WAN SERN METAL INDUSTRIES PTE LTD v HUA TIAN ENGINEERING PTE. LTD.

Facts

Wan Sern Metal Industries Pte Ltd, a sub-contractor on the Defu Industrial City project, engaged Hua Tian Engineering Pte Ltd to supply labour for installation works. After alleging defects, Wan Sern terminated the sub-contract on 15 July 2022. Hua Tian had already obtained an adjudication determination under the Building and Construction Industry Security of Payment Act 2004 for $616,670.80, and Wan Sern then began SIAC Arbitration No 166 of 2022, which proceeded on an expedited, documents-only basis before a sole arbitrator.

Wan Sern claimed back charges; Hua Tian counterclaimed, among other things, the value of the work it had completed (the Balance Work Counterclaim). In its written submissions of 22 May 2023, Hua Tian for the first time claimed the value of both completed and uncompleted work as expectation damages. Wan Sern replied that a party could not claim for work it had not done and that adding lost profits would mean double recovery. In the award of 31 July 2023, the arbitrator found the termination wrongful, dismissed Wan Sern's claims and allowed the Balance Work Counterclaim at $776,694.51, stating that Wan Sern had not contested its measure or quantum.

A judicial commissioner dismissed Wan Sern's application in HC/OA 1079/2023 to set aside the award. Wan Sern appealed in Civil Appeal No 10 of 2024.

Issues

1. Whether the arbitrator breached natural justice by failing to apply her mind to the objection to the unpleaded expectation damages claim
2. Whether the arbitrator exceeded the scope of the submission or departed from the agreed arbitral procedure
3. Whether the other five heads of challenge disclosed any ground for setting aside the award
4. Whether the award on the Balance Work Counterclaim should be set aside or remitted to the arbitrator

Holding

The Court of Appeal allowed the appeal in part. It set aside the award insofar as it concerned the Balance Work Counterclaim, declined to remit that part to the arbitrator, and left the rest of the award standing. As each side had succeeded in part, the parties were directed, failing agreement, to file costs submissions of no more than six pages within 21 days.

Reasoning

The court held that the arbitrator did not appreciate that the expectation damages claim was unpleaded and outside the agreed list of issues, and so reduced Wan Sern's case to an objection to entitlement alone. In fact Wan Sern had objected to how the claim was valued: damages measured by the value of work never done would amount to gross revenue rather than lost profit. By attributing to Wan Sern a position it had not taken, the arbitrator failed to consider the real issue, which was a breach of natural justice, as in Front Row. Prejudice was shown because the breach could reasonably have made a difference, since only a proportion of the value of the uncompleted work could be recoverable. The court stressed that pleadings matter more in a documents-only arbitration, and a tribunal faced with an unpleaded issue should check with the parties whether it may decide it.

Because that breach was enough to set aside this part of the award, the court did not decide the arguments on defective reasoning, excess of jurisdiction or departure from the agreed procedure.

The challenges on the other heads, including the Pan Sing and Toto claims, the safety supervisor fees and the labour supply claim, showed at most errors of fact or law, a misunderstanding of Wan Sern's case or inadequate reasons. None of these is a ground for setting aside an award, and the judge's reasoning on them was adopted.

On remedy, the principle of limited curial intervention weighs against remission. As the issue was unpleaded, remission would require the arbitrator to entertain a late amendment, which the court considered inappropriate; Hua Tian had chosen how to run its case and had to bear the consequences. The court also criticised Hua Tian's counsel for refusing, without taking instructions, to negotiate what was a small sum in dispute, noting that this might bear on costs.

From the judgment