Singapore: Legal Update: Singapore High Court Sets Aside SIAC Award In Palm Oil Dispute

Last Updated: 9 August 2016
Article by Prakash Pillai

Clasis LLC acted as counsel for JVL Agro Industries Ltd.

The High Court of Singapore has, in the recent decision of JVL Agro Industries Ltd v Agritrade International Pte Ltd [2016] SGHC 126, set aside an SIAC arbitral award on the basis that there had been a breach of natural justice in the arbitration which had caused prejudice to the plaintiff, JVL Agro Industries Ltd ("JVL").

The High Court found that the Tribunal failed to grant JVL a fair hearing by dismissing JVL's claim on an issue which the defendant Agritrade International Pte Ltd ("Agritrade") had never advanced as part of its case and which was only put to JVL's counsel in the course of his oral closing submissions.

The background

In March to August 2008, the parties entered into 29 contracts for the sale and purchase of palm oil. In the second half of 2008, due a fall in the market price of palm oil, the parties agreed to a "price-averaging" arrangement, which involved keeping the 29 contracts on foot but deferring performance of the contracts. At the same time, the parties would continue entering into new contracts to buy palm oil at the prevailing market price. Each time there was to be a new shipment of palm oil, the parties would discuss and agree on: (a) the quantity of palm oil to be shipped; and (b) the ratio in which the palm oil comprising that cargo was to be attributed to the old and new contracts – which would in turn allow the parties to compute an adjusted unit price for the palm oil.

The effect of the "price-averaging" arrangement was to average down the overall unit price of the palm oil.

By June 2010, all but 5 of the contracts had been discharged through the "price-averaging" arrangement. Agritrade refused to perform the 5 remaining contracts, JVL issued notices of default under those 5 contracts. Subsequently, after the parties agreed to refer the dispute to arbitration under SIAC Rules, the JVL commenced arbitration for Agritrade's breach of its delivery obligations under the 5 remaining contracts.

In the arbitration, Agritrade's defence was that the "price-averaging" arrangement made rendered each disputed contract void for uncertainty. Its alternative defence was that even if they were not void for uncertainty, they had been mutually terminated.

On the first day of the arbitration hearing, Agritrade abandoned the mutual termination defence, relying solely on the uncertainty defence. The High Court found that at this point, all Agritrade's eggs were in the "uncertainty basket" and that if the Tribunal were to hold that the 5 contracts were sufficiently certain to be binding, Agritrade could not, on its own case, escape being found liable to JVL.

The Tribunal's Award

In October 2013, the Tribunal delivered its final award. The 3 members of the Tribunal unanimously dismissed the uncertainty defence, finding that the 5 disputed contracts were sufficiently certain to be binding.

Yet, the majority of the Tribunal dismissed JVL's claim.

In dismissing JVL's claim, the majority considered the question of whether the parol evidence rule precluded Agritrade from relying on the price-averaging arrangement and concluded that the "price-averaging" arrangement was a collateral contract, which was an exception to the parol evidence rule and thus was in law capable of varying the parties' performance obligation under the disputed contracts.

This was not an argument made by Agritrade at any time during the course of the arbitration, despite (as the High Court found) having had numerous opportunities to do so.

JVL subsequently applied to the High Court of Singapore to set aside the Tribunal's award under section 24 of the International Arbitration Act.

The Court's decision

Taking as the starting point the Tribunal's unanimous finding that the 5 disputed contracts were sufficiently certain to be valid and binding (which was not disputed in the High Court proceedings), Justice Coomaraswamy ultimately found that the majority of the Tribunal, in finding that the "price-averaging" arrangement was a collateral contract and thus, an exception to the parol evidence rule, had failed to give JVL an opportunity to be heard on this issue, which prejudiced JVL.

The learned Judge arrived at the above conclusion through the following line of reasoning:

  1. Under the parol evidence rule, unless one of the limited number of exceptions applies, a party to a contract which has been reduced into documentary form cannot rely on evidence extrinsic to the document to vary, contradict, add to or subtract from the contract.Therefore, the 5 disputed contracts, being valid and binding, cannot be varied by the "price-averaging" arrangement unless such arrangement fell within one of the established exceptions to the parol evidence rule;

  2. Neither party had put the parol evidence rule or its exceptions into play. In fact, it was the Tribunal that raised the issue during the evidential phase of the arbitration;

  3. Despite the above and despite having the burden of doing so because of the fundamentally adversarial nature of arbitration, Agritrade never advanced the collateral contract exception as part of its case, whether formally on the pleadings or even informally through its submissions. The learned Judge highlighted 5 rounds of written and oral submissions in which Agritrade had the opportunity, but failed, to do so.Agritrade also never adduced any evidence on the collateral contract exception;

  4. In addition, the learned Judge found that the Tribunal never directed JVL to address the collateral contract exception;

  5. Yet, despite the above, the Tribunal went on to find, in its final Award, that the "price-averaging" arrangement constituted a collateral contract, and therefore an exception to the parol evidence rule. The learned Judge held that this finding was "determinative" of the ultimate issue before the Tribunal, i.e. whether Agritrade was liable to JVL for breach of the 5 disputed contracts.

  6. In the circumstances set out above, the learned Judge found that the Tribunal had impermissibly relieved Agritrade of its entire burden and therefore, the majority of the Tribunal had exercised "unreasonable initiative" in making its Award. Accordingly, the learned Judge held that there had been a breach of the rules of natural justice; and

  7. The learned Judge found that JVL suffered prejudice because, as a result of the breach of natural justice, the Tribunal had been deprived of arguments or evidence that could reasonably have made a difference to the Tribunal's decision.

Conclusion

This decision serves as a timely reminder that tribunals should always ensure that each party has the opportunity to fairly present its case and to address the other party's submissions and evidence before the tribunal comes to a final decision.

Moreover, if it appears to the tribunal that there is an issue which neither party has raised or advanced but the tribunal feels is relevant to the ultimate issue before them, the tribunal should expressly make that known to the parties and give each party the chance to adduce evidence and make submissions in respect of that issue.

Legal Update: Singapore High Court Sets Aside SIAC Award In Palm Oil Dispute

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions