ONGC Petro additions Ltd v DL E&C Co, Ltd (formerly known as Daelim Industrial Co Ltd) [2023] SGHC 197

The application before me arises out of an arbitration which was bifurcated into two phases on liability and quantum respectively. The claimant in the arbitration (and in this application) succeeded at the liability stage. However, at the quantum stage of the arbitration, the tribunal found that the claimant had failed to prove its pleaded loss, and awarded it only nominal damages. The claimant brings the present application to set aside the award on quantum, on the grounds that the tribunal exceeded its jurisdiction and breached the rules of natural justice by, among others, reversing itself on certain findings it had allegedly made in the award on liability. For the reasons I shall elaborate upon below, I dismiss the claimant’s application.

Facts

Background to the dispute

The claimant, ONGC Petro additions Limited (“OPAL”), is an Indian joint venture petrochemical company. OPAL is the owner of the Dahej Petrochemical Complex in the state of Gujarat, India. In or around November 2009, OPAL invited bids for the construction of a High-Density Polyethylene plant (“HDPE Plant”) at the complex. The contract was to be on a Licensing plus Engineering, Procurement and Construction (“L+EPC”) basis, which meant that the contractor would also have to bring with it a licensor to provide the technological know-how to construct the HDPE Plant, and provide the licence to OPAL to operate the plant using the licensed technology.

Two eligible bids were submitted. The first was by the defendant, DL E&C Co, Ltd (formerly Daelim Industrial Company Limited) (“Daelim”), using the proprietary technology of Chevron Philips Chemical Company LLC (“CP Chem”). The second was by Samsung Engineering Co Ltd (“Samsung”), using the proprietary technology of Mitsui Chemicals Inc (“Mitsui”). OPAL compared the two bids with the aid of its project management consultant, Engineers India Limited (“EIL”), and assessed Daelim’s bid to be more advantageous. The L+EPC contract was therefore awarded to Daelim by way of a Notification of Award (“NOA”) dated 6 January 2011, for a price of approximately US$138,038,000 plus Indian rupees (“INR”) 4,593,300,500. The NOA incorporated by reference OPAL’s Bidding Documents, which included the General Conditions of Contract (“GCC”). The GCC contained the arbitration clause constituting the foundation of the arbitration proceedings that were to come. More importantly, the terms of the GCC also formed the basis of much of the dispute regarding OPAL’s claims against Daelim. Daelim acknowledged the NOA and the project was set in motion – as per the NOA, the parties were to sign a formal contract within 30 days.

Daelim’s triumph in the bidding process was, however, short-lived. Various issues arose with its licensor, CP Chem, which were ultimately never resolved. Just over a month later, on 11 February 2011, Daelim informed OPAL that it could not enter into the formal contract. OPAL’s attempts to mediate between Daelim and CP Chem proved unsuccessful, and OPAL proceeded to terminate the NOA on 28 April 2011. With Daelim no longer an option, the L+EPC contract was awarded to the only other bidder, Samsung, on 29 April 2011. This set the stage for the dispute between OPAL and Daelim.

The arbitration proceedings

OPAL commenced arbitration proceedings against Daelim on 26 November 2012, claiming damages for Daelim’s abandonment of the contract. A three-member tribunal consisting of Mr Peter Leaver KC, Justice VN Khare (Retd) and Justice RV Raveendran (Retd) (the “Tribunal”) was constituted. Justice VN Khare subsequently resigned as a member of the Tribunal and was replaced by Justice GS Singhvi (Retd). The proceedings were vigorously contested, with Daelim bringing challenges to the constitution of the Tribunal and to its jurisdiction, first before the Tribunal itself, and subsequently before the Singapore High Court in HC/OS 140/2016. The subject matter of these challenges are not material to the present application – it suffices to say that the High Court decided that the Tribunal was validly constituted, and the arbitration was seated in Singapore.

The liability phase

By agreement of the parties, the proceedings were bifurcated into two phases dealing with liability and quantum respectively.

OPAL’s case on liability was essentially as follows: a binding and enforceable contract had come into existence by Daelim’s acceptance of the NOA. However, Daelim’s subsequent withdrawal amounted to a wrongful repudiation. OPAL therefore sought a declaration that it had rightfully terminated the contract following Daelim’s repudiation and claimed, among others, compensation under the following heads of claim:

(a) US$13,803,800 plus INR459,330,050 amounting to 10% of the contract price guaranteed to be paid as security for performance of the contract (the “Guarantee Claim”);

(b) INR300.80 crores (or INR3,008,000,000) or an appropriate sum as compensation for the 113-day delay between Daelim’s abandonment and the award of the contract to Samsung, resulting in loss on account of delay in creating a revenue producing asset (the “Delay Claim”); and

(c) INR409.28 crores (or INR4,092,800,000) as compensation for the loss of Net Present Value (“NPV”) (the “Loss of NPV Claim”).

