Key takeaways
One common challenge to the enforcement of an arbitral award for a breach of natural justice, is for the award debtor to argue that the arbitral tribunal had failed to adequately consider the essential issues before it in breach of the fair hearing rule (an infra petita challenge). In this Part 2 of our series of articles on natural justice in arbitration we look at such challenges in Singapore and Hong Kong.
Recently the Singapore Court of Appeal in DKT v DKU[1] issued a stinging rebuke against award debtors making unmeritorious complaints under the guise of natural justice challenges and clarified the proper scope of such infra petita challenges, stressing that the court should carefully scrutinise invitations to delve into the details of the arbitral record. The Court expressed similar concerns in Palm Grove Beach Hotels v Hilton Worldwide.[2]
The Hong Kong Court of First Instance showed similar short shrift to this type of challenge in X & YCo v ZCo,[3] noting that any inference that a tribunal has failed to consider an important issue is to be made only if it is clear and virtually inescapable and that the onus is on the parties to identify the salient issues in dispute during the proceedings.
In a notable exception, the Singapore Court of Appeal partially set aside an arbitral award in the case of Wan Sern Metal Industries v Huan Tian Engineering[4] due to such a breach of natural justice in an expedited, documents-only arbitration. The Court underscored the importance of pleadings in documents-only proceedings, where the parties do not have the opportunity to clarify any misconceptions of their positions orally.
DKT v DKU: Singapore Court of Appeal clarifies basis for infra petita challenges
In DKT v DKU,[5] the Singapore Court of Appeal dismissed an appeal to set aside an arbitral award, finding that the appellant’s complaints were unmeritorious and merely an attempt to challenge the merits of the award under the guise of natural justice violations. In doing so, the Court clarified the proper scope of infra petita challenges and how this related to a challenge based on the tribunal’s chain of reasoning. The Court reiterated that “the court should not countenance any attempt to re-open the merits of an award and should carefully scrutinise invitations to delve into the details of the arbitral record.”[6]
Background
The case arose from a dispute between the appellant, DKT, and the respondent, DKU, regarding maintenance work undertaken by DKT on the DKU’s properties. DKT submitted numerous claims for payment, which DKU contested on the basis that the work was either incomplete or not performed correctly based on the expert report of Mr K. The tribunal ultimately ruled in favour of DKU, finding that DKT had charged for unnecessary crack repairs in at least 246 instances based on Mr K’s report.
DKT sought to set aside the award on several grounds, primarily alleging breaches of natural justice. DKT argued that the tribunal had disregarded certain of its pleaded defences and adopted a chain of reasoning that was not reasonably expected when dealing with Mr K’s admission in evidence that he had taken core samples from the wrong places in at least 5 locations.
The Court dismissed the challenge, finding that tribunal had identified the issues raised by DKT in defence, expressly stated that it had applied its mind to such defences and then rejected them. In relation to Mr K’s evidence, the court found that the tribunal had dealt with the issue and observed that if core samples had been taken from the wrong places, it would only affect the credibility of the witness’ report. The tribunal had found that there was sufficient proof to make out a prima face case against the appellant. This chain of reasoning could not have come as a surprise to the parties.
Unusually for Singapore, in dismissing the appeal the Court of Appeal awarded indemnity costs against the appellant.
Court of Appeal sets out a framework for infra petita challenges
An infra petita challenge is a claim that the tribunal has not carried out its mandate by considering all the material issues that were raised in the arbitral proceedings. The Court emphasised that an infra petita challenge can only be mounted if the following four conditions are met:[7]
- The point must have been properly brought before the tribunal for its determination. It is not open to a party to raise such a challenge where it elected not to participate in an arbitration or failed to raise the point in question.
- The point must have been essential to the resolution of the dispute. A tribunal does not have the duty to deal with every issue raised and need only deal with the essential ones. A tribunal is not obliged to pursue moot issues.
