Sigur Ros Sdn Bhd(Company No:553068-H) … PlaintiffAndMaster Mulia Sdn Bhd(Company No:868833-U) … Defendant

  

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IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

 

(COMMERCIAL DIVISION) ORIGINATING SUMMONS NO. 24NCC-120-03/2015

 

SIGUR ROS SDN BHD In the matter of Sections 37(1)(a)(iv), 37(1)(b)(ii), 37(2)(b) and Section 42 of the Arbitration Act 2005 And In the matter of an arbitration award dated 23.1.2015 between Master Mulia Sdn Bhd and Sigur Ros Sdn Bhd And In the matter of Order 5 Rule 3 of the Rules of Court 2012 And In the matter of Order 69 of the Rules of Court 2012 BETWEEN

 

(COMPANY NO:553068-H) … PLAINTIFF

 

AND

 

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MASTER MULIA SDN BHD (COMPANY NO:868833-U)

 

… DEFENDANT

 

JUDGMENT

 

A. Introduction

 

1. This case raises, among others, an interesting question of whether the court may set aside part of an arbitral award made by a sole arbitrator who has decided one matter without giving an opportunity to the parties to adduce expert evidence and present submission (written and oral) on the matter. In such a case, is there a breach of the following:

 

(a) the arbitrator’s duty to give each party “a fair and reasonable opportunity of presenting” the party’s case to the arbitrator; and/or

 

(b) the second rule of natural justice

 

– which necessitates judicial intervention?

 

B. Background

 

2. The defendant company (Defendant) owns a pipe-laying barge (Vessel) which has been chartered by the plaintiff company (Plaintiff) pursuant to a charterparty agreement dated 23.10.2012 between the Plaintiff and Defendant (CPA).

 

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3. The CPA is based on a standard form “BIMCO Time Charter Party for Offshore Services Code Name Supplytime 2005”.

 

4. The Vessel has been chartered by the Plaintiff to carry out, among others, pipe-laying works in Indonesia.

 

5. The period of hire under the CPA was from 23.10.2012 to 21.11.2012. The Plaintiff first extended the charter period for 30 days on 27.11.2012. The second extension of the charter period by the Plaintiff was until

 

26.1.2013.

 

6. While the Vessel was carrying pipe-laying works on 9.1.2013, the Vessel’s stinger hitch (Stinger Hitch) was damaged.

 

C. Defendant’s claim in arbitral proceedings

 

7. In the “Amended Points of Claim” filed by the Defendant (Defendant’s Amended Claim) in the arbitral proceedings against the Plaintiff before the sole arbitrator (Arbitrator), the Defendant alleged the following:

 

(a) the Plaintiff did not inform the Defendant of the damage to the Stinger Hitch until a survey of the Vessel was carried out on 7.3.2013 in the Defendant’s presence by a surveyor, Matthews

 

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Daniel International Pte. Ltd. (MDI). The Defendant had not agreed to the appointment of MDI;

 

(b) by a letter dated 8.3.2013, the Defendant had put the Plaintiff on notice that, among others, the Vessel must be re-delivered to the Defendant in the Vessel’s original condition, failing which, the Vessel would remain on hire and the Plaintiff was obliged to reinstate the Vessel;

 

(c) by a letter dated 12.3.2013, the Defendant gave notice to the Plaintiff to submit a proposal to repair and/or reinstate the Vessel, failing which, the Defendant would repair and/or reinstate the Vessel at the Plaintiff’s expense as provided in clause 4 CPA (Clause 4);

 

(d) by way of a letter dated 14.3.2013, the Plaintiff denied its obligations to repair and/or reinstate the Vessel;

 

(e) the Plaintiff and Defendant had conducted a joint inspection of the Vessel on 6.3.2013, 7.3.2013 and 30.4.2013 (Post-Damage Joint Inspection). During the Post-Damage Joint Inspection, the Defendant discovered that the Plaintiff had caused alterations to the Vessel’s structure and had damaged the Vessel’s tools and equipment;

 

(f) the Defendant instructed Malaysia Marine & Heavy Engineering Sdn. Bhd. (MMHE) to repair and/or reinstate the Vessel;

 

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(g) the repair and/or reinstatement of the Vessel was complete on

 

22.5.2013. Hence, the Defendant claimed from the Plaintiff daily charter hire for the charter period from 15.2.2013 until 22.5.2013 as the Plaintiff had only paid for the charter period up to 14.2.2013;

 

(h) the Defendant had claimed from the Plaintiff a sum of RM1,582,400 as cost of repair and/or reinstatement of Vessel;

 

(i) the Plaintiff had failed to pay to the Defendant for the Plaintiff’s usage of consumables, medicine, tools, communications and equipment of the Vessel during the charter period amounting to RM309,717.72;

 

(j) the Plaintiff had earlier provided an irrevocable, unconditional and “on demand” bank guarantee for a sum of RM3,719,115 in favour of the Defendant (BG) as required by clause 43 CPA (Clause 43). When the Plaintiff extended the charter period, the Plaintiff had failed to extend the BG.

 

The Plaintiff had filed a suit in the Kuala Lumpur High Court Originating Summons No. 24NCC-89-03/2013 and had applied for a declaration that the BG had expired and the Defendant was not entitled to call on the BG [Plaintiff’s Suit (BG)]. The Plaintiff’s Suit (BG) was allowed with costs (High Court’s Decision On BG) and the Defendant did not appeal to the Court of Appeal against the High Court’s Decision On BG; and

 

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(k) the Defendant claimed for, among others, the following relief from the Plaintiff –

 

(i) a declaration that the charter period of the Vessel was until 22.5.2013;

 

(ii) a declaration that the Plaintiff had failed to extend BG and/or adjust the value of BG to cover the whole of the charter period, in breach of Clause 43;

 

(iii) a sum of US$3,968,270 (or RM12,698,464 at the conversion rate of US$1 to RM3.20) to be paid by the Plaintiff to the Defendant as charter hire up to 22.5.2013;

 

(iv) a sum of RM1,582,400 to be paid by the Plaintiff to the Defendant for the cost of repair and/or reinstatement of the Vessel;

 

(v) a sum of RM309,717 to be paid by the Plaintiff to the Defendant for the cost of replacement and/or replenishment of consumables, medicine, tools, communications and equipment of the Vessel during the charter period;

 

(vi) a sum of RM27,000 as costs ordered by the High Court’s Decision On BG to be paid by the Defendant to the Plaintiff and a sum of RM51,412.47 as legal fees incurred by the Defendant in defending the Plaintiff’s Suit (BG); and

 

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(vii) loss of benefit suffered by the Defendant in respect of the BG when the Plaintiff failed to extend the BG.

 

D. Plaintiff’s defence and counterclaim in arbitral proceedings

 

8. In the Plaintiff’s “Re-amended Defence and Counterclaim” filed before the Arbitrator (Plaintiff’s Re-amended Defence and Counterclaim), the Plaintiff denied the Defendant’s claim and alleged, among others, as follows:

 

(a) prior to the CPA, by way of a letter dated 23.10.2012 from the Defendant to the Plaintiff, the Defendant had, in consideration of the Plaintiff entering into the CPA with the Defendant, “irrevocably and unconditionally authorized and consented” for 25% of all charter payments to be set off against an agreed sum of RM5,867,056.81 (Prior Agreement);

 

(b) the Plaintiff accepted the Vessel based on an express and/or implied representation by the Defendant that the Vessel would be fit for the purpose of the CPA as stated in Box 17, Part 1 CPA (Box 17) and would comply with the Vessel’s specifications as stated in clause 3(a) CPA [Clause 3(a)] read with Annex A to the CPA (Annex A);

 

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(c) clause 3(b) CPA [Clause 3(b)] provides that the Defendant “shall exercise due diligence to maintain the Vessel” “in every way fit for the service stated in Clause 6 throughout the period of this Charter Party’;

 

(d) the Stinger Hitch had a hidden damage which could not be discovered during the parties’ joint inspection of the Vessel before the commencement of the charter (Pre-Charter Joint Inspection). On 9.1.2013, the Stinger Hitch, pedestal crane and winch no. 7 (Winch No. 7) broke down. The Stinger Hitch broke down despite the fact that the Stinger Hitch had been operated “well within its accepted parameters”. Consequently, the Vessel could not be used by the Plaintiff for 10.77 days and the Plaintiff should not be obliged to pay charter hire to the Defendant for this period of 10.77 days;

 

(e) based on clause 44 CPA (Clause 44) read with Annex A, the Stinger Hitch, pedestal crane and Winch No. 7 were equipment and not part of the structure of the Vessel;

 

(f) the Defendant had breached its duty under Clause 3(b) to exercise proper control and command of the Vessel and its equipment. On this ground, the Plaintiff also relied on clauses 7(d) CPA [Clause 7(d)], 8(a) CPA, 14(b)(i) CPA and Clause 44;

 

(g) an “off-hire survey’ of the Vessel was carried out by MDI on

 

5.3.2013. The “pictorial report’ dated 6.3.2013, report dated

 

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7.3.2013 and 11 final report’ dated 14.3.2013 had been submitted to the Defendant by the Plaintiff;

 

(h) the Vessel was re-delivered by the Plaintiff to the Plaintiff on

 

5.3.2013, the date of MDI’s survey. As such, the Defendant could not claim for charter hire from 6.3.2013 until 22.5.2013. The Plaintiff also relied on clause 49(b) CPA;

 

(i) the Plaintiff only paid for the charter hire up to 14.2.2013 and did not pay for charter hire from 15.2.2013 until 5.3.2013 (the date the Plaintiff claimed the Plaintiff had lawfully re-delivered the Vessel to the Defendant) because the Plaintiff had counterclaims and crossclaims against the Defendant which exceeded the charter hire for the period from 15.2.2013 to 5.3.2013;

 

(j) in respect of the BG, the Plaintiff relied on the High Court’s Decision On BG. The Plaintiff further contended that as the Defendant had not availed itself of the remedies provided in Clause 43, the Defendant had accordingly waived its rights under Clause 43;

 

(k) the Plaintiff’s counterclaim and cross-claims against the Defendant were as follows –

 

(i) the Defendant breached its express and/or implied obligations owed to the Plaintiff under Box 17, Clause 3(a) read with Annex A, Clause 7(d) and Clause 44 when the Defendant delivered

 

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the Vessel to the Plaintiff with the Stinger Hitch not in good operating condition;

 

(ii) the Defendant had also failed and/or neglected to exercise proper control over the operations of the Stinger Hitch, pedestal crane and Winch No. 7 which were damaged on 9.1.2013. The Plaintiff had repaired such damage in the sum of US$2,074,963.21 (Plaintiff’s Repair Cost); and

 

(iii) in view of the damage to the Vessel, the Vessel could not be used by the Plaintiff for 10.77 days. The Plaintiff was not obliged to pay charter hire to the Defendant for this period of 10.77 days; and

 

(l) the Plaintiff counterclaimed from the Defendant for the following

 

relief, among others –

 

(i) a declaration that pursuant to the Prior Agreement, the Plaintiff was entitled to a 25% deduction from all charter payments made and to be made to the Defendant;

 

(ii) an order pursuant to the Prior Agreement for the Defendant to account for 25% deduction of all charter payments made to be made by the Plaintiff to the Defendant; and

 

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(iii) an order for the Defendant to pay the Plaintiff’s Repair Cost to the Plaintiff.

 

E. Arbitrator’s final award (Award)

 

9. On 23.1.2015, the Award was given as follows, among others:

 

(a) the Plaintiff shall pay to the Defendant the sum of US$3,023,269.52 for the outstanding charter hire payments (1st Sum);

 

(b) the Plaintiff shall pay to the Defendant the sum of US$82,332.33 as pre-Award interest on the 1st Sum until the date of the Award;

 

(c) the Plaintiff shall pay to the Defendant the sum of RM502,141.47 in full and final settlement of the Defendant’s claims in this arbitration towards repair and reinstatement of the Vessel, reimbursable items and BG;

 

(d) all other claims by the Defendant and Plaintiff (including claims by way of defence and counterclaim) are dismissed; and

 

(e) the Plaintiff shall pay to the Defendant post-Award simple interest at the rate of 5% per annum from the date of the Award until date of full payment.

 

F. This suit

 

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10. This originating summons (OS) has been filed by the Plaintiff with the following prayers:

 

(a) the Award be set aside under s 37(1)(a)(iv), 37(1)(b)(ii) and 37(2)(b) of the Arbitration Act 2005 (AA);

 

(b) the Award be set aside or varied under s 42 AA based on the following 11 questions (11 Questions) –

 

(i) whether the Defendant’s rights under Clause 43 extends to costs incurred by the Defendant in failing to enforce the BG? (1st Question);

 

(ii) whether on the proper construction of Clauses 7(d) and 44, the Defendant, including its officers and crew, is entitled or has the unfettered discretion to stop the Plaintiff’s pipe-laying operations or use of any equipment on board the Vessel for pipe-laying if the operations or use of the equipment cannot be safely undertaken? (2nd Question);

 

(iii) whether on the proper construction of Clause 44, the Defendant has control and authority over the Plaintiff’s use of the Vessel’s major equipment, including the Stinger Hitch, at all times? (3rd Question);

 

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(iv) whether Clauses 7(d) or 44 or both of them are intended to protect the Defendant Owner’s Vessel and its equipment from damage or danger by vesting the right of control and authority in the Vessel and its equipment and the operations on the Defendant Owner or its crew or officers at all times? (4th Question);

 

(v) on a proper construction of the words and language of Clauses 7(d) and 44, whether the Defendant, including its officers and crew, is entitled to instruct the Plaintiff to stop pipe-laying operations or the use of any equipment on the Vessel if the weather conditions are not safe or suitable to carry out pipelaying operations? (5th Question);

 

(vi) whether the Defendant is estopped or barred from exercising any of its rights under the CPA, against the Plaintiff if the Defendant itself fails to exercise its rights under Clauses 7(d) or 44? (6th Question);

 

(vii) whether the exercise or application of the Defendant’s rights under Clause 4 is conditional or subject to the Defendant’s exercising its rights under Clauses 7(d) or 44 where the structural alteration or installation of additional equipment under Clause 4 is due to damage to the Vessel or its equipment during the performance of the services of the charter party? (7th Question);

 

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(viii) whether the application of Clauses 7(d) and 44 depends on or is conditional on the Defendant Owner having a sufficient number of crew or officers on the Vessel? (8th Question);

 

(ix) whether on a proper construction of Clause 3(b), the Defendant has an absolute obligation to maintain the Vessel and its equipment in every way fit for service? (9th Question);

 

(x) whether on a proper construction of Clause 3(b), the Defendant has an obligation to ensure the fitness for purpose of the Vessel and its equipment or the seaworthiness of the Vessel throughout the charterparty? (10th Question); and

 

(xi) whether on a proper construction of Clause 3(b), the onus is on the Defendant Owner to show that it has exercised due diligence to maintain the Vessel throughout the charterparty? (11th Question); and

 

(c) costs of the OS be paid by the Defendant.

 

G. Plaintiff’s submission

 

11. In support of the OS, Mr. Chew Chang Min (Mr. Chew), learned counsel for the Plaintiff, firstly contended that the Arbitrator had breached the second rule of natural justice in the following manner:

 

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(a) in paragraph 407 of the Award (Paragraph 407), the Arbitrator had decided as follows –

 

“The Vessel has been operating in severe weather conditions, as evident from the reports provided, since January 4, 2013. It is reasonable and fair to believe that the weather induced erratic stress and loading, the structural members of the stinger assembly were subjected to fatigue. Further due to continuous excessive loads accentuated by severe weather during the week, resulted in the cracking of the plate, which is one of the critical load bearing and load transfer member between the stinger hitch box and the hull of the Vessel. This cause even though not investigated through metallurgical or scientific methods for material analysis of the failed member (Cracked Plate), by the Parties, but on the balance of probabilities, the Tribunal finds that the damage is sustained due to continuing operations of the Stinger and the Vessel in severe weather conditions by the [Plaintiff], prior to and on the day the damage was discovered.”

