TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 23 September 2013
• Date: 23 September 2013
• Docket Number: Originating Summons No 178 of 2012/E
• Court: High Court (Singapore)

TMM Division Maritima SA de CV

Plaintiff

and

Pacific Richfield Marine Pte Ltd

Defendant

[2013] SGHC 186

Chan Seng Onn J

Originating Summons No 178 of 2012/E

High Court

Arbitration—Arbitral tribunal—Jurisdiction—Award—Recourse against award—Setting aside—Whether arbitrator breaching rules of natural justice—Whether arbitrator dealing with issues falling outside scope of submission

The plaintiff, TMM Division Maritima SA de CV (‘TMM’) purchased two vessels (‘the Vessels’) from the defendant, Pacific Richfield Marine Pte Ltd (‘PRM’). The contracts of sale for each vessel, which included two addenda, provided a list of items which TMM wanted repaired before the Vessels were to be delivered. On 28 October 2008, PRM issued a ‘Notice of Readiness’ (‘NOR’) for PRM to take delivery of the Vessels and make payment of the balance 90% of the purchase price which had yet to be paid. TMM claimed that the NOR was not valid as cl 11 of the contracts required PRM to ensure that the repairs were first completed before issuing an NOR. TMM claimed that it had not received proof that the Vessels had been repaired, and refused to take delivery or make payment. PRM insisted that the NOR was valid because the repairs had been completed and in any event, cl 11 was not a condition precedent. On 31 October 2008, PRM notified TMM that its rejection of the NOR was a repudiatory breach of the contracts which PRM accepted, though PRM offered TMM the chance to repurchase the Vessels on the same terms. This was also rejected by TMM which denied that it had breached the contracts by rejecting the NOR. On 9 November 2008, two days after the contractual delivery date, TMM informed PRM that because it had not provided a valid NOR by the delivery date, it had repudiated the contracts, which repudiation TMM accepted. Consequently, TMM demanded PRM consent to the release of the deposit which had been paid to an escrow agent to TMM. PRM refused to consent, and TMM commenced arbitration proceedings. PRM counterclaimed for an order that the escrow agent release the deposit to PRM.

The arbitrator rejected TMM's claim that PRM had not issued a valid NOR. He held that the repairs had been completed, and in any event, PRM's obligation to repair was not a condition precedent but a warranty, the breach of which did not entitle TMM to terminate the contracts and consider itself discharged from further liability. Dissatisfied, TMM commenced the present proceedings to set aside the arbitrator's award on the grounds that he had breached the rules of natural justice, and that he had dealt with a dispute outside of the scope of submission to arbitration.

Held, dismissing the application:

(1) When a challenge was brought against an award, the court had a duty to entertain and engage the challenge. Invariably, the court had to look at the evidence on the record to determine the merits of the challenge. However, it did not follow that this process always entailed sifting through the entire record of the arbitral proceedings with a fine-tooth comb. The court ought not to nit-pick at the award. Infelicities were to be expected and were generally irrelevant to the merits of any challenge: at [43] to [47] .

(2) An issue which surfaced in the course of the arbitration and was known to all the parties would be considered to have been submitted to the arbitral tribunal even if it was not part of any memorandum of issues or pleadings: at [52] .

(3) The arbitrator did not exceed his mandate by dealing with issues outside of the scope of submission. The agreed memorandum of issues was intended to assist in the identification of the main areas of contention. In fact, the memorandum stated that the list was inclusive, rather than exclusive or exhaustive: at [55] .

(4) The foundational principle which courts ought not to lose sight of was that parties who chose arbitration as their preferred system of dispute resolution had to live with the decision of the arbitrator, good or bad. Commercial parties appointed arbitrators for their expertise and experience, technical, legal, commercial or otherwise. These arbitrators could not be so straightjacketed as to be permitted to only adopt in their conclusions the premises put forward by the parties. If an unargued premise flowed reasonably from an argued premise, it was not incumbent on the arbitral tribunal to invite the parties to submit new arguments. The arbitral tribunal, in arriving at its decision, would have been doing nothing more than inferring a related premise from one that had been placed before it: at [65] .

