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Nature of Matter

Arbitration – Award – Recourse against award – Setting aside

Case Summary

The appellants and respondent entered into two agreements on 9 June 2013:

1. A contract (“the Contract”) between the first appellant and the respondent where the respondent agreed to design, build, launch, equip, commission, test, complete, sell, and deliver to the first appellant a Self-Erected Tender Rig and a Derrick Equipment Set (collectively, the “Hull”); and
2. A company guarantee by the second appellant in favour of the respondent in respect of the Contract (the “Guarantee”).
   Addendum No. 2 to the Contract was entered into on 24 September 2014. Of central importance to the appeal was Article 6(d) of Addendum No. 2, which varied the payment term in the Contract such that 10% of the total contract sum (the “Fourth Instalment”) would become payable upon “launching and receipt of [the] invoice issued by the respondent”.

On 20 January 2015, the respondent purported to launch the Hull into the water for the purposes of Article 6(d) of Addendum No. 2, but the first appellant's project manager emailed the respondent to state that the first appellant did not consider the floating as launching.

On 21 January, 7 April and 28 April 2015, various Construction and Progress Meetings took place. It was the respondent's position that by 28 April 2015, all outstanding issues and/or deficiencies in relation to the Hull had been resolved. On 3 May 2015, the Hull was launched. On 5 May 2015, the respondent demanded payment of the Fourth Instalment. As payment was not made, the respondent issued a default notice on 3 August 2016 pursuant to the terms of the Guarantee requesting that the appellants pay the Fourth Instalment. As payment continued to be withheld, the respondent commenced the Arbitration against the appellants.
The central issue in question at the Arbitration was whether the respondent (i.e. the claimant in the Arbitration) was entitled to the Fourth Instalment. The tribunal found that there was no valid reason for the appellants to withhold payment of the Fourth Instalment and ordered the appellants to pay the respondent the Fourth Instalment.

The appellants applied to set aside the part of the award that related to the Fourth Instalment on the grounds that the Award had been made in excess of the tribunal's jurisdiction and there had been a breach of the appellants' right to present their case. The Judge dismissed all the appellants' attempts to impugn the Award, to which the appellants appealed.

The Court of Appeal dismissed the appellants’ appeal.

The appellants’ arguments were twofold, that the tribunal had acted in excess of its jurisdiction and there had been a breach of the right to present their case. The factual matric for both grounds were identical. Therefore, failing to establish that the tribunal had acted in excess of its jurisdiction would cause the breach of natural justice argument to fail.

Whether the tribunal acted in excess of its jurisdiction

First argument – No reference in Statement of Claim and Notice of Arbitration to second launch

The appellants argued that the Statement of Claim and Notice of Arbitration did not make any reference to the second launch as providing a basis for the Fourth Instalment becoming payable and contended that the tribunal’s reliance on the events of May 2015 concerning the second launch constituted reliance on unpleaded material.

The Court found that the argument was mistaken as the jurisdiction of a tribunal in deciding the dispute was not framed only by the Statement of Claim and Notice of Arbitration (see PT Prima International Development v Kempinski Hotels SA and other appeals [2012] 4 SLR 98 at [34] and JVL Agro Industries Ltd v Agritrade International Pte Ltd [2016] 4 SLR 768 at [150]). In this regard, the Court would look at the five sources of submissions: the parties’ pleadings, Agreed List of Issues (ALOI), opening statements, evidence adduced, and closing submissions at the Arbitration.

The Pleadings

It was not in contention that the initial claim based on the notice of arbitration and the Statement of Claim was premised on the first launch of 20 January 2015, and did not make reference to the second launch in May 2015.

In this regard, in the appellants' own Statement of Defence and Counterclaim, the appellants expressly addressed the issue of whether the first appellant had granted its approval on 28 April 2015 for the second launch. Further, it was clear from the Reply and Defence to Counterclaim that the respondent itself argued that by 28 April 2015, all outstanding issues relating to the launch of the Hull had been resolved such that the second launch in May 2015 would trigger the payment of the Fourth Instalment. The appellants also continued to take issue with this precise point in the Rejoinder. The Rejoinder illustrated that the appellants were fully aware of and were responding to the respondent's case that there was a second launch scheduled for May, and that the May launch followed from the appellants' approvals in the Construction and Progress Meetings. Thus, it could not be viably contended that the question of whether the first appellant had approved the launch of the Hull after the first launch in January 2015 was not in issue, nor could it viably be contended that the tribunal had exceeded its jurisdiction.

The Agreed List of Issues (ALOI)

The issues (a) whether the Hull was launched on 20 January 2015 or on 3 May 2015; and (b) whether prior to each of these launch dates, the first appellant’s approval had been obtained, had been identified and agreed by both parties as issues for the tribunal’s determination. Therefore, the tribunal’s finding that the first appellant had, on 28 April 2015, approved the second launch could not be said to have been made in excess of jurisdiction.

