Prestige Marine Services Pte Ltd v Marubeni International Petroleum (S) Pte Ltd

[2011] SGHC 270

Case Number : Originating Summons No 1143 of 2010
Decision Date : 30 December 2011
Tribunal/Court : High Court
Coram : Tan Lee Meng J
Counsel Name(s) : Andre Maniam SC, Jenny Tsin, Lim Wei Lee and Wendy Lin (WongPartnership LLP)
for the plaintiff; Toh Kian Sing SC, Maureen Poh, Ritchie Ng and Nathanael Lin
(Rajah & Tann LLP) for the defendant.
Parties : Prestige Marine Services Pte Ltd — Marubeni International Petroleum (S) Pte Ltd

Arbitration

30 December 2011 Judgment reserved.

Tan Lee Meng J:

1 The plaintiff, Prestige Marine Services Pte Ltd (“Prestige”), was dissatisfied with an arbitration
award dated 11 October 2010 (“the Award”) in favour of the defendant, Marubeni International
Petroleum (S) Pte Ltd (“Marubeni”). As such, Prestige sought to set aside the Award and obtain leave
to appeal against the Award on four questions of law. The application was opposed by Marubeni.

Background

2 Marubeni, the claimant in the arbitration proceedings, entered into a contract to sell Prestige
120,000 mt of High Sulphur Fuel Oil with viscosity of 380 centistokes (“HSFO 380CST”) (“the cargo”)
to be delivered in July, August and September 2008. Prestige was required to lift 40,000 mt of the
cargo during each of the three months. The contract price for the cargo was determined on the basis
of the average prices reported on Platts Asia Pacific, an industry newsletter report, for that month
plus USD3.25 per mt.

3 Prestige failed to lift approximately 21,761 mt of the August 2008 cargo as at 1 October 2008.
As of that date, the entire 40,000 mt of the September 2008 cargo had not been lifted. As such,
around 61,761 mt of the agreed cargo of 120,000 mt remained unlifted.

4 Although the deadline for lifting the agreed cargo expired on 30 September 2008, there were
on-going negotiations between the parties for Prestige to continue to lift the unlifted cargo. Such
lifting after the deadline is known as a “rollover” of cargo. During this “rollover” period, Prestige
arranged for two more letters of credit that enabled 10,955 mt of the outstanding August 2008
contractual quantities to be lifted by the early hours of 11 October 2008 on the basis of the August
2008 price for the cargo. As such, the unlifted cargo was reduced to around 50,805.9 mt.

5 In the meantime, the parties considered “booking-out” the August 2008 cargo that remained
unlifted as well as rolling over the September 2008 cargo, which totalled 40,000 mt. Under a “book-
out” arrangement, the buyer agrees to resell to the seller the agreed cargo. No physical delivery of
the cargo is required and the difference between the contract price and the book-out price is paid to
the party entitled to it.

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6 On 10 October 2008, Marubeni sent Prestige a letter setting out letters of credit projections
relating to the August/September 2008 outstanding cargo. Annoyed, Prestige replied on the same day
as follows:

....

Even [though] there were backlogs and we were losing lots of money, we still load your cargoes.
By pushing us to the corner, we have [the] right to terminate the contracts due to this non-
performance....

7 On the same day, Marubeni sent a second letter to Prestige to remind the latter to procure the
issuance of letters of credit for the remaining unlifted cargo.

8 On 14 and 15 October 2008, the parties met again to discuss a possible booking-out of the
unlifted cargo. On 14 October 2008, Marubeni emailed Prestige as follows:

As you are aware, you have not completed performance of Aug-priced liftings and Sept-priced
liftings which until early last week indications that you will lift before the Oct-priced cargo. Our
acceptance of your nomination is therefore without prejudice to your obligations to clear the Aug
and Sept cargoes first.

Prestige did not reply to this email.

9 With the failure of the negotiations on booking-out the cargo, Marubeni began to take a grim
view of its “financial exposure” under its contract with Prestige by 16 October 2008. It decided to rely
on cl 10(a) of the contract, which provided that if Prestige’s “reliability or financial responsibility”
should become “impaired or unsatisfactory” in Marubeni’s “reasonable opinion”, Prestige could be
required to procure a standby letter of credit to cover Marubeni’s financial exposure under the
contract. If such a demand is made under cl 10(a) of the contract, the standby letter of credit must
be furnished by 5 pm on the second banking day in Singapore following the written request, failing
which Marubeni would be entitled to terminate the contract forthwith.

10 On 17 October 2008, Marubeni served the requisite written demand under cl 10(a) on Prestige
for a standby letter of credit for US$12m to be issued in its favour. Marubeni claimed that in order to
ascertain its total financial exposure for the unlifted cargo, it sold paper positions on another type of
fuel oil, HSFO 180CST, on 16 and 17 October 2008. Another such sale was made on 24 October 2008.
HSFO 180CST is a little less viscous that HSFO 380CST, which was the agreed cargo, and has slightly
different specifications from the agreed cargo. Apparently, these transactions (“the paper
transactions”), which do not result in any physical delivery of the oil, were carried out for
HSFO180CST fuel oil and not HSFO 380CST fuel oil because it is a more “liquid” commodity in the oil
paper trade. Based on the paper transactions, Marubeni fixed the amount of standby letter of credit
required under clause 10(a) at US$12m.

