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Singapore Court of Appeal ruled that awarding standard costs is the default position in unsuccessful challenges to arbitral awards

Under common law, costs are usually assessed on either a ‘standard’ or ‘indemnity’ basis. The Singapore Court of Appeal recently held in CDM v CDP [2021] SGCA 45 that indemnity costs would not be the default position in cases where an application to set aside an arbitral award has been unsuccessful. This is contrary to the established precedent in Hong Kong where its Court of Appeal had held that “..if a party was unsuccessful in setting aside or resisting enforcement of the arbitral award, in the absence of special circumstances, he should pay costs on an indemnity basis” (Pacific China Holdings Ltd (in Liquidation) v Grand Pacific Holdings Ltd [2012] 6 HKC 40)

The Decision
In CDM’s case, the Court was reluctant to follow the Hong  Kong’s reasoning and decided that setting aside applications cannot constitute exceptional circumstances warranting indemnity costs. This decision ratifies a similar decision made by the Singapore High Court in BTN v BTP [2021] SGHC 38 which we have previously discussed.

In expounding why it did not subscribe to the Hong Kong’s approach, the Court stated the following:

  • Under the Singapore Rules of Court, the usual course is to award a successful litigant party-and-party costs on a standard basis. Costs are only awarded on an indemnity basis where there are exceptional circumstances warranting departure.

  • The practice of awarding indemnity costs in Hong Kong was to uphold its underlying objectives of maintaining a cost-effective and efficient dispute resolution. These considerations are not “absolute trumps”, and various factors in the Rules of Court must be considered when the courts exercise its broad discretion “to make an exceptional award of indemnity costs”.
  • There must be some conduct that takes the case “out of the norm” to warrant indemnity costs and applications to set aside an award does not amount to an exceptional circumstance.

While the Hong Kong approach aims to cast down futile challenges to set aside arbitral awards, this judgment in CDM affirms the consistency of the approach to be taken by the Singapore courts in not treating setting aside applications as exceptional circumstances. It does not prohibit indemnity costs being ordered in appropriate cases.

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