Progen Engineering Pte Ltd v Chua Aik Kia (trading as Uni Sanitary Electrical Construction)

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 07 September 2006
• Neutral Citation: [2006] SGHC 159
• Docket Number: Originating Motion No 23 of 2005
• Date: 07 September 2006
• Published date: 12 September 2006
• Year: 2006
• Plaintiff Counsel: Philip Fong (Harry Elias Partnership) and Lim Khoon (Lim Hua Yong & Co)
• Citation: [2006] SGHC 159
• Defendant Counsel: Gregory Vijayendran and Gandhi (Wong Partnership)
• Court: High Court (Singapore)
• Subject Matter: Whether grounds existing for setting aside of arbitral award made by arbitrator,Whether arbitrator's actions or omissions motivated by bias or error of law or fact,Whether application for leave to appeal against arbitral award on questions of law under s 28(2) Arbitration Act should be granted,Section 28 Arbitration Act (Cap 10, 1985 Rev Ed),Appeal under Arbitration Act,Arbitration,Whether arbitrator misconducting himself or proceedings under s 17(2) Arbitration Act,Misconduct under Arbitration Act,Section 17(2) Arbitration Act (Cap 10, 1985 Rev Ed),Award,Recourse against award

7 September 2006

Belinda Ang Saw Ean J:

1 This amended originating motion was brought by Progen Engineering Pte Ltd (“Progen”) to set aside an arbitration award dated 25 May 2005 (“the Award”) for misconduct of the arbitrator or, alternatively, for leave to appeal against the Award on questions of law. At the conclusion of the hearing, I dismissed the application with costs, being of the view that Progen had not made out its case either under s 17(2) or s 28 of the Arbitration Act (Cap 10, 1985 Rev Ed) (“the Act”). Progen appealed against my decision on 31 March 2006.

Background facts

2 The nominated subcontractor of the Tuas Checkpoint Project, Toyoko Riken Co Ltd (“TRC”), engaged Progen as its direct subcontractor for the air-conditioning and mechanical ventilation installation works (“ACMV works”). Progen in turn engaged as its subcontractor, Chua Aik Kia trading as Uni Sanitary Electrical Construction (“USEC”), for the following scope of ACMV works:

(a) to supply labour and materials, namely, fittings for all pipe works pursuant to USEC’s quotation No QU/301/96 dated 5 October 1996 and Progen Purchase Order No PEPL/022/96 dated 7 October 1996 at a contract sum of $772,000 (hereafter referred to as the “Pipe Works” or “Pipe Works Agreement”);

(b) to supply labour and materials to paint all air-conditioning pipes pursuant to USEC’s quotation No QU/303/96 dated 9 October 1996 at a contract sum of $73,000 (hereafter referred to as the “Paint Works” or the “Paint Works Agreement”); and

(c) to supply labour and insulation for pre-insulation works pursuant to USEC’s quotation No QU/327/97 dated 3 May 1997 at a contract sum of $290,000 (hereafter referred to as the “Pre-Insulation Works” or “Pre-Insulation Works Agreement”).

3 The Pipe Works Agreement, Paint Works Agreement and Pre-Insulation Works Agreement were, in the Award, collectively referred to as “the Agreements”. Again, in the Award, the Pipe Works, Paint Works and Pre-Insulation Works were referred to collectively as “the Works”. The same definitions are used in this decision.

4 The Works were commenced in October 1996. Towards the last quarter of 1997, there were problems relating to late or non-delivery of essential materials. This led to USEC sending a series of letters to Progen pressing for delivery of materials to the construction site. There were also problems with drawings and other documents which were either not furnished, or, if made available, were said to be inaccurate. The site was seemingly left without proper supervision. At a meeting between the two parties on 17 January 1998, USEC served written notice to terminate its services with effect from 21 January 1998.

5 By this termination letter of 17 January 1998, USEC cited Progen’s failure to fulfil its contractual obligations as a reason for the termination. This led to the appointment of another contractor to complete the Works and to rectify existing defects. Progen maintained that the termination was wrongful. It also accused USEC of bad workmanship.

