THE NATURAL JUSTICE FALLIBILITY IN SINGAPORE ARBITRATION PROCEEDINGS

• Published date: 01 December 2014
• Citation: (2014) 26 SAcLJ 562
• Author: Khushboo Hashu SHAHDADPURI LLB (hons) (King's College London); Advocate and Solicitor (Singapore).
• Date: 01 December 2014

Parties frequently envelop all types of arguments under the ambit of a breach of natural justice, in a bid to set arbitral awards aside. This article explores the elements constituting natural justice and the jurisprudence developed by the Singapore courts in approaching applications to set aside arbitral awards on the grounds of a breach of natural justice. In doing so, the author will also deal with the Singapore court's approach in discerning between genuine breaches of natural justice vis-à-vis attempts to challenge an arbitral award on its merits under the guise of natural justice and, attempt to consolidate this convoluted and easily abused arena of law. As a concluding point, the extent to which a breach of the natural justice rules constitutes a violation of the public policy of Singapore will also be explored.

I. Introduction

1 The rules of natural justice take particular importance in arbitration as opposed to court litigation due to the former being characterised by flexibility and freedom from the technical rules of procedure that are ubiquitous in the latter.1 This is especially in the light of the fact that in arbitration proceedings, adjudicators are chosen by the parties themselves or by the arbitral institution that the parties choose and the arbitral awards rendered are final, subject only to limited grounds for challenge in national courts.2

2 This article will focus on the approach of the courts in Singapore in discerning between genuine challenges to an arbitral award vis-à-vis attempts to challenge an arbitral award on its merits under the guise of a breach natural justice. In analysing the court's approach, the duty of arbitrators, in ensuring that they do not stray from the accepted

parameters of the rules of natural justice in their adjudication process, will also be explored. In addition, the extent to which a breach of the natural justice rules constitutes a violation of the public policy of the State in applications to set aside arbitral awards will also be touched on.

3 For the purposes of this article, challenges invoked under both the domestic arbitration regime3 and the International Arbitration Act4 (“IAA”) will be used interchangeably in the light of the Court of Appeal's dicta that “the same approach towards natural justice ought to be adopted for both international and domestic arbitrations in Singapore”.5 This point was also reiterated in L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd6 (“L W Infrastructure”) where the Court of Appeal had stated that it was Parliament's intention that the Arbitration Act7 (“AA”) should be aligned with the Model Law to “narrow the differences between the two regimes”.8 In addition, although the provisions for setting aside arbitral awards and challenging enforcement or refusal of recognition of foreign arbitral awards may be similar, it should be noted that this article only focuses on the former. However, as and when the law for both is identical, they will be used interchangeably.

II. What is natural justice?

4 The concept of natural justice derives from the English common law tradition and is succinctly captured in the two Latin maxims: nemo judex in causa sua and audi alteram partem. These maxims have been accurately summarised by Marks J in Gas & Fuel Corporations of Victoria v Wood Hall Ltd & Leonard Pipeline Contractors Ltd9 and affirmed by Singapore's Court of Appeal in Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd10 (“Soh Beng Tee”) as follows:11

The first is that an adjudicator must be disinterested and unbiased. This is expressed in the Latin maxim —nemo judez in causa sua. The second principle is that the parties must be given adequate notice and opportunity to be heard. This is in turn expressed in the familiar Latin

maxim— audi alteram partem. In considering the evidence in this case, it is important to bear in mind that each of the two principles may be said to have sub-branches or amplifications. One amplification of the first rule is that justice must not only be done but appear to be done; (Lord Hewart CJ in R v Sussex Justices, ex parte McCarthy, [1924] 1 KB 256 at 259; [1923] All ER Rep 233). Sub-branches of the second principle are that each party must be given a fair hearing and a fair opportunity to present its case. Transcending both principles are the notions of fairness and judgment only after a full and fair hearing given to all parties. [emphasis added by Court of Appeal in Soh Beng Tee]

5 Apart from these two principles, some jurisdictions have accepted a third limb of natural justice: the “no evidence rule” where awards “premised on findings of fact made without any evidential basis, ie, no rationally probative evidence capable of supporting the findings, are liable to be set aside for breach of natural justice” [emphasis in original].12 This rule was explained more intricately by Lord Diplock in R v Deputy Industrial Injuries Commissioner, ex parte Moore13 as follows:14

