Vitol Asia Pte Ltd v Machlogic Singapore Pte Ltd

• Jurisdiction: Singapore
• Court: High Court (Singapore)
• Judge: Vinodh Coomaraswamy J
• Judgment Date: 22 October 2020
• Neutral Citation: [2020] SGHC 209
• Citation: [2020] SGHC 209
• Hearing Date: 13 January 2020
• Published date: 29 October 2020
• Plaintiff Counsel: Kevin Kwek, Gina Tan and Chong Li Tang (Legal Solutions LLC)
• Defendant Counsel: Leslie Yeo and Jolene Tan (Sterling Law Corporation)
• Docket Number: Originating Summons No 980 of 2019 (Summons No 4116 of 2019)
• Subject Matter: Recourse against award,Arbitration,Award

Vinodh Coomaraswamy J: Introduction

The applicant and the respondent were parties to a documents-only arbitration seated in Singapore.¹ The arbitration concluded with an award entirely in the applicant’s favour in February 2019.² The applicant secured leave ex parte in August 2019 to enforce the award as a judgment of the High Court under s 19 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the Act”).³ The respondent now applies to set aside the applicant’s leave to enforce the award.⁴

Chapter VIII of the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”) deals with recognising and enforcing awards. Art 36 of the Model Law, found in Chapter VIII, prescribes the grounds on which a court may refuse to recognise or enforce an award. Unlike the remainder of the Model Law, Chapter VIII is not given the force of law in Singapore by s 3(1) of the Act. It is common ground, however, that an application to resist enforcement of an award under s 19 can succeed only on one of the grounds prescribed in Art 36 (PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and others and another appeal [2014] 1 SLR 372 at [84]).⁵ I therefore proceed in these grounds as though Art 36 of the Model Law applied directly to the application before me.

The respondent resists enforcement of the award on three of the grounds prescribed in Art 36 of the Model Law:⁶ The arbitration agreement on which the applicant relies is not in truth an arbitration agreement within the meaning of s 2A(1) of the Act. In the alternative, the arbitration agreement is vitiated by corruption and fraud in which the applicant was complicit. The arbitration agreement is therefore “not valid” under Singapore law within the meaning of Art 36(1)(a)(i). The contract between the parties was procured by fraud and corruption in which the applicant was complicit. The respondent therefore required a hearing to present and test viva voce critical evidence going to the issue of fraud and corruption. The arbitrator’s decision to proceed documents-only deprived the respondent of that opportunity. The respondent was therefore unable to present its case in the arbitration within the meaning of Art 36(1)(a)(ii). Because the parties’ contract was procured by fraud and corruption, enforcing the award is contrary to the public policy of Singapore within the meaning of Art 36(1)(b)(ii).

Having considered the parties’ submissions and evidence, I have dismissed the respondent’s application. In brief, I have found as follows. First, s 2A(6) of the Act operated on the facts of this case to deem there to be an effective arbitration agreement between the parties. It therefore does not matter whether the parties’ contract contains an arbitration agreement within the meaning of s 2A(1) of the Act and whether the parties’ contract was procured by fraud or corruption. Second, the arbitrator’s decision to proceed documents-only did not leave the respondent unable to present its case in the arbitration. In any event, proceeding documents-only caused no prejudice to the respondent. Finally, even assuming that the parties’ contract was procured by fraud and corruption, there is nothing contrary to public policy in the arbitration or the award. And the respondent was aware of the fraud and corruption during the arbitration but deliberately declined to raise the issue for the arbitrator to determine. The respondent therefore cannot resist enforcement of the award on the public policy ground.

The respondent has appealed against my decision. I now set out the grounds for my decision.

Background facts The contract

The applicant is a trader in a number of oil products, including gas oil.⁷ The dispute between the parties arose out of a contract under which, as the arbitrator found, the respondent agreed in late December 2017 to sell a substantial cargo of gas oil to the applicant.