11 On the same day that Marubeni effected a sale of HSFO 180CST in the paper transactions, it
bought back the cargo that it had sold. As the buying back price was fixed on the basis of November
and December 2008 prices for the fuel oil, Marubeni alone bore the risk of fluctuations in the re-
purchase in the paper transactions. Prestige claimed that Marubeni made a profit on the paper
transactions and that the alleged profits should be taken into account to reduce Marubeni’s losses
but Marubeni contended that the paper transactions had nothing to do with its losses arising from
Prestige’s failure to lift the entire agreed cargo. More will be said about the paper transactions later
on. What needs to be noted here is that at the time Marubeni entered into the paper transactions, it

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had to hold on to the physical stocks of the unlifted cargo that it had sold to Prestige as the said
stocks would have to be delivered to Prestige if the latter complied with its demand for a standby
letter of credit under clause 10(a).

12 Under clause 10(a) of the contract, the standby letter of credit had to be issued by 5 pm on
21 October 2008. As it was not issued by the deadline, Marubeni’s solicitors, Rajah & Tann, wrote to
Prestige on 22 October 2008 to accept the latter’s repudiatory conduct, and to terminate the
contract.

13 Marubeni claimed that after terminating the contract on 22 October 2008, it tried to dispose of
the unlifted cargo. However, the unlifted cargo had to be sold in smaller quantities on a “spot” basis
in a rapidly falling market. The first spot contract was made on 13 November 2008 and the remaining
unlifted cargo was sold by Marubeni to various third parties under 10 spot contracts from
14 November 2008 to 1 December 2009. Based on the difference between the contract price of the
cargo and the sale price under the said spot contracts, Marubeni’s losses totalled around US$19.26m.

14 In accordance with the terms of the contract, which required the parties to resolve their
differences under the contract by means of arbitration, the dispute between the parties was referred
to an Arbitrator.

The Arbitrator’s decision

15 The Arbitrator found that it was only on 22 October 2008 that Prestige had by its conduct
clearly and unequivocally repudiated the contract. By that date, Prestige had not caused the standby
letter of credit demanded by Marubeni pursuant to clause 10(a) of the contract to be issued before
the deadline on the evening of 21 October 2008. It was also evident by then that the parties’
attempt to agree on a booking-out arrangement for the remaining unlifted cargo was unsuccessful.

16 It was common ground that if Marubeni was entitled to damages, the position was governed by
s 50(3) of the Sale of Goods Act (Cap 393, 1999 Rev Ed) (“the SGA”), which provides as follows:

Where there is an available market for the goods in question, the measure of damages is prima
facie to be ascertained by the difference between the contract price and the market or current
price at the time or times when the goods ought to have been accepted or (if no time was fixed
for acceptance) at the time of the refusal to accept.

[emphasis added]

17 The relevant market price was the “Ex-Wharf Price” for HSFO 380CST. Applying the second limb
o f s 50(3) of the SGA, the Arbitrator decided that 22 October 2008 was the relevant date for
determining the market price of the unlifted cargo for the purpose of awarding Marubeni damages. As
such, he awarded Marubeni the difference between the contractual price of the cargo and the market
price as at 22 October 2008. Prestige was required to pay Marubeni US$11,957,748.43, after setting
off a sum of USD 795,685.80, which Marubeni admitted owing to Prestige with respect to other
transactions between them. Prestige was also ordered to pay interest on the sum awarded and costs.

18 Dissatisfied with the Award, Prestige sought to set aside the Award as well as to appeal on four
questions of law in relation to the Award.

The application to set aside the Award

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19 Prestige’s primary reason for having the Award set aside concerned the Arbitrator’s refusal to
take into account Marubeni’s alleged profits from the paper transactions for the purpose of reducing
the damages awarded to Marubeni. Prestige asserted that the Award should be set aside because it
appeared from paragraph 213 of the Award that the Arbitrator had relied on a deleted part of
Marubeni’s pleadings with respect to hedging to come to his decision that the alleged profits from the
paper transactions should not be taken into account when computing Marubeni’s losses. Paragraph
213 of the Award reads as follows:

However, the evidence establishes that the Claimant sold “paper” HSFO180CST positions it had
entered into earlier, in the same quantities as the outstanding unlifted quantities under the
Contract, to crystallize/quantify its losses arising from Respondent’s repudiatory breach of the
Contract for the purposes of the issuance of the Clause 10(a) notice on 17 October 2008 (the
‘Sale Transactions’). These Sale Transactions also functioned as a hedge for the physical 50,800
metric tons of HSFO380CST purchased by the Claimant over 2 to 8 October 2008 for potential
onward supply to the Respondent…. The re-purchase of the ‘paper’ HSFO180CST positions sold
earlier via the Purchase Transactions served as a hedge against the Claimant’s disposal of the
physical 50,800 metric tons of HSFO380CST of outstanding contractual quantities from November
to December 2008. In other words, a physical sale position is cancelled out by a paper purchase
position and vice-versa.

[emphasis added]

20 Prestige pointed out that while the question of hedging was initially canvassed by Marubeni, the
latter had abandoned this defence and the latter’s Statement of Case in its final form contained no
assertion that the paper transactions were intended to be “hedges”. As such, Prestige contended
that it was not open to the Arbitrator to decide in paragraph 213 of the Award that the paper
transactions were “hedges” for the re-sale by Marubeni of 50,800 mt of the physical cargo that
remained unlifted.

21 Marubeni disagreed with Prestige’s reading of paragraph 213 of the Award and submitted that
the Arbitrator did not rely on the deleted part of it pleadings relating to hedging.

22 At a hearing on 8 February 2011, the parties agreed to seek a clarification from the Arbitrator
as to what the word “hedge” in paragraph 213 meant and the court recorded the following consent
order (“the consent order”):

1 In respect of the Arbitration Award dated 11 October 2010 (the “Award”) issued by Mr Lim
Joo Toon (the “Arbitrator”) in SIAC Arb No 085 of 2008 (the “Arbitration”), the Arbitrator be
directed to state in relation to paragraph 213 of the Award, whether the word “hedge” (or its
grammatical variants)appearing in that paragraph:

(a) Had the same meaning as the word “hedge” (or its grammatical variants) as the latter
was used in Paragraph 20 and the Particulars thereto, as well as Paragraph 28 of the
Amended Statement of Case which the Defendant to the Originating Summons (ie, Marubeni
International Petroleum (S) Pte Ltd) had withdrawn by way of its amendments to these
Paragraphs; and which were struck through in the final version of the Amended Statement of
Case dated 6 February 2010, as well as in Paragraph 43(a) of Andrew Chan’s Supplementary
Witness Statement dated 19 January 2010, which was withdrawn on 2 February 2010; or

(b) Meant that the sale of “paper” HSFO180CST positions on 16, 17 and 24 October 2008
by the Defendant (the “Sale Transactions”) functioned as counter-transactions for the

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 50,800 metric tons of physical HSFO 380CST purchased by the Defendant over 2 to
8 October 2008 for potential onward supply to the Plaintiff in the Originating Summons (ie,
Prestige Marine Services Pte Ltd) under the Contract, and that the re-purchase of the
“paper” HSFO180CST positions sold earlier (the “Purchase Transactions”) functioned as
counter-transactions to the Defendant’s disposal of the physical 50,800 metric tons of
HSFO380CST of outstanding contractual quantities from November to December 2008; in
other words, a physical sale position was cancelled out by a paper purchase position and
vice-versa, or

(c) Was used to convey another meaning, and if so, what is that other meaning.

2 The Arbitrator is to provide Parties with his statement on the above within 21 days of this
Order hereto.

3 Parties are at liberty to provide the Arbitrator with copies of this Order of Court, the
Originating Summons, and a summary of their case on the above issue which shall not exceed 8
pages.

The position stated in subparagraph 1(a) of the consent order encapsulated Prestige’s position while
subparagraph 1(b) of the said order was what Marubeni thought the Arbitrator had meant in
paragraph 213 of the Award. Subparagraph 1(c) of the consent order allowed the Arbitrator to state
what he meant by the use of “hedge” in paragraph 213 of the Award if he did not agree with the
positions outlined in subparagraphs 1(a) and 1(b) of the consent order.

23 It is noteworthy that at the hearing on 8 February 2011, Marubeni had wanted the following
additional paragraph to be included in the consent order:

In the event that the Arbitrator states that the word “hedge” (or its grammatical variants)
appearing in paragraph 213 of the Award has the meaning as is set out in paragraph 1(b)
hereinabove, the Plaintiff hereby withdraws Prayer 1 and 2 of the Originating Summons.

24 Prestige’s counsel, Mr Andre Maniam SC (for WongPartnership), thought that the Arbitrator
should not be informed that if he answered the question posed to him in the consent order in a
particular way, the setting aside application will be abandoned. Consequently, the said additional
paragraph was not included in the consent order. However, Prestige agreed, and this was recorded by
the court, that if the Arbitrator clarified that he did not use the word “hedge” in the manner stated in
subparagraph 1(a) of the consent order but in the sense advanced by Marubeni in subparagraph 1(b)
of the said order, it would not proceed with prayers 1 and 2 in Originating Summons No 1143 of 2010,
which concerned the setting aside of the Award.

25 The parties forwarded their written submissions to the Arbitrator. In addition, on 9 March 2011,
WongPartnership (see [24]) instead wrote to the Arbitrator about his options and stated as follows:

6 …. The Order does not in any way prevent you from saying what you meant by the word
“hedge” in [213] of the Award. To the contrary, the whole point of the Order is to seek your
clarification as to what you had meant. If you should consider that the Order restricts you from
stating what you had meant, we invite you to say so when you provide your statement on the
matter.

7 In particular, the Order is not a directive that the word “hedge” cannot mean what is in both
1(a) and 1(b).

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 [underlining in original, emphasis added in italics]

26 In his letter dated 11 March 2011 to the solicitors of both parties, the Arbitrator stated what
he meant by “hedge” in para 213 of the Award as follows:

I confirm that the word “hedge (or its grammatical variants)” appearing in paragraph 213 of the
Award had the same meaning as that set out in paragraph 1(b) of the Order, that is to say,

“meant that the sale of “paper” HSFO180CST positions on 16, 17 and 24 October 2008 by
the Defendant (the “Sale Transactions”) functioned as counter-transactions for the 50,800
metric tons of physical HSFO380CST purchased by the Defendant over 2 to 8 October 2008
for potential onward supply to the Plaintiff in the Originating Summons (ie, Prestige Marine
Services Pte Ltd) under the Contract, and that the re-purchase of the “paper” HSFO180CST
sold earlier (the “Purchase Transactions”) functioned as counter-transactions to the
Defendant’s disposal of the physical 50,800 metric tons of HSFO380CST of outstanding
contractual quantities from November to December 2008; in other words, a physical sale
position was cancelled out by a paper purchase position and vice-versa.

27 As the Arbitrator had adopted Marubeni’s interpretation of the word “hedge” in paragraph 213,
Prestige was obliged to abandon its attempt to set aside the Award. However, on 11 March 2011,
WongPartnership wrote to the Arbitrator to seek a clarification of the latter’s letter of the same date.
It stated as follows:

2 Further, we note at paragraph 3 of your letter, you confirm that the word “hedge” (or its
grammatical variants)” appearing in paragraph 213 of the Award had the same meaning as set out
under paragraph 1(b) of the Order. Please let us know if the word “hedge (or its grammatical
variants)” also had the same meaning as that set out under paragraph 1(a) of the Order.

3 If you feel that the terms of the Order do not allow you to select both meanings (ie that
under paragraphs 1(a) and 1(b), please let us know.

[emphasis in original]

28 Marubeni regarded Prestige’s attempt to get the Arbitrator to clarify the position again as
nothing more than wanting a second bite of the proverbial cherry. On 14 March 2011, its solicitors,
Rajah & Tann, wrote to the Arbitrator as follows:

Paragraph 3 of your letter confirms that the word “hedge” (or its grammatical variants)”
appearing in paragraph 213 of the Award dated 11 October 2011 had the same meaning as that
set out under paragraph 1(b) [of the Consent Order]. We are respectfully of the view that it
must follow that neither the meaning as set out in paragraph 1(a) nor any other meaning
including 1(a) read with 1(b) could be ascribed to the word “hedge” in view of your statement.
Your statement as to what you meant by your use of the word “hedge” (or its grammatical
variants) in paragraph 213 of the award is clear and unambiguous. Accordingly, we see no reason
for the clarification sought in paragraph 2 of M/s WongPartnership’s letter.

29 On 16 March 2011, the Arbitrator replied to WongPartnership as follows:

1 I refer to your letters dated 11 March 2011 and 15 March 2011.

2 The terms of the Order of Court dated 8 February 2011 are clear: they only require me to

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 state which of the 3 sub-paragraphs 1(a), 1(b) or 1(c), the word “hedge” in paragraph [213] of
the Award meant. I am respectfully of the view that I have by my letter dated 11 March 2011
complied with the Order by stating that it meant sub-paragraph 1(b). Your requests as stated in
your abovementioned letters are beyond the terms of the Order of Court.

30 On 18 March 2011, Rajah & Tann wrote to the Supreme Court Registry as follows:

....

3 As far as Marubeni is concerned, the effect of the Arbitrator’s position is clear and
unambiguous: prayers 1 and 2 of the captioned Originating Summons are withdrawn. Therefore
Marubeni does not see what there is for Prestige to address the Honourable Court.

4 Only Prestige’s application for leave to appeal on questions of law under prayers 3 to 8 of the
captioned Originating Summons remain to be determined by the Honourable Court....

31 At the hearing before me on 22 September 2011, Prestige asserted that the Arbitrator had not
stated his position clearly and that he should be asked to do so. Prestige’s position was untenable. As
has been mentioned, on 9 March 2011, WongPartnership had written to the Arbitrator to say that if
the Order restricted him from stating what he had meant in paragraph 213, he should say so.
WongPartnership went so far as to add that the Order was not a directive that the word “hedge”
cannot mean what is in both 1(a) and 1(b).

32 Two days after having been advised by WongPartnership on his options, the Arbitrator chose to
confirm in his letter dated 11 March 2011 to the solicitors of both parties that subparagraph 1(b) of
the consent order reflected what he meant by the word “hedge” in paragraph 213 of the Award and
he reiterated this in his letter to WongPartnership dated 16 March 2011. It is noteworthy that if the
Arbitrator had intended to convey a meaning different from that stated in subparagraphs 1(a) or 1(b),
he was entitled under subparagraph (c) of the consent order to explain that other meaning.

33 As the Arbitrator had adopted Marubeni’s interpretation of paragraph 213 of the Award, Prestige
must honour its agreement not to proceed with prayers (1) and (2) of the Originating Summons.
Consequently, no order was made to require the Arbitrator to further clarify the matter.

The application for leave to appeal on questions of law

34 As I ruled that Prestige was obliged to honour its commitment to abandon its attempt to set
aside the Award if the Arbitrator agreed with Marubeni’s interpretation of para 213 of the Award, I
proceeded to hear the parties’ arguments on Prestige’s application for leave to appeal on questions of
law.

Section 49 of the Arbitration Act

35 Section 49(1) of the Arbitration Act (Cap 10, 2002 Rev Ed) (“the Act”) provides that a party to
arbitration proceedings may appeal to the Court on a question of law arising out of an award in the
proceedings. An appeal may not, however, be brought except with the agreement of all the parties to
the proceedings or with the leave of the court (see s 49(3) of the Act). The conditions for obtaining
leave are set out in s 49(5), which provides as follows:

Leave to appeal shall be given only if the Court is satisfied that –

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 (a) the determination of the question will substantially affect the rights of one or more of the
parties;

(b) the question is one which the arbitral tribunal was asked to determine;

(c) on the basis of the findings of fact in the award —

(i) the decision of the arbitral tribunal on the question is obviously wrong; or

(ii) the question is one of general public importance and the decision of the arbitral tribunal
is at least open to serious doubt; and

(d) despite the agreement of the parties to resolve the matter by arbitration, it is just and
proper in all the circumstances for the Court to determine the question.

36 In relation to Prestige’s application for leave to appeal, a number of other points ought to be
noted. First, for “one-off” contracts, such as the contract presently being considered, the discretion
to grant leave to appeal is strictly exercised: see Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema)
[1982] AC 724 and Antaios Compania Naviera SA v Salen Rederierna AB (The Antaios) [1985] AC 191.
In fact, in The Antaios, Lord Diplock stated (at p 206) that the test in situations involving a one-off
clause or event is “whether the arbitrator was, in the judge’s view so obviously wrong as to preclude
the possibility that he might be right”. In American Home Assurance Co v Hong Lam Marine Pte Ltd
[1999] 2 SLR(R) 992 (“American Home Assurance Co”), the Court of Appeal reiterated (at [20]) that
in the case of a "one-off" contract or clause, leave to appeal would normally be refused unless the
judge is satisfied that the construction given by the arbitrator is "obviously wrong". The Court added
that the important question is whether an error can be demonstrated quickly and easily, and if hours
of legal argument are required, the applicant will not have succeeded in satisfying the court that the
award is obviously wrong. In the present case, the arguments as to whether the Arbitrator was right
or wrong were complex and took several hours.

