Introduction

Calderbank offers, stemming from the English Court of Appeal decision in Calderbank v Calderbank [1976] Fam 93 (CA), are useful tools in dispute resolution to (hopefully) avoid protracted proceedings and/or improve one’s position on costs. The legal position is broadly uncontroversial – a court has the discretion, after taking into account various factors, to make an adverse costs order against a party if he refuses a written offer to settle proceedings for a particular sum and eventually obtains a judgment for less than the offered sum.

The utility of Calderbank offers remains the same in an arbitration for a dispute governed by Singapore law. However, what if a party is dissatisfied with an adverse costs order made because he did not accept a favourable Calderbank offer? Is he able to frame it as a question of law under section 49(3)(b) of the Arbitration Act (Cap 10, 2002 Rev Ed) (AA)? The recent High Court decision in CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd [2020] SGHC 81 had the opportunity to examine this question.

Facts

The facts are relatively straightforward. CKR Contract Services (CKR) was engaged by Asplenium Land Pte Ltd (ALPL) as the main contractor to carry out building and constructions works for a condominium project. A dispute arose and parties entered into arbitration. CKR was eventually awarded around SGD 6.4 million. However, ALPL had previously made a Calderbank offer of S$9.5 million in full and final settlement of the arbitration and other related claims in court proceedings. Since the Calderbank offer was more favourable than the eventual awarded sum, the tribunal found that CKR was liable for costs from the date of the Calderbank offer onwards.

Dissatisfied, CKR made an application to the High Court under section 49(3)(b) of the AA for leave to appeal several questions of law.

Holding

The High Court framed CKR’s questions of law to three categories:

1. Whether the tribunal necessarily has to penalise a party in costs if that party has rejected a Calderbank offer and later failed to obtain a better outcome in the arbitration (Category I).
2. Whether the tribunal has “jurisdiction” to consider proceedings not before it, or to consider the impact of its own findings on those proceedings (Category II). This argument is based on the fact that the Calderbank offer in question was made in full and final settlement of the arbitration and related claims in other court proceedings.
3. On the same basis, the third category of question is whether a tribunal can consider the favourability of a Calderbank offer where the offer seeks to settle non-monetary claims pending before the Court or another tribunal (Category III).

It is uncontroversial that a party seeking leave under section 49(3)(b) of the AA has to satisfy stringent requirements, as summarised in Ng Tze Chew Diana v Aikco Construction Pte Ltd [2019] SGHC 259 at [59]:

1. The appeal must be on a question of law;
2. The determination of that question will substantially affect the rights of one or more of the parties to the arbitration;
3. The question was one which the arbitrator was asked to determine;
4. On the basis of the findings of fact in the award, the decision of the arbitrator on the question is obviously wrong, or the question is one of general public importance and the decision of the tribunal is at least open to serious doubt; and
5. Despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.

The High Court found that CKR failed to satisfy these conditions:

1. Category I: CKR argued that the tribunal had relied on erroneous submissions by ALPL. However, the High Court noted that the law on Calderbank offers are fairly trite and parties had not disputed the law in question, but how the tribunal had exercised its discretion. There is a difference between an error in the application of law (which is not appealable) and a question of law (which is appealable).
2. Category II: CKR made several arguments in this category:
1. First, it argued that the tribunal had no “jurisdiction” to consider the monetary value of matters in a Calderbank offer not before the tribunal. The court observed that the label “jurisdiction” was neither apposite nor useful on the facts – what the tribunal did was to make certain observations about legal proceedings, and there was nothing that suggested that the tribunal could not do that. Further, the court proceeded to find that CKR’s arguments before the tribunal centred on the evidential difficulty of determining what was offered in the Calderbank offer and the value of what was being offered. There was nothing on the jurisdiction of the tribunal. The question of “jurisdiction” was therefore not an issue that the arbitrator was asked to determine.
2. Second, CKR argued that there was a question of law in whether, in assessing the monetary value of the various proceedings, the tribunal ought to evaluate the merits of the parties’ cases in other proceedings before the court. However, the court held that the determination of this question would not substantially affect the rights of the parties. Even if this question was resolved in favour of CKR, this would not change the tribunal’s exercise of its discretion to award adverse costs. This was because the tribunal had already proceeded on the best case scenario for CKR and assumed that it would succeed in the court proceedings. In doing so, it had relied on key findings of fact, which were not open to challenge.
3. Category III: Finally, CKR argued that there was a question of law on whether the tribunal can consider the favourability of a Calderbank offer where the offer seeks to settle a non-monetary claim that was pending. Crucially, the non-monetary claim in question had already been disposed of with costs ordered against CKR. This did not operate in CKR’s favour in assessing the Calderbank offer now, which the court cannot shut its eyes to under section 49(5)(a) of the AA. As such, the resolution of this question would have no bearing on the tribunal’s finding. Further, the non-monetary nature of the claim in question was also not canvassed before the tribunal.

Significance

This decision is a timely reminder on two points: first, parties should keep in mind that such offers to settle (sometimes known in arbitration circles as sealed offers) can be made for purely tactical reasons or to incentivise a settlement, and save the relationship, time and costs. Parties should hence carefully evaluate all such offers to settle because they carry the stick of appropriate costs orders. Calderbank offers are all the more important especially in arbitration, where there is no formal offer to settle regime like that which we see in Order 22A of the Rules of Court (Cap 322, R 5, 2014 Rev Ed). It is also important to ensure clarity on the terms of the Calderbank offer, especially when it concerns other related proceedings elsewhere. Indeed, a point of contention in this decision was what exactly the phrase “any and all claims, counterclaims… and/or costs” in the Calderbank offer referred to.

The need to carefully consider Calderbank offers in arbitrations is also fortified by the fact that the right of appeal is severely restricted, which leads to the second point – the threshold for the grant of leave under section 49(5) of the AA is a high one, and parties should carefully consider the merits of making an application for leave to appeal. This decision illustrates the difficulties a party will face in making such an application.

If you would like to find out more on how to approach written offers to settle in arbitrations or are considering making an application for leave to appeal an arbitral award under the AA, please reach out to us. The relevant principles do not distinguish between international and domestic arbitrations.