Skip to content
laws.sgby aturio
Grounds publishedDecided 30 Oct 2015
Contents

High Court

AMZ v AXX

Feedback & support

[2015] SGHC 283Case no. Originating Summons No [P]

What happened, in plain English

There is no plain-English summary of this judgment yet.

Ask about this judgment

Laws this judgment relies on

Grounds of decision

Official text from eLitigation

  1. Vinodh Coomaraswamy J:

  2. Introduction

  3. [1] A claimant commences arbitration seeking damages for breach of contract. Its case rests solely on the premise that the respondent has committed three breaches of contract which, taken together, amount to a repudiatory breach of contract. The claimant advances no alternative claim for damages for breach of contract falling short of a repudiatory breach. The respondent denies that it is in breach of contract; denies that the three breaches amount to a repudiatory breach of contract; and asserts that it is the claimant itself who has breached the contract.

  4. [2] In its award, the tribunal finds one alleged breach of contract to have been established but find that the other two alleged breaches are not breaches at all. The tribunal holds, however, that the claimant is unable to rely on the lone breach of contract as being a repudiatory breach of contract. In the absence of an alternative claim for damages, the tribunal dismisses the claim in its entirety. In its award, the tribunal expresses its views on a number of questions which the parties placed before it but which were not, in the light of its reasoning, necessary for its decision.

  5. [4] The claimant has appealed to the Court of Appeal against my decision. I now set out my reasons. At the respondent’s request, these reasons have been anonymised.

  6. The parties and their contract

  7. The parties

  8. [5] The plaintiff in these proceedings was the claimant in the arbitration. It is a company incorporated in a country I shall call “Alderaan” and trades in oil products, including crude oil.

  9. [6] The defendant in these proceedings was the respondent in the arbitration. It is a company incorporated in a country I shall call “Bespin”, and is a wholly-owned subsidiary of a substantial entity. The defendant’s business is processing oil and manufacturing chemicals. It owns three large petrochemical development plants. One of those plants is in a province of Bespin which I shall call “Cloud City”.

  10. The Supply Contract

  11. [7] By a contract in writing dated 1 December 2010 (“the Supply Contract”), the plaintiff agreed to sell to the defendant 600,000 barrels +/- 5% of Dar Blend. Dar Blend is a type of crude oil originating in South Sudan.

  12. [8] The plaintiff relied in the arbitration on three provisions of the Supply Contract. First, it relied on clause 4 which provided for the Dar Blend to be delivered to the defendant ex ship during a ten-day delivery window between 10 January 2011 and 20 January 2011 in Cloud City in Bespin. Second, it relied on cl 6 which obliged the defendant to open an irrevocable letter of credit in the plaintiff’s favour by 16 December 2010. Clause 6 further provided that the plaintiff had no obligation to deliver the Dar Blend before receiving a letter of credit and that the defendant would be responsible for all demurrage incurred if it opened the letter of credit late. Finally, the plaintiff relied on cl 11 of the Supply Contract which obliged the defendant, as the importer of record of the Dar Blend, to arrange for customs clearance of the Dar Blend in Cloud City.

  13. [9] The price for the Dar Blend under the Supply Contract was not a fixed price. Instead, the price was to be the prevailing price for Brent crude oil in the second half of January 2011, during the delivery window, subject to a discount of US$3.50 per barrel.

  14. [10] The Supply Contract was governed by English law and provided for disputes to be resolved by arbitration in Singapore under the rules of the Singapore International Arbitration Centre (“SIAC”).

  15. [11] An oil trader employed by the plaintiff, whom I shall refer to as “Owen”, took the lead for the plaintiff in negotiating, documenting and performing the Supply Contract. Also involved for the plaintiff in performing the Supply Contract, albeit at one step removed from Owen, was the plaintiff’s Finance Manager, whom I shall refer to as “Beru”.

  16. The lead-up to the Supply Contract

  17. [12] When the parties were negotiating the Supply Contract in September and October 2010, the defendant lacked a crude oil import licence issued by the government of Bespin. Without that licence, the defendant could not lawfully import crude oil, such as Dar Blend, into Bespin. Nevertheless, the defendant’s representatives assured Owen during these negotiations that the defendant expected to be issued the necessary licence before the end of December 2010 or by 1 January 2011.

  18. [13] At the same time as the plaintiff and the defendant entered into the Supply Contract, they also entered into what they call the Buy-back Contract. Under the Buy-back Contract, the plaintiff agreed to buy the Dar Blend back from the defendant on fob terms if the defendant was not able to take delivery of the Dar Blend during the delivery window because it lacked a crude oil import licence. The plaintiff’s obligation under the Buy-back Contract was to buy back the Dar Blend at the prevailing price for Brent crude oil in the second half of January 2011, subject to a discount of only US$2.50 per barrel.

  19. [14] It is an important point that the defendant’s price as the plaintiff’s seller under the Buy-back Contract was higher than the defendant’s price as the plaintiff's buyer under the Supply Contract. The combined effect of the two contracts meant that the defendant would, if it failed to secure a crude oil import licence, earn a profit of US$1.00 per barrel, or a profit of US$600,000 (+/- 5%) in absolute terms, on the overall transaction.

  20. [15] In November 2010, in anticipation of concluding the Supply Contract with the defendant and in order to fulfil its delivery obligation under that contract, the plaintiff took three steps. First, it contracted to purchase the necessary quantity of Dar Blend from a supplier. Second, it arranged financing for this purchase with its bank (“the Bank”). Finally, it chartered and nominated a vessel, which I shall call the “Tantive IV”, to transport the Dar Blend from South Sudan to up to three safe ports including Alderaan and Cloud City.

  21. [16] Although the Supply Contract was dated 1 December 2010, the defendant returned the signed execution pages of the Supply Contract to the plaintiff only on 14 December 2010. On 13 December 2010, therefore, the plaintiff still did not know whether the defendant had undertaken a binding commitment to buy the Dar Blend which the plaintiff had already committed itself to purchasing from its supplier. As a result, on 13 December 2010, Owen sent a chaser to the defendant’s representative inquiring about the status of the Supply Contract. The defendant responded to the plaintiff the same day with what the parties and the Tribunal have called “the Confirmation Letter”. In the Confirmation Letter, the defendant confirmed that it accepted the plaintiff’s offer to sell it the Dar Blend on the terms set out in the draft Supply Contract.

  22. [17] The Confirmation Letter was followed on the night of 14 December 2010, as I have said, by the duly-executed signature pages of the Supply Contract.

  23. The defendant breaches the Supply Contract

  24. [18] It was the defendant’s obligation under cl 6 of the Supply Contract to open by 16 December 2010 a letter of credit to pay the plaintiff for the Dar Blend. However, even as late as 14 December 2010, when it finally took on a contractual commitment to buy the Dar Blend under the Supply Contract, the defendant had not opened a letter of credit.

  25. [19] The plaintiff, with the knowledge and approval of the Bank, agreed with the defendant to accept the defendant’s payment undertaking in place of a letter of credit. The plaintiff and the Bank were prepared to forgo the substantial security of a letter of credit because of the defendant’s own creditworthiness and also because of the defendant’s status as a wholly-owned subsidiary of a substantial and creditworthy enterprise.

