Chief Justice Sundaresh Menon’s warnings in Wan Sern Metal Industries Pte Ltd v Hau Tian Engineering Pte Ltd [2025] SGCA 5 are compelling and especially valuable because the warnings apply to both arbitrators and the parties. Accelerated procedures and ‘documents-only’ arbitrations have perceived benefits. But, as this case demonstrates, there are nuanced practical limits of natural justice and a tangible duty on arbitrators to “balance the parties’ desire for an accelerated process against the tribunal’s own duty to ensure procedural fairness so as to produce an award that is enforceable”. Put differently, whilst challenges on natural justice can arise in all arbitrations, the Singapore Court of Appeal reminds us that an absence of a hearing can increase the lack of clarity as to the parties’ positions, which can be an inadvertent stimulus to a breach of natural justice.
What Happened?
The Arbitration concerns a construction project where Wan Sern was a sub-contractor, and the Respondent was its sub-sub-contractor. Disputes arose between the Parties, with Wan Sern alleging, among other things, that the Respondent’s works were defective. After sending several notifications of the defects to the Respondent in June and July 2022, the Appellant issued a notice of termination of the Sub-Contract on 15 July 2022. Following a statutory adjudication pursuant to the Building and Construction Industry Security of Payment Act 2004 (2020 Rev Ed) certain disputes were referred to arbitration under the SIAC Rules, 2016 using the Expedited Procedure as a documents-only arbitration. In the pleadings and the agreed list of issues, the Respondent sought damages “for the full value of works done to date [of the termination]” but in later written submissions, it also sought damages based on the value of completed and uncompleted work that it expected to complete under the Sub-Contract. In reply written submissions, Wan Sern stated that the Respondent was not entitled to damages for work it had not completed and that it could not also be entitled to damages for loss of profits (because that would be double recovery). In the Award, the Arbitrator found that the Appellant was not entitled to terminate the Sub-Contract and, accordingly, held that the Respondent was entitled to damages for wrongful termination. The Arbitrator then computed this based on the value of work the Respondent expected to complete when it entered into the Sub-Contract.
The Court of Appeal found that the Arbitrator was wrong and had acted in breach of natural justice. The Arbitrator failed to apply her mind to the Parties’ cases. Chief Justice Sundaresh Menon explained:
- There are at least two situations in which the fair hearing rule is breached: (a) where the tribunal fails to apply its mind to the essential issues arising from the parties’ arguments; and (b) where the tribunal adopts a defective chain of reasoning.
- The Arbitrator’s reasoning demonstrated her failure to appreciate the precise point being taken, and this was especially significant because it was in relation to an unpleaded point, namely, the claim for the value of uncompleted work at the time of termination of the Sub-Contract.
- No mention was made in the Award of the fact that the Respondent had belatedly introduced the unpleaded “Expectation Damages Issue,” without first applying to amend its pleadings; the Arbitrator did not attempt to consider the scope of the Parties’ submission to arbitration, such as by referring to the agreed list of issues; the Arbitrator did not attempt to clarify the scope of the Parties’ cases, or did not ask whether the Respondent wished to amend its pleadings to include a claim to recover damages in respect of the uncompleted work; and while the Arbitrator was alive to the fact that granting the Respondent damages computed by reference to the full value of the Sub-Contract and loss of profits would amount to double recovery, she did not appear to be aware that no question of double recovery would have arisen under the Respondent’s pleaded case.
Court’s Guidance
The Singapore Court of Appeal recognised that in arbitral proceedings generally, pleadings are not necessarily determinative in the same way or to the extent that they might be in court litigation. In international arbitration, recourse is typically had to various sources to determine the scope of submission to arbitration including: (a) the pleadings; (b) the agreed list of issues; (c) the opening statements; (d) the evidence adduced in the arbitration; and (e) the closing submissions. But the Court was also clear that it is vital that arbitrators and parties “understand the contours of the parties’ respective cases” and “[t]his will typically not be the case where a documents-only arbitration is concerned.” This may shock some Readers, but Chief Justice Sundaresh Menon could not be clearer [41]:
“While [documents-only] is a choice that parties are entitled to make, the tribunal and the parties should appreciate the somewhat different context in which such a hearing would be conducted, as a result of which, there may be a real chance that the tribunal and/or the parties might have failed to appreciate the contours of the dispute and whether points were being taken by one side that had not been fully understood by the other, or for that matter, by the tribunal”
So, what should an arbitrator do?
The guidance on documents-only arbitrations as gleaned from Wan Sern Metal Industries Pte Ltd v Hau Tian Engineering Pte Ltd indicates:
- When faced with an unpleaded issue, a tribunal should clarify the parties’ positions (i.e. clarifying whether the parties are aware that an unpleaded issue has been introduced; whether the aggrieved party wishes to object to this introduction or otherwise respond to the issue; and whether the pleadings should be amended).
- A tribunal should clarify with the parties whether it can decide an issue that has not been pleaded.
- The parties should make their positions clear, “especially given the lack of an oral hearing which might otherwise have provided an invaluable avenue for clarification on their respective cases.”
- A party that wishes to advance arguments on an unpleaded issue should take steps to amend its pleadings. And if a party discovers that its counterparty has introduced an unpleaded issue, the sensible response should be to draw the arbitrator’s attention to this.
On the facts of the present case, the Arbitrator was held to have failed to consider the entirety of Wan Sern’s case as regards the uncompleted works, because of her belief that its objection was only on the Respondent’s entitlement to that measure of damages. It is this failure which the Court of Appeal considered to be a breach of natural justice. The analysis is so very precise. Speed and cost-efficiency are, of course, important, but this important judgement shows the power of “the shared responsibility between the tribunal and the parties to ensure the effective functioning of the arbitral process in the context of a documents-only arbitration.”
In a highly memorable ICCA Session [1] titled “Oral Argument” and moderated by VV Veeder, an array of eminent international arbitration practitioners explored, “Oral argument is one of the great challenges and, it must be said, greatest satisfactions of the arbitration practitioner. But setting aside the stories and the tradition, what actually works, and what doesn’t? Do sophisticated tribunals need argument, or just answers? And how does oral argument intersect with written submissions?” One specific point for discussion was:
“Given Users’ increasing complaints at the high cost of international arbitration, is oral argument now an expensive luxury which should be dispensed with, or at least severely curtailed?”
Lord Slynn (describing his experience at the European Court of Justice), made the comment, “Long live oral argument, for ever and ever.” It is difficult to disagree.
[1] International Arbitration 2006: Back to Basics? Panel Session: Working Group B: Contemporary Practice in the Conduct of Proceedings (Round Table on Oral Argument) published in VV Veeder QC Memorial Volume, ICCA Congress Series, International Council for Commercial Arbitration (ICCA), 2020 ISBN: 978-94-92405-18-0 pp 87.