The requirement that a person exercising quasi-judicial functions must base his decision based on evidence means no more than it must be based upon material which tends logically to show the existence or non-existence of facts relevant to the issue to be determined, or to show the likelihood or unlikelihood of the occurrence of some future event the occurrence of which would be relevant. It means that he must not spin a coin or consult an astrologer, but he may take into account any material which, as a matter of reason, has some probative value in the sense mentioned above. If it is capable of having any probative value, the weight to be attached to it is a matter for the person to whom Parliament has entrusted the responsibility of deciding the issue.

6 The “no evidence rule” bears a high threshold with a significant hurdle to be crossed.15 To successfully establish a breach of the “no evidence rule”, it will not suffice to merely show that an adjudicator drew an inference by illogical reasoning.16 Rather, it must be proven that there was no evidence that permitted this inference from being drawn by any process of reasoning.17

7 However, it is debatable whether the “no evidence rule” forms the third limb of the natural justice rules in Singapore. This was touched upon briefly in the recent case of TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd18 (“TMM”). Unfortunately in TMM, the learned Chan Seng Onn J held that as counsel had not argued this point fully, no view could be expressed on whether this rule forms part of the Singapore jurisprudence.19 Thus, it remains to be seen whether this third limb of the natural justice rules is accepted by the courts in Singapore.

8 Apart from the legal principles stemming from the concept of natural justice, Lord Morris's dictum provides a succinct, practical and to the point layman elucidation of natural justice: “Natural justice, it has been said, is only ‘fair play in action’.”20

III. Natural justice in Singapore

9 Natural justice is an integral part of Singapore's common law heritage21 and is accorded due weight in Singapore's legislation. Section 24(b) of the IAA expressly provides for an award to be set aside if “a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced”.

10 The United Nations Commission on International Trade Law (“UNCITRAL”) Model Law on International Commercial Arbitration 198522 (“Model Law”), incorporated into Singapore's legislation by way of the First Sched to the IAA, provides six grounds for setting aside arbitral awards in Arts 34(2)(a) and 34(2)(b). Although breaches of the natural justice rules are not explicitly provided for, the grounds under Arts 34(2)(a) and 34(2)(b) encompass the procedural fairness element of the natural justice rules.23 In particular, the inability to present one's

case24 is recognised as a “mirror image” of a breach of the principle that parties must be given an opportunity to be heard.25

11 When a challenge is brought against an award, “the court has a duty to entertain and engage the challenge” as provided for in the IAA and the Model Law.26 However, this does not mean that a court is always obliged to sift through, arduously, records of the arbitral proceedings with a fine-tooth comb.27 Rather, “an award should be read generously such that only meaningful breaches of the rules of natural justice that have actually caused prejudice are ultimately remedied”.28

12 In an attempt to fit in all sorts of arguments which do not fall under other grounds for setting aside arbitral awards, parties frequently take a creative approach in arguing breaches of natural justice.29 As fittingly cited by the Court of Appeal in Soh Beng Tee:30

For a disappointed arbitral litigant, jurisdiction and natural justice are good pickings. Jurisdiction and natural justice invoke the primordial instinct of courts to second guess other tribunals and thus defeat the greatest benefit of arbitration, its finality.

It is therefore important for the court to resist its natural tendency, faced with a clear and attractive argument on jurisdiction and natural justice, to plunge into the details of the arbitration and second-guess the arbitration not only on the result but also on the punctilio of the process.

13 This makes it a daunting feat for the courts to discern between genuine and disguised applications for setting aside arbitral awards while at the same time respecting the finality and autonomy of arbitral awards.

IV. Establishing natural justice in Singapore (the Soh Beng Tee checklist)

14 The starting point in any successful application to set aside arbitral awards for breach of natural justice in Singapore is the satisfaction of the test set out by Choo Han Teck J in the case of John Holland Pty Ltd v Tokyo Engineering Corp (Japan),31 duly affirmed by the Court of Appeal in Soh Beng Tee.32 The party...