In its defence, Daelim raised several grounds such as illegality and impossibility of performance to contend that the contract was void or that Daelim was discharged from performance. Daelim further denied OPAL’s entitlement to the heads of damage claimed. It argued that:

(a) OPAL was not entitled to make the Guarantee Claim because the final contract was never finalised and executed, such that Daelim’s obligation to provide a performance guarantee never arose;

(b) OPAL was not entitled to make the Delay Claim because it did not suffer any loss or damage on account of the alleged delay and the claim was in any event excluded under cll 6.2.1 and 6.2.3 of the GCC;

(c) the Loss of NPV Claim was also barred by cll 6.2.1 and 6.2.3 of the GCC, which excluded liability for loss of profits, loss of production and interest; and

(d) OPAL had no further remedy beyond terminating the NOA and forfeiting Daelim’s bid security of US$500,000.

For completeness, cll 6.2.1 and 6.2.3 of the GCC provided as follows:

The liability hearing took place in tranches between 18 December 2017 and 28 July 2018. The Tribunal issued a final award dated 28 December 2018 on liability, and a correction on 28 February 2019 (collectively, the “Liability Award”). The Tribunal was split, with Justices Raveendran and Singhvi in the majority, and Mr Leaver KC dissenting. In the Liability Award, the majority held that there was a concluded contract in existence between the parties, which Daelim had wrongfully abandoned. Turning to the heads of claim for damages, the majority dismissed the Guarantee Claim and Delay Claim outright, on the grounds that the former was a duplication of the Loss of NPV Claim, whereas the latter was barred by cll 6.2.1 and 6.2.3 of the GCC.

As such, the majority permitted the claim to proceed to the quantum phase. Whether, in so doing, the majority made conclusive findings as to how quantum was to be assessed is a major point of contention between the parties which I elaborate on below. In the dispositive paragraph, the Tribunal concluded as follows:

The dissenting arbitrator issued a dissenting opinion. In his view, the contract was unenforceable because at least one fundamental term had not been agreed between the parties. He further raised several points of disagreement relating to damages, particularly with the majority’s decision permitting the Loss of NPV Claim to proceed to the quantum phase at all. As I shall explain below, OPAL also relies on the dissent to support its case for setting aside the Quantum Award.

The quantum phase

Neither party challenged any aspect of the Liability Award following its issuance. The arbitration then proceeded to the quantum hearing.

In this phase, OPAL presented a revised claim for loss of NPV (the “Revised NPV Claim”) amounting to INR11,019,300,000 (or 1101.93 crores) – this represented a significant increase from the sum claimed at the liability stage. To support the Revised NPV Claim, OPAL heavily relied on a report produced by Mr Andrew Flower, its expert witness in the quantum stage (“Mr Flower’s Report”). The Revised NPV Claim consisted of two separate heads of claim:

(a) the overall extra cost to OPAL of building and operating the plant with Samsung as the contractor instead of Daelim (the “Incremental Cost Claim”); and

(b) the value of missing production capability, ie, the inability to produce a product which would have been available if the plant had been built by Daelim using CP Chem’s technology (the “Loss of Capability Claim”).

Having dismissed those claims, the Tribunal considered whether OPAL’s Revised NPV Claim as pleaded in the quantum stage (if they could be made out at all) could be re-worked to fit the claim as originally pleaded in the liability stage. The Tribunal analysed Mr Flower’s Report, which formed the basis of the Revised NPV Claim, and found that his calculations suffered “from serious and fundamental errors requiring rejection”. The Tribunal concluded in the round that OPAL had failed to prove its loss, and eventually only awarded OPAL nominal damages amounting to INR500,000.

The parties’ cases

OPAL, dissatisfied with this turn of events, raises two main objections which it says render the Quantum Award liable to be set aside.

First, OPAL contends that the Tribunal exceeded its jurisdiction by revisiting or reversing three critical findings which it had made in the Liability Award, and in respect of which it was consequently functus officio.

Second, OPAL argues that the Tribunal acted in breach of the rules of natural justice in two respects:

(a) The Tribunal’s “U-turn” in respect of the three critical findings constituted a chain of reasoning which could not have been reasonably foreseen, rendering the award manifestly incoherent. This amounted to a breach of the rules of natural justice, in addition to being a decision made in excess of the Tribunal’s jurisdiction.

(b) Some aspects of the Tribunal’s reasoning and the illustrations it used were not derived from the parties’ submissions or raised by the Tribunal to the parties so that OPAL did not have a reasonable opportunity to make submissions on them.

Daelim contends that OPAL’s objections are groundless. As against OPAL’s submissions on excess of jurisdiction, Daelim argues that the Tribunal did not make any conclusive determinations in respect of the three “critical findings” alleged by OPAL, and that the validity of the Loss of NPV Claim remained very much a live issue at the quantum phase. Daelim contends that this is supported by the parties’ conduct throughout the quantum phase of the arbitration. On this basis, Daelim makes a separate argument that based on positions taken by OPAL during the arbitration, it is now barred under the doctrine of approbation and reprobation and/or waiver by election from contending that the Tribunal was functus officio in respect of the three critical findings.

In respect of OPAL’s contentions on breach of natural justice, Daelim submits that every link in the Tribunal’s chain of reasoning was pleaded or submitted on by the parties and/or their expert witnesses. Accordingly, OPAL could not claim that it had no reasonable notice of the reasoning in the Quantum Award.

Daelim further argues that in any event, the Tribunal had also ruled against OPAL on entirely separate grounds, viz the fact that its case at the quantum phase was not pleaded, and that there were serious and fundamental errors in Mr Flower’s calculations. Daelim says that on these grounds, OPAL was not in fact prejudiced by any of the determinations it now seeks to challenge – it would have lost the arbitration anyway and thus, even if the alleged breaches by the Tribunal did not occur, it could have made no reasonable difference to the outcome for OPAL.

