Ceb v Cec

JurisdictionSingapore
CourtHigh Court (Singapore)
JudgeSimon Thorley IJ
Judgment Date04 May 2020
Date04 May 2020
Docket NumberOriginating Summonses Nos 2 and 3 of 2020

[2020] SGHC(I) 11

Singapore International Commercial Court

Simon Thorley IJ

Originating Summonses Nos 2 and 3 of 2020

CEB
and
CEC and another matter

Andre Darius Jumabhoy and Low Ying Ning Elaine (Peter Low & Choo LLC) for the plaintiff;

Bazul Ashhab bin Abdul Kader, Prakaashs/oPaniar Silvam, Tanya Thomas VadakethandTay Lin Qian (Oon & Bazul LLP) for the defendants.

Case(s) referred to

AKN v ALC [2015] 3 SLR 488 (folld)

BAZ v BBA [2018] SGHC 275 (refd)

BLC v BLB [2014] 4 SLR 79 (folld)

John Holland Pty Ltd v Toyo Engineering Corp (Japan) [2001] 1 SLR(R) 443; [2001] 2 SLR 262 (folld)

PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597; [2007] 1 SLR 597 (folld)

Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86; [2007] 3 SLR 86 (folld)

STX Mumbai, The [2015] 5 SLR 1 (refd)

Union of India v McDonnell Douglas Corp [1993] 2 Lloyd's Rep 48 (distd)

Legislation referred to

International Arbitration Act (Cap 143A, 2002 Rev Ed) s 24(b) (consd); ss 3, 24

Arbitration and Conciliation Act 1996 (Act No 26 of 1996) (India) ss 33(4), 34, 34(3)

Indian Contract Act 1872 (Act No 9 of 1872) (India) s 73

Arbitration — Award — Recourse against award — Setting aside — Seller claiming against buyers for outstanding payments and damages for consequential loss — Arbitrator failing to make finding on seller's claims for consequential loss — Seller failing to request arbitrator to make additional arbitral award — Whether arbitrator failed to consider seller's claims for consequential loss in breach of natural justice — Whether court should exercise discretion to set aside award — Section 24(b) International Arbitration Act (Cap 143A, 2002 Rev Ed)

Arbitration — Award — Recourse against award — Setting aside — Seller claiming against buyers for outstanding payments and damages for consequential loss — Buyers counterclaiming damages for breach of contract — Arbitrator allowing buyers' counterclaims to be set off from seller's claims for outstanding payments — Whether arbitrator erred in law — Whether award in conflict with public policy of Singapore — Article 34(2)(b)(ii) UNCITRAL Model Law on International Commercial Arbitration

Facts

The seller entered into several contracts with the buyers, CEE and CEC, for the sale and purchase of various commodities. The seller duly supplied goods in respect of some of the contracts as the delivery dates fell due, however, the buyers failed to make full payment despite several extensions of the payment due dates. Consequently, the seller unilaterally cancelled the remaining contracts in respect of which delivery had not yet been made. This included six contracts between the seller and CEE which had been entered into after CEE's initial failure to meet the original payment due date.

The seller claimed against CEE for, inter alia, outstanding payments and consequential losses amounting to US$25,391,499 and US$150,000 respectively. In response, CEE counterclaimed for, inter alia, the alleged loss of US$25,095,000 arising from the seller's failure to deliver the goods due on the outstanding contracts. In relation to CEC, the seller claimed for, inter alia, outstanding payments and consequential losses amounting to US$83,177,017.01 and US$250,000 respectively. In response, CEC counterclaimed for US$11,900,000 representing the increase in value of the goods due to be delivered pursuant to the outstanding contracts.

The seller and each of the buyers agreed to resolve their respective disputes by arbitration conducted in accordance with the Arbitration and Conciliation Act, 1996 (Act No 26 of 1996) (India) (“the 1996 Indian Act”) and for the seat of arbitration to be Singapore. The arbitration clauses further provided that the arbitrations shall be “governed by and construed in accordance with the laws of India”.