  26. [20] The defendant failed to secure a letter of credit or to issue a payment undertaking by 16 December 2010 or indeed at all.

  27. The cargo sets sail for Alderaan

  28. [21] Even though the plaintiff did not have either a letter of credit or a payment undertaking, Owen proceeded to load the Dar Blend onto the Tantive IV at Port Sudan on 17 and 18 December 2010. However, Owen did not instruct the Tantive IV to sail directly from Port Sudan to Cloud City. Instead, he instructed the vessel to sail from Port Sudan to Alderaan and to remain in Alderaan awaiting further routing orders. Alderaan is approximately two-thirds of the way from Port Sudan to Cloud City.

  29. [22] On or about 21 December 2010, the plaintiff’s Geneva office informed Owen of market rumours that the defendant had failed to secure a crude oil import licence. He checked with the defendant’s representative and was assured that there was nothing to worry about. It remained the case, he was told, that the defendant would be issued a crude oil import licence by 1 January 2011.

  30. [23] The Tantive IV arrived in Alderaan on or around 1 January 2011. Owen held the vessel there pending further routing orders.

  31. The defendant fails to secure a crude oil import licence

  32. [24] On 4 January 2011, the defendant’s representative confirmed to Owen that it had indeed failed to secure a crude oil import licence and would not be able to take delivery of the Dar Blend if the Tantive IV were to sail from Alderaan to Cloud City. The defendant suggested that the plaintiff try and sell the Dar Blend to a third party.

  33. [26] Given what the plaintiff viewed as the defendant’s repudiatory breach of the Supply Contract in failing to secure a crude oil import licence and to take delivery of the Dar Blend, Owen decided it was too risky to order the Tantive IV to set sail for Cloud City from Alderaan.

  34. [27] The last day of the delivery window was 20 January 2011. By a letter dated 20 January 2011, the plaintiff put the defendant on notice that the plaintiff considered the defendant to be in repudiatory breach of the Supply Contract and that it accepted the repudiatory breach. The plaintiff sent a second letter to the defendant on 25 February 2011 notifying it that it had not yet found another buyer for the Dar Blend in order to mitigate its loss and would now have to offload the Dar Blend as a distressed cargo at the best available price.

  35. [28] The defendant denies that the plaintiff issued any of these notices.

  36. The plaintiff sells the Dar Blend to a third party

  37. [29] In March 2011, the plaintiff sold the Dar Blend to a company which I shall call “the Company”. Because the plaintiff sold the Dar Blend as a distressed cargo, the best price which it could achieve was the price of Brent crude oil in May 2011 subject to a discount of US$18.00 a barrel. This discount of US$18.00 a barrel was several multiples of the discount which the plaintiff had agreed with the defendant under the Supply Contract (US$3.00). But, between December 2010 and March 2011, the price of Brent crude oil had risen dramatically. Therefore, despite the deep discount of US$18.00 a barrel, the net price per barrel on the plaintiff’s sale to the Company was higher than the net price per barrel under the Supply Contract.

  38. [30] This substantial increase in the price of Brent crude oil from January 2011 to March 2011 meant that the plaintiff made a profit on the sale of the Dar Blend to the Company despite the distressed circumstances of the sale. Indeed, the plaintiff made a profit in two senses.

  39. [34] In March 2011, the plaintiff demanded that the defendant pay within one week the sum of US$10.17m as compensation for the defendant’s breach of the Supply Contract. The defendant did not satisfy this demand, either within one week or at all.

  40. The arbitration

  41. [35] On 7 April 2011, the plaintiff commenced arbitration against the defendant. Each party nominated one arbitrator and the SIAC nominated the presiding arbitrator. The Tribunal was duly constituted in July 2011.

  42. The plaintiff’s case in the arbitration

  43. On liability

  44. [36] The plaintiff’s case in the arbitration on liability was straightforward. The defendant was in breach of the Supply Contract because: (i) it had breached cl 6 by failing to open a letter of credit or, as later agreed, to issue a payment undertaking in its place by 16 December 2010; (ii) it had breached cl 11 by failing to secure a crude oil import licence; and (iii) it had breached cl 4 by failing to take delivery of the Dar Blend during the delivery window. These three breaches taken together amounted to a repudiatory breach of the Supply Contract. The plaintiff had accepted that repudiatory breach. The defendant was thus obliged to pay damages to the plaintiff.

  45. [37] The important point about the plaintiff’s claim is that it rested on – and only on – an allegation that the defendant was in repudiatory breach of the Supply Contract. Nowhere in its statement of claim did the plaintiff plead in the alternative that the defendant had breached the Supply Contract in a manner which fell short of being a repudiatory breach but which nevertheless left the defendant liable in damages to the plaintiff.

  46. On quantum

  47. [38] The plaintiff’s case in the arbitration on quantum was that the defendant’s repudiatory breach of contract had caused it a total loss of US$13.48m. That sum comprised two components.

  48. [40] The second component was the sum of US$8.37m which the plaintiff claimed as the difference between the plaintiff’s financial position if the defendant had taken delivery of and paid for the Dar Blend in January 2011 under the Supply Contract and its financial position after the Company took delivery of and paid for the Dar Blend in March 2011. The plaintiff’s case was that it would have made a profit of US$3.04m in the former counterfactual scenario; and that, by reason of the defendant’s breach, it in fact suffered a loss of US$5.32m in the latter actual scenario. The difference between those two positions – one being a profit and the other a loss – is US$8.37m.

  49. [41] This US$8.37m component of the plaintiff’s claim requires further explanation. Between December 2010 and March 2011, the plaintiff entered into a series of contracts to hedge its exposure under the Supply Contract. The plaintiff’s evidence in the arbitration was that hedging in this way is a normal part of an oil trader’s risk management. It therefore claimed its losses on these hedging contracts as losses which were within the parties’ contemplation and which were therefore recoverable as damages.

  50. [42] By the delivery window in January 2011, the plaintiff had lost US$4.01m on its hedging positions. Thus, the plaintiff quantified the profit it would have earned if the defendant had taken delivery of the Dar Blend by charging the defendant with the hypothetical profit of $7.05m and then giving credit to the defendant for US$4.01m, being the plaintiff’s actual hedging losses up to the delivery window. The difference between those two figures leaves a net profit of US$3.04m from the hypothetical transaction with the defendant.

  51. [43] The defendant’s breach of contract meant, however, that the plaintiff’s exposure to the oil market’s fluctuations continued until March 2011, when it finally found a buyer for the Dar Blend, and did not end, as it should have, by the delivery window. Therefore, the plaintiff was compelled to continue to hedge its exposure under the Supply Contract up to March 2011. By that date, its hedging losses had ballooned from US$4.01m to US$14.09m. To compute its actual profit on the sale to the Company, therefore, the plaintiff credited the defendant with the actual profit of US$8.77m and then charged against that figure its total hedging losses up to March 2011 of US$14.09m to arrive at a loss of US$5.32m.

  52. [44] All of that can be summarised in the following two tables:

  53. The defendant’s defence in the arbitration

  54. [45] In the arbitration, the defendant raised four defences which are relevant for present purposes. The defendant pleaded each defence as an alternative to the preceding defences and without prejudice to its position on those preceding defences: The four defences are as follows:

  55. (a) The defendant was not in breach of the Supply Contract.

