Northern Elevator Manufacturing Sdn Bhd v United Engineers (Singapore) Pte Ltd (No 2)

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 26 March 2004
• Neutral Citation: [2004] SGCA 11
• Docket Number: Civil Appeal No 57 of 2003
• Date: 26 March 2004
• Year: 2004
• Published date: 29 March 2004
• Plaintiff Counsel: C R Rajah SC (Tan Rajah and Cheah) and Mary Ong (Hoh Law Corporation)
• Citation: [2004] SGCA 11
• Defendant Counsel: Monica Neo (ChanTan LLC)
• Court: Court of Appeal (Singapore)
• Subject Matter: Arbitrator allegedly failing to consider compensatory principle in assessment of damages,Section 28 Arbitration Act (Cap 10, 1985 Rev Ed),Award,Whether concerning general principle relating to assessment of damages or one-off point,Whether dispute raising issue of concern which is singular and unlikely to recur,Whether leave to appeal should have been granted by judge,Whether question of law,Appeal under Arbitration Act (Cap 10, 1985 Rev Ed),Recourse against award,Arbitration

26 March 2004

Choo Han Teck J (delivering the judgment of the court):

1 This was an appeal against the granting of leave to the respondent, United Engineers (Singapore) Pte Ltd (“United”), to appeal against an arbitration award, as well as an order that the award be remitted back to the arbitrator with the court’s opinion on the question of law which was the subject of the appeal. We were of the opinion that leave should not have been granted, and allowed the appeal. We now give our reasons.

Facts

2 The facts of this case were largely undisputed. By an agreement dated 15 April 1995, United engaged the appellant, Northern Elevator Manufacturing Sdn Bhd (“Northern”), to be its specialist sub-contractor for the design, manufacture, supply and delivery of passenger and cargo lifts to two blocks of warehouses at Pandan Crescent/West Coast Highway.

3 Northern carried out the sub-contract work. Disputes subsequently arose between the parties as to the quality of work done. United claimed damages against Northern for, inter alia, defective installation of the lifts. Northern, in turn, counterclaimed for, inter alia, the balance sum due under the agreement. The parties went for arbitration before Yang Yung Chong (“the Arbitrator”) in September 1998.

4 The arbitration was held in two parts – the first part dealt solely with the issue of liability, and the second part concerned the assessment of damages (if any). On 21 December 2001, the Arbitrator delivered his first interim award (“first award”) in which he found that Northern had breached the agreement in failing to supply adequately-sized guide rails and the corresponding safety devices for the lifts. He awarded United the cost of replacing the guide rails, the brackets and the safety devices (“cost of rectification”), which sum was to be assessed. He also found for Northern on its counterclaim, holding that United was liable to Northern for the balance sum due under the agreement.

5 The assessment of damages was held on 4 September 2002. At the hearing, United presented quotations in regard to the cost of rectification. United claimed a total of $975,160, comprising the following sums:

(a) $845,600 being the lowest of three quotations obtained from independent contractors for lift installation.

(b) $84,560 for “overheads and administrative costs” assessed at 10% of the cost of rectification; and

(c) $45,000 to hire a professional engineer to supervise the rectification and submit a Certificate of Supervision to the Commissioner of Building Control.

6 Northern strongly disputed the quotations presented by United. Koay Teng Cheang, executive director of Northern, submitted an affidavit which dealt with pricing of parts and materials for the rectification works. In addition, Northern submitted a quotation from V Elevator Pte Ltd (“V Elevator”), also a contractor for lift installation, which cited a price of $64,000 for dismantling and fixing of the guide rails. In all, Northern submitted that the cost of rectification, including the cost for labour, parts and materials, but excluding the fees for a professional engineer, would be $262,501.92.

7 Both parties summoned witnesses who were duly cross-examined on the vast differential in the quotes given. On 23 January 2003, the Arbitrator released his second interim award (“second award”), where he assessed the costs of rectification at $320,699.12. This comprised the following:

(a) $4,800 being the professional engineer’s fees for load test;

(b) $64,000 being labour for rectification works;

(c) $72,367.52 being the cost of 33kg guide rails and fishplates;

(d) $57,360 being the cost of car rail brackets c/w fastening items;

(e) $23,900 being the cost of modifying car/cwt combination brackets;

(f) $57,600 being the cost of safety gears c/w mounting brackets; and

(g) $40,671.60 being the cost of car guide shoes.

8 United took issue with the grounds on which the Arbitrator determined the cost of rectification, alleging that the Arbitrator had not applied the compensatory principle in his assessment of damages. United then filed a motion seeking leave to appeal against the second award.