- The tribunal must have completely failed to consider the point. Assessing whether the tribunal completely overlooked an essential point will typically be a matter of inference, and if such an inference is to be drawn at all, it must be shown to be clear and virtually inescapable. Courts adopt a “generous approach” to making such inferences, any doubt will be resolved in favour of upholding the award in accordance with the principle of minimum curial intervention. The focus here is not on how well or accurately the tribunal understood, analysed and dealt with the point; but with whether it did in fact consider the point at all (however incompetently or incorrectly it may be said to have done so).
- If the tribunal failed to consider an essential point placed before it, there must have been real or actual prejudice occasioned by this breach of natural justice.
Court of Appeal clarifies when the tribunal’s chain of reasoning breaches the fair hearing rule
The Court noted that, exceptionally, a tribunal’s chain of reasoning may breach the fair hearing rule where it was: (1) not one which the parties had reasonable notice of; or (2) one which did not have a sufficient nexus to the parties’ arguments.[8]
A “manifestly incoherent decision” is not itself a ground for challenge and must be tied back to a demonstrable breach of an established rule of natural justice. The fundamental question is whether the “manifest incoherence”:
- Results from a chain of reasoning that parties had no reasonable notice of or had an insufficient nexus to the parties’ agreement, such that the parties did not have the chance to address the point in that chain of reasoning, or
- Gives rise to a clear and virtually inescapable inference that the tribunal has completely failed to consider an essential point.
X & YCo v ZCo: Hong Kong Court stresses the need for parties to identify the key issues
X and YCo applied to set aside an arbitral award issued in ZCo’s favour on the basis that the tribunal had not dealt with “key issues” put before it. In dismissing the application, the Hong Kong Court of First Instance emphasised that the onus is on the parties to identify the salient issues in dispute before the tribunal.
Background
X, YCo and ZCo were parties to a Share Subscription and Purchase Agreement (SPA), under which ZCo acquired a 65% stake in a company from YCo, with YCo retaining 35%. ZCo later exercised an exit right under the SPA, requiring X and YCo to repurchase ZCo’s shares. When X and YCo failed to do so, ZCo commenced arbitration seeking either specific performance or damages in lieu. The tribunal ruled in ZCo’s favour. X and YCo then applied to set aside the award, arguing that the tribunal had not addressed two independent defences:
- The “Condition Precedent Defence”, namely that their obligation to repurchase ZCo’s shares under the SPA was only triggered upon the satisfaction of a condition precedent, which had not been satisfied; and
- The “Tax Defence”, whereby they claimed that even if they were liable for specific performance, tax liabilities arising from completion of the transfer of the shares should be borne by ZCo and thus deducted from the exit price payable.
X and YCo claimed that the tribunal failed to consider these two defences when it determined the exit price to be paid under the Award. The tribunal was “not listening” and there was no real opportunity for X and YCo to be heard.
Hong Kong Court dismisses the challenge and emphasises the importance of the list of issues
The court noted that the grounds for the refusal of enforcement are to be construed narrowly and only conduct “sufficiently serious or egregious”[9] amounting to a denial of due process would suffice to warrant an order to set aside or refuse enforcement of an award. An award should be read generously,[10] in a reasonable and commercial way, always bearing in mind the policy of minimal curial intervention. Any inference that a tribunal has failed to consider an important issue is to be made only if it is clear and virtually inescapable.
The court emphasised that the prime duty is on the parties to clearly identify and refer the tribunal to the salient issues in dispute, the issues to be decided by the tribunal and the key issues. The court and the tribunal would expect the key issues to be identified in a list of issues and in the opening and closing submissions for the hearing. The court did not expect the tribunal to review all of the written submissions and evidence extensively to work out for itself what issues were being put to it by the parties for determination.
Regarding the Condition Precedent Defence, the court noted that the fact that an issue was not included in the list of issues is a strong indication that the issue was not regarded by either the parties or the tribunal to be a key issue for determination in the arbitration. The court found that X and YCo had made a conscious decision not to pursue this defence, and there was no evidence before the tribunal to support it.
As for the Tax Defence, the court found it was not properly raised or substantiated. ZCo had addressed it in its submissions, but X and YCo did not pursue it further, nor did they include any tax liability in their calculation of the exit price when requested by the tribunal.
