Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd

Andrew Ang J:

[1] This was an application by Front Row Investment Holdings (Singapore) Pte Ltd (“Front Row”) for an order to set aside part of an award dated 3 July 2009 (“the Award”) of the arbitrator (“the Arbitrator”) in an arbitration involving Daimler South East Asia Pte Ltd (“Daimler”) as claimant, and Front Row as respondent. The part of the Award sought to be set aside was in respect of Front Row’s counterclaim.

[2] The ground upon which the application was founded was that the Arbitrator had breached the rule of natural justice expressed in the Latin maxim audi alteram partem. In particular, the Arbitrator had inexplicably concluded that Front Row relied upon only one of three misrepresentations when there was no basis on which he could have concluded that Front Row had abandoned reliance on the rest.

[3] Section 48(1)(a)(vii) of the Arbitration Act (Cap 10, 2002 Rev Ed) (“the Act”) provides that an arbitral award may be set aside by the High Court if:

The threshold which an applicant under s 48(1)(a)(vii) has to surmount is high. It is particularly so in the present case, given the undoubted calibre and experience of the Arbitrator. Nevertheless, after hearing the parties’ submissions and in the absence of any serious attempt by Daimler’s counsel to explain away the Arbitrator’s apparent misapprehension, I allowed Front Row’s application. I now give my reasons.

[4] Front Row is a company incorporated in Singapore. It was set up specifically for a joint venture with Daimler. Daimler is also a company incorporated in Singapore. It was previously known as DaimlerChrysler South East Asia Ltd.

[5] Front Row and Daimler were parties to an agreement dated 15 September 2005 (“the Agreement”) by which they agreed jointly to organise and run a series of races across South East Asia using 35 specially built light-weight Mercedes-AMG SLK 55 cars. This series of races was to be called the “Asian Cup Series”. Under the Agreement, Front Row was responsible for financing the venture whilst Daimler was responsible for organising the Asian Cup Series. As part of Daimler’s obligation to organise the Asian Cup Series, it was to second one of its employees, Mr Thomas Buehler (“Buehler”), to Front Row to act as its general manager.

[6] The background to and terms of the joint venture were reflected in two key documents:

(a) A pre-contractual powerpoint presentation titled “Daimler Chrysler Project Asian Cup”, dated 6 July 2005, which Buehler sent to Front Row’s chief executive officer, Mr Daniel Prager (“Prager”), on 26 July 2005. This presentation was a “Concept/Feasibility Study” of the joint venture; and

(b) The Agreement, the key terms of which included the following paragraphs:

[7] From the foregoing, it is clear that Front Row’s obligations under the Agreement were to:

(a) purchase the cars as specified by Daimler and manufactured by Mercedes-AMG GmbH, a company related to Daimler; and

(b) provide the working capital required to fund the running of the Asian Cup Series.

On the other hand, Daimler’s obligations under the same were to:

(a) organise, brand and promote the Asian Cup Series;

(b) organise up to 20 races per year for two years with each race weekend holding two races; and

(c) ensure that Buehler will devote 100% of his time and effort to the running and organisation of the Asian Cup Series.

The Agreement also provided that all disputes between Front Row and Daimler arising out of or in connection with the Agreement should be settled in Singapore by a single arbitrator applying the Rules of Conciliation and Arbitration of the International Chamber of Commerce (“the ICC Rules”).

[8] Front Row duly purchased the said 35 SLK 55 cars which were specially built for the racing series. However, according to Front Row, Daimler failed to keep its side of the bargain. There was practically no organisation, branding or promotion on Daimler’s part. Daimler only organised three races and none of the races had sufficient participation. The number of participants fell steadily from 15 in the first race, which was half the expected number, to six in the second, and five in the third. In respect of the three failed races, Front Row suffered a total loss of $40,586.53.

[9] According to Front Row, following the failure of the third race, it became apparent to Front Row that the Asian Cup Series was not going to be a success. Consequently, Front Row’s director and shareholder, Mr Yeo Wee Koon (“Yeo”), tried to make the best of the situation by suggesting that Front Row stage a supporting event for the A1 Grand Prix in March 2007 using the SLK 55 cars. However, he was informed by Mercedes-AMG via a letter on 27 March 2007 (“the Letter”) that that was not possible as the SLK 55 cars had not been made for actual racing. They had been developed only for use in “driving training programmes … which [did] not involve the cars competing against each other”.

