Court of Appeal affirms arbitral award made in breach of natural justice

In the case of PhoenixFin Pte Ltd. and others v Convexity Ltd. [2022] SGCA 17, the Court of Appeal found that the arbitral tribunal’s ruling was in breach of natural justice, outside the scope of submission and contrary to the arbitral procedure. Facts of the case have been previously discussed here 

In this case, the Court held that pleadings in arbitration are important especially when an issue is of mixed fact and law and can be the basis for a finding of breach of natural justice. Remarkably, the court rejected the appellants’ argument that the breach was remedied by subsequent attempts by the tribunal, by requesting further written submissions and directing that there be a limited cross-examination, to afford the respondent an opportunity to be heard on the penalty issue.

The Court also opined that the arbitral tribunal had wrongly reversed the burden of proof. The burden was on the appellants to show why the disputed clauses were penalty clauses as a matter of fact in light of the applicable legal principles. Further, the tribunal’s failure to require the appellants to establish the factual basis of their case led to the breach of agreed procedures. Due to this fact, the respondent was denied an opportunity to adequately respond to the penalty issue.

The Court thus agreed with the High Court’s ruling that there was a breach of natural justice and the penalty issue was outside the scope of submission.