  56. (b) The defendant was not in repudiatory breach of the Supply Contract.

  57. (c) The plaintiff had not validly communicated its acceptance of the repudiatory breach.

  58. (d) The plaintiff had suffered no recoverable loss as a result of the repudiatory breach.

  59. [46] It is useful at this point to expand on the defendant’s reasons for arguing that it was not in breach of the three obligations under the Supply Contract which the plaintiff relied upon for its claim:

  60. (a) The plaintiff had waived the defendant’s performance of its obligation under cl 6 of the Supply Contract; alternatively, the plaintiff had continued to take steps to perform its obligations under the Supply Contract notwithstanding the defendant’s breach of cl 6; and the plaintiff was therefore precluded from relying on the breach of cl 6 to justify its failure to perform its own obligations under the Supply Contract.

  61. (b) It was the plaintiff who was in breach of the Supply Contract because it had had no intention of delivering the Dar Blend to the defendant and in fact failed to deliver the Dar Blend to the defendant at all; alternatively, the defendant had no obligation under cl 11 of the Supply Contract to secure a crude oil import licence; alternatively the effect of the defendant’s breach in failing to secure a crude oil import licence would have been cured contractually by the operation of the Buy-back Contract; alternatively, the plaintiff was estopped from requiring the defendant to have a crude oil import licence because it proceeded to load the Tantive IV knowing that the defendant did not have that licence.

  62. (c) The defendant was not in breach of its obligation to take delivery of the Dar Blend because it was in fact the plaintiff who had committed a repudiatory breach of the Supply Contract when it took the unilateral decision of its own volition not to deliver the Dar Blend during the delivery window without contractual justification.

  63. [47] By reason of this final point (at [46(c)] above), the defendant asserted a cross-claim for damages for non-delivery against the plaintiff and claimed a right to set-off those damages against any damages found to be due to the plaintiff.

  64. The jurisdictional hearing

  65. [48] In addition to the substantive defences which I have outlined above, the defendant also raised a jurisdictional objection, arguing that the Supply Contract was a forgery, thereby depriving the Tribunal of any jurisdiction over it. The Tribunal directed that the defendant’s jurisdictional objection be heard as a preliminary issue, with evidence. It made the usual provisions for viva voce evidence and for submissions on the jurisdictional objection to be exchanged in advance of the hearing.

  66. [49] The jurisdictional hearing took place on 5 and 6 December 2011. The evidence of each side’s witnesses was tested by cross-examination in the presence of the Tribunal. The plaintiff adduced evidence from four witnesses of fact and one expert witness. The defendant adduced evidence from six witnesses of fact and one expert witness. Owen was one of the plaintiff’s witnesses of fact. Beru was not.

  67. [50] Following the jurisdictional hearing, the Tribunal received legal submissions in writing from the parties.

  68. [51] On 30 April 2012, the Tribunal notified the parties that: (i) it was disinclined at that stage to accept the defendant’s jurisdictional objection; (ii) that it would proceed to hear the parties’ dispute on the merits; and (iii) that it would deal conclusively with the defendant’s jurisdictional challenge in its final award.

  69. The hearing on the merits

  70. [52] The hearing on the merits took place from 18 to 20 February 2013. That hearing was preceded in the usual way by an exchange of pleadings, documents, witness statements and opening statements. It was followed in the usual way by an exchange of legal submissions in writing.

  71. [53] The plaintiff called only one witness of fact at the merits hearing: Beru. In addition, it relied at the merits hearing on Owen’s evidence from the jurisdictional phase. It therefore did not adduce a fresh witness statement from Owen for the merits hearing or make him available for further cross-examination.

  72. [54] The defendant also called only one witness of fact at the merits hearing.

  73. [55] The crucial issue at the merits hearing was precisely why, in January 2011, Owen had taken the decision to hold the Tantive IV and its cargo of Dar Blend in Alderaan (see [23] above) rather than instructing it to sail on to Cloud City in order to be able to deliver the Dar Blend to the defendant during the delivery window. The importance of this issue could not have been a surprise to the plaintiff. The defendant had pleaded specifically that the plaintiff had never had any intention of delivering the Dar Blend to the defendant and that its failure to do so was a unilateral decision taken of its own volition (see [46(c)] above).

  74. [56] The only evidence from Owen which was before the Tribunal at the merits hearing on this issue was the transcript of his evidence given earlier at the jurisdictional hearing. His evidence there was that he had held the Dar Blend in Alderaan in January 2011 because of the defendant’s failure to secure a crude oil import licence. He put it in two ways. First, Owen said, he and the Bank thought that the Dar Blend – which was, after all, the Bank’s only security for the trade financing it had extended to the plaintiff – would be at risk if the Tantive IV sailed into Bespin’s waters when the defendant as the purchaser of the Dar Blend did not have the necessary licence from the government of Bespin to take delivery of it. Second, Owen said, he was afraid that it would be difficult to maintain the heating necessary to keep the Dar Blend at the required temperature in the wintry conditions off Cloud City if it proved impossible to discharge the Dar Blend there because the defendant did not have a crude oil import licence. If the Dar Blend was not properly heated, its condition would deteriorate and it could solidify entirely such that it could not be discharged.

  75. [57] Crucially, Owen did not, in his witness statement or in his cross-examination at the jurisdictional hearing, cite the defendant’s failure to issue the payment undertaking as a reason for his decision to hold the Dar Blend in Alderaan in January 2011.

  76. The award

  77. [58] The Tribunal issued its award on 21 January 2014. In the award, the Tribunal frames the issues before it in the following passage:

  78. [59] Issues (c) and (d) are the only issues material to the application before me. I now summarise the Tribunal’s reasoning on these two issues. I need not and do not deal with the Tribunals’ reasoning on the three remaining issues.

  79. Issue (c) – repudiatory breach of contract

  80. [60] The Tribunal begins this section of its award by summarising the parties’ cases. Thus, it notes that the plaintiff’s case is that the defendant committed three breaches of the Supply Contract (see paragraph [196(c)(i) to (iii) of the Award cited at [58] above) amounting to a repudiatory breach; and that the plaintiff accepted the defendant’s repudiation, thereby releasing the plaintiff from its obligation to deliver the Dar Blend to the defendant in Cloud City within the delivery window:

  81. [61] The Tribunal then summarises the defendant’s defence, which I have set out in more detail at [45]–[47] above:

  82. [62] The Tribunal then analyses separately the three breaches of the Supply Contract alleged by the plaintiff before considering the three breaches all together. This section of the award commences with the following paragraph:

  83. First alleged breach – letter of credit or payment undertaking

  84. [63] On the first alleged breach, the Tribunal finds that the defendant’s failure to issue a letter of credit or a payment undertaking by 16 December 2010 was indeed a breach of cl 6 of the Supply Contract. However, the Tribunal finds that the plaintiff nevertheless chose, in December 2010, to perform its obligations under the Supply Contract. For this finding, the Tribunal relies on the evidence of Beru in the merits hearing. She testified that, despite the defendant’s failure to comply with cl 6 of the Supply Contract at the time the Tantive IV set sail from Port Sudan to Alderaan, the defendant’s Confirmation Letter received on 13 December 2010 (see [16] above) was sufficient assurance for the plaintiff that the defendant was working on the payment undertaking and would eventually issue it to the plaintiff. The Tribunal therefore holds that, on the plaintiff’s own case, it did not, in December 2010, accept the defendant’s breach of cl 6 as a repudiatory breach. The Tribunal holds instead that the plaintiff did quite the opposite: that the plaintiff in December 2010, following the breach of cl 6 of the Supply Contract, affirmed it. On these grounds, the Tribunal concludes that it was not in December 2010 but only in early January 2011 that the plaintiff decided to divert the Dar Blend from its intended destination at Cloud City.