[10] Shortly after Front Row received the Letter, Buehler stopped working for Front Row. In June 2008, Front Row attempted to sell the cars back to Mercedes-AMG but without success. Front Row was also unable to find any buyer for the cars as they were usable neither on normal roads nor as race cars.

[11] On 22 February 2008, Daimler commenced arbitration proceedings against Front Row, claiming $610,506.06 from Front Row for the sums invoiced as Buehler’s salary under the Agreement (“the Arbitration”). In the Arbitration, Front Row denied liability for the same and asserted, as set out in the Terms of Reference, that Daimler:

[12] Front Row also brought the counterclaim, based on misrepresentation, against Daimler contending that:

[13] Both Daimler’s claim and Front Row’s counterclaim were dismissed by the Arbitrator. In respect of the latter, the Arbitrator noted at para 33 of the Award that Front Row had formulated its counterclaim in the following manner, which he adopted: Whether [Front Row] was induced to enter into the Agreement by one or more representations made by or on behalf of [Daimler].

[14] The Arbitrator then found, at paras 55 and 56 of the Award, that by the time Front Row’s case closed, its case had narrowed to just one representation, which was that:

[15] Following his finding that Front Row’s case of misrepresentation had narrowed to just one representation, he took the view, at para 61 of the Award, that the “race-worthiness” of the SLK 55 cars was the “key question” in the arbitration before him:

[16] The answer to this question was dependent on the meaning and effect of the Letter. The Arbitrator found, at para 67 of the Award, that Mercedes had only indicated that professional racing (ie, the type of racing which required the racing cars to have FIA homologation) and not all racing (including the type which had taken place in the three races organised as part of the Asian Cup Series) was prohibited. Since Daimler’s representation to Front Row was only that the SLK 55 cars could be used for some form of racing, and not any “professional racing”, the Arbitrator found that Daimler had not been shown to have induced Front Row to enter into the Agreement by any false representation. Accordingly, Front Row failed in its counterclaim.

[17] Dissatisfied with the outcome of the arbitration, Front Row filed this originating summons on 1 October 2009 and prayed for the following orders, inter alia:

(a) that the part of the Award dealing with Front Row’s counterclaim be set aside as a whole or to the extent as may be determined by this court; and

(b) that that part of the Award so set aside be tried afresh by a newly appointed Arbitrator.

[18] Front Row did not challenge the merits of the Arbitrator’s decision concerning the race-worthiness of the SLK 55 cars as that course of action was not open to it. Instead, Front Row based its application to this court on the Arbitrator’s finding that in the end Front Row was asserting inducement from a single misrepresentation. It said that the question whether the Letter was directed at a departure from the Asian Cup Series or effectively prohibited what had gone on in the three previous races was not the only question which had been placed before the Arbitrator for his determination. According to Front Row, it had not abandoned the ground in the counterclaim, that it had relied on Daimler’s representation, inter alia, that the latter would organise, brand and promote the Asian Cup Series. Accordingly, in reaching his decision under the erroneous impression that Front Row had abandoned such ground, the Arbitrator had breached a principle of natural justice as he would then not have considered the merits of Front Row’s submissions and arguments made in relation thereto.

[19] As stated earlier, Daimler did not make any serious attempt to explain away the Arbitrator’s apparent misapprehension. Dr Rudiger Friedrich Ackermann (“Dr Ackermann”), Daimler’s attorney before the Arbitrator, tried to defend the Arbitrator’s finding by pointing to oral submissions made by Front Row’s counsel which had focused entirely on the Letter (see Dr Ackermann’s affidavit filed on 26 October 2009, at paras 34 and 57). However, it was explained by Ms Sunita Sonya Parhar, Front Row’s solicitor before the Arbitrator that the oral submissions focused entirely on the Letter only because Front Row was addressing specific questions which the Arbitrator had posed to both parties during the oral hearing held on 20 February 2009 (see paras 5 to 9 of Ms Sunita Sonya Parhar’s affidavit filed on 9 November 2009). To that explanation there was no effective rebuttal. Before me, Daimler’s counsel made no further mention of this argument. Neither did Daimler’s counsel challenge Front Row’s legal submissions on the effect of the Arbitrator’s failure to consider Front Row’s submissions with regard to the representations which the Arbitrator concluded had been abandoned. His counter, rather, was that the representations alleged to have been made in fact formed no part of Front Row’s claim under misrepresentation. This will be dealt with in greater detail below.

