Case Summaries

BRS v BRQ and another and another appeal [2020] SGCA 108

SUPREME COURT OF SINGAPORE

29 October 2020

Case summary

Civil Appeal No 34 of 2019 and Civil Appeal No 35 of 2019
BRS v BRQ and another and another appeal [2020] SGCA 108

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Decision of the Court of Appeal (delivered by Justice Woo Bih Li):

Outcome: Court of Appeal holds that a party’s request for an arbitral tribunal to “effect corrections” in the arbitral award was not in substance a correction request under Art 33(1)(a) of the UNCITRAL Model Law on International Commercial Arbitration. In the result, the party’s request did not have the effect of extending the time permitted for filing a setting-aside application, and the party’s setting-aside application is time-barred.

The Court also holds that the tribunal’s failure to wholly consider an aspect of another party’s evidence and arguments amounted to a breach of natural justice which caused real and actual prejudice to that party, and so remits the award to the tribunal for it to consider the omitted evidence and arguments.

Background facts

1 BRS (“the Seller”) was undertaking a project to build a hydroelectric power plant (“the Project”) through a special purpose vehicle company, BRR (“the SPV”). While the Project was underway, the SPV ran out of funds, and BRQ (“the Buyer”) entered the picture as an investor to inject fresh funds for the Project to continue. Under a Sale and Purchase Agreement (“the SPA”), the Buyer contracted to buy all the shares in the SPV. In the SPA, it was envisaged that the Project would be completed or “wet commissioned” by 31 March 2013, and further that the Project cost would be about S$170m (“the Project Cost”).

2 The Project was not wet commissioned on 31 March 2013. Instead, it achieved wet commissioning more than two years later, on 31 October 2015. As a result of the Project delays, and as the costs of the Project exceeded the Project Cost, the Buyer and the SPV (collectively, “the Claimants”) initiated arbitration proceedings against the Seller, claiming payment for the additional costs above the Project Cost and damages that were incurred due to the delay in completion.

3 The arbitral tribunal (“the Tribunal”) issued a final award that was in substance in favour of the Claimants (“the Award”). However, it limited the Seller’s liability with respect to certain time-dependent components to 30 June 2014 (the “Cut-off Date”). In the Tribunal’s view, the Project could have achieved wet commissioning on the Cut-off Date (rather than the eventual date of 31 October 2015) if the Claimants had undertaken the construction and commissioning of the Project in the most prudent and cost-effective manner.

Procedural history

4 Both the Claimants and Seller were dissatisfied with various aspects of the Award, and they filed separate Originating Summonses to set aside portions of the Award. The Claimants sought to set aside the finding in relation to the Cut-off Date, which they alleged had been arrived at due to a breach of the rules of natural justice on the Tribunal’s part. The Seller challenged various other aspects of the Award in relation to its liability, arguing that the Tribunal had acted in breach of natural justice and/or in excess of its jurisdiction.

5 In addition to the substantive arguments raised, the Claimants alleged that the Seller’s setting-aside application was time-barred, as it had been filed on 22 June 2018, which was past the three-month time limit that commenced on 31 January 2018, when the parties received the Award.

6 The High Court judge (“the Judge”) held that the three-month time limit for filing the setting-aside application only began to run from 23 March 2018, when the Seller’s request for correction (“the Correction Request”) was dismissed by the Tribunal. Accordingly, the Seller’s setting-aside application, having been filed on 22 June 2018, was within the three-month period, and not time-barred. Nonetheless, the Judge dismissed the Seller’s setting aside application on the basis that none of the grounds it had put forward had been made out.

7 The Claimants’ grounds for setting aside the Award were also rejected by the Judge, with the result that the Award remained wholly intact. Both parties appealed against the Judge’s decision.

Decision of the Court of Appeal

8 The issues on appeal were: (a) whether the Seller’s setting-aside application was within the three-month time limit; (b) if the Seller’s setting-aside application was filed within time, whether the Tribunal had acted in breach of natural justice and/or in excess of jurisdiction in respect of the issues raised by the Seller; and (c) whether the Tribunal acted in breach of natural justice by failing to consider certain evidence and arguments raised by the Claimants in fixing the Cut-off Date at 30 June 2014.

The Seller’s setting-aside application was filed out of time

9 Art 34(3) of the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”), which is incorporated in Schedule 1 of the International Arbitration Act (Cap 143A, 2002 Rev Ed), provides that “[a]n application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the award or, if a request had been made under Article 33, from the date on which that request had been disposed of by the arbitral tribunal.” Pursuant to Art 33 of the Model Law, a party may make three types of requests to the arbitral tribunal: (a) first, for “the arbitral tribunal to correct in the award any errors in computation, any clerical or typographical errors or any errors of similar nature” (“Art 33 correction request”); (b) second, for “the arbitral tribunal to give an interpretation of a specific point or part of the award” (“Art 33 interpretation request”); and (c) third, for “the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award” (“Art 33 additional award request”). In determining whether the three-month time limit in Art 34(3) has been postponed, the crucial question is whether “a request had been made under Art 33” (“the Phrase”): at [41]–[43].

10 A request under Art 33 need not be granted by the arbitral tribunal for the extension of time under Art 34(3) of the Model Law to be operative. Hence, the extension of time would operate even if the Art 33 request is eventually dismissed by the tribunal: at [66].

