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

• Jurisdiction: Singapore
• Court: High Court (Singapore)
• Judge: Chan Seng Onn J
• Judgment Date: 23 September 2013
• Neutral Citation: [2013] SGHC 186
• Citation: [2013] SGHC 186
• Docket Number: Originating Summons No 178 of 2012/E
• Hearing Date: 21 May 2013,14 June 2013,24 October 2012,23 October 2012,25 October 2012,22 May 2013,24 July 2012
• Plaintiff Counsel: Vivian Ang, Andrew Chan and Paul Tan (Allen & Gledhill LLP)
• Defendant Counsel: Haridass Ajaib and Subashini Narayanasamy (Haridass Ho & Partners)
• Subject Matter: Arbitration,Arbitral tribunal,Jurisdiction,Award,Setting aside
• Published date: 11 October 2013

Chan Seng Onn J: Introduction

However good or bad in the eyes of a party, the decision of an arbitral tribunal with the requisite jurisdiction is final and binding. This general proposition of law is a manifestation of the fundamental principle of interest reipublicae ut sit finis litium or finality in proceedings. Arbitration will not survive, much less flourish, if this core precept is not followed through by the courts. The integrity and efficacy of arbitration as a parallel dispute resolution system will be subverted if the courts appear unable or unwilling to restrain themselves from entering into the merits of every arbitral decision that comes before it. As is well-established under Singapore arbitration jurisprudence, the power to intervene in arbitrations generally, and more specifically to set aside awards, must and should only be exercised charily, in accordance with the rules under the applicable arbitral framework.

Although parties have a right and expectation to a fair arbitral process and the courts should give maximum effect to these safeguards in deserving cases, parties must not be encouraged to dress up and massage their unhappiness with the substantive outcome into an established ground for challenging an award. Particularly for international commercial arbitrations under the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”), it is imperative that an application to set aside an award under s 24 read with Art 34(2) of the UNCITRAL Model Law for International Commercial Arbitration 1985 (“Model Law”) is not a guise for a rehearing of the merits. Unfortunately, as this case exemplifies, sieving out the genuine challenges from those which are effectively appeals on the merits is not easy under the present law.

Facts Background

Originating Summons No 178 of 2012 is an application to set aside an arbitral award (“the Award”) made in respect of two arbitrations which were consolidated (“the Arbitration”). The Arbitration arose out of a dispute over the sale and purchase of two second-hand vessels, namely, the “The Pacific 18” and “The Pacific 38” (individually the “Vessel” and collectively the “Vessels”).

The Memorandum of Agreement

On 24 September 2008, more than a month after negotiations commenced, Grupo TMM SAB (“Grupo TMM”) entered into two Memoranda of Agreement (“MOAs”) with Pacific Richfield Marine Pte Ltd (“PRM”) for the purchase of the Vessels from PRM, one Memorandum of Agreement (“MOA”) for each vessel. The MOAs were signed after the Vessels’ classification records had been inspected between 16 August 2008 and 20 August 2008.

Each MOA was accompanied by, inter alia, two addenda, a specification describing the capabilities of each Vessel (collectively “the Specifications”), and a schematic diagram of each Vessel. Addendum No 2¹ provided that Grupo TMM shall novate the MOA to its subsidiary, TMM Division Maritima SA de CV (“TMM”). Thus, for all intents and purposes, TMM was the buyer and PRM was the seller of the Vessels.

Addendum No 1, the more crucial of the two addenda, stated that each Vessel shall be delivered with the repairs in the attached spreadsheet completed and accomplished at PRM’s account and cost. Essentially, the two spreadsheets (collectively “the Spreadsheets”) contained the items in each Vessel which TMM wanted to be repaired before delivery.² There were a total of 16 items in the spreadsheet for The Pacific 18, and eight items for The Pacific 38.

One of the key repairs sought was the restoration of the Vessels to Dynamic Positioning (DP) System 1 (DP-1) Class notation and for the American Bureau of Shipping (“ABS”) to classify them with the DP-1 Class notation. This was listed as Item 1 on the Spreadsheets. It is common ground that at the time the Vessels were inspected prior to the signing of the MOAs, and at the time of entering into the MOAs, the Vessels were neither equipped with a DP-1 system nor did their Class certificates contain a DP-1 Class notation.

TMM paid US$5.15m, 10% of the purchase price of the Vessels (“the Deposit”), into an escrow account with E S Platou (Asia) Pte Ltd (“Platou”). The delivery date for the Vessels was 7 November 2008.