[20] In order to establish that a breach of natural justice had occurred such that the Award may be set aside, Front Row had to satisfy the test set out by Choo Han Teck J in John Holland Pty Ltd v Toyo Engineering Corp (Japan) [2001] 1 SLR(R) 443 and affirmed by the Court of Appeal in Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86 (“Soh Beng Tee”). At [29] of Soh Beng Tee, the Court of Appeal said:

[21] In summary, the outcome of Front Row’s application turned on five issues:

(a) Whether Front Row had, in its counterclaim against Daimler, pleaded Daimler’s representation that it would support Front Row in organising, branding and promoting the Asian Cup Series and, in particular, that it would organise 20 races over ten weekends per annum with 30 cars;

(b) Whether, in the course of the arbitration proceedings, Front Row had ceased to rely on the same;

(c) Whether the Arbitrator’s failure to consider the same amounted to a breach of a principle of natural justice. (This involved a consideration of two sub-issues, namely, (i) which principle of natural justice had been breached; and (ii) how the Arbitrator breached this principle);

(d) Whether the Arbitrator’s breach was connected to the making of the Award; and

(e) Whether the Arbitrator’s breach prejudiced Front Row’s rights.

[22] At para 22 of its submissions before this court, Front Row relied on Yeo’s affidavit which stated that the decision to enter into the joint venture with Daimler was founded, inter alia, on three main representations Daimler made in the Concept/Feasibility Study and the Agreement. Paragraph 76 of Yeo’s affidavit provided as follows:

The only representation relevant for our consideration is that referred to in sub-para (c) (hereafter referred to as “the Representation”). Although the Representation was described by Yeo in terms set out in sub-para (c) above, references in the ReRe-Amended Answer and Counterclaim to her Representation were more specifically to the latter part of the Representation, viz, the organisation of 20 races. However, references to the Representation as a whole were subsequently made in Front Row’s opening and closing submissions.

[23] Daimler argued that the Representation did not form part of Front Row’s claim for misrepresentation at all. It relied on paras 11 to 13 and 24 of Front Row’s ReRe-Amended Answer and Counterclaim for its contention that there was no allegation by Front Row that Daimler had made the Representation; the requirement that Daimler organise, brand and promote the Asian Cup Series only appeared in relation to Front Row’s defence for its alleged breach of the Agreement (see [11] above); it did not form any part of its counterclaim.

[24] It must be said that the ReRe-Amended Answer and Counterclaim could have been better drafted. Nevertheless, on a close scrutiny of the ReRe-Amended Answer and Counterclaim, I was of the view that Daimler’s argument was not tenable. The pleadings in the Answer in paras 10 to 13, which are set out below, clearly included the Representation:

At para 26 of the same, Front Row had averred (albeit with reference to the Agreement) that Daimler’s obligations under the Agreement were precisely to organise and promote the Asian Cup Series, as mentioned at [7] above:

[25] Further, at para 28 of the ReRe-Amended Answer and Counterclaim, under the heading “Counterclaim”, Front Row pleaded:

It then stated explicitly in the next paragraph that Daimler’s misrepresentations and breaches of the Agreement were the cause of its loss, and thus the basis of its counterclaim. Paragraph 29 averred as follows:

[26] Whilst it might be argued that the words “in not performing their obligations and not promoting, organizing, initiating, staging or otherwise bringing about the AMG-Mercedes South East Asian Cup Series” were in amplification of the breach of the Agreement rather than in reference to Daimler’s misrepresentation, it could be inferred from paras 28 and 29 of the ReRe-Amended Answer and Counterclaim that Front Row not only regarded Daimler’s breach of obligation to organise, brand and promote the Asian Cup Series as a defence against Daimler’s claim for breach of the Agreement; it also treated Daimler’s misrepresentation as to its intention to undertake particular actions (in particular to organise and promote the Asian Cup Series) as a ground for its counterclaim. Why else would Front Row repeat paras 1 to 26 under the counterclaim? I was also guided by the Terms of Reference agreed upon by both parties and by Front Row’s opening and closing submissions during the arbitration proceedings. The Terms of Reference provided at page 4 that:

