Prometheus Marine Pte Ltd v. King, Ann Rita and another  SGCA 61
In considering an appeal to set aside an arbitration award, the Singapore Court of Appeal has reinforced the judiciary’s pro-arbitration stance and upheld a high threshold for setting aside. Separately, the Court of Appeal also warned that any allegation of bias, fraud and corruption should be credibly substantiated.
The background facts and issues
The Respondent purchased a yacht from the Appellant pursuant to a sale and purchase agreement (the “Contract”), which was damaged before delivery. The Respondent commenced arbitration proceedings and the arbitrator eventually awarded damages to the Respondent for: (i) the cost of the necessary repairs to render the yacht compliant with Contract specifications; and (ii) the diminution in value of the yacht (in comparison to a brand new non-defective yacht).
The Appellant sought to have the award set aside and filed two High Court summonses under section 48(1) of the Arbitration Act (“AA”) and section 24 of the International Arbitration Act (“IAA”), arguing that the award was “flawed and by reason of the arbitrator’s failure to determine whether the AA or the IAA applied” (and thus impossible to determine under which statute the setting aside application should be brought). Section 24 of the IAA/Section 48(1) of the AA provides that the High Court can set aside an award if the making of the award was induced or affected by fraud or corruption, or a breach of natural justice occurred in connection with the making of the award. Article 34 of the UNICTRAL Model Law on International Commercial Arbitration, as incorporated into Singapore law, provides that the arbitral award can be set aside if the award conflicts with the public policy of the State.
At first instance, the High Court dismissed the summonses in their entirety. Among other things, the Court gave the following reasons:
(i) The Court will not lightly set aside an award for breach of the rules of natural justice. A challenge on this ground had to meet a high threshold, which the Appellant had failed to meet. The arbitrator is not obliged to address every argument submitted, and the tribunal had indeed fully considered the submissions before issuing its award and, in fact, found in favour of the Appellant on some issues.
(ii) The seat of arbitration invariably determines the lex arbitri: the seat is in Singapore. In any event, whether the AA or the IAA was applicable did not have a material bearing on the setting aside application because the grounds relied upon in both IAA / AA are very similar.
(iii) The Appellant’s allegations of bias on the basis of the arbitrator’s mere rejection of the Appellant’s submissions were completely unsubstantiated.
The grounds of appeal
The Appellant appealed against the above decision on the following bases:
(i) The Judge was apparently biased against the Appellant;
(ii) The Judge erred in finding that the arbitrator’s failure to determine the lex arbitri was not contrary to public policy;
(iii) The Judge erred in finding that there was no evidence that the making of the award was induced by fraud on the Respondent’s part or non-pecuniary corruption on the arbitrator’s part;
(iv) The Judge erred in finding that the arbitrator had neither acted in excess of jurisdiction nor in breach of natural justice when he held that the Appellant was liable for breaches of the Contract; and
(v) The Judge erred in finding that the Appellant was the seller under the Contract (and was consequently a party to the arbitration agreement incorporated into the Contract) and, therefore, also erred in finding that the arbitrator had the requisite jurisdiction to hear the dispute.
The Court of Appeal decision
The Court of Appeal dismissed both appeals for the following reasons:
(i) The Appellant argued that arbitration was delocalised. Given that the award did not specify whether it was made under the AA or the IAA, it should not be enforced as this was contrary to public policy. The Court of Appeal held that there was never an issue of the arbitration being a delocalised nullity, as the Appellant had accepted that the arbitration was seated in Singapore – the fact that relief was sought under both the AA and IAA meant that the Appellant accepted that at least one of them governed the arbitration. In addition, the failure to determine the lex arbitri was not a valid ground for setting aside an award.
(ii) The Court of Appeal rejected the Appellant’s arguments that the arbitrator’s findings were irrational, in excess of his jurisdiction and breached natural justice. Any errors of law or fact were not a ground for setting aside, as it is a critical foundation principle in arbitration that parties choose their adjudicators and must also accept the consequences of their choices (policy of minimal curial intervention).
(iii) The Judge’s strong language in dealing with the Appellant’s arguments and having pre-conceived notions about the case were not signs of apparent bias. Rather: (i) the Judge’s strong words were justified as they aptly reflected the state of the Appellant’s submissions; and (ii) the Judge was supposed to read the parties’ submissions before the hearing and form a provisional view about the case before the hearing.
Notably, the Court of Appeal also cautioned counsel that it is irresponsible and an abuse of privilege of an advocate and solicitor to put forward serious allegations such as fraud, corruption or apparent bias without credible evidence.
Once again, the Singapore judiciary has demonstrated the principle of minimal curial intervention in arbitration proceedings by setting a high threshold for setting aside an arbitration award. Separately, this case also serves as a timely reminder to counsel that their duties are owed to the Court, especially to substantiate serious allegations with credible evidence.