The Notice of Readiness

The clauses in the MOAs which are particularly relevant to this dispute are cll 5(a), and 11. They provide: 5. Notices, time and place of delivery a) The Sellers shall keep the Buyers well informed of the Vessel’s itinerary and shall provide the Buyers with 05 days, and 01 days notice of the delivery estimated time of arrival at the intended place of drydocking/underwater inspection/delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery. Such Notice of Readiness shall only be given in the period between the hours of 1800 hrs Mexican time on a Sunday and 1700 hrs Mexican time on a Wednesday during any such period that falls within the delivery spread as stated in Line 60 herein.

...

11. Condition for delivery

The Vessel with everything belonging to her shall be at the Sellers’ risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreement she shall be delivered and taken over as is where is, but as she was at the time of inspection, fair wear and tear excepted. However, the Vessel shall be delivered physically ready with her class maintained without condition/recommendation, free of average damage affecting the Vessel’s class, and with her classification certificates valid for 3 months after delivery and national certificates, as well as all other certificates the Vessel had at the time of inspection, valid and unextended without condition/recommendation by Class or the relevant authorities at the time of delivery. ...

“Inspection” in this Clause 11, shall mean the Buyers’ inspection, according Clause 4 a) or 4 b), if applicable, or the Buyers’ inspection prior to the signing of this Agreement. If the Vessel is taken over without inspection, the date of this Agreement shall be the relevant date.

[original emphasis omitted; emphasis added in italics and bold italics]

Thus, the issuance of a valid Notice of Readiness for delivery of the Vessels (“NOR”) pursuant to cl 5(a) of the MOAs is an important step in the transaction as it obliges the buyer to take delivery of the Vessels. This in turn affects the date on which the buyer is obliged to make payment of the balance purchase price, a matter governed by cl 3 of the MOA which reads:

The said deposit and the 90% balance of the Purchase Price shall be paid in full free of bank charges to an account with the Seller’s nominated bank on the date of closing and delivery of the Vessel and simultaneously with the delivery of all closing / delivery documentation as mutually agreed in this MOA, but not later than 36 hours 3 banking days after the Vessel is in every respect physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with Clause 5.

On 28 October 2008 (Mexican Time), PRM issued a NOR which reads:³

On behalf of the Sellers, we hereby give you Notice of Delivery of the vessels. The vessels presently ready for delivery at mile 20 offshore Veracruz, Mexico in every respect ready for delivery. The present coordinates of the vessel are as follows reported at 17:00 hours on 28th October 2008 Mexican Time:

Pacific 18 Latitude 19-29.15N and Longitude 095-54.92W Pacific 38 Latitude 19-29.0N and Longitude 095-54.1W

In accordance with the said Memoranda of Agreement please take delivery of the vessels and make payment of the balance purchase price and R.O.B. Our lawyers in Singapore Haridass Ho & Partners are ready with all closing documents to close this transaction.

The NOR was promptly rejected by TMM on 29 October 2008. In an email to PRM,⁴ TMM explained that the NOR was not valid as TMM had not received evidence that the items in the Spreadsheets had been repaired. The Vessels were therefore not, in TMM’s view, in every respect physically ready, as required under cl 5(a) of the MOAs.

A series of emails were then exchanged between the parties’ respective solicitors on or about 31 October 2008. The first was from PRM’s solicitors, Haridass Ho & Partners (“HHP”), stating that PRM treated TMM’s rejection of the NOR as a repudiatory breach of the MOAs which PRM accepted. PRM nevertheless reiterated that it had complied with the terms of the MOAs, and despite having accepted TMM’s purported repudiation, offered the latter a chance to purchase the Vessels on the same terms as per the MOAs.⁵

This was followed by a response from TMM’s solicitors, Allen & Gledhill LLP (“A&G”), in which TMM denied that it had breached the MOAs by rejecting the NOR. A&G pointed to cl 5(a) of the MOAs and highlighted that the Vessels were not in every respect physically ready given that the repairs in the Spreadsheets had not yet been completed. In particular, ABS had not yet classified The Pacific 18 with DP-1 Class notation. A&G noted that PRM’s wrongful rejection of TMM’s refusal to accept the NOR was itself a repudiation of the MOAs. In these circumstances, TMM reserved its right to accept PRM’s repudiation but was prepared to await a valid NOR for the Vessels.⁶

HHP responded, maintaining PRM’s position that TMM had repudiated the MOAs. It added that TMM’s superintendents were on board the Vessels throughout the repairs at the dry dock and shipyard and had inspected all the works. On the DP-1 Class notation, PRM’s stance was that the ABS had inspected the DP-1 systems, and arrangements had been made to issue the DP-1 Class notations. That was the extent of PRM’s obligation.⁷

On 1 November 2008, A&G again stressed that the Vessels were not physically ready in every...