CBP v CBS

• Jurisdiction: Singapore
• Judge: Ang Cheng Hock J
• Judgment Date: 31 January 2020
• Neutral Citation: [2020] SGHC 23
• Court: High Court (Singapore)
• Docket Number: Originating Summons 215 of 2019
• Published date: 05 February 2020
• Year: 2020
• Hearing Date: 25 October 2019,23 October 2019,07 August 2019
• Plaintiff Counsel: Clarence Lun Yaodong, Tan Yingxian Selwyn, Lim Jia Ying, Samuel Lim Jie Bin, Giam Zhen Kai and Lin Yu Mei (Foxwood LLC)
• Defendant Counsel: Peh Aik Hin, Lee May Ling and Chia Su Min, Rebecca (Allen & Gledhill LLP)
• Subject Matter: Arbitration,Award,Recourse against award,Setting aside,Breach of natural justice,Witness gating
• Citation: [2020] SGHC 23

Ang Cheng Hock J: Introduction

Central to this judgment is the scope of the right to a fair hearing. The arbitrator in this case declined to hear evidence from all seven of the plaintiff’s witnesses because he was of the view that he was empowered by the procedural rules governing the arbitration to do so. The plaintiff now seeks to set aside the arbitrator’s award by alleging that there has been a breach of the rules of natural justice.

Alternatively, the plaintiff claims that the arbitrator lacked the jurisdiction to determine the matter. In this regard, the defendant argues that the plaintiff is precluded from raising issues of jurisdiction past the statutorily permitted time frame given that the plaintiff participated in the arbitration proceedings. In connection with this, issues relating to the assignment of the arbitration agreement to the defendant have also been raised for my consideration.

Facts

The plaintiff (“the Buyer”) is a company incorporated in India, which is engaged in the business of steel manufacturing and power generation. The defendant is a bank ( “the Bank”), incorporated in Singapore.¹

Agreement to purchase coal

On or around 19 November 2014, as recorded in an email sent on that date, the Buyer entered into an agreement to buy 50,000 metric tonnes (“MT”) of coal from the Seller, a Singapore incorporated company, at a price of US$74 per MT. The coal was to be delivered in two tranches, with the first 30,000 MT to be delivered in December 2014, and the second 20,000 MT to be delivered in January 2015.²

The agreement in relation to the two tranches of coal was subsequently recorded in two separate sale and purchase contracts, detailing the parties’ obligations with respect to the 50,000 MT of coal that was to be purchased by the Buyer (“agreements”). As per the email dated 19 November 2014, they stipulated that the price of the coal was to be US$74 per MT of coal, and that the coal was to be delivered in two tranches, with 30,000 MT delivered first (“the first agreement”), and the remaining 20,000 MT delivered thereafter (“the second agreement”).³ Both agreements were executed on 7 January 2015 but backdated to 24 November 2014 for the first agreement and 20 December 2014 for the second agreement.⁴

For both agreements, the Buyer and the Seller also agreed that “[a]ny dispute arising out of or in connection with this contract … shall be referred to and finally resolved by arbitration under the Rules of Singapore Chamber of Maritime Arbitration as amended and in force, from time to time” (“the Arbitration Clause”).⁵

There were, however, slight differences between the two agreements. First, while there was no assignment clause in the first agreement, clause 22 of the second agreement provided that:

…The Seller is permitted to assign any receivables due under the Agreement to any bank or other Institution as part of its financing agreement. The Buyer hereby agrees to execute any deeds, documents or letters or do such other things as may be reasonable [sic] be required by the Seller to give effect to or recognise any such assignment.⁶

The payment terms in the two agreements also differed. While the first agreement provided that the Buyer was to provide a letter of credit in favour of the Seller for the payment of 100% of the cargo value payable at 180 days from the date of a bill of exchange,⁷ the second agreement provided that the Buyer would have to pay 100% of the cargo value 150 days after the date of a bill of exchange to be drawn by the Seller, which would evidence the maturity date and the value of the cargo.⁸

Dispute in relation to the second tranche of coal

No dispute appears to have arisen in relation to the delivery of the first tranche of 30,000 MT of coal.⁹

On 21 December 2014, the Seller shipped the second tranche of 20,000 MT of coal from Newcastle, Australia to the Buyer in India.¹⁰ The coal arrived at the port of Gangavaram, India, on 14 January 2015.¹¹ Discharge of the coal took place from that date until 28 January 2015. According to the Buyer, it was unable to lift 5,000 MT of coal from the port because the Seller only procured the issuance of delivery orders for 15,000 out of the 20,000 MT of coal.¹²

In the meantime, the Seller had entered into an Accounts Receivable Purchase Facility with the Bank, which provided for the assignment of the Seller’s trade debts to the Bank. Pursuant to the facility agreement, the Seller wrote to the Buyer on 19 January 2015, informing the latter that, pursuant to clause 22 of the second agreement, the Seller had assigned “all of [its] trade debts so that … all amounts due both now and in the future, in respect of invoices, must be paid only to [the Bank]”.¹³

