DBL v DBM

•  Even if there is a breach of natural justice, curial intervention would only be justified where an aggrieved party is able to show that there was actual or real prejudice caused by the breach. In this regard, the aggrieved party must show that as a result of the breach, the tribunal was denied the benefit of arguments or evidence that had a real as opposed to fanciful chance of making a meaningful difference to the outcome of the arbitral proceedings: at [44]–[45].

1 Pursuant to a sales contract (the “Sales Contract”), the appellant agreed to sell prime steel slabs to the respondent. The Sales Contract expressly required the prime steel slabs to be loaded at any port in the Kingdom of Saudi Arabia (“KSA”). Based on the terms of the Sales Contract, either party could terminate the Sales Contract in the event of any breach of the conditions, and the Sales Contract was governed by English law and provided for arbitration in Singapore in accordance with the arbitration rules of the Singapore Chamber of Maritime Arbitration for the time being in force at the commencement of arbitration.

2 The prime steel slabs (the “Goods”) were loaded onto a vessel (the “Vessel”) on 19 September 2013. On the same day, payment of USD 9,922,152.97 (the “Purchase Price”) was made by the respondent’s bank to the appellant for the Goods.

3 According to the bill of lading, the Goods were loaded at the Dammam Port in the KSA. However, the respondent’s bank subsequently notified the respondent on 24 September 2013 that it had reason to believe that the Goods had been loaded at Bandar Abbas in Iran instead, which was a jurisdiction subject to sanctions. This led to the respondent seeking an indemnity from the appellant on 24 September 2013. The appellant provided the respondent with a signed document titled “Indemnity Bond” (the “Bond”) which was backdated to 8 September 2013 under which the appellant confirmed that the Goods would originate from the KSA and be loaded at the Dammam Port in the KSA. The Bond also provided that the Sales Contract could be terminated with all payments received by the appellant to be refunded to the respondent if the parties were not satisfied with the documentation in relation to the Goods.

4 On 29 September 2013, the respondent informed the appellant that it was “cancelling” the Sales Contract and asked the appellant to refund the Purchase Price to the respondent’s bank as soon as possible. The respondent never took delivery of the Goods. The appellant in due course sold the Goods to another buyer and informed the respondent that it was awaiting payment of the proceeds from the sale of the Goods to another buyer before it remitted the Purchase Price to the respondent. A net sum of USD 499,975 was paid by the appellant to the respondent on 7 November 2013 as a demonstration of good faith by the appellant while it was awaiting receipt of the proceeds from the sale of the Goods to the other buyer.

5 Between April and May 2014, the appellant and the respondent entered into an agreement under which the appellant was to supply nickel to the respondent. Adjusting the outstanding amount against the agreed purchase price of the nickel, the respondent contended that the net outstanding amount owed by the appellant was USD 4,683,418.77 (the “New Outstanding Amount”). The appellant, on the other hand, contended twice while confirming the balance outstanding that the net balance owing was USD 4,610,707.65 (being the New Outstanding Amount less a sum of USD 72,711.12).

6 The respondent commenced arbitral proceedings on 24 July 2020 in which it pursued two alternative claims. First, the respondent pursued a claim for breach of the Sales Contract as varied by the Bond, seeking a refund of the New Outstanding Amount as well as an indemnity against some other losses, costs and penalties it had incurred, along with interest. In the alternative, the respondent sought damages for breach of the Sales Contract. Second, and in the alternative to its claim for breach of the Sales Contract as varied by the Bond, the respondent presented a claim in unjust enrichment, seeking restitution of the New Outstanding Amount.

7 The respondent contended that its claim was not time-barred (despite the passage of time between the breach in September 2013 and the commencement of arbitral proceedings on 24 July 2020) by virtue of the confirmations of the balance outstanding that the appellant had issued on two occasions, the effect of which was to extend the time from which any period of limitations would run.

8 The appellant, in turn, argued that it had not breached the Sales Contract or the Bond and that the Goods had, in fact, been loaded at the Dammam Port in the KSA. The appellant also raised the following arguments in the arbitral proceedings:

a. the respondent’s causes of action were time-barred because the acknowledgments which the respondent relied on did not meet the prescribed requirements under the English Limitation Act and thus did not extend the limitation period (the “Limitation Defence”); and

b. the Bond was unenforceable under English law because it was neither supported by consideration nor made by deed (the “Unenforceable Bond Defence”).

9 During the oral closing submissions of arbitration hearing, the respondent’s counsel carried out a demonstration (the “Searoutes Demonstration”) in which the counsel entered data (including the coordinates of the Vessel on the morning of 20 September 2013) onto a route planning and vessel tracking website, searoutes.com, in order to show that it was highly implausible that the Goods had been loaded onto the Vessel on 19 September 2013 at the Dammam Port in the KSA. The Searoutes Demonstration was not disclosed by the respondent in advance of the oral closing submissions despite there being an agreed hearing protocol which required any party intending to rely on demonstrative exhibits derived from evidence on the record to do so. However, the appellant’s counsel did not object to the Searoutes Demonstration during the hearing. The appellant’s counsel also did not substantively address the Searoutes Demonstration in its oral closing submissions (which followed the respondent’s oral closing submissions), or otherwise.

10 The arbitral tribunal (the “Tribunal”) found in favour of the respondent. The appellant was ordered to pay the respondent the sum of USD 4,683,418.97, being the balance of the Purchase Price which had not previously been paid.