37 Secondly, a distinction is made between a question of law and an error of law, in respect of
which there is no appeal. In Ahong Constuction (S) Pte Ltd v United Boulevard Pte Ltd [1993]
2 SLR(R) 208, GP Selvam JC explained (at [7]-[8]):

7 A question of law means a point of law in controversy which has to be resolved after
opposing views and arguments have been considered.... If the point of law is settled and not
something novel and it is contended that the arbitrator made an error in the application of the
law there lies no appeal against that error for there is no question of law which calls for an
opinion of the court....

8 An error in law ... by itself does not confer a right of appeal....

38 Selvam JC’s views were endorsed in Northern Elevator Manufacturing Sdn Bhd v United
Engineers (Singapore) Pte Ltd [2004] 2 SLR(R) 494 by the Court of Appeal, which added (at [19]):

A “question of law” must necessarily be a finding of law which the parties dispute, that requires
the guidance of the court to resolve. When an arbitrator does not apply a principle of law
correctly, that failure is a mere “error of law” (but more explicitly, an erroneous application of the
law) which does not entitle an aggrieved party to appeal.

39 More recently, in Ng Eng Ghee and Others v Mamata Kapildev Dave and others (Horizon

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Partners Pte Ltd, intervener) and another appeal [2009] 3 SLR(R) 109, the Court of Appeal, while
explaining what an error of law entails in the context of an appeal to the High Court from a decision of
the Strata Titles Board, endorsed (at [90]) the following passage in Halsbury’s Laws of England Vol
1(1), Butterworths, 4th Ed Reissue, 1989:

Errors of law include misinterpretation of a statute or any other legal document or a rule of
common law; asking oneself and answering the wrong question, taking irrelevant considerations
into account or failing to take relevant considerations into account when purporting to apply the
law to the facts; admitting inadmissible evidence or rejecting admissible and relevant evidence;
exercising a discretion on the basis of incorrect legal principles; giving reasons which disclose
faulty reasoning or which are inadequate to fulfil an express duty to give reasons; and
misdirecting oneself as to the burden of proof.

It is noteworthy that in this case, VK Rajah JA, while observing that the definition of a question of law
in each context may be wider or narrower depending on the underlying policy considerations, added
(at [100]) that it “can be persuasively said that policy considerations undergirding the arbitration
scheme, where party autonomy is the primary consideration, are quite different” from those of other
schemes.

Whether leave to appeal should be granted

40 Prestige sought leave to appeal on questions of law in respect of four allegedly erroneous
findings by the Arbitrator, which were listed in its skeletal submissions at paragraph 14 as follows:

(a) that where damages are assessed based on market price under section 50(3) of the [SGA],
one can nevertheless take into account the actual re-sale price of the goods (at [211]-[218] and
[227] of the Award (see 1st question of law);

(b) that there is no need for a party to mitigate its losses after breach by the other party of
the contract; he would only need to mitigate losses after the contract had been terminated (at
[211] of the Award) (see 2nd question of law);

(c) that the relevant date to take the market price under section 50(3) of the [SGA] is on the
date of termination of the contract, rather than on the date of breach of the contract (at [173],
[207]-[209] of the Award) (see 3rd question of law);

(d) that damages under section 50(3) of the [SGA] for a contract with a fixed time for
performance, should be assessed on the basis of “the time of [Prestige’s] refusal to accept
[Marubeni’s] [cargo]” rather than “at the time or times when the goods ought to have been
accepted” (at [202]-[203] of the Award) (see 4th question of law).

41 Prestige contended that the four questions in respect of which leave to appeal was sought
concerned matters of general public importance and that the threshold for leave (under s 49(5)(c)
(ii))was thus that the Arbitrator’s decision is open to serious doubt and not the higher test for other
matters, which is that the Arbitrator was obviously wrong.

42 Whether the test for the granting of leave to appeal is that the Arbitrator’s decision is obviously
wrong or that it is open to serious doubt, Prestige faced insurmountable hurdles in complying with the
pre-conditions in s 49(5) of the Act. Furthermore, if one looks at the questions carefully, what
Prestige was mainly complaining about were in fact the Arbitrator’s alleged errors of law, in respect of

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which there can be no appeal.

The first question of law

43 The first question of law (“the first question”) was framed as follows:

In relation to the Arbitrator’s decision that damages payable by the Plaintiff should not be
reduced by the USD 6,433,522.73 profit made by the Defendant from its “paper” HSFO 180CST
swap transactions on 16, 17 and 24 October 2008 (to the extent of the balance of cargo under
the contract):

1st Question of law

Where damages are assessed based on market price under section 50(3) of the Sale of Goods Act
... can the actual re-sale price of the goods nevertheless be taken into account?

44 The application for leave to appeal on the first question was fundamentally flawed as it was
based on two false assumptions. The first was that the Arbitrator had found that Marubeni made a
profit of US$6,433,522.73 from the paper transactions (“the alleged profit”). The Arbitrator made no
such finding and had merely referred to this sum as the “alleged” profit.

