BZW v BZV: Setting Aside Arbitration Award for Breach of Natural Justice in Shipbuilding Dispute
In a shipbuilding dispute between BZW and BZX (Appellants) and BZV (Respondent), the Court of Appeal of Singapore dismissed an appeal against a High Court decision to set aside an arbitral award. The dispute arose from a contract where the Appellants were to construct a vessel for the Respondent. The Respondent claimed liquidated damages for delay and damages for inadequate generators. The Tribunal dismissed both claims and the Appellants' counterclaim. The High Court set aside the award due to breaches of natural justice. The Court of Appeal upheld the High Court's decision, finding that the Tribunal failed to properly address key issues and adopted a chain of reasoning with no nexus to the parties' submissions.
1. Case Overview
1.1 Court
Court of Appeal of the republic of singapore1.2 Outcome
Appeal Dismissed
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Appeal dismissed. The court set aside an arbitral award due to breaches of natural justice, specifically the tribunal's failure to properly address key issues.
1.7 Decision Date
2. Parties and Outcomes
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Sundaresh Menon | Chief Justice | No |
| Judith Prakash | Justice of the Court of Appeal | Yes |
| Steven Chong | Justice of the Court of Appeal | No |
4. Counsels
4. Facts
- Appellants and Respondent entered into a ship-building contract on 29 November 2012.
- The contract required the Appellants to construct and deliver a vessel to the Respondent by 31 May 2014.
- The Appellants failed to deliver the vessel by the original delivery date.
- The parties entered into a second supplemental agreement (SA2) on 2 February 2015, extending the delivery date.
- The Buyer informed the Respondent that the generators installed in the vessel did not conform to specifications.
- The Appellants delivered the vessel on 22 September 2015, and the Respondent accepted the vessel and made full payment.
- The Respondent asserted claims for liquidated damages and breach of contract against the Appellants.
5. Formal Citations
- BZW and another v BZV, Civil Appeal No 1 of 2020, [2022] SGCA 1
6. Timeline
| Date | Event |
|---|---|
| Ship-building contract entered into | |
| Original delivery date of vessel | |
| Respondent entered into discussions with Buyer | |
| ABS conducted tests on vessel | |
| Second supplemental agreement (SA2) entered into | |
| Buyer informed Respondent about generator issue | |
| New delivery date of vessel | |
| Cancelling date of vessel | |
| Respondent put Appellants on notice of failure to deliver | |
| ModuSpec inspected the vessel | |
| Fourth supplemental agreement (SA4) entered into | |
| Appellants delivered vessel to Respondent | |
| Respondent commenced arbitration proceedings | |
| Tribunal constituted | |
| Evidential hearing took place | |
| Tribunal issued the award | |
| Respondent submitted request for correction of Award | |
| Tribunal issued decision and addendum | |
| Respondent made further request for interpretation of Award | |
| Request for interpretation rejected | |
| Respondent filed originating summons in High Court | |
| Supporting affidavit filed | |
| Judge set aside part of the Award | |
| Appeal heard and dismissed | |
| Grounds of decision provided |
7. Legal Issues
- Breach of Natural Justice
- Outcome: The court found that the Tribunal breached the rules of natural justice, specifically the fair hearing rule, by failing to apply its mind to essential issues and adopting a chain of reasoning with no nexus to the parties' submissions.
- Category: Procedural
- Sub-Issues:
- Failure to apply mind to essential issues
- Defective chain of reasoning
- Absence of nexus between reasoning and parties' cases
- Setting Aside Arbitration Award
- Outcome: The court held that the application to set aside the award was filed within the prescribed time limit and that there were valid grounds for setting aside the award due to breaches of natural justice.
- Category: Procedural
- Sub-Issues:
- Time limit for application
- Grounds for setting aside
- Remission of Award
- Outcome: The court declined to remit the award to the Tribunal, finding that the breaches were fundamental and that a reasonable person would no longer have confidence in the Tribunal's ability to come to a fair and balanced conclusion.