 

(emphasis added);

 

(b) the Defendant’s pleaded case was –

 

(i) the Plaintiff’s personnel was responsible for the operation of the Vessel and its equipment; and

 

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(ii) the Plaintiff’s negligent operation and handling of the Vessel and its equipment, including the Stinger Hitch, had caused damage to the Stinger Hitch;

 

(c) the Defendant had adduced, among others, expert evidence regarding the Plaintiff’s negligent operation of the Vessel and its equipment, including the Stinger Hitch, during severe weather conditions on 9.1.2013. According to the Defendant’s expert evidence, the Plaintiff should have taken “heavy weather preventive measures” as a prudent operator of the Vessel but the Plaintiff failed to do so. The Defendant further contended that the Plaintiff should have practised good seamanship and should have stopped operating the Stinger Hitch when the weather deteriorated on

 

9.1.2013. The Plaintiff however continued to operate the Stinger Hitch during severe weather conditions on 9.1.2013 and such an operation exceeded the Stinger Hitch’s limitation which then led to the damage to the Stinger Hitch;

 

(d) the cross-examination of the Plaintiff’s witness in the arbitral proceedings by the Defendant’s learned counsel, concentrated on the Plaintiff’s negligence in the operation and handling of the Vessel’s equipment, including the Stinger Hitch;

 

(e) the Defendant’s written submission addressed the “primary allegation of negligence” on the Plaintiff’s part;

 

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(f) the Arbitrator had dismissed the Defendant’s claim that the Plaintiff’s

 

negligence had caused damage to the Stinger Hitch (paragraphs

 

396, 398 and 400 of the Award);

 

(g) in respect of Paragraph 407 –

 

(i) there was no evidence adduced in the arbitral proceedings to prove that that due to “weather induced erratic stress and loading, the structural members of the stinger assembly were subjected to fatigue”;

 

(ii) the Arbitrator had admitted that there was no investigation “through metallurgical or scientific methods for material analysis of the failed member (Cracked Plate), by the Parties”;

 

(iii) the Arbitrator did not invite the Plaintiff and Defendant to adduce evidence to determine as a fact whether weather induced erratic stress and loading had led to a fatigue of the structural members of the stinger assembly; and

 

(iv) the Arbitrator did not give an opportunity to the Plaintiff and Defendant to submit on the issue of whether weather induced erratic stress and loading had led to a fatigue of the structural members of the stinger assembly; and

 

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(h) the second rule of natural justice had been breached by the Arbitrator when Paragraph 407 was decided by the Arbitirator without the parties being given a right to adduce expert evidence and to submit on the matter decided in Paragraph 407.

 

12. In support of the Arbitrator’s alleged breach of the second rule of natural justice, Mr. Chew has cited an impressive array of cases from Malaysia and other jurisdictions such as Singapore, England, Australia, New Zealand and Scotland.

 

13. In respect of the Plaintiff’s application under s 42 AA, Mr. Chew contended as follows:

 

(a) the Arbitrator had erred in law in the interpretation of Clauses 7(d) and 44 by deciding that the operation, management, control and authority of the Vessel vested in the Plaintiff and not the Defendant. The Arbitrator had wrongly construed Clauses 7(d) and 44 by reference to the Defendant’s conduct. As such, 2nd to 5th and 8th Questions should be answered in the affirmative in the Plaintiff’s favour; and

 

(b) in respect of the 6th Question, the Defendant had failed to exercise its rights under Clauses 7(d) and 44 to prevent the Plaintiff’s pipelaying operations and is thereby estopped from exercising any of its rights under the CPA. Accordingly, the 6th Question should be answered “yes” in favour of the Plaintiff.

 

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14. There is no written and oral submission by the Plaintiff in respect of the 1st, 7th and 9th to 11th Questions.

 

15. I must record my appreciation for the extensive research done by Mr. Chew.

 

H. Judicial intervention in respect of final arbitral awards

 

16. Sections 37 and 42 AA read as follows:

 

“Application for setting aside

 

s 37(1) An award may be set aside by the High Court only if –

 

(a) the party making the application provides proof that –

 

(i) a party to the arbitration agreement was under any incapacity;

 

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it, or, failing any indication thereon, under the laws of Malaysia;

 

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present that party’s case;

 

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(iv) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration;

 

(v) subject to subsection (3), the award contains decisions on matters beyond the scope of the submission to arbitration; or

 

(vi) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Act from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Act; or

 

(b) the High Court finds that –

 

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the laws of Malaysia; or

 

(ii) the award is in conflict with the public policy of Malaysia.

 

(2) Without limiting the generality of subparagraph (1)(b)(ii), an

 

award is in conflict with the public policy of Malaysia where

 

(a) the making of the award was induced or affected by fraud or corruption; or

 

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(b) a breach of the rules of natural justice occurred –

 

(3)

 

(4)

 

(5)

 

(6)

 

(i) during the arbitral proceedings; or

 

(ii) in connection with the making of the award.

 

Where the decision on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside.

 

An application for setting aside may not be made after the expiry of ninety days from the date on which the party making the application had received the award or, if a request has been made under section 35, from the date on which that request had been disposed of by the arbitral tribunal.

 

Subsection (4) does not apply to an application for setting aside on the ground that the award was induced or affected by fraud or corruption.

 

On an application under subsection (1) the High Court may, where appropriate and so requested by a party, adjourn the proceedings for such period of time as it may determine in order to allow 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.

 

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(7) Where an application is made to set aside an award, the High

 

Court may order that any money made payable by the award shall be brought into the High Court or otherwise secured pending the determination of the application.

 

Reference on questions of law

 

s 42(1) Any party may refer to the High Court any question of law arising out of an award.

 

(1A) The High Court shall dismiss a reference made under subsection (1) unless the question of law substantially affects the rights of one or more of the parties.

 

(2) A reference shall be filed within forty-two days of the publication and receipt of the award, and shall identify the question of law to be determined and state the grounds on which the reference is sought.

 

(3) The High Court may order the arbitral tribunal to state the

 

reasons for its award where the award –

 

(a) does not contain the arbitral tribunal’s reasons; or

 

(b) does not set out the arbitral tribunal’s reasons in sufficient detail.

 

(4) The High Court may, on the determination of a reference –

 

(a) confirm the award;

 

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(b) vary the award;

 

(c) remit the award in whole or in part, together with the High Court’s determination on the question of law to the arbitral tribunal for reconsideration; or

 

(d) set aside the award, in whole or in part.

 

(5) Where the award is varied by the High Court, the variation shall

 

have effect as part of the arbitral tribunal’s award.

 

(6) Where the award is remitted in whole or in part for

 

reconsideration, the arbitral tribunal shall make a fresh award in respect of the matters remitted within ninety days of the date of the order for remission or such other period as the High Court may direct.

 

(7) Where the High Court makes an order under subsection (3), it

 

may make such further order as it thinks fit with respect to any additional costs of the arbitration resulting from that order.

 

(8) On a reference under subsection (1) the High Court may –

 

(a) order the applicant to provide security for costs; or

 

(b) order that any money payable under the award shall be brought into the High Court or otherwise secured pending the determination of the reference.”

 

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(emphasis added).

 

17. Sections 37 and 42 AA apply to “awards” [defined widely in s 2(1) AA to include “any final, interim or partial award and any award on costs or interest but does not include interlocutory orders”]. This case only concerns a final award.

 

18. In deciding to intervene in respect of a final award under ss 37 and/or 42 AA, there are 4 matters (4 Considerations) which I need to remind myself as follows:

 

(a) parties have the freedom to agree to arbitrate any dispute which may arise between them (Party Autonomy). The Court of Appeal in Kerajaan Malaysia v Perwira Bintang Holdings Sdn Bhd [2015] 1 CLJ 617, at 632 (Perwira Bintang Holdings Sdn Bhd), has

 

recognized Party Autonomy as one of the policy considerations that the court should “embrace” in deciding whether to intervene in respect of an arbitral award;

 

(b) parties are at liberty to agree that an arbitral award which is made at the conclusion of arbitral proceedings of their choice, is final and binding on the parties (Finality of Awards). Section 36(1) AA embodies Finality of Awards by providing as follows –

 

“An award is final and binding

 

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36(1) An award made by an arbitral tribunal pursuant to an arbitration agreement shall be final and binding on the parties and may be relied upon by any party by way of defence, set-off or otherwise in any proceedings in any court .”

 

(emphasis added).

 

Finality of Awards has been reiterated by the Court of Appeal in Antara Steel Mills Sdn Bhd v CIMB Insurance Brokers Sdn Bhd

 

[2015] 5 CLJ 1018, at 1024. At this juncture, I must refer to s 18(8) and (10) AA which provide as follows –

 

“18(8) Where the arbitral tribunal rules on such a plea as a

 

preliminary question that it has jurisdiction, any party may, within thirty days after having received notice of that ruling appeal to the High Court to decide the matter.

 

(10) No appeal shall lie against the decision of the High Court under subsection (8).”

 

(emphasis added).

 

Section 18(8) and (10) AA provide a limited right of appeal to the High Court only [no further appeal can be made to the Court of Appeal against a decision of the High Court under s 18(8) AA] against an arbitral tribunal’s ruling on a preliminary question that the

 

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arbitral tribunal has jurisdiction to decide the dispute in question. Section 18(8) AA does not provide an appeal to the High Court against a final arbitral award;

 

(c) the AA (including ss 37 and/or 42) does not provide for an appeal to the High Court against a final arbitral award. This is clear from, among others, the following 2 Court of Appeal cases –

 

(i) in Awangku Dewa Pgn Momin & Ors v Superintendent of Lands and Surveys, Limbang Division [2015] 3 CLJ 1, at 10, 13 and 15 (Awangku Dewa), Mohd. Hishamudin Yunus JCA decided as follows –

 

“ There Is No Appeal Against The Decision Of An Arbitral

 

Tribunal

 

[12] There is a basic and important legislative policy codified in our Arbitration Act 2005, and that policy is that the award of an arbitrator is final and binding. There is no recourse to a court of law by way of an appeal. This is clearly stated by s. 36 [AA]…

 

Exceptions To The Policy

 

[13] However, the [AA] provides for some but limited exceptions where an award of the arbitrator may be challenged in a court of law. A party to an arbitration proceedings aggrieved by an award may apply to a

 

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High Court to set aside the award under s. 37 [AA].

 

But he may do so only in the limited circumstances as specified by that section.

 

[14] Another exception is that a party to an arbitral proceedings, dissatisfied with the decision of the arbitral tribunal, may refer a question of law to the High Court pursuant to s. 42 [AA] for the court’s determination.”

 

(emphasis added); and

 

(ii) in Antara Steel Mills Sdn Bhd, at p. 1024-1025, Mohd. Hishamudin Yunus JCA decided as follows –

 

—[18] In our judgment, with respect, there is no merit in the defendant’s argument which raises the issue of causation in regard to the financial loss suffered by the plaintiff. In the first place, there is a misconception here on the part of the defendant as well as on the part of the learned Judicial Commissioner that the decision of the arbitral tribunal is appealable. Under the Arbitration Act, there is no right of appeal against the decision of the arbitral tribunal. The decision of the arbitral tribunal is final, binding and unappealable.

 

[20] We do, however, note that the learned Judicial Commissioner has in her grounds of judgment cited ss. 37 and 42 of the Arbitration Act as if these

 

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provisions provide for an appeal against the award of the arbitral tribunal. We do not propose to labour on these provisions. It is sufficient for us just to state here that the learned Judicial Commissioner, with respect, was mistaken in her grounds of judgment: these provisions do not provide for an appeal against the award of an arbitral tribunal. Section 37 merely provides for an application to the High Court by an aggrieved party to set aside the award of an arbitral tribunal in the limited circumstances as specified by the section. And s. 42 merely provides for referral on a question of law to the High Court.”

 

(emphasis added); and

 

(d) s 8 AA provides for a “minimalist judicial intervention” approach. Section 8 AA has been amended by the Arbitration (Amendment) Act 2011 (Act A1395) (2011 Amendment Act) and provides as follows –

 

“Extent of court intervention

 

s 8. No court shall intervene in any of the matters governed by this Act, except where so provided in this Act .”

 

(emphasis added).

 

Section 8 AA provides for a “minimalist judicial intervention” approach by courts in respect of, among others, final arbitral

 

28

 

awards. I rely on David Wong Dak Wah JCA’s judgment in the Court of Appeal case of MTM Millenium Holdings Sdn Bhd v Pasukhas Construction Sdn Bhd & Anor [2013] 1 LNS 1325, at paragraph 23, as follows:

 

11 [23] From the outset we should state what the Courts’

 

approach today is when faced with an attack on an Arbitral Award. It is now firmly established that the policy employed by the Courts is one of minimal intervention. This policy is nothing but an acknowledgement and respect accorded to the finality to the arbitral process agreed to by the disputing parties. Put in another way, the parties have agreed and preferred that their disputes to be settled outside the Court system and whatever decision that tribunal arrives at shall be final. This policy has given rise to the trite principle that Courts will not interfere even if the arbitrator had made mere errors of law or fact.”

 

(emphasis added).

 

19. In view of the 4 Considerations, cases cited by Mr. Chew on the breach of the second rule of natural justice which do not concern final arbitral awards, should be read with caution. This OS will be decided with the 4 Considerations in mind.

 

20. As held by Mohd. Ariff Yusof JCA in Perwira Bintang Holdings Sdn Bhd, at 639, a party dissatisfied with an award, may apply to the High Court under both s 37 AA and 42 AA. It will be up to the plaintiff to prove

 

29

 

the grounds under s 37 AA and/or 42 AA for the court to intervene in respect of the award in question.

 

I. Salient parts of Award

 

21. The material parts of the Award are reproduced as follows:

 

(a) in respect of the issues involving the BG –

 

“C.2.3 Analysis by the Tribunal on the Issue of Bank Guarantee

 

173. In determining this issue, the Tribunal first finds the

 

answers to the three underlying questions:

 

i) Is the issue of the Bank Guarantee res judicata as submitted by the [Plaintiff]?

 

ii) Is the [Plaintiff] in breach of its obligations under [Clause 43] for not adjusting the value of the BG and not extending the validity of the BG?

 

iii) Did [Defendant] waive its rights under [Clause 43]?

 

180. The answer to the question (i) based on the facts before the Tribunal is in the negative, i.e., the issue of the obligation of providing a Bank Guarantee was neither submitted not determined by the Courts. The Tribunal agrees with the [Defendant] that in this arbitration, the Tribunal shall determine the issue of the [Plaintiff’s] failure

 

30

 

to renew the Bank Guarantee and what are the remedies available to the [Defendant].

 

184. There is no reminder or action required from the [Defendant] under [Clause 43] to prompt the [Plaintiff], save as to invoking and exercising its rights as provided therein. Thus the Tribunal find that it was the Responsibility of the [Plaintiff] to maintain the BG active for the intended duration of the Charter without any reminder from the [Defendant]. The Tribunal finds that the [Plaintiff] has breached [Clause 43].

 

197. Thus it follows from the foregoing that in answer to the question (iii), the Tribunal finds that, the [Defendant] had not waived its rights under [Clause 43].

