* Kohe Hasan is a Partner in Reed Smith's Singapore office and a Director of Resource Law LLC. Kelvin Tay is an Associate in Reed Smith's Singapore office.
Speedread
The Singapore Court of Appeal has dismissed two applications that sought to set aside a Singapore International Arbitration Centre (SIAC) arbitration award, upholding the decision of the Singapore High Court. The applications were brought under both section 24 of the International Arbitration Act (Cap 143A) (IAA) and section 48(1) of the Singapore Arbitration Act (Cap 10) (SAA), on the grounds that the High Court judge, along with apparent bias against the appellant, erred in finding, among other things, no evidence that the making of the award was induced by fraud on the respondent's part or non-pecuniary corruption on the arbitrator's part. The Court of Appeal raised grave concerns with the appellant's solicitor's willingness to raise unsubstantiated allegations of fraud and corruption against the arbitrator and bias against the judge.
This decision reaffirms Singapore's pro-arbitration outlook. The right to set aside an award is strictly limited by the applicable provisions of the IAA and SAA and courts will not lightly set aside an award unless the grounds relied upon are well proven.
This case is also a cautionary tale to members of the legal profession and a reminder of their primary duty to the court. An application to set aside an arbitration award is to be taken seriously and any arguments advanced before a court that would involve serious allegations such as fraud or corruption must be properly considered and responsibly brought on credible grounds. (Prometheus Marine Pte Ltd v King, Ann Rita and another appeal [2017] SGCA 61.)
Background
Section 24 of the International Arbitration Act (Cap 143A) (IAA) and Article 34 of the UNCITRAL Model Law, contained in the First Schedule of the IAA, sets out the grounds under which a court may set aside an arbitration award.
Section 24 of the IAA provides in relevant part:
"24. Notwithstanding Article 34(1) of the Model Law, the High Court may, in addition to the grounds set out in Article 34(2) of the Model Law, set aside the award of the arbitral tribunal if —
(a) the making of the award was induced or affected by fraud or corruption; or
(b) 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.
(…)."
Article 34 of the Model Law provides:
"(1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this Article.
(2) An arbitral award may be set aside by the court specified in Article 6 only if:
(…)
(b) the court finds that:
(…)
(ii) the award is in conflict with the public policy of this State."
These grounds are mirrored in section 48(1) of the Singapore Arbitration Act (Cap 10) (SAA).
Facts
The respondent, Mrs Ann Rita King, contracted with Prometheus Marine Pte Ltd (appellant) to purchase a yacht under a sale and purchase agreement (Contract). The Contract was governed by Singapore law and contained an arbitration clause referring disputes to the Singapore International Arbitration Centre (SIAC).
When the yacht was due to be delivered to the respondent, it suffered damage while being loaded onto a barge at the shipyard for shipment to Singapore. A dispute arose in relation to the repairs to rectify damage and persisting defects.
The respondent commenced arbitration against the appellant, seeking a full refund for the purchase price of the yacht and damages and/or the cost of repairs. By consent, a sole arbitrator was appointed.
The arbitrator awarded the respondent damages for the cost of repairs that were necessary to render the yacht compliant with the specifications agreed in the Contract and its diminution in value.
The appellant applied to the Singapore High Court to have the award set aside. The appellant made two concurrent applications: one was filed under section 48(1) of the SAA while the other was filed under section 24 of the IAA. The appellant took this approach on the basis that the lex arbitri (the law governing the arbitration) was unknown.
The High Court held that there were no grounds to set aside the award and dismissed the appellant's applications.
The appellant appealed the High Court's decision, arguing the High Court judge:
- Was apparently biased against the appellant.
- Erred in finding that the arbitrator's failure to determine the lex arbitri was not contrary to public policy. It was the appellant's case that because the arbitrator did not specify if the IAA or the SAA governed the arbitration, he had "delocalised" the arbitration and an award rendered under a delocalised arbitration would be contrary to public policy.
- Erred in finding no evidence that the making of the award was induced by fraud on the respondent's part or non-pecuniary corruption on the arbitrator's part.
- Erred in finding that the arbitrator had neither acted in excess of jurisdiction nor in breach of natural justice.
- Erred in finding that the appellant was the seller under the Contract and therefore a party to the arbitration agreement.
Decision
The Singapore Court of Appeal upheld the decision of the High Court and dismissed the appeal in its entirety.