(5) The question of whether cl 11 was a condition, innominate term or warranty was in issue between the parties. In any case, the finding that cl 11 was a collateral warranty was not only reasonably connected to the arguments raised by both parties; it was a reasonable follow-through from his finding that cl 11 was not a condition: at [68] to [70] .

(6) An arbitral tribunal was not obliged to deal with every argument. It was neither practical nor realistic to require otherwise. All that was required of the arbitral tribunal was to ensure that the essential issues were dealt with. The arbitral tribunal did not need to deal with each point made by a party in the arbitration. It had to also be given fair latitude in determining what was essential and what was not. An issue did not need to be addressed expressly in an award; it could be implicitly resolved. If the outcome of certain issues flowed from the conclusion of a specific logically prior issue, the arbitral tribunal could dispense with delving into the merits of the arguments and evidence for the former: at [72] , [74] and [77] .

(7) The arbitrator dealt with all the essential issues. The dispute between the parties was over the purported repudiation of the contracts. The essential issues were therefore those which touched on whether TMM's actions amounted to a repudiation of the contracts and if so, whether the repudiation was justified. Hence, once the arbitrator took the position that PRM's failures in respect of the repairs (if any) only amounted to a breach of a warranty and not a condition, TMM was accordingly not entitled to reject delivery of the Vessels. TMM's rejection of the NOR and refusal to take and complete delivery therefore amounted to a wrongful repudiation of the contracts: at [78] .

(8) To ensure that the right to be heard was effectively safeguarded, an arbitral tribunal had to demonstrably have at least attempted to comprehend the parties' arguments on the essential issues. The inexplicability of the decision was only one factor which went towards proving that the arbitral tribunal did not in fact properly attempt to consider or comprehend the parties' arguments. The central inquiry was whether the award reflected the fact that the arbitral tribunal had applied its mind to the critical issues and arguments. Nevertheless, the arbitral tribunal could have, after applying its mind, failed to comprehend the submissions or comprehended them erroneously, and thereby come to a decision which might fall to be characterised as inexplicable. Such a situation fell short of a breach of the rules of natural justice: at [89] to [91] .

(9) The arbitrator's view that TMM's continued refusal to accept delivery amounted to a repudiation of the contracts was not inexplicable. To say that the arbitrator ought to have appreciated the distinction which TMM made between rejecting the NOR and repudiating the contracts, which failure amounted to failing to attempt to understand TMM's submissions, was essentially to force the arbitrator to accept - and not just consider or comprehend - its argument. No party has a right to expect the arbitral tribunal to accept its arguments, regardless of how strong and credible it perceives its own arguments to be: at [93] and [94] .

(10) The arbitral tribunal was generally bound to give reasons for its decision. However, arbitrators were not in general required to set out in their reasons an explanation for each step taken by them in arriving at their evaluation of the evidence and in particular for their attaching more weight to some evidence than to other evidence or for attaching no weight at all to such other evidence. All that was necessary was that the arbitrators ought to set out what, on their view of the evidence, did or did not happen and ought to explain succinctly why, in the light of what happened, they had reached their decision and what that decision was. Even if some of an arbitral tribunal's conclusions were bereft of reasons, that was not necessarily fatal. There were a variety of reasons why an arbitral tribunal might elect not to say something. The standards relating to the level of detail to be given for judgments which were applicable to judges were assistive indicia to arbitrators: at [100] to [103] .

(11) It would not suffice if the arbitral tribunal merely stated in its award that it had considered both parties' submissions and evidence. However, the arbitrator did more than that. He summarised the relevant facts and evidence relating to the material issue, viz, whether the NOR was wrongfully rejected by TMM; crystallised the parties' cases on that key issue; and thereafter set out his conclusions on the construction of the contracts, and the merits of TMM's reliance on a purported breach of cl 11 to reject the NOR. In so doing, the arbitrator crossed the minimum standard for giving reasons and explanations which was expected of an arbitral tribunal: at [106] .

(12) Even if TMM was right in that the evidence overwhelmingly pointed to the repairs not being completed with the corollary that these evidenced a prima facie breach of the rules of natural justice, the arbitrator's decision would not have caused actual or real prejudice to TMM. The arbitrator would, in all likelihood, have maintained his view that TMM ought not to have rejected the NOR because the...