CVV v CWB: The Nature of Set-Aside Applications and Adequacy of the Tribunal’s Reasons

It is well established that parties seeking to set aside an arbitral award for a breach of natural justice face significant hurdles. In CVV & 10 Ors v CWB (“CVV”),[1] Singapore’s Court of Appeal addressed how parties often misapprehend the process and treat it effectively as an appeal on the merits, when it is in fact a much more limited review with a relatively high bar to success. Notably, the Court also provided guidance on whether an award can be attacked on the basis of inadequacy of the tribunal’s reasons (that is, lack of sufficient reasons), which will be of significant interest to Canadian readers. Below, we review the case and its takeaways.

Facts

In CVV, CWB[2] was engaged as an asset advisor by Singaporean fund manager CVQ, and claimed that CVQ had failed to pay it certain fees. CVQ and subsidiaries of two of its funds (collectively, the “Claimants”) brought the dispute to arbitration.

A tribunal dismissed their claims and allowed counterclaims by CWB for payment of the advisory fees, and in particular, a “Performance Fee”. The Claimants then came to court to have the award against them set aside on the grounds of a breach of natural justice.

The “crux” of their argument was that the tribunal “breached the fair hearing rule by failing to apply its mind and/or to give reasons for its decision on essential issues in the Award”.[3] Their application was dismissed at first instance, and – as discussed below – by the Court of Appeal.

The Decision

Readers will recall from our recent article on CZT v CZU[4] that a party challenging an award in Singapore on the grounds of natural justice must show:

• 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.[5]

In CVV, the Court also identified a common reason for unsuccessful challenges, namely that the applicant argues the merits of the award:

From a brief survey of Singapore cases, a significant majority of such applications have been unsuccessful because those challenges were found in substance to have engaged the merits of the award. When a dissatisfied party relies on an alleged breach of the rules of natural justice, it is crucial to bear in mind that the typical grounds on which a litigant may challenge a judgment are quite different and distinct from those which apply in the context of an arbitral award. The failure to properly appreciate this vital distinction is usually the reason why the challenge is ultimately unsuccessful.[6] [emphasis added]

The Court offered the following admonition:

For better or for worse, parties in an arbitration must accept the consequences of their choice of the arbitral tribunal as regards the merits of the award, irrespective of the degree of their dissatisfaction with the outcome in the award.[7] [emphasis added]

The Court also observed that finality is “[o]ne of the key virtues” of arbitration, but that this seems only to be “appreciated by the winning party because dissatisfied parties are increasingly seeking the court’s assistance and intervention to set aside arbitral awards.”[8]

Against that backdrop, the Court addressed four arguments from the Claimants.

First, the Claimants alleged that the tribunal did not consider whether the Performance Fee was due and payable. The Court rejected this argument, finding that the tribunal was not required in its award to individually address each submission from the Claimants.

Second, the Claimants alleged that the tribunal used inconsistent dates for the end of the life of one of the funds. The Court found this did not show that the tribunal failed to apply its mind to essential issues. In fact, the Court concluded the use of two dates was “readily explicable on the facts and d[id] not show that [the tribunal] made inconsistent findings”.[9] The use of different dates was a byproduct of the Claimants’ refusal to provide its own calculations for the advisory fees at issue. The tribunal had relied on the calculations of CWB’s expert, and he had employed dates that differed from the tribunal’s.

Third, the Claimants argued that the tribunal failed to consider its objections to calculations by CWB’s expert regarding various advisory fees. The Claimants pointed to the fact that the tribunal mistakenly stated in the award that the Claimants had failed to challenge his calculations until closing submissions, when they had in fact challenged them in his cross-examination.