  85. [64] The Tribunal therefore holds that the plaintiff lost the chance in December 2010 to treat the defendant’s breach of cl 6 as terminating the plaintiff’s own delivery obligation under the Supply Contract, even if this breach were capable of constituting a repudiatory breach. This made it unnecessary for the Tribunal to decide whether the defendant’s breach of cl 6 in fact constituted a repudiatory breach. The Tribunal does not therefore analyse this point further.

  86. [65] The Tribunal does, however, go on to consider what rights the plaintiff did in fact have arising from the defendant’s breach of cl 6. It concludes that the plaintiff had the right to withhold delivery of the Dar Blend until the defendant complied with cl 6 and to claim damages for the defendant’s breach of cl 6. The Tribunal then observes that the plaintiff’s sole case on liability was advanced on the basis that the defendant was in repudiatory breach of the Supply Contract. The plaintiff had thereby elected to make no claim for damages caused by any of the defendant’s breaches – including a breach of cl 6 – as a single and compensable breach falling short of a repudiatory breach. But, the Tribunal opines, even if the plaintiff had pursued a claim for damages for the loss caused by a breach alone of cl 6, the plaintiff would have found it difficult to establish that it had suffered any actual loss which was causally connected to the breach, whether in terms of reliance loss or in terms of expectation loss. The Tribunal therefore concludes that the plaintiff suffered no loss by reason of the defendant’s breach of cl 6 alone.

  87. Second alleged breach – crude oil import licence

  88. [66] On the second alleged breach, the Tribunal holds that the defendant had no obligation under the Supply Contract to secure a crude oil import licence. The Tribunal begins its analysis by holding that, in a contract for delivery ex ship such as the Supply Contract, “the buyer...has sole responsibility for obtaining any import licence, and [cannot] rely on the absence of such a licence as a valid excuse for non-performance.” That, however, does not impose a contractual obligation on the buyer to secure a required import licence or excuse the seller from its own performance if the buyer fails to secure that licence. It simply means that when the seller delivers, the buyer cannot rely on the lack of an import licence as an excuse for failing to take delivery. The Tribunal notes, however, that the defendant was not in this case relying on the absence of a crude oil import licence to explain its failure to take delivery.

  89. [67] Finally, the Tribunal holds that it was not, in any event, necessary for the defendant to hold a crude oil import licence in order for the defendant to perform its obligation to take delivery of the Dar Blend under the Supply Contract. The contract, being a contract for delivery ex ship, permitted the defendant to take delivery of the Dar Blend in several ways other than by actually taking possession of the Dar Blend and which did not require the defendant to have a crude oil import licence.

  90. [68] To support its holding, the Tribunal notes that the parties’ overall bargain showed that they did not consider the defendant’s failure to secure a crude oil import licence to be a breach of the Supply Contract. It relies for this holding on the effect of the Buy-back Contract (see [13] above). The Tribunal finds it difficult to believe that the parties would have agreed that the defendant should earn a profit of approximately US$600,000 under the Buy-back Contract if the parties had also intended the defendant’s failure to secure a crude oil import licence to constitute a breach of the Supply Contract.

  91. Third alleged breach – failure to take delivery

  92. [69] The Tribunal begins its analysis of the third alleged breach by noting that the defendant’s performance of its obligation to take delivery of the Dar Blend is dependent upon the plaintiff’s performance of its obligation to make delivery of the Dar Blend. Thus, the Tribunal reasons, the defendant’s failure to take delivery cannot be a breach of contract unless the plaintiff’s failure to make delivery was not itself a breach. That would be the case only if the plaintiff’s failure to make delivery is attributable to an antecedent breach of the Supply Contract by the defendant.

  93. [70] The Tribunal then notes that the plaintiff has focused primarily on the defendant’s failure to obtain a crude oil import licence by early January 2011 as the plaintiff’s reason for not performing its obligation to deliver the Dar Blend. The Tribunal accepts as true in point of fact Owen’s evidence in the jurisdictional phase that he held the cargo of Dar Blend in Alderaan in January 2011 (see [56] above) because of the defendant’s failure to secure a crude oil import licence. But the Tribunal has already held that the defendant’s failure to secure a crude oil import licence was not a breach of the Supply Contract and that the defendant’s obligation to take delivery was not subject contractually to its possession of a crude oil import licence. So, the Tribunal concludes, the defendant’s failure to secure a crude oil import licence cannot be a contractual justification for the plaintiff’s failure to deliver.

  94. [71] The Tribunal’s analysis up to this point means that the plaintiff’s failure to deliver is a breach of contract unless it resulted from the defendant’s failure to issue the promised payment undertaking. That is because that is the only one of the three alleged breaches of contract which the Tribunal has found the plaintiff to have established. It is only if that breach caused the plaintiff not to deliver that it can be said that the defendant breached the Supply Contract by failing to take delivery.

  95. [72] On this point, the plaintiff relied on the evidence given at the merits hearing by Beru. She testified that the reason the plaintiff did not deliver the Dar Blend to the defendant was because the Bank, as the plaintiff’s financing bank, would not allow the plaintiff to discharge the cargo without the security of a payment undertaking. This was inconsistent with Owen’s evidence on the same point at the jurisdictional hearing. The only reason he had given for his decision to hold the Dar Blend in Alderaan in January 2011 was the defendant’s failure to secure a crude oil import licence (see [56] above). He did not, at the jurisdictional hearing, testify that he had declined to deliver because of the defendant’s failure to issue a payment undertaking.

  96. [73] The Tribunal prefers Owen’s evidence, discounting and ultimately rejecting Beru’s evidence on this critical point. It does so for three reasons. First, Beru did not give her evidence from personal knowledge. It was Owen who took the decision to hold the Dar Blend in Alderaan in January 2011, not Beru. On her own evidence, Beru was one step removed from Owen’s decision. Second, the Tribunal notes that Beru’s evidence is not corroborated by the contemporaneous documentary record. Third, the Tribunal does not find her evidence convincing. The plaintiff’s payment undertaking, unlike a letter of credit, offered the plaintiff no security for its price. The Supply Contract already obliged the defendant to pay the plaintiff for the Dar Blend. An additional and separate undertaking to make payment therefore added nothing to the defendant’s existing contractual obligation to make payment. The defendant’s failure to give a payment undertaking could not, in and of itself, explain the plaintiff’s unwillingness to perform its obligation to deliver. The Tribunal was therefore not satisfied that the defendant’s breach of contract in failing to issue a payment undertaking – as compared, for example, to a failure to provide true security for payment in the form of a letter of credit – could rationally have been the plaintiff’s reason for not performing its obligation to deliver.

