Arbitration award set aside for breach of natural justice

In the case of CEF and another v CEH [2022] SGCA 54, the Singapore Court of Appeal ruled that there was a breach of natural justice in one of the Tribunal’s orders (the “Damages Order”) as the Tribunal’s chain of reasoning in respect of the Damages Order was not one which the parties had received reasonable notice that the Tribunal could adopt.

Facts
Previously, the appellants applied to the High Court to set aside the award. The High Court judge therein declined to set aside the Transfer Order, the Repayment Order or the Damages Order for the reasons discussed here 

COA’s Decision
Now, the Court of Appeal (“the Court”) held that the Tribunal’s Damages Oder did not have a sufficient nexus to the parties’ arguments. Its reliance on a proposition in a case cited by the respondent had no connection to the issue before the Tribunal of what the appropriate award for the respondent’s alleged reliance loss should be.

The Tribunal had found the respondent’s evidence in support of its five heads of reliance loss to be deficient. Despite this, it inexplicably proceeded to adopt a “flexible approach” and to award the respondent 25% of each head of reliance loss, without first telling the parties it would be doing so or giving them the opportunity to address the Tribunal on the same.

The Court opined that a reasonable litigant in the appellants’ position could not have foreseen the possibility of reasoning of the type revealed in the award – i.e., that the Tribunal, having noted all the deficiencies in the respondent’s evidence, would then go on to adopt a figure of 25% of the amount claimed as being the loss incurred. Instead, the parties would have expected the Tribunal to dismiss the claim for reliance loss in its entirety.

In the Court’s view, this breach of natural justice prejudiced the appellants’ rights, and compliance with the rules of natural justice could reasonably have made a difference to the outcome of the Arbitration. Therefore, the appeal in relation to the Damages Order was allowed on the basis that there had been a breach of the fair hearing rule.