Did the Tribunal exceed its jurisdiction by revisiting and reversing findings on which it was functus officio?

OPAL’s objection

Starting with OPAL’s first objection, the three critical findings which OPAL contends were made by the Tribunal in the Liability Award are as follows:

(a) OPAL was entitled to damages for extra costs under cl 8.4.1.1 read with cl 8.4.1.2 of the GCC, and that the NPV methodology was the appropriate method for calculating this extra cost (the “First Critical Finding”).

(b) OPAL’s Loss of NPV Claim was not barred by the exclusion clauses in cll 6.2.1 and 6.2.3 of the GCC (the “Second Critical Finding”).

(c) OPAL had suffered loss and it was not necessary to prove actual expenditure in order to prove such loss (the “Third Critical Finding”).

Counsel for OPAL, Ms Koh Swee Yen SC (“Ms Koh”) stressed that if the Tribunal had not made any of these three critical findings at the liability stage, then it would simply have dismissed all of OPAL’s claims (including the Loss of NPV Claim) at the threshold, without even proceeding to the quantum phase. On OPAL’s case, the fact that the Loss of NPV Claim (which was based solely on the NPV methodology) was allowed to proceed to quantification at all supported OPAL’s argument that the Tribunal had made all three findings. It therefore followed that the Tribunal was functus officio in relation to these findings and had no jurisdiction to revisit them in the Quantum Award.

In contravention of the Second Critical Finding, the Tribunal found that OPAL’s claim was barred by the contract:

Finally, in contravention of the Third Critical Finding, the Tribunal found that OPAL had failed to prove its loss:

It is therefore OPAL’s argument that the Tribunal exceeded its jurisdiction in revisiting and reversing the three critical findings in the Quantum Award, thereby rendering the Quantum Award liable to be set aside.

The applicable principles

An award may be set aside under Art 34(2)(a)(iii) of the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”) as set out in the First Schedule to the International Arbitration Act 1994 (2020 Rev Ed) (“IAA”) if the party making the application furnishes proof 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”. In other words, where a tribunal exceeds its jurisdiction in the making of its award, that award is liable to be set aside.

A tribunal acts in excess of jurisdiction where it revisits an issue it has already dealt with in an earlier award. Once a final and binding award is made, the tribunal is functus officio and no longer has jurisdiction in respect of that issue. This principle is enshrined in s 19B of the IAA:

To be clear, an award can be “final” in a few ways, as summarised by the Court of Appeal in PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation [2015] 4 SLR 364 (“PT Perusahaan”) at [51]–[53]:

(a) First, an award is “final” if it resolves a claim or matter in an arbitration with preclusive effect (ie, the same claim or matter in an arbitration cannot be re-litigated).

(b) Second, a “final” award can refer to an award that has achieved a sufficient degree of finality in the arbitral seat. In other words, the award is no longer susceptible to being appealed against or being subject to annulment proceedings in the arbitral seat.

(c) Third, a “final” award can refer to the last award made in an arbitration which disposes of all remaining claims.

For present purposes, what we are concerned with is whether the Liability Award was “final” in the first way, in respect of the three critical findings alleged by OPAL. If it is, then the Tribunal would have been functus officio under s 19B of the IAA in relation to those issues as resolved in the Liability Award, and those findings would have res judicata effect in common law (PT Persusahaan at [206] and Bloomberry Resorts and Hotels Inc and another v Global Gaming Philippines LLC and another [2021] 2 SLR 1279 at [157]).

How then does the court determine if an arbitral tribunal has resolved an issue finally and conclusively? As OPAL correctly points out in its submissions, the primary focus must undoubtedly be on what the tribunal said and concluded in the award. However, one must not lose sight of the context in which the tribunal made its decision. In York International Pte Ltd v Voltas Ltd [2022] SGHC 153 (at [54]), I had occasion to summarise what I considered should be the general approach of the court in determining this question:

(a) The court will give real weight to the question of substance and not merely to form.

(b) There is a role however for form. The arbitral tribunal’s own description of the decision is relevant, although it will not be conclusive in determining its status.

(c) It may also be relevant to consider how a reasonable recipient of the tribunal’s decision would have viewed it.

(d) A reasonable recipient is likely to consider the objective attributes of the decision relevant. These include the description of the decision by the tribunal, the formality of the language used, and the level of detail in which the tribunal has expressed its reasoning.

(e) A reasonable recipient would also consider such matters as whether the decision complies with the formal requirements for an award under any applicable rules.

(f) The focus must be on a reasonable recipient with all the information that would have been available to the parties and to the tribunal when the decision was made. It follows that the background or context in the proceedings in which the decision was made is also likely to be relevant.

Analysis and Decision

Having considered both awards and the evidence with the above principles in mind, I find that the Tribunal did not in fact make any final and conclusive determinations in respect of the alleged three critical findings raised by OPAL.

The Liability Award

The obvious starting point to determine whether the Tribunal had made the three critical findings is the Liability Award itself (read objectively and in its proper context), and it is to that award that I now turn.