The Parties' Opening Statements

The parties' opening statements further buttressed the fact that the parties had in fact joined issue over the approval granted for the second launch.

It was apparent from the opening statements that the appellants sought to (a) deny that agreement to launch was of “contractual significance” in triggering the Fourth Instalment, and that in any event (b) no such agreement had arisen as of 28 April 2015 for the second launch on 3 May 2015. The appellants had therefore clearly addressed the second launch as an issue, and they could not therefore claim that the question of whether the parties had agreed to the second launch in May 2015 was not in issue before the tribunal.

The Evidence Adduced by the Parties

The evidence adduced by the parties at the Arbitration engaged with the question of whether approval had been granted for the second launch in May 2015, such that the payment obligation for the Fourth Instalment was triggered. In particular, cross-examination on the issues of (a) the alleged grant of approval on 28 April 2015; (b) the second launch on 3 May 2015; and (c) the Fourth Instalment falling due by virtue of Article 6(d) of the Contract Addendum No. 2 did in fact take place. It was indefensible for the appellants to contend that none of those points were in issue or even live throughout the arbitration.

The Parties' Closing Submissions

The appellants’ closing submissions dealt with the second launch, and whether the requisite approvals had been procured. In particular, the Court noted that the appellants did not raise any jurisdictional objections about the respondent's reply closing submissions on these matters.

Second Argument: tribunal erred in finding that the Hull had been launched

The appellants argued that the tribunal had erred in finding that the Hull had been launched, as was required in Contract Addendum No. 2, as the Hull had only been floated.

In determining an application to set aside an arbitral award on the basis of an alleged excess of jurisdiction, it is trite that the Court in determining the same is not concerned with the merits of the dispute, but only with the process. The correctness of the tribunals' decision is not in issue. The key question lies in determining the ambit of the tribunal's jurisdiction. It was therefore not for the Court to reconsider the merits of whether the Hull had been launched or only floated.

Third Argument: the respondent's only alternative argument made at the arbitration, was on arising out of estoppel

The appellants argued that apart from the respondent's primary case that the Hull had been launched in January 2015, any reference to the second launch in May 2015 pertained only to the context of estoppel, and did not provide a basis for the tribunal to make its finding that the obligation to pay the Fourth Instalment had been triggered.

The Court found that this assertion was untrue. It was evident that the second launch was squarely before the tribunal and issue had been joined by both parties on it.

Fourth Argument: Even if reference had been made to the second launch and approval for the same, such reference was not the "crux' or "focus" of the parties' cases in the arbitration

The appellants argued that even if there had been reference made to the second launch and approval for the second launch, such reference was not the crux of the parties’ cases in the Arbitration.

The Court found that so long as an issue was raised, however briefly, the opposing party could avail itself of the opportunity to address the issue at whatever length and in whatever detail it so decides. Given that it was clear that the issues of the second launch was categorically within the ambit of the tribunal's jurisdiction, the argument that the reference to the second launch and approval for the same was not the crux is grounds for setting aside was dismissed.

Breach of natural justice

Since it was concluded that the tribunal had not exceeded its jurisdiction, and the appellants’ own acknowledgment that the breach of natural justice alleged was entirely dependent on the tribunal having in fact exceeded its jurisdiction, it was held that the breach of natural justice argument by the appellants failed to stand.

Costs

The respondent contended at first instance that it, having been successful in resisting the appellants' attempt to set aside the Award, should be entitled to costs on an indemnity basis. While the respondent abandoned this position, the Court thought it was a good opportunity to set its brief views on whether there should be a presumption of indemnity costs in the event of an unsuccessful application for setting aside.

The Court favoured the reasoning of Justice Belinda Ang in BTN and another v BTP and another [2021] SGHC 38 where it was held that it was well established in Singapore that the imposition of costs on an indemnity basis was dependent on there being exceptional circumstances to warrant a departure from the usual course of awarding costs on a standard basis.

The Court found that while the category of exceptional circumstances attracting indemnity costs is not closed, it would do violence to the notion of such circumstances having to be "exceptional" if every instance of an award being challenged unsuccessfully is said to be presumptively an "exceptional" circumstance warranting indemnity costs.

Further, and fundamentally, such an approach is not reflective of Singapore's approach to indemnity costs, which provides a broad discretion to the Court to award costs. Nothing in both case law and the Singapore rules of court suggests that an entire area should be presumptively hived-off as attracting costs on an indemnity basis because of the concerned subject matter. The assessment of indemnity costs should turn on the facts, and an assessment of the totality of the facts and circumstances.

Notably, the Court disagreed with the Hong Kong position (wherein there is a presumption of indemnity costs on the basis that (a) parties to arbitration recognise arbitral awards as final and binding; (b) any challenge to arbitral awards in court would therefore be tantamount to going back on this recognition by the parties; and (c) indemnity costs should thus be ordered), as this failed to recognise the limited avenues available to challenge an arbitral award are statutorily provided for in the same way as a right of appeal against a decision of the court below. There is therefore no principled reason to draw any distinction between the two.