11 The appellant sought to set aside the arbitral award (the “Award”) in the court below pursuant to s 24(b) of the International Arbitration Act 1994 (2020 Rev Ed) asserting a breach of the rules of natural justice which resulted in the appellant’s rights being prejudiced. The Judge in the court below considered each of the appellant’s three arguments and ultimately dismissed the appellant’s application for the following reasons:

a. First, the appellant argued that it was not afforded a reasonable and fair opportunity to address the Searoutes Demonstration (the “Searoutes Demonstration Issue”). The Judge, however, found that any objection by the appellant to the Searoutes Demonstration would have made no difference as the Tribunal had relied on other evidence aside from the Searoutes Demonstration in concluding that the Goods had not been loaded at the Dammam Port in the KSA. Further, the appellant’s conduct throughout the arbitration did not evince any intention on the appellant’s part to object to the Searoutes Demonstration. Rather, its conduct suggested that it did not regard the Searoutes Demonstration as objectionable at all.

b. Second, the appellant argued that the Tribunal had failed to consider its Limitation Defence (the “Limitation Defence Issue”). However, the Judge found that the Tribunal had considered the Limitation Defence and rejected it. While the Tribunal may not have explained why it considered that the acknowledgments satisfied the requirements of the English Limitation Act, the Tribunal was not required to deal with each argument raised as long as it dealt with the essential issues.

c. Third, the appellant argued that the Tribunal had failed to consider or apply its mind to the Unenforceable Bond Defence (the “Unenforceable Bond Defence Issue”). The Judge accepted that the Tribunal did not address the Unenforceable Bond Defence. However, this did not amount to a breach of natural justice because the respondent’s claim was not based solely on a breach of the Sales Contract as varied by the Bond. Rather, the Judge found that the respondent had pursued an alternative claim based on a breach of just the Sales Contract. While the Award did not expressly refer to such an alternative, in the Judge’s view, the Award had held that the appellant had breached terms in both the Sales Contract as well as the Bond. Therefore, the Judge found that there was no need for the Tribunal to decide on the enforceability of the Bond since the alternative claim did not depend on the Bond. It followed that no prejudice was suffered by the appellant. Even if the Tribunal had accepted the appellant’s argument that the Bond was unenforceable and had considered the respondent’s alternative claim for breach of just the Sales Contract, the Tribunal would likely have arrived at the same result.

13 In considering whether a party had been denied its right to a fair hearing by a tribunal’s conduct of the proceedings, the proper approach was for the court to ask itself if what the tribunal did (or decided not to do) fell within the range of what a reasonable and fair-minded tribunal in those circumstances might have done. A tribunal ought not to be criticised as having acted unfairly when the alleged unfairness was never brought to the attention of the tribunal by the aggrieved party: at [28].

14 An aggrieved party was not entitled to simply “reserve” its position until after the award and only pursue a point if the outcome of the award turned out to be unpalatable to it. Hedging against an adverse result was impermissible because an aggrieved party ought not to be allowed to argue a breach of natural justice when at the material time it presented itself as a party which was ready, able and willing to see the arbitral proceedings through to the end: at [29].

15 The appellant’s contention that it was not afforded a reasonable and fair opportunity to address the Searoutes Demonstration was disposed of on the ground that the appellant did not object to the Searoutes Demonstration before the Tribunal. Rather, its conduct suggested that it had no issue with the Searoutes Demonstration at the material time: [30]–[32].

16 It was clear on the face of the Award that the Tribunal had considered the essential issue as to whether the respondent’s claims were time-barred. While the Award made no reference to the parties’ arguments on whether the various acknowledgments satisfied the prescribed requirements under the English Limitation Act, this did not amount to a breach of natural justice. While natural justice requires that parties should be heard, it does not require that they be given responses to all submissions made. Accordingly, a tribunal is only required to deal with the essential issues and is not obliged to deal with every argument made by the parties: at [34]–[36].

17 The Tribunal did not deal with the Unenforceable Bond Defence. There was also neither an explicit nor implicit indication that the Tribunal had considered the Unenforceable Bond Defence: at [40].

18 However, the Judge erred in finding that it was unnecessary to consider the enforceability of the Bond on the basis that the Award appeared to rest on findings that the respondent had breached terms in both the Sales Contract as well as in the Bond:

a. First, the respondent did not plead such an alternative claim for breach of just the Sales Contract standing alone. Though a more generous approach may be taken towards pleadings in arbitral proceedings, and pleadings in arbitral proceedings are not determinative in the same way that they might be in court litigation, this does not allow the court to fill in gaps in a party’s case or read into a party’s case a claim which it had not explicitly advanced: at [42(a)].

b. Second, it was clear that the Tribunal had not expressly referred to or even considered an alternative claim for breach of just the Sales Contract standing alone. Given this, it could not be said that the Tribunal had made any finding in the Award that the respondent had breached the Sales Contract: at [42(b)].

19 Despite the foregoing, there was no basis for setting aside the Award as the appellant did not suffer any actual or real prejudice on account of the breach of natural justice. In particular, there did not appear to be a real chance of a meaningful difference to the outcome of the arbitral proceedings even if the matter had been remitted to the Tribunal to consider the Unenforceable Bond Defence. Even assuming that the Bond was unenforceable, this would not have changed the fact that there was nevertheless a breach of the Sales Contract. The Tribunal would have then had to consider the damages payable by the appellant to the respondent for the breach of the Sales Contract. While damages would typically have had to be assessed, the present case was one where the Purchase Price had been released to the appellant by the respondent’s bank and the Goods had made their way back to the appellant who then sold the Goods to another buyer. Therefore, even if damages were to have been assessed, the damages payable would have simply been the New Outstanding Amount. This was the same amount which the Tribunal had ordered the appellant to pay the respondent in the Award, albeit framed as a refund: at [43]–[47].

20 The appeal was dismissed, and costs were fixed in favour of the respondent in the aggregate sum of $60,000: at [48].