BLB v BLC: Setting Aside Arbitral Award for Failure to Decide Counterclaim

In BLB and another v BLC and others, the Singapore High Court considered an application to set aside an arbitral award. The plaintiffs, BLB and another, sought to set aside the award, arguing that the sole arbitrator failed to decide a counterclaim submitted to arbitration. The court, presided over by Justice Belinda Ang Saw Ean, found that the arbitrator had indeed failed to address the Disputed Counterclaim and that this failure constituted a breach of natural justice and exceeded the scope of submission to arbitration. The court allowed the application and remitted the Disputed Counterclaim for Receivables and costs thereof to a new tribunal for determination.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Application allowed; Disputed Counterclaim for Receivables and costs remitted to a new tribunal for determination.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

The Singapore High Court set aside an arbitral award due to the arbitrator's failure to address a counterclaim, violating natural justice and exceeding authority.

1.7 Decision Date

29 September 2013

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
BLB	Plaintiff	Corporation	Partial Win	Partial	Teo Chun-Wei Benedict of Drew & Napier LLP Hri Kumar Nair of Drew & Napier LLP
BLC	Defendant	Corporation	Partial Loss	Partial	Chenthil Kumar Kumarasingam of Lawrence Quahe & Woo LLC Aston Lai of Lawrence Quahe & Woo LLC

3. Judges

Judge Name	Title	Delivered Judgment
Belinda Ang Saw Ean	Judge	Yes

4. Counsels

Counsel Name	Organization
Teo Chun-Wei Benedict	Drew & Napier LLP
Hri Kumar Nair	Drew & Napier LLP
Chenthil Kumar Kumarasingam	Lawrence Quahe & Woo LLC
Aston Lai	Lawrence Quahe & Woo LLC

4. Facts

An arbitral award was issued on 31 July 2012.
The plaintiffs sought to set aside the arbitral award.
The plaintiffs alleged the arbitrator failed to decide a counterclaim.
The counterclaim was for RM5,838,956 being receivables purportedly due to P1 as of 31 January 2008.
The arbitrator adopted the defendants’ framework of issues to be tried.
The arbitrator framed the issues such that if the plaintiffs were in breach of the BOA and the LA, they would not be entitled to any of the amounts counterclaimed.
The Tribunal held that P1 had breached its obligations under Clauses 5.4.1 and 5.4.3 of the BOA and Clause 4.1 of the LA.

5. Formal Citations

BLB and another v BLC and others, Originating Summons No 1006 of 2012, [2013] SGHC 196

6. Timeline

Date	Event
2003-07-03	Heads of Agreement entered into between D2 and P1.
2003-10-13	Asset Sale Agreement (ASA) dated between D4 and P1.
2004-04-03	Shareholders Agreement dated between D4 and P2.
2004-04-03	Business Operations Agreement (BOA) dated between D1 and P1.
2004-04-03	Licence Agreement (LA) dated between D1 and P1.
2005-06-01	P2 took over operation of P1.
2005-07-01	D2 made various call-offs for the P1 Product Lines.
2006-05-18	D2 issued a Notice of Default in delivery to P1.
2006-07-11	D1 issued a Notice of Default for purported breaches of the BOA and LA.
2006-08-15	D1 wrote to P1 to terminate the BOA and LA.
2006-07-01	D1 issued 14 purchase orders to P1 between July 2006 and February 2007.
2007-02-13	P1 wrote to D1 to demand payment of RM4,653,604.78.
2007-02-14	D1 responded to P1's demand.
2007-02-28	P1 wrote back to D1 denying monies were due and owing to D1.
2007-02-13	P1 wrote to D4 to demand the transfer of bank balances amounting to RM22,185.88.
2007-02-14	D4 wrote to dispute its liability to transfer this sum to P1.
2007-03-15	P1 wrote to D4 to reiterate its demand for the transfer of the said sum.
2007-05-30	D1 commenced arbitration proceedings against P1.
2007-06-25	D4 commenced arbitration proceedings against P2.
2008-02-22	Ad hoc agreement executed by all parties.
2009-01-12	Arbitration heard from 12 January 2009 to 15 January 2009.
2009-07-22	Arbitration heard from 22 July 2009 to 24 July 2009.
2009-11-20	Parties’ submissions and reply submissions were tendered.
2012-07-31	Award was issued.
2012-08-01	Arbitrator ceased private practice.
2012-01-01	Originating Summons No 1006 of 2012 filed.
2013-09-30	Judgment reserved.

