In BZW and another v. BZV [2022] SGCA 1, the Singapore Court of Appeal (CoA) considered the fair hearing rule and determined that a tribunal must pay attention to what is put before it and give its reasoned decision based on the arguments and evidence presented. This requirement would not be met if the decision was “manifestly incoherent”.
After consideration of an arbitral award, the CoA found the tribunal to have breached natural justice, and affirmed the High Court’s decision to set aside the award. The CoA further clarified the procedural requirements for a valid setting aside application, and instances when remission of an award would not be appropriate.
What happened between the parties?
The appellant shipbuilders entered into a shipbuilding contract with the respondent buyer. Following delivery of the vessel, the respondent pursued two claims against the appellant for (i) liquidated damages of about US$3.65 million for delay in the delivery of the vessel (the Delay Claim), and (ii) damages for breach of the shipbuilding contract arising from the installation of inadequate generators (the Rating Claim). The appellant counterclaimed for payment of additional work.
The proceedings were seated in Singapore and conducted under the Arbitration Rules of the Singapore International Arbitration Centre (SIAC).
What did the tribunal decide and why?
The three-member arbitral tribunal found that a Mr Tan, whom it identified as 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. It further concluded that the vessel was not ready for delivery by the appellant, but nevertheless dismissed both the respondent’s claims and the appellant’s counterclaim.
Following receipt of the award, the respondent requested the tribunal correct the award which had incorrectly identified the appellant’s representative Mr Tan as the respondent’s representative. The award was subsequently reworded.
What did the High Court decide and why?
The respondent applied to the High Court (HC) to set aside the award pursuant to section 24(b) of the International Arbitration Act (Cap. 143A, 2002 Rev. Ed.) (IAA) and Article 34(2)(a)(iii) of the UNCITRAL Model Law (the Model Law). The respondent asserted 11 breaches of natural justice, most notably that:
- there was no nexus between the tribunal’s chain of reasoning and the cases which the parties had advanced in respect of both the Delay Claim and the Rating Claim, and
- the tribunal had failed to direct its mind to the merits of the Delay Claim.
The appellant opposed the grounds of the application, and argued that the application was filed out of time, contending that the respondent’s supporting affidavit, which was filed after the expiry of the three-month time limit under Article 34(3) Model Law, contained the grounds of the application. In any event, the appellant attested that the judge should suspend the setting aside proceedings and remit the award to the tribunal.
The judge held that the setting aside application had been filed in time and allowed the application: the judge found 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. Order 69A of the Rules of Court (2014) provides that an affidavit need not be filed at the same time as a setting aside application.
The judge found the tribunal to be in breach of natural justice as it may have found in the respondent’s favour had it applied its mind to the issues. Further, in dismissing the respondent’s Delay Claim, the tribunal’s chain of reasoning had no nexus to any of the appellant’s defences. This therefore did not comply with the fair hearing rule, which requires a tribunal to pay attention to what is put before it and give its reasoned decision on the arguments and evidence presented. The judge declined to remit the award to the tribunal because the purpose of remission is not to allow the tribunal an opportunity to rationalise its original decision after the fact, and also due to the tribunal’s “fundamental” breaches. Accordingly, the judge set aside the part of the award dismissing the respondent’s claims. The appellant appealed.