  97. [74] The Tribunal therefore concludes that, while the defendant’s failure to issue a payment undertaking was a breach of contract, that antecedent breach was factually unconnected to the plaintiff’s decision not to perform its own delivery obligation and therefore did not operate to make the defendant’s failure to take delivery a breach of contract. In short, the plaintiff’s failure to deliver was the result of a voluntary decision by the plaintiff and not of any antecedent breach by the defendant:

  98. Overview of all three breaches taken together

  99. [75] As foreshadowed at the beginning of this section of the award (see [60] above), the Tribunal then takes all three of the defendant’s alleged breaches into account and evaluates the plaintiff’s case in the round. The Tribunal’s view, resulting from its prior findings, remains that the plaintiff had no contractual justification for its failure to perform its obligation to deliver:

  100. [76] The Tribunal concludes further that the plaintiff had no reasonable factual basis in early January 2011 on which to anticipate that the defendant would breach its obligation to take delivery, given that the plaintiff made no direct inquiries of the defendant as to whether it remained prepared to accept delivery. As the Tribunal says:

  101. [77] The Tribunal thus holds that the defendant was not in repudiatory breach of the Supply Contract. The plaintiff placed before the Tribunal no alternative case against the defendant founded on a breach of the Supply Contract falling short of a repudiatory breach. This holding of the Tribunal therefore suffices to reject the plaintiff’s entire case on liability.

  102. Issue (d) – consequences of the defendant’s breach

  103. [78] The Tribunal’s finding that the defendant did not commit a repudiatory breach of the Supply Contract made it unnecessary for the Tribunal to consider the remaining issues put before it. In particular, it was no longer necessary for the Tribunal to determine whether the plaintiff had validly accepted the defendant’s repudiatory breach. So too, it was no longer necessary for the Tribunal to determine the issue of damages, whether as to principle or quantum.

  104. [79] The Tribunal nevertheless goes on to consider all of the plaintiff’s claims for damages. The remainder of the Tribunal’s analysis which I summarise below therefore rests on the assumption, unsupported by the Tribunal’s actual findings and holdings, that the defendant was in repudiatory breach of the Supply Contract and that the plaintiff had validly accepted that repudiatory breach.

  105. Damages – contract price

  106. [80] The Tribunal holds that the plaintiff suffered no recoverable loss arising from the defendant’s assumed repudiatory breach. Indeed, the Tribunal gives two reasons why the plaintiff was in fact better off because the defendant did not take delivery of the Dar Blend in January 2011. First, the plaintiff sold the cargo to the Company in March 2011 at a price which was higher in absolute terms than the price the defendant would have been obliged to pay in January 2011 (see [30] above). Second, if the defendant had in fact taken delivery of the Dar Blend in January 2011, that would have immediately triggered the plaintiff’s own obligation to repurchase the Dar Blend under the Buy-back Contract, because the defendant had in fact failed to secure a crude oil import licence. Therefore, if the defendant had fulfilled its obligation to take delivery of the Dar Blend in January 2011, the defendant would have been immediately entitled to impose on the plaintiff an immediate loss of US$1 per barrel for a total loss of US$600,000 +/- 5% (see [14] above).

  107. Damages – hedging losses

  108. [81] The Tribunal holds, further, that the plaintiff’s losses on the hedging contracts would not have been recoverable as damages.

  109. [82] The Tribunal commences its analysis by accepting the evidence of the defendant’s expert witness that hedging against price risk is a normal and prudent risk management strategy for a trader who sells crude oil under a contract, like the Supply Contract, which fixes the price by reference to a fluctuating market price.

  110. [83] The Tribunal then examines the case law on the recoverability, or otherwise, of hedging losses as damages. It holds that such losses are recoverable in principle within the first limb of Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 (“Hadley v Baxendale”), but that whether they were in fact recoverable under that limb depends in each case on whether the losses are reasonably foreseeable and on whether it can be said that the contract-breaker had taken responsibility for those losses.

  111. [84] On the facts before it, the Tribunal finds that the defendant could not reasonably have foreseen the plaintiff’s hedging losses. First, the defendant could not be presumed to have knowledge of what was the normal and prudent practice of oil traders. It was not an oil trader itself, it had never dealt with the plaintiff before entering into the Supply Contract and the plaintiff had adduced no evidence that the defendant had a track record of dealing with other oil traders from which it could be taken to have the necessary knowledge that a prudent oil trader in the plaintiff’s position would normally hedge. Second, the hedging losses in this case were not reasonably foreseeable because it was not the plaintiff who had entered into the hedging transactions itself, but its parent company.

  112. [85] The Tribunal also held that the plaintiff could not recover the hedging losses as consequential loss under the second limb of Hadley v Baxendale. First, the Supply Contract had an express clause excluding liability for consequential loss. Second, there was no evidence that the plaintiff had made the hedging transactions known to the defendant, whether before or after entering into the Supply Contract. Third, the hedging losses which the plaintiff incurred up to 4 January 2011 would have been incurred with or without the defendant’s assumed repudiatory breach of contract. And finally, the plaintiff’s hedging losses after 4 January 2011 were even more remote than its earlier hedging losses. The Tribunal holds that the plaintiff should have acted to mitigate its loss by not automatically rolling over its existing hedging positions but instead by actively considering how to balance the risk of the price of Brent crude oil rising or falling in absolute terms against the risk of Dar Blend’s discount to Brent crude rising or falling.

  113. [86] Finally, the Tribunal finds that the hedging losses were magnified by a crisis in Libya in early 2011 which was “a significant intervening event that hugely exacerbated the extent of the [plaintiff’s] losses”. The Tribunal did not consider that it would be reasonable to throw these magnified losses onto the defendant: (i) when it was the plaintiff’s parent who made the decision to continue rolling over the hedging transactions; (ii) when the defendant was not even aware that these hedging transactions were in place; and (iii) when the hedging losses exceeded the difference between the Supply Contract’s price and the actual sale price by more than 500%.

  114. Damages – specific items of other losses

  115. [87] The Tribunal then goes on to consider the specific items of other loss and expense which the plaintiff claimed (see [39] above). The Tribunal’s view is that, if it had been necessary for the Tribunal to deal with these items of loss, it would have rejected each of them for one or more of the following reasons:

  116. (a) the loss claimed arose from a voluntary decision taken by the plaintiff and did not follow necessarily from the defendant’s alleged breach;

  117. (b) the loss claimed, whether taken alone or with the other losses claimed, would not have exceeded the additional US$1.72m which the plaintiff earned on the sale of the Dar Blend to the Company by reason of the fluctuation in crude oil prices between January 2011 and March 2011;

  118. (c) the plaintiff had produced insufficient evidence to establish a causal connection between the loss claimed and the defendant’s alleged breach;

  119. (d) the loss claimed was consequential loss which was irrecoverable either because of the exclusion clause in the Supply Contract or because the plaintiff failed to prove that the defendant had special knowledge of the likelihood of that loss; or

  120. (e) the loss had been suffered by the plaintiff’s parent and not by the plaintiff itself.

  121. The challenge to the award

  122. The grounds of challenge

  123. [88] The plaintiff now seeks to set aside the Tribunal’s award on the following grounds:

  124. (a) Under s 24(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the Act”) on the basis that the Tribunal breached the rules of natural justice in making its award and thereby prejudiced the plaintiff’s rights. In conjunction with this ground, the plaintiff also argues that it was unable to present its case in the arbitration within the meaning of Article 34(2)(a)(ii) of the Model Law and that the Tribunal failed to extend to the plaintiff equality of treatment within the meaning of Article 18 of the Model Law.

