AUF v AUG: Challenge to Arbitral Award on Defective External Wall System

In AUF v AUG, the Singapore High Court heard three applications challenging an arbitral award concerning a dispute over a defective external wall system on a commercial building. AUF, the Contractor, challenged the award, seeking to set it aside in part and for leave to appeal on questions of law. AUG, the Owner, sought to uphold the award. The court, presided over by Belinda Ang Saw Ean J, dismissed all three applications, finding that the arbitrator did not exceed his jurisdiction or breach natural justice in making the award. The underlying dispute arose from leaks and water-seepage issues after the building's completion, leading to claims of breach of contract and damages.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Applications dismissed with costs.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Challenge to an arbitral award regarding a defective external wall system. The court dismissed the challenge, upholding the arbitrator's decision.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
AUFPlaintiff, Defendant, RespondentCorporationApplications dismissed with costsLost
AUGDefendant, Plaintiff, AppellantCorporationApplications dismissed with costsWon
AUDOtherCorporation
AUEOtherCorporation
AUBOtherCorporation
AUCOtherCorporation

3. Judges

Judge NameTitleDelivered Judgment
Belinda Ang Saw EanJudgeYes

4. Counsels

Counsel NameOrganization
Davinder SinghDrew & Napier LLC
David FongDrew & Napier LLC
Cheryl TanDrew & Napier LLC
Alvin YeoWong Partnership LLP
Ian de VazWong Partnership LLP
Nikki NgiamWong Partnership LLP
Wang YeWong Partnership LLP

4. Facts

  1. The dispute arose from the construction of a 13-storey commercial building.
  2. The Owner claimed defects in the external wall system installed by a nominated sub-contractor.
  3. The Contractor was the main contractor for the project.
  4. Leaks and water seepage occurred after the building's completion in March 1997.
  5. The Owner initially sought recladding of the external walls, but later withdrew this claim.
  6. An independent expert was appointed to assess the defects.
  7. The arbitrator awarded damages based on 40% of the final sub-contract sum.

5. Formal Citations

  1. AUF v AUG and other matters, Originating Summons No 790 of 2014, Originating Summons No 791 of 2014 and Originating Summons No 789 of 2014 (Summons No 4899 of 2014), [2015] SGHC 305

6. Timeline

DateEvent
Main Contract signed between the Owner and the Contractor.
Building completed.
Complaints of leaks and water-seepage into the Building surfaced.
Contractor carried out ad hoc repair works by face-sealing and over-sealing the Building.
Further rectification works were carried out.
Rectification works completed, but the leaks persisted.
Owner informed the Contractor that it wanted the external wall to be re-cladded.
NSC was joined as a third party to the arbitral proceedings.
Owner added its alternative claim for damages for diminution in the value of the Building to its pleadings.
The Owner’s re-amended Points of Claim was dated.
First tranche of hearing on the issue of liability was held.
First tranche of hearing on the issue of liability was held.
Contractor offered the Owner a sum of $4.43m in full and final settlement of the Owner’s claims.
Owner's Calderbank letter.
Contractor's offer of 26 August 2005 was expressly withdrawn.
Procedural meeting held; Owner withdrew its claim for recladding of the external walls of the Building.
An independent expert was appointed.
The Independent Expert issued a draft report on the defects listed in Appendix A1.1 in two parts.
The Independent Expert issued a draft report on the defects listed in Appendix A1.1 in two parts.
A procedural meeting was held following the Contractor’s proposal to limit the scope of the arbitral hearing.
End of tender period.
Oral hearing was held for counsel on both sides to address the Arbitrator on their respective written submissions.
Oral hearing was held for counsel on both sides to address the Arbitrator on their respective written submissions.
The Arbitrator directed the parties to address the Tribunal on the issue of diminished value.
A procedural meeting was held.
Arbitral award dated.
Ex parte Order of Court dated to enforce the Award as a judgment of the High Court.
Parties clarified in their respective letters.
Parties clarified in their respective letters.
Judgment reserved.

