WITNESS GATING IN ARBITRATION
In CBS v CBP [2021] SGCA 4 (“CBS v CBP”), the Singapore Court of Appeal upheld the Singapore High Court’s decision to set aside an arbitration award for breach of natural justice.
Background. The appellant bank had obtained an arbitration award against the respondent buyer in relation to a dispute over payment for a shipment of coal. The arbitration was under the Rules of the Singapore Chamber of Maritime Arbitration (3rd Edition) (“SCMA Rules”).
Rule 28.1 SCMA Rules provides: “28.1. Unless the parties have agreed on a documents-only arbitration or that no hearing should be held, the Tribunal shall hold a hearing for the presentation of evidence by witnesses, including expert witnesses, or for oral submissions.”
In the course of the arbitration:
The buyer failed to file a defence on time, and belatedly informed the arbitrator that it intended to contest the claim under protest as to jurisdiction. The arbitrator granted time for the buyer to file its defence and counterclaim together with its list of witnesses, and also directed that he would ask parties to agree on the necessity of an oral hearing once all submissions have been completed. ([14] – [15] CBS v CBP)
The buyer eventually filed its defence and counterclaim late, with a list of 7 witnesses, 6 of whom the buyer alleged were present at a meeting in December 2015 where there was allegedly an agreement to reduce the price. ([16] CBS v CBP)
When the bank filed its reply and defence to counterclaim, the bank informed the arbitrator that it did not intend to call any witnesses or submit any witness statements. The bank submitted that the arbitration proceed on a documents-only basis, or a hearing held for oral submissions only without taking oral witness evidence. ([18] CBS v CBP)
The arbitrator asked the buyer to provide its position and reasons for calling its witnesses and the need for oral testimony. The buyer simply stated an oral hearing was required and necessary, referring to its SCMA Questionnaire. However, the arbitrator found the SCMA Questionnaire to be lacking in detail. ([19] CBS v CBP)
The arbitrator asked the buyer to describe what it expected to develop with the introduction of its proposed witnesses. The buyer simply re-asserted the necessity of examining the witnesses. ([20] CBS v CBP)
The arbitrator then directed that the buyer provide detailed witnesses statements, and the parties submit a brief on what constitutes breach of natural justice under Singapore law, before the arbitrator decided whether the arbitration would be documents-only or if an oral hearing was necessary. ([21] CBS v CBP)
The buyer replied that it was a breach of the rules of natural justice for the arbitrator to require it to submit witness statements before he decided whether to hold an oral hearing. ([22] CBS v CBP).
The arbitrator referred to r 33.1(c) of the SCMA Rules for its authority to conduct enquiries. The buyer stated it was entitled to call witnesses at a hearing under r 28.1 of the SCMA Rules. ([23] – [24] CBS v CBP)
The arbitrator reiterated his request for the buyer’s witness statements and the parties’ briefs on the rules of natural justice in Singapore. The arbitrator stated that if the buyer still did not submit its witness statements, it would be taken as having waived any right to submit witnesses in the event of an oral hearing. ([25] CBS v CBP)
The buyer reiterated its position that it was entitled to call its witnesses to give oral evidence notwithstanding the lack of written statements for each witness . ([26] CBS v CBP)
The arbitrator then directed that a hearing will be held for oral submissions only, and no witnesses would be presented because the buyer failed to provide witness statements or any evidence of the substantive value of presenting witnesses. ([26] CBS v CBP)
As stated earlier, the bank obtained an award against the buyer. On the buyer’s application, the Singapore High Court set aside the award for breach of natural justice.
When is hearing not needed? The Court of Appeal agreed with the Singapore High Court on the interpretation of r 28.1 SCMA Rules on the situations where a hearing can be dispensed with. Importantly, the tribunal has no power to choose what type of hearing to hold in the absence of an agreement. The Court of Appeal explained at [56] – [57]:
“56. In our view, r 28.1 provides for two situations where a hearing need not be held. First, where the parties have agreed to a documents-only arbitration, ie, that the dispute will be determined based on documentary evidence only, without witness testimony, whether oral or written. This situation is purely concerned with the type of evidence that may be led. Secondly, where the parties agree that there no hearing shall be held, ie, no hearing will be held even for oral submissions with the matter being decided based purely on documents and written submissions. The latter part of r 28.1 – holding a hearing “for the presentation of evidence by witnesses, including expert witnesses, or for oral submissions” [emphasis added] – is thus made clear. Unless the parties have agreed on a documents-only arbitration, meaning that unless they have agreed to dispense with evidence from witnesses in any form (which was plainly not the case here), the tribunal shall hold a hearing for the presentation of evidence by witnesses, including expert witnesses. Unless the parties have agreed that no hearing shall be held, ie, unless they have agreed to dispense even with oral submissions, then a hearing shall be held for oral submissions.
