The Court of Appeal in CAJ v. CAI [2021] SGCA 102 has upheld an earlier High Court decision to set aside part of an arbitral award, in circumstances where the party was deprived of its fundamental right to be heard – i.e., the right to present its case, and the right to respond to the case against it. While cases of arbitral awards being set aside are uncommon, this case shows that the Singapore courts will intervene when there are meritorious challenges.
Factual Background
In CAJ v. CAI [2021] SGCA 102, the defendants appealed against an earlier decision of the General Division of the High Court (the “High Court“) to set aside part of an arbitral award. The High Court had allowed the setting aside application, in circumstances where the tribunal had accepted an extension of time (EOT) defense that was raised by the defendants for the very first time in its written closing submissions.
While the claimant had responded to the new EOT defense in its own written closing submissions, the defense had not been raised during the oral hearing and so there had been no opportunity to adduce evidence or to cross-examine witnesses on the requested EOT. In its award, the arbitral tribunal accepted that there had been “no direct evidence” before it on the issue, but neverthless considered itself “capable of fairly and reasonably determining” an appropriate EOT, in view of its own “experience in these matters”.
The High Court’s Decision
The High Court allowed the setting aside application because, among others:
- The claimant did not have a fair and reasonable opportunity to respond to the EOT defense.
- The Tribunal had relied substantially on its professed experience in reaching its decision on the EOT defense.
The defendants challenged the High Court’s decision by arguing, among others:
- The High Court took too narrow a view of the scope of the parties’ submission to arbitration, as well as the Terms of Reference, the pleadings and the draft Lists of Issues.
- The claimant had been given a fair and reasonable opportunity to respond to the EOT defense, and the claimant had been given the opportunity to address the chain of reasoning adopted by the tribunal.
The Court of Appeal’s Decision
The Court of Appeal rejected the defendants’ arguments, and explained that:
- It was impermissible for the court or the tribunal to “broadly” construe the pleadings, Lists of Issues and Terms of References in the arbitration in order to read in a defense that was not pleaded.
This was a “classic case of breach of natural justice”. The EOT defense was a completely new defense, which the claimant did not have notice of until its belated appearance in the defendants’ closing submissions. Further, the claimant did not have the opportunity to respond to the tribunal’s unarticulated “experience”, which the tribunal relied on to reach its findings.
Comments and Key Takeaways
- Pleadings in arbitration proceedings provide a convenient way for the parties to define the jurisdiction of the tribunal. This is because parties can set out the precise nature and scope of the disputes in respect of which they seek the tribunal’s adjudication.
- To determine whether a tribunal has the jurisdiction to adjudicate on a particular dispute, it is necessary to refer to each party’s pleaded case to see whether the issues of law or fact raised in the pleadings cover that dispute.
- Even where a new issue is raised by the tribunal on its own motion as a result of the evidence adduced during the trial, the defense should be amended for good order.
- This is so that the claimant may file an amended reply and, if necessary, call rebuttal evidence on the new issue. This is an established processto ensure fairness to the party affected by the new issue.
- Only a new fact or change in the law arising after a submission to arbitration which is ancillary to the dispute submitted for arbitration and which is known to all the parties to the arbitration need not be pleaded. This is because it is already part of that dispute.
Parties should ensure that key legal or factual arguments are expressly set out in their pleadings. Where new facts or legal points arise which parties wish to raise for the tribunal’s consideration, parties should amend their pleadings at an early stage to set out these points. Doing so allows the tribunal the opportunity to consider if further evidence or submissions should be permitted to address these new points, and can help to mitigate against any accusations of failing to afford the opposing side a right to be heard.
At the same time, if parties are made aware of failures which taint the arbitral process, they should clearly and unequivocally raise their complaints to the tribunal at the earliest opportunity. If, as was the case here, the alleged breach of natural justice only arises at a late stage, an affected party should nonetheless raise their objection to the tribunal as soon as possible and as a matter of priority, so that the record will show the party was not simply content to proceed with the arbitration.