On 22 January 2015, the Bank sent over the bill of exchange drawn by the Seller requiring the Buyer to pay US$1,480,400 by 22 June 2015 (“the Bill of Exchange”) to the order of the Bank.¹⁴

On 12 February 2015, the Buyer’s bank, IDBI Bank Limited Raipur, sent a SWIFT message to the Bank, indicating in unequivocal terms that the Buyer “has accepted the Bill [ie, the Bill of Exchange] and will make payment on due date” (“the SWIFT message”). The SWIFT message also made clear that the “Mat Dt” (ie, due date) was 22 June 2015 and that the “Amt Accepted” (ie, amount due) was US$1,480,400, as per the Bill of Exchange sent by the Bank.¹⁵

However, the Buyer failed to make payment of the US$1,480,400 (“the outstanding price”), or any amount part thereof, on the due date of 22 June 2015.¹⁶

After the due date, from 6 July 2015 to 20 October 2015, the Bank sent chasers to the Buyer seeking payment of the outstanding price.¹⁷ During this period, the Buyer responded twice, via email, stating that it was “trying [its] level best to arrange maximum funds so that [the] liabilities can be paid at the earliest”, and explaining that the delay in payment was occasioned by annual maintenance to its plant, which affected its cash flow. References were also made to the fact that the market conditions were unfavourable, such that the prices of its goods were decreasing due to the lack of demand (“the July 2015 emails”).¹⁸

In a sudden departure from this position, in October 2015, the Buyer alleged in an email to the Bank, for the first time, that (1) only 15,000 MT of the second tranche of 20,000 MT of coal had been supplied to it, such that it had to source for 5,000 MT of coal from elsewhere, and (2) that the market price of the coal had been reduced such that it would only pay for the coal at a reduced price of US$61 per MT, rather than the agreed price of US$74 per MT.¹⁹

The December 2015 meeting

It is undisputed that, on or around 2 December 2015, representatives of the Seller met with the Buyer’s representatives (“the December 2015 meeting”) to discuss the issue of the outstanding payment and the short delivery.²⁰ However, what transpired at this meeting is at the heart of the parties’ dispute.

According to the Buyer, this meeting took place at one of the Buyer’s plants in India. Four of the Buyer’s representatives were present at the meeting. Three other persons represented the Seller and an Entity C. ²¹ Entity C is in the trade credit insurance business. While the presence of Entity C has not been explained by the parties, it is likely to have been involved in insuring the receivables that had been assigned to the Bank.

The Buyer claims that a global settlement was reached between the parties at the meeting. It was orally agreed that, as there had been a decrease in the market price of coal, the price of the coal would be revised to US$61 per MT for all 50,000 MT of coal.²² However, the Seller subsequently failed to honour the oral agreement that had been reached at the December 2015 meeting, and maintained its claim for the second tranche of coal at the price of US$74 per MT.²³ In contrast, the Bank wholly denies that the Seller had agreed to a new price at the meeting.

Commencement of arbitration

Subsequently, on 21 October 2016, the Bank commenced arbitration proceedings against the Buyer, claiming the outstanding price and late payment interest. As per the Arbitration Clause in the second agreement, the arbitration was to be governed by the Arbitration Rules of the Singapore Chamber of Maritime Arbitration (3rd Edition, 2015) (“SCMA Rules”).²⁴ A sole arbitrator was appointed on 25 April 2017, pursuant to the SCMA Rules.²⁵

Jurisdictional challenge

As a preliminary point, the Buyer raised a jurisdictional objection to the arbitration proceedings on the basis that there was no arbitration agreement between the Buyer and the Bank.²⁶ The Buyer argued that there only existed an arbitration agreement between the Buyer and the Seller. In its submissions to the tribunal, the Buyer argued that:

… the assignment of receivables between [the Seller] … and [the Bank] does not ipso facto lead to the assignment of the arbitration agreement without the consent of [the Buyer].²⁷

The arbitrator considered the issue of jurisdiction as a preliminary issue in the arbitral proceedings. After considering the parties’ submissions, the arbitrator issued a partial award on 6 December 2017 (“the partial award”). In the partial award, the arbitrator concluded that:

… pursuant to the plain language of [clause 22 of the second agreement] and the applicable law in Singapore[,] the assignment of receivables by the Seller included [the] assignment of the entire Agreement including the Arbitration Clause.²⁸

Accordingly, the arbitrator found that there had been a valid assignment of the Arbitration Clause, such that he had jurisdiction to deal with the merits of the Bank’s claim.²⁹

Circumstances relating to the arbitration proceedings on the merits

The Buyer’s delay in filing its defence

After having decided the issue on jurisdiction in the Bank’s favour, the arbitrator directed the Buyer to file its defence to the Bank’s...