In dismissing the application, the court concluded that neither defence was put to the tribunal for decision, and the tribunal’s alleged failure to consider them did not amount to a denial of due process.
Palm Grove v Hilton: a party cannot challenge the award on the basis of defences it wished it had made in the arbitration but didn’t
Palm Grove Beach Hotels Pvt Ltd (Palm Grove) sought to set aside two partial arbitral awards rendered by a Singapore-seated tribunal. The arbitral proceedings concerned several disputes with the Defendants, Hilton Worldwide Manage Limited and Hilton Hotels Management India Private Limited (together, Hilton) over the management of the Conrad Pune hotel.
In five consolidated arbitrations, Hilton advanced claims for unpaid fees, failure to inject working capital, wrongful suspension of operations, and interference with management. Palm Grove counterclaimed for alleged breaches by Hilton.
Following the tribunal’s issuance of three partial awards, Palm Grove sought to set aside two of them on the basis that the tribunal had not considered all of its defences and counterclaims.
Singapore High Court dismisses the challenge
The High Court dismissed Palm Grove’s application to set aside the awards, emphasising that a tribunal’s failure to consider an issue is not ipso facto ground for setting aside an award — only issues of such importance that their omission would have altered the whole balance of the award and its effects are relevant. [11]
The scope of the parties’ submission for arbitration could be found by examining:
· The parties’ pleadings
· The agreed list of issues;
· Opening and closing statements; and,
· Evidence adduced in the arbitration (in context and read as a whole).
Importantly, a tribunal cannot be faulted for failing to consider an issue if it was never properly submitted for its consideration to begin with.[12] The Court found that several of the defences and counterclaims now submitted by Palm Grove had not been adequately pleaded in the arbitration or included in its proposed list of issues.
Singapore Court of Appeal reiterates the importance of reading awards generously
The Court of Appeal dismissed the appeal, noting that these proceedings “demonstrated efforts taken to go through the weeds of the arbitration to mount unmeritorious challenges” and “[t]hese sorts of challenges are not in keeping with the approach to arbitration”.[13]
Consistent with the High Court, the Court found that Palm Grove’s key issues and defences were either not properly pleaded or had been considered by the tribunal and any misinterpretation did not amount to a breach of natural justice. The Court emphasised that awards should be read generously:
“[a] submission that an essential issue was not dealt with will have to be a fairly obvious point and not something that is open to doubt. Any doubt will be resolved in favour of upholding the award in line with the policy of minimal curial intervention and the “generous approach””.[14]
Wan Sern Metal Industries v Hua Tian Engineering: documents only arbitration award set aside for the arbitrator’s failure to properly consider a key issue
In a notable exception, the Singapore Court of Appeal recently set aside part of an arbitral award rendered in an expedited, documents-only arbitration for a breach of the right to be heard. The Court noted that the way the arbitration proceeded resulted in a lack of clarity as to the parties’ positions which the arbitrator failed to appreciate and resolve.
Background
Wan Sern Metal Industries Pte Ltd (Wan Sern) was a sub-contractor engaged in a construction project known as Defu Industrial City. Wan Sern engaged Hua Tian Engineering Pte Ltd (Hua Tian) as its subcontractor, to supply labour for the installation works. Disputes arose, leading to Wan Sern terminating the Sub-Contract on the basis that Hua Tian’s works were defective.[15]
Wan Sern commenced SIAC arbitration proceedings, which proceeded on an expedited documents-only basis before a sole arbitrator. All submissions were filed within 3 months.
The arbitrator found that Wan Sern was not entitled to terminate the Sub-Contract, dismissed most of Wan Sern’s claims and allowed most of Hua Tian’s counterclaims. In its pleaded Balance Work Counterclaim, Hua Tian sought payment of the outstanding value of work it had completed, but in its submissions Hua Tian also sought payment for the work it had not completed yet due to the termination of the Sub-Contract. The arbitrator awarded damages by computing the revenue value of the completed and uncompleted work under the Sub-Contract. This measure of damages for the uncompleted work was wrong in law as it failed to account for the fact that Hua Tian did not incur the costs of undertaking the uncompleted work. The key question was whether this wrong decision was a breach of natural justice.
