(2013) 25 SAcLJ 595-613 (KooZX-J Lim - LW Infrastructure V LimChinSan)
(2013) 25 SAcLJ 595-613 (KooZX-J Lim - LW Infrastructure V LimChinSan)
Case Note
THE INTRICACIES INVOLVED IN THE PURSUIT OF
NATURAL JUSTICE IN ARBITRATION
L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd
[2013] 1 SLR 125
* The views expressed in this article are those of the authors and are not
representative of the views of the Attorney-General’s Chambers.
1 [2013] 1 SLR 125.
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596 Singapore Academy of Law Journal (2013) 25 SAcLJ
7 L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125
at [76].
8 L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125
at [58].
9 That is, two of the requirements of s 43(4) of the Arbitration Act (Cap 10,
2002 Rev Ed). See para 2 above.
10 L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125
at [87]–[92].
11 [2007] 3 SLR(R) 86.
12 Affirming the formulation of the elements set out in John Holland Pty Ltd v Toyo
Engineering Corp (Japan) [2001] 1 SLR(R) 443.
13 Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86
at [29].
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598 Singapore Academy of Law Journal (2013) 25 SAcLJ
14
way” [emphasis added]. The seeming need for an actual alteration in
the final outcome before prejudice could be established can also be
detected in an earlier paragraph of that judgment, where the court
explained that “[i]t may well be that though a breach has preceded the
making of an award, the same result could ensue even if the arbitrator
15
had acted properly” [emphasis added]. This test of prejudice appears to
allow for the argument that no prejudice can be said to result if the
16
arbitral tribunal reaches a decision which could have been reached if the
17
breach of natural justice did not occur.
19
would necessarily have done so”. This relatively bright line approach is
helpful in so far as it provides a practical guideline for courts to
ascertain whether a “prejudicial breach” has occurred without straying
too far into the realm of assessing the merits of the case in the
arbitration, which properly belongs in the domain of the arbitral
tribunal.
19 L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125
at [51] and [54].
20 Lim Chin San Contractors Pte Ltd v L W Infrastructure Pte Ltd [2012] 2 SLR 1040
at [45] and [53].
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600 Singapore Academy of Law Journal (2013) 25 SAcLJ
21
natural justice itself. In contrast, the Court of Appeal engaged with the
two limbs of the jurisdictional question head-on by carefully assessing
what the plaintiff might have submitted before the arbitrator on these two
22
limbs. It then came to the view that there was no prejudice suffered by
23
the plaintiff in relation to the first limb of the jurisdictional question.
The High Court was certainly correct that, when a party makes a request
for an additional award pursuant to s 43(4), the arbitrator should be the
one to decide on whether the requirements of s 43(4) are satisfied.
However, the paradigm changes when a court is deciding if there has
been actual or real prejudice suffered in a breach of natural justice. To
assess the prejudice that has been caused to the plaintiff, the court
necessarily has to assess “the arguments [the plaintiff] would have raised
before the arbitrator”; not for the purposes of replacing the arbitrator’s
role, but only so as to possess an Archimedean point to determine
the prejudice suffered by the plaintiff. It must be noted that the Court
of Appeal was not undertaking the exercise to determine the answer
24
to the jurisdictional question conclusively. Rather, the exercise was
undertaken simply to answer the question of prejudice; and the test of
prejudice necessitated the court asking whether the argument(s) that
were not submitted “could reasonably have made a difference to the
arbitrator”. The conclusive findings of whether the claim was presented
yet omitted would have to be made by the court in a setting aside
25
application under s 48(1)(a)(v) of the Arbitration Act, but not in a case
where the setting aside application is based on a breach of natural
justice.
21 See L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125
at [77]–[78].
22 See para 4 above.
23 L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125
at [80]–[81]; see also para 4 above, and paras 10 and 11 below. The Court of
Appeal, however, held that there was prejudice suffered in relation to the second
limb of the jurisdictional question, see paras 13–16 below.
24 See L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125
at [88].
25 Cap 10, 2002 Rev Ed. See L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte
Ltd [2013] 1 SLR 125 at [40] and also paras 17–20 below.