45 The other false assumption was that the Arbitrator had taken into account the re-sale price of
the unlifted cargo. The Arbitrator, who made it clear that the damages awarded to Marubeni were
based on the difference between the contract price and the market price on 22 October 2008,
discussed the actual re-sale price of the cargo in the context of Prestige’s assertion that it was
entitled to deduct the alleged profit from the damages awarded to Marubeni. The Arbitrator
considered this argument and pointed out that if Prestige wanted to deduct the alleged profit, the
losses from the sale of the physical stocks of the unlifted cargo, which amounted to around USD
19.26m, must likewise be taken into account since the paper transactions were inextricably linked to
the purchase and sale of the physical stocks of the unlifted cargo. It was in this context that the
Arbitrator pointed out that if all these inextricably linked transactions were taken into account,
Marubeni’s loss would be US$12,833,905.82, a sum which was “broadly similar” to the amount of
damages under the market price rule based on the price of the unlifted cargo on 22 October 2008.
There was thus no basis for saying that the Arbitrator took the actual re-sale prices into account,
and especially so when he made it absolutely clear in paragraph 228 of the Award that Marubeni was
entitled to the difference between the August and September 2008 contract prices and the market
price of the unlifted cargo on 22 October 2008.

46 Secondly, the first question runs afoul of s 49(5)(a) of the Act as its determination will not
substantially affect Prestige’s rights. Even if the first question is answered in Prestige’s favour, the
paper transactions cannot be taken into account to reduce the damages awarded to Marubeni
because the Arbitrator found that there was no causal connection between the alleged profits from
the paper transactions and Prestige’s breach. There was no appeal by Prestige in relation to this
finding.

47 Thirdly, as the first question was not one which the Arbitrator was asked to determine, the
condition precedent in s 49(5)(b) of the Arbitration Act was not met. This question did not feature in
the list of 10 issues set out by the Arbitrator in paragraph 46 of the Award when he discussed the
issues for determination in the arbitration.

48 Finally, Prestige correctly asserted in paragraph 109 of its skeletal submissions dated 7 February

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2011 that it is “trite” law that when the market price rule is applicable, the actual price of a
subsequent resale of the goods is irrelevant. As the first question involves a trite principle of law,
Prestige can only say that the Arbitrator misapplied this trite principle and even if Prestige is right,
there can be no appeal against this error of law.

49 As it was clear that the underlying factual premise for the first question was erroneous, that
the Arbitrator was not asked to consider the question, that the answer to the said question will not
substantially affect Prestige’s rights, and that Prestige is really complaining about an error of law,
leave to appeal cannot be granted with respect to this question.

The second question of law

50 The second question of law (“the second question”) was framed as follows:

In relation to the Arbitrator’s decision that damages payable by the Plaintiff should not be
reduced by the USD 6,433,522.73 profit made by the Defendant from its “paper” HSFO 180CST
swap transactions on 16, 17 and 24 October 2008 (to the extent of the balance of cargo under
the contract):

2nd Question of law

Does a party who suffers loss from a breach of contract have no duty to mitigate such loss, until
after the contract has been terminated?

51 The second question is flawed because it assumed that the alleged profit from the paper
transactions is the result of Marubeni’s attempt to mitigate the loss resulting from Prestige’s failure to
take over the unlifted cargo. Prestige, with its eye on the higher sale prices for the unlifted cargo at
around 10 October 2008, as compared to 22 October 2008, asserted that Marubeni should have
mitigated its loss before 22 October 2008 when the prices of the cargo were higher. However, as the
Arbitrator found that it was only on 22 October 208 that it became clear that Prestige was no longer
going to or was unable to continue to perform its outstanding obligations, Marubeni could not have
mitigated its loss by selling the physical stocks of the unlifted cargo before 22 October 2008 as it
would have been obliged to supply the unlifted cargo to Prestige had the latter complied with the
notice under clause 10 of the contract and caused a letter of credit to be issued in Marubeni’s favour.
As such, the question of taking steps before 22 October 2008 to mitigate the loss did not arise and
the second question should not be posed to the court.

52 Leave to appeal on the second question should also not be granted as the answer to this
question will not substantially affect Prestige’s rights. As such, the requirement in s 49(5)(a) of the
Act has not been met. The Arbitrator had given a number of other reasons for not taking the alleged
profits into account for the computation of damages for Prestige’s breach of contract. It may be
recalled that the first reason was that even if there was a profit on the paper transactions, it was
dwarfed by the massive losses of around US$19 m sustained by Marubeni in the sale of the unlifted
physical stocks in November and December 2008. Another reason given by the Arbitrator for not
taking into account the alleged profits is that there was no causative link between Prestige’s breach
of contract and the alleged profits. Marubeni alone bore the risk of either future profits or losses from
the paper transactions and its future profits or losses were independent of Prestige’s breach of
contract. The Arbitrator cited Campbell Mostyn (Provisions) Ltd v Barnett Trading Company [1954] 1
Lloyd’s Rep 65 and AKAS Jamal v Moolla Dawood Sons & Co [1916] 1 AC 175 (“Jamal”) to support his
finding. Prestige has not sought leave to challenge these aspects of the Arbitrator’s decision or his
reasoning that the paper transactions were “inextricably linked” with the transactions with respect to

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the sale of the physical cargo. As such, even if the second question was answered in Prestige’s
favour, its position would not be altered as the Arbitrator would still have been entitled to disregard
the alleged profits on the other grounds he had given.

