Introduction
Recently, the Singapore courts have partially set aside two arbitral awards for, respectively, a breach of natural justice and dealing with issues outside the scope of submission to arbitration.
In Wan Sern Metal Industries Pte Ltd v Hua Tian Engineering Pte Ltd [2025] SGCA 5 (“Wan Sern“), the Court of Appeal (“CA“) set aside part of an arbitral award where the arbitrator had acted in breach of natural justice by failing to apply her mind to the parties’ cases. In particular, the CA addressed the significance of pleadings in a documents-only arbitration and what natural justice might demand in that context. It also issued practical advice to both tribunals and parties on prudent steps to take when an unpleaded issue is raised.
In India Glycols Ltd and others v Texan Minerals and Chemicals LLC [2025] SGHC 28 (“India Glycols“), the dispute centred around the part of the arbitral award which held that all three respondents in the arbitration were liable to the claimant in the arbitration. The High Court found that the issue of only one respondent’s liability was within the scope of submission to arbitration, and set aside the impugned part of the award.
We delve into the cases below, highlighting the key takeaways.
Wan Sern: Breach of Natural Justice
The appellant had hired the respondent as its sub-contractor for the supply of labour for certain works pursuant to an agreement (“Sub-Contract“). A dispute arose when the appellant alleged that the respondent’s works were defective, leading to the appellant’s termination of the Sub-Contract.
The appellant commenced an arbitration administered by the Singapore International Arbitration Centre (“SIAC“), claiming back charges for the costs incurred in completing the respondent’s scope of works. The Respondent counterclaimed for damages “for the full value of works done to-date” (“Balance Work Counterclaim“), among other matters.
Importantly, the arbitration proceeded on an expedited basis as a documents-only arbitration. Within three months, the parties had filed their pleadings, witness statements, reply witness statements, written submissions, and reply written submissions. There was no oral hearing, and the arbitrator issued the award two months later.
The arbitrator largely found in favour of the respondent, determining that the appellant was not entitled to terminate the Sub-Contract and dismissing the appellant’s claims. Crucially, the arbitrator allowed the Balance Work Counterclaim (after various deductions) for the aggregate value of both the completed and uncompleted work under the Sub-Contract.
This raised several issues. First, the respondent had sought payment for only the value of the completed work in its pleaded case. Second, the counterclaim for the value of the uncompleted works (“Expectation Damages Issue“) was unpleaded, and had been first raised by the respondent in its written submissions.
This gave rise to a key question: Was the arbitrator able to compute the amount due to the respondent on a basis that was not pleaded?
Setting-aside application before the High Court
The appellant applied to set aside the award with regard to the arbitrator’s decision on the Expectation Damages Issue, among other matters. It alleged that the arbitrator had (i) exceeded the scope of submission to arbitration; (ii) acted in breach of the agreed arbitral procedure; and (iii) acted in breach of natural justice.
The High Court Judge dismissed the application, and the appellant appealed.
Appeal before the CA
The CA allowed the appeal in relation to the Balance Work Counterclaim, finding that the arbitrator’s failure to appreciate that the Expectation Damages Issue was unpleaded led her to oversimplify the appellant’s case, incorrectly believing that the appellant’s objection to the Expectation Damages Issue was based on the appellant’s entitlement to terminate the Sub-Contract.
In reality, the appellant had objected to how the claim was being valued. Allowing such a claim would essentially be to award the respondent damages amounting to a loss of gross revenue, since it did not incur any costs for works that were not undertaken. This would place the respondent in a better position than if the Sub-Contract had not been terminated.
The arbitrator’s failure to understand the appellant’s position resulted in her ascribing an incorrect position to the appellant. In turn, this led her to fail to consider the true issue with regard to the Expectation Damages Issue. This constituted a breach of natural justice, which led to actual prejudice.
Natural justice in the context of a documents-only arbitration
Significantly, the CA commented on the importance of pleadings in a documents-only arbitration. Unlike litigation, the consensual nature of arbitration means that parties may agree to an unpleaded issue being dealt with in the arbitration. The scope of submission would be determined by additional sources beyond pleadings, such as the opening statements, evidence adduced, and closing submissions.
However, where an arbitration is expedited and determined based on documents alone, it will lack an element of continuous interaction that provides multiple opportunities for the tribunal and the parties to understand the parties’ respective cases. As such, pleadings play a more significant role in defining the issues and assessing what natural justice demands must be afforded to a party faced with an unexpected claim.
