In DDI v DDJ and DDK [2024] SGHC 68, the Singapore High Court considered an application to set aside a domestic Singapore-seated SIAC award. The dispute arose after the respondents had bought shares in the applicant’s company, which purportedly owned and managed a piece of jewellery with a lab-grown (as opposed to naturally‑mined) gem, and which was endorsed by a Singapore celebrity.
In her award the arbitrator found that the agreement under which the respondents purchased the shares was null and void because the applicant had misled the respondents regarding the lab-grown nature and true value of the jewellery.
The applicant argued that the award should be set aside on the following grounds, with regard to sections 48(1)(a)(iv) and (vii) of the Arbitration Act 2001 (which are materially similar to equivalent provisions in the International Arbitration Act 1994):
- The award contained decisions on matters beyond the scope of submission to arbitration;
- The applicant was prevented from effectively presenting his case during the arbitration and there had been a breach of the rules of natural justice, in particular the fair hearing rule and the rule against bias.
The scope of the arbitration
The court quickly dismissed the applicant’s claim that the arbitrator wrongly considered and decided on matters that were outside the scope of the submission to the arbitration. When ruling on such a challenge, “the court must look at matters in the round”, i.e. by reference to the parties’ pleadings, the evidence adduced, any lists of issues, and opening and closing submissions. In the instance the court found that the issues that were alleged to have been outside of the scope of the arbitration (namely the issue of the ownership of the jewellery and the issue of misconceptions about the parties’ financial status) were actually referred to in the parties’ pleadings, and were squarely within the scope of the arbitration.
Breach of natural justice
The applicant claimed that the arbitrator’s conduct during the arbitration had breached natural justice, by demonstrating bias and/or prejudgement and so preventing the applicant from presenting his case. The court reiterated that there are “two pillars” of natural justice under section 48(1)(a)(vii) of the Arbitration Act:
- To have adequate notice and opportunity to present one’s case prior to the decision being made (the fair hearing rule); and
- To be heard before a decision-maker objectively considered to be disinterested, unbiased and impartial, and not to have pre-judged the decision (the rule against bias).
A party challenging an award as being contrary to these rules of natural justice must establish:
- Which rule of natural justice was breached;
- How it was breached;
- In what way the breach was connected to the making of the award; and
- How the breach prejudiced its rights.
The fair hearing rule
The applicant argued that the fair hearing rule had been breached by the arbitrator, because essential issues had not been addressed, and relevant evidence had been disregarded. It also argued that the arbitrator had misunderstood facts and fixated on unpleaded issues.
The court largely considered these allegations to be baseless, but even if the arbitrator had, as alleged, failed to adequately consider the issues highlighted by the applicant, there was no breach of natural justice that would justify the setting aside of the award. This was because the applicant could not establish how the alleged conduct actually impacted the outcome of the final award and how its rights had been prejudiced as a result.
Bias
More interestingly, the applicant alleged that the arbitrator had “sealed her mind” from the applicant’s evidence, and breached the rule against bias by:
- Demonstrating prejudgment against lab-grown gemstones: The applicant alleged that the arbitrator had a bias against lab-grown gemstones as demonstrated by:
- describing synthetic gemstones as “fake” and therefore, inherently less valuable than naturally-mined gemstones.
- interrupting the applicant’s witness to say he was not “comparing like with like” after the applicant referred to a naturally-mined gemstone with a similar saturation (which had been apparently known to fetch over US$2 million in the past).
- Intervening to elicit evidence in support of her preconceived views: The applicant considered that the arbitrator “descended into the arena” to find evidence in support of her prejudged views. For example, the arbitrator had:
- asked the applicant’s expert to confirm her understanding that comparing natural gemstones to synthetic ones would be like “comparing champagne with Coke”.
- dismissed the applicant’s expert’s approach to valuing the jewellery by suggesting that it reflected a “magic figure” or “arbitrary” figure.
- asked leading questions to the respondent’s expert witness.
- Imposing her personal views on celebrity status: The applicant alleged that the arbitrator imposed onto the applicant’s expert her own views regarding the lack of value in the celebrity endorsement of the applicant’s jewellery. The arbitrator had:
- asked the applicant’s expert whether he accepted that the celebrity was not as bankable a star as, for example, Julia Roberts.
- asked the applicant’s expert if he wanted to temper his view about the celebrity status of the jewellery with some reality.
- commented that in the larger scheme of things, the celebrity was a celebrity in inverted commas.
However, the court rejected these arguments, finding that the arbitrator’s inquiries were reasonable and within her role. There was no evidence that her inquiries had influenced proceedings unfairly and whilst the arbitrator didn’t “mince” her words, she was entitled to clarify the evidence put before her.
Whilst the court said it would have been preferable for the arbitrator to have used open questions instead of leading questions, this was not enough to constitute a breach of the rule against bias. The crucial question was whether the arbitrator’s conduct was such as to “impair her ability to evaluate and weigh the case presented by the parties”. This is a high threshold and it was not crossed in this case as there was no evidence of the applicant’s rights being prejudiced by the highlighted conduct.
Takeaway
This decision confirms the high bar that needs to be met for a breach of natural justice to justify the setting aside of an arbitral award. It is not enough for a party to merely point to instances where they consider that an arbitrator may have erred or made comments which they find objectionable. It is not even enough to be able to show that a rule of natural justice has been breached during an arbitration.
Instead, “an award should be read generously such that only meaningful breaches of the rules of natural justice that have actually caused prejudice are ultimately remedied”. If parties cannot show how such a breach has impacted the outcome of the arbitration and caused prejudice to their rights, a breach of the rules of natural justice will not justify the setting aside of an award
Authored by Shi Jin Chia, Hugo Petit, and Paris Buti.
