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Denying Right to be Heard in Arbitration: Breach of Natural Justice
Introduction
The Singapore Court of Appeal affirmed the High Court's judgment by setting aside an award in CBS v CBP [2021] SGCA 4. Despite the challenged party's refusal to provide any written witness statements, the arbitrator's decision not to enable a hearing for oral witness testimony was held to be a breach of natural justice in the lack of explicit powers to do so (often referred to as "witness gating" powers). Although the judgment is based primarily on an interpretation of the applicable Singapore Chamber of Maritime Arbitration (SCMA) Rules, its implications might be far-reaching.
Facts
The underlying issue was an Indian business (the buyer) failing to pay for coal that it had committed to acquire from a seller who had allocated the debt to a Singapore bank (the bank).
Rule 28.1 of the SCMA Rules stated, among other things: The Tribunal will convene a hearing for the presentation of evidence by witnesses, including expert witnesses, or for oral arguments unless the parties agree to a documents-only arbitration or that no hearing should be placed.
The bank did not present any witnesses and wished to do the arbitration on a document basis, whereas the sellers wished to present 7 witnesses to give “oral testimony”. In response to this, the arbitrator stated that before finalizing if the arbitration will be a document basis or hearing of witnesses, the arbitrator wished to have detailed written statements from each witness.
The buyer denied to produce any written witness statements and so the arbitrator directed for a hearing on oral submissions and no witnesses to be presented. The buyer did want not to present for the hearing and so the bank’s arguments were granted in full which also included that the buyer’s case was rejected because of the alleged oral agreement.
The buyer approaches the High court to set aside the award of the arbitrator on the ground that “by denying the right of the buyer to call its witnesses, the award has been a breach of Natural Justice, to which the bank appealed.
The case before Court of Appeal
Court of Appeal referred to Article 18 of Model Law and recognized the rule of Natural Justice i.e, ‘full opportunity to be heard. The court mainly looked into if the conduct of the arbitrator can be justified as something that any fair-minded tribunal might have done in the given circumstances.
The interpretation of SCMA Rule 28.1 was the first major point of disagreement. In other words, whether – as the bank argues – the final “or” means the rule should be interpreted “disjunctively,” meaning that in the absence of an agreement between the parties to a documents-only procedure or a hearing, the arbitrator is only obligated to hold a hearing for oral evidence or oral submission.
The Court of Appeal concurred with the High Court's "holistic" reading but held that ". R. 28.1 needs to be read in its whole and it does not provide the tribunal with the ability to determine what sort of hearing to hold in the absence of an agreement" in favor of the buyer. In the absence of an agreement for "documents-only arbitration" or "no hearing," the arbitrator lacked the "witness gating" authority to deny the buyer's request for an oral witness evidence hearing.
On the second key issue, the Court of Appeal agreed that, as part of their broad, discretionary case management powers (and that the arbitrator, in this case, had this power under SCMA Rule 25), tribunals can limit oral witness evidence in certain circumstances, such as when "evidence from multiple witnesses is repetitive or of little or no relevance to the issues." This power, however, is not unlimited and is subject to natural justice's basic principles.
The arbitrator's rejection of the buyer's proposed oral witness evidence and imposition of a condition requiring the buyer to show that it had "substantive value" before deciding whether to allow it at a hearing fell outside the range of what a reasonable and fair-minded tribunal might have done, according to the Court of Appeal, and thus constituted a breach of natural justice.
Conclusion
The arbitrator's actions were not the most blatant behavior of natural justice, and this was not a simple decision. Rather than cutting across practice, the decision emphasizes the importance of exercising extreme caution when evaluating the applicable arbitral rules and factual circumstances, and that making any conclusions based on practices or experiences under other rules or circumstances is risky.
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(This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, or Religion, Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre Foundation shall not be responsible for any errors caused due to human error or otherwise.)
- Facts
- Case before Court of Appeal
- Conclusion
