SIArb Newsletters

Nature of Matter

Setting aside of Arbitral Award; Breach of Natural Justice 

Case Summary

1. The Appellants entered into a shipbuilding contract with the Respondent. Following delivery of the vessel, the Respondent commenced arbitration proceedings against the Appellants for: (i) liquidated damages of about US$3.65 million for delay in the delivery of the vessel (“Delay Claim”); and (ii) damages for breach of the shipbuilding contract arising from the installation of inadequate generators (“Rating Claim”). The Appellants counterclaimed for payment of additional work.
2. In its award, the three-member arbitral tribunal (“Tribunal”) dismissed the Respondent’s claims. The tribunal found, amongst others, that the Respondent’s representative had provided supporting documents showing that the generators were fit for purpose and the Appellant was therefore not in breach of the contract.
3. On 15 April 2019, the Respondent filed an application to set aside part of the Award under s24(b) of the International Arbitration Act (“IAA”) and Article 34(2)(a)(iii) of the Model Law.
4. Apart from contesting the grounds of the Respondent’s application, the Appellants also objected on the basis that the application had been filed out of time under Article 34(3) of the Model Law (which provides for a three-month time limit). They argued that the supporting affidavit was filed after the expiry of the three-month limit and that it was the affidavit (and not just the originating summons) that contained the grounds of the application.
5. Accordingly, three main issues arose in the Respondent’s setting aside application before the High Court:
   (a) Whether the application was filed in time;
   (b) Whether there was any basis to set aside the Award under s 24(b) of the IAA and/or Article 34(2)(a)(iii) of the Model Law; and
   (c) Whether the Award should be remitted to the Tribunal under Article 34(4) in order to eliminate the grounds for setting aside.
6. The High Court held that the application was filed in time because the originating summons was sufficient for the purposes of an “application” under Article 24(3) of the Model Law. The High Court also found the Tribunal to be in breach of natural justice because the Tribunal adopted a chain of reasoning which had no nexus to the parties’ cases, and failed to apply its mind to an essential issue arising from the parties’ arguments. The High Court also found it inappropriate to remit the Award to the Tribunal. The Appellants appealed.

7. The Court of Appeal affirmed the High Court’s findings on all three issues.
   
   The application was filed in time
   
   
8. The Court of Appeal agreed that what amounts to an ‘application’ falls outside the scope of the Model Law and is instead a matter of the court’s civil procedure. Under domestic law, viz Order 69A of the Rules of Court, there was nothing in Order 69A, r.2(4) which requires an affidavit to be filed at the same time as the originating summons in a setting aside application.
   
   The Tribunal breached rules of natural justice in the way it dealt with the Delay Claim and the Rating Claim
   
   
9. The Court of Appeal also agreed with the High Court judge that the Tribunal breached rules of natural justice in the way it dealt with the claims. The fair hearing rule requires the Tribunal to pay attention to what is put before it and gives its reasoned decision on the arguments and evidence presented. This requirement would not be met if a tribunal’s decision is manifestly incoherent, as it shows that a tribunal has not understood or dealt with the case at all.
10. Here, the Tribunal’s findings were often mere assertions rather than the result of examining documentary evidence and considering the credibility of witnesses. The Court of Appeal also found it exceedingly difficult to map the Tribunal’s findings to the essential issues arising from the parties’ cases on both claims and that the Tribunal adopted a chain of reasoning that had no nexus with the parties’ submissions.
    
    The Award should not be remitted
    
    
11. The Court of Appeal found that remission was not appropriate because the Tribunal failed entirely to appreciate the correct questions it had to pose to itself. Further, this was a case where it would be invidious and embarrassing for the Tribunal to be required to free itself from all previous ideas and to redetermine the same issues. A reasonable person was unlikely to have confidence in the Tribunal’s ability to come to a fair and balanced conclusion on the issues if remitted.
12. Last but not least, there would be no significant savings in time and costs to remit the matter to the Tribunal, as a substantial amount of time had elapsed since the Tribunal heard the evidence and submissions.