Proceedings in the court below

9 Before the judge, both parties agreed that the arbitration proceedings were governed by the old Arbitration Act (Cap 10, 1985 Rev Ed) (“the Act”). The relevant provision of the Act is s 28 which reads:

Judicial review of arbitration awards

28.—(1) Without prejudice to the right of appeal conferred by subsection (2), the court shall not have jurisdiction to set aside or remit an award on an arbitration agreement on the ground of errors of fact or law on the face of the award.

(2) Subject to subsection (3), an appeal shall lie to the court on any question of law arising out of an award made on an arbitration agreement; and on the determination of such an appeal the court may by order —

(a) confirm, vary or set aside the award; or

(b) remit the award to the arbitrator or umpire for reconsideration together with the court’s opinion on the question of law which was the subject of the appeal,

and where the award is remitted under paragraph (b) the arbitrator or umpire shall, unless the order otherwise directs, make his award within 3 months of the date of the order.

10 United contended that the following question of law arose for determination:

Whether on the facts set out in his [second] award, there were any grounds upon which the Arbitrator could properly at law have assessed damages in the manner he did?

United conceded that for leave to be granted, it needed to show that the appeal came within the guidelines laid down by the House of Lords in Pioneer Shipping Ltd v BTP Tioxide Ltd [1982] AC 724 (“The Nema”) and in Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 (“The Antaios”), which were affirmed by this court in Hong Huat Development Co (Pte) Ltd v Hiap Hong & Co Pte Ltd [2000] 2 SLR 609.

11 The Nema-Antaios guidelines for determining whether leave should be granted may be summarised thus: Where the question of law raised is a “one-off” point, leave to appeal should not be given unless it is apparent to the court that the arbitrator was obviously wrong on the face of the record. Where the question does not concern a “one-off” issue, leave to appeal should not be given unless the court considers that a strong prima facie case has been made out that the arbitrator was wrong.

12 In this regard, United’s argument here and below was that the question of law in this case was one which concerned the general principles relating to the assessment of damages, and any decision on this point would have an impact on the assessment of damages in future claims. As such, United argued that this was not a “one-off” point of law. United then submitted that it was clear on the face of the record that the Arbitrator had erred.

13 Northern opposed the motion, contending that leave to appeal should not be granted because United had not identified a valid question of law arising from the award. It submitted that the question posed was actually a question of fact disguised as a question of law. In any case, Northern submitted that the question, even if valid, was a “one-off” point and did not warrant leave to be granted, since there was nothing obviously wrong with the Arbitrator’s decision.

Decision of the court below

14 In granting United leave to appeal, the judge stated that she was “of the view that the Arbitrator had erred in law on the amount of damages he awarded on their claim”. She found that the Arbitrator, in distinguishing the case of Ruxley Electronics and Construction Ltd v Forsyth [1995] 3 All ER 268, appeared to have thought that the compensatory nature of damages did not apply to the assessment of damages. This was a stance she found to be “untenable”. Further, she agreed that the Arbitrator had erred by overlooking several factors in his assessment of damages, namely:

(a) the fact that another contractor, and not Northern would be carrying out the rectification works;

(b) the fact that the quotation presented by United was the lowest of three received from reputable lift contractors and there was no basis to suggest that this quotation was not genuine or had been inflated; and

(c) the fact that the price of the brackets at $240 were based on 18kg brackets and not 33kg brackets as required by the rectification works.

15 The judge ordered that the award be remitted to the Arbitrator for reassessment, taking into account the errors stated in her judgment. Northern appealed.

Issues arising on appeal

16 Before this court, Northern submitted that the judge had erred on three grounds: first, Northern contended that the judge erred in accepting that a valid question of law arose from the award. Second, if at all there was a question of law, it was a matter unique to the facts of the present case and should have been regarded as a “one-off” point. As such, the Arbitrator needed to be obviously wrong before leave should have been granted. Lastly, Northern contended that the judge failed to consider the fact that the question of law did not substantially affect the rights of any party since it only concerned a differential in the assessment of damages of approximately $15,000.

Whether there was a question of law arising from the award

17 Section 28 of the Act confers upon the High Court a power to grant leave to appeal against an arbitration award if there is a “question of law”, arising from the award, to be determined. As a preliminary point, it is essential to delineate between a “question of law” and an “error of law”, for the former confers jurisdiction on a court to grant leave to appeal against an arbitration award while the latter, in itself, does not.

18 An opportunity arose for comment in Ahong Construction (S) Pte Ltd v United Boulevard Pte Ltd [2000] 1 SLR 749. In that case, G P Selvam JC (as he then was) stated at [7]:

A question of law means a point of law in controversy which...