Zhida Chen Shi Yin Kim January 11 2022 When can a Singapore court set aside an arbitral award for endorsing an unpleaded defence? Helmsman LLC | Litigation - Singapore Zhida Chen, Shi Yin Kim Litigation FactsDecisionOrdersCommentIn Singapore, the courts adopt a limited curial interventionist attitude towards arbitrations, and they will interfere in an arbitral award or order only in exceptional circumstances. However, exceptional circumstances do occasionally find their way before the courts; CAJ v CAI(1) was one such example. In that case, the Court of Appeal acknowledged at the outset that "the court will exercise its power with restraint" in relation to arbitration proceedings; nevertheless, it found that curial intervention into an arbitral award was warranted on the facts of the case.FactsThe appellants were contractors who were engaged to construct a polycrystalline silicon plant for the respondent's subsidiary. During the plant's construction, excessive vibrations were found in the plant's compressors. Rectification works were then conducted in accordance with the instructions of the respondent's subsidiary (the "admitted instructions"). The excessive vibrations were rectified only after mechanical completion.In International Chamber of Commerce arbitration proceedings commenced by the respondent and its subsidiary against the appellants, the respondent sought liquidated damages for the delay. The appellant pleaded, among other things, that the delay arose out of the admitted instructions and that the respondent waived its right to and/or was estopped from raising such a claim.However, during closing submissions, the appellants relied, for the first time, on a contractual clause that permitted the appellants to a time extension to conduct the rectification works (the "EOT defence"). The EOT defence was not raised in the pleadings.The tribunal ultimately found that the appellants had failed to achieve mechanical completion on time and rejected the appellants' estoppel defence. However, the tribunal accepted the EOT defence and held that the respondent was entitled to liquidated damages for only 74 out of the 99 days, in light of the EOT defence. The respondent commenced court proceedings to set aside the arbitral award. The respondent cited two reasons in support of its application:By ruling on and allowing the EOT defence, the tribunal had exceeded the scope of the parties' submissions to arbitration (the "jurisdiction argument").The tribunal had breached natural justice in making the award (the "natural justice argument").The High Court agreed with the respondent. The appellant appealed.DecisionThe Court of Appeal upheld the High Court's decision that, in allowing the EOT defence, the tribunal had exceeded the scope of the parties' submissions to arbitration and/or breached natural justice.Contractual right to time extension – prompt notice requiredAs a preliminary point, the Court of Appeal noted that the appellants did not invoke the EOT defence until the closing portion of the arbitration. The EOT defence was, in the words of the Court of Appeal, a "creature of a contractual provision". Whether the appellants could invoke the EOT defence depended on the satisfaction of specific express conditions before the appellants were entitled to a time extension for the construction works, including the contractual requirement to provide prompt notice "as soon as reasonably practicable". The notice requirement is so important that it may even be considered as a condition precedent to the time extension. Hence, a claim for such an extension must have been made contemporaneously, not at the arbitration, because such notification enables the employer, architect or other certifier to verify the claim for the extension, monitor the event and its effect on the works' progress. However, the appellants provided no contemporaneous notice.Jurisdiction argumentThe Court of Appeal took the view that the tribunal had acted in excess of jurisdiction, which was circumscribed by the parties' pleadings. There was no room to argue that the EOT defence, despite not being expressly raised in the pleadings, was somehow within the arbitration's scope. The Court made three further observations:It was impermissible for the appellants to suggest adopting a broad reading of the pleadings, list of issues or terms of reference in order to include a defence that was not pleaded. In particular, the EOT defence was a specific and fact-sensitive contractual defence. It would "make nonsense" of the role of pleadings and other related documents if they were broadly construed to encompass defences that did not arise from or were not a natural consequence of the existing pleadings.The appellant's argument that the EOT defence fell within the scope of submission to arbitration simply because it had a bearing on the respondent's liquidated damages claim was untenable. Many defences would have affected the extent of a liquidated damages claim. Such an argument would enable many unpleaded defences to fall within the scope of submission to arbitration, which would undermine the purpose of pleadings.The Court endorsed the principles cited in PT Prima International Development v Kempinski Hotels SA and other appeals(2) that:the tribunal's jurisdiction in the proceedings is demarcated by the disputes which the parties choose to submit for arbitration;the role of pleadings in arbitration proceedings is to provide a convenient way for parties to define the tribunal's jurisdiction by setting out the precise nature and scope of the disputes to be adjudicated by the tribunal; andeven where new issues are raised, the defence should be amended and the counterparty should file an amended reply, if necessary, to ensure fairness to the party affected by the new issue.Breach of natural justiceThe Court of Appeal affirmed the lower court's finding that the respondent did not have a fair and reasonable opportunity to respond to the EOT defence. Had the respondent been given the opportunity to tender further evidence, test the appellants' evidence and make further legal submissions, this reasonably could have made a difference to the tribunal's determination on the EOT defence.The Court of Appeal also affirmed the lower court's finding that the tribunal relied on its self-professed experience in reaching its decision on the EOT defence without substantiating how its self-professed experience would affect its finding on said defence. In reaching this decision, the Court looked at the tribunal's reasoning for allowing the EOT defence and it found that the reasons "made no sense at all". This highlighted the importance of pleadings, evidence and submissions supplementing the tribunal's "experience", and the prejudice that the respondent suffered from failing to address the tribunal on its "experience".HedgingThe appellants argued that the respondent's actions amounted to "hedging". The appellant claimed that the respondent had made substantive submissions in the arbitration on the merits of the EOT defence. Since the tribunal had considered the respondent's arguments and allowed the EOT defence, the respondent was now precluded from seeking to set aside the award.The Court disagreed. The EOT defence was raised last minute and the defendant had seriously objected to the raising of the new defence. It could not be faulted for responding to the EOT defence to the best of its ability. It would be manifestly unfair to treat the respondent's reaction as equivalent to a fair opportunity to address the EOT defence or an attempt to hedge its position.OrdersThe Court of Appeal found that the matter was not an appropriate case for remission. Unlike other cases where awards have been remitted, the EOT defence was outside the scope of the submission to arbitration. It was also manifestly unfair to direct the appellants to amend their defence to include the EOT defence at such a late stage. The Court held that the EOT defence should not be allowed and it ordered the appellants to pay liquidated damages for the full 99 days of delay.Although not addressed in the Court of Appeal judgment, in the lower-court judgment of CAJ v CAI,(3) the High Court held that is has the power to make consequential or ancillary orders to give effect to setting aside the tribunal's decision to grant a 25-day time extension. This power is drawn from the court's express jurisdiction under article 34(2)(a)(iii) of the Model Law to partially or wholly set aside an award. This finding was not challenged before the Court of Appeal.CommentThe apex court's decision in CAJ v CAI(4) is a timely reminder of the importance of properly pleading a case to ensure that the disputed issues are properly ventilated between the parties and considered by the tribunal. Arbitrating parties would do well to remember that the failure to plead their case could lead to serious consequences for the parties – including a reversal of an otherwise favourable award.For further information on this topic please contact Zhida Chen or Shi Yin Kim at Helmsman LLC by telephone (+65 6816 6660) or email ([email protected] or [email protected]). The Helmsman LLC website can be accessed at www.helmsmanlaw.com.Endnotes(1)  SGCA 102.(2)  4 SLR 98.(3)  SGHC 21.(4) Supra at 1.