Apparent bias
The court found no merit in the argument that the High Court judge was apparently biased against the appellant and made the following observations:
- It is not improper for a judge to express his or her honest impressions of the case as presented by counsel
- It is not contrary to judicial function for a judge to express provisional views or concerns in a case to counsel for them to be addressed.
As for arguments advanced by the appellant's solicitor for "misfindings" of fact and law by the judge, the court found them immaterial in this case. Further, it reasoned that errors in findings of law or fact by a judge do not necessarily entail a bias against a party.
Arbitrator's failure to determine the lex arbitri was not contrary to public policy
The court dispelled the appellant's notion of a delocalised arbitration, and saw little controversy or complication with this point as it was accepted that Singapore was the seat of arbitration and therefore, the arbitration was a Singapore arbitration. While the arbitrator did not explicitly state that the IAA was applicable, the court found that it was implicit in the award that the IAA applied. The court went further and said that even if the arbitrator had failed to determine the lex arbitri, it did not follow that this would invalidate the award, whether under the IAA or the SAA.
Award was induced by fraud on the respondent's part or non-pecuniary corruption on the arbitrator's part
The court found procedural irregularities with the appellant's approach and held that as a matter of procedure, the factual basis for the appellant's arguments regarding fraud and non-pecuniary corruption should have been set out within an affidavit in support with grounds and evidence relied on as required by the Rules of Court, rather than advancing them through oral arguments before the court. As no affidavit was filed, the allegations were deemed to be without basis.
The court in any event did briefly consider this argument and, on the facts, found no hint of fraud in the making of the award. The court then, in referring to the decision in Beijing Sinzonto Mining Investment Co Ltd v Goldenray Consortium (Singapore) Pte Ltd [2013] SLR 84 at paragraph 41, restated the high threshold requirement for proving fraud in that it must involve elements of "bad faith during the arbitration such as bribery, undisclosed bias of the arbitrator or willful destruction or withholding of evidence". None of these elements were found to be satisfied in this case.
Arbitrator had neither acted in excess of jurisdiction nor in breach of natural justice
Having regard to the appellant's argument on jurisdiction, the court highlighted the position in law in that an error of law or fact made by an arbitrator, however irrational, does not afford a ground for setting aside an award.
On analysis of the facts of the case and the arbitrator's findings, the court also found no evidence of the arbitrator reformulating the respondent's case as the agreed issue submitted for the arbitrator's resolution was the same in substance regardless of how it was classified (Specifications Term or Correspondence with Description Term). The court was also satisfied that the appellant was given the opportunity to be heard on the issue of damages payable as repair costs and that there had been no breach of natural justice.
Appellant was the seller under the Contract and therefore a party to the arbitration agreement
The court fully agreed with the reasoning and analysis of the High Court that the appellant was the seller under the contract and therefore, a party to the arbitration agreement. It found no merits in the appellant's argument otherwise nor a need to further address this argument.
Conduct of counsel
In its decision, the Court of Appeal also raised grave concerns with the appellant's solicitor’s willingness to raise allegations of fraud and corruption against the arbitrator and bias against the judge without basis. The court held that as an officer of the court, he owed a duty to ensure that there was reasonably credible material before raising allegations of such severity. It was also made clear that an advocate and solicitor is not an "unwitting or unthinking mouthpiece" of a client and is bound to decline to put forward any position that he may find, in good conscience, to be untenable.
Comment
This decision reaffirms Singapore's pro-arbitration outlook and reemphasises the position in Singapore that grounds for setting aside an arbitration award must meet a high threshold.
The right to set aside an award is strictly limited by the applicable provisions of the IAA and SAA and courts will not lightly set aside an award unless the grounds relied upon are well proven.
This decision is also a helpful reminder of the importance of compliance with procedure and how the court can dispose of matters raised in an application on procedural irregularities. Any application to set aside an award must comply with procedural requirements and have an evidentiary basis.
Lastly, this case is also a cautionary tale to members of the legal profession and a reminder of their primary duty to the court. An application to set aside an arbitration award is to be taken seriously and any arguments advanced before a court that would involve serious allegations such as fraud or corruption must be properly considered and responsibly brought on credible grounds.
Case
Prometheus Marine Pte Ltd v King, Ann Rita and another appeal [2017] SGCA 61 (Singapore Court of Appeal)
