APPEALING AGAINST ARBITRAL AWARDS: QUESTIONS OF LAW ONLY
In CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd [2020] SGHC 81 ("CKR v Asplenium"), the High Court reiterated that the standard for appealing against an arbitral award based on questions of law under s. 49 of the Arbitration Act remains a high one. In particular, the court found that CKR had raised questions concerning the incorrect application of the law, and held that such questions were not "questions of law" under s. 49 of the Arbitration Act.
Background. CKR Contract Services Pte Ltd ("CKR") and Asplenium Land Pte Ltd ("Asplenium") entered into a contract for CKR to carry out building and construction work on the Seletar Park Residence project. The contract incorporated the Singapore Institute of Architects’ Articles and Conditions of Building Contract (Lump Sum Contract) 9th Edition (Reprint August 2011), which contained an arbitration agreement in Clause 37 (at [3] CKR v Asplenium).
Subsequently, Asplenium terminated CKR's employment under the contract (at [4] CKR v Asplenium), and made two calls on the performance bond amounting to its full sum of $8,806,383.80 (at [5] CKR v Asplenium).
CKR commenced arbitration proceedings against Asplenium, which were bifurcated into two parts: the liability phase and the quantum phase (at [7] CKR v Asplenium). The arbitral tribunal made four partial awards, of which only Partial Award 4 is relevant to this case.
Partial Award 4 concerned costs to be awarded to the parties in light of the fact that CKR had not responded (let alone accepted) a Calderbank offer made by Asplenium to settle “any and all claims, counterclaims … and/or costs” for $9.5 million (at [9],[11] and [16] CKR v Asplenium), and CKR subsequently obtained an award for a smaller sum of approximately $6.4 million (at [8]). The crux of a Calderbank offer is that “where a party had made a written offer to settle proceedings for a particular sum but refuses the offer, contests proceedings, and obtains a judgment for less than that particular sum, an adverse costs offer may be made against him.” (at [10] CKR v Asplenium).
In this case, since the last day for accepting the Calderbank offer was 13 August 2018, the arbitral tribunal awarded CKR costs of $950,758.27 in relation to the quantum stage incurred up to that date, and awarded Asplenium $826,540.88 for costs in relation to the quantum stage incurred after that date. The net costs of $124,217.39 were to be paid to CKR (at [14] CKR v Asplenium).
Dissatisfied with Partial Award 4, CKR appealed to the High Court on five questions arising from Partial Award 4 ([21] CKR v Asplenium). The Court divided the questions into three categories ([23]). This article focuses on the Category I issue, as this where the Court dealt with the distinction between errors of law and errors of application of the law.
Category I. Category I dealt with Question 1 raised by CKR, regarding whether a tribunal has the discretion to order costs should a party who rejects a Calderbank offer fails to achieve a better outcome in arbitration.
In relation to Question 1, CKR argued that the tribunal “appears to have proceeded on the incorrect legal basis that it had no choice but to order CKR to bear all costs” (at [25] CKR v Asplenium). However, this argument was rejected by the court for several reasons.
1. Firstly, pointing to [36] of Partial Award 4, the court found that the tribunal was clear that it did in fact have a discretion whether to award costs ([28] CKR v Asplenium). This was because the relevant paragraph stated that "… a tribunal may, in an appropriate situation, award to Party A costs on an indemnity basis or a higher proportion of costs".
2. To the court, this meant that the typical outcome where a party rejected a Calderbank offer but failed to achieve a better result was that costs consequences would apply (at [30] CKR v Asplenium). It would be "implausible" to suggest that the tribunal believed it had the discretion only to award costs on an indemnity basis or a higher proportion of costs (at [31] – [32] CKR v Asplenium).
3. Secondly, the court found that the law regarding Calderbank offers and costs was relatively settled, as noted by the tribunal itself (at [33] CKR v Asplenium).
4. Thirdly, although Asplenium had made two misquoted excerpts in its written submissions to the tribunal ([25] CKR v Asplenium), these misquotations had not been presented to suggest that the tribunal had no discretion in awarding adverse costs against CKR. To the contrary, they were presented to suggest that "the tribunal has the power to consider a ‘without prejudice’ offer to settle and order the receiving party (who had rejected that offer) to ‘bear all costs incurred’" (at [34] CKR v Asplenium).
No question of law under s. 49(1) Arbitration Act. More importantly, the court found that no "question of law" under s. 49(1) of the Arbitration Act had arisen.
This was because there were no novel points of law or particular nuances of argument that arose, and the relevant law had not been disputed between the parties. Thus, there was (at most) a question regarding the application of the law (at [36] – [38] CKR v Asplenium).
As stated by the Court at [36] CKR v Asplenium, “… the parties had [not] disputed the relevant law in relation to the tribunal’s discretion to make adverse costs orders following a Calderbank offer. What was in dispute was whether and how the tribunal should exercise the said discretion. Accordingly, no question of law arises even taking CKR’s case at its highest on this Question 1, and it is only an error in the application of the law which is disclosed.”
Then Court then stated at [37] CKR v Asplenium that “The distinction between an error in the application of the law (which does not confer a right of appeal under the AA) and a question of law (which does confer a right of appeal under the AA) reflects longstanding authority…”
Significance. The Court in CKR v Asplenium dealt with a variety of issues. We have highlighted this distinction of error of law versus error of application of law because when electing between arbitration and litigation, parties should bear in mind that in general, arbitrations have more limited scope in terms of an appeal than would be available if the action was a litigation.
In its decision, the court in CKR v Asplenium reiterated the high standard for appeals against points of law arising from arbitral award under the Arbitration Act. As the court noted, this high standard is based on the courts' reluctance to subvert the parties' agreement to resolve disputes between them by arbitration (at [109] CKR v Asplenium).
Thus, the court took a dim view of CKR's attempts to frame questions of fact as questions of "jurisdiction" (i.e. Category 2 questions), describing such attempts as a "backdoor challenge" (at [76] CKR v Asplenium) and seeking to contrive questions of law from questions of fact (at [84] CKR v Asplenium). It further noted that "[t]he Court will be vigilant in guarding against attempts to frame a challenge to the tribunal’s findings of fact as a question of law" (at [93] CKR v Asplenium).
This decision also shows the importance of properly considering Calderbank offers. As the court noted (at [111] CKR v Asplenium), the approximately $9.5m Calderbank offer made by Asplenium was generous especially in light of the approximately $6.4m award that was eventually made in favour of CKR. While the Calderbank offer was not determinative of the decision in this case, the court noted that this appeal could have been avoided altogether if CKR had properly considered the Calderbank offer and its precise ambit.
Tags: Arbitration Act; Appeals against arbitral award; Calderbank offers; Errors of law; Errors of application of law
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