In the recent decision of Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd [2010] SGHC 80, Andrew Ang J set aside an arbitral award on the basis that there had been a breach of natural justice by the Arbitrator pursuant to Section 48(1)(a)(vii) of the Arbitration Act (Cap 10, 2002 Rev Ed) (the “Act”).

For the purpose of this article, we shall limit our discussion of this case to the counterclaim raised by Front Row Investment Holdings (Singapore) Pte Ltd (“Front Row”) as Front Row had only applied for an order to set aside the Arbitrator’s award in respect of its counterclaim.

The facts of the case are briefly set out as follows.

Front Row and Daimler South East Asia Pte Ltd (“Daimler”) agreed to jointly organise and run a series of races across South East Asia (“Asian Cup Series”) using 35 Mercedes-AMG SLK 55 cars (the “Agreement”). Based on the Agreement, Daimler’s obligations were, inter alia, to organise, brand and promote the Asian Cup Series and organise up to 20 races per year for two years.

Front Row’s obligations under the Agreement were to purchase the Mercedes-AMG SLK 55 cars, provide the working capital required to fund the running of the Asian Cup Series and employ one Mr Thomas Buehler, who had been seconded by Daimler to front Row as its general manager.

Following the failure of the Asian Cup Series, Daimler commenced arbitration proceedings against Front Row for the sums invoiced as Mr Buehler’s salary under the Agreement.

Front Row in turn brought a counterclaim, based on misrepresentation, against Daimler contending that Daimler had represented that the Mercedes-AMG SLK 55 cars were appropriate for nonprofessional racing and that Daimler would support Front Row in organising, branding and promoting the Asian Cup Series and that in particular, it would organise 20 races would be organised as part of the Asian Cup Series.

Despite Daimler’s representations, Front Row argued that Daimler had only organised three races and the Mercedes- AMG SLK 55 cars were not appropriate for racing or competitive events.

Upon the close of proceedings, the Arbitrator hearing the matter found that Front Row had ceased to rely on its pleaded representations save for the representation that the Mercedes-AMG SLK 55 cars could be used for racing. The Arbitrator went on to find that Daimler had not induced Front Row to enter into the Agreement based on any false representation as the Mercedes- AMG SLK 55 cars could be used for some form of racing. He proceeded to dismiss Front Row’s counterclaim.

Front Row then founded their application to the High Court to set aside the arbitral award with respect to the counterclaim, on the basis that the Arbitrator had breached the rule of natural justice expressed in the Latin maxim audi alteram partem, i.e., the principle that parties must be given adequate notice and opportunity to be heard.

Front Row argued that the Arbitrator had failed to consider its submissions regarding the issue of Daimler’s obligation to organise, brand and promoting the Asian Cup Series because he mistakenly believed that Front Row had ceased to rely on this issue.

One of the main issues that the court had to determine was whether the Arbitrator’s failure to consider the pleaded representations of Front Row amounted to a breach of natural justice.

The Court, found that the Arbitrator’s failure to regard the issue had denied Front Row the opportunity to address its position to the judicial mind and held the Arbitrator had therefore failed to accord Front Row natural justice.

This is the first reported decision in the Singapore Courts in which a party has successfully applied to set aside an arbitral award on the ground of a breach of the rules of natural justice.

It should also be noted that the principles enunciated in this decision are not merely confined to Section 48(1)(a)(vii) of the Act but are equally applicable to cases involving the International Arbitration Act (Cap 143A, 2002 Rev Ed) (the “IAA”) since Section 48(1)(a)(vii) of the Act is in pari materia with Section 24(b) of the IAA.