When faced with an unpleaded issue, it will therefore be important to consider (i) the manner in which the unpleaded issue was raised; (ii) the other party’s response; and (iii) whether the tribunal provided the parties with a fair opportunity to be heard regarding these issues.
- For a tribunal, it would be prudent to ascertain the parties’ position by, for instance, clarifying:
- that an unpleaded issue has been introduced;
- whether the aggrieved party wishes to object or respond to the introduction;
- whether the pleadings should be amended; and
- whether it may decide an unpleaded issue, with this last point being especially relevant for documents-only arbitrations.
- For a party wishing to make arguments on an unpleaded issue, it should take steps to amend its pleadings.
- For a party that discovers that an unpleaded issue has been introduced, it should raise this to enable the tribunal to ensure that matters proceed fairly.
Wan Sern stands out primarily for the CA’s illuminating remarks and practical advice to both tribunals and parties on the demands of natural justice and the importance of pleadings in the context of a documents-only arbitration. Arbitrators should balance the parties’ desire for an accelerated process against the tribunal’s own duty to ensure procedural fairness, to ensure that the award will be enforceable.
India Glycols: Issues Outside the Scope of Submission
By way of background, the three respondents were respectively (i) a manufacturer of hand sanitiser products (“IGL“); (ii) IGL’s wholly-owned subsidiary (“ICI“); and (iii) a director and board member of ICI (“Dharmesh“) (together, the “Respondents“). IGL and the claimant in the arbitration (“Texan“) executed a Manufacturer Representation Agreement (“MRA“), under which IGL nominated Texan to be the exclusive distributor of its hand sanitiser products in North America. The MRA stipulated that IGL was to maintain a “Robust quality assurance program including [Good Manufacturing Practices] as required by USA FDA”.
A dispute arose when Texan alleged that the products did not comply with the current GMP (“CGMP“), in breach of the MRA. All four parties then executed an arbitration agreement to have the dispute resolved by way of arbitration administered by SIAC.
In its award, the tribunal found that the Respondents had breached the MRA by failing to comply with the CGMP. This had caused Texan to incur loss due to the expense of storing and disposing of the products (“Storage Costs“). However, the Respondents had a claim in contractual debt against Texan for the price of the delivered products. The tribunal therefore set off the Storage Costs against the price of the delivered products, resulting in a damages award of approximately US$261,000 which the Respondents were collectively ordered to pay to Texan.
Proceedings before the High Court
Before the High Court, the Respondents contended that the impugned part of the award contained decisions on matters beyond the scope of the submission to arbitration. The tribunal’s decision to impose liability for damages on ICI and Dharmesh was based solely on the finding that there was a breach of the MRA. However, neither ICI nor Dharmesh were parties to the MRA, while Texan’s case had been that IGL alone had breached the MRA.
The High Court agreed with the Respondents, finding that only the issue of IGL’s liability for breach of the MRA was within the scope of the submission to arbitration. This was evident from a holistic and objective review of the parties’ pleadings, evidence and submissions; there was no agreed list of issues.
Rather than set aside the award in its entirety, the High Court found that the award was severable such that only the impugned part needed to be set aside. The arbitrator had awarded damages, and allowed a defence of set-off, against the Respondents on a joint and several basis. Setting aside the impugned part of the award would simply mean that the award of damages and set-off would stand as against IGL.
In so doing, the High Court dismissed Texan’s argument that the defence of set-off created difficulties in setting aside part of the award. Even if Texan were correct, the High Court noted that this would instead raise the question of whether the award should be set aside in its entirety, rather than prevent the award from being set aside at all – a clear signal that the courts will not allow an unjust award to stand.
Concluding Remarks
Singapore has a reputation for being pro-arbitration, with the principle of minimal curial intervention often emphasised by the courts. Nonetheless, Wan Sern and India Glycols underscore that Singapore courts will not shy away from intervening where there has been a true departure from the fundamental principles enshrined in the International Arbitration Act 1994 (which adopts the UNCITRAL Model Law on International Commercial Arbitration) or the New York Convention.
The decisions reinforce Singapore’s position as a safe seat – one where the courts will neither be overly ready to intervene nor hesitate to act where justice so requires.
This article was authored by Avinash Pradhan and Divyesh Menon. A PDF version is available here.
Avinash Pradhan