[27] Front Row’s outline opening submissions were also replete with references to the promotion and organisation of the Cup Series (see paras 1, 9 and 10). At para 14.a of the same, Front Row explicitly stated that two sets of disputes had arisen between itself and Daimler, the first being in relation to the question:

This was reiterated at para 15 of the same:

Later at para 78 of the same, Front Row emphasised that the fundamental basis of its claim in misrepresentation lay in the representations made by Daimler to Front Row, which were eventually found in the Concept/Feasibility Study and the Agreement:

[28] In its written closing submissions, Front Row then reiterated its position that Daimler had made representations that it would organise, brand and promote the Asian Cup Series. Under the heading “Brief Summary of the Story”, Front Row submitted that:

Subsequently, under the heading “Issue A – Misrepresentation” of Front Row’s written closing submissions, Front Row repeated the representations which it relied on:

[29] Considering Front Row’s ReRe-Amended Answer and Counterclaim and its opening and closing submissions in their totality, it was clear to me that Front Row’s claim for misrepresentation was founded on the Representation, inter alia. Indeed, the Arbitrator himself referred to the Representation in the Award, albeit in the context of finding that Front Row had ceased to rely on this representation in its case of misrepresentation against Daimler. Under the heading “Misrepresentation Issue” at para 56 of the Award, the Arbitrator said:

From para 56 of the Award, it can be seen that the Arbitrator accepted that Front Row did plead that Daimler had represented that it would organise 20 races, that this representation was one of the grounds which Front Row had relied upon in its claim for misrepresentation, and that Front Row had ceased to rely on the same. Also, I noted that this representation that Daimler would organise 20 races was part of what organising, branding and promoting entailed. What the Arbitrator dealt with in the Award was more the specific than the general. Accordingly, I was of the view that Daimler could not argue that the Representation did not form any part of Front Row’s counterclaim and was relied upon only in Front Row’s defence against Daimler’s claim for Buehler’s salary.

[30] Section 48(1)(a)(vii) of the Act provides that the High Court may set aside an arbitral award where:

There are two fundamental principles of natural justice. These are reflected in the maxims nemo judex in causa sua and audi alteram parterm, which were explained by the Court of Appeal in Soh Beng Tee (at [20] supra) at [43]:

[31] In Pacific Recreation Pte Ltd v SY Technology Inc [2008] 2 SLR(R) 491, the Court of Appeal held that a court or tribunal would be in breach of natural justice if it decided a case on a basis not raised or contemplated by the parties, since the affected party would have been deprived of its opportunity to be heard or to address the issues upon which the case was decided: at [30]. The corollary is plainly also true – that a court or tribunal will be in breach of natural justice if in the course of reaching its decision, it disregarded the submissions and arguments made by the parties on the issues (without considering the merits thereof). Otherwise, the requirement to comply with the maxim audi alteram partem would be hollow and futile, satisfied by the mere formality of allowing a party to say whatever it wanted without the tribunal having to address or even understand and consider whatever had been said.

[32] As the Court of Appeal noted in Soh Beng Tee ([20] supra) at [65(a)]:

[33] This principle is reflected in the decision of the High Court in Koh Bros Building and Civil Engineering Contractor Pte Ltd v Scotts Development (Saraca) Pte Ltd [2002] 2 SLR(R) 1063 at [47], namely, that the basic duty of an arbitrator is to listen to both sides of the argument and give each side an opportunity to submit on all relevant points.