  125. (b) Under Article 34(2)(a)(iii) of the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration (“Model Law”), on the grounds that the award either: (i) deals with a dispute outside the submission to arbitration; or (ii) decides matters beyond the scope of the submission to arbitration.

  126. (c) Under Article 34(2)(a)(iv) on the grounds that the arbitral procedure was not in accordance with the parties’ agreement.

  127. [89] In particular, and in summary, the plaintiff makes the following arguments:

  128. (a) The Tribunal breached the audi alteram partem rule of natural justice as a result of which the plaintiff was unable to present its case in connection with the Tribunal’s decision, both on liability (summarised above at [60]–[76]) and on damages (summarised above at [77]–[87]).

  129. (b) The Tribunal dealt with matters outside the scope of the submission to arbitration when it considered the Buy-back Contract in order to decide: (i) that the defendant was under no contractual obligation to secure a crude oil import licence (see [66]–[68] above); and (ii) that the plaintiff had suffered no recoverable loss (see [80] above).

  130. (c) The Tribunal adopted a procedure which was not in accordance with the agreement of the parties when it failed to accord equal weight to the evidence of Owen in the jurisdictional hearing to that of Beru in the merits hearing when making its determination (see [70]–[73] above).]

  131. (d) There is a reasonable suspicion that the arbitrator nominated by the defendant was biased against the plaintiff; and that his bias had influenced the other two members of the Tribunal against the plaintiff.

  132. The law

  133. [90] Because the contest between the parties is on the application of the law to the facts rather than on the law itself, I can state the law briefly.

  134. Natural justice

  135. [91] The plaintiff seeks to set aside the Tribunal’s award under s 24(b) of the Act on the grounds that “a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of the plaintiff have been prejudiced.”

  136. [92] It is well-established that a party who seeks to set aside the award of an arbitral tribunal under s 24(b) must establish:

  137. (a) Which rule of natural justice was breached;

  138. (b) How that rule was breached;

  139. (c) In what way the breach was connected to the making of the award; and

  140. (d) How the breach prejudiced the party’s rights.

  141. The authorities for these propositions are John Holland Pty Ltd (formerly known as John Holland Construction & Engineering Pty Ltd) v Toyo Engineering Corp (Japan) [2001] 1 SLR(R) 443 at [18]; Soh Beng Tee & Co v Fairmont Development Pte Ltd [2007] 3 SLR(R) 86 (“Soh Beng Tee”) at [29]; L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd and another appeal [2013] 1 SLR 125 (“L W Infrastructure”) at [48].

  142. [93] The two rules of natural justice are the rule against bias and the fair hearing rule.

  143. [94] The rule against bias requires a tribunal to bring to its decision-making function a mind which is impartial both in reality and in appearance. The plaintiff relies on apparent bias rather than actual bias. The rule against bias will be infringed on grounds of apparent bias if a reasonable and fair-minded person observing the proceedings and knowing all the relevant facts would have a reasonable suspicion that a fair determination of the dispute is not possible: Jeyaretnam Joshua Benjamin v Lee Kuan Yew [1992] 1 SLR(R) 791 at [79]–[83]; Re Shankar Alan s/o Anant Kulkarni [2007] 1 SLR(R) 85 at [91].

  144. [95] The fair hearing rule has two components on which the plaintiff relies in this challenge. The plaintiff relies first on the principle that a tribunal should not base its decision on a point not submitted to it or a matter not argued before it; and should allow the parties to address it on all key issues: Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd [1985] 2 EGLR 14 at 15 (“Zermalt”); Interbulk Ltd v Aiden Shipping Co Ltd (The Vimeira) [1984] 2 Lloyd’s Rep 66 at [74]–[75]; and Koh Brothers Building and Civil Engineering Contractor Pte Ltd v Scotts Development (Saraca) Pte Ltd [2002] 2 SLR(R) 1063 at [47]; Soh Beng Tee at [65].

  145. [96] The plaintiff also relies on the principle that a tribunal cannot disregard an argument or a submission made by a party without directing its judicial mind to the merits of that argument or submission through an active process of intellectual reasoning: Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd [2010] SGHC 80 at [31]–[39]; Laing O’Rourke Australia Construction Pty Ltd v H&M Engineering & Construction Pty Ltd [2010] NSWSC 818 at [38]–[39].

  146. [97] To that I would add only two points. First, a tribunal is not required to refer every issue which falls for decision to the parties for submissions. A tribunal’s decision may be considered unfair only when a reasonable litigant in the position of the party challenging the award could not have foreseen the possibility of the tribunal’s actual reasoning in the award: Soh Beng Tee at [65(d)]; CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR 305 (“CRW”) at [32]. Second, a tribunal is not confined on each disputed issue before it merely to making a binary choice between the diametrically-opposed positions taken by the parties on that issue. The tribunal may legitimately arrive at a finding which falls between the two parties’ submissions so long as the finding is supported by the evidence and does not constitute a dramatic departure from the parties’ positions: Soh Beng Tee at [65(e)].

  147. [98] The plaintiff also alleges that it was unable to present its case within the meaning of Article 34(2)(a)(ii) of the Model Law and that the Tribunal denied it equal treatment and a full opportunity to present its case within the meaning of Article 18 of the Model Law. Its reliance on those provisions does not add anything to its case under s 24(b) of the Act. I therefore need not analyse those provisions in greater detail.

  148. Dealing with matters beyond the scope of the submission

  149. [99] The plaintiff seeks to set aside the Tribunal’s award also under Article 34(2)(a)(iii) of the Model Law on the grounds that the award “deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration.”

  150. [100] In considering whether to set aside an award under Article 34(2)(a)(iii) of the Model Law, the Court must consider two questions:

  151. (a) What matters were within the scope of the submission to the tribunal; and

  152. (b) Whether the award confined itself to such matters or whether it strayed into resolving a new difference outside the scope of the submission to arbitration and therefore irrelevant to the issues requiring determination.

  153. The authority for this proposition is PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597 at [44].

  154. Procedure not in accordance with parties’ agreement

  155. [101] The plaintiff also seeks to set aside the Tribunal’s award also under Article 34(2)(a)(iv) of the Model Law on the grounds that “the arbitral procedure was not in accordance with the agreement of the parties”.

  156. [102] The plaintiff points out that the ground for setting aside an award under Article 34(2)(a)(iv) of the Model Law is very similar to the ground for refusing to recognise an award under Article V(I)(d) of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). The plaintiff then relies on New York Convention: Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 – Commentary (Reinmar Wolff gen ed) (C.H. Beck, Hart and Nomos, 2012) to submit that the elements to be satisfied to resist enforcement under Article V(I)(d) of the New York Convention:

  157. (a) There must be an agreement between the parties on a particular arbitral procedure;

  158. (b) The tribunal must have failed to adhere to that agreed procedure;

  159. (c) The failure must be causally related to the tribunal’s decision in the sense that the decision could reasonably have been different if the tribunal had adhered to the parties’ agreement on procedure; and

  160. (d) The party mounting the challenge will be barred from relying on this ground if it failed to raise an objection during the proceedings before the tribunal.