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Intricacies Involved in the Pursuit of
(2013) 25 SAcLJ Natural Justice in Arbitration 601
plaintiff that the claim for pre-award interest was “not presented” by the
26
defendant. It did so in the following terms:
Given that the Defendant would automatically have been entitled to
post-award interest even if it did not include a claim for ‘interest’ in its
‘Points of Claims’ by virtue of the previous s 35(2) of [the Arbitration
Act], there can be no real basis for contending that the prayer for
interest was not wide enough to cover pre-award interest. What else
could it have meant? The claim for pre-award interest had therefore
been presented to the Arbitrator.
26 L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125
at [80].
27 Gary Born, International Commercial Arbitration vol II (Kluwer Law International,
2009) at p 2609. See also Georgios Petrochilos, Procedural Law in International
Arbitration (Oxford University Press, 2004) at p 147: “where a specific type of relief
has been prayed for even in general terms, the tribunal will be within its rights to
grant it …”.
28 [2012] 4 SLR 98 at [47].
29 [2013] 1 Lloyd’s Rep 630.
30 c 23. Section 57(3)(b) states: “The tribunal may on its own initiative or on the
application of a party … make an additional award in respect of any claim
(including a claim for interest or costs) which was presented to the tribunal but
was not dealt with in the award.”
31 Cap 10, 2002 Rev Ed.
32 The first limb being “whether a claim for the Accrued Interest was ‘presented to the
tribunal’”; and the second limb being “whether the claim was ‘dealt with in the
Award’”.
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602 Singapore Academy of Law Journal (2013) 25 SAcLJ
15 This was not the route the Court of Appeal took. Focusing on
40
the precise words used by the arbitrator in the initial award, the court
adopted a “straight-forward reading” and stated that it was possible to
interpret the arbitrator as having confined his award to post-award
interest only and the initial award accordingly as a “deliberate decision
not to award pre-award interest” (that is, the claim for pre-award interest
41
might not have been omitted, it was impliedly denied). By recognising
this very possibility in spite of the arbitrator’s – albeit ex post facto –
insistence that he did omit the claim, the court appeared to have
eschewed a subjective approach (inquiring what might have been in the
arbitrator’s mind) in determining whether there had been “omission”
under s 43(4) and embraced an objective approach (inquiring how a
reasonable person might have interpreted the initial award based on
how it was drafted and also taking into account the governing legislative
42
framework ) instead. It is submitted that the objective approach can be
justified on the basis that a supervisory court should not be mired in
dealing with the speculative and post-hoc versions of what might have
been in the minds of arbitrators when they rendered their decisions.
40 L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125
at [86] (the arbitrator having dealt with the interest rate, principle amount and
exact date from which interest should accrue).
41 L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125
at [87].
42 In particular, the principle of finality in arbitration reflected in s 44 of the
Arbitration Act (Cap 10, 2002 Rev Ed), see L W Infrastructure Pte Ltd v Lim Chin
San Contractors Pte Ltd [2013] 1 SLR 125 at [83]–[85].
43 This factual determination can, however, be heavily infused with norms as
evidenced by the reliance of the Court of Appeal on the principle of finality in
arbitration to determine whether or not the claim for pre-award interest was
indeed omitted: see L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd
[2013] 1 SLR 125 at [83]–[85].
44 Cadogan Maritime Inc v Turner Shipping Inc [2013] 1 Lloyd’s Rep 630 at [48].
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604 Singapore Academy of Law Journal (2013) 25 SAcLJ
18 Despite its role as dicta in Lim Chin San, this useful guidance on
47
s 48(1)(a)(v) of the Arbitration Act (which is in pari materia with
48
Art 34(2)(a)(iv) of the Model Law) provides a rare discussion of the
applicability of Art 34(2)(a)(iv). Prior to this judgment, there appears to
49
be only four local decisions on Art 34(2)(a)(iv) and in none of these
four cases did the applications to set aside the award on Art 34(2)(a)(iv)
succeed. What can be gained after the decision in Lim Chin San is that
the word “procedure” in Art 34(2)(a)(iv) might refer to:
(a) any procedural rule in the legislative framework that is
provided by the applicable governing law of the arbitration; and
(b) any procedural rule that the parties have agreed on.
had suffered real or actual prejudice, as when the complaint is made that
there has been a breach of natural justice, exists as well in Singapore
50
for all statutory grounds of setting aside. The court can exercise its
discretion to decline to set aside an arbitral award even though one of
the prescribed grounds for setting aside has been made out if no
prejudice has been sustained by the complainant. This can be seen from
51
CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK,
52
where the Court of Appeal stated as follows:
Before us, CRW raised a new argument that was not canvassed in the
court below, namely, that the court had a residual discretion to refuse
to set aside an arbitral award even though one or more of the
prescribed grounds for setting aside had been made out.