7. Legal Issues

  1. Breach of Contract
    • Outcome: The court found that the arbitrator did not err in finding a breach of contract.
    • Category: Substantive
    • Sub-Issues:
      • Defective works
      • Failure to perform contractual obligations
  2. Jurisdiction of Arbitrator
    • Outcome: The court held that the arbitrator did not exceed his jurisdiction.
    • Category: Jurisdictional
    • Sub-Issues:
      • Exceeding scope of reference
      • Awarding damages on unpleaded basis
  3. Breach of Natural Justice
    • Outcome: The court found no breach of natural justice.
    • Category: Procedural
    • Sub-Issues:
      • Denial of fair hearing
      • Lack of opportunity to present case
      • Award based on unaddressed submissions
  4. Damages Assessment
    • Outcome: The court upheld the arbitrator's assessment of damages based on diminution in value.
    • Category: Substantive
    • Sub-Issues:
      • Diminution in value
      • Cost of cure
      • Appropriate measure of damages

8. Remedies Sought

  1. Setting aside arbitral award
  2. Leave to appeal on questions of law
  3. Damages

9. Cause of Actions

  • Breach of Contract

10. Practice Areas

  • Arbitration
  • Construction Disputes
  • Commercial Litigation

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Multiplex Constructions (UK) Limited v Cleveland Bridge UK LimitedHigh Court of JusticeYes[2006] EWHC 1314 (TCC)England and WalesCited regarding the concept of abatement of value.
St Louis LLC v Final Touch Glass & Mirror IncSuperior Court of New JerseyYes386 NJ Super 177New Jersey, United StatesCited for the proposition that the tribunal could use the cost of repair as a measure of diminution in value, even though the market value could be ascertained.
State Property & Building Commission of the Department of Finance v H W Miller Construction Company IncCourt of Appeal of KentuckyYesKy 385 SW 2d 211Kentucky, United StatesCited for the principle that in the absence of evidence to the contrary, it would ordinarily be presumed that the anticipated cost of remedial work would reduce the price by an equivalent amount.
Ruxley Electronics and Construction Ltd v ForsythHouse of LordsYes[1996] 1 AC 344United KingdomCited for the legal principle that damages must be reasonable.
Philips v WardCourt of AppealYes[1956] 1 WLR 471England and WalesCited as illustrative authority on how to derive the value of work supplied.
Watts v MorrowCourt of AppealYes[1991] 1 WLR 1421England and WalesCited as illustrative authority on how to derive the value of work supplied.
Nada Fadil Al-Medenni v Mars UK LimitedCourt of AppealYes[2005] EWCA Civ 1041England and WalesCited regarding the principle that parties should clearly identify the issues that arise in the litigation.
CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBKCourt of AppealYes[2011] 4 SLR 305SingaporeCited for the distinction between an erroneous exercise of an available power and the purported exercise of a power which it did not possess.
PT Prima International Development v Kempinski Hotels SA and other appealsCourt of AppealYes[2012] 4 SLR 98SingaporeCited for the role of pleadings in arbitration.
Carillion Construction Limited v Devonport Royal Dockyard LimitedEnglish Court of AppealYes[2005] EWCA Civ 1358England and WalesExplained that it is often not practicable for an adjudicator to put to the parties his provisional conclusions for comment.
Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte LtdCourt of AppealYes[2007] 3 SLR(R) 66SingaporeConsidered the authorities and distilled the principles of fairness in arbitration.
Trustees of Rotoaira Forest Trust v Attorney-GeneralHigh CourtYes[1999] 2 NZLR 452New ZealandThe test of whether a particular decision reasonably flows from or may be foreseen from parties’ arguments is to be tested on an objective basis.
R v Deputy Industrial Injuries Commissioner, ex parte MooreQueen's BenchYes[1965] 1 QB 456England and WalesExplained the 'no evidence rule'.
TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty LtdFederal Court of AustraliaYes[2014] FCAFC 83AustraliaConsidered the 'no evidence' rule in the context of international commercial arbitration.
Emerald Grain Australia Pty Ltd v Agrocorp International Pte LtdFederal Court of AustraliaYes[2014] FCA 414AustraliaAnalysed the 'no evidence' rule from a public policy perspective.
TMM Division Maritima SA de CV v Pacific Richfield Marine Pte LtdHigh CourtYes[2013] 4 SLR 972SingaporeThe status of the 'no evidence' rule was expressly left open.
AQU v AQVHigh CourtYes[2015] SGHC 26SingaporeThe status of the 'no evidence' rule was expressly left open.
Thong Ah Fat v Public ProsecutorCourt of AppealYes[2012] 1 SLR 676SingaporeAcknowledged that parties are to be given a fair opportunity to be heard, but also apprised of how and why a judge has reached his decision.