- Category: Procedural
- Sub-Issues:
- Appropriateness of remission
- Tribunal's ability to reconsider decision
8. Remedies Sought
- Setting aside of arbitral award
9. Cause of Actions
- Breach of Contract
10. Practice Areas
- Arbitration
- Commercial Litigation
- Construction Law
11. Industries
- Construction
- Shipping
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| BZV v BZW and another | High Court | Yes | [2021] SGHC 60 | Singapore | The High Court decision which is the subject of the current appeal. |
| JVL Agro Industries Ltd v Agritrade International Pte Ltd | Court of Appeal | Yes | [2016] 4 SLR 768 | Singapore | Cited for the principle that a tribunal's chain of reasoning must have a sufficient nexus to the parties' arguments to comply with the fair hearing rule. |
| TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd | Court of Appeal | Yes | [2013] 4 SLR 972 | Singapore | Cited for the principle that a breach of the fair hearing rule can arise from the tribunal's failure to apply its mind to the essential issues arising from the parties’ arguments. |
| 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 principle that a breach of natural justice causes a party to suffer actual or real prejudice if complying with the rules of natural justice could reasonably have made a difference to the outcome. |
| ABC Co v XYZ Co Ltd | High Court | Yes | [2003] 3 SLR(R) 546 | Singapore | Cited for the requirement that an application to set aside an award must state the grounds for the application. |
| SEF Construction Pte Ltd v Skoy Connected Pte Ltd | High Court | Yes | [2010] 1 SLR 733 | Singapore | Cited for the principle that natural justice requires that the parties should be heard; it does not require that they be given responses on all submissions made. |
| 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 that a reasonable litigant could not have foreseen the possibility of reasoning of the type revealed in the award. |
| John Holland Pty Ltd (formerly known as John Holland Construction & Engineering Pty Ltd) v Toyo Engineering Corp (Japan) | High Court | Yes | [2001] 1 SLR(R) 443 | Singapore | Cited for the four elements that must be established to set aside an award on grounds of breach of natural justice. |
| BLC and others v BLB and another | Court of Appeal | Yes | [2014] 4 SLR 79 | Singapore | Cited for the principle that an error of fact or law is not a basis for setting aside an award. |
| ASG v ASH | Court of Appeal | Yes | [2016] 5 SLR 54 | Singapore | Cited for the principle that the fact that an award fails to address one of the parties’ arguments expressly does not, without more, mean that the tribunal failed to apply its mind to that argument. |
| AKN and another v ALC and others and other appeals | Court of Appeal | Yes | [2015] 3 SLR 488 | Singapore | Cited for the principle that an award will not be set aside on the ground that the tribunal failed to apply its mind to an essential issue arising from the parties’ arguments unless such failure is a clear and virtually inescapable inference from the award. |
| AKN and another v ALC and others and other appeals | Court of Appeal | Yes | [2016] 1 SLR 966 | Singapore | Cited for the principle that there is no power to remit an award after it has been set aside. |
| Secretary of State for the Home Department v Raytheon Systems Ltd | Not specified | Yes | [2015] 159 ConLR 168 | United Kingdom | Cited for the principle that the court has to consider whether there is a real risk that the tribunal may sub-consciously be tempted to achieve the same result as before. |
| Lovell Partnerships (Northern) Limited v A W Construction plc | Not specified | Yes | (1996) 81 BLR 83 | United Kingdom | Cited for the test of whether a reasonable person would no longer have confidence in the Tribunal’s ability to come to a fair and balanced conclusion on the issues if remitted. |
13. Applicable Rules
| Rule Name |
|---|
| Rules of Court (2014 Rev Ed) |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| International Arbitration Act (Cap 143A, 2002 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Arbitration
- Setting Aside
- Natural Justice
- Ship-building Contract
- Liquidated Damages
- Generators
- UNCITRAL Model Law
- International Arbitration Act
- Fair Hearing Rule
- Causation
- Estoppel
15.2 Keywords
- arbitration
- setting aside
- natural justice
- shipbuilding
- breach of contract
- singapore
17. Areas of Law
16. Subjects
- Arbitration
- Construction Dispute
- Contract Law
- Civil Procedure