I start with the intended scope of the Liability Award. This was summarised by the Tribunal in para 47 where it set out the issues arising for its determination:

What is immediately apparent from a perusal of the eight issues listed above is that the Liability Award was not confined to issues of liability in the strict and technical sense. Issues (i) – (iii) were purely on liability for breach of contract, being issues pertaining to voidability, frustration and breach of contract. However, Issues (iv) and (v) related to contentions raised by Daelim at the liability phase that the terms of the contract either excluded the compensation sought by OPAL altogether (ie, Issue (iv)) or at least substantially restricted the quantum of such compensation (ie, Issue (v)). Daelim’s contentions here could be characterised as raising threshold questions, which would significantly alter the nature of the inquiry at the quantum phase.

Taken together, the first five listed issues indicate that the majority of the Tribunal was not confining itself strictly to determining whether Daelim was liable for breach of contract – it also had its eye on the quantum phase. To that extent, there is some truth to the argument made by Ms Koh, that the phrase “Liability Award” was a misnomer. This however does not mean, as Ms Koh suggests, that the Tribunal must be taken to have made final and conclusive findings on every issue relating to quantum raised in the liability phase. The situation is not a binary one. An examination of the listed issues shows that the Tribunal was not using the term “liability” in the strict legal sense. The Tribunal was certainly making determinations on what one could describe as issues of liability in the strict sense (eg, whether there was a valid and enforceable contract and whether Daelim was in breach in abandoning/repudiating the contract), but also on whether OPAL could show, at least in principle, that it had suffered a (or some) recoverable loss which was not excluded by the contract (ie, Issue (iv)) and which should be reserved to be fully argued and determined at the quantum phase. In that sense, it is not entirely a misnomer to call the award a “Liability Award” – the Tribunal also decided whether Daelim’s threshold “quantum” arguments had any merit, ie, those arguments which had been raised at the liability phase to persuade the Tribunal that OPAL’s heads of compensation could be rejected at the threshold and that there was nothing to send to the quantum stage for further consideration. In my judgment, that is the context in which the Liability Award is to be read.

Seen in this light, it becomes clear why the Tribunal even gave consideration to Issues (vi) – (viii) at this stage, notwithstanding that they were not issues relating to “liability” in the strict sense. Those issues pertained to the three heads of compensation claimed by OPAL, and the focus of the analysis by the Tribunal was to determine which claims should be rejected at the threshold, and which should be allowed to proceed to the quantum phase for further consideration.

With this in mind, the Tribunal analysed Issue (vi), relating to the Guarantee Claim, and rejected it at the threshold because (a) it would lead to double compensation, and (b) as a matter of law, OPAL could not insist upon a performance guarantee or seek an equivalent amount where the contract was no longer in existence:

The Tribunal similarly analysed Issue (viii), relating to the Delay Claim, and rejected it on the grounds that it was (a) a claim for a notional loss (rather than an actual loss) and (b) also a claim for consequential loss excluded by the contract:

Unlike the Guarantee Claim and Delay Claim however, the Tribunal did not reject the Loss of NPV Claim (which was the subject of Issue (vii)) summarily. Instead, the Tribunal expressed (at para 140(iii) of the Liability Award) that the validity and quantum of this claim would be considered at the quantum phase, albeit limited to 20% of the contract price as per the terms of the contract (see [13] above). Did this then mean that the Tribunal had conclusively accepted every facet of this claim, including by making the alleged three critical findings? In my judgment, the answer is no. Given the general approach taken by the majority in analysing the issues relating damages and quantum, it is difficult to see why it would have intended to make any conclusive findings, especially in respect of a claim for which both questions of validity and quantum were expressly reserved to the quantum phase. Nonetheless, it is OPAL’s case that such conclusive findings were made by the majority, based on the clear words of the majority at multiple points in the Liability Award. I now turn to these passages in the Liability Award.

Ms Koh highlighted paras 120–124 of the Liability Award in particular, arguing that the majority had clearly made all three critical findings within these paragraphs. To give some context to these paragraphs, I first reproduce below the point which the majority was addressing its mind to:

At para 124, the majority then stated as follows:

Ms Koh argued that the Second Critical Finding, ie, that the Loss of NPV Claim is not barred by the exclusion clauses in cll 6.2.1 and 6.2.3 of the GCC, could be found in para 122:

Ms Koh contended that the last sentence also encapsulates the First Critical Finding.

Lastly, Ms Koh submitted that the Third Critical Finding, ie, that OPAL suffered loss and did not have to show actual expenditure, was made in para 123:

At first glance, there are statements, words and phrases in the quoted paragraphs above which, if taken in isolation, could support OPAL’s contentions. But that is not how an award should be read. The reasoning of the majority of the Tribunal must be read in its entirety and understood in its proper context, as I have discussed at [35].

(1) The First Critical Finding

OPAL has sought to qualify the majority’s language in paras 124 and 140(iii) by arguing that the reference to legal principles and the validity of the claim was only directed at the fact that Daelim had made arguments on the assumptions to be applied in the calculation of loss of NPV and on remoteness, and that it was these arguments which would be considered at the quantum phase. In my view, this is a strained reading of the words used by the majority, particularly where the objective meaning of these words are clearly consistent with the rest of the majority’s reasoning.