  161. The plaintiff submits by analogy that these elements suffice also to satisfy the ground for setting aside an award under Article 34(2)(a)(iv) of the Model Law. I accept that submission.

  162. Actual prejudice

  163. [103] A party who seeks to set aside an award under s 24(b) of the Act must show that it has suffered actual prejudice by reason of the tribunal’s breach of the rules of natural justice: Soh Beng Tee at [65(f)]; L W Infrastructure at [54]. The test of actual prejudice is not whether the tribunal would definitely have arrived at a different result if not for the tribunal’s breach of the rules of natural justice which, ex hypothesi, the challenging party has established. As explained by the Court of Appeal in L W Infrastructure at [54], the test is whether the tribunal could reasonably have arrived at a different result if not for that breach:

  164. [104] The same principle applies when a party seeks to set aside an award on the ground that the award deals with a dispute outside the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission within the meaning of Article 34(2)(a)(iii) of the Model Law: CRW at [32]. That same principle must also apply when a party seeks to set aside an award on the grounds that the arbitral procedure was not in accordance with the parties’ agreement within the meaning of Article 34(2)(a)(iv) of the Model Law.

  165. [105] It is therefore for the party seeking to set aside the award on each of these grounds to show not only that the award is tainted in a particular respect by a procedural defect, but that it has also suffered actual prejudice by reason of that particular procedural defect because the tribunal could reasonably have arrived at a different result if not for that defect.

  166. Breach of natural justice – audi alteram partem

  167. On liability

  168. Whether the defendant breached cl 6

  169. [106] The key point which underpins the plaintiff’s submission on this aspect of its challenge is that its case before the Tribunal was that: (i) the plaintiff suspended its own performance under the Supply Contract in December 2010; and (ii) it did so because the defendant had by that date had breached cl 6 of the Supply Contract by failing to issue either a letter of credit or a payment undertaking by 16 December 2010.

  170. [107] The plaintiff then submits that the defendant’s admitted breach of cl 6 gave rise to the following three issues for the Tribunal’s decision:

  171. (a) Whether this breach amounted to a repudiatory breach of the Supply Contract;

  172. (b) Whether this breach entitled the plaintiff not to perform its own delivery obligation under the Supply Contract; and

  173. (c) Whether this breach alone caused the plaintiff any loss or damage.

  174. [108] The plaintiff submits that the Tribunal breached natural justice in arriving at the following findings on these three issues; further or alternatively, that the plaintiff was unable to present its case in respect of the following findings:

  175. (a) That the plaintiff did not suspend its performance under the Supply Contract in December 2010 but only in January 2011;

  176. (b) That the defendant’s breach of cl 6 was not a repudiatory breach of the Supply Contract; and

  177. (c) That the defendant’s breach of cl 6 did not cause the plaintiff any recoverable loss.

  178. [109] It is useful now to set out the Tribunal’s reasoning on these issues:

  179. [110] The plaintiff’s submission on these paragraphs of the Award appear at [105]–[110] of its written submissions. I set out these paragraphs in full below, striking through the words in those paragraphs which counsel for the plaintiff withdrew in the course of her oral submissions and double-underlining the words which she added. The single underlining in the extract below appears in the original submissions.

  180. [111] The plaintiff’s submissions continue in the same vein at [110]:

  181. [112] I deal with each of the alleged breaches of natural justice in turn.

  182. When did the plaintiff suspend performance?

  183. [113] On the Tribunal’s first finding (see [108] above), the plaintiff’s submission are as follows. The plaintiff’s evidence, submissions and arguments were that it suspended its performance under the Supply Contract as early as 16 December 2010 by not taking steps to deliver the Dar Blend to the defendant, as a response to its breach of cl 6. Yet the Tribunal found instead that the plaintiff exercised its right not to deliver the Dar Blend only in early January 2011. This shows that the Tribunal did not turn its mind to the plaintiff’s evidence, submissions and arguments; that it completely misunderstood the plaintiff’s case; that it arrived at this finding on its own basis; that it relied on the defendant’s mischaracterisation of the plaintiff’s case; and that it deprived the plaintiff of its opportunity to be heard.

  184. [114] This submission is misconceived.

  185. [115] The plaintiff’s case on this finding is not that the Tribunal denied it natural justice by depriving it of the opportunity to put evidence, submissions and arguments on the issue before the Tribunal. The plaintiff’s case, instead, is that the Tribunal denied it natural justice by not applying its mind to the plaintiff’s evidence, submissions and arguments.

  186. [116] The passage which I have set out at [109] above shows that this is simply not true.

  187. [117] The Tribunal had before it two conflicting cases as to whether the defendant’s breach of cl 6 meant that the plaintiff ceased to be obliged to deliver the Dar Blend under the Supply Contract. The plaintiff’s case in its Statement of Claim was that, in and from December 2010, it ceased to be under any such obligation by reason of the defendant’s breach of cl 6 of the Supply Contract. The defendant’s case in its Statement of Defence was that the plaintiff was precluded from relying on the defendant’s breach of cl 6 as a ground for not delivering the Dar Blend to the defendant under the Supply Contract:

  188. [118] The passage I have quoted from the award at [109] above makes clear that the Tribunal did apply its mind to the evidence, submissions and arguments of both parties. Thus, the Tribunal held that the defendant’s breach of cl 6 did entitle the plaintiff, on and from 17 December 2010, to suspend performance of its delivery obligation. But it held also that the plaintiff’s decision on 18 December 2010 to instruct the Tantive IV to leave Port Sudan and sail to Alderaan – which, it must be remembered, instructed the vessel to sail two-thirds of the way towards Cloud City, even if not to Cloud City – amounted to the plaintiff’s election to proceed with performance of its delivery obligation and thereby to affirm the Supply Contract, notwithstanding the breach of cl 6. This finding amounts simply to the Tribunal preferring the defendant’s case over the plaintiff’s.

  189. [119] The Tribunal’s finding that the plaintiff did not suspend performance of its delivery obligation under the Supply contract in December 2010 is not affected by any breach of natural justice; nor was the plaintiff unable to present its case on this issue.

  190. Was the breach of cl 6 a repudiatory breach?

  191. [120] On the Tribunal’s second finding (see [108] above), the plaintiff’s case before me is as follows. The defendant’s failure to issue a letter of credit or a payment undertaking by 16 December 2010 was a repudiatory breach of the Supply Contract. Yet the Tribunal found that the plaintiff did not accept the defendant’s failure to furnish security by 16 December 2010 as a repudiation of the Supply Contract. The Tribunal therefore expressly declined to decide the critical threshold issue whether the defendant’s breach was in fact a repudiatory breach.

  192. [121] This submission too is misconceived.

  193. [122] The Tribunal’s reasoning at [374] in the passage I have quoted at [109] above is that, even if the defendant’s breach of cl 6 were a repudiatory breach of the Supply Contract, the plaintiff continued its performance and therefore did not accept the defendant’s breach as bringing its own delivery obligation to an end. For the reasons I have set out at [113]–[119] above, the Tribunal’s finding that the plaintiff continued its performance after the defendant’s breach of cl 6 was not a finding reached in breach of natural justice nor was the plaintiff unable to present its case on it.

