Artic Builders & Co Pte Ltd

- vs -

Tan Tong Meng Co Pte Ltd

Judgment

KC Lai J

(delivered the judgment of the court)

1. By an agreement in writing dated 15 November 1975 between Artic Builders & Co (Pte) Ltd (the Appellants) and Tan Tong Meng Co Pte Ltd (the respondents), the appellants agreed to erect and complete for the respondents a 19-storey apartment block at the price of $4,227,818.

2. Clause 25(1) providing for the termination of the building agreement was in the following terms:

   If the Contractor shag make default in any one or more of the following respects, that is to say: (a) If he without reasonable cause wholly suspends the carrying out of the Works before completion thereof, or (b) If he fails to proceed regularly diligently with the Works, or (c) If he refuses or persistently neglects to comply with a written notice from the Architect requiring him to remove defective work or improper materials or goods and by such refusal or neglect the Works are materially affected, or (d) .... then the Architect may give to him a notice by registered post or recorded delivery specifying the default, and if the Contractor either shall continue such default for fourteen days after receipt of such notice or shall at any time thereafter repeat such default (whether previously repeated or not), then the Employer without prejudice to any other rights or remedies, may within ten days after such continuance or repetition by notice by registered post or recorded delivery forthwith determine the Employment of the Contractor under this Contract provided that such notice shall not be given unreasonably or vexatiously.

3. Before the completion of the works the respondents by a letter dated 2 June 1978 terminated the appellants’ employment. On 26 June 1978 the parties agreed to refer all matters in dispute between them to a sole arbitrator, Mr. Cashin, an advocate and solicitor.

4. The arbitration proceedings commenced on 23 January 1979 and on 9 May 1979 the arbitrator published his interim award on the issue of liability. It is common ground that the parties agreed that the interim award was a ‘speaking’ award, that is, an award which deals with all issues of fact and law and the findings of fact being final and conclusive. The arbitrator found that the respondents did not procedurally give the notices as required by cl 25(1) of the contract and that therefore no proper notice of termination was given. The arbitrator also found that on the facts there was no sufficient justification for the notices leading to the letter of termination of 2 June 1978.

5. On 18 June 1979, the respondents’ solicitors wrote to the arbitrator a letter which reads:

   HE Cashin Esq, Messrs Murphy & Dunbar, 1901 Hong Leong Building, (19th Floor) Raffles Quay, Singapore 1 Dear Sir, Re: Arbitration between Artic Builders & Co Pte Ltd and Tan Tong Meng & Co Pte Ltd (1) We have now been instructed to act for M/s Tan Tong Meng & Co Pte Ltd, the Respondents in this Arbitration, in place of M/s CB Yeow & Co, and refer to the Interim Award signed and published by you on the 9 May 1979. (2) We have perused your Interim Award in the context of the Pleadings and other documents which were placed before you in this Arbitration. We refer in particular to the Architects, Messrs Ong & Ong’s letter of the 17 May 1978 to the claimants and to Messrs SK Lee & Co’s letter of the 2 June 1978 to M/s Donaldson & Burkinshaw Whereas, both the said letters invoked the provisions of cl 25(1) of the Agreement dated 15 November 1975 between the claimants and the Respondents, they did not limit the Respondents’ rights to cl 25(1)(c). Indeed, in terminating the contract under the provisions of cl 25(1) of the Agreement, the Respondents were not limiting their rights to the facts and circumstances that may have fallen to be governed by cl 25(1)(c). Instead, the Respondents were relying upon the record of performance or the lack of it of the claimants under the entire contract. (3) In the circumstances, your Interim Award, predicated, as it is, upon the limited issues and facts that may have fitted themselves into the framework of cl 25(1)(c) of the contract, has not considered all the other issues that were germane to the question of whether the Respondents’ termination of the contract was legally valid and whether, further, the Respondents were entitled to their counter-claim in all the circumstances of the case. (4) Due to the foregoing considerations we have been instructed to take matters further and we would be grateful to know if you would be prepared, in view of the larger issues we have referred to above, to state a special case to the Court with respect to your Interim Award on the question of whether you were right in considering the effect in law of cl 25(1)(c) only and not the entire cl 25(1) of the contract. We refer in this regard to s 28 of the Arbitration Act (Cap 16). (5) We would be grateful to have your reply by return, as, we may have to move the Court for appropriate relief within the time limited by the Rules, otherwise. Yours faithfully, Sgd: Rodyk & Davidson