Taufik Othman is a broker who introduced business to the applicant from time to time.⁸ In December 2017, Mr Taufik was approached by one Saiful Alam via a mutual acquaintance, one Jimmy Ong. Mr Saiful described himself as the respondent’s “Field Sales Manager”.⁹ Mr Saiful told Mr Taufik that the respondent was interested in supplying a substantial cargo of gas oil to the applicant.¹⁰ Mr Taufik duly put Mr Saiful in touch directly with the applicant.¹¹ Mr Saiful thanked Mr Taufik by email, copying the email to the respondent’s director, one Choo Foong Yee (also known as Ms Chanel Choo).¹²

Mr Saiful followed up with a formal written offer to sell a substantial cargo of gas oil to the applicant.¹³ The offer was set out on the respondent’s letterhead and addressed directly to the applicant.¹⁴ It was signed by Mr Saiful, bore the defendant’s rubber stamp and described Mr Saiful as the respondent’s “Field Sales Manager”.¹⁵

As part of the applicant’s routine “know your customer” due diligence, the applicant asked Mr Saiful for additional information about the respondent.¹⁶ Mr Saiful emailed the information to the applicant, copying Ms Choo on his email.¹⁷

The parties differ in their account of subsequent events. The applicant’s account is as follows. The applicant accepted the respondent’s offer in late December 2017. The parties then entered into a contract under which the respondent was obliged to deliver the cargo of gas oil to the applicant. Mr Saiful executed the contract as the respondent’s employee and with the respondent’s actual or ostensible authority.¹⁸ The contract was therefore valid and binding on the respondent.¹⁹

The arbitrator accepted the applicant’s account in its entirety in her award.

The respondent’s account is as follows. Mr Saiful was not an employee of the respondent and had no authority to enter into the purported contract with the applicant on the respondent’s behalf.²⁰ Mr Saiful in fact conspired with the applicant to defraud the respondent²¹ by purporting to bind it to a contract which he procured for his own personal benefit by offering corrupt gratifications to Mr Taufik and Mr Ong.²²

Two clauses in the contract are relevant for present purposes:²³ (a) A performance deposit clause which required the respondent to pay the applicant US$297,000 at the very outset as a guarantee of supply; (b) The final clause of the contract:

Law and Arbitration

Singapore law shall be applied.

The applicant asserted in the arbitration and asserts on this application that the final clause of the contract is an arbitration agreement within the meaning of s 2A(1) of the Act. The respondent did not deny this assertion at any time in the course of the arbitration. But the respondent denies the applicant’s assertion now, in order to resist enforcement of the award. The respondent’s case on this application is that the award is unenforceable under Art 36(1)(a)(i) of the Model Law on the ground that there is no valid arbitration agreement between the parties.

The dispute

The respondent failed to comply with the performance deposit clause. It also failed to deliver any gas oil to the applicant. This failure was despite several reminders from the applicant to comply with both obligations. Ms Choo was copied on some of this correspondence.²⁴

The applicant took the position that the respondent’s failures amounted to repudiatory breaches of the contract.²⁵ In May 2018, the applicant served notice on the respondent accepting the repudiatory breaches and terminating the contract with immediate effect.²⁶

Ms Choo received the notice of termination.²⁷ But she did not respond to it. Her evidence is as follows. The notice of termination was the first time she knew anything about any purported contract between the respondent and the applicant.²⁸ She investigated internally. She discovered that all of the emails between the applicant and Mr Saiful about the contract which had been copied to her had gone into her junk mail folder.²⁹ She retrieved these emails from her junk mail folder. She also retrieved emails from Mr Saiful’s email account.³⁰ As a result, she read the full email chain for the first time.³¹ She pieced together Mr Saiful’s conspiracy with the applicant to defraud the respondent.³² She confronted Mr Saiful with the applicant’s notice of termination and interrogated him about the contract.³³ But Mr Saiful disappeared in June 2018 without offering any explanation at all.³⁴

It is probably at this point that the applicant engaged Kennedys Legal Solutions (“Kennedys”). Kennedys are the firm of solicitors who have acted for the applicant throughout this dispute, including in this application.

In mid-July 2018, Kennedys sent a letter before action to the respondent.³⁵ The letter claimed that the applicant was entitled to recover damages quantified at about US$279,000 from the respondent for the losses which the applicant had suffered as a result of the respondent’s repudiatory breaches of the contract.³⁶ The letter demanded that the respondent pay the US$279,000 within 14 days.³⁷

Up until this point, Ms Choo had not communicated with the applicant. Ms Choo now replied to the applicant. Her reply denied any liability to the applicant and refused to make payment.³⁸

The parties met in an attempt to resolve the matter amicably. The attempt failed.³⁹

The arbitration

In July 2018, the applicant served a notice of arbitration on the respondent.⁴⁰ The notice of arbitration asserted that the parties’ contract provides for disputes be submitted to arbitration. Although the notice of arbitration did not cite a specific clause in the contract as the arbitration agreement, it is common ground that the applicant relied on the final clause in the contract (see [13(b)] above) as the parties’ arbitration agreement.

Ms Choo accepts that she received the notice of arbitration.⁴¹ The applicant and Ms Choo exchanged two further emails. In both emails, Ms Choo...