(2) The Second Critical Finding

(3) The Third Critical Finding

Lastly, the contention that the majority had made the Third Critical Finding (ie, that OPAL had suffered loss and it was not necessary to prove actual expenditure) misconstrues what the majority had intended to say in para 123.

In para 123, the majority was addressing Daelim’s argument that OPAL could not recover for loss if it had not actually spent any money – that was the nub of the argument. The majority’s explanation, supplemented by an illustration, boiled down to a simple and fundamental principle – a party claiming damages for breach of contract is not restricted to recovering its reliance loss (eg, money expended as a result of the breaching party’s non-performance), but can also claim for expectation loss to be put in the position it would have been if the contract had been performed. However, even expectation loss, must (as a matter Indian law which governed the Contract) be proved – loss cannot be established by bare assertions without evidence. I do not read the majority to be declaring, in contradiction of basic legal principle, that OPAL had established loss and was entitled to recover damages in respect of the Loss of NPV Claim (to be quantified) without actually proving its entitlement. If that was truly what the majority had intended, then there would have been no need for any quantum hearing at all and OPAL could have been awarded its then claimed sum of INR409.28 crores in full. Clearly, that was not the case.

In summary, even based on a reading of the Liability Award alone, I find that the majority of the Tribunal did not make the three critical findings contended by OPAL.

The Dissenting Opinion

The fact that this dissent was made at all must mean, OPAL argues, that the issues must have been deliberated upon and that the majority must have made at least the First Critical Finding and Third Critical Finding, thereby rejecting the dissenting arbitrator’s views.

I disagree that the dissenting opinion advances OPAL’s case. First, I observe that the appropriateness of the NPV methodology to assess OPAL’s loss was not the raison dêtre for the issuance of the dissenting opinion. The dissenting arbitrator’s primary conclusion (on which he disagreed with the majority) was that there was no enforceable contract at all because the terms of the contract were uncertain and it was therefore at best, an agreement to agree. So much is clear from the following paragraphs of the dissenting opinion:

The dissenting arbitrator’s views relating to damages, and specifically the NPV methodology, were clearly couched as secondary to his primary conclusion on the absence of an enforceable contract, and therefore obiter at best.

More fundamentally, I disagree with the premise underlying OPAL’s argument – that the Liability Award and dissenting opinion are mirror images of each other, and where a statement is made in the dissent, one can assume that the majority must have made the opposite finding. This would be contrary to the principle that dissenting opinions are not part of the award and should not be treated as such – the point is summarised in Gary Born, International Commercial Arbitration (Kluwer Law International, 3rd Ed, 2021) (“International Commercial Arbitration”) at p 3305:

Nor should a dissenting opinion be treated as evidence of a tribunal’s deliberations. One cannot assume that every facet of a dissenting opinion would have been deliberated (and disagreed upon) by the majority arbitrators. Further, as stated in International Commercial Arbitration at p 3309, arbitrators are bound by obligations of confidentiality inter se, and are not generally free to disclose deliberations without restriction in their opinions:

The confidentiality of arbitrators’ deliberations was recently affirmed by the Singapore International Commercial Court in CZT v CZU [2023] SGHC(I) 11 (“CZT”) at [43]–[44]. While in CZT, the court discussed exceptions to this general principle, those exceptions relate to orders for production of deliberations where serious allegations have been raised such that the interests of justice in producing the records of deliberations outweigh the policy reasons for the protection of confidentiality of deliberations (CZT at [53]). That is an entirely different context from the application before me.

Therefore, the fact that the dissenting arbitrator had expressed his disapproval of the NPV methodology does not necessarily mean, as OPAL contends, that the Tribunal was in fact making critical or conclusive findings at that stage as to whether the NPV methodology would be the method for calculating damages in the quantum phase of the arbitration. In fact, the dissent is equally consistent with the majority simply permitting OPAL to pursue its case on the NPV methodology at the quantum stage, without deciding the point in the Liability Award, and the dissenting arbitrator on the other hand concluding that OPAL’s case simply failed at the threshold and that there was therefore no need to even proceed to the quantum phase.

A further point against OPAL’s reliance on the dissenting opinion is that the dissenting arbitrator’s views are mistaken at least in so far as they relate to the alleged Third Critical Finding. In para 19 of the dissenting opinion (see [58] above), the dissenting arbitrator records his disapproval with the majority’s supposed view at para 114(c) of the Liability Award that the difference between Daelim’s and Samsung’s bids represented actual loss. In the referenced passage – which was likely to be para 116(c) (there being no para 114(c) in the Liability Award) – the majority was not actually setting out its view. Rather, it was only summarising OPAL’s case and arguments at the liability stage:

Having concluded that the Liability Award, objectively read, does not contain the three critical findings contended by OPAL, I find additionally that there is nothing in the dissenting opinion which changes this conclusion. As such, in my judgment, there is no question of the Tribunal exceeding its jurisdiction by allegedly revisiting and reversing any findings on which it was functus officio.