The Court concluded that this was “at most an error of fact which would not justify setting aside the award.”[10] The Court then distinguished Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd,[11] a case in which an award was set aside. In that case, the arbitrator was “under the erroneous impression that the respondent had ceased to rely on several pleaded points in its counterclaim for misrepresentation, and consequently failed to have regard to the respondent’s submissions on the issue”.[12] By contrast, in CVV, the tribunal had not “failed to have regard to the Claimants’ case.”[13]

Fourth, the Claimants argued that the tribunal did not consider whether CWB’s claims were awarded as a debt or as an award for damages. The Court found that the Claimants did not argue before the tribunal that such a distinction was important, and that therefore the tribunal did not breach the fair hearing rule.

The Court also addressed another key question, being the sufficiency of a tribunal’s reasons (i.e. the extent to which the tribunal must give reasons in order to comply with natural justice). While the Court agreed with the Claimants that a tribunal must give reasons, it cautioned that, in Singapore, “it is not settled in the case law whether a tribunal’s failure to give adequate reasons is itself a reason to set aside an award”,[14] and it is “not entirely settled what the content of a tribunal’s duty to give reasons is.”[15]

The Court rejected the notion that an arbitral tribunal should be held to the “judicial standard” because, unlike arbitration, court proceedings are generally (1) open to the public, and “justice must not only be done but it must be seen to be done”, and (2) open to appeal, such that the reviewing court must be able re-examine the merits.[16] Rather, what is required of a tribunal “will depend upon the nature of the dispute and the particular circumstances of the case”.[17]

However, the Court ultimately decided not to address this point definitively, because it found that the Claimants relied on the alleged insufficiency of the tribunal’s reasons in order to demonstrate that the tribunal’s failed to “apply its mind” to the issues.[18] Echoing the Court in CZT v CZU, the Court of Appeal noted that “the inadequate provision of reasons and explanations is, without more, a mere error of law and an allegation of the same is therefore incapable of sustaining a challenge against an award”,[19] given that a mere error of law is not itself a breach of natural justice.

Commentary

CVV is instructive as to the finality of arbitral awards. It is broadly recognized that a set-aside application is not an appeal on the merits or a re-litigation of the dispute, but for whatever reason, it seems that this misapprehension persists in many jurisdictions (including in Canada). In that regard, errors of law or of fact may not be sufficient to warrant the setting aside of an award, and the fair hearing rule does not hold arbitrators to a standard of perfection.

As a practical matter, dissatisfied parties will therefore need to consider whether the potential errors they have identified in the award rise to the level of a breach of natural justice. As well, it is worth keeping in mind that the “fairness” of a hearing is often in the hands of the parties themselves. In CVV, the Claimants appear to have made a tactical decision not to provide their own calculations of the advisory fees. This decision apparently backfired, and the Court was unsympathetic to their complaints. Therefore, it will behoove parties to ensure from the very start of an arbitration that they craft a procedure with opposing parties and the tribunal in order to ensure that they are satisfied that the matter will proceed in a manner consistent with what they believe will ensure a fair hearing. Seeking out a procedural unfairness ex post facto is rarely a recipe for success, and parties should therefore proceed with that in mind.

In addition, the question of sufficiency of reasons is, of course, highly relevant to Canadian readers. It is unfortunate, although perhaps unsurprising, that the Court avoided deciding the question, given how difficult it would be to determine the content of the duty to provide reasons, particularly in the abstract and without the issue having been fully briefed by the parties. It is entirely common in the construction law context, particularly in the case of dispute adjudication boards – the status of which remain uncertain in Canada as to whether they qualify as arbitration or expert determination – for parties to agree that the tribunal or board shall only provide limited reasons (or in some instances, no reasons) in the interest of delivering a decision swiftly, such that the parties cannot subsequently complain on this basis. On the other hand, in circumstances where the tribunal or board’s duty to provide reasons is ill-defined, it should perhaps come as no surprise that parties may seek to use a lack of detailed reasons as the basis for attacking an award.