[34] In that case, the applicant contractors had applied to the arbitrator for an interim award of the sum claimed. The developers objected on the ground of res judicata and the arbitrator agreed to hear their preliminary objections on that ground to the application for an interim award. At the hearing, the developer’s counsel objected additionally to the application for an interim award on the basis that the matter was not an appropriate one for summary disposal. Counsel for the contractors quite rightly did not address the additional ground at the hearing but focussed on the issue of res judicata since that had been the only issue for which the hearing had been convened. However, the arbitrator evidently agreed with the submissions of the developer’s counsel on the latter ground for, after the hearing, the arbitrator wrote to the parties to notify them that he did not consider it appropriate to hear the application for an interim award. The contractor filed a motion to remove the arbitrator on the basis of his misconduct pursuant to s 17(1) of the Arbitration Act (Cap 10, 1985 Ed) (since repealed).

[35] Judith Prakash J agreed (at [44]) with the submission that the arbitrator had acted inappropriately because he:

Prakash J ruled (at [45]) that there had been a breach of natural justice because the arbitrator had:

(a) gone beyond the boundaries of the reference he had stipulated for the hearing on the application for an interim award;

(b) failed to indicate clearly during the course of the hearing that he was considering making a decision on the basis of the submission on the additional ground which had not been addressed by the contractors; and

(c) failed to afford parties an opportunity to address him on the facts of the case so that he could consider them in determining whether the issues could be dealt with summarily.

The failure to allow a party to address the tribunal on a key issue is the corollary to allowing the submission but then ignoring it altogether whether deliberately or otherwise. In both cases, the mischief is precisely the same: a party is denied the opportunity to address its position to the judicial mind. As Front Row’s counsel posed rhetorically at para 37 of its submissions:

That this cannot be right is demonstrated by a line of Australian cases in which the courts have considered the duty of an arbitrator or adjudicator in similar circumstances. These cases deal with applications by the plaintiffs seeking to impugn the determination by adjudicators of claims arising under the New South Wales Building and Construction Industry Security of Payment Act 1999 (“the NSW SOP Act”). Section 22 of the NSW SOP Act deals with the contents of a determination and s 22(2) sets out the matters to which an adjudicator must have regard when reaching his decision on the application. These include, inter alia, all the submissions made by the claimant and respondent in support of their respective cases. Section 22(2) provides:

[36] The first of the Australian line of cases, Timwin Construction v Façade Innovations [2005] NSWSC 548 (“Timwin”) concerned the adjudicator’s failure to consider a reason given by the plaintiff, Timwin, for withholding certain payments to Façade. Timwin had advanced three reasons for resisting Façade’s claim. The adjudicator said that one of the reasons given by Timwin did not “make sense” and emphasised his difficulty in understanding the reason, using the words “whatever that means” in relation to Timwin’s explanation of that reason (see [14]) of Timwin. Façade had, however, addressed and rebutted that particular reason in its submissions. McDougall J was of the view that if the adjudicator was seeking to understand Timwin’s explanations, he would have referred to Façade’s apparent understanding and rebuttal. As he did not attempt to understand and address the issues before him, he had denied Timwin natural justice. McDougall J’s remarks bear repetition:

[37] A clear principle that can be drawn from Timwin is that there will be a breach of natural justice when the arbitrator disregards the submissions made by a party during the hearing, or has regard to them but does not really try to understand them and so fails to deal with the matter in dispute.

[38] In Lanskey v Noxequin [2005] NSWSC 963 (“Lanskey”), the adjudicator had incorrectly described Lanskey’s defences to Noxequin’s claim for payment as set offs when in fact some of Lanskey’s defences were to the effect that some work had not been done at all and, as a result, Noxequin had not completed the work as a whole. This was material because the claim was for final payment and release of the retention sum. The court held that the adjudicator’s failure to properly consider the submission as to whether the work had been done at all amounted to a failure to accord Lanskey natural justice as required under s 22 of the NSW SOP Act. The court held the adjudication determination to be void, setting it aside. It reasoned at [15] of its judgment that:

[39] It was submitted on behalf of Front Row that although Lanskey was decided on the basis of certain statutory provisions, the same reasoning can be applied in the present case since it is not just a requirement of statute but rather one which is also enshrined in the common law, that an arbitrator fairly consider the issues before him. I agree and would also note that ultimately the court held that Lanskey had not been accorded natural justice. The propositions which Front Row’s counsel submitted (and I agree) may be distilled from Lanskey are that, first, a tribunal has at least to consider all issues that have been raised by parties. Secondly, the court will look at the face of the documents and the tribunal’s decision to determine whether the tribunal has in fact fulfilled its duty to apply its mind to the issues placed by the parties before it and considered the arguments raised.

