Arbitration analysis: A recent Singapore High Court case (BTN and Anor v BTP and Anor [2021] SGHC 38) confirmed the default position under Singapore law that unsuccessful applications to set aside an arbitral award will be awarded costs on a standard basis rather than on an indemnity basis. Costs on an indemnity basis will only be awarded in exceptional circumstances. An application for the court to fix the quantum of costs is not an opportunity for a party to request the court to switch the basis of the costs order from a standard to an indemnity basis.

What are the practical implications of this case?

This decision reaffirms the Singapore position that court applications that fail to set aside an arbitral award will be awarded costs on a standard basis by default. Costs on an indemnity basis will only be awarded in exceptional circumstances that warrant a departure from the usual course of awarding standard costs, such as when a party exhibits conduct outside of the norm, had acted in bad faith or abused the court’s process.

What was the background?

The plaintiffs’ application in HC/OS 683/2018 (“OS 683”) to set aside a partial arbitral award was dismissed with costs by the High Court. The plaintiffs’ appeal to the Court of Appeal was also dismissed. The Court of Appeal awarded the defendants fixed costs for the appeal – see New Analysis: Singapore – Court of Appeal considers doctrine of res judicata in clarification of public policy groun for setting aside awards (BTN v BTP).

The parties were unable to reach an agreement on the quantum of costs of OS 683. The defendants tried to persuade the Court of Appeal to order costs on an indemnity basis for OS 683, but the Court of Appeal declined to disturb the High Court’s costs order, which was on a standard basis.

The defendants argued for indemnity costs as they had to fend off unmeritorious proceedings in OS 683 that ought not to have been brought in the first place, bearing in mind that the parties had agreed to resolve their disputes in arbitration and to honour any award made in the arbitration.

The defendants asked the court not to apply the costs guidelines contained in Appendix G of the Supreme Court Practice Directions (“the Costs Guidelines”). The Costs Guidelines are derived from party and party costs on a standard basis. The defendants urged the court to adopt the Hong Kong approach in assessing the quantum of costs on an indemnity basis. The Hong Kong approach adopts a default rule that indemnity costs will be granted when an arbitral award is unsuccessfully challenged in court proceedings unless special circumstances can be shown.

The plaintiffs argue that there is no basis whatsoever to depart from an award of costs on a standard basis and the Costs Guidelines should apply. The Hong Kong approach is diametrically opposed to the Singapore approach, which places the burden of proof for proving exceptional circumstances on the party seeking indemnity costs, not the other way around.

What did the court decide?

The court dismissed the defendants’ application for indemnity costs in OS 683.

First, it was impermissible for the defendants to try to re-argue the basis of the High Court’s costs order in OS 683 in order to try to obtain a higher quantum of costs.  All the defendants were permitted to do was to persuade the court not to follow the range of costs in the Cost Guidelines.

Second, the court held that the defendants failed to show exceptional circumstances that warrant an order for indemnity costs. A critical requirement for indemnity costs is the existence of some conduct that takes the case out of the norm. An application that turns out to be unmeritorious is not necessarily an unarguable case that hints of bad faith or reflects no more than an attempt to delay or impede payment.

The court found that the plaintiffs had conducted their case in an economical way without undue prolongation of hearings or submissions.

The defendants, on the other hand, instructed senior counsel at the last minute to defend the defendants in the second hearing. This speaks of the following: (1) the defendants thought that the plaintiffs’ jurisdictional challenge was arguable in the defendants’ opinion; and (2) a freshly appointed senior counsel would invariably go over the arguments covered by the defendants’ original counsel in the first hearing. The last-minute involvement of the senior counsel was likely to have extended the second hearing somewhat.

Accordingly, the court held that the plaintiffs are to pay the defendants’ costs of and in relation to OS 683 on a standard basis.

*This article may be cited as Wei Ming Tan, “Singapore – standard costs to be awarded by default for failed award set-aside applications (BTN v BTP)” (24 February 2021) (Singapore—standard costs to be awarded by default for failed award set-aside applications (BTN v BTP) | News | LexisNexis)

+First published by LexisPSL.