6. On 20 June 1979 the arbitrator replied by letter which reads:

   M/s Rodyk & Davidson, Singapore. Dear Sir, Arbitration between Artic Builders & Co Pte Ltd and Tan Tong Meng & Co Pte Ltd. I thank you for your letter of 18 June 1979 (1) At the end of the first phase of the hearing I clarified with Mr. CS Wu, Counsel for the Claimants, and with Mr. M Karthigesu, Counsel for the Respondents, the form in which they wished me to make my award. I first asked Mr. Karthigesu whether he wanted me to give my award by way of case stated and his reply to me was that this would not be necessary if my award was to be given in ‘speaking’ form. Mr. Wu agreed. (2) My note on this reads ‘K states no need for case stated if I give ‘speaking’ award. FW agrees.’ I should explain that Mr. CS Wu is also known as Mr. Fred Wu hence the reference to FW. (3) At the opening of his case Mr. CS Wu referred to the notices allegedly sent under s 25(1) by the Respondents and as a result on the 24 January 1979, Mr. Karthigesu applied to amend the particular in order to reply upon the minutes of a meeting held on 21 March 1979. The minutes themselves were dated 23 March. Both Counsel during the course of Mr. Wu’s opening agreed that it was sub-cl (c) of cl 25(1) on which the Respondents were relying. If further clarification was needed, in his opening, I have recorded Mr. Karthigesu as saying ‘Confine F’s evidence to the issue as to whether determination of contract was justified. Rely on amendment made — 25(1)(c) of Contract three documents (1) Minutes 23 March 1978 (2) Letter 17 May 1978 (3) Letter 2 June 1978 Mr. Karthigesu then went on to direct his entire case towards these issues and in his closing address once again limited his argument to 25(1)(c). (4) In these circumstances, I find it impossible to concede that the Respondents did not limit their rights to cl 25(1)(c). I do not accept that they relied upon the record or performance or the lack of it of the Claimants under the entire contract. (5) Further, in view of the fact that both Counsel agreed that I should not submit my award as a case stated for the decision of the High Court, I do not see how following that agreement the Respondents can now invite me to state a case. (6) Finally, in the manner in which this first phase of the arbitration was agreed to be taken and heard, I am of the view that I am functus officio as far as this phase of the arbitration is concerned. However, it is open to you to apply to Court for any order which you may think proper or applicable. Yours faithfully, Sgd: HE Cashin

7. On the same day, 20 June 1979 the respondents filed in the High Court Originating Motion No 39 of 1979 seeking to set aside, vary or remit to the arbitrator the interim award on five ground as set out in the notice of motion. On 6 October 1979 the respondents filed a ‘Supplementary Notice of Additional Grounds of Appeal’ setting out a sixth ground on which they relied.

8. The originating motion was part-heard by AP Rajah J on 11 & 12 October 1979. The hearing was resumed on 4 March 1980 when an order was made that ‘The case be remitted to the Arbitrator, Mr. HE Cashin on the question of whether the Respondents had made cl 25(1)(a) and cl 25(1)(b) of the Building Contract dated November 1975 part of their case, and if so, the Arbitrator do make his findings on the Respondents’ case under these Clauses’.

9. Pursuant to the remission order the parties appeared before the arbitrator on 2 April 1980 and on 10 April 1980 the arbitrator published his remission findings. The arbitrator found that the respondents relied only on cl 25(1)(c) on the question of termination in presenting their case before him during the arbitration proper. In his published remission findings he also ruled that he would not reopen the case and hear further submissions as to what notices were given which might have satisfied termination under cl 25(1)(b).

10. As much has turned in the proceedings below and will turn in the appeal before us on the remission findings of the arbitrator, we find it necessary to quote extensively from them. At the remission hearing, Mr. M Karthigesu, who was counsel at the original arbitration hearing, also appeared in a neutral position to assist the arbitrator and the parties.

