WITNESS GATING AND BREACH OF NATURAL JUSTICE
Is an arbitrator entitled to decline to hear evidence from all of a party’s witness based on his interpretation of the arbitral rules? This issue arose for consideration in the High Court decision of CBP v CBS [2020] SGHC 23 (“CBP v CBS”), and on the facts of the case, the High Court set aside the arbitral award for breach of natural justice.
The facts. A dispute arose between the plaintiff (the “Buyer”) and the defendant (the “Bank”) in relation to an agreement for the purchase of coal, which was recorded in two separate sale and purchase contracts (the “agreements”) ([3] – [5], [9] – [19] CBS v CBS).
The Bank commenced arbitration proceedings against the Buyer, which was governed by the Arbitration Rules of the Singapore Chamber of Maritime Arbitration (3rd Edition, 2015) (the “SCMA Rules”), and a sole arbitrator was appointed ([20] CBP v CBS).
At the expense of over-simplification, a series of events occurred which resulted in the arbitrator directing that “since parties had not agreed to a documents-only arbitration, pursuant to r 28.1 of the SCMA Rules, an oral hearing would be conducted… pursuant to the same rule, there would be no witnesses presented at the hearing as the Buyer had “failed to provide witness statements or any evidence of the substantive value of presenting witnesses.”…” (emphasis in original) ([40] CBP v CBS).
In due course, the final award was issued, and the Buyer applied to set aside the entirety of the award ([47] CBP v CBS) on the basis that there was no valid arbitration agreement, there was a breach of the rules of natural justice, and/or that the Buyer was unable to present its case ([48] CBP v CBS).
Rule 28.1 SCMA Rules. We set out Rule 28.1 of the SCMA Rules given its importance to the dispute in CBP v CBS:
Unless the parties have agreed on a documents-only arbitration or that no hearing should be held, the Tribunal shall hold a hearing for the presentation of evidence by witnesses, including expert witnesses, or for oral submissions.
In CBP v CBS, the High Court identified the key dispute as “… whether the latter portion, which relates to the conduct of an oral hearing in the event that parties do not agree to a documents-only arbitration, permits the arbitrator to dispense with the need for the presentation of witnesses even where one of the parties insists on the need for witness testimony” ([57] CBP v CBS).
Interpretation of Rule 28.1 SCMA Rules. The High Court held that Rule 28.1 of the SCMA Rules did not give the arbitrator the power to reject all of the Buyer’s witnesses ([63] CBP v CBS).
Referring to Simon Davidson (SCMA Head of Procedure Committee) Commentary on the 3rd Edition of the Rules of SCMA 21 October 2015), the High Court held that the commentary suggests that the latter portion of Rule 28.1 must be read holistically such that oral submissions cannot be used as an alternative to the presentation of evidence by witnesses. This is especially considering Rule 30.5 of the SCMA Rules. Hence, an oral hearing should always be held unless the parties agree otherwise ([64] – [67] CBP v CBS).
In this regard, it is important to note that the High Court distinguished Rule 28.1 of the SCMA Rules from other arbitral rules, such as Art. 16(a)(ii) of the London Maritime Arbitrators Association Terms (2017) and Art. 8.2 of the International Bar Association Rules on the Taking of Evidence in Internationla Arbitration (2010) ([68] CBP v CBS).
The power to gate witnesses is subject to the fair hearing rule. More importantly, while the High Court accepted that “… the expeditious disposition of matters is a relevant consideration in arbitration, … this does not grant the arbitrator free reign to reject all witness evidence in the interest of efficiency”, referring to Rule 25.1 of the SCMA Rules which requires the arbitrator to ensure the “just, expeditious, economical and final determination of the dispute” ([71] CBP v CBS).
In this regard, after referring to various authorities, the High Court held that even if the arbitrator had the power to gate witnesses under the SCMA Rules (which the High Court doubted as there was no express witness-gating provision), such a power must be exercised subject to the fair hearing rule. Hence, “[i]f the calling of a witness is plainly relevant to a particular issue, an arbitral tribunal cannot gate the witness on the basis of its procedural powers. Such would be to utilise a procedural power to defeat the substantive rights of the parties.” As such, a tribunal’s “… witness-gating powers are not absolute, and can only be utilised if it can be seen that the witnesses’ evidence are plainly irrelevant or repetitive” ([72] – [77] CBP v CBS).
Witnesses were relevant. The High Court then found at [79] that “… Even if the Buyer had been uncooperative, and unclear as to precisely why the witnesses were necessary, … [this does not justify] the arbitrator’s decision when it was obvious that the purported oral agreement was fundamental to its defence. This is all the more so as four of the seven witnesses which the Buyer intended to call were either from the Seller or Entity C, and were accordingly not even in the employer of the Buyer, rendering it impracticable for the Buyer to procure witness statements from those four witnesses.”
As such, the High Court held that the arbitrator had denied the Buyer the “right of a fair opportunity to present a fundamental aspect of its defence” ([80] CBP v CBS), and as such, a “sufficiently serious breach of the fair hearing rule [has occurred] such that it prima facie warrants curial intervention” ([81] CBP v CBS).
The High Court then proceeded to find that the breach was directly connected to the making of the award ([84] – [93] CBP v CBS), and it has caused prejudice to the Buyer ([94] – [102] CBP v CBS), and set aside the award ([103] CBP v CBS).
Significance. CBP v CBS is a rare instance where an arbitral award has been set aside for breach of natural justice. In this regard, tribunals would do well to pay careful attention to the High Court’s observation on when and how witness-gating powers should be exercised.
Tags: Arbitration; Setting Aside; Breach of Natural Justice; Witness Gating; Exclusion of witness evidence
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