6 The disputes between the parties were referred to the arbitrator, Chan Han Chong, a registered professional engineer. USEC, as the claimant in the arbitration, sought payment for work done with Progen defending and submitting a counterclaim against USEC. The hearing of the arbitration took place over nine days in the period between 30 August and 14 October 2004. In May 2005, the arbitrator ruled substantially in favour of USEC. Progen’s counterclaim was dismissed. The Award was for $628,791.75 with interest. A breakdown of the Award of $628,791.75 is as follows:

S/N	Nature of Claim	Amount $
1	Payment of overtime	120,150.35
2	Variation works	236,682.20
3	Balance payable for Works done less; materials	250,604.10
4	Interest on $250,604.10 at 6% pa from; 5.2.98 to14.5.98, ie, 98 days x $41.20; per day	4,037.60
5	Loss of profits	17,317.50
	Total Award	628,791.75

7 As stated, Progen applied for (a) an order setting aside the Award on the grounds that the arbitrator had misconducted himself or the proceedings and (b) for leave to appeal against the Award on questions of law. By way of clarification, the 1985 revised edition of the Arbitration Act is applicable as the arbitration proceedings were commenced prior to 1 March 2002. The complaints against the arbitrator were significantly cut down after the originating motion with many overlapping issues was first amended with leave of the court on 3 February 2006. This came about after the first adjourned hearing on 19 September 2005. Even with the amendments, this motion, counting the 19 September 2005 sitting, was heard over a number of days. Counsel for USEC, Mr Gregory Vijayendran, relying on the comments of Judge Thornton QC in Norwest Holst Construction Ltd v Co-Operative Wholesale Society Ltd [1997] EWHC Technology 356 (2 December 1997) (Technology and Construction Court, England and Wales High Court) at [39], had earlier observed that Progen was attempting to hedge its bets by raising complaints which were both misconduct and an application for leave in the hope that of the several volleys, one would find the target. As Judge Thorton QC remarked, “A party must decide the precise nature of the complaint in advance and then only pursue the remedy appropriate to that complaint.” Whilst the court will intervene in a proper case, there is equal concern that allegations of misconduct must not be allowed as a back door means of appeal on questions of fact or law (see Lloyd J in Mabanaft GmbH v Consentino Shipping Co SA (The “Achillet”) [1984] 2 Lloyd’s Rep 191 at 192).

Leave to appeal on questions of law under section 28 of the Act

8 As a matter of convenience and, perhaps, logically as well, I consider the proper course is to first deal with the application for leave to appeal under s 28(3)(b) of the Act. Section 28 of the Act provides as follows:

(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 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.

(3) An appeal under this section may be brought by any of the parties to the reference —

…

(b) subject to section 30, with the leave of the court.

(4) The court shall not grant leave under subsection (3) (b) unless it considers that, having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more of the parties to the arbitration agreement; and the court may grant any leave subject to such conditions as it considers appropriate.

…

9 This leads me to two considerations. The first consideration centres on the question: “How should the court identify any questions of law arising out of the Award?” In relation to this question, the Court of Appeal has made it clear in Northern Elevator Manufacturing Sdn Bhd v United Engineers (Singapore) Pte Ltd (No 2) [2004] 2 SLR 494 (“Northern Elevator”) that (a) an error of law does not give rise to an appeal under s 28(2) of the Act and (b) a wrong application of the law constitutes a mere error of law. As a matter of Singapore law, a question of law under s 28(2) involves a finding of a point of law by the arbitrator which the guidance of the court is required to resolve. Choo Han Teck J (delivering the judgment of the court) said (at [17]–[18]):

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.

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 has to be resolved after opposing views and arguments have been considered. It is a matter of substance the determination of which will decide the rights between the parties. … If the point of law is settled and not something novel and it is contended that the arbitrator made an error in the application of the law there lies no appeal against that error for there is no question of law which calls for an opinion of the court. [emphasis in original]

10 Moreover, the point of law must be one that substantially affects the rights of at least one of the parties (see s 28(4) of the Act). As discussed in Pioneer Shipping Ltd v BTP Tioxide Ltd [1982] AC 724 (The Nema), there are two types of questions of law that can arise from an arbitration award. They have been concisely summarised by Prakash J in Permasteelisa Pacific Holdings Ltd v Hyundai Engineering & Construction Co Ltd [2005] 2 SLR 270 at [10]–[11]:

As discussed in The Nema, there are two types of questions of law that can arise from an arbitration award. The first is a question relating to the proper construction of a contract, because English law (and thus Singapore law too) regards the interpretation of a written document as being a question of law rather than a question of fact. When such a question arises,...