 

198. In deciding the remedies available to the [Defendant] for breach of Clause 43 by the [Plaintiff], the next two questions arise as follows:

 

(iv) Did [Defendant] suffer any damages or loss of benefit for the failure of the [Plaintiff] to extend the BG?

 

(v) If yes, then is the [Plaintiff] liable to compensate the [Defendant]?

 

203. The Tribunal finds that the [Defendant] has incurred costs as a consequence of exercising its rights under the Clause 43 by attempting to draw on the BG. Thus damages suffered by the [Defendant] are in terms of the legal costs being claimed and the payment made to the [Plaintiff] pursuant to the [High Court’s Decision On BG].

 

31

 

214. Recalling Paragraph (184), the Tribunal has earlier made a finding that the [Plaintiff] has breached its obligation under [Clause 43]. The Tribunal finds that a declaration in this regard is of no effect in future in future, as all issues of the Parties including those related to the failure of providing a valid. BG have been submitted in this arbitration and are determined in this Award. Accordingly the Tribunal Dismisses the application for a declaration as sought on the issue of the [Plaintiff’s] breach of [Clause 43].’;

 

(b) regarding the issue whether the Vessel had any “hidden damage” at the time of commencement of the charter hire –

 

“250. Having considered the evidence presented, repairs

 

records and “As Built Report” of P.T. Abadi Shipyard, lengthy cross-examination of witnesses CW1, CW5 and RW3, On-Hire Condition Survey Report, and the arguments canvassed above, the Tribunal finds, that the Vessel was without any “hidden damage” or crack at the time of commencement of charter hire.’;

 

(c) concerning the question of whether the charter period had been extended –

 

“264. The Tribunal notes that the [Plaintiff] did not agree to the extension of the charter after expiry date of January 26, 2013 and also did not give notice as to if there will be a delay in redelivery of the Vessel.

 

32

 

265. The [Plaintiff] also did not reply to the emails from the [Defendant] prior to the delivery date and after the lapse of redelivery date. The [Plaintiff] relies on the contention that the CPA was terminated on January 26, 2013 but did not provide any basis either as per the terms of the CPA or any evidence which give the right to declare the termination of the CPA due to failure of the [Plaintiff] to redeliver the Vessel on the due date. This tantamount [sic] to first breaching the term of the CPA as well as the Addendum, and then attempting to avoid the responsibility of timely redelivery of the Vessel.

 

266. The Tribunal notes that the [Plaintiff] had failed to give notice that the Vessel will not be delivered on January 26, 2013. Further [Plaintiff] failed to give notice that the CPA is terminated and if terminated than in accordance with which termination clauses of provisions in the CPA. However the [Plaintiff] in this arbitration claims that, the CPA was lapsed and/or automatically terminated. In the alternative the [Plaintiff] admits that the CPA was lapsed either on February 14, 2013 when the notice for demobilization was given by the [Plaintiff].

 

267. The Tribunal notes from the CPA Part I Box 8, the [Plaintiff] is required to give notice of redelivery “seven (7) days in advance of demobilization from offshore site” but as seen from the email of February 14, 2013 the [Plaintiff] stated that the Vessel, “PLBMM is being demob today.” The [Defendant’s] witness CW3 gave evidence that this email from the [Plaintiff] was in reply to his email of February 5, 2013. In light of the said exchanges between the parties, the Tribunal observes that the [Plaintiff] did not initiate a notice for redelivery in accordance with the CPA but appears to be reacting to the reminders from the [Defendant]. The [Plaintiff] did not provide justifiable grounds for failing to redeliver the Vessel on January 26,

 

33

 

2013 and for failing to give notice of redelivery. The lapse of the redelivery date does not provide a conclusion either explicitly or implicitly that the CPA has lapsed and or terminated automatically. However, this proves the point against the [Plaintiff] that the [Plaintiff] has breached the CPA by failing to deliver the Vessel, and did not abide by the agreement with the [Defendant], as per the CPA and the subsequent Addendum, dated December 27, 2012.

 

268. The [Defendant] relying on the Clause 31 and specifically Clause 31(b) (vii) of the CPA contends that even if the CPA is terminated for the causes provided therein or if either Party is in repudiatory breach of its obligations, the [Plaintiff], as the Charterer is not relieved from its obligations for Hire and other payments.

 

269. Having considered the alternative options in parallel as contended by the [Plaintiff], witness testimonies, documentary evidence before the Tribunal and the pleadings of the Parties, the Tribunal finds that the parties had not reached an agreement on extension of the Charter Period after January 26, 2013. The [Plaintiff’s] deliberations and arguments did not convince the Tribunal that the CPA had lapsed and/or automatically terminated.

 

270. The Tribunal finds that the [Plaintiff] has breached the redelivery obligations under the CPA, but neither party has exercised its right to terminate the CPA. In the event, even if the parties had agreed to the termination of the CPA, the Tribunal finds and agrees with the [Defendant’s] submission that pursuant to Clause 31 of the CPA, the [Plaintiff] is not relived [sic] from its obligations for Hire and any other payments due to the [Defendant].”;

 

34

 

(d) concerning the question of causation of the damage to the Stinger Hitch –

 

“386. The Tribunal analyses here the most probable causes and or contributory factors contentiously mooted and contested by the Parties, which are:

 

(i) Existing Crack from pre-charter commencement period

 

(ii) Lack of Maintenance by the [Defendant]

 

(iii) Negligent Method of pipe-laying by the [Plaintiff]

 

(iv) Operating the stinger during severe weather conditions

 

(i) Existing Crack from pre-charter commencement

 

period

 

387. The Tribunal recalls Section II.C.3.1 Paragraph (250) in which the Tribunal has already made the finding of the fact that there was no “pre-existing crack” at the stinger hitch box guide base plate, at the time of delivery of the Vessel. Thus the proposition of an existing crack with marine growth around as the probable cause for the damage to the stinger hitch box guide base plates on January 9, 2013 has been ruled out.

 

(ii) Lack of Maintenance by the [Defendant]

 

35

 

394.

 

395.

 

(iii)

 

400.

 

(iv)

 

In view of the foregoing and review of the continuous operations of the Vessel since October 28, 2012 till the month of January 2013, the Tribunal find that if there was a sign of wear and tear or deformation or crack then it would have surfaced earlier. The [Defendant] has provided the last work done report in February 2012. The [Plaintiff’s] redelivery survey report dated march 14, 2013 shows that the ABS Class certificate is valid till 06.12.2014 and MODU Safety Certificate is valid till 16.11.2016. The temporary repairs were undertaken without first conducting any material failure or fatigue analysis of the stress bearing members. So it was not established by the Parties that whether war and tear was the cause or sudden impact load has caused the crack.

 

The Tribunal finds that the proposition that poor maintenance or lack of it by the [Defendant] was the cause of stinger hitch box base plate damage as invalid.

 

Negligent Method of Pipe-laying by the [Plaintiff]

 

Having considered the contentions of the Parties and presentations made before it, the Tribunal finds that there is no conclusive evidence to support the proposition that the negligent method of pipe-laying was the cause of the stringer hitch box related damage.

 

Operating the stinger during severe weather conditions

 

36

 

403. The Tribunal notes from the weather data analysis from January 4 to 9, 2013, that weather has been severe in Java Sea including the site where the Vessel was operating, during the period. The wind speed was ranging from 3 to 50 knots with a warning of 50/70 knots on January 6, 2013. The wave heights were reported to be from 2.0m to 4.0m. The witness RW1 testified that the weather at the specific location of the Vessel (Longitude & Latitude) is taken into consideration by the [Plaintiff] for planning the pipe-laying activities. The [Plaintiff] had abandoned the pipe-laying operations on the morning of January 9, 2013 due to prevailing weather, forecasts and inability of the AHT to relocate the anchors. This is also testified by RW1. The DPR from January 9, 2013 till January 23, 2013 also reflect that weather was still a major contributing factor for commencing works to retrieve the abandoned six inch (“6”) pipeline. The severity of the weather at the prevailing area of operations, is further corroborated by the testimony of the witness CW6 that he was unable to board the Vessel due to bad weather and was waiting at Jakarta from January 5 till 12, 2013. The witness CW1 in his testimony described that due to weather he could not board the Vessel earlier to investigate the stinger damage and events of January 9, 2013.

 

407. The Vessel has been operating in severe weather conditions, as evident from the reports provided, since January 4, 2013. It is reasonable and fair to believe that the weather induced erratic stress and loading, the structural members of the stinger assembly were subjected to fatigue. Further due to continuous excessive load accentuated by severe weather during the week, resulted in the cracking of the plate, which is one of the critical load bearing and load transfer member between the stinger hitch box and the hull of the Vessel. This cause even though not investigated through metallurgical or scientific

 

37

 

methods for material analysis of the failed member (Cracked Plate), by the parties, but on the balance of the probabilities, the Tribunal finds that the damage is sustained due to continuing operations of the Stinger and the Vessel in severe weather conditions by the [Plaintiff], prior to and on the day the damage was discovered.

 

408. The Tribunal has taken into account all contentions of the parties, witness testimonies, documents, records and evidence before it. In context of the reasons explained herein, the Tribunal Finds and Holds that on the balance of probabilities, the cracks and damages related to the stinger hitch box assembly resulted from continuing to operate the stinger and the Vessel in the severe weather conditions.”;

 

(e) on the issues of re-delivery and “off-hire survey’ –

 

“409. In this section, the Tribunal makes the finding of the two facts: 1) was the Vessel redelivered around March 7, 2013 as submitted by the [Plaintiff]; and 2) if [sic] the survey report of March 13, 2013 is to be treated as an Off-Hire Survey Report. The issues and submissions of the Parties for deciding the application of Clause 4 and Clause 5 of the CPA are determined separately in Section III of this Award.

 

423. The Tribunal makes the finding of the facts based on the analysis of all the evidentiary records before it, that the Vessel was not redelivered on either March 5 or 7, 2013 as contended by the [Plaintiff]. Secondly, the survey report dated March 14, 2013 is not considered as an Off-Hire Survey report in accordance with the Clause 5 38

 

of the CPA, due to the reasons and inconsistencies found in it, as explained above.’;

 

(f) regarding the question of repair and reinstatement of the Vessel by MMHE –

 

“443. The Tribunal finds, having considered all evidence and the arguments canvassed by the parties, the temporary repairs carried out by the [Plaintiff] had to be removed first before the damage repair could be carried out to reinstate the Vessel to original condition as the Vessel was during the on-hire survey. Further the stinger repairs has to be carried out in a shipyard and in a dry dock.

 

444. The Tribunal finds that the [Plaintiff’s] witness has conceded that, considering that it was not possible to get a dry-dock and carry out the repairs in shortest time after the incident of 9 January 2013. Thus [Plaintiff] decided to carry out the temporary repairs so that the [Plaintiff] could complete the remaining pipe-laying works.

 

445. The [Plaintiff] has not substantiated or corroborated with factual evidence that the services have been rendered to or on behalf of the [Defendant], for which the counterclaim could be considered. Further, as the [Defendant] contended that these items were used by the [Plaintiff] and damage was caused by the [Plaintiff]. The [Plaintiff] did not explain as to how these items were repaired and whether [Defendant] had refused to repair or was [Defendant] notified before the [Plaintiff] undertook the repairs. There is a lack of substantiation. The [Plaintiff] has failed to 39

 

discharge its burden of proof for making the counterclaims.”;

 

(g) concerning the question of who was responsible for the maintenance of the Vessel and its equipment –

 

11522. The Tribunal is not persuaded as to the [Plaintiff’s] contention that the cause of damage is disputed or remains unknown. In contrast to the above three cases referred by the [Plaintiff], in the present case, the pipe-laying operations had been carried out since November 2012 and there were no evidence of breakdown of the stinger until it was discovered on January 9, 2013 after the [Plaintiff] had abandoned pipe-laying operations, due to severe weather conditions.

 

525. The Tribunal notes that the [Defendant’s] eight (8) to nine (9) crew members on-board the Vessel were responsible for maintenance of the machinery and equipment and operation of the winch as per the instructions of the Charter. This fact has been confirmed by the [Plaintiff’s] witness RW1 and [Defendant’s] witnesses. The Tribunal recalls Paragraphs (473) to (478) and is of the view that the [Defendant] has fulfilled the obligation for continuing seaworthiness condition and maintenance of the Vessel.

 

526. The Tribunal recalls the Paragraphs (401) to (408) and in context of the foregoing finds that the causation of the stinger box area damage is not in doubt in this case as the [Plaintiff] contends, but has been

 

40

 

identified on the balance of probabilities, as caused by the [Plaintiff], by continuing to operate the stinger in severe weather conditions

 

(h) concerning the Plaintiff’s contention that the CPA had lapsed –

 

“529. The [Plaintiff] submits that, —the CPA had lapsed and/or has been automatically terminated and is therefore no longer binding on the Parties, the [Defendant] is not entitled to rely on the any of the terms of the CPA to claim hire at the rate of USD45,000.00 per day for —On Tow/Standby” as alleged or at all.

 

530. The Tribunal recalls Paragraphs (264) to (270) and based on the foregoing finds and holds that the CPA is valid and had not lapsed automatically. The Tribunal notes emails of the [Defendant] from January 22, 2013 to February 5, 2013 and subsequent notice for reinstatement and redelivery of the Vessel by letters dated March 8, 12 and 19, 2013.

 

531. As a matter of background fact, the record before the Tribunal is clear that, the [Plaintiff] failed to deliver the Vessel on January 26, 2013 and by conduct, the [Defendant] elected to reject the repudiation of the Contract by the [Plaintiff], and treated the Contract as subsisting.”;

 

(i) on the issue of the charter hire period –

 

41

 

11538. The Tribunal recalls Paragraph (267) and in the context of the foregoing the Tribunal Finds and Holds that the [Plaintiff] by failing to give seven (7) days’ notice for demobilization from the offshore site, not replying to the letters from the [Defendant] for extension or confirmation of redelivery date, and failing to redeliver the Vessel on January 26, 2013 in accordance with redelivery terms of the CPA, has committed a breach of the CPA by repudiation.

 

539. The Tribunal recalls Paragraph (531) and Finds and Holds that the [Defendant] by conduct elected to reject the [Plaintiff’s] repudiation and treated the Contract as subsisting. Thus the hire as per the CPA remains payable till redelivery of the Vessel to the [Defendant].

 

540. In order to determine the period for which hire is payable, the Tribunal notes that the Vessel was towed to the place of redelivery and presented for redelivery on March 7, 2013. The Tribunal has made a finding in paragraph (504) that pursuant to [Clause 4] the structural alterations were carried out by the [Plaintiff]. Thus the Vessel shall be redelivered after reinstatement. The Tribunal finds that March 7, 2013 is not the redelivery date as the structural alterations on the Vessel were not reinstated at that time.

 

543. In context of the foregoing, the Tribunal Finds and Holds that the Vessel is to be considered as redelivered when the structural alterations are removed, which is in five days from the date of entering the repair yard. Thus the [Plaintiff] is liable to pay charter hire till May 1, 2013. This time is inclusive of the time it would have incurred if the Vessel was redelivered at Kong Kong Anchorage Johore, 42

 

Malaysia, provided if the [Defendant] had not kept the Vessel in the yard for other repairs.

 

544. The Tribunal finds that form the conduct of the [Defendant] to continue with dry-docking works at MMHE after removal of the stinger hitch box, the [Defendant] has accepted the redelivery from the Respondent at MMHE yard.”;

 

(j) regarding claims for charter hire, general damages, repair and replacement cost, consumables, medicine, tools, communication and equipment –

 

“558. Taking into consideration the submissions of the [Plaintiff], the Tribunal should first make the determination of a breach of the CPA, Secondly if it is caused by the [Plaintiff]. Next, if the [Defendant] has suffered loss and it’s proved with good quality evidence, that the loss was caused by the breach committed by the [Plaintiff] and finally the loss or damages claimed are not remote.

 

559. The Tribunal has determined above in paragraph (538) that the [Plaintiff] has committed a breach of the CPA by failing to redeliver the Vessel on the terminal date agreed between the parties.

 

561. The Tribunal has also made the determination in Paragraphs (512) and (543), that the [Plaintiff] has further delayed the redelivery beyond March 7, 2013 by not reinstating the Vessel to original condition after

 

43

 

making structural alterations during the employment of the Vessel.

 

562. The Tribunal is not persuaded by the [Plaintiff’s] submission that, “the [Defendant] is not entitled to rely on any of the terms of the CPA, [Defendant] is only entitled for general damages and damages must be proved: after [Plaintiff] committing the breach of the CPA. …

 

564. The Parties had agreed on the applicable DCR at the time of signing the CPA on October 23, 2012. The [Defendant] had an option when the [Plaintiff] breached the CPA, to accept the breach, and claim damages based on the market rate, for the daily hire payable, and in addition claim general damages. However the [Defendant] elected for subsisting the CPA. Thus the [Defendant] is entitled for the DCR as was mutually agreed by the parties and stated in the CPA.

 

566. The Tribunal finds that in this case the breach is due to failure to discharge the obligation of the [Plaintiff] under the CPA and the DCR is also specifically provided within the CPA. The compensation claimed by the Claimant is not remote but a provision of the CPA. It is not a question of claiming liquidated damages or penalty as the [Plaintiff] puts it, but a straight forward claim which the [Defendant] is entitled to receive when the [Plaintiff] is defaulting. …

 

568. In consideration of the foregoing, the Tribunal Finds and Holds that the [Plaintiff] is liable to pay the [Defendant] at the day rates as per DCR during the

 

44

 

period of delays exceeding January 26, 2013 till the date of redelivery, May 2, 2013 as determined in this Award.; and

 

(k) in respect of the Plaintiff’s counterclaim and cross-claim against the Defendant –

 

“634. The [Plaintiff] submitted counterclaim for damage suffered due to repairs carried out in stinger hitch, pedestal crane, Winch No. 7 and Anchor Wire S4 problem.

 

635. The [Plaintiff] submitted claim for 10.77 days of downtime due to breakdown of the equipment and pursuant to the Clause 13(a) of the CPA.

 

637. Recalling paragraphs (438) to (442), the [Plaintiff’s] submission that a deduction of hire for 10.77 days towards down-time is applicable was not sustainable. This is evidenced by the testimony of the [Plaintiff’s] witness RW1. The [Plaintiff] had continuous use of the Vessel and its spread. In view of the foregoing the Tribunal finds and holds that the [Plaintiff’s] counterclaim for deduction of 10.77 days is not valid and therefore rejected.

 

638. The Tribunal has made the ruling in paragraph (446) on the [Plaintiff’s] counterclaim for repairs and damages. The Tribunal finds that the [Plaintiff] has not substantiated or corroborated with factual evidence that the services have been rendered to or on behalf of the [Defendant], for which the counterclaim could be considered. The Tribunal finds that the [Plaintiff]

 

45

 

has failed to properly substantiate its claims and discharge the burden of proof, thus the claims for damages due to the following item are invalid and rejected:

 

i) Pedestal Crane Rectification;

 

ii) Stinger Rectification;

 

iii) Winch No. 7 for Anchor Wire S4 problem; and

 

iv) Procurement.

 

639. Accordingly, the Tribunal finds that the [Plaintiff’s] counterclaim for US$2,074,963.21 is rejected for the reasons given above .”

 

(emphasis added).

 

J. Singapore’s Arbitration Act (SAA) and International Arbitration Act (SIAA)

 

22. Sections 48 to 51 of SCA provide as follows:

 

—Court may set aside award

 

48(1) An award may be set aside by the Court –

 

(a) if the party who applies to the Court to set aside the award proves to the satisfaction of the Court that –

 

(i) a party to the arbitration agreement was under some incapacity;

 

46

 

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it, or failing any indication thereon, under the laws of Singapore;

 

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;

 

(iv) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, except that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside;

 

(v) the composition of the arbitral tribunal or the arbitral procedure is not in accordance with the agreement of the parties, unless such agreement is contrary to any provisions of this Act from which the parties cannot derogate, or, in the absence of such agreement, is contrary to the provisions of this Act;

 

(vi) the making of the award was induced or affected by fraud or corruption;

 

(vii) a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced; or

 

(b) if the Court finds that –

 

(i) the subject-matter of the dispute is not capable of settlement by arbitration under this Act; or

 

(ii) the award is contrary to public policy.

 

(2) An application for setting aside an award may not be made after

 

the expiry of 3 months from the date on which the party making the application had received the award, or if a request has been

 

47

 

made under section 43, from the date on which that request had been disposed of by the arbitral tribunal.

 

(3) When a party applies to the Court to set aside an award under

 

this section, the Court may, where appropriate and so requested by a party, suspend the proceedings for setting aside an award, for such period of time as it may determine, 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.

 

Appeal against award

 

49(1) A party to arbitral proceedings may (upon notice to the other parties and to the arbitral tribunal) appeal to the Court on a question of law arising out of an award made in the proceedings.

 

(2) Notwithstanding subsection (1), the parties may agree to exclude the jurisdiction of the Court under this section and an agreement to dispense with reasons for the arbitral tribunal’s award shall be treated as an agreement to exclude the jurisdiction of the Court under this section.

 

(3) An appeal shall not be brought under this section except –

 

(a) with the agreement of all the other parties to the proceedings; or

 

(b) with the leave of the Court.

 

(4) The right to appeal under this section shall be subject to the restrictions in section 50.

 

(5) Leave to appeal shall be given only if the Court is satisfied that —

 

(a) the determination of the question will substantially affect the rights of one or more of the parties;

 

(b) the question is one which the arbitral tribunal was asked to determine;

 

(c) on the basis of the findings of fact in the award –

 

48

 

(i) the decision of the arbitral tribunal on the question is obviously wrong; or

 

(ii) the question is one of general public importance and the decision of the arbitral tribunal is at least open to serious doubt; and

 

(d) despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the Court to determine the question.

 

(6) An application for leave to appeal under this section shall identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted.

 

(7) The leave of the Court shall be required for any appeal from a decision of the Court under this section to grant or refuse leave to appeal.

 

(8) On an appeal under this section, the Court may by order —

 

(a) confirm the award;

 

(b) vary the award;

 

(c) remit the award to the arbitral tribunal, in whole or in part, for reconsideration in the light of the Court’s determination; or

 

(d) set aside the award in whole or in part.

 

(9) 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.

 

(10) The decision of the Court on an appeal under this section shall be treated as a judgment of the Court for the purposes of an appeal to the Court of Appeal.

 

(11) The Court may give leave to appeal against the decision of the Court in subsection (10) only if the question of law before it is

 

49

 

one of general importance, or one which for some other special reason should be considered by the Court of Appeal.

 

Supplementary provisions to appeal under section 49

 

50(1) This section shall apply to an application or appeal under section 49.

 

(2) An application or appeal may not be brought if the applicant or appellant has not first exhausted –

 

(a) any available arbitral process of appeal or review; and

 

(b) any available recourse under section 43 (correction or interpretation of award and additional award).

 

(3) Any application or appeal shall be brought within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant or appellant was notified of the result of that process.

 

(4) If on an application or appeal it appears to the Court that the award —

 

(a) does not contain the arbitral tribunal’s reasons; or

 

(b) does not set out the arbitral tribunal’s reasons in sufficient detail to enable the Court to properly consider the application or appeal,

 

the Court may order the arbitral tribunal to state the reasons for its award in sufficient detail for that purpose.

 

(5) Where the Court makes an order under subsection (4), it may make such further order as it thinks fit with respect to any additional costs of the arbitration resulting from its order.

 

(6) The Court may order the applicant or appellant to provide security for the costs of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with.

 

(7) The power to order security for costs shall not be exercised by reason only that the applicant or appellant is –

 

50

 

(a) an individual ordinarily resident outside Singapore; or

 

(b) a corporation or association incorporated or formed under the law of a country outside Singapore or whose central management and control is exercised outside Singapore.

 

(8) The Court may order that any money payable under the award shall be brought into Court or otherwise secured pending the determination of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with.

 

(9) The Court may grant leave to appeal subject to conditions to the same or similar effect as an order under subsection (6) or (8) and this shall not affect the general discretion of the Court to grant leave subject to conditions.

 

Effect of order of Court upon appeal against award

 

51(1) Where the Court makes an order under section 49 with respect to an award, subsections (2), (3) and (4) shall apply.

 

(2) Where the award is varied by the Court, the variation shall have effect as part of the arbitral tribunal’s award.

 

(3) Where the award is remitted to the arbitral tribunal, in whole or in part, for reconsideration, the tribunal shall make a fresh award in respect of the matters remitted within 3 months of the date of the order for remission or such longer or shorter period as the Court may direct.

 

(4) Where the award is set aside or declared to be of no effect, in whole or in part, the Court may also order that any provision that an award is a condition precedent to the bringing of legal proceedings in respect of a matter to which the arbitration agreement applies, shall be of no effect as regards the subject-matter of the award or, as the case may be, the relevant part of the award.”

 

(emphasis added).

 

23. Section 24 SIAA reads as follows:

 

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—Court may set aside award

 

24. Notwithstanding Article 34(1) of the Model Law, the High

 

Court may, in addition to the grounds set out in Article 34(2) of the Model Law, set aside the award of the arbitral tribunal if –

 

(a) the making of the award was induced or affected by fraud or corruption; or

 

(b) a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced. ”

 

(emphasis added).

 

24. Our s 37 AA is substantially similar to s 48 SAA. I will discuss some of the differences between s 37 AA and s 48 SAA subsequently in this judgment. In view of the many similarities between our s 37 AA with s 48 SAA, Singapore cases on s 48 SAA are persuasive and I will refer to them in determining this OS.

 

25. It is to be noted that our s 42 AA (which provides for “reference on question of law’) is different from ss 49 to 51 SAA (which provide for “appeals” against awards). As such, Singapore cases on ss 49 to 51 SAA should be read with caution.

 

K. Sections 33 and 68 to 71 of United Kingdom’s Arbitration Act 1996 [AA (UK)]

 

26. Sections 33 and 68 to 71 of AA (UK) provide as follows:

 

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“33. General duty of the tribunal

 

(1) The tribunal shall –

 

(a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and

 

(b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.

 

(2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it.

 

68. Challenging the award: serious irregularity

 

(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award.

 

A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).

 

(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant –

 

(a) failure by the tribunal to comply with section 33 (general duty of tribunal);

 

(b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67);

 

(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;

 

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(d) failure by the tribunal to deal with all the issues that were put to it;

 

(e) any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers;

 

(f) uncertainty or ambiguity as to the effect of the award;

 

(g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;

 

(h) failure to comply with the requirements as to the form of the award; or

 

(i) any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award.

 

(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may –

 

(a) remit the award to the tribunal, in whole or in part, for reconsideration,

 

(b) set the award aside in whole or in part, or

 

(c) declare the award to be of no effect, in whole or in part.

 

The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.

 

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(4) The leave of the court is required for any appeal from a decision of the court under this section.

 

69. Appeal on point of law

 

(1) Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings.

 

An agreement to dispense with reasons for the tribunal’s award shall be considered an agreement to exclude the court’s jurisdiction under this section.

 

(2) An appeal shall not be brought under this section except –

 

(a) with the agreement of all the other parties to the proceedings, or

 

(b) with the leave of the court.

 

The right to appeal is also subject to the restrictions in section 70(2) and (3).

 

(3) Leave to appeal shall be given only if the court is satisfied –

 

(a) that the determination of the question will substantially affect the rights of one or more of the parties,

 

(b) that the question is one which the tribunal was asked to determine,

 

(c) that, on the basis of the findings of fact in the award –

 

(i) the decision of the tribunal on the question is obviously wrong, or

 

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(ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and

 

(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.

 

(4) An application for leave to appeal under this section shall identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted.

 

(5) The court shall determine an application for leave to appeal under this section without a hearing unless it appears to the court that a hearing is required.

 

(6) The leave of the court is required for any appeal from a decision of the court under this section to grant or refuse leave to appeal.

 

(7) On an appeal under this section the court may by order –

 

(a) confirm the award,

 

(b) vary the award,

 

(c) remit the award to the tribunal, in whole or in part, for reconsideration in the light of the court’s determination, or

 

(d) set aside the award in whole or in part.

 

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 tribunal for reconsideration.

 

(8) The decision of the court on an appeal under this section shall be treated as a judgment of the court for the purposes of a further

 

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appeal. But no such appeal lies without the leave of the court which shall not be given unless the court considers that the question is one of general importance or is one which for some other special reason should be considered by the Court of Appeal.

 

70. Challenge or appeal: supplementary provisions

 

(1) The following provisions apply to an application or appeal under section 67, 68 or 69.

 

(2) An application or appeal may not be brought if the applicant or appellant has not first exhausted –

 

(a) any available arbitral process of appeal or review, and

 

(b) any available recourse under section 57 (correction of award or additional award).

 

(3) Any application or appeal must be brought within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant or appellant was notified of the result of that process.

 

(4) If on an application or appeal it appears to the court that the award –

 

(a) does not contain the tribunal’s reasons, or

 

(b) does not set out the tribunal’s reasons in sufficient detail to enable the court properly to consider the application or appeal,

 

the court may order the tribunal to state the reasons for its award in sufficient detail for that purpose.

 

(5) Where the court makes an order under subsection (4), it may make such further order as it thinks fit with respect to any additional costs of the arbitration resulting from its order.

 

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(6) The court may order the applicant or appellant to provide security for the costs of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with.

 

The power to order security for costs shall not be exercised on the ground that the applicant or appellant is –

 

(a) an individual ordinarily resident outside the United Kingdom, or

 

(b) a corporation or association incorporated or formed under the law of a country outside the United Kingdom, or whose central management and control is exercised outside the United Kingdom.

 

(7) The court may order that any money payable under the award shall be brought into court or otherwise secured pending the determination of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with.

 

(8) The court may grant leave to appeal subject to conditions to the same or similar effect as an order under subsection (6) or (7). This does not affect the general discretion of the court to grant leave subject to conditions.

 

71. Challenge or appeal: effect of order of court

 

(1) The following provisions have effect where the court makes an order under section 67, 68 or 69 with respect to an award.

 

(2) Where the award is varied, the variation has effect as part of the tribunal’s award.

 

(3) Where the award is remitted to the tribunal, in whole or in part, for reconsideration, the tribunal shall make a fresh award in respect of the matters remitted within three months of the date of the order for remission or such longer or shorter period as the court may direct.

 

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(4) Where the award is set aside or declared to be of no effect, in whole or in part, the court may also order that any provision that an award is a condition precedent to the bringing of legal proceedings in respect of a matter to which the arbitration agreement applies, is of no effect as regards the subject matter of the award or, as the case may be, the relevant part of the award”

 

(emphasis added).

 

27. A comparison between our s 37 AA and s 68 AA (UK) [challenge of an award on the ground of a “serious irregularity’] reveals many differences. Section 68 AA (UK) does not state that a breach of second rule of natural justice, constitutes a ground to challenge an award. However, s 68(2)(a) AA (UK) provides for a party to challenge an award if, among others, the arbitral tribunal has failed to comply with its “general duty’ to “act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent [s 33(1)(a) AA (UK)]. For reasons expressed later in this judgment, I am of the view that English cases on an arbitral tribunal’s breach of its general duty to act fairly under ss 33(1)(a) and 68(2)(a) AA (UK), may be referred to in the interpretation of our ss 20, 37(1)(b)(ii) and 37(2)(b) AA (regarding an allegation of breach of the second rule of natural justice).

 

28. Our s 42 AA (which provides for “reference on question of law”) is different from s 69 AA (UK) [which provide for “appeals” against awards]. In this respect, English cases on s 69 AA (UK) should be read with caution.

 

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L. Did Award deal with a dispute not contemplated by or not falling within terms of submission to arbitration?

 

29. Prayer 1 of the OS prays for the Award to be set aside under, among others, s 37(1)(a)(iv) AA. Section 37(1)(a)(iv) allows the High Court to set aside an award which deals with a dispute not contemplated by or falling within the terms of submission to arbitration.

 

30. Before me, Mr. Chew did not pursue the prayer based on s 37(1)(a)(iv) AA. Nonetheless, I should deal with this point in deciding this OS.

 

31. The Court of Appeal has decided as follows in Perwira Bintang Holdings Sdn Bhd, at p. 626-627:

 

“Finding Of “New Difference” By The High Court

 

[22] The learned High Court Judge considered the background facts in some detail. Her Ladyship also evaluated the issues formulated by the arbitrator, as agreed and modified by both parties. Her Ladyship considered the detailed finding of the arbitrator, which was quoted in extenso, but concluded that the arbitrator had decided on a dispute which was not contemplated by, or not falling within the terms of the submission to arbitration. This is an area of arbitration law which allows the court to set aside an award on the ground that an arbitrator had decided on a “new difference” which is irrelevant to the claim, the “new difference” being understood as a new dispute not contemplated by or not

 

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falling within the terms of the arbitration submission. The underlying rationale for this rule rests on the consensual nature of arbitration. Parties are not compelled to resort to arbitration contractually, but if they provide for it and refer their dispute to arbitration, the mandate of the arbitrator must be limited to the terms defined by the parties for him to exercise his jurisdiction. If the arbitrator strays from the confines of this mandate, he will be acting in excess of his jurisdiction, even though he may have the initial and primary jurisdiction to arbitrate between the parties. This rationale is stated succinctly by the Court of Appeal, Singapore in PT Prima International Development v. Kempinski Hotel SA & Other Appeals [2012] SGCA 35:

 

An arbitral tribunal has no jurisdiction to resolve disputes which have not been referred to it in the submission to arbitration. Simply put, a party cannot raise a new dispute in an arbitration without the consent of the other party. These propositions flow inexorably from the consensual nature of arbitration.

 

[23] This case was cited by Her Ladyship, together with several other decisions of the Singapore Courts, such as PT Asuransi Jasa Indonesia (Persero) v. Dexia Bank SA [2007] 1 SLR (R) 597, CRW Joint Operation v. PT Perusahaan Gas Negara [2011] 4 SLR 305 and Sui Southern Gas Co Ltd v. Habibullah Coastal Power Co (Pte) Ltd [2010] 3 SLR 1.

 

[24] These persuasive cases, and others, that have been addressed by our courts lay down one basic principle – an arbitrator must decide the dispute according to the scope of the arbitration and he cannot decide the dispute on issues that have not been raised or addressed by the parties. This basic principle arose in the High Court case of Government of the Lao People’s Democratic Republic v. Thai-Lao Lignite Co Ltd (“TLL”) A Thai Company & Anor

 

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[2013] 1 LNS 83, where Lee Swee Seng JC (as he then was) said:

 

Whilst it is generally stated that under the Model Law regime as reflected in the AA 2005, there is a palpable shift towards non-interference in international arbitration award especially on issues of error of law so called, yet where jurisdiction is concerned, the Model Law does recognize and respect court’s interference where arbitrators have acted outside their jurisdiction and this principle is reflected in ss. 37(1)(a)(iv) and (v) of the AA 2005 … (at pg. 18 of the Judgment)

 

[25] Lee Swee Seng, JC expressly referred to and adopted the reasoning shown in the Singapore authorities, namely PT Asuransi Jasa Indonesia (Persero) v. Dexia Bank SA, supra, and CRW Joint Operation v. PT Perusahaan Gas Negara, supra.

 

[26] A differently constituted panel of this court agreed with the High Court’s decision and dismissed the appeal ”

 

(emphasis added).

 

32. It is to be noted that Lee Swee Seng JC’s (as he then was) judgment in the High Court case of Government of the Lao People’s Democratic Republic v Thai-Lao Lignite Co Ltd & Anor [2013] 1 LNS 83 (which has been followed in Perwira Bintang Holdings Sdn Bhd), has been affirmed by the Court of Appeal in Thai-Lao Lignite Co Ltd & Anor v

 

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Government of the Lao People’s Democratic Republic [2014] 1 LNS 525.

 

33. The Court of Appeal in Perwira Bintang Holdings Sdn Bhd has applied Singapore cases in respect of s 37(1)(a)(iv) AA. This is understandable as our s 37(1)(a)(iv) AA is similar to s 48(1)(a)(iv) SAA. I refer to Chan Sek Keong CJ’s judgment in the Singapore Court of Appeal case of PT Asuransi Jasa Indonesia (PERSERO) v Dexia Bank SA [2007] 1 SLR 597, at paragraphs 37 and 44 (PT Asuransi), as follows:

 

“37. The law on the jurisdiction of an arbitral tribunal is well established. Article 34(2)(a)(iii) of the Model Law merely reflects the basic principle that an arbitral tribunal has no jurisdiction to decide any issue not referred to it for determination by the parties. In relation to this matter, we note Lord Halsbury’s observations in London and North Western and Great Western Joint Railway Companies v J H Billington, Limited [1899] AC 79, where he noted, at 81, as follows:

 

I do not think any lawyer could reasonably contend that, when parties are referring differences to arbitration, under whatever authority that reference is made, you could for the first time introduce a new difference after the order of arbitration was made. Therefore, upon that question I certainly do give a very strong opinion. [emphasis added]

 

44. Counsel for the appellant argued that the second and third critical findings, being inconsistent with the findings of the First

 

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Tribunal, could and should be set aside for not being within the scope of submission to arbitration of the Second Tribunal. This argument requires this court to enter into two separate but related enquiries: first, the ascertainment of the matters that were within the scope of submission to the Second Tribunal; and second, whether the second and third critical findings involved such matters .”

 

(emphasis added).

 

34. As explained in PT Asuransi, I will make the following 2 enquiries to decide whether the Award in this case has dealt with a dispute not contemplated by or not falling within the terms of submission to arbitration:

 

(a) what are the matters which have been submitted by the parties to arbitration (Submitted Matters); and

 

(b) whether the Award involved Submitted Matters or concerned a “new difference” [a new dispute decided by the Arbitrator which was not contemplated by the Submitted Matters or which did not fall within the Submitted Matters (New Difference)].

 

35. In respect of the first enquiry, the Submitted Matters are ascertained based on the following documents:

 

(a) the Defendant’s Amended Claim;

 

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(b) the Plaintiff’s Re-amended Defence and Counterclaim;

 

(c) the Defendant’s “Amended Reply to Defence and Amended Defence to Counterclaim”;

 

(d) minutes of the preliminary meeting on 11.2.2014 (held by the Arbitrator in the presence of learned counsel for both the Plaintiff and Defendant) (Preliminary Meeting). In the Preliminary Meeting, the Defendant had raised 3 “principal issues” to be decided by the Arbitrator, namely –

 

(i) under the CPA, whether the charter period had been extended to 22.5.2013;

 

(ii) whether the Plaintiff should have extended the BG under Clause 43; and

 

(iii) the determination of causation of damage to the Vessel and liabilities arising therefrom

 

(3 Principal Issues);

 

(e) 2 written submissions from the Plaintiff; and

 

(f) 2 written submissions from the Defendant.

 

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36. Based on the above documents, I find that the Submitted Matters consist

 

of the following:

 

(a) the 3 Principal Issues;

 

(b) if the Plaintiff is liable to the Defendant in respect of any one or more of the 3 Principal Issues, what is the quantum of such a liability?;

 

(c) whether the Defendant was liable for the Plaintiff’s counterclaim (Plaintiff’s Counterclaim) as follows –

 

(i) whether Defendant had breached CPA by delivering the Vessel to the Plaintiff with the Stinger Hitch not in good operating condition; and

 

(ii) whether Defendant had failed and/or neglected to exercise proper control over the operations of the Stinger Hitch, pedestal crane and Winch No. 7 on 9.1.2013; and

 

(d) if the Plaintiff is successful in proving the Plaintiff’s Counterclaim, what would be the extent of the Defendant’s liability to the Plaintiff in respect of the Plaintiff’s Counterclaim.

 

37. In respect of the second enquiry, I have perused the Award vis-à-vis the

 

Submitted Matters.

 

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38. Based on the 2 above enquires, I am satisfied that –

 

(a) the Arbitrator has decided all the disputes between the Plaintiff and Defendant as per the Submitted Matters; and

 

(b) the Arbitrator has not decided –

 

(i) any dispute which is not contemplated by the Submitted Matters;

 

(ii) any dispute which does not fall within the Submitted Matters; or

 

(iii) a New Difference.

 

39. In view of the above reasons, I have no hesitation in rejecting the Plaintiff’s application to set aside the Award under s 37(1)(a)(iv) AA.

 

M. Arbitral tribunal’s duty to act fairly and breach of second rule of natural justice

 

40. Sections 20, 21, 25 and 26 AA are relevant in this case and are reproduced as follows:

 

“Equal treatment of parties

 

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20 The parties shall be treated with equality and each party

 

shall be given a fair and reasonable opportunity of presenting that party’s case.

 

Determination of rules of procedure

 

21(1) Subject to the provisions of this Act, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings.

 

(2) Where the parties fail to agree under subsection (1), the arbitral tribunal may, subject to the provisions of this Act, conduct the arbitration in such manner as it considers appropriate.

 

(3) The power conferred upon the arbitral tribunal under subsection (2) shall include the power to –

 

(a) determine the admissibility, relevance, materiality and weight of any evidence;

 

(b) draw on its own knowledge and expertise;

 

(c) order the provision of further particulars in a statement of claim or statement of defence;

 

(d) order the giving of security for costs;

 

(e) fix and amend time limits within which various steps in the arbitral proceedings must be completed;

 

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(f) order the discovery and production of documents or materials within the possession or power of a party;

 

(g) order the interrogatories to be answered;

 

(h) order that any evidence be given on oath or affirmation; and

 

(i) make such other orders as the arbitral tribunal considers appropriate.

 

Statements of claim and defence

 

25(1) Within the period of time agreed by the parties or, failing such

 

agreement, as determined by the arbitral tribunal, the claimant

 

shall state –

 

(a) the facts supporting his claim;

 

(b) the points at issue; and

 

(c) the relief or remedy sought, and the respondent shall state his defence in respect of the particulars set out in this subsection, unless the parties have otherwise agreed to the required elements of such statements.

 

(2) The parties may –

 

(a) submit with their statements any document the parties consider relevant; or

 

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(3)

 

Hearings

 

26(1)

 

(2)

 

(3)

 

(4)

 

(5)

 

(b) add a reference to the documents or other evidence that the parties may submit.

 

Unless otherwise agreed by the parties, either party may amend or supplement the claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow such amendment having regard to the delay in making it.

 

Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or oral arguments, or whether the proceedings shall be conducted on the basis of documents and other materials.

 

Unless the parties have agreed that no hearings shall be held, the arbitral tribunal shall upon the application of any party hold oral hearings at an appropriate stage of the proceedings.

 

The parties shall be given reasonable prior notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of goods, other property or documents.

 

All statements, documents or other information supplied to the arbitral tribunal by one party shall be communicated to the other party.

 

Any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties .”

 

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(emphasis added).

 

41. Our s 20 AA is similar to –

 

(a) s 22 SAA which reads as follows –

 

“General duties of arbitral tribunal

 

22. The arbitral tribunal shall act fairly and impartially and shall give each party a reasonable opportunity of presenting his case.”

 

(emphasis added); and

 

(b) s 33(1)(a) AA (UK).

 

In view of the above similarities, I will refer to cases from Singapore and England on this matter.

 

42. The only Malaysian case on s 37(2)(b) AA has been cited by Mr. Chew, namely Mary Lim Thiam Suan J’s decision in the High Court case of Ahmani Sdn Bhd v Petronas Penapisan (Melaka) Sdn Bhd [2015] AMEJ 887. In Ahmani Sdn Bhd, at paragraphs 24, 25, 28, 42-45, 49, 50, 54, 62 and 63, the High Court decided as follows:

 

—[24] It is the specific issue of inflation when calculating Petronas’ additional costs that Ahmani contended that the Arbitral Tribunal had gone wrong quite aside from its other contention that the Arbitral Tribunal had awarded on an un-pleaded and unclaimed matter. The

 

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Arbitral Tribunal is said to have gone wrong by dealing with a matter or issue which Ahmani claimed was not brought up by the parties, that the parties were not alerted to and invited to address, that the Award contains decisions on matters beyond the scope of the submission to arbitration which contravenes subparagraphs 37(1)(a)(v) and 37(1)(b) and raises questions of law under section 42.

 

[25] Under section 42, Ahmani offered four questions of law which it

 

claims emanate or arise out of the Award; namely:

 

a. Whether the Honourable Panel of Arbitrators can award a sum which was not pleaded?

 

b. Whether the Honourable Panel of Arbitrators can award a sum which was not claimed?

 

c. Whether the Honourable Panel of Arbitrators can make its findings based on issue which was never presented or argued before it?

 

d. Whether by not inviting parties to present or argue on the issue which formed the basis of its decision, the Honourable Panel of Arbitrators had acted beyond its jurisdiction and breached the rules of natural justice?

 

[28] On this matter of inflation, both counsel for the respective parties agreed that the parties were not asked to address on this matter, be it on its relevance or application, before the Arbitral Tribunal came to a decision on the counterclaim; that this was never submitted or raised by either of the parties. In fact, it was contended by Ahmani that the issue was never even pleaded or claimed, let alone presented or argued. By not inviting the parties to present or argue on the issue which formed the basis of its decision on the counterclaim, Ahmani contended that the Arbitral Tribunal had acted beyond its jurisdiction and breached rules of natural justice.

 

[42] Here, there are three points that must be made.

 

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[43] In general, the parties have a right to be heard effectively on every issue that may be relevant to the resolution of the dispute. The overriding concern is fairness and the opportunity to be heard before the pronouncement or decision is made. Therefore, in keeping with that rule, the Arbitral Tribunal should not base its decision on matters that the parties have not submitted on. Although the Arbitral Tribunal is not required to select any one of the arguments or approaches articulated by the parties, it is perfectly entitled to steer a middle course through all the arguments made in order to reach its own conclusions or findings; any conclusion or finding reached nevertheless must be based on evidence placed before the Arbitral Tribunal. While the Arbitral Tribunal does not have to consult the parties on its thinking process before finalising its award, it must consult the parties where the argument by which it reaches its decision is one which does not reasonably flow from any of the already argued or submitted premises – see Soh Beng Tee & Co Ltd v Fairmount Development Pte Ltd [2007] 3 SLR (R) 86, discussed in Government of India v Cairns Energy & Anor [2013] MLJ 123. Where the Arbitral Tribunal has done so, as is alleged here, then a case of a breach of natural justice is made out.

 

[44] Next, it is significant to note that the Arbitral Tribunal had already agreed with Ahmani on the lack of evidence or proof of Petronas’ counterclaim for additional costs incurred to complete the contract. The Arbitral Tribunal had in fact given similar reasons when rejecting Ahmani’s claim for reimbursement of unpaid preliminaries.

 

[45] Thirdly, and this is most important, both parties before the Court today have agreed that the fact and factor of inflation was never addressed by the parties nor were the parties invited to do so. In fact, the parties did not address the position of what happens if the evidence of Petronas’ witnesses are disbelieved or the witnesses are not competent to testify on the documentary evidence before the arbitral tribunal given that they are not the makers of those documents. The parties did not address the Arbitral Tribunal on the factor of inflation and what would be a fair amount to “support” Petronas’ counterclaim. The parties only learnt about this matter for the first time from the Award itself.

 

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[49] With respect, this is where the Arbitral Tribunal has exceeded its jurisdiction. Where the Arbitral Tribunal wants to do more, which it obviously wanted in this case, including introducing the matter or element of inflation, as well as offer its views as to the value of that factor of inflation; the Arbitral Tribunal was obliged to go back to the parties. There, it may sound out its concerns, bring up this matter of inflation and even offer its view as to the value of the inflation as well as the source or evidence of that value and then, invite views or submissions of the parties on the matter. The Arbitral Tribunal is obliged to do so because it takes its jurisdiction from the submission of the parties. Although the parties may have submitted the matter of the counterclaim for the Arbitral Tribunal’s determination, it was only within the terms as found in the Points of Claim, Defence etc. The evidence was entirely of the parties’ making and responsibility; not the Arbitral Tribunal’s. The Arbitral Tribunal does not have inherent or residual powers or jurisdiction in these matters which are almost entirely dictated by the parties.

 

[50] Hence, the Arbitral Tribunal ought to have invited the parties to address or make further submissions first before it proceeded to consider and to make this particular item of award. It is this failure that gives merit to Ahmani’s complaint that the Award contains a decision on a matter beyond the scope of the submission to arbitration under subparagraph 37(1)(a)(v).

 

[54] Be that as it may, on the challenge under section 42 [24C(ARB)-11-03/2015], the Court agrees with Petronas that questions 1 and 2 do not come within the test of being real, proper and valid questions of law. The matter of the counterclaim was pleaded and that was what the Arbitral Tribunal was addressing in the material paragraphs complained of. However, in relation to the 3rd and 4th questions, these are real and not dressed up questions relating to an appeal against the Arbitral Tribunal’s findings.

 

[62] At the risk of repeating what the Court has already found satisfactorily proved, that the parties were not invited nor had they addressed the matter of inflation and its impact, application or relevance in computing Petronas’ counterclaim for additional costs; and given that at that point of its award, the Arbitral Tribunal had already found that there was no evidence of the third party’s costs which is the root of Petronas’ counterclaim;

 

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that there was in fact no evidence upon which the Arbitral Tribunal could proffer its findings and decision; that the Arbitral Tribunal did not explain where it sourced the factor of inflation; or the value of that factor of inflation in the matter of the computation of additional costs of completing the remaining works; the Arbitral Tribunal’s decision on this matter was certainly and clearly one that it could not and should not have embarked on without first hearing out the parties. Doing so not only exceeded the limits of the dispute that was submitted to the Arbitral Tribunal for decision, it also breached the rules of fair play and natural justice. The decision of the Arbitral Tribunal on this matter is within what has been described in Crystal Realty Sdn Bhd v Tenaga Insurance (Malaysia) Sdn Bhd [2008] 3 CLJ 791 as a decision that requires intervention of the Court as it “is patent and obvious as to render the award manifestly unlawful and unconscionable to subsist and, thereby justify it to be set aside”; as recognised by all the decisions of the Court of Appeal.

 

[63] I am further satisfied that paragraph 20 of the affidavit filed in support in the facts of this case adequately explains how Ahmani’s rights have been affected substantially. Given all these consideration Questions 3 and 4 are indeed valid and proper questions of law which the Court now answers in Ahmani’s favour. ”

 

(emphasis added).

 

43. I must first acknowledge that there are many cases from other Common Law jurisdictions which have expressed certain views on the breach of second rule of natural justice. Regrettably, I am not able to reconcile all these views. My respectful opinion regarding such cases is as follows:

 

(a) whether an “arbitral tribunal’ [defined in s 2(1) AA] (Tribunal) in a particular case, has complied with the second rule of natural justice or otherwise, is ultimately a question of fact. In this sense, cases on

 

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the second rule of natural justice, are “fact-centric” and can only offer valuable guidance and do not constitute binding legal precedents in themselves; and

 

(b) it is important to note whether the wording of the relevant provisions of the arbitration legislation of the country in question, is similar or not to our AA, in particular ss 20, 37(1)(b)(ii) and 37(2)(b) AA.

 

44. I am of the following view regarding the application of ss 20, 37(1)(b)(ii) and 37(2)(b) AA:

 

(a) under s 20 AA, a Tribunal “shall’ –

 

(i) treat equally all parties; and

 

(ii) give every party a fair and reasonable opportunity of presenting that party’s case

 

(Tribunal’s Duty Under Section 20);

 

(b) a Tribunal’s Duty Under Section 20 should be adhered to by a Tribunal in 2 stages, namely –

 

(i) during the arbitral proceedings within the meaning of s 37(2)(b)(i) AA; and

 

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(ii) during the deliberation and making of an award as envisaged in s 37(2)(b)(ii) AA

 

(2 Stages);

 

(c) ss 37(1)(b)(ii) and 37(2)(b) AA should be read together in harmony with s 20 AA. If a Tribunal’s Duty Under Section 20 has been fulfilled in respect of the 2 Stages, the Tribunal has not breached the second rule of natural justice within the meaning of ss 37(1)(b)(ii), 37(2)(b)(i) and (ii) AA;

 

(d) the first example of a breach of the Tribunal’s Duty Under Section 20 (1st Example) is when the Tribunal makes an award based on a matter which is the “Tribunal’s own invention or idea”. I rely on the Singapore Court of Appeal case of Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR 86 (Soh Beng Tee & Co). In Soh Beng Tee & Co, at paragraphs 29 and 41, VK Rajah JA (now the Attorney General of Singapore) decided as follows –

 

“29 It has been rightly held in John Holland Pty Ltd v Toyo Engineering Corp (Japan) [2001] 2 SLR 262 (“John Holland”), at [18], that a party challenging an arbitration award as having contravened the rules of natural justice must establish: (a) which rule of natural justice was breached; (b) how it was breached; (c) in what way the breach was connected to the making of the award; and (d) how the breach prejudiced its rights. The rule of natural

 

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justice alleged to have been breached in the present case is the alleged right of Fairmount to be heard on an issue that it maintains was crucial to the outcome of the Arbitrator’s decision. In the circumstances, the core issues on appeal telescoped into the following:

 

(a) whether the Disputed Issue was alive during the arbitration or whether it was, as the trial judge found, “entirely the arbitrator’s own idea”;

 

(b) if there was a breach of natural justice, how that breach affected the Award; and

 

(c) whether the breach was merely technical or whether it caused prejudice to Fairmount.

 

41 In addition, even if we were to determine that the issue of whether time was at large was not truly alive during the arbitration, that per se would not be sufficient to inexorably lead to the conclusion that the Arbitrator had necessarily failed to adhere to the rules of natural justice in denying Fairmount an occasion to present its contentions on the issue. It is frequently a matter of degree as to how unexpected the impugned decision is, such that it can persuasively be said that the parties were truly deprived of an opportunity to argue it. As helpfully summarised in Sir Michael J Mustill & Stewart C Boyd, The Law and Practice of Commercial Arbitration in England (Butterworths, 2nd Ed, 1989) (“Commercial Arbitration”) at p 312:

 

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If the arbitrator decides the case on a point which he has invented for himself, he creates surprise and deprives the parties of their right to address full arguments on the base which they have to answer. Similarly, if he receives evidence outside the course of the oral hearing, he breaks the rule that a party is entitled to know about and test the evidence led against him. [emphasis added]”

 

(emphasis added).

 

In the 1st Example, the plaintiff complains that the plaintiff has been deprived of an opportunity to adduce evidence and/or to present submission (written and oral) in respect of the “Tribunal’s own invention or idea”.

 

To decide whether the Tribunal’s Duty Under Section 20 has been breached in the 1st Example, the court has to ascertain whether the issue decided by the Tribunal against the plaintiff (Alleged Issue) is “alive” during the arbitration (an issue which has been submitted by the parties to the Tribunal for the Tribunal’s decision and has not been abandoned by the parties) or whether the Alleged Issue is the “Tribunal’s own invention or idea”. For this purpose, the court should peruse, among others –

 

(i) the pleadings filed by the parties;

 

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(ii) the parties’ written and oral submission presented to the Tribunal; and

 

(iii) the award.

 

If the Tribunal has decided on an Alleged Issue which is the “Tribunal’s own invention or idea”, the Tribunal has breached the Tribunal’s Duty Under Section 20 and consequently, there has been a breach of the second rule of natural justice within the meaning of ss 37(1)(b)(ii) and 37(2)(b) AA (2 Breaches). The court should then consider the next question of whether the 2 Breaches have actually prejudiced the plaintiff so as to enable the court to set aside the award in question (Effect of 2 Breaches). The Effect of 2 Breaches will be discussed subsequently in this judgment;

 

The 1st Example is illustrated in Ahmani Sdn Bhd, at paragraphs 25, 28, 43-45, 49, 50 and 62, where the Tribunal in that case had decided the issue of inflation (Inflation Issue) on its own when –

 

(1) the Inflation Issue had not been pleaded by the parties;

 

(2) the parties did not adduce any evidence on the Inflation Issue; and

 

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(3) the Tribunal did not invite parties to adduce evidence and to submit on the Inflation Issue;

 

(e) a second example of a breach of the Tribunal’s Duty Under Section 20 (2nd Example) is when the Tribunal decides a “live” issue based on a matter, legal or factual (New Matter) when –

 

(i) the parties to the arbitration have not adduced any evidence in respect of the New Matter;

 

(ii) the parties have not submitted, either orally or in writing, on the New Matter; and/or

 

(iii) the parties have not been invited by the Tribunal to adduce evidence and to submit on the New Matter.

 

The New Matter may be based on the Tribunal’s personal expertise, experience and/or knowledge;

 

(f) a third example of a breach of the Tribunal’s Duty Under Section 20 (3rd Example) is when the Tribunal receives or considers “extraneous evidence” which has not been adduced by the parties in the arbitral proceedings and such “extraneous evidence” is relied on by the Tribunal to make an award without giving an opportunity to the parties to –

 

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(i) test the “extraneous evidence

 

(ii) adduce admissible evidence to rebut the “extraneous evidence”; and/or

 

(iii) present written and/or oral submission in respect of the “extraneous evidence”.

 

In the 3rd Example, the “extraneous evidence” may be based on the Tribunal’s personal expertise, experience and/or knowledge.

 

In Paragraph 407, the Arbitrator seemed to have considered and accepted 2 pieces of “extraneous evidence” (not adduced by the Plaintiff and Defendant) (2 Items of Extraneous Evidence) that –

 

(1) “weather induced erratic stress and loading” subjected the structural members of the Stinger Hitch to fatigue; and

 

(2) “continuous excessive loads accentuated by severe weather during the week, resulted in the cracking of the plate”.

 

Based on Paragraph 407, this case involves the 3rd Example which will be discussed later in this judgment; and

 

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(g) in respect of the Effect of 2 Breaches, our s 37(2)(b) AA does not require proof that the 2 Breaches have prejudiced the rights of the plaintiff. Section 48(1)(a)(vii) SAA and s 24(b) SIAA provide that an award can only be set aside if the breach of natural justice has prejudiced the plaintiff’s rights. According to s 68(2)(a) AA (UK), the court may intervene in respect of a serious irregularity [such as a failure on the part of the Tribunal to comply with the Tribunal’s duty to act fairly under s 33 AA (UK)], if the serious irregularity “has caused or will cause substantial injustice to the applicant.

 

I am of the opinion that before the court can set aside an award for the 2 Breaches, a plaintiff should prove that the 2 Breaches have prejudiced him or her. My view is premised on the following reasons

 

(i) even if 2 Breaches have been proven, the court has a discretion not to set aside an award under s 37(1) AA. This is clear from the use of the permissive term “may’ in s 37(1) AA;

 

(ii) if the 2 Breaches have not prejudiced a plaintiff, namely the 2 Breaches are merely technical, the court’s discretionary power to set aside an award under s 37(1) AA, should not be exercised in vain as no injustice has been caused to the plaintiff by the 2 Breaches; and

 

(iii) the above requirement of proof of prejudice to the plaintiff due to the 2 Breaches, is consistent with the 4 Considerations to ensure, among others, Party Autonomy, Finality of Awards and a “minimalist judicial intervention” approach.

 

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N. Did Arbitrator commit 2 Breaches in this case?

 

45. Before I decide whether the Arbitrator has committed the 2 Breaches in this case, I refer to a recent Singapore Court of Appeal case of AKN & Anor v ALC & Ors, and other appeals [2015] SGCA 18. In AKN, at paragraphs 39, 47 and 59, Sundaresh Menon CJ decided as follows:

 

“39 In the light of their limited role in arbitral proceedings, the courts must resist the temptation to engage with what is substantially an appeal on the legal merits of an arbitral award, but which, through the ingenuity of counsel, may be disguised and presented as a challenge to process failures during the arbitration. A prime example of this would be a challenge based on an alleged breach of natural justice. When examining such a challenge, it is important that the court assesses the real nature of the complaint. Among the arguments commonly raised in support of breach of natural justice challenges are these:

 

(a) that the arbitral tribunal misunderstood the case presented and so did not apply its mind to the actual case of the aggrieved party;

 

(b) that the arbitral tribunal did not mention the arguments raised by the aggrieved party and so must have failed to consider the latter’s actual case; and

 

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47

 

59

 

(c) that the arbitral tribunal must have overlooked a part of the aggrieved party’s case because it did not engage with the merits of that part of the latter’s case.

 

Although such arguments may be commonly raised, more often than not, they do not, in fact, amount to breaches of natural justice

 

Front Row was recently considered in AQU v AQV [2015] SGHC 26 (“.AQU’’), where the High Court judge distilled the very principles which we have just enunciated above (see AQU at [30]-[35]). The judge in AQU also considered the High Court decision of TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 (“TMM”), and reiterated the proposition that no party to an arbitration had a right to expect the arbitral tribunal to accept its arguments, regardless of how strong and credible it perceived those arguments to be (see AQU at [35], citing TMM at [94]). This principle is important because it points to an important distinction between, on the one hand, an arbitral tribunal’s decision to reject an argument (whether implicitly or otherwise, whether rightly or wrongly, and whether or not as a result of its failure to comprehend the argument and so to appreciate its merits), and, on the other hand, the arbitral tribunal’s failure to even consider that argument. Only the latter amounts to a breach of natural justice; the former is an error of law, not a breach of natural justice.

 

With respect, poor reasoning on the part of an arbitral tribunal is not a ground to set aside an arbitral award; even a misunderstanding of the arguments put forward by a party is not such a ground. As noted by this court in BLC at [86], the court “is not required to carry out a hypercritical or excessively syntactical analysis of what the arbitrator

 

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has written” when considering whether an arbitral award should be set aside for breach of natural justice. Neither should it approach an arbitral award with a “meticulous legal eye endeavouring to pick holes, inconsistencies and faults … with the objective of upsetting or frustrating the process of arbitration” (likewise at [86] of BLCJ. …”

 

(emphasis added).

 

46. A perusal of the following documents –

 

(a) the pleadings of both the Plaintiff and Defendant;

 

(b) the minutes of the Preliminary Meeting;

 

(c) the written submission of the Plaintiff and Defendant; and

 

(d) the Award – shows that

 

(i) the cause of damage to the Stinger Hitch was a “live” issue which had been submitted by the Plaintiff and Defendant to the Arbitrator for the Arbitrator’s decision; and

 

(ii) Paragraph 407 was not the Arbitrator’s “own invention or idea”.

 

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In view of the above reasons, the Plaintiff’s complaint in this case does not fall within the 1st Example.

 

47. In Paragraph 407, the Arbitrator did not decide on a New Matter. Hence, the 2nd Example does not apply in this case.

 

48. This case concerns the 3rd Example where the Arbitrator has considered and accepted 2 Items of Extraneous Evidence in Paragraph 407 without giving the parties an opportunity to –

 

(a) test the 2 Items of Extraneous Evidence;

 

(b) adduce admissible evidence to –

 

(i) prove or disprove the existence of the 2 Items of Extraneous Evidence; and/or

 

(ii) corroborate or rebut the 2 Items of Extraneous Evidence.

 

Under s 21(3)(h) AA, the Arbitrator may invite parties to adduce expert evidence in respect of the 2 Items of Extraneous Evidence; and

 

(c) present submission, both written and oral, in respect of the 2 Items of Extraneous Evidence.

 

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49. Section 21(3)(b) AA allows the Arbitrator to “draw on its own knowledge and expertise”. According to s 26(5) AA, any expert report or document relied on by a Tribunal in making its decision, should be communicated to parties. I am of the opinion that in view of ss 20, 26(5), 37(1)(b)(ii) and 37(2)(b) AA, if a Tribunal draws on its own expertise, experience and knowledge pursuant to s 21(3)(b) AA, the Tribunal should have informed the parties of such a matter and invite parties to adduce evidence (or expert evidence) and submit on such a matter. I rely on Ackner LJ’s (as he then was) judgment in the English Court of Appeal case of Interbulk Ltd v Aiden Shipping Co Ltd, The Vimeira [1984] 2 Lloyd’s Rep 66, at 76, as follows –

 

“If an arbitrator considers that parties or their experts have missed the real point – a dangerous assumption to make, particularly where, as in this case, the parties were represented by very experienced Counsel and solicitors – then it is not only a matter of obvious prudence, but the arbitrator is obliged, in common fairness or, as it is sometimes described, as a matter of natural justice, to put the point to them so that they have an opportunity of dealing with it ”

 

(emphasis added).

 

50. I am satisfied that the parties have been caught by surprise regarding the 2 Items of Extraneous Evidence. The Arbitrator has committed the 2 Breaches under ss 20, 37(1)(b)(ii) and 37(2)(b) AA in the following manner –

 

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(a) the Arbitrator had failed to inform the parties of the 2 Items of Extraneous Evidence that the Arbitrator might rely on and which the Arbitrator did indeed subsequently rely on in Paragraph 407; and

 

(b) the Arbitrator had failed to give parties an opportunity to –

 

(i) test the 2 Items of Extraneous Evidence;

 

(ii) adduce admissible evidence, including expert evidence, to –

 

(1) prove or disprove the existence of the 2 Items of Extraneous Evidence; and/or

 

(2) corroborate or rebut the 2 Items of Extraneous Evidence; and

 

(iii) submit, in writing and/or orally, in respect of the 2 Items of Extraneous Evidence.

 

O. Was Plaintiff prejudiced by 2 Breaches?

 

51. The following 2 Singapore Court of Appeal cases have held that even if there has been a breach of the second rule of natural justice, the court

 

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will not set aside an award unless such a breach has caused prejudice to a plaintiff:

 

(a) in Soh Beng Tee & Co, at paragraph 86, VK Rajah JA held as follows –

 

“86 It is necessary to prove that the breach, if any, had

 

caused actual or real prejudice to the party seeking to set aside an award. It may well be that though a breach has preceded the making of an award, the same result could ensue even if the arbitrator had acted properly.”

 

(emphasis added); and

 

(b) Sundaresh Menon CJ decided as follows in AKN, at paragraphs 6768 –

 

“67 Based on the Tribunal’s conclusion that the TAA did not alter the obligation owed by the Liquidator and the Secured Creditors to transfer clean title to the Plant Assets to the Purchasers on the Closing Date, on the Tribunal’s analysis, this obligation had been breached from the onset. Hence, even if the Tribunal had failed to consider the Liquidator’s and/or the Secured Creditors’ arguments on the revocation of the TAA or had wrongly attributed the arguments of one party to the other party, and even if this had amounted to a breach of natural justice, it was unlikely to materially affect the conclusion which the Tribunal reached on its analysis of the APA, namely, that the Liquidator

 

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and the Secured Creditors had breached the obligation to deliver clean title to the Plant Assets under the APA.

 

68 For these reasons, we do not agree with the Judge

 

that there was a breach of natural justice which prejudiced the Liquidator and the Secured Creditors, and accordingly, also do not consider that there is any basis for setting aside the Award on this ground .”

 

(emphasis added).

 

52. After perusing the parties’ pleadings, written submission and the Award, I am of the view that even though the Arbitrator has committed the 2 Breaches under ss 20, 37(1)(a)(ii) and 37(2)(b) AA, the Plaintiff has not suffered any actual or real prejudice which will warrant judicial intervention in this case. My decision is premised on the following reasons:

 

(a) as explained in the above paragraph 35, there are 3 Principal Issues to be decided by the Arbitrator in this case. Paragraph 407 merely concerned the cause of damage to the Stinger Hitch. Paragraph 407 is not even one of the 3 Principal Issues. Paragraph 407 does not affect the following 2 Principal Issues –

 

(i) whether the charter period had been extended in this case; and

 

(ii) whether the Plaintiff should have extended the BG under Clause 43.

 

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Accordingly, the 2 Breaches concerning Paragraph 407 do not prejudice the Plaintiff in any manner in respect of the above 2 of the 3 Principal Issues;

 

(b) Paragraph 407 was part of the third Principal Issue, namely who caused the damage to the Vessel, including the Stinger Hitch, and the liabilities that arose therefrom (3rd Principal Issue). In respect of the 3rd Principal Issue, the Arbitrator has made the following findings –

 

(i) the Arbitrator had rejected the Plaintiff’s averment that the Vessel had a hidden damage which could not be discovered by the Plaintiff during the Pre-Charter Joint Inspection (paragraphs 222-250 of the Award). In other words, there was no evidence that the Stinger Hitch had a latent damage at the time of the commencement of the charter period when the Vessel was handed by the Defendant to the Plaintiff;

 

(ii) in paragraphs 461 to 466 of the Award, the Arbitrator had found that the Defendant had discharged its obligations under Clause 3(a) to deliver the Vessel in a seaworthy condition;

 

(iii) the Arbitrator had also decided that the Plaintiff and not the Defendant, had management and control of the Vessel (paragraphs 479-486 of the Award). In other words, the damage to the Stinger Hitch was caused while the Plaintiff had management and control of the Vessel, including the Stinger Hitch;

 

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(iv) the Arbitrator had upheld the Defendant’s claim that the Plaintiff had effected structural alteration to the Vessel by welding the detachable Stinger Hitch to the hull of the Vessel (paragraphs 487-504 of the Award). As such, the Arbitrator had decided that to remove this structural alteration, the Vessel needed to go to a dry dock to be reinstated to its original condition as reinstatement could not be carried out while the Vessel was afloat; and

 

(v) the Arbitrator had found that the Plaintiff should be liable to the Defendant for the cost of repair and/or reinstatement of the Vessel (paragraphs 426-450 of the Award). The Arbitrator had also dismissed the Plaintiff’s Counterclaim

 

(Arbitrator’s Findings On 3rd Principal Issue);

 

(c) the Arbitrator’s Findings On 3rd Principal Issue are based on –

 

(i) the evidence adduced by the parties in the arbitral proceedings conducted before the Arbitrator; and

 

(ii) the submission made by the parties to the Arbitrator;

 

(d) I have perused the Arbitrator’s Findings On 3rd Principal Issue and I am satisfied that the Arbitrator has given adequate and detailed reasons for the Arbitrator’s Findings On 3rd Principal Issue; and

 

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(e) based on the above reasons, in the words of Sundaresh Menon CJ in AKN, I do not see how the 2 Breaches could have “materially affect’ the Arbitrator’s Findings On 3rd Principal Issue and the final outcome of the Award. Nor can I discern any “actual or real prejudice” to the Plaintiff caused by the 2 Breaches (as explained by VK Rajah JA in Soh Beng Tee & Co).

 

53. Even if the 2 Breaches have been committed by the Arbitrator, the many cases cited by Mr. Chew can be distinguished from this case as the Plaintiff has failed to show that the 2 Breaches have caused actual or real prejudice to the Plaintiff.

 

P. Can Plaintiff set aside part of Award under ss 20, 37(1)(b)(ii) and 37(2)(b) AA?

 

54. If a plaintiff can prove the 2 Breaches and the fact that the 2 Breaches have caused actual or real prejudice to the plaintiff, the Court may set aside the entire award under s 37(1) AA. The court has no power to set aside part of an award under s 37(1)(b)(ii) and (2)(b) AA. The only instance when the court has power to set aside part of an award is provided in s 37(3) AA when the court may set aside part of an award which contains a matter which has not been submitted to arbitration. This is clear from Mary Lim Thiam Suan J’s judgment in Ahmani Sdn Bhd, at paragraphs 36-39, as follows:

 

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“[36] I must say that subparagraph 37(1)(a)(iv) is not properly

 

invoked in the instant case as Ahmani is seeking to set aside only a part of the Award [that which is in respect of the counterclaim]; and not the whole Award as there is that other part of the Award which is in its favour. That being the case, only subparagraph 37(1)(a)(v) can be relied on as read together with subsection (3), it allows for those parts of the Award which contain decisions on matters which had not been submitted to arbitration to be set aside.

 

[37] I must further say that subparagraph 37(1)(b)(ii) cannot be invoked because again, this ground leads to the setting aside of the whole Award and not just the part complained of. Ahmani cannot choose or cherry pick. Its challenge must also be seen against those parts which are not challenged or complained of. When that is done, it will be seen that it is only asking for certain parts of the Award to be set aside and not the whole Award, which is what subparagraph 37(1)(b)(ii) is about.

 

[38] I am fortified in this regard from a reading of subparagraph 37(2). This sub-provision indicates that the complaint of conflict of public policy is in relation to the Award or that the Award contains decisions or decisions on matters which conflict with the public policy of Malaysia; and not just certain parts of the decision.

 

[39] In this case, the complaint is that there was a breach of natural justice during the arbitral proceedings or in connection with the making of the Award when the Arbitral Tribunal dealt with the factor of inflation without first inviting the parties to submit or address on the factor. If indeed such an allegation is true, then it would be the whole Award which will be tainted and not just that part identified by the complainant. The provisions of section 37 do not appear to allow the Court to sever as it may in cases of allegations of violations of subparagraph 37(1)(a)(iv). Mindful of the limited powers of intervention of the Court, a restrictive approach is hereby adopted and applied”

 

(emphasis added).

 

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55. The above interpretation of s 37(1), (2) and (3) AA is fortified by a comparison between s 37 and s 42(4) AA. Section 37 AA has no provision which is equivalent to s 42(4)(b) and (d) AA (which allows the court to vary or set aside part of an award in a reference of question of law under s 42 AA). Accordingly, it is clear that Parliament has conferred power on the High Court to set aside part of an award under s 42(4)(d) AA but not in respect of an application to set aside part of an award under s 37(1) AA [except when a Tribunal has decided on a matter which has not been submitted to arbitration as provided in s 37(3) AA].

 

Q. Reference under s 42 AA (Court Reference)

 

56. In Zenbay Sdn Bhd v Yong Choo Kui Shipyard Sdn Bhd [2015] AMEJ 1058, at paragraphs 45-47, I have stated my understanding of Malaysian case law regarding a Court Reference as follows:

 

—45. The second matter which I need to highlight is that s 42 AA is sui generis, namely there is no equivalent of s 42 AA in the 1996 AA or in the arbitration legislation of other countries. This is stated in the following cases:

 

(a) the judgment of Mohamad Ariff Yusoff JCA in the Court of Appeal case of Kerajaan Malaysia v Perwira Bintang Holdings Sdn Bhd [2015] 1 CLJ 617, at 624 (Perwira Bintang Holdings), as follows –

 

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—However, s 42 has no direct equivalent provision in

 

the [UNCITRAL Model Law]”;

 

(b) Nallini Pathmanathan J (as Her Ladyship then was) held in the High Court case of Exceljade Sdn Bhd v Bauer (M) Sdn Bhd

 

[2014] 1 AMR 253, at 260, as follows –

 

—[5] The [AA] is modelled on UNCITRAL Model Law (—the Model Law”). However, s 42 is one of the few sections that has no parallel in the Model Law. As such, no recourse may be made to the Model Law to ascertain or construe this section.”; and

 

(c) in MMC Engineering Group Bhd & Anor v Wayss & Freytag

 

(M) Sdn Bhd [2015] AMEJ 873, at paragraphs 16 and 18, Mary Lim Thiam Suan J decided as follows in the High Court –

 

—[16] Section 42 [AA] is peculiar to the Malaysian arbitration scene.

 

[18] The recourse of referring questions of law to Court under section 42 is not unusual as other jurisdictions do similarly allow questions of law to be posed but, using an appeals mechanism.

 

In fact, it would appear that Malaysia is the only jurisdiction that uses this mechanism, and it is in this sense, that I would say that section 42 is peculiar to Malaysia.”

 

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46. Thirdly, an application of s 42 AA concerns the following 3 matters:

 

(a) whether a plaintiff has fulfilled certain threshold requirements under s 42 AA read with Order 69 rules 2, 4 and 6 RC so as to confer jurisdiction on the court to determine the question of law referred to it. I will describe this preliminary stage as a —Threshold Stage”;

 

(b) if the Threshold Stage is resolved in favour of a plaintiff, the court may proceed to answer the question(s) of law referred to it. The court’s determination of question(s) of law referred to it, will be described in this judgment as the —Determination Stage”; and

 

(c) if the question(s) of law is (are) determined against a plaintiff, the OS will consequently be dismissed. If however the court answers the question(s) of law in favour of a plaintiff, the court nevertheless retains a discretion not to grant any relief as provided in s 42(4)(a) to (b) AA. I will refer to this final stage as the —Relief Stage”.

 

47. In my view, there are at least 9 threshold requirements (9 Threshold Requirements) before the court has jurisdiction to decide a Court Reference. ”

 

57. The 9 Threshold Requirements for a Court Reference, as explained in Zenbay Sdn Bhd, at paragraph 47, are as follows:

 

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(a) under s 42(2) AA and Order 69 rule 6(1) of the Rules of Court 2012 (RC), a Court Reference should be made within 42 days from the date of publication and receipt of an award – please see Hamid Sultan J’s (as he then was) judgment in the High Court case of Chip Lam Seng Bhd v R1 International Pte Ltd [2001] 1 LNS 64, at paragraphs 1-3;

 

(b) only pure questions of law may be referred under s 42 AA. Questions of mixed law and fact cannot be the subject matter of a Court Reference. The following cases are pertinent –

 

(i) the Court of Appeal’s judgment in Awangku Dewa, at p. 15;

 

(ii) the Court of Appeal in Perwira Bintang Holdings Sdn Bhd, at

 

p. 637-638, has approved Nallini Pathmanathan J’s (as she then was) judgment in Exceljade Sdn Bhd v Bauer (M) Sdn Bhd [2014] 1 AMR 253 as follows –

 

“ The Issue Of Recognising What Is A Question Of Law

 

[58] It has to be stated and recognised, however, that the issue of what constitutes “a question of law” is a difficult one. Nallini J in Exceljade, supra, has helpfully addressed this vexed issue by drawing on the acute observations of Mustil J in Finelvet AG v. Vinava Shipping Co Ltd, The Chrysalis [1983] 1 Lloyd’s Rep 503;

 

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[1983] 1 WLR 1469. We reproduce the useful analysis by Nallini J below:

 

Mustil J then goes on to consider the proper test or approach to be adopted by a court determining the substantive appeal which turns on a question of law arising out of the arbitration:

 

… Starting therefore with the proposition that the court is concerned to decide on the hearing of the appeal whether the award can be shown to be wrong in law, how is this question to be tackled? In a case such as the present, the answer is to be found by dividing the arbitrator’s process of reasoning into three stages. (1) The arbitrator ascertains the facts. This process includes the making of findings on any facts which are in dispute. (2) The arbitrator ascertains the law. This process comprises not only the identification of all material rules of statute and common law, but also the identification and interpretation of the relevant parts of the contract, and the identification of those facts which must be taken into account when the decision is reached. (3) In light of the facts and the law so ascertained, the arbitrator reaches his decision.

 

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In some case, stage (3) will be purely mechanical. Once the law is correctly ascertained, the decision follows inevitably from the application of it to the facts found. In some instances, however, stage (3) involves an element of judgment on the part of the arbitrator. There is no uniquely —right” answer to be derived from marrying the facts and the law, merely a choice of answers, none of which can be described as wrong.

 

Stage (2) of the process is the proper subject matter of an appeal under the Act of 1979 … (emphasis added)

 

[59] Mustil J in The Chrysalis, supra, was of course referring to the English Arbitration Act 1979 (since amended) where the procedure is that of an —appeal” with leave, but the general principles and guidelines analysed are very relevant for our purposes. To this extent, we agree with the views expressed in Exceljade, supra, in highlighting the proper approach.

 

[60] In practical terms, we are persuaded that we should be looking at stage (2) of the process of reasoning as the proper focus of the inquiry under s. 42, which will mean ascertaining not so much a clear position of the “law” without regard to underlying facts, but, as analysed, the arbitrator will be ascertaining the “law” as a process comprising “not only the identification of

 

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all material rules of statute and common law, but also the identification and interpretation of the relevant parts of the contract, and the identification of those facts which must be taken into account when the decision is reached.” Typically, this process will involve a mixed consideration of relevant statutory rules, case laws and legal principles, and an identification of the relevant facts on which to apply the “law”.and

 

(iii) the judgments of Aziah Ali and Hamid Sultan JJCA in the Court of Appeal case of SDA Architects v Metro Millenium Sdn

 

Bhd [2014] 3 CLJ 632, at 646, 656-657 and 658;

 

(c) s 42(1) AA and Order 69 rule 6(2)(a) RC require the question of law to arise out of an award and not from the arbitral proceedings -please see the Court of Appeal’s judgment in Perwira Bintang Holdings Sdn Bhd, at p. 637;

 

(d) s 42(1A) AA requires the question of law to affect substantially the rights of one or more of the parties – please see Perwira Bintang Holdings Sdn Bhd, at p. 637. It is to be emphasized that subsection (1A) has been specifically inserted by Parliament in s 42 AA by way of the 2011 Amendment Act. Section 42(1A) AA is also relevant in the Determination Stage;

 

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(e) the question of law should be clearly and sufficiently identified as required by s 42(2) AA and Order 69 rule 6(2)(a) RC – please see Mohd. Hishamudin Yunus JCA’s judgments in SDA Architects (at p. 639) and Awangku Dewa (at p. 15);

 

(f) Order 69 rules 4(1)(a)(ii) and 6(2)(a) RC require the question of law to be stated in the OS;

 

(g) the grounds for the Court Reference (Gounds) should be stated in the OS in accordance with s 42(2) AA and Order 69 rule 6(2)(b) RC

 

– please see Mary Lim Thiam Suan J’s judgment in MMC Engineering Group Bhd, at paragraph 30;

 

(h) Order 69 rule 6(2)(c) RC requires the OS to give particulars of each Ground for the Court Reference on which it is contended that the Tribunal has erred in law with reference to the paragraphs or passages in the award which each alleged error of law is to be found

 

– please see Mohd. Hishamudin Yunus JCA’s judgment in Awangku Dewa, at p. 14-15; and

 

(i) the OS and the supporting affidavit should be served on each of the arbitrators in question according to Order 69 rules 2(1)(h), (3), 4(4) and 6(4) RC.

 

R. Did Plaintiff refer pure questions of law?

 

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58. The 6th Question concerns the application of the estoppel doctrine. I am of the view that whether a party is estopped from relying on a contract or otherwise, is a question of fact dependent on the particular circumstances of the case in question. I rely on Gopal Sri Ram JCA’s (as he then was) judgment in the Federal Court case of Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 4 CLJ 283, at 294, as follows:

 

“ The time has come for this Court to recognise that the doctrine of estoppel is a flexible principle by which justice is done according to the circumstances of the case. It is a doctrine of wide utility and has been resorted to in varying fact patterns to achieve justice. Indeed, the circumstances in which the doctrine may operate are endless ”

 

(emphasis added).

 

59. Based on Awangku Dewa, as the 6th Question is a factual issue, the 6th Question does not fulfil a threshold requirement of a Court Reference and should not therefore be answered by this court.

 

60. The 7th Question asks whether the exercise of the Defendant’s rights under Clause 4 is conditional or subject to the Defendant’s exercising its rights under Clauses 7(d) or 44 where the structural alteration or installation of additional equipment under Clause 4 is due to damage to the Vessel or its equipment during the performance of the services of the charter party? The 7th Question assumes a factual position, namely there

 

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is structural alteration or installation of additional equipment under Clause 4 which is due to damage to the Vessel or its equipment during the performance of the services of the charter party.

 

The 8th Question inquires whether the application of Clauses 7(d) and 44 depends on or is conditional on the Defendant having a sufficient number of crew or officers on the Vessel. To answer the 8th Question, the court needs to ascertain the factual position of what is the “sufficient number of crew or officers on the Vessel”.

 

I am of the view that the 7th and 8th Questions are actually questions of mixed law and fact. Questions of mixed law and fact are not allowed in a Court Reference – Awangku Dewa.

 

S. 2 tests to determine 1st to 5th and 9th to 11th Questions

 

61. I will now proceed to the Determination Stage in respect of the 1st to 5th and 9th to 11th Questions (Remaining Questions). Based on my understanding of Malaysian case law, I have stated in Zenbay Sdn Bhd, at paragraphs 51-54, that there are 2 approaches which may be applied in the Determination Stage.

 

62. The first approach (1st Approach) is to ascertain whether there is any error of law on the face of the award which warrants the court to grant

 

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relief to a plaintiff. The 1st Approach is described as the “patent error of law” test and has been applied in the following cases:

 

(a) the judgments of Aziah Ali and Hamid Sultan JJCA in the Court of Appeal case of SDA Architects, at p. 649 and 660;

 

(b) Hamid Sultan J’s decision (as he then was) in Chip Lam Seng Bhd, at paragraph 3(c); and

 

(c) Mary Lim Thiam Suan J’s judgment in MMC Engineering Group Bhd, at paragraphs 52-57, 62 and 64-65.

 

63. A second approach has been adopted in the Determination Stage and involves an analysis of the reasons for the award (2nd Approach). The 2nd Approach ascertains whether the reasons for the award contains an error of law which has substantially affected the rights of the plaintiff and which warrants court intervention. The 2nd Approach is known as the “process of reasoning” test. The 2nd Approach is illustrated in the Court of Appeal case of Perwira Bintang Holdings, at p. 633-634 and 636, wherein Mohd. Ariff Yusof JCA has approved Nallini Pathmanathan J’s (as she then was) judgment in Exceljade Sdn Bhd.

 

64. To determine the Remaining Questions, I will apply both the “patent error of law test as well as the “process of reasoning” test.

 

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S1. 1st Question

 

65. In respect of the 1st Question, Clause 43 reads as follows:

 

“43. Bank Guarantee

 

Charterers shall provide to Owners an irrevocable, unconditional and on demand Bank Guarantee (BG) from a Malaysian bank in the format acceptable to Owners for the amount of RM 3.888 Million within 7 working days from the time the Vessel is delivered to the Charterers as stated in Box 9. This BG shall be valid until 14 days upon the expiry of the charter duration and/or delivery of Vessel at the port of redelivery. In event the Charter is extended or is expected to extend beyond the extended 30 days extension option, Charterers shall adjust the value of the BG and extend the BG’s validity to cover the intended extension period. Should Charterers fail to provide the BG, adjust its value or extend the validity of the BG, Owners reserves the full right to demobilize the Vessel, its spread and crew and charge all costs incurred to Charterers, as well as and in addition to , in the case of late extension of the BG, to draw on the BG .”

 

(emphasis added).

 

66. The wording of Clause 43 clearly provides that upon the extension of the charter period, the Plaintiff “shall adjust the value of the BG and extend the BG’s validity”. If the Plaintiff did not extend the BG, the Plaintiff would have breached Clause 43. In such an event, the Defendant may enforce

 

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Clause 43 and claim, among others, legal costs of the High Court’s Decision On BG. The 1st Question is therefore answered in the affirmative.

 

67. The Arbitrator has decided the issues concerning the BG in paragraphs 173 to 214 of the Award. Upon a perusal of the entire Award, I can detect no patent error of law on the face of the Award in respect of the Arbitrator’s decision regarding the BG. Nor is there any error of law in the reasoning process of the Arbitrator concerning the BG.

 

S2. 2nd to 5th Questions

 

68. I will determine the 2nd to 5th Questions together as these 4 questions concern Clauses 7(d) and 44.

 

69. Clauses 7 and 44 provide as follows:

 

7. Master and Crew

 

(d) The entire operation, navigation, and management of the Vessel and its equipment and Spread shall be in the exclusive control and management of the Owners, their Master, Officers and Crew. The Vessel will be operated and the services hereunder will be rendered as requested by the Charterers, subject always to the exclusive right of the Owners or the Master of the Vessel to determine whether operation of the Vessel and its equipment

 

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and Spread may be safely undertaken. In the performance of the Charter Party, the Owners are deemed to be an independent contractor, the Charterers being concerned only with the results of the services performed.

 

44. Operations of the Equipment

 

Owner’s Barge Supt (or any other nominated personnel) onboard the Vessel, shall, at all times, have full control and authority over the safety of the Vessel’s major equipment (crane, tensioner, anchor wire winches etc.) and therefore have the right and final say on the equipment’s operational method. Charterers’ work execution using the equipment shall be subject to all his instructions and orders .”

 

(emphasis added).

 

70. My interpretation of Clauses 7(d) and 44 is that the Defendant as the Vessel’s owner, is entitled to stop the Plaintiff’s pipe-laying operations or the use of any equipment in the Vessel, including the Stinger Hitch, on the ground of safety. As such, the 2nd, 4th and 6th Questions should be answered in the affirmative when the safety issue arises. When there is no safety issue, the 3rd Question cannot be answered in the affirmative because the Defendant does not have control “at all times” over the Plaintiff’s use of the Vessel’s major equipment, including the Stinger Hitch. In view of the particular wording of the 3rd Question, the 3rd Question has to be answered in the negative.

 

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71. The above interpretation of Clauses 7(d) and 44 does not mean that the Defendant as the owner of the Vessel, has actually operated the Vessel’s equipment, including the Stinger Hitch, before and at the time of the damage to the Stinger Hitch on 9.1.2013. Whether the Plaintiff or Defendant actually operated the Vessel’s equipment, including the Stinger Hitch, before and at the time of the damage to the Stinger Hitch on 9.1.2013, is a question of fact. In paragraphs 272-290 and 479-486 of the Award, the Arbitrator has found as a fact that the Plaintiff actually operated the Vessel’s equipment, including the Stinger Hitch, before and at the time of the damage to the Stinger Hitch on 9.1.2013. I quote paragraph 483 of the Award:

 

11483. The Tribunal clarified with the witness RW1 [Plaintiff’s witness], that which Party has the final say in matters of decisions making [sic] for operations related to the [Plaintiff’s] works of pipe-laying. The witness RW1 testified that [Plaintiff’s] client is the final authority .”

 

(emphasis added).

 

72. In view of the aforesaid finding of fact by the Arbitrator, the 2nd to 5th Questions do not substantially affect the Plaintiff’s rights as required by s 42(1A) AA.

 

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73. In any event, I have perused the Arbitrator’s finding and reasons regarding Clauses 7(d) and 44. On an objective reading of the whole Award, I am satisfied that –

 

(a) there is no patent of error of law on the face of the Award in respect of Clauses 7(d) and 44; and

 

(b) there is no error of law in the reasoning process of the Arbitrator concerning Clauses 7(d) and 44.

 

S3. 9th to 11th Questions

 

74. The 9th to 11th Questions seek an interpretation of Clause 3(b). As such, I will discuss 9th to 11th Questions together.

 

75. Clause 3 reads as follows:

 

“3. Condition of Vessel

 

(a) The Charterers accept the Charter of the Vessel based on an “as is where is” basis as specified in ANNEX A.

 

(b) The Owners shall exercise due diligence to maintain the Vessel in such Class and in every way fit for the service stated in Clause 6 throughout the period of this Charter Party .”

 

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(emphasis added).

 

76. I have cited the above Clause 3(a) which has been relied on by the Defendant and accepted by the Arbitrator.

 

77. In my view, Clause 3(a) and (b) should be read together. The Plaintiff has agreed to accept the Vessel on an “as is where is” basis as specified in Annex A. As such, the Defendant has no “absolute obligation” under Clause 3(b) to maintain the Vessel and its equipment in every way fit for service. Accordingly, the 9th Question must be answered in the negative.

 

78. I am of the view that the 10th and 11th Questions should be answered in the affirmative. In paragraphs 384-395 and 473-478 of the Award, the Arbitrator has made a finding of fact that the Defendant has not breached Clause 3(b). Furthermore, the Arbitrator has held as a fact that the Plaintiff was in control of the Vessel and its equipment at the material time. In view of these findings of fact, the 10th and 11th Questions do not substantially affect the Plaintiff’s rights as required by s 42(1A) AA.

 

79. Upon a perusal of the whole Award, I am satisfied that –

 

(a) the Arbitrator has not committed any patent of error of law on the face of the Award in respect of Clause 3(a) and (b); and

 

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(b) there is no error of law in the reasoning process of the Arbitrator concerning Clause 3(a) and (b).

 

T. Should costs be awarded in this case?

 

80. Under Order 59 rule 3(2) RC, the court has a discretion not to order “costs to follow the event’. Order 59 rule 3(2) RC reads as follows:

 

“If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings, the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs ”

 

(emphasis added).

 

81. In view of the 2 Breaches committed by the Arbitrator (as explained in the above Part N), I exercise my discretion not to order costs in this case.

 

U. Court’s decision

 

82. Based on the above reasons, the OS is dismissed with no order as to costs.

 

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WONG KIAN KHEONG

 

Judicial Commissioner High Court (Commercial Division) Kuala Lumpur

 

DATE: 13 OCTOBER 2015

 

Counsel for Plaintiff:

 

Mr. Chew Chang Min, Mr. Chan Kheong Hoe & Ms. Yang Lee Yuen (Messrs Kheng Hoe & Partners)

 

Counsel for Defendant: Mr. Gan Khong Aik & Ms. Lim Bee San (Messrs Gan Partnership)

 

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