Amz v Axx

• Jurisdiction: Singapore
• Judgment Date: 30 October 2015
• Date: 30 October 2015
• Docket Number: Originating Summons No [P] Vinodh Coomaraswamy J
• Court: High Court (Singapore)

AMZ

Plaintiff

and

AXX

Defendant

[2015] SGHC 283

High Court — Originating Summons No [P] Vinodh Coomaraswamy J

Originating Summons No [P] Vinodh Coomaraswamy J

High Court

Arbitration — Award — Recourse against award — Setting aside — Whether award included decisions on matters beyond scope of submission to arbitration — Whether actual prejudice caused — Article 34(2)(a)(iii) UNCITRAL Model Law on International Commercial Arbitration

Arbitration — Award — Recourse against award — Setting aside — Whether tribunal breached natural justice by failing to apply its mind to plaintiff’s evidence, submissions and arguments — Whether plaintiff deprived of opportunity to present case or address key issue — Whether actual prejudice caused — Whether tribunal tainted by apparent bias — Article 34(2)(a)(ii) UNCITRAL Model Law on International Commercial Arbitration — Section 24(b) and First Schedule International Arbitration Act (Cap 143A, 2002 Rev Ed)

Arbitration — Award — Recourse against award — Setting aside — Whether tribunal deviated from agreed arbitral procedure — Whether actual prejudice caused Article 34(2)(a)(iv) UNCITRAL Model Law on International Commercial Arbitration — Article V(I)(d) 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards

Facts

The plaintiff contracted to sell to the defendant a certain quantity of crude oil to be delivered ex ship during a ten-day delivery window in January 2011. Under the contract, the defendant was obliged to:

(a) open an irrevocable letter of credit in the plaintiff’s favour by 16 December 2010; and

(b) arrange customs clearance for the oil. At the same time, the parties also entered into a contract which obliged the plaintiff to buy back the oil at a loss if the defendant was not able to obtain a license to import the crude oil.

The defendant failed to provide a letter of credit or the agreed alternative by the stipulated deadline. The plaintiff nevertheless permitted the oil to be loaded and shipped to an intermediate location to await further routing orders. In early January 2011, the defendant informed the plaintiff that it had failed to secure a crude oil import licence and would not be able to take delivery of the oil. The defendant suggested that the plaintiff sell the oil to a third party. The plaintiff did this in March 2011. Although the sale price of the oil, being a distressed cargo, was at a substantial discount to the March 2011 market price, the plaintiff made a profit on the sale in the sense that its sale price in March 2011 was higher than its sale price under its contract with the defendant. Nevertheless, the plaintiff incurred substantial hedging losses and other items of loss and expense in holding the cargo until March 2011, which far exceeded those profits. It therefore commenced arbitration against the defendant, seeking compensation for its losses. The plaintiff’s claim rested solely on an allegation that the defendant was in repudiatory breach of the contract for the sale of the oil to the defendant.

The tribunal held that the defendant’s failure to obtain a crude oil import license and to take delivery of the crude oil was not a breach of the contract. The tribunal accepted, however, that the defendant’s failure to issue a letter of credit or the agreed alternative was a breach of contract. But the tribunal held that this sole breach of contract was not a repudiatory breach. It also found that even if it had been a repudiatory breach, the plaintiff would not have been entitled to damages as it had suffered no recoverable loss.

The plaintiff applied to set aside the award on three grounds:

(a) that the tribunal had breached the rules of natural justice;

(b) that the award either dealt with a dispute outside the submission to arbitration or decided matters beyond the scope of the submission to arbitration;

(c) that the arbitral procedure was not in accordance with the parties’ agreement.

Held, dismissing the application:

(1) The elements that had to be satisfied to resist enforcement under Art V(I)(d) of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards sufficed also to satisfy the ground for setting aside an award under Art 34(2)(a)(iv) of the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration: at [102].

(2) It was clear from the award that the tribunal did apply its mind to the plaintiff’s evidence, submissions and arguments in holding that the plaintiff had elected to proceed with performance of its delivery obligation and affirm the contract notwithstanding the defendant’s breach of contract. This finding amounted simply to the tribunal preferring the defendant’s case over the plaintiff’s: at [118].

