CEB v CEC and another matter

• Jurisdiction: Singapore
• Judge: Simon Thorley IJ
• Judgment Date: 04 May 2020
• Neutral Citation: [2020] SGHC(I) 11
• Plaintiff Counsel: Andre Darius Jumabhoy and Low Ying Ning Elaine (Peter Low & Choo LLC)
• Docket Number: Originating Summonses Nos 2 and 3 of 2020
• Date: 04 May 2020
• Hearing Date: 06 April 2020
• Subject Matter: Award,Recourse against award,Arbitration,Setting aside
• Published date: 16 May 2020
• Citation: [2020] SGHC(I) 11
• Defendant Counsel: Bazul Ashhab bin Abdul Kader, Prakaash s/o Paniar Silvam, Tanya Thomas Vadaketh and Tay Lin Qian (Oon & Bazul LLP)
• Court: International Commercial Court (Singapore)
• Year: 2020

Simon Thorley IJ: Introduction

On 12 March 2019, the plaintiff in each of these actions issued an originating summons seeking an order that the final award rendered by the sole arbitrator (“the Arbitrator”) in two arbitrations should each be set aside.

For convenience, I shall refer to SIC/OS 2/2020 as “the CEC Action” and to SIC/OS 3/2020 as “the CEE Action”. I shall also refer to the defendants in the CEC Action and the CEE Action as “CEC” and “CEE" respectively.

The Originating Summons in the CEC Action seeks to set aside the award of the Arbitrator in the arbitration between the plaintiff and CEC (which I shall refer to as “the CEC Award” and “the CEC Arbitration”). The Originating Summons in the CEE Action seeks to set aside the award of the Arbitrator in the arbitration between the plaintiff and CEE (which I shall refer to as “the CEE Award” and “the CEE Arbitration”).

The two arbitrations were heard together by the Arbitrator and, although he gave two awards, the same issues arose and his reasoning and conclusions were to the same effect. Both Originating Summonses seek identical relief, namely the setting aside of the awards, and the two grounds raised are likewise identical. The defendants each relied upon affidavits that are in substance the same and are now represented by the same Singapore solicitors. Only one set of written submissions was served by those solicitors on behalf of both defendants. At the oral hearing the parties agreed that only one judgment should be prepared in respect of both Originating Summonses.

The Originating Summonses were originally issued in the Singapore High Court and were transferred to the Singapore International Commercial Court by order dated 25 February 2020.

The plaintiff in both actions is a company organised under the laws of India and has its registered office in Mumbai, India.

CEC is a company organised under the laws of the UAE and has its registered address in Dubai, UAE. CEE is also a company organised under the laws of the UAE and has its registered address in Sharjah, UAE.

The CEE Action

I shall first consider the Originating Summons in the CEE Action.

Background facts

In November 2015, the plaintiff and CEE entered into four contracts for the sale by the plaintiff and the purchase by CEE of palm oil and canola oil. Having supplied the goods, the plaintiff raised invoices against CEE for payment of a total value of US$25,391,499. The payment under each contract was due in April 2016. CEE failed to make any payment by the due date. The plaintiff and CEE then agreed to an extension of the due date to July 2016.

In the meantime, in June 2016, the plaintiff and CEE entered into six more contracts, this time for the sale and purchase of castor oil. The delivery dates under these contracts were initially in December 2016 and January 2017 but were subsequently extended until March 2017. CEE however continued to fail to make any payment for the outstanding sums due in respect of the initial four contracts and, on 31 March 2017, the plaintiff unilaterally cancelled the later six contracts on the ground that CEE had failed to pay the sums due under the initial four contracts.

CEE contended that it was not open to the plaintiff to cancel the six contracts and that the plaintiff was in breach of contract in failing to supply the goods by the agreed date. The purchase price of the castor oil due under the six contracts was US$31,955,000. By the date of the alleged breach by the plaintiff, the value of that amount of castor oil had risen to US$57,050,000 so that CEE claimed that its direct loss as a result of the non-delivery was US$25,095,000.

Background to the dispute

Rather than litigate in the courts, the parties entered into an arbitration agreement on 2 November 2017 which provided that the parties’ dispute was to be resolved by arbitration conducted in accordance with the Arbitration and Conciliation Act, 1996 (India) (“the 1996 Indian Act”), the seat and venue of the arbitration was to be Singapore and the arbitration was to be governed by and construed in accordance with the laws of India. By agreement between the parties, the Arbitrator was appointed as the sole arbitrator.

The plaintiff commenced the CEE Arbitration by a Notice of Arbitration dated 6 November 2017 and served its Statement of Claim on 30 January 2018. In response, CEE filed its Written Statement and Counterclaim on 14 February 2018.

