Singapore Court Finds Breach of Natural Justice, Setting Aside Award

In CAI v CAJ [2021] SGHC 21, the General Division of the Singapore High Court was asked to set aside part of an arbitral award, on the basis that the tribunal had wrongly accepted an extension of time defence that was raised by the defendants for the very first time in its written closing submissions.  The case arose out of the construction by CAJ of a polycrystalline silicon plant where in proceedings commenced by CAI for liquidated damages, CAJ raise in its written closing submissions and for the first time, a new argument under the contract seeking an extension of time for completion, which the tribunal accepted (thereby extending the time for completion by 25 days).

CAI did respond to the new argument in its own written closing submissions, but the defence had not been raised during the oral hearing and there had therfore been no opportunity to adduce evidence or to cross-examine witnesses.  In its award, the tribunal accepted that there was “no direct evidence” before it on the issue, but nonetheless considered itself “capable of fairly and reasonably determining” an appropriate extension of time, in view of its own “experience in these matters”.

CAI applied to set aside the part of the award regarding the 25-day extension, for breach of natural justice, arguing that it did not have a fair and reasonable opportunity to respond to the extension of time argument and that the tribunal relied on its own experience and not the submitted evidence in reaching its decision without offering parties an opportunity to provide input.  Ruling in favour of CAI, the High Court considered a number of points:

  • The extension of time defence was new, having been introduced only at the very end of the arbitral proceedings.  Accordingly, CAI did not have the opportunity to adduce the evidence or make submissions in respect of it.
  • The fact that CAJ had used the same evidence previously adduced in the proceedings for another defence did not assist them.  The real question was whether CAI, not CAJ, had a reasonable opportunity to present its case, and each defence was conceptually and factually distinct from the other defence, and each needed to be addressed differently.
  • A response was difference to presentation – in other words, an opportunity to respond to the counterparty’s legal submissions on a newly raised defence could not constitute a reasonable opportunity to present one’s case.
  • The court considered that CAI’s conduct did not amount to “hedging” – i.e. a failure to object “forcefully and unequivocally rather than to hedge their bets by objecting half-heartedly”.  On the facts, the court held that CAI had objected clearly and unequivocally to the extension of time defence in its written closing submissions.
  • Since CAI had objected in their closing submissions, the “ball was in the tribunal’s court” to rule upon CAI’s objection to the extension of time defence; the breach of natural justice only occurred when the final award had been delivered, not when the proceedings were declared closed or at any point prior, as no one knew if the extension of time defence had been allowed or not.
  • A tribunal that seeks to rely on its own experience in making a decision must provide parties an opportunity to make submissions on the tribunal’s thinking; on the facts, the Court held that there “was no elucidation in the award of what [the tribunal’s] experience entailed or what it encompassed, and the parties were not given any opportunity to address the tribunal.

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About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Hong Kong Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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