(3) The tribunal’s failure to decide whether the defendant’s breach of contract was a repudiatory breach did not constitute a breach of natural justice; nor was the plaintiff unable to present its case on this issue. A decision on that issue fell away because of the tribunal’s finding that, even assuming the defendant’s breach to have been a repudiatory breach, the plaintiff had not accepted that breach as putting its delivery obligation at an end. It was not a breach of natural justice in itself for a tribunal to decline to express a view on an issue which its chain of reasoning rendered unnecessary: at [123] and [124].

(4) The tribunal’s finding that the defendant’s breach of contract did not cause the plaintiff any recoverable loss was not arrived at in breach of natural justice, and the tribunal did not deprive the plaintiff of an opportunity to present its case or to address the tribunal on a key issue that operated on its mind. The plaintiff’s case was based only on the defendant being in repudiatory breach of contract. Whether the plaintiff had suffered any recoverable loss by reason of the defendant’s non-repudiatory breach of contract was not an issue which was before the tribunal in any form, whether as the plaintiff’s primary case or as its alternative case. It was therefore wholly unnecessary for the tribunal to have considered this issue, let alone to have determined it: at [131].

(5) The plaintiff suffered no actual prejudice by reason of the tribunal’s decision to consider and express a view on the issue of whether the defendant’s non-repudiatory breach of contract caused the plaintiff any recoverable loss. Whatever the tribunal said on this issue had no effect whatsoever on its ultimate decision that the defendant was not liable to the plaintiff on the case advanced by the plaintiff: at [132].

(6) The tribunal did not breach natural justice or deprive the plaintiff of an opportunity to present its case in finding that the defendant was not in anticipatory breach of the contract. By the time the tribunal came to this part of the award, it had made a set of findings which was sufficient in itself to reject the plaintiff’s only case on liability based on the defendant’s actual breach. It was, therefore, not necessary for the tribunal to have even considered the issue of anticipatory breach: at [145] and [146].

(7) The tribunal did not breach natural justice or deprive the plaintiff of an opportunity to present its case in finding that the plaintiff had no contractual entitlement under the contract not to deliver the oil to the defendant. At this point of the tribunal’s reasoning, the plaintiff’s entire case on liability turned on the reason for the plaintiff’s decision in January 2011 not to deliver the oil to the defendant. It considered the evidence of both of the plaintiff’s witnesses, weighed the two competing and conflicting accounts and came to a reasoned decision to prefer the evidence of one over that of another. The tribunal neither fundamentally misunderstood the plaintiff’s argument nor did it go on a frolic of its own: at [154] and [155].

(8) The tribunal’s reliance on the absence of corroborating documentary evidence as a further factor for preferring one of the plaintiff’s witness’s evidence over the other’s was not a deviation from the parties’ agreed arbitral procedure. Although the tribunal did express the wish that it could have heard further in the second tranche of the hearing from the witness whose evidence it preferred, it was not the tribunal’s function to settle the parties’ witness list; much less was it a breach of natural justice if the tribunal did not do so. There was simply no basis for any suggestion that the tribunal had not accorded the same weight to the evidence led at the first tranche as it did to evidence led at the second tranche: at [157] and [158].

(9) Whatever the tribunal might have found on damages, and whatever procedural defects there might have been in making those findings, its findings on damages were wholly unnecessary. They made no difference whatsoever to its decision that the defendant was not liable to the plaintiff at all. They could not conceivably have caused the plaintiff any actual prejudice: at [162] and [164].

(10) The tribunal’s consideration and determination of two issues arising in respect of the contract to buy back the oil, relating to the defendant’s obligation to obtain a crude oil import license and the loss and damage suffered by the plaintiff, were not decisions on matters beyond the scope of the submission to arbitration. The tribunal had determined no issues arising in respect of the buy- back contract; it merely relied on the existence and effect of the buy-back contract as support for its findings on the two issues: at [169].

(11) In any case, the tribunal’s reliance on the existence and effect of the buy- back contract to arrive at those two findings caused no actual prejudice to the plaintiff. The tribunal had concluded that the defendant had no obligation to secure a crude oil import licence even before it considered the inference to be drawn on this issue from the existence and effect of the buy-back contract. Further, it was...