Prestige Marine Services Pte Ltd v Marubeni International Petroleum (S) Pte LtdHigh CourtYes[2012] 1 SLR 917SingaporeThe inadequate provision of reasons by an arbitral tribunal is a mere error of law.
LW Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd and another appealCourt of AppealYes[2013] 1 SLR 125SingaporeClarified the statement of 'actual prejudice' in Soh Beng Tee.
Lesotho Highlands Development Authority v Impregilo SpA and othersHouse of LordsYes[2006] 1 AC 221United KingdomIf the arbitrator applies the correct remedy, but does so in an incorrect way, then there is no excess of jurisdiction.
AKN and another v ALC and others and other appealsCourt of AppealYes[2015] 3 SLR 488SingaporeAn example of an act in excess of jurisdiction would be where an arbitral tribunal makes an arbitral award that neither party requested.
Pacific Recreation Pte Ltd v S Y Technology Inc and another appealCourt of AppealYes[2008] 2 SLR(R) 491SingaporeThe decision was sufficiently reasoned and is also reasonable either as a matter of inference or from the arguments made before the Arbitrator.
Bulfracht (Cyprus) Ltd v Boneset Shipping Co Ltd (“The Pamphilos”)Commercial CourtYes[2002] 2 Lloyd’s Rep 681England and WalesArbitrators are appointed because of their professional, legal, commercial or technical expertise and the parties take the risk that, in spite of that expertise, errors of fact may be made or invalid inferences drawn without proper warning.
Chong Ah Kwee and another v Viva Realty Pte LtdHigh CourtYes[1990] 1 SLR(R) 244SingaporeCases where the court allowed the purchaser to reclaim moneys which it had overpaid by way of a proportionate abatement of price where property had been sold with an inaccurate and inflated estimated floor area.
Ling Kai Seng and another v Outram Realty Pte LtdHigh CourtYes[1991] 1 SLR(R) 885SingaporeCases where the court allowed the purchaser to reclaim moneys which it had overpaid by way of a proportionate abatement of price where property had been sold with an inaccurate and inflated estimated floor area.
Ahong Construction (S) Pte Ltd v United Boulevard Pte LtdCourt of AppealYes[1994] 3 SLR(R) 669SingaporeAn award of interest is at the discretion of the arbitral tribunal.
Chin Yoke Choong Bobby and another v Hong Lam Marine Pte LtdCourt of AppealYes[1999] 3 SLR(R) 907SingaporeThe provision confers a wide discretion.
Northern Elevator Manufacturing Sdn Bhd v United Engineers (Singapore) Pte LtdCourt of AppealYes[2004] 2 SLR(R) 494SingaporeA ‘question of law’ must necessarily be a finding of law which the parties dispute, that requires the guidance of the court to resolve.
Aloe Vera of America, Inc v Asianic Food (S) Pte Ltd and anotherHigh CourtYes[2006] 3 SLR(R) 174SingaporeThe first stage of enforcing an arbitral award is a “mechanistic” one and that it need only satisfy the court that the formalistic requirements in O 69 r 7(3) of the 1997 Rules of Court were complied with.
The Vasiliy GolovninHigh CourtYes[2008] 4 SLR(R) 994SingaporeA party applying for an ex parte court order has a duty to make full and frank disclosure of the all the facts material to the application.
Koh Bros Building and Civil Engineering Contractor Pte Ltd v Scotts Development (Saraca) Pte LtdHigh CourtYes[2002] 2 SLR(R) 1063SingaporeA mishandling of the arbitration may include cases where the arbitral tribunal acted in excess of jurisdiction, or where it committed a breach of natural justice.
John Holland Pty Ltd (fka John Holland Construction & Engineering Pty Ltd) v Toyo Engineering Corp (Japan)High CourtYes[2001] 1 SLR(R) 443SingaporeThe complaint, if valid, reveals no more than a plain error of law, or of a mixed fact and law. That is outside the ambit of s 17(2) of [the 1985 Act].
Anwar Siraj and another v Ting Kang Chung and anotherHigh CourtYes[2003] 2 SLR(R) 287SingaporeSets out the applicable test for prejudice required under s 17(2) of the 1985 Act.

13. Applicable Rules

Rule Name
Rules of Court (Cap 322, R 5, 1997 Rev Ed) O 68 r 7

14. Applicable Statutes

Statute NameJurisdiction
Arbitration Act (Cap 10, 1985 Rev Ed)Singapore
Arbitration Act (Cap 10, 2002 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Arbitral award
  • External wall system
  • Diminution in value
  • Cost of cure
  • Breach of contract
  • Natural justice
  • Jurisdiction
  • Sub-contract works
  • Independent expert
  • Final sub-contract sum

15.2 Keywords

  • arbitration
  • construction
  • breach of contract
  • defective works
  • Singapore
  • High Court

17. Areas of Law

Area NameRelevance Score
Arbitration95
Breach of Contract90
Contract Law85
Damages80
Construction Law75
Construction Contracts70
Contractual Disputes65
Jurisdiction60

16. Subjects

  • Arbitration
  • Construction Dispute
  • Contract Law