  194. [123] In light of this finding, it became unnecessary for the Tribunal to decide whether the defendant’s breach of cl 6 was in fact a repudiatory breach of contract. Although that issue was one of a handful of fundamental issues before the Tribunal, a decision on that ultimate issue fell away because of the Tribunal’s finding that, even assuming the defendant’s breach of cl 6 to have been a repudiatory breach, the plaintiff did not accept that breach as putting its delivery obligation at an end. It is not a breach of natural justice in itself for a tribunal to decline to express a view on an issue which its chain of reasoning renders unnecessary.

  195. [124] The Tribunal’s decision not to decide whether the defendant’s breach of cl 6 of the Supply Contract was a repudiatory breach of that contract does not constitute a breach of natural justice; nor was the plaintiff unable to present its case on this issue.

  196. Did the breach cause the plaintiff any recoverable loss?

  197. [125] On the Tribunal’s third finding (see [108] above), the plaintiff’s case before me proceeds as follows. The Tribunal expressly acknowledged that the plaintiff had not been afforded an opportunity to show what loss it had suffered by reason of the defendant’s failure to open a letter of credit or to issue a payment undertaking by 16 December 2010. Yet, the Tribunal found that this breach had, in itself, caused the plaintiff no recoverable loss. The Tribunal reached this finding as a result of a frolic of its own, in breach of natural justice, depriving the plaintiff of any opportunity to present its case or to address the Tribunal on a key issue which was operating on the Tribunal’s mind, and did so knowing that that is what it was doing.

  198. [126] This submission too is misconceived.

  199. [127] The plaintiff chose to premise its case to the Tribunal on the sole foundation that the defendant’s three breaches of contract put it in repudiatory breach of the Supply Contract, which discharged the plaintiff from its own obligation to deliver the Dar Blend under the Supply Contract and entitled the plaintiff to damages for the defendant’s failure to take delivery of the Dar Blend. The plaintiff concedes this in its written submissions:

  200. The defendant’s case in response was simply, for the reasons set out at [45]–[46] above, to deny that it was in breach of contract, let alone repudiatory breach of contract; and that it was in fact the plaintiff who was in repudiatory breach of contract by choosing unilaterally and of its own volition not to deliver the Dar Blend.

  201. [128] The plaintiff’s case on liability – in its pleadings, its evidence and its submissions – was therefore an all-or-nothing case. It staked its entire case on liability on being able to persuade the Tribunal to find that the defendant was in repudiatory breach of the Supply Contract. The plaintiff had to take this position because nothing less than a finding that the defendant was in repudiatory breach would have operated to excuse the plaintiff from its own delivery obligation under the Supply Contract. Without a contractual excuse for its own failure to deliver, the plaintiff would have found itself in breach of contract, unable to recover any damages at all and potentially liable to the defendant in damages (see [47] above).

  202. [129] The plaintiff’s tactical choice in how it framed its case left the position before the Tribunal as follows. If the plaintiff satisfied the Tribunal that the defendant was in repudiatory breach of the Supply Contract, the plaintiff would have established a contractual justification for not delivering the Dar Blend and would succeed on liability. If the plaintiff failed to satisfy the Tribunal that the defendant was in repudiatory breach of contract, it would have no contractual justification for not delivering the Dar Blend and would lose on liability. So the plaintiff could lose on liability either if the Tribunal found that the defendant was not in breach of the Supply Contract at all (as the Tribunal did in connection with the defendant’s failure to secure a crude oil import licence), or if the Tribunal found that the defendant was in breach of the Supply Contract but that the breach did not amount to a repudiatory breach (as the Tribunal did with the defendant’s failure to issue the payment undertaking).

  203. [130] Crucially, the plaintiff could not put forward an alternative case that, if the Tribunal were to find the defendant in breach of the Supply Contract in any of the three respects which the plaintiff advanced, but were to hold that the breach did not amount to repudiatory breach, the defendant would nevertheless be liable to the plaintiff to pay damages for the specific individual breaches of contract found. That would have exposed the plaintiff to liability to the defendant for non-delivery.

  204. [131] In any event, for whatever reason, whether the plaintiff had suffered any recoverable loss by reason of the defendant’s breach of cl 6 of the Supply Contract was not an issue which was before the Tribunal in any form, whether as the plaintiff’s primary case or as its alternative case. It was therefore wholly unnecessary for the Tribunal to have considered this issue, let alone to have determined it.

  205. [132] Further, the plaintiff suffered no actual prejudice by reason of the Tribunal’s decision to consider and express a view on this issue. Whatever the Tribunal said on this issue had no effect whatsoever on its ultimate decision that the defendant was not liable to the plaintiff on the case advanced by the plaintiff. Even if the Tribunal had heard from the plaintiff on this issue, therefore, the Tribunal’s ultimate decision would remain unchanged.

  206. [133] Indeed, if the Tribunal had concluded on this issue that the plaintiff had in fact suffered loss as a result of the defendant’s breach of cl 6 of the Supply Contract and had awarded the plaintiff damages for that breach alone, the Tribunal would have gone beyond the case which the plaintiff had presented to the Tribunal and the defendant would have had very strong grounds to set aside the award under s 24(b) of the Act and under several limbs of Article 34(2)(a) of the Model Law.

  207. [134] The fact is that the plaintiff presented to the Tribunal, for whatever reason, an all-or-nothing case on liability. It cannot complain simply because the Tribunal has given it nothing.

  208. [135] The Tribunal’s finding that the plaintiff suffered no recoverable loss arising from the breach of cl 6 does not constitute a breach of natural justice; nor was the plaintiff unable to present its case on this issue.

  209. Whether the defendant was in anticipatory breach

  210. [136] The plaintiff submits that the Tribunal breached natural justice in arriving at its finding that the defendant was not in anticipatory breach of the Supply Contract; further or alternatively, that the plaintiff was unable to present its case on this finding in the following respects:

  211. (a) The plaintiff’s case was that the defendant’s three breaches taken together constituted an actual, repudiatory breach of the Supply Contract; it was never the plaintiff’s case that the defendant was in anticipatory breach of the Supply Contract.

  212. (b) The Tribunal, “on its own basis and without notice to the plaintiff and without giving the plaintiff an opportunity to present its case on this issue, adopted the defendant’s ... submissions in finding that the plaintiff’s claim was better considered as a claim for anticipatory breach and proceeded to approach the plaintiff’s claim as an anticipatory breach claim, although this was not the way that the plaintiff had framed its case”.

  213. [137] This submission too is misconceived.

  214. [138] The relevant passage of the award which the plaintiff attacks with this submission reads as follows:

  215. [139] The plaintiff’s submission on this passage is as follows:

  216. [140] The core of the plaintiff’s submission on this aspect of its case is the proposition advanced by the plaintiff at [148] of its written submissions and which I have underlined in the passage quoted at [139] above. If that proposition is correct, it means that a tribunal breaches natural justice – or denies a party a full opportunity to present its case – if the tribunal fails to advise a party on how it should better frame its own case and then fails to hear that party’s submissions on the new case which the tribunal has advised it to advance. That is a startling proposition and one which I should have thought was unsupported by authority.

The judgment continues past this page. Read the rest at eLitigation.