57. … r 28.1 has to be read as a whole and it does not give the tribunal the power to choose what type of hearing to hold in the absence of an agreement. This coheres with the basic fact that the parties are allowed (within certain limits, see [49] – [51] above and from [58] below on the tribunal’s case management powers) to decide what evidence they want to lead. The Buyer here was unequivocal in requesting a hearing for the presentation of oral evidence as to what transpired at the December 2015 meeting and the Buyer was acting within its legal rights to do so.”
(emphasis in original)
The interplay with broad case management powers. The Court of Appeal also explained that a tribunal’s broad powers in managing the case and regulating the evidentiary process is subject to the rules of natural justice, at [61] – [68]:
“61 We have little difficulty accepting that tribunals have the power to limit the oral examination of witnesses as part of their general case management powers. This can occur when the evidence from multiple witnesses are repetitive or of little or no relevance to the issues. This much is also envisioned by Art 19(2) of the Model Law. However, r 25.1 cannot be an unfettered power that overrides the rules of natural justice. …
…
68 It is apparent that the facts of Triulzi are quite different from the present case. As noted above, the Buyer here was unequivocal in its insistence on presenting oral witness evidence and the arbitrator was not unaware of this. Whilst due latitude will be given to an arbitral tribunal to control the proceedings before it, in the final analysis, the tribunal must weigh the laudable desire for efficient and effectual arbitral proceedings against the necessity of affording parties their right to be heard. The fundamental nature of the rules of natural justice means that they must not be sacrificed in the name of efficacy and due weight must be afforded to those rules. It is self-evident that this balance is not amenable to prescriptive rules and each case will turn on its precise facts and circumstances.”
The Court of Appeal also endorsed the High Court’s guidance on how the arbitrator could have dealt with the conduct of a reluctant respondent, at [78]:
“78 None of the foregoing should be taken as suggesting that the court is countenancing any dilatory tactics on the part of the Buyer. It is not lost on us that the Buyer’s conduct of the arbitration was less than cooperative, to say the least. However, the conduct of such reluctant respondents, when they are acting within their rights, does not furnish any legal defence against a setting-aside application. As the Judge was at pains to explain, perhaps a better route which the arbitrator should have taken in the premises, was to fix a hearing for the presentation of the Buyer’s witness evidence and at the same time, ask for the witness statements from the Buyer (even then, this would probably not have included the evidence from the Sellers and the person from the trade credit insurance entity). At the hearing, the arbitrator can, as he sees fit, manage the evidentiary process by for instance, limiting the amount of time for individual witnesses, as he is entitled to under the case management powers in r 25.1 of the SCMA Rules (Judgment at [92]). Where the arbitrator fell into error was by suggesting that whether a hearing for witness testimony would be convened would be determined based on the Buyer’s witness statements, which had to be submitted beforehand. As we have noted above, this was not an option open to the Arbitrator to pursue. For these reasons, we are unable to accept the Bank’s submission before us that the arbitrator’s conduct fell within the “range or what a reasonable and fair-minded tribunal in those circumstances might have done”: China Machine at [98].”
Request to remit award to arbitrator must be made before the High Court. Another important point arising from this case is that the Court of Appeal held that it cannot remit the award back to the tribunal if no such request was made before the High Court in the setting-aside application, at [103]:
“103 In our view, the phrase “when asked to set aside an award”, which immediately follows the opening reference to “the court” is critical. Two interrelated observations can be made here. First, it is settled that under the Model Law, the only grounds for setting aside an award are those stipulated in Art 34(2). The opening words of Art 34(2) of the Model Law stipulate that an award may be set aside “by the court specified in Article 6” on various enumerated grounds. As clearly provided in s 8(1) of the IAA, this specific court in Art 34(2) is the High Court. As a matter of construction, thereafter, whenever the phrase “the court” is used in the following paragraphs of Article 34, it must similarly mean the High Court. Secondly, in the present case, it cannot be said that the Court of Appeal is being “asked to set aside an award”. We have passed that point. The Buyer succeeded in setting aside the Final Award before the High Court and now the Bank is seeking to reverse the High Court’s decision. Put differently, there is no longer any award to set aside and since we have found no basis for reversing the Judge’s decision below, the issue of remittal does not arise.”
Significance. This case reminds us that the rules of natural justice are fundamental. When the tribunal falls into error in this regard, the award cannot stand.
Tribunals should therefore be mindful that, broad as a tribunal’s case management powers may be, the Tribunal must nonetheless ensure that the rules of natural justice are complied with.
It is also an important reminder that the Tribunal’s powers may be circumscribed by the relevant institutional arbitration rules: therefore, the Tribunal must bear in mind the relevant institutional rules when conducting the arbitration.
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