Front Row Investments v Daimler South East Asia
Singapore High Court
Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd: Singapore High Court; Judgment delivered by Andrew Ang J, 15 March 2010;  SGHC 80
Rajah & Tann LLP for the Plaintiff, Front Row
Chelliah & Kiang for the Defendant, Daimler
ARBITRATION: RECOURSE AGAINST AWARD: WHETHER FAILURE TO CONSIDER A PARTY’S SUBMISSIONS ON AN ISSUE CONSTITUTES A BREACH OF NATURAL JUSTICE
An arbitrator’s failure to consider a party’s submissions on a disputed issue constitutes a breach of natural justice under section 48(1)(a)(vii) of the Singapore Arbitration Act, necessitating the setting-aside of an arbitral award.
This case note was contributed by Ang & Partners, the International Contributor to this website for Singapore
The Plaintiff, Front Row Investment Holdings (Singapore) Pte Ltd (“Front Row”) and the Defendant, Daimler South East Asia Pte Ltd (“Daimler”) entered into an agreement dated 15 September 2005 (“the Agreement”) whereby they jointly agreed to organize and run a series of races across South-East Asia known as Asian Cup Series, using 35 specially built lightweight Mercedes-AMG SLK 55 cars.
Under the Agreement, Front Row was supposed to finance the venture and would purchase the specially built cars from Mercedes-AMG GmbH, while Daimler would organize up to 20 races per year for 2 years, with each race weekend holding 2 races, and would second one of its employees, Mr Thomas Buehler to Front Row to act as its general manager, ensuring that Buehler spent 100% of his time and effort on the running and organization of the Asian Cup Series.
The races suffered from poor participation and only 3 races were eventually carried out.
Front Row suggested that it stage a supporting event for the A1 Grand Prix in March 2007 using the SLK 55 cars but were informed by Mercedes-AMG via a letter dated 27 March 2007 that it was not possible, as the SLK 55 cars were not made for actual racing. Shortly after this, Buehler stopped working for Front Row. Front Row unsuccessfully tried to sell the SLK 55 cars both to Mercedes-AMG and other buyers.
Daimler commenced arbitral proceedings against Front Row for sums invoiced as Buehler’s salary under the Agreement. Front Row brought a counterclaim premised on misrepresentation.
The arbitrator dismissed both Daimler’s claim and Front Row’s counterclaim. In respect of Front Row’s counterclaim, the arbitrator stated that Front Row had abandoned a number of alleged misrepresentations pleaded, namely Daimler’s representations that it would give full support in marketing, promoting and organizing the Asian Cup Series and would organize 20 races over 10 weekends per annum, and was relying on the sole misrepresentation regarding the race-worthiness of the SLK 55 cars. The arbitrator was of the view that the contents of the 27 March 2007 letter from Mercedes-AMG indicated that only professional racing - and not all racing - was prohibited, and so concluded that there was no misrepresentation by Daimler.
Front Row applied to the High Court for an order that the award in respect of its counterclaim be set aside, on the grounds that it had not abandoned the other alleged misrepresentations. Front Row claimed that, as the arbitrator had failed to consider their submissions on these allegations, the arbitrator had breached the rules of natural justice
a) Whether the Arbitrator’s failure to consider the Front Row’s reliance on Daimler’s representations that it would give full support in marketing, promoting and organizing the Asian Cup Series and would organize 20 races over 10 weekends per annum (namely, the ‘further representations’) amounted to a breach of a principle of natural justice;
b) Whether the Arbitrator’s breach was connected to the making of the Award; and
c) Whether the Arbitrator’s breach prejudiced Front Row’s rights.
1. As preliminary points, the Court considered the following questions:-
a. Whether Front Row had, in its counterclaim against Daimler, pleaded and placed reliance on Daimler’s further representations and
b. Whether, in the course of the arbitration proceedings, Front Row had ceased to rely on the said representations.
2. The Court concluded that Front Row had indeed pleaded Daimler’s further representations.
3. After considering the pleadings, and the opening and closing submissions in their totality, the Court further concluded that Front Row had not abandoned the further representations in its counterclaim.
a) Whether the Arbitrator’s failure to consider the Front Row’s reliance on Daimler’s further representations amounted to a breach of a principle of natural justice.
4. The Court held that the failure of the arbitrator to consider Front Row’s submissions on the further representations constituted a breach of natural justice, namely, that parties ought to be given the opportunity to be heard.
5. In arriving at its decision, the Court considered, the Singapore decisions in Pacific Recreation Pte Ltd and SY Technology Inc  2 SLR (R) 491 and Koh Bros Buidling and Civil Engineering Contractor Pte Ltd v Scotts Development (Saraca) Pte Ltd  2 SLR (R) 1063 which respectively established that a breach of natural justice occurs both when the tribunal decides a case on a basis not raised by the parties, and when a party is not allowed to address the tribunal on a key issue.
6. The Court held that the corollary to these two decisions is also true – that is, a tribunal would be in breach of natural justice if, in the course of reaching its decision, it deliberately or otherwise disregarded the submissions made by the parties on the issues without considering the merits thereof.
b) Whether the Arbitrator’s breach was connected to the making of the Award.
7. The Court held that the arbitrator’s failure to consider the further representations was causally linked to his decision to dismiss Front Row’s counterclaim thereby prejudicing Front Row’s rights.
8. As the arbitrator had (in relation to Daimler’s claim) found that Daimler “did not properly or fully perform its obligation to promote the Series”, the arbitrator would not have dismissed Front Row’s counterclaim without due consideration, had the arbitrator known that Front Row was still relying on the further representations.
c) Whether the Arbitrator’s breach prejudiced Front Row’s rights.
9. The Court was of the view that the breach had prejudiced Front Row’s rights, even though there was no assurance that this would have altered the eventual award. The fact that such material issues were ignored was sufficient to prejudice Front Row.