The Tribunal had only awarded post-award interest on the sum of $603,608.90 in the Supplementary Award No. 2 (Remitted Issues). 4. It is provided in section 43(4) of the Arbitration Act (‘the Act’) as follows:-

Unless otherwise agreed by parties, a party may, within 30 days of receipt of the award and upon notice to the other party, request the arbitral tribunal to make an additional award as to claims presented during the arbitration proceedings but omitted from the award.

5. Pursuant to section 43(4) of the Act, our clients hereby request the Tribunal to make an additional award as to a claim for pre-award interest presented during the arbitration proceedings but omitted from the Supplementary Award No. 2 (Remitted Issues).

[emphasis in original]

The Arbitrator responded three days later even though the Plaintiff’s solicitors had not responded to the request. In his reply dated 20 October 2011, the Arbitrator stated:⁶ 1. I refer to the letter from [the Defendant’s solicitors] dated 17 Oct 2011. 2. I enclose herewith my Additional Award issued pursuant section 43(4) [sic] dealing with pre-award interest on the sum of $603,608.90 awarded.

The additional award (“the Additional Award”) was for a further sum of $274,114.61 payable to the Defendant as pre-award interest calculated on the sum of $603,608.90 from 13 January 2003 to the date of the Second Supplementary Award. The Arbitrator stated that 13 January 2003 was selected as the date from which pre-award interest would be payable because liquidated damages accrued then.⁷ At the time he issued the Additional Award, the Arbitrator had not heard submissions on issues such as (a) the principal amount that should carry interest, (b) the rate of interest, (c) the time from which interest should be awarded, or (d) why the situation in favour of the Defendant should differ from that which applied when he made his Final Award in favour of the Plaintiff and confined interest to post-award interest (see above at [5]).

The Plaintiff’s solicitors protested on the same day, taking issue with the Additional Award having been made prior to the Plaintiff having the opportunity to present its “position and/or arguments on the issue of pre-award interest”.⁸ In a letter to the Arbitrator, the Plaintiff’s solicitors stated:⁹

For the record, we had intended to write to you today to rebut the [Defendant’s] request or application on inter alia the basis that the claim presently sought by the [Defendant] was not omitted as such by the Tribunal since the [Defendant] did obtain interest on its claim. We would also have pointed out that, in [the Second Supplementary Award], only post-award interest was added … the Tribunal is functus officio in regard to the award of interest for the reasons stated above. [emphasis in original]

The Arbitrator responded on 21 October 2011, stating:¹⁰ 2. … I held my hands for 3 days till 20 Oct 2011 pending a response from [the Plaintiff]. Since there was no objection raised and no interim reply to suggest that the [Plaintiff] intended to object to the request, I proceeded to deal with the application. 3. I am also surprised by your suggestion that because the original award had only dealt with post-award interest that it was my intention to exercise my discretion on pre-award interest. It is obvious from [the Additional Award] that it was indeed an oversight in the original award. If it was my intention not to award pre-award interest, I would have refused the [Defendant’s] application.

The Plaintiff’s solicitors replied to this letter and this elicited a final reply from the Arbitrator on 27 October 2011 which stated in material part:¹¹ 2. As stated in my letter dated 21 Oct 2011, there was no interim reply from [the Plaintiff] to suggest that [the Plaintiff] intended to object to the application for the Additional Award. ... Having not heard from [the Plaintiff] I had assumed that [the Plaintiff] did not object to the application. 3. In any event … the basis of your objection is that you assumed to be able to read my intention that I had chosen to exercise my discretion to award only post award interest. If that had been the case I would have rejected [the Defendant’s] application for pre-award interest. It was because I had in fact overlooked to order pre-award interest that I had issued the Additional Award.

A brief observation may be made on the Arbitrator’s response. It appears on the one hand that the Arbitrator proceeded to make the Additional Award because he inferred from the Plaintiff’s three-day silence that there was no objection to this. The corollary to this is that if the Plaintiff had objected, the Arbitrator would have considered this with an open mind. But on the other hand, the Arbitrator appeared also to be saying that he had already formed the intention to award pre-award interest in the manner he eventually did in the Additional Award but had simply overlooked reflecting this in the Second Supplementary Award. While this might explain the seeming haste with which the Additional Award was issued, it raises other questions. If indeed the Arbitrator had already arrived at a decision and had simply forgotten to mention it in the earlier award, then it is unclear on what basis he had done so since he had not yet been...