In addition to its claim for the sums due under the four initial contracts, the plaintiff also claimed interest on those sums together with the sum of US$150,000 in respect of certain consequential losses and US$50,000 for litigation expenses.

For its part, CEE counterclaimed for the alleged loss of US$25,095,000 arising from the plaintiff’s failure to deliver the castor oil due on the outstanding six contracts together with interest on that sum. CEE also counterclaimed for an alleged consequential loss of opportunity to proceed with its plans for producing sebacic acid, a derivative of castor oil.

Following a hearing in Singapore on 20 and 21 September 2018, the Arbitrator issued the CEE Award dated 4 December 2018 which, it is common ground, was received by the parties on 13 December 2018. In para 63 of the CEE Award, the Arbitrator found in favour of the plaintiff in respect of payments due under the first four contracts in the sum of US$25,391,499. However, whilst he recorded in para 57 of the CEE Award that the plaintiff claimed the sum of US$150,000 in respect of consequential losses, he made no finding in relation thereto.

On the counterclaim, the Arbitrator concluded that each of the six contracts for castor oil was a distinct and independent contract from the other five and also from the initial four contracts such that non-performance of one contract did not give the plaintiff the right to repudiate any of the other contracts. He therefore held that the plaintiff was in breach of contract in terminating the six contracts for the supply of castor oil. He however rejected CEE’s claim in relation to the alleged loss of opportunity to produce sebacic acid (see paras 70–71 of the CEE Award).

In para 74 of the CEE Award, the Arbitrator expressed his conclusions: 74. I AWARD and DIRECT that: 1) The sum of USD 25,391,499.00 IN FAVOR OF THE CLAIMANT for the goods supplied by it to the Respondent. 2) The sum of USD 25,095,000.00 IN FAVOR OF THE RESPONDENT for the losses incurred due to cancellation of the Castor Oil Contracts by the Claimant which can be set off by the Respondent against amount payable by the Respondent to the Claimant. 3) The Counter Claim of Respondent is Rejected to the extent of consequential loss incurred due to opportunity loss. 4) Interest @ 2.57 % per annum to the Claimant i.e. Total USD 20159.00 on the net amount of the Award i.e. after adjusting the liabilities of the Parties to each other as declared in para 1 & 2 of this Award

…

The upshot therefore was that the net sum due to the plaintiff was US$316,658 rather than the US$25,391,499 that was owing in relation to the initial four contracts.

The Originating Summons in the CEE Action

The Originating Summons in the CEE Action was issued on 12 March 2019, within the three-month period provided for in s 34(3) of the 1996 Indian Act and also in Art 34(3) of the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”), which is given the force of law in Singapore pursuant to s 3 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”). The grounds on which the plaintiff seeks to have the CEE Award set aside are contained in para 22 of the affidavit of one of the plaintiff’s Indian solicitors which reads as follows: 22. The Plaintiff Company is relies [sic] on a number of grounds in support of its Application to set aside the Award, which are as follows: (a) The Award is in breach of the rules of natural justice in that the Tribunal failed to consider the Plaintiff’s Company pleaded issue of consequential losses (estimated at USD 150,000). At paragraph 57 of the Award, the Tribunal listed the Plaintiff Company’s claim for consequential losses as an issue in the Arbitration but failed to address it, either by allowing or dismissing the claim, whether in whole or in part. (b) The Award is in conflict with the public policy of the State in that the Arbitral Tribunal decision in respect of the Defendant Company’s counterclaim is flawed in law. (c) The Award is in breach of public policy of the State in that the result of the Award is so manifestly unjust that it shocks the conscience of the court. Allowing the Defendant Company’s counterclaim (i.e. for the Plaintiff Company’s apparent breach of the Castor Oil Contracts) allowed the Defendant Company received [sic] the benefit of the goods in the Palm Oil and Canola Oil Contracts for the price of USD 316,658 (being the difference in the award to the Plaintiff Company for the goods supplied (with interest) less the set-off sum awarded to the Defendant Company). This is in stark contrast to the invoiced cost of the goods of USD 25,391,499.00 (not inclusive of late payment interest). The invoiced sum was not disputed by the Defendant Company and forms part of the Award. This was a substantial and unconscionable windfall obtained by the Defendant Company.

[emphasis in original]

In substance therefore two issues arise, the first pertaining to the failure of the Arbitrator to address the issue relating to the plaintiff’s alleged consequential loss, and the second based upon an alleged breach of public policy in respect of the holding that the plaintiff could not unilaterally cancel the six contracts.

The CEC Action Background facts

The background facts of the CEC Action are similar to but not precisely the same as those in the CEE Action. The issues that arise are however the...