11. The arbitrator stated in his remission findings as follows:

    I have already in my Award stated that the notes of evidence do not form part of the Award. I cannot now vary my Award. I have perused my notes of evidence very carefully. Indeed as a result of an exchange of letters when Mr. Selvadurai took over from the Respondents’ previous solicitors, I had already had occasion to study this issue closely. At the original hearing Mr. Wu opened at length and referred to the termination provisions under cl 25 of the contract. It is common ground that at quite an early stage, he, Mr. Wu, asked Mr. Karthigesu, then Counsel for the Respondents, if he could confirm that three notices were required under cl 25(1)(c) and Mr. Wu cited Keatingon Building Contracts on the point. Mr. Karthigesu confirmed this before me. It was at this stage in the original hearing that Mr. Karthigesu indicated that he would be asking to amend particulars to meet the case of determination under cl 25(1)(c). This in fact Mr. Karthigesu did the next day. I confirm that at the original hearing Mr. Wu stated That he needed to know, as he would have to decide the extent of the evidence to be called, whether the Respondents were relying only upon cl 25(1)(c). Mr. Wu stated no one at any point relied on assignment [cl 25(1)(d)] or total suspension [cl 25(1)(a)]. Before me Mr. Karthigesu agreed that he had not relied on 25(1)(a) or 25(1)(d). Mr. Wu pointed out that the evidence required under cl 25(1)(c) might well overlap with the evidence required to satisfy cl 25(1)(b). Mr. Wu then pointed out that in his opening it was his distinct recollection that Mr. Karthigesu stated that his case for determination was only under cl 25(1)(c). He then pointed out that the evidence led by Mr. Karthigesu from witnesses concerned determination under cl 25(1)(c). Mr. Karthigesu interjected that he placed particular emphasis on cl 25(1)(c). He did not think that in doing this he had abandoned cl 25(1)(b). He agreed that he had not referred to the notices required to satisfy cl 25(1)(b). Mr. Karthigesu then pointed out that the evidence required to satisfy cl 25 (1)(c) would overlap with that required to satisfy cl 25(1)(b). Mr. Selvadurai, as I have said, was handicapped in that he was not present at the original hearing. He made various references to the evidence which in my opinion were not correct. He then asked me for my notes of evidence and stated that he wished to know what that evidence was so that he could argue before me that cl 25(1)(b) had been relied upon. He also wished thereafter to address me so that he could point out to me now what letters in his view constituted the notices required to satisfy cl 25(1)(b). I ruled that I would not reopen the case and would hear no further submissions as to what notices were given which satisfied termination under cl 25(1)(b). I also stated that I would not make any notes available to either Counsel and stated that I would give my reasons in writing later. As I have said, in my Interim Award I did not make the notes of evidence part of the Award and I am of the view that I cannot vary that decision and so I cannot publish my notes of evidence now. I do not think it necessary for me to go into much detail. I am completely satisfied that in the manner in which the Claimants’ case was presented by Mr. Wu and as a result of the answers given by Mr. Karthigesu to queries raised by Mr. Wu with regard to which particular sub-clause of cl 25 he was relying on the point of termination, Mr. Karthigesu, although originally he was not completely satisfied that he would rely only on cl 25(1)(c), in fact never cross-examined in sufficient breadth to indicate that he was relying on cl 25(1)(b) as well. The amendment for which he asked, which had direct bearing on the notices on which he was relying, related entirely to cl 25(1)(c). Much more important, in his opening I have recorded him as saying as follows: Confine evidence to the issue as to whether determination of contract was justified. 25(1)(c) of contract three documents. 1.  Minutes of 23 March 1978. 2.  Minutes of 17 May 1978. 3.  Minutes of 2 June 1978. He then referred to the contract.

12. It was quite clear that when Mr. Karthigesu said that he confined his evidence to the issue as to whether the determination of the contract was justified, he meant exactly what he said and that was tantamount to his reliance only on cl 25(1)(c). It is interesting to note that the evidence led by him related only to this issue. The only notices he referred to again related only to this issue and at no stage of his address was cl 25(1)(b) ever mentioned.

13. As I have already pointed out, it is common ground that no one relied on total suspension of the contract or termination under cl 25(1)(a).

14. I therefore find that the Respondents relied only on cl 25(1)(c) on the question of termination in presenting their case to me.

15. Ten days before the first originating motion filed in 1979 was finally disposed of, an affidavit of Tan Wai See was filed on behalf of the respondents. It was deposed on behalf of the respondents that Mr. Karthigesu at the remission hearing had stated that the evidence that was recorded by the arbitrator was not confined to the situation under cl 25(1)(c) but covered the situation under Cl 25(1)(b) as well. Mr. Karthigesu, it was further deposed to, then went on to state that whilst he had concentrated on the situation under cl 25(1)(c) in making his submission on the law, he had not abandoned or waived the respondents’ rights under cl 25(1)(b) of the building agreement. The respondents also complained very strongly that the arbitrator had wrongfully refused to reveal his notes of the evidence. In the circumstances, the respondents contended that the arbitrator had by his rulings shown against them bias such that the interim award as amplified by his remission findings ought to be set aside.

16. The 1979 originating motion was heard for the last time before AP Rajah J on 22 May 1980. At the conclusion of it, the learned judge ordered that the respondents pay the appellants’ the costs of the motion and the remission hearing. It should be noted that in terms, the order of court stated that the motion came on for further hearing ‘On the question of costs.’ As far as that particular motion is concerned, that was the last order made and there has been no appeal.

17. What had happened was that a week earlier, on 15 May 1980, the respondents had filed another Originating Motion No 31 of 1980 and sought an order from the High Court to set aside the interim award of the arbitrator as amplified by the remission findings. In support of the motion, the respondents set out altogether seven grounds, the first six of which were a repetition of the six grounds which were unsuccessfully canvassed in the 1979 motion.

