Award set aside as Tribunal fails to consider parties’ arguments

In BZV v BZW and another [2021] SGHC 60, the Singapore High Court set aside an arbitral award on the basis that there was a breach of natural justice (i.e. the fair hearing rule) as the Tribunal had failed entirely to appreciate the correct questions it had to pose to itself.

The dispute arose from a shipbuilding contract between the parties. At the arbitration, the claimant sought to claim from the defendant, for: (i) liquidated damages for delay in delivery of the vessel; and (ii) damages due to the incorrect installation of a generator. Both claims were dismissed by the Tribunal. Thereafter, the claimant applied to the High Court to set the award aside.

The High Court’s Decision
The Court allowed the plaintiff’s application on the basis that the Tribunal breached the rules of natural justice, specifically the fair hearing rule under Section 24 of International Arbitration Act. The Court held that there was no nexus between the arguments presented by the parties and the reasoning adopted by the Tribunal. Particularly, in relation to the plaintiff’s delay claim, the Tribunal had not applied its mind to whether the plaintiff’s preventive act had caused the defendants to be unable to deliver the vessel on time. Whereas in relation to the plaintiff’s incorrect generators claim, the court found that the Tribunal did not rely on a chain of reasoning with a connection to the defendants’ defences in arriving at its decision to dismiss this claim.

It was opined that if the Tribunal had applied its mind to parties’ cases and the essential issues arising from parties’ arguments on those cases, it could certainly have found in favour of the plaintiff on both the claims. As such, the Tribunal’s breach of natural justice caused real prejudice to the plaintiff. Further, the Court noted that had the Tribunal declined to amend the award, as egregious an error of fact that would have left, the plaintiff’s setting aside application would have failed.

The decision illustrates that while an award cannot be set aside based on mere errors of fact or law, it can be set aside if such award is fundamentally flawed as it is wholly inconsistent with the submissions and issues put before it.