Court of Appeal sets aside the award
The Court emphasised the significance of pleadings in documents-only arbitrations, as providing “a crucial anchor in ensuring that the tribunal is fully cognisant of the parties’ cases”.[16] It also noted that, in documents-only arbitrations, it is more likely that a party will be faced with an issue that it may not have had the opportunity to address and that it is important that both the tribunal and the parties clarify how such an unpleaded issue will be addressed.
Nevertheless, the Court did not set aside the award on the basis that the issue was outside the scope of the submission of jurisdiction given that Wan Sern had responded to the issue in its submissions.
Instead, the Court found that in this case the arbitrator failed to appreciate the point taken by Wan Sern in relation to the measure of damages, which resulted in her ascribing an incorrect position to Wan Sern, leading her to fail to consider the true issue which had been raised.
Given this, in a fine distinction, the Court found that the arbitrator failed to apply her mind to the parties’ cases, as opposed to erroneously applying her mind, thereby acting in breach of the fair hearing rule.[17]
Conclusion
The bar for setting aside awards on the basis that the arbitral tribunal has failed to adequately consider essential issues in breach of natural justice remains high. Both the Singapore and Hong Kong Courts have emphasised that awards should be read generously and that drawing an inference that the tribunal has overlooked a point should be done only if it is clear and inescapable.
That said, parties must be attentive to how they present their case and ensuring that they guide the tribunal as to what are the essential issues. With lengthy submissions it is easy for tribunals to miss points and in this respect a well drafted list of issues can be very helpful.
The decision in Wan Sern Metal Industries v Huan Tian Engineering points to the danger of raising new points outside of the pleadings and list of issues, particularly in a documents-only arbitration. The fact that the arbitrator had failed to note that Hua Tian’s new damages claim had not been pleaded, no doubt contributed to the Court’s decision that she had failed to apply her mind to the essential issues raised by this claim.
[1] DKT v DKU [2025] SGCA 23
[2] Palm Grove Beach Hotels Pvt Ltd v Hilton Worldwide Manage Ltd [2025] SGCA 14
[3] X and YCo v ZCo [2024] HKCFI 695
[4] Wan Sern Metal Industries Pte Ltd v Hua Tian Engineering Pte Ltd [2025] SGCA 5.
[5] DKT v DKU [2025] SGCA 23.
[6] DKT v DKU [2025] SGCA 23 at [2]
[7] DKT v DKU [2025] SGCA 23 at [8]
[8] BZW and another v BZV [2022] 1 SLR 1080 at [60(b)].
[9] Grand Pacific Holdings v Pacific China Holdings Ltd [2012] 4 HKLRD 1, and LY v HW [2022] HKCFI 2267.
[10] LY v HW [2022] HKCFI 2267 and CNG v G&G [2024] HKCFI 575.
[11] Palm Grove Beach Hotels Pvt Ltd v Hilton Worldwide Manage Ltd [2024] SGHC 125 at [56], and CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR 305 at [32].
[12] Palm Grove Beach Hotels Pvt Ltd v Hilton Worldwide Manage Ltd [2024] SGHC 125 at [60].
[13] Palm Grove Beach Hotels Pvt Ltd v Hilton Worldwide Manage Ltd [2025] SGCA 14 at [2].
[14] Palm Grove Beach Hotels Pvt Ltd v Hilton Worldwide Manage Ltd [2025] SGCA 14 at [71].
[15] Wan Sern Metal Industries Pte Ltd v Hua Tian Engineering Pte Ltd [2025] SGCA 5 at [6]-[8].
[16] Wan Sern Metal Industries Pte Ltd v Hua Tian Engineering Pte Ltd [2025] SGCA 5 at [42].
[17] Wan Sern Metal Industries Pte Ltd v Hua Tian Engineering Pte Ltd [2025] SGCA 5 at [36]-[48].