The quantum phase and Quantum Award

Given my conclusions on an objective reading of the Liability Award, it is strictly unnecessary to go further. However, substantial submissions were made on the parties’ positions and the Tribunal’s conduct after the liability phase to support either party’s case on what the Tribunal decided in the Liability Award. Accordingly, I proffer some brief views on the arguments raised. To be clear, I have not considered the parties’ and Tribunal’s conduct post-Liability Award in order to interpret or discern what, objectively, the Tribunal decided in the Liability Award. Rather, I have considered these arguments simply to assess how the parties conducted themselves after the Liability Award was issued and whether that conduct (particularly OPAL’s) was consistent with the case advanced in this application. In short, a review of the record post-Liability Award and of the Quantum Award shows, in my judgment, that neither the Tribunal nor OPAL were under the impression that any final determinations had been made in respect of the Loss of NPV Claim at the liability phase.

OPAL re-affirmed the arguments it raised in the striking out application, both in its written opening statement for the quantum hearing, and once again in its oral opening submissions. Furthermore, in its written closing submissions, OPAL emphasised:

These arguments were evidently not lost on the Tribunal, as they were included in the Tribunal’s statement of OPAL’s position in the Quantum Award – a statement which OPAL has not challenged as inaccurate or wrong:

Similarly, it is evident on the record that the Tribunal never regarded itself as accepting with any finality the use of NPV methodology to calculate damages. One such statement to this effect can be found in the Tribunal’s ruling on 19 August 2018, which related to OPAL’s application to place on record additional legal authorities pertaining, among others, to NPV. This application was made after the close of the liability tranche hearing and before the Liability Award was issued, on account of questions which the Tribunal had raised during the liability hearing. The Tribunal ruled this application as premature and made clear that these were properly to be considered at the quantum tranche:

There are also clear indications in the Quantum Award itself that the Tribunal, in framing the issues it had to answer, did not regard the appropriateness of NPV methodology as having already been decided definitively in the Liability Award. The first indication of this can be found at para 21 of the Quantum Award, which contains OPAL’s suggested list of issues, as summarised by the Tribunal:

This, in my view, is a clear indication that NPV had not (as far as the Tribunal was concerned) been decided as the method for calculating damages. Otherwise, para 21(i) would not have been necessary at all. While Ms Koh sought to draw a distinction between “calculations” and “methodology” at various points during the oral arguments before me, I do not think that distinction applies in this instance. It is clear that the Tribunal was considering whether NPV was an appropriate basis to compute damages – if it had only meant to address the reliability of NPV calculations tendered, then it would not be necessary to have both paras 21(i) and 21(iv).

Further, at para 28 of the Quantum Award, the Tribunal started its analysis of OPAL’s claim by framing the question it had to address as follows:

This issue had already been raised by Daelim in the liability phase (see [44] above). Again, if the use of NPV to calculate damages had truly been accepted definitively and finally in the Liability Award, there would have been no reason for the Tribunal to consider it again in the Quantum Award.

Therefore, even if I were to consider events after the issuance of the Liability Award and reading the Quantum Award itself, there is, in my view, no credible basis to say that the Tribunal had made any of the three critical findings as contended by OPAL.

Conclusion on excess of jurisdiction

For the reasons discussed above, I accordingly reject OPAL’s contention that the Tribunal was functus officio and had exceeded its jurisdiction by revisiting and reversing any findings it had allegedly made in the Liability Award.

Was the Tribunal’s decision in breach of the rules of natural justice?

General principles on breach of natural justice

The principles governing breaches of natural justice are well-established and uncontroversial. Section 24(b) of the IAA provides that the court may set aside an award if “a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced”. A party seeking to set aside an award on this ground must establish (a) which rule of natural justice was breached; (b) how it was breached; (c) in what way the breach was connected to the making of the award; and (d) how the breach prejudiced its rights (Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86 (“Soh Beng Tee”) at [29]).

For present purposes, the relevant rule of natural justice that OPAL relies on is the fair hearing rule, which requires each party to be given adequate notice of the case it must meet and a fair opportunity to be heard (Soh Beng Tee at [43]). Two slightly different facets of the fair hearing rule are, according to OPAL, engaged in this case:

(a) First, the fair hearing rule is breached where an arbitral tribunal issues a manifestly incoherent decision, as that incoherence demonstrates that the tribunal has not understood or dealt with the case at all (BZW and another v BZV [2022] 1 SLR 1080 (“BZW”) at [56]).

(b) Second, the rule is also breached where the tribunal’s chain of reasoning is not one which (i) the parties had reasonable notice that the tribunal would adopt, or (ii) had sufficient nexus to the parties’ arguments. A party has reasonable notice of a chain of reasoning where it arose expressly, arose by reasonable implication from the parties’ pleadings, was reasonably brought to the party’s actual notice, flows reasonably from the parties’ arguments or is related to those arguments. To set aside an award on the basis of a defect in the chain of reasoning, a party must establish that the tribunal conducted itself either irrationally or capriciously such that a reasonable litigant in the party’s shoes could not have foreseen the possibility of reasoning of the type revealed in the award (BZW at [60(b)]).

OPAL’s objection on the three critical findings

The first prong of OPAL’s argument can be disposed of quickly. This objection is premised on there being an excess of jurisdiction by reason of the Tribunal, despite being functus officio, revisiting and reversing the three critical findings as alleged by OPAL. As held by the Court of Appeal in CDM and another v CDP [2021] 2 SLR 235 at [16], where a party’s allegations of breach of natural justice and excess of jurisdiction overlap (in the sense that both arise from the same factual matrix), a failure to establish the latter ground would necessarily be fatal to the former. Since, as I have found, there was no reversal by the Tribunal of any findings made in the Liability Award (see [75] above), OPAL’s excess of jurisdiction argument falls away, and with it, the first prong of OPAL’s argument on breach of natural justice.