11 Nonetheless, an Art 33 request which is only a request in form would not qualify to extend time under Art 34(3). Instead, the Phrase requires the court to consider the substance of a request that has purportedly been made under Art 33. The request to the arbitral tribunal will only have the effect of extending the initial time limit under Art 34(3) if the substance of the request comes within the scope of at least one of the three types of requests under Art 33 of the Model Law: at [64]–[72].

12 In the present case, the Seller expressly stated in the Correction Request that it was “requesting the Tribunal to effect corrections in the Award”. However, a review of the request showed that the “corrections” sought by the Seller were in truth reviews of the Tribunal’s decision on substantive matters. Amongst other contentions, the Seller had raised arguments that had been made before the Tribunal, and which were dismissed by the Tribunal. Therefore, the purported corrections clearly fell outside the permissible corrections that could be made by a tribunal under Art 33(1)(a) of the Model Law, and did not qualify as an Art 33 correction request: at [73]–[80].

13 The Seller did not contend that the Correction Request was either an Art 33 interpretation request or an Art 33 additional award request. Hence, there was no request made under Art 33 that triggered the extension of the initial time limit under Art 34(3) of the Model Law. Since the Seller’s setting-aside application was filed more than three months after the Award had been received by the parties, and as the court did not have the power to otherwise extend the three-month time limit in Art 34(3), the Seller’s application to set aside the Award was time-barred, and the grounds raised by the Seller in support of its setting-aside application were academic: at [81] and [83].

The Claimants’ setting-aside application

14 In its setting-aside application, the Claimants levied two main arguments against the Tribunal’s finding about the Cut-off Date. First, the Tribunal failed to consider evidence that showed that the Claimants’ decision to completely reline cracks in the penstock (“the Relining Method”) was necessary, and thus the most prudent and cost-effective manner of completing the Project. Secondly, the Tribunal failed to consider evidence that the transmission line suffered from several design flaws. As a result, the transmission line could not be completed until 17 October 2015, and so the Project could not have been wet commissioned on the Cut-off Date of 30 June 2014. It was alleged that the Tribunal’s omission to consider such evidence and arguments amounted to a breach of natural justice which warranted a setting aside of part of the Award: at [86].

15 A party seeking to set aside an arbitral award on the ground of natural justice must identify: (a) the relevant rule of natural justice that was breached; (b) how the rule was breached; (c) in what way the breach was connected to the making of the award; and (d) how the breach prejudiced its rights (Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86 at [29]). An aspect of the rules of natural justice is that a tribunal has to consider all important issues. Where it is contended that a tribunal has “wholly missed one or more important pleaded issues”, “the inference … if it is to be drawn at all, must be shown to be clear and virtually inescapable” (AKN and another v ALC and another and other appeals [2015] 3 SLR 488 at [46]): at [89] and [90].

The Relining Method evidence

16 It was not a “clear and virtually inescapable” conclusion that the Tribunal had missed certain arguments and evidence pertaining to the Relining Method. The evidence that the Tribunal had allegedly omitted had been expressly acknowledged to be in evidence, and the Tribunal also noted that it had been fully cross-examined upon. Nonetheless, the Tribunal focussed on other evidence that had been put forward by the Claimants. In particular, it placed emphasis on a report by the Vice-President of the Buyer, which suggested to the Tribunal that another method of simply patching and re-welding the cracked areas of the penstock would have sufficed. Hence, the Tribunal concluded that the Project would have been wet commissioned by the Cut-off Date had the Claimants acted in a sufficiently prudent manner: at [92]–[94].

17 Even if there was an omission to consider the Relining Method evidence, no real prejudice resulted to the Claimants by such omission, as the Tribunal’s view was that such relining amounted to a departure from the agreed contractual specifications, so that even if the Relining Method was necessary, the Seller would not be liable for the delays that flowed from a departure from the SPA: at [95]–[96].

The Transmission Line evidence

18 It was undisputed, as between the parties and the Judge, that the Tribunal failed to consider, whether explicitly or implicitly, the Claimants’ evidence and submissions relating to the transmission line defects being a separate cause of the delay in achieving wet commissioning. This amounted to a breach of natural justice: at [102], [104] and [106].

19 The breach of natural justice caused real and actual prejudice to the Claimants, as it resulted in the Tribunal limiting the Claimants’ entitlement to indemnity for certain components to the Cut-off Date. This Cut-off Date was contingent on the premise that the Claimants’ failure to complete the Project was caused solely by its failure to undertake the penstock repairs in the most prudent and cost- effective manner. But, had the Tribunal considered the Claimants’ arguments that the defects in the transmission line works were an alternate and independent source of the delay of the wet commissioning of the Project, it might have arrived at a different Cut-off Date, as the SPA separately required the transmission line to be completed before the Project could be wet commissioned: at [107].

20 The transmission line issue pertained more broadly to whether the Cut-off Date was appropriate, and was an isolated issue that was severable from the rest of the Award. If the Cut-off Date were to be revised, this would only affect the quantum of the indemnity payable by the Seller to the Claimants, which could be effected without upending the entire Award. Accordingly, the issue of whether the transmission line delays would have affected the Cut-off Date of 30 June 2014 was remitted to the Tribunal for its consideration. All other respects of the Award remained intact: at [111].

 

This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.

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