Similarly, it would seem reasonable to treat the content of the duty as contextual. For instance, given that Ontario’s Arbitration Act, 1991[20] permits appeals on questions of law with leave (and on questions of fact or mixed fact and law, if the arbitration agreement so provides), then the tribunal’s reasons would presumably need to be held to a higher standard in order to allow for the appellate court to be able to scrutinize the tribunal’s reasons. This has already occurred in prior Ontario case law where awards have been appealed, and interestingly, courts in that context have applied case law from the labour arbitration, administrative law, and even criminal law contexts in order to conclude that a failure to provide sufficient reasons is an error of law, effectively holding tribunals to the same standard as courts.[21]

On the other hand, however, this perhaps speaks to the idiosyncrasies of Ontario’s domestic arbitration legislation since, as readers, will appreciate, its international domestic legislation – just like other Model Law-based legislation – does not allow for appeals of any kind. Accordingly, this too may speak to the need for overhauling Ontario’s domestic arbitration legislation, in order to align it with international norms and avoid bringing it too close in form to litigation.[22]

[1] CVV and others v CWB, [2023] SGCA(I) 9.

[2] In keeping with convention, the Court anonymized the parties.

[3] CVV and others v CWB, [2023] SGCA(I) 9 at para 25.

[4] CZT v CZU, [2023] SGHC(I) 22.

[5] CVV and others v CWB, [2023] SGCA(I) 9 at para 29, citing Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd, 2007 SGCA 28.

[6] CVV and others v CWB, [2023] SGCA(I) 9 at para 2.

[7] CVV and others v CWB, [2023] SGCA(I) 9 at para 3.

[8] CVV and others v CWB, [2023] SGCA(I) 9 at para 1.

[9] CVV and others v CWB, [2023] SGCA(I) 9 at para 56.

[10] CVV and others v CWB, [2023] SGCA(I) 9 at para 62.

[11] Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd, [2010] SGHC 80.

[12] CVV and others v CWB, [2023] SGCA(I) 9 at para 62.

[13] CVV and others v CWB, [2023] SGCA(I) 9 at para 62.

[14] CVV and others v CWB, [2023] SGCA(I) 9 at para 32 (italics in original).

[15] CVV and others v CWB, [2023] SGCA(I) 9 at para 33 (italics in original).

[16] CVV and others v CWB, [2023] SGCA(I) 9 at paras 33-34.

[17] CVV and others v CWB, [2023] SGCA(I) 9 at para 34, citing the High Court of Australia in Westport Insurance Corporation v Gordian Runoff Ltd, [2011] HCA 37.

[18] CVV and others v CWB, [2023] SGCA(I) 9 at para 35.

[19] CVV and others v CWB, [2023] SGCA(I) 9 at para 35 (emphasis added).

[20] Arbitration Act, 1991, SO 1991, c 17, s 45.

[21] See, for example, Wang v. Takhar, 2019 ONSC 5535 at paras 46-47 at 56-60. See also Farmer v. Farmer,  2021 ONSC 5913, where the Court relied upon s. 38(1) of the Arbitration Act, 1991 – which stipulates that “an award… shall state the reasons on which it is based” – and s. 40(1) and (2), which state that a tribunal may be compelled to give an explanation to the Court, before turning at paras 110-116 to a discussion of sufficiency of reasons that relies upon case law from the criminal law context. This latter case was a family law decision, which imports different policy considerations, but which in turn speaks to the proposition that family law arbitration might more appropriately be dealt with by its own legislation rather than together with commercial arbitration.

[22] Consider for example, that in The Bay Hotel and Resort Ltd and another v Cavalier Construction Co Ltd. And another, [2001] UKPC 34, the House of Lords determined that in respect of a private arbitration regarding the construction of a hotel resort in Turks and Caicos governed by the Construction Industry Arbitration Rules of the American Arbitration Association, the tribunal’s award contained sufficient reasons notwithstanding that it was five paragraphs in length and contained minimal substantive analysis (what the House of Lords referred to as “lean and unembellished”).

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