OPAL’s objection on the Tribunal’s reasoning and use of illustrations

I turn to the second prong of OPAL’s argument relating to the Tribunal’s reasoning and use of illustrations. I begin by setting out the paragraphs of the Quantum Award that OPAL takes issue with, in advancing this argument:

(a) The technologies used in Samsung’s and Daelim’s respective bids utilised different additives and catalysts, in differing quantities and with different values or prices.

(b) Where there were differences in the inputs and outputs of two processes, both in terms of type and volume, it would be very difficult to use the NPV methodology to determine the conversion efficiencies and consequently, calculate the extra cost of using one process over the other, not least because the prices of inputs and outputs would vary over the life cycle of the plant.

(c) OPAL’s case was such a case (ie, Illustration 3 at para 94), in that Samsung’s and Daelim’s bids involved varying inputs, and different types and quantities of additives and catalysts. Furthermore, the cost of some of the catalysts/additives to be used in Daelim’s bid were not known due to their compositions being made secret. These uncertainties also meant that even a small variation in the quantities of the inputs could result in a “huge difference” in the economic value (at para 95).

(d) Thus, it was not possible to quantify, with any certainty, whether there was any extra cost to OPAL and if so, the quantum of such cost (at para 97).

As I discussed above (see [67]–[69]), OPAL itself had also taken the position in the quantum proceedings that the NPV methodology had not been accepted with any finality in the Liability Award, and that the validity of the claim (including the NPV methodology) would be considered at the quantum phase.

At the hearing of this application, counsel for Daelim, Mr Mahesh Rai (“Mr Rai”), pointed to not less than five sources from which the Tribunal’s reasoning and illustrations were drawn to demonstrate that the building blocks upon which the Tribunal’s reasoning was constructed were present, in the pleadings and in the evidence before the Tribunal:

(a) Starting with the arbitration pleadings, in Daelim’s Reply to the SOC-Q, Daelim highlighted several errors and erroneous assumptions in Mr Flower’s Report and criticised his calculations as being “unreliable and unsound”. Mr Rai contended that this was the source for the Tribunal’s criticism (at para 94 of the Quantum Award) of the NPV methodology being unsound and unreliable.

(b) During the quantum hearing, Daelim’s expert, Dr Malcolm J Kaus, listed several poor assumptions made by Mr Flower in his calculations based on NPV. These included assumptions that the revenue stream and fixed costs would remain the same over the entire plant life. Mr Rai pointed out that this was the source for Illustration 3 in para 94 of the Quantum Award, where the Tribunal said that it was not possible to treat certain input and output items as constant.

(c) During the presentation of Mr Flower’s evidence at the quantum hearing, Mr Flower said that (i) the technologies used by Samsung and Daelim would have involved very different additives mixes, such that it would be difficult to draw links from one to the other; and (ii) that he had made certain assumptions about prices of catalysts and additives based on information in the bids because there was no market evidence. Mr Rai said that this was another source for the Tribunal’s reasoning that “[c]omparison becomes very difficult where two different technologies require use of different additives/catalysts of varying quantities to the main raw materials”.

(d) During the experts’ “hot-tubbing” involving Mr Flower and Daelim’s expert, Mr Chaitanya Arora (“Mr Arora”), Mr Flower accepted that in comparing the increases in prices of additives between Samsung’s and Daelim’s processes, he was comparing Samsung’s actual prices against Daelim’s bid prices. Mr Rai contended that this was another reason why the Tribunal found OPAL’s claim based on NPV methodology unsound and unreliable.

(e) At a later point in the expert’s evidence, Mr Arora pointed out that there was a high level of unreliability in Mr Flower’s methodology, in that even very small corrections would result in very large changes to the final calculations when extrapolated over a long period of time and over high quantities of production. Mr Rai highlighted that this evidence found its way directly into para 95 of the Quantum Award, where the Tribunal stated its concern over small variations in quantity resulting in a huge difference in economic value.

Given the sources listed above, I agree that it cannot be said that the Tribunal’s reasoning and illustrations were pulled out of thin air or that it came up with its own ideas without affording the parties the opportunity to address them. In essence, the Tribunal agreed with Daelim’s arguments (contrary to OPAL’s submissions) that the NPV methodology was unsound and unreliable. That was a decision on the merits of the claim, and the building blocks for the illustrations used were also found in the evidence adduced and submissions made during the quantum phase of the arbitration. It is thus not open to OPAL to challenge the Tribunal’s decision on the merits by attempting to argue that there was a process failure. In my judgment, OPAL’s objection is in effect a disguised attempt to attack the decision on its merits, which is impermissible. I accordingly reject the second prong of OPAL’s argument on breach of natural justice.

Was OPAL prejudiced by the Tribunal’s findings?

It is not enough for a party to show that there was a breach of natural justice occasioned by the tribunal’s conduct.