[40] In Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941 (“Trysams”), Trysams had first relied on a report to show that some tiles were defective, thus justifying retention of payment. The adjudicator held that Club Constructions had not had the opportunity to consider the report at the time of the application for adjudication and so disregarded it. Trysams submitted that the report should have been considered by the adjudicator and that his failure to consider the report was a breach of natural justice. The court accepted that it was so. At [49], [60] and [61], the court held as follows:

[41] Trysams had also put in a counterclaim for liquidated damages. The adjudicator stated that Trysams had not given him sufficient information to enable him to assess liquidated damages, as Trysams had not advised him of the date of practical completion of the units. As such, he made no finding on that issue.

[42] Counsel for Club Constructions readily conceded before Hammerschlag J that the adjudicator had been provided with sufficient information for him to have assessed liquidated damages. However, he submitted that in determining that Trysams had provided insufficient information to assess any liquidated damages, the adjudicator had simply made an “unfortunate mistake” in failing to consider the submission which, he submitted, was insufficient to make the adjudication void.

[43] The court found that the adjudicator had been provided with sufficient information to have assessed liquidated damages as, on the face of the adjudicator’s written decision, Trysams had advised its determination of the date of practical completion and, moreover, the adjudicator made reference to this date in his own decision. As such, the court held as follows:

[44] All three Australian cases were recently considered by Prakash J in SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2009] SGHC 257 (“SEF Construction”). In SEF Construction, the defendant, Skoy, sought payment from the plaintiff, SEF, under a building contract by bringing an adjudication application under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the SOP Act”). The adjudicator determined that SEF was to pay Skoy a certain sum of money. SEF sought to set aside this adjudication determination. It contended that although it had relied on four grounds to contend that Skoy’s adjudication application was invalid, the adjudicator had only dealt with two of those four grounds in giving his reasons for his determination. SEF therefore argued, first, (at [28] and [33]) that the adjudicator’s failure to consider duly made submissions amounted to a breach of his duty to consider the same in good faith under s 17(3) of the SOP Act; and second, (at [31] and [48]) that in line with Timwin, Lanskey and Trysams, the adjudicator’s failure to deal with the two issues amounted to a failure to exercise his powers under the SOP Act in good faith and constituted a breach of his duty to comply with the rules of natural justice as prescribed by s 16(3)(c) of the SOP Act. Prakash J found that it would be superfluous to import a duty to act in good faith from administrative law as s 16(3) of the SOP Act was clear about the manner in which the adjudicator had to conduct the arbitration, mandating that he acted independently, impartially and in a timely fashion. Nevertheless, she also said at [58] that: “[w]hat the Australians say in regard to good faith can be applied to the requirements of natural justice as well”. Prakash J then turned to the question whether the adjudicator had breached the rules of natural justice. On the facts, she found that in arriving at his decision, the adjudicator did have regard to the respective submissions and material before him, even though he had omitted to state explicitly his reasons for rejecting the same. Accordingly, there was no breach of natural justice. The following passages from SEF Construction are instructive:

[45] In other words, Her Honour found that there was no breach of natural justice in SEF Construction because the adjudicator clearly had regard to the submissions of parties and the material before him in arriving at his decision. In contrast, I could not make a similar finding in the present case. The Arbitrator had explicitly stated, at paras 55 and 56 of the Award, that he was disregarding the issue concerning Daimler’s obligation to organise, brand and promote the Asian Cup Series because Front Row had ceased to rely on this issue. This was not a case where he had had regard to Front Row’s submissions on the issue but accidentally omitted to state his reasons for rejecting the same or had found the same to be so unconvincing as to render it unnecessary to explicitly state his findings on it (SEF Construction at [60]).

[46] The conclusion which I ineluctably came to was that in failing to consider Front Row’s submissions on the Representation, the Arbitrator failed to accord Front Row natural justice.

[47] Not only was I convinced that the Arbitrator’s failure to consider the Representation amounted to a breach of natural justice, I was also convinced that this breach was causally linked to his decision to dismiss Front Row’s counterclaim, thereby prejudicing Front Row’s rights.

