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Lloyd's Law Reporter


[2009] SGHC 231, High Court of Singapore, Judith Prakash J, 16 October 2009

Arbitration - Setting aside of award - Award allegedly obtained on the basis of fraud, perjury and suppression of documents - Whether plaintiff had been caused substantial injustice by the fraud - Award not set aside - Sale of goods - Damages - Quantification of damages in case of a breach of contract for the sale of goods - No available market - Suspensory condition - One-off contract - Sale of Goods Act, section 50(2)

The parties had entered into a contract for fob sale of iron ore which was never completed; according to the plaintiff buyer, because its nominated vessel was rejected and the cargo not ready to load; according to the defendant seller, because the plaintiff had failed to take delivery and to nominate a vessel in time. The defendant said that it had mitigated its damages by selling the cargo to two buyers in India at prices substantially lower than the contract price payable by the plaintiff and claimed the difference in the prices. An arbitration resulted in award for the defendant. This was the plaintiff's application for a declaration that the arbitration award had been procured by fraud and for the setting aside of the award. The plaintiff's grounds for the application were that the defendant had falsified testimony at the arbitration relating to the amount of cargo it had sold to third parties in mitigation of damages and had suppressed documents in order to perpetuate the falsehood; the arbitrator had thus been deceived into thinking that the defendant possessed the required cargo to fulfil its obligations under a contract of sale to the plaintiff and that it had properly mitigated its loss; on the basis of the false testimony, the arbitrator had held that the plaintiff was liable to the defendant for US$1,201,609.20 and therefore this deception and fraud had caused prejudice to the plaintiff.Prakash J dismissed the application, holding as follows. Intentional non-disclosure in itself was insufficient. To set aside an award there must not be a good reason for such non-disclosure. Perjury is regarded as fraud and a deliberate attempt to withhold documents may also be considered fraudulent or akin to fraud. However, proving fraud or unconscionable conduct is insufficient. In order to obtain relief, the complainant must show that the reprehensible conduct or fraud had caused it substantial injustice in that the same procured or substantially impacted the making of the award. Summarising the law: (a) if the fraud alleged is the shape of perjury, the applicant must prove that its new evidence could not have been discovered or produced, despite reasonable diligence, during the arbitration proceedings; (b) the newly discovered evidence must be decisive in that it would have prompted the arbitrator to have ruled in favour of the applicant instead of the other party; (c) if the fraud was in the shape of non-disclosure of a material document, the document must be so material that earlier discovery would have prompted the arbitrator to rule in favour of the applicant; and (d) negligence or error in judgment in failing to discover a crucial document would not be sufficient to justify a setting aside of the award and for that purpose, the non-disclosure must have been deliberate and aimed at deceiving the arbitrator. The arbitrator was the master of the facts and he had been satisfied on the evidence before him that the defendant was fully able to meet its contractual obligation to the plaintiff and that a sale to third parties had been concluded. Even if the arbitrator made mistakes of fact in reaching those conclusions, that was not a matter which could be brought before the court for remedy. The court's jurisdiction was limited and that was why the plaintiff has based its attack on fraud. Fraud was a serious accusation and the claimant had to produce evidence cogent and strong enough to establish the fraud. On whether substantial injustice had been caused, the judge rejected the argument of the plaintiff, deciding that there was only one measure of damages under the Sale of Goods Act, section 50(2) [the Singapore provision is the same as the English one] and that is the "estimated loss directly and naturally arising" from the breach, meaning the difