Singapore High Court: Non-Consideration of the Pre-Contractual Evidence In the Award And Breach of Natural Justice

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In the case of CDI v CDJ [2020] SGHC 118 the underlying agreement between the parties contained an entire agreement clause which inter alia provided that the agreement supersede all previous agreements whether oral or written between the Parties in relations thereto. However, independent to Arbitrator’s consideration of any pre-contractual evidence and based on his interpretation of other primary issues to which pre-contractual evidence was ancillary and in addition to his findings that the entire agreement clause is unambiguous (and excludes consideration of pre-contractual evidence), he decided in favour of the Award Holder.

Subsequently, the Award Debtor resisted enforcement of the award passed by the arbitrator on the ground that there was a breach of natural justice as the Arbitrator decided to exclude evidence of pre-contractual negotiations in interpreting the entire agreement clause. It was the case of the Award Debtor that the Arbitrator did so without inviting parties to make any submissions on the admissibility of such evidence, and in particular, whether an entire agreement clause, precluded the use of such evidence.

Whether failure of an arbitrator to refer every point for decision to the parties is a valid ground for resisting enforcement of award in all conditions?

The key question before the Court was whether the Arbitrator’s reasoning could be characterised as unforeseeable or surprising. However, the failure of an arbitrator to refer every point for decision to the parties for submissions is not invariably a valid ground for challenge.[1] Further, the overriding burden is on party resisting the enforcement to show that a reasonable litigant in his shoes could not have foreseen the possibility of reasoning of the type revealed in the award.[2] It is only in these very limited circumstances that the arbitrator’s decision might be considered unfair.[3]

In light of the above position of law, the Court concluded that the Arbitrator’s finding that it was not necessary to consider a contextual interpretation of the entire agreement clause meant, in pith and substance, that the Arbitrator was agreeing with the Plaintiff’s primary position i.e. that primacy should be given to the text of the words used in the entire agreement clause. It thus cannot be said that the Arbitrator’s reasoning or ultimate decision was unforeseeable or surprising or that the manner in which the decision was reached by the Arbitrator was irrational or capricious.

Whilst the Arbitrator may not have considered the pre-contractual extrinsic evidence or invited parties to submit on the applicability or relevance of the entire agreement clause, the reasoning employed and decision reached by the Arbitrator in the Award on the decisive issue did not, involve any significant or dramatic departure from the parties’ submissions.

Therefore, the Court held the fact that the Arbitrator did not call for submissions on the issue of admissibility of pre-contractual evidence or the applicability of the entire agreement clause is in and of itself insufficient to amount to a breach of natural justice.

Whether Arbitrator can only accept or adopt things presented before it by the parties?

An arbitrator is not bound to accept or adopt only the premises put forward by the parties. In addition, an arbitrator is entitled to infer a related premise from an argued premise placed before it, without asking parties to submit new or further arguments.[4]

The “principles of natural justice are not breached just because an arbitrator comes to a conclusion that is not argued by either party as long as that conclusion reasonably flows from the parties’ arguments”[5]. A particular chain of reasoning would be open to an arbitrator if the links in the chain flow reasonably from the arguments actually advanced by either party or are related to those arguments.[6] Conversely, there may be a breach of natural justice if an arbitrator “decides the case on a point which he has invented for himself”[7] and that an arbitrator “should not make bricks without straw”.[8]

Basis parties submissions, the Court found that the logically antecedent question of whether pre-contractual extrinsic evidence was even admissible in the first place and ought to be considered by the Arbitrator is one that reasonably flowed from or was, at the very least, related to the parties’ submissions on the relevance of such evidence. Thus, the Court held that the Arbitrator was entitled to decide on the question regarding the admissibility of pre-contractual evidence in the interpretation of the entire agreement clause without having to invite the parties to present submissions on the point.

Whether the party who could have foreseen or anticipated the finding of the Arbitrator which is now under challenge can claim breach of Natural Justice?

In Glaziers Engineering Pte Ltd v WCS Engineering Construction Pte Ltd[9], the Singapore Court of Appeal discussed three scenarios which may result in surprising outcomes for the parties:

  • In the first scenario, the parties addressed a question which the decision-maker posed as a decisive issue, but the decision-maker answered that question in a manner that was “so far removed from any position which the parties have adopted that neither of them could have contemplated the result” (“Type One”).[10]
  • In the second scenario, the parties did not address the question which was posed by the decision-maker as a decisive issue because they did not know and could not reasonably have expected that it would be an issue (“Type Two”).[11]
  • In the third scenario, the parties did not address a particular issue “even though they could reasonably have foreseen that the issue would form part of the court’s decision” (“Type Three”).[12] A Type Three scenario could occur because the parties “failed to apply their minds to it, or failed to appreciate its significance, or because they each assumed that the decision-maker would adopt their position on that issue”. Regardless of the reason for which the parties did not address the issue, the Court of Appeal held that this type of decision “cannot be set aside on the basis of any breach of natural justice because if the parties could reasonably have foreseen that the issue would arise, and if they choose not to address that issue, they cannot complain that they have been deprived of a fair hearing”.[13]

Considering the above scenarios, the Court held that the present case bears a closer resemblance to a Type Three scenario and therefore, enforcement of the Award should not be refused as there was no breach of natural justice. This is because, pre-contractual extrinsic evidence or the relevance of the entire agreement clause was not posed, either by the parties or by the Arbitrator, as decisive issues. Neither of these points featured in the parties’ pre-arbitration legal correspondence or their pleadings; nor was any clear or specific reference made to such points.

Adopting Glaziers, where a party fails (knowingly or otherwise) to apply its mind to and address a reasonably foreseeable issue (even if that issue was subsidiary to the ultimate issue before the tribunal), it cannot subsequently complain that it has been deprived of the right to a fair hearing or denied a reasonable opportunity to be heard. Overall, the Court observed that the Award Debtor is, in reality, seeking an opening to challenge the Award on its merits in the guise of a complaint dressed up as a breach of natural justice.

Thus, in view of the above, the Court held that there was no breach of natural justice occasioned by the Arbitrator in this case in not inviting submissions from the parties on the admissibility of pre-contractual extrinsic evidence or the effect of entire agreement clause and thus, the award cannot be refused enforcement for the breach of natural justice.

Disclaimer: The views expressed in this post are mine and do not reflect the views of the organisation(s) I am engaged with

[1] Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86 (“Soh Beng Tee”) at [65(d)]

[2] Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452

[3] Soh Beng Tee at [65(d)]

[4] TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 (“TMM”) at [65]

[5] AQU v AQV [2015] SGHC 26 at [18],

[6] JVL Agro Industries v Agritrade International Pte Ltd [2016] 4 SLR 768 at [156]

[7] Sir Michael J Mustill & Stewart C Boyd, The Law and Practice of Commercial Arbitration in England (Butterworths, 2nd Ed, 1989) at p 312),

[8] Soh Beng Tee at [41]

[9] [2018] 2 SLR 1311(“Glaziers”) at [56] to [62]

[10] (at [56])

[11] (at [58])

[12] (at [60])

[13] (at [60])

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