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Nature of Matter

Setting aside of Arbitral Award

Case Summary

1. The Plaintiff and the 1st Defendant entered into a contract (“Contract”) where the Plaintiff was appointed as a sub-contractor for the design, supply, installation, testing and commissioning of overhead cranes (“Overhead Cranes”) for a warehouse and container depot.
2. A dispute arose regarding whether the Overhead Cranes supplied by the Plaintiff were defective. The 1st Defendant claimed that the Overhead Cranes were of unsatisfactory quality under the Contract and/or the Sale of Goods Act (“SOGA”). After the 1st Defendant terminated the Contract on grounds of breach, it commenced arbitration under the Singapore International Arbitration Centre seeking, among others, a rescission of the Contract and a refund of the sums it had paid to the Plaintiff.
3. The arbitrator found in favour of the Defendants on the issues of breach by the plaintiff of the SOGA, the 1^st Defendant’s right to terminate the Contract and to treat the plaintiff’s breach of the Contract as repudiatory.
4. After the arbitrator rendered his award (“Award”), the Plaintiff conducted a site visit and discovered that the Overhead Cranes had not just been dismantled but had been damaged and/or destroyed.
5. The Plaintiff then commenced an application pursuant to s 48(1)(a)(vi) of the Arbitration Act to partially set aside the Award on, inter alia, the following grounds:
   (a) the Award was induced or affected by fraud and should be set aside. The 1^st Defendant dishonestly concealed from the arbitrator the fact that the Overhead Cranes had, before or during the arbitration, been dismembered and/or destroyed, with several key parts missing and/or cannibalised by the 1^st Defendant for its own use.
   (b) The 1^st Defendant’s fraudulent conduct deprived the Plaintiff of a reasonable and/or fair opportunity to make arguments regarding the alleged actual condition of the Overhead Cranes, and specifically, to resist the claim by the 1st Defendant for rescission of the underlying contract and/or mount significant defences to the claim for rescission.
   (c) The Award was contrary to public policy because it was rendered on the basis of an egregious error of fact that the Overhead Cranes had not been damaged.

6. The High Court dismissed the setting-aside application.
   
   The Plaintiff’s fraud objection was not made out
   
   
7. The High Court found that the Plaintiff had neither adduced the necessary strong and cogent evidence for fraud, nor established the three core elements of procedural fraud, namely: (a) dishonesty or bad faith; (b) the causal link between the new evidence and the decision of the tribunal; and (c) the non-availability of the evidence during the arbitration.
8. On element (a) dishonesty or bad faith, the High Court did not find any indication of dishonesty or bad faith in the way that the 1^st Defendant had conducted itself during the Arbitration. Given that the Plaintiff did not plead and raise the issue of a diminution in the value of the Overhead Cranes resulting from the dismantlement in the arbitration, there was good reason for the 1st Defendant not to have disclosed anything regarding the alleged actual state of the Overhead Cranes to the arbitrator
9. On element (b), this was also not made out because evidence of the alleged actual condition of the Overhead Cranes could not be said to be decisive, in that it would have necessarily resulted in the arbitrator coming to a decision in favour of the Plaintiff instead of the 1^st Defendant.
10. As regards element (c), the High Court was of the view that evidence regarding the condition of the Overhead Cranes could have been obtained with reasonable diligence at the time of the arbitration.
    
    There was no breach of natural justice in the making of the Award
    
    
11. The High Court rejected the Plaintiff’s argument that the fair hearing rule was breached because it was precluded from presenting to the arbitrator a different defence or counterclaim based on the Overhead Cranes being allegedly damaged or destroyed. The High Court observed that it is the Plaintiff’s duty to seek and adduce evidence regarding the condition of the Overhead Cranes and to take all the relevant points in its pleadings and submissions. Where it has failed to do so, it cannot be permitted, at the setting-aside stage, to regain ground from its omission to make the relevant inquiries, and its decision to run its case in a certain way.
    
    Award was not contrary to public policy
    
    
12. Given that the Plaintiff’s allegations of fraud have been rejected by the Court, the Plaintiff’s public policy objection which is grounded on those same allegations also fails.