53 In any case, the Arbitrator’s decision not to take into account the alleged profits when
assessing Marubeni’s damages was neither obviously wrong nor open to serious doubt. A seller who
wishes to speculate on the price of goods, as Marubeni did in its paper transactions, is not in a
position to foist his speculation losses onto the buyer. The Arbitrator rightly noted that Marubeni
alone bore the risk of the paper transactions. Had it made a huge loss by selling and buying back the
HSFO180CST fuel oil in the paper transactions, it could not have held Prestige responsible for the
loss. Similarly, Marubeni need not account to Prestige for any profit made in the paper transactions.
In Jamal, the Privy Council explained at p 179:

If ...the purchaser is entitled to the benefit of subsequent sales, it must also be true that he
must bear the burden of subsequent losses. The latter proposition is in their Lordships’ opinion
impossible and the former is equally unsound.... [T]he speculation as to the way the market will
subsequently go is the speculation of the seller, not the buyer; the seller cannot recover from
the buyer the loss below the market price at the date of the breach if the market falls, not is he
liable to the purchaser for the profit if the market rises.

[emphasis added]

54 For the reasons stated, the second question need not be further considered.

The third and fourth questions of law

55 Both the third and fourth questions of law (“the third and fourth question” respectively) were
also intended to cast doubt on the Arbitrator’s application of s 50(3) of the SGA. They were framed
as follows:

In relation to the Arbitrator’s decision to assess damages based on the market price: (a) as at
22 October 2008 – the date on which [Marubeni] wrote to terminate the contract, rather than
(b) as at 11 October 2008 – beyond which there was no further performance of the contract (the
market price as at 11 October 2008 (a Saturday) being the same as that as at 10 October 2008
(Friday); resulting in a difference of US$5,055,187.85:

3rd Question of law

(c) Under section 50(3) of the [SGA], is the relevant market price that on the date when the
contract is terminated, or when the contract is breached?

4th Question of law

(d) Under section 50(3) of the [SGA], where the time contractually stipulated for performance
has been exceeded, is the relevant market price that on the date when performance has ceased
(“when the goods ought to have been accepted”), or when there is refusal to perform any further
(“at the time of the refusal to accept [the goods]”).”

56 Marubeni pointed out that the third question was inappropriately framed as s 50(3) of the SGA
refers neither to the date when a contract is terminated or when the contract is breached. Instead,
s 50(3) refers to the time when the goods ought to have been accepted and the time when the party

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in breach refused to accept the goods if no time was fixed for acceptance.

57 As for Prestige’s argument in the present proceedings that the relevant date of its breach was
11 October 2008, Marubeni pointed out that this was not its pleaded position during arbitration
proceedings. Prestige’s primary position was that damages should be assessed on the basis of the
market price of the unlifted cargo on 10 October 2008, the date it claimed to have terminated the
contract, or alternatively on 14 or 15 October 2008. In its closing submissions, Prestige reiterated its
pleaded position by stating:

In the circumstances, the date at which Marubeni’s damages should be referenced to is

10 October 2008, which is the date by which Prestige had made it clear it would not perform the
[contract] further and indeed purported to terminate it.

58 The Arbitrator had considered all the dates submitted by both parties. In his Table at p 74 of
the Award, he referred to the main and alternative dates put forward by both parties for assessment
o f damages and accepted Marubeni’s primary position, which was that the market price should be
determined on 22 October 2008.

59 Although Prestige contended that the Arbitrator found that it was in breach as at 11 October
2008 by failing to load the unlifted balance of the cargo, it conveniently ignored the Arbitrator’s
finding that whatever may have passed between the parties before 22 October 2008, it was only on
that date that Prestige was in repudiatory breach of contract.

60 The Arbitrator was mindful of Prestige’s assertion that it had in a letter to Marubeni on
10 October 2008 terminated the contract. However, he pointed out that Prestige did not state in that
let t er that it was terminating the contract or that it was no longer going to perform its own
outstanding obligations under the contract. In fact, he found that Prestige was still trying to perform
its outstanding obligations on 11 October 2008. Furthermore, the Arbitrator took the view that a
meeting on 14 October 2008 between the parties reinforced Marubeni’s understanding that Prestige
was, at that point, still trying to perform its obligation to lift the outstanding cargo. At paragraph 202
of the Award, the Arbitrator concluded:

Considered in totality, the actions of [Prestige] cannot be reasonably construed as a clear

indication on their part in refusing to perform their end of the contract under section 50(3) of the
Sale of Goods Act. For there to be repudiatory conduct, or in this context, a refusal on a buyer’s
part to accept delivery, there must be a clear and unequivocal refusal to perform their end of the
bargain....

61 The Arbitrator also referred to Prestige’s solicitor’s letter of 28 October 2008, which claimed
that Marubeni’s letter of termination of 22 October 2008 constituted “further repudiatory conduct by
Marubeni”. Crucially, the solicitors added:

On the basis of Marubeni’s repudiatory breaches, Prestige hereby terminates the contract.

The Arbitrator noted that if, as Prestige claimed, the contract had already been terminated on
10 October 2008, its solicitors would not have used the phrase “hereby terminates the contract” on
28 October 2008.

62 It is not for this court to interfere with the important findings by the Arbitrator that Prestige
had not terminated the contract on 11 October 2008 and that the relevant market price for
assessment of damages was that on 22 October 2008. In any event, I do not think that the Arbitrator

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has made a mistake in his finding regarding the relevant date for determining the market price of the
unlifted cargo but even if he did, he had reached his decision by applying s 50(3) of the SGA. Prestige
may be unhappy with the Arbitrator’s reading of s 50(3) of the SGA but the alleged error in relation to
his reading comes within the ambit of an error of law.