…
We accept that the court may, in its discretion, decline to set aside an
arbitral award even though one of the prescribed grounds for setting aside
has been made out. However, in our view, the court ought to exercise
this residual discretion only if no prejudice has been sustained by the
aggrieved party. In the present case … PGN has suffered real prejudice
as a result of the Majority Members acting in excess of their
jurisdiction and also in breach of the rules of natural justice. Given the
prevailing circumstances, there is simply no basis for this court to
invoke its residual discretion to refuse to set aside the Final Award.
[emphasis added]
50 See CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011]
4 SLR 305 at [34].
51 CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR 305.
52 CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR 305
at [98]–[100].
53 UNCITRAL Model Law on International Commercial Arbitration (UN Doc A/40/17
annex I and A/61/17 annex I) (adopted 21 June 1985; amended 7 July 2006).
54 See para 6 above.
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606 Singapore Academy of Law Journal (2013) 25 SAcLJ
55
possibility of the matter being remitted back to the arbitrator, but
given that the arguments in relation to remission were not fully argued,
the court decided to confine itself to the setting aside of the additional
56
award and made no special consequential orders. It is humbly
submitted that the legal positions on whether an issue can be “remitted”
back to an arbitrator and, more importantly, the effect of an award
which has been set aside, are relatively undeveloped in Singapore and
would benefit from fuller arguments from counsel when the next
opportunity arises.
55 L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125
at [93].
56 L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125
at [93].
57 Howard M Holtzmann & Joseph E Neuhaus, A Guide to the UNCITRAL Model
Law on International Commercial Arbitration: Legislative History and Commentary
(Kluwer Law, 1989) at p 921.
58 See Chan Leng Sun, Singapore Law on Arbitral Awards (Academy Publishing, 2011)
at para 6.226 (“the mandate of the tribunal should not be considered terminated
where the award is set aside by the court”); Nigel Blackaby et al, Redfern and
Hunter on International Arbitration (Oxford University Press, 5th Ed, 2009)
at para 10.90 and Gary Born, International Commercial Arbitration vol II (Kluwer
Law International, 2009) at pp 2699–2700.
59 Grounds which affect the arbitral tribunal’s jurisdiction would be when there
is an invalid arbitration agreement, or if the subject matter was not arbitrable
(see Chan Leng Sun, Singapore Law on Arbitral Awards (Academy Publishing,
2011) at para 6.220).
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Intricacies Involved in the Pursuit of
(2013) 25 SAcLJ Natural Justice in Arbitration 607
appear to be of the view that “setting aside the award under the
Arbitration Act 1996, s 68(3)(a) does not affect the validity of the
original agreement between the parties to submit their agreement to
68
arbitration”.
26 However, on the present facts of Lim Chin San, what was set
aside was not the original award, but an additional award. Crucially,
the additional award finds its juristic source not just in the parties’
69
arbitration agreement, but the jurisdictional requirements of s 43(4)
being satisfied as well. In the present case, the 30-day deadline for a
request for the arbitrator to render a fresh additional award would have
long passed. Unfortunately for the defendant, s 11(2) of the Arbitration
70
Act applies only to time bars under the Limitation Act and there does
not appear to be any provision allowing the court to waive “time bars”
71
which are mandated within the provisions of the Arbitration Act itself.
With the additional award being set aside, the defendant might have just
reached the end of the road with regards to its attempt to recover its
pre-award interest.
68 Robert Merkin, Arbitration Law (LLP, 2004) at para 20.34; see also Hussmann
(Europe) Ltd v Ahmed Pharaon [2003] EWCA Civ 266.
69 The jurisdictional requirements are as follows: (a) The request for an additional
award must be made within 30 days after receipt of the original award; (b) notice
must be given to the other party; (c) the claim must have been presented during
the arbitration proceedings, and (d) the claim was omitted from the award.
70 Cap 10, 2002 Rev Ed.
71 For example, the 30-day deadline in s 43(4) of the Arbitration Act (Cap 10,
2002 Rev Ed).
72 A sum which amounted to $274,114.61 (see L W Infrastructure Pte Ltd v Lim Chin
San Contractors Pte Ltd [2013] 1 SLR 125 at [10]).