An award may only be set aside on grounds of a breach of natural justice if that breach caused actual or real prejudice. Prejudice here means that if there was no such breach, that could reasonably have made a difference to the outcome of the arbitration (L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd and another appeal [2013] 1 SLR 125 (“L W Infrastructure”) at [81]). Taking a step back and looking at the Quantum Award as a whole, there was, in my view, no prospect of the Tribunal coming to a different conclusion. As such, OPAL could not have suffered any prejudiced even if there was any breach of natural justice on the part of the Tribunal. I elaborate below.

In para 57 of the Quantum Award, the Tribunal referred to its finding in the Liability Award as being “binding” on the parties. Reading this in context (as set out in para 56), it is apparent that this was not a reference to the Tribunal accepting conclusively the appropriateness of NPV methodology in the Liability Award (as alleged by OPAL). This was the Tribunal emphasising that what OPAL had been permitted to do in the quantum phase was to prove its entitlement to and quantum of loss of NPV as pleaded in its statement of claim in the liability phase. As discussed at [16], OPAL did not do this.

Instead, OPAL made a tactical decision to amend its claim, which in its submission was merely an updated claim with no change to the NPV methodology. This decision ultimately backfired on OPAL, as the Tribunal found that OPAL’s amended claim was not merely an update, but one which contained fundamental (and unpleaded) changes in assumptions and parameters for calculations. This led to the Tribunal’s conclusion at para 59 of the Quantum Award:

This, however, was not the end of the line for OPAL’s case. In the next paragraph (and throughout the remainder of the Quantum Award), the Tribunal went on to consider whether there was enough material on the record for it to decide OPAL’s original pleaded claim. This was done by assessing whether OPAL could prove its new unpleaded claim, and if so, whether that could then be re-worked to fit within the mould of its original pleaded case:

Thus, it is clear that the Tribunal was very much alive to the issues in play, and was proactively seeking to “connect the proverbial dots” (to use the Court of Appeal’s words in BZW at [58]) between OPAL’s new and unpleaded claim and its original pleaded case.

Having set out the context for its analysis to follow, the Tribunal sought to determine the first question, ie, whether OPAL could make out its new and unpleaded claim. This required a close examination of Mr Flower’s Report, which formed the foundation for OPAL’s new claim. The Tribunal agreed with Daelim that Mr Flower’s Report contained several errors which made it unreliable. Three major errors were discussed in the Quantum Award under the headers “Re. Error in the rate of Zinc Stearate”, “Re. Calculation of ‘loss’ period” and “Date of assessment of damages”. It was only after analysing these major errors in detail that the Tribunal proceeded to make its separate comments on the unsoundness of the calculation of damages (at paras 93–97 of the Quantum Award) which have formed the basis of OPAL’s present objections in this application.

In the Tribunal’s concluding paragraphs under the header “Whether OPaL has established the quantum of loss for award of damages”, the Tribunal summarised, in two distinct paragraphs, its reasons for finding that OPAL had failed to establish its claim:

It is clear that the Tribunal’s conclusions at para 99, ie, that OPAL chose not to prove what it pleaded in the liability phase and that Mr Flower’s Report suffered from “serious and fundamental errors requiring rejection”, were separate conclusions to that reached by the Tribunal on the unsoundness of the calculation of damages by OPAL. Thus, these formed separate and independent grounds for the Tribunal’s ultimate finding that OPAL had failed to prove its pleaded claim for INR409.28 crores. As such, even if the Tribunal had accepted that NPV methodology was acceptable to calculate OPAL’s damages, OPAL’s claim would, in my view, still have failed on these separate grounds. Consequently, no prejudice arises in this case.

Mr Arora’s Sixth Expert Report

OPAL raised a final objection with regard to an expert report provided by Mr Arora (which the Tribunal referenced at para 67 of the Quantum Award) (the “Sixth Expert Report”). Essentially, OPAL points to the fact that Mr Arora had, in the course of pointing out errors to Mr Flower’s calculations, offered his own alternative figure of INR355 million after making certain adjustments to the calculations. OPAL complains that it was deprived of an opportunity to respond to the Sixth Expert Report because it was tendered on the last day of the quantum hearing. This did not, however, stop OPAL from relying on this report to argue that it should at the very least have been awarded INR355 million in damages rather than nominal damages of INR500,000. I address these contentions in turn.

First, I do not think that OPAL was prejudiced on account of not being able to respond to the Sixth Expert Report. That report could not reasonably have made a difference when the Tribunal’s primary conclusion was that OPAL had not proven its pleaded loss.

Having chosen to adopt a particular strategy at the quantum phase of the arbitration, OPAL must lay in the bed it made, no matter that the outcome of the arbitration is unpalatable to it. It is not for the court to rescue OPAL from strategic decisions which, with the benefit of hindsight, may have proven to be disastrous.

Conclusion on breach of natural justice

I reject OPAL’s arguments that there was any breach of natural justice in this case or that it had been prejudiced by any such breach on the part of the Tribunal. This disposes of the second string to OPAL’s bow in this application.

Waiver by election / approbation and reprobation

Given that I have rejected all of OPAL’s grounds of objection, it is unnecessary for me to consider Daelim’s arguments that OPAL is in any event precluded from raising these objections either because the doctrine of approbation and reprobation applies, or by reason of waiver by election on OPAL’s part. It suffices to say that based on the material before me, it appears that there has been some inconsistency in the positions taken by both OPAL and Daelim over the course of the arbitration and in these proceedings.

Conclusion