63 As for the fourth question, which concerns a situation where, as in the present case, the time
for the buyer’s performance of contractual obligations has been extended, Prestige was confronted
with other difficulties. Prestige contended that the Arbitrator should have assessed damages under
the first limb of s 50(3) of the SGA, which refers to “the time or times when the goods ought to have
been accepted”. However, during the arbitration proceedings, both Prestige and Marubeni relied on
the second limb of s 50(3), which concerns the position where no date of acceptance has been
agreed upon. Having relied on the second limb of s 50(3), Prestige is in no position to now assert that
the Arbitrator should have applied the first limb of s 50(3). In any case, this complaint relates to an
error of law, in respect of which there is no appeal.

64 Prestige clutched at straws when it contended that the second limb of s 50(3) of the SGA was
inapplicable as the time fixed for acceptance was 30 September 2008. This argument has no merit
because with the roll-over, the time for performance had been extended by Marubeni beyond
30 September 2008. That was why Prestige could lift more cargo right up to 11 October 2008.
Furthermore, the possibility of a booking-out arrangement for the remaining unlifted cargo was
discussed. As the date for acceptance had been extended beyond 30 September 2008 to a date that
had not been fixed, it was understandable that the Arbitrator relied on the second limb of s 50(3) of
the SGA to determine the damages to which Marubeni was entitled for Prestige’s repuditory breach.
There is much support for the view that when the contractual date for performance has passed but
the parties agree to extend that date and continue to perform their obligations beyond that date, the
market price of the goods at the date of the breach may not be the relevant date for assessment of
damages. In Johnson v Agnew [1980] AC 367, pp 400-401, Lord Wilberforce explained:

.... Where the contract is one of sale, this principle normally leads to assessment of damages as
at the date of the breach.... But this is not an absolute rule: if to follow it would give rise to
injustice, the court has power to fix such other date as may be appropriate in the circumstances.

In cases where a breach of a contract for sale has occurred, and the innocent party reasonably
continues to try to have the contract completed, it would to me appear more logical and just
rather than tie him to the date of the original breach, to assess damages as at the date when
(otherwise than by his default) the contract is lost....

[emphasis added]

65 In Benjamin’s Sale of Goods (Sweet & Maxwell, 8th Ed, 2010), the position was summed up as
follows in paragraph 16-073:

[I]f the seller agreed to waive the original delivery date but no definite date or period was
substituted by agreement, the calculation of damages will be made at the market price at a
reasonable time after the last request by the buyer for postponement of delivery, or at the date
when the seller refused to give any further time.

66 McGregor on Damages (Sweet & Maxwell, 18th ed 2010) echoes the same position as it states
at paragraph 20-120 as follows:

Where the time fixed for acceptance has been postponed at the buyer’s request and he

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 ultimately fails to accept in the extended period, the point in time at which breach takes place is
deferred and the damages will be calculated at the market price on the last day to which the
contract was extended if a date was fixed, or at the date when the claimant refused to grant
further indulgence, or at a reasonable period after his last grant of indulgence.

67 The Arbitrator, having heard the witnesses and considered the documents, was entitled to take
the view that as the original date for performance of Prestige’s obligations had passed, the market
price on 22 October 2008 was the relevant date for determining Marubeni’s loss. His decision was not
obviously wrong and even if the questions posed by Prestige were of general public importance, his
decision was not open to serious doubt. As such, the third and fourth questions need not be further
considered.

Just and proper in all the circumstances for leave to be granted

68 Section 49(5)(d) of the Arbitration Act provides that leave to appeal shall be given only if the
Court is satisfied that despite the agreement of the parties to resolve the matter by arbitration, it is
just and proper in all the circumstances for the Court to determine the question. This is a requirement
that must be satisfied even if the other conditions precedent in s 49(5) have been met. In the 2001
companion volume to Mustill and Boyd: Commercial Arbitration second edition (Butterworths, 2001),
the authors, while referring to the corresponding provisions in the Arbitration Act 1996 (c 23)(UK),
stated at pp 357-358:

There is now a further requirement that “despite the agreement of the parties to resolve the
matter by arbitration, it is just and proper in all the circumstances for the court to determine the
question”.... This requirement is plainly not satisfied simply by demonstrating that the other
requirements of [the sub-section] are satisfied, for otherwise [sub-section (d)] would be
unnecessary. Some further reason for intervention must be present: the court is likely to refuse
leave to appeal if there are circumstances which indicate that the parties wished speed and
finality to prevail even if the tribunal decided a question of law in a way which was obviously
wrong, or at least open to serious doubt.

[emphasis added]

69 In Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] NZCA 131, Blanchard J,
who delivered the judgment of the New Zealand Court of Appeal, listed a number of factors which the
court could take into account, one of which was whether the contract provides for the arbitral award
to be final and binding. In regard to this factor, he stated (at [54]):

....

(7) Whether the contract provides for the arbitral award to be final and binding

Where there is such a clause, it will not be determinative, but it will be an important
consideration. It will indicate that the parties did not contemplate becoming involved in litigation
over the arbitral award. The High Court should lean towards giving effect to the stated
[preference of the parties for finality.

70 In the present case, the arbitration clause provided that “any dispute arising out of or in
connection with this contract “shall be referred to and finally resolved by arbitration in Singapore”
(emphasis added). Clearly, Prestige and Marubeni had intended that where possible, there should be a
final resolution of any dispute arising out of the contract by means of arbitration and without involving

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the courts unnecessarily. It follows that apart from failing to meet some of the other conditions
precedent in s 49(5) of the Act, Prestige’s failure to show that it would be just and proper for the
court to grant leave to appeal is another reason why its application must be dismissed.

Conclusion on the application for leave to appeal

71 For the reasons stated, Prestige’s application for leave to appeal is dismissed with costs.
C opyright © Government of Singapore.

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