73 L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125
at [93].
74 Cap 10, 2002 Rev Ed.
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Intricacies Involved in the Pursuit of
(2013) 25 SAcLJ Natural Justice in Arbitration 609
It is interesting that the court in Soh Beng Tee had justified its view on
88
the appropriateness of remission based on:
… the policy of minimal curial intervention [which] implies that the
court’s focus should be on the proportionality between the harm
caused by the breach and how that can be remedied: see also the
statutory directive in s 49(9) of [the Arbitration Act].
89
32 With respect, s 49(9) relates to the court’s powers when there is
90
an appeal against an award. As the complainants in both Soh Beng Tee
and the present case had chosen to set aside the award (as opposed to
having appealed against it), the proper provision which would empower
the court to “remit the matter back to the Arbitrator” should have been
found in s 48(3) instead. Regrettably, the use of the remission procedure
found in s 48(3) or Art 34(4) does not appear to be argued with any
frequency by counsel in setting aside applications. It might be that
some counsel perceive what is untested as what might ultimately be
91
unsuccessful as it has been perceptively noted that:
… the true nature of article 34(4) [of the Model Law] remains
somewhat obscure. The grounds for recourse as provided are limited
and for the most part their use will be confined to cases involving
some element of procedural unfairness or impropriety during an
arbitral hearing. [emphasis added]
88 Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86
at [92].
89 Section 49(9) of the Arbitration Act (Cap 10, 2002 Rev Ed) states: “The court shall
not exercise its power to set aside an award, in whole or in part, unless it is satisfied
that it would be inappropriate to remit the matters in question to the arbitral
tribunal for reconsideration.”
90 See Halsbury’s Laws of Singapore vol 1(2) (LexisNexis, 2011 Reissue) at para 20.128:
“Unlike an appeal against an award, in an application for setting aside, the court
has no power to vary or remit the award to the tribunal for consideration.”
91 David Williams, “Recent Developments in Arbitration and Dispute Resolution in
New Zealand” (2001) 4(2) Int ALR 41 at 43. See also Leila Anglade, “Challenge,
Recognition and Enforcement of Irish and Foreign International Arbitral Awards
under the Irish 1997 Arbitration (International Commercial) Bill” (1998)
9(5) ICCLR 128 at 129: “It is the experience in other Model Law countries that
[Art 34(4)] is not used very often”; Gary Born, International Commercial
Arbitration vol II (Kluwer Law International, 2009) at p 2545: “The powers under
Article 34(4) are rarely invoked with there apparently being no reported decisions
applying the provision” and Pieter Sanders, “What May Still be Done in the World
of Arbitration?” (1999) 65(4) Arbitration 260 at 262.
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612 Singapore Academy of Law Journal (2013) 25 SAcLJ
V. Conclusion
92 See David Williams & Amokura Kawharu, Williams and Kawharu on Arbitration
(LexisNexis, 2011) at para 17.3.6: “The court may take into account the conduct of
the tribunal when deciding whether remission [under Art 34(4)] will be
appropriate”.
93 UNCITRAL Model Law on International Commercial Arbitration (UN Doc A/40/17
annex I and A/61/17 annex I) (adopted 21 June 1985; amended 7 July 2006).
94 Cap 10, 2002 Rev Ed.
95 Section 48(3) of the Arbitration Act (Cap 10, 2002 Rev Ed) states: “… to allow the
arbitral tribunal to resume the arbitral proceedings or take such other action as
may eliminate the grounds for setting aside an award” [emphasis added]; while
Art 34(4) of the UNCITRAL Model Law on International Commercial Arbitration
(UN Doc A/40/17 annex I and A/61/17 annex I) (adopted 21 June 1985; amended
7 July 2006) states: “… to give the arbitral tribunal an opportunity to resume the
arbitral proceedings or to take such other action as in the arbitral tribunal’s opinion
will eliminate the grounds for setting aside” [emphasis added]. The phrasing in
Art 34(4) appears to require the court to consider (or even consult) “the arbitral
tribunal’s opinion” as compared to s 48(3) where such a requirement appears to be
absent.
96 Cap 10, 2002 Rev Ed.
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Intricacies Involved in the Pursuit of
(2013) 25 SAcLJ Natural Justice in Arbitration 613