Sanctity Of An Arbitration Award: When Does A Breach Of Natural Justice Tip The Balance?

Overview

The plaintiff applied to set aside three arbitral awards. The first was awarded on the merits which was challenged on the basis that the arbitrator had totally failed to consider or understand the plaintiff's evidence and submissions and therefore, there was a breach of natural justice which prejudiced the plaintiff. The second and third arbitral awards were challenged on the basis that both had been made functus officio - the arbitrator had dealt with the issue of costs in the first arbitral award, but realised he had mistakenly done so and therefore withdrew it in the second arbitral award, and later issued a third arbitral award to deal with costs.

The Singapore High Court refused the plaintiff's application to set aside the first arbitral award but allowed the second and third arbitral awards to be set aside because they were issued functus officio. In doing so, the Singapore High Court once again emphasised that a generous approach must be taken towards reading arbitration awards to avoid undermining the purpose of arbitration as an alternative dispute resolution mechanism.

Relevant facts

The defendant was a developer undertaking a substantial construction project. The plaintiff was the contractor engaged by the defendant to construct the foundations for the same project. Under the contract, the plaintiff was obliged to complete the works within six months, i.e. on or before 23 June 2008, failing which it would be liable to pay the defendant liquidated damages at a rate of S$135,000 per day.

On 27 December 2007, the plaintiff submitted a baseline programme to architects and engineers, and was required to wait for their approval before commencing construction. Although approval was given by email on 6 February 2008, the final stamp of approval was only given on 18 February 2008. The plaintiffs argued they were entitled to a 12-day extension based on this (the First Extension). On 22 December 2008, the architects granted the plaintiff a 75-day extension of time in total. On 1 April 2009, the plaintiff issued a formal notice of dispute to the architects, taking the position that it was entitled to a further 14-day extension based on the additional rock excavations required (the Second Extension).

The defendant later imposed liquidated damages on the plaintiff in the sum of approximately S$3.5 million in view of the late completion of works after taking into account the extension of time granted to the plaintiff. The parties subsequently resorted to arbitration, where the plaintiff sought relief, among others, that it was entitled to an extension of time of a further 26 days (comprising the First Extension and the Second Extension).

The arbitrator dismissed the plaintiff's claim of the First and Second Extensions (the...