The arbitrations were heard together before the same arbitrator. The arbitrator allowed the seller's claims for outstanding payments but made no finding in relation to its claims for consequential loss, although such claims had been identified in the written awards. The arbitrator further allowed the buyers' counterclaims on the basis that each of the contracts was distinct and independent, such that non-performance of one contract did not give the seller the right to repudiate any of the other contracts. The arbitrator also ordered the claims to be set off from each other. As a result, in CEE's case, the sums owing by CEE to the seller for a long time were, in substance, wiped out. In CEC's case, the seller was similarly unable to recover the full amount due under the contracts where delivery had been made. While s 33(4) of the 1996 Indian Act permitted a party to request, within 30 days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award, the seller did not invoke this provision.

Subsequently, the seller applied to set aside the awards in Singapore under s 24(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”) and/or Art 34(2)(b)(ii) of the UNCITRAL Model Law on International Commercial Arbitration. The seller argued that the awards were made in breach of natural justice in so far as the arbitrator had failed to consider its claims for consequential loss. The seller further submitted that the awards were in conflict with the public policy of Singapore as the arbitrator had erred in law by failing to consider the question of anticipatory breach. Moreover, the awards resulted in the buyers obtaining a substantial and unconscionable windfall.

Held, dismissing the application:

(1) Proceeding on the basis that the failure of the arbitrator to rule on the seller's claims for consequential loss had been an oversight on his part, the first three of the four criteria set out in Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd[2007] 3 SLR(R) 86 (ie, which rule of natural justice was breached, how it was breached, and how the breach was connected to the making of the award) were met. Moreover, since the breach deprived the seller of the opportunity of having its claim considered and potentially allowed, its rights had been prejudiced by the breach: at [57] and [58].

(2) As considered by the Court of Appeal in BLC v BLB[2014] 4 SLR 79, a party's failure to invoke the arbitral tribunal's power to make an additional award was not fatal to the party's application to set aside the award. However, it was a factor which could be taken into account by the court in deciding whether to exercise its discretion to set aside the award. This entailed weighing the balance between the principle of minimal curial intervention and the desire to avoid a breach of natural justice. Where the breach of natural justice was in relation to a small percentage of the claim, it was even more incumbent on the party seeking relief to adopt the quicker and cheaper course of requesting the tribunal to issue an additional award: at [62] and [64].

(3) On the facts, the balance fell heavily on the side of the principle of minimal curial intervention. No reasons were given for the seller's failure to make an application under s 33(4) of the 1996 Indian Act, so as to justify a de facto extension of the 30-day period provided for in s 33(4) of the 1996 Indian Act. Moreover, the value of the omitted matters constituted 0.3% and 0.6% of the seller's overall claims in arbitration against CEC and CEE respectively. In these circumstances, it would be wholly disproportionate to remit the matters back to the arbitrator, much less set aside the awards: at [60], [63] and [64].

(4) The arbitrator had not erred in law by failing to consider the question of anticipatory breach. Since the arbitrator had found that the contracts were separate contracts, it was a necessary conclusion that the buyers' failure to perform one of the contracts did not amount to anticipatory breach of each of the other contracts thereby entitling the seller to rescind them. Moreover, there were no implied or express terms permitting the seller to cancel the contract: at [71], [72] and [75].

(5) Even if the arbitrator had erred in law, this was not a ground for setting aside the awards. An essential aspect of the principle of minimal curial intervention was that there was no right of recourse to the courts where an arbitrator had simply made an error of law and/or fact: at [75].

(6) The result of the awards did not shock the conscience of the court. The seller made certain commercial decisions that turned out to be disadvantageous, which was part and parcel of normal trading. The seller took the risk of extending credit to the buyers by not requiring payment before shipment. The seller entered into new contracts with CEE in the knowledge that payments were overdue and CEE was in financial difficulties, yet it did not insert clauses protecting itself. In both cases, the seller cancelled the outstanding contracts taking the risk that this would be held not to be a justifiable breach, and sold the goods at the elevated price available at the time of cancellation. Although the outcome in CEE's case was stark, this could not turn a bad commercial deal into one which shocked the conscience: at [76] and [77].

[Observation: One interpretation of the arbitration clauses was that Singapore law was both the lex arbitri and the procedural law, subject to the relevant provisions of the 1996 Indian Act applying by contractual incorporation to govern the internal conduct of the arbitration. An alternative interpretation was that the parties had chosen not merely to have the arbitration conducted in accordance with the procedure of a different legal system from the arbitration law of the seat but also that the arbitration should be decided in accordance with the laws of that system. While it was arguable that the parties had chosen the latter interpretation, a...

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