[48] In Soh Beng Tee ([20] supra), applied by the High Court in subsequent cases such as Dongwoo Mann+Hummel Co Ltd v Mann+Hummel GmbH [2008] 3 SLR(R) 871 (“Dongwoo”), the Court of Appeal stated at [73] that:

[49] At para 67(i) of the Award, the Arbitrator specifically found that Daimler “did not properly or fully perform its obligation to promote the Series”. This was his basis for concluding that Front Row had a defence to Daimler’s claim for reimbursement of Buehler’s salary package. Had he known that the ground of counterclaim based on the Representation was still extant, he could not have dismissed the counterclaim without giving that ground due consideration, taking into account, inter alia, Daimler’s failure to organise the 20 races per year. I was therefore of the view that the breach of natural justice was sufficiently connected to the arbitrator’s dismissal of Front Row’s counterclaim.

[50] Finally, the court may only intervene to set the Award aside where the Arbitrator’s breach of natural justice prejudiced Front Row’s rights. Once again, Soh Beng Tee ([20] supra) and Dongwoo ([48] supra) were instructive. In the former, the Court of Appeal held at [91] and [98] that:

[51] In seeking to persuade the court that the Arbitrator’s breach of natural justice prejudiced the rights of Front Row, the latter pitched its arguments too high (and, in my view, unnecessarily so). I set out below the key paragraphs from its written submissions:

[52] While it is true that a key limb of Front Row’s defence was also a key limb in its counterclaim, viz, Daimler’s failure “to organise, brand and promote the Cup Series, specifically, [its failure] to make reasonable efforts to organise up to 20 races per year for 2 years” (at para 68 of Front Row’s written submissions), this was in itself insufficient for Front Row’s counterclaim to succeed. Paragraph 65, read with para 68, of the written submissions mistakenly assumed that just because Daimler had failed to organise, brand and promote the Asian Cup Series, in particular, to organise 20 races per year for two years, Front Row’s counterclaim had to succeed. This is not true. From my perusal of the Award, Daimler’s claim for reimbursement of Buehler’s salary was dismissed because it breached its contractual obligation to promote the Asian Cup Series (In this regard, Front Row’s submission (at para 70 of its written submissions) that the Arbitrator had dismissed Daimler’s claim for reimbursement of Buehler’s salary because Daimler had breached its representation that it would undertake responsibility for the branding and promotion of the Asian Cup was erroneous). However, it does not inexorably follow from the breach of Daimler’s contractual obligation that Front Row would have succeeded in its counterclaim based on misrepresentation. It has to be remembered that the alleged misrepresentation was as to Daimler’s avowed intention to organise 20 races per year for the Asian Cup Series. It is not enough that Daimler failed to do so. It must be proved on a balance of probability that when Daimler made the Representation, it did not truly intend to carry out the avowed intention. Having said that, it was not necessary for Front Row to satisfy me that it would have succeeded in the counterclaim had the Arbitrator not mistakenly concluded that Front Row had dropped the issue with regard to the Representation (Indeed, it would be an unwarranted intrusion for this court to go into the merits of the counterclaim). It sufficed that the Arbitrator had failed to consider the issue because of his misapprehension that it had been dropped, provided such failure prejudiced the rights of Front Row in that the Arbitrator did not get round to considering whether Front Row’s claim with respect to the Representation had been made out.

[53] As I have concluded earlier, an arbitrator’s failure to consider material arguments or submissions is a breach of natural justice. In the present case, the Arbitrator had dismissed Front Row’s counterclaim without considering the grounds of its counterclaim in full because he was under the misapprehension that Front Row had abandoned its reliance on the Representation. Had he not been mistaken, he would have had to decide whether or not the Representation was false. A decision that there had been a misrepresentation in regard thereto would have resulted in an award in favour of Front Row, assuming the other ingredients for a successful claim (viz, “reliance” and “detriment”) were satisfied. It was not for me to delve further into the question whether Front Row’s reliance upon the Representation would have succeeded but for the arbitrator’s misrepresentation. It sufficed that the Arbitrator failed to consider such a material ground. That alone was sufficient prejudice to Front Row.