18. The seventh ground was in these terms:

    That the learned arbitrator had misconducted himself by showing bias against the Plaintiffs and failing to observe the rules of natural justice during the Remission Hearing that took place on 2 April 1980 pursuant to the Order made by the Honourable Mr. J AP Rajah on the 4 March 1980 in Originating Motion No 39 of 1979.

19. The originating motion was also heard by AP Rajah J in May, 1981. In his reserved judgment, he held that the seventh ground was made out and he set aside the interim award as amplified by the remission findings. Against this judgment, this appeal is brought.

20. The learned judge had come to the conclusion that there was a miscarriage of justice at the remission hearing principally on two grounds: viz

    1. the arbitrator had failed to disclose his notes of evidence by appending them to his remission findings; and

    2. the arbitrator had failed to allow counsel for the respondents to submit on the notices which were allegedly given and which would have founded a termination under cl 25(1)(b) by reason of which the hearing at the remission was unfair to the respondents.

21. The important question for our decision is whether the arbitrator had acted judicially and fairly at the remission hearing in coming to the conclusion that the respondents had confined their termination of the building contract under cl 25(1)(c). It has been common ground throughout that no reliance has been placed on cl 25(1)(a). Had the respondents kept alive their alternative case of lawful termination under para 25(1)(b)?

22. Having scrutinized the interim award and the remission findings, we are entirely satisfied that the respondents had confined their case of termination solely under cl 25(1)(c) and had, in fact, abandoned whatever case they had had under cl 25(1)(b). The remission findings which we have quoted disclosed the evidence and the reasons which clearly support the arbitrator’s conclusion. We need not repeat them. We note that it was recorded in the arbitrator’s notes of evidence that Mr. Karthigesu had said words to the following effect:

    Confine evidence to the issue as to whether determination of contract was justified. 25(1)(c) of contract three documents. 1. Minutes of 23 March 1978. 2. Minutes of 17 May 1978. 3. Minutes of 2 June 1978.

23. Although the learned judge thought that the arbitrator should have made his notes of evidence a part of his interim award, we must again stress that there are very good reasons why, save possibly in the exceptional cases, notes of evidence of the arbitrator should be excluded from an award: see Tersons Ltd v Stevenage Development Corp [1965] 1 QB 37. In arbitrations, findings of facts are within the sole province of the arbitrator. Under the law of arbitration as unamended, which applied to this arbitration, the courts’ supervisory jurisdiction was exercised only

    1. where there is a manifest error of law on the face of the award;

    2. where there is a misconduct; or

    3. where a special case if stated on a question of law.

24. So far as the remission findings are concerned, we are unable to find any misconduct, in the technical sense, on the part of the arbitrator.

25. The learned judge was also critical of the arbitrator’s refusal to hear any submission from the respondents on cl 25(1)(b). We are unable to understand the criticism. Having answered the first limb of the remission order in the negative, it is plain and logical that the arbitrator should not, as he quite properly did not, entertain any submission nor hear any evidence bearing on cl 25(1)(b) nor make any findings thereon.

26. Before us, the appellants also relied on the plea of res judicata.

27. They contended that the seventh ground in the second originating Motion was first raised in the, respondents’ affidavit of 12 May 1980 in the course of the first originating motion. Relying on Yat Tung Investment v Dao Heng Bank [1957] AC 581 the Appellants further contended in the alternative that the matter could have been raised in the first originating motion. Not having raised it, the respondents were precluded, as the appellants contended, from raising it in the second originating motion. In our judgment, the plea of res judicata must fail. A remission order having been made, the first Originating Motion was virtually spent. When the final order was made by the learned judge, he and the parties before him were all only concerned with the single question of dealing with the question of the costs of the first originating motion. Indeed, the terms of the order expressly confirm the position. We are satisfied that the allegations of the respondents made in their affidavit, which related to the remission hearing and findings, were not matters properly before the learned judge nor were they matters which could have arisen in the first originating motion.

28. For these reasons, we accordingly allow the appeal with costs here and below. The order of the learned Judge is set aside.[a]

Cases

Tersons v Stevenage Development Corp [1965] 1 QB 37; Yat Tung Investment v Dao Heng Bank [1975] AC 581

Representation

CS Wu (Donaldson & Burkinshaw) for the appellants.

P Selvadurai and RS Rabindran (Rodyk & Davidson) for the respondents.

Notes:-

[a] The respondent appealed against this decision. The Privy Council (Lord Bridge of Harwich, Lord Brightman, Lord Mackay of Clashfern, Lord Ackner & Lord Goff of Chieveley) on 22 May 1986 dismissed the appeal. See Tan Tong Meng Co Pte Ltd v Artic Builders & Co Pte Ltd @www.ipsofactoJ.com/archive/index.htm [1986] Part 5 Case 3 [PC]