7. Legal Issues

Breach of Natural Justice
- Outcome: The court found that the arbitrator's failure to consider the Disputed Counterclaim constituted a breach of natural justice.
- Category: Procedural
- Sub-Issues:
  - Failure to consider essential issues
  - Failure to apply mind to essential issues
Scope of Submission to Arbitration
- Outcome: The court found that the arbitrator's failure to consider the Disputed Counterclaim meant that the award dealt with a dispute not falling within the terms of the submission to arbitration.
- Category: Jurisdictional
- Sub-Issues:
  - Matters beyond the scope of submission to arbitration
  - Failure to decide matters submitted to arbitration

8. Remedies Sought

Setting aside of arbitral award
Remittal of Disputed Counterclaim to a new tribunal

9. Cause of Actions

Breach of Contract

10. Practice Areas

Arbitration
Commercial Litigation

11. Industries

No industries specified

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
TMM Division Maritama SA de CV v Pacific Richfield Marine Pte Ltd	High Court	Yes	[2013] SGHC 186	Singapore	Cited to exemplify the tension between the supervisory function of the court and the principles of minimal curial intervention and finality in arbitration proceedings.
Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd	Court of Appeal	Yes	[2007] 3 SLR(R) 86	Singapore	Cited for the principle of minimal curial interference with arbitral awards and the test for setting aside an award due to a breach of natural justice.
Sui Southern Gas Co Ltd v Habibullah Coastal Power Co (Pte) Ltd	High Court	Yes	[2010] 3 SLR 1	Singapore	Cited for the principle that errors of law or fact are not sufficient grounds to set aside an arbitral award under Art 34(2)(a)(iii) of the IAA.
CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK	Court of Appeal	Yes	[2011] 4 SLR 305	Singapore	Cited for the legal principles underlying the application of Art 34(2)(a)(iii) of the Model Law, particularly regarding the failure to decide matters submitted to arbitration.
Lesotho Highlands Development Authority v Impregilo SpA	House of Lords	Yes	[2006] 1 AC 221	United Kingdom	Cited to distinguish between the erroneous exercise of an available power and the purported exercise of a power which the arbitral tribunal did not possess.
L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd and another appeal	Court of Appeal	Yes	[2013] 1 SLR 125	Singapore	Cited for the reconsideration of the required level of prejudice before an award can be set aside due to a breach of natural justice.
Gas & Fuel Corporation of Victoria v Wood Hall Ltd & Leonard Pipeline Contractors Ltd	Supreme Court of Victoria	Yes	[1978] VR 385	Australia	Cited for distilling the essence of the two pillars of natural justice in the maxims nemo judex in causa sua and audi alteram partem.
R v Sussex Justices; ex parte McCarthy	King's Bench Division	Yes	[1924] 1 K.B. 256	United Kingdom	Cited for the amplification of the first rule of natural justice that justice must not only be done but appear to be done.
Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd	High Court	Yes	[2010] SGHC 80	Singapore	Cited as an instance where the High Court set aside an arbitral award under s 48(1)(a)(vii) of the AA due to the arbitrator's failure to consider the grounds of the counterclaim in full.
SEF Construction Pte Ltd v Skoy Connected Pte Ltd	High Court	Yes	[2010] 1 SLR 733	Singapore	Cited as an instance where the High Court found that there was no breach of natural justice and declined to set aside the adjudicator’s determination.
Brookhollow Pty Ltd v R&R Consultants Pty Ltd	Supreme Court of New South Wales	Yes	[2006] NSWSC 1	Australia	Cited for the principle that error in identifying or addressing issues, as distinct from lack of good faith in attempting to do so, is not a ground of invalidity of the adjudication determination.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
International Arbitration Act (Cap 143A, 2002 Rev Ed)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Arbitral award
Counterclaim
Natural justice
Minimal curial intervention
Scope of submission
Receivables
Business Operations Agreement
Licence Agreement
Infra petitia

15.2 Keywords

arbitration
setting aside
counterclaim
natural justice
receivables

17. Areas of Law

Area Name	Relevance Score
Natural justice	90
International Arbitration	80
Arbitration	75
International Arbitration Act	70
Setting Aside Arbitral Award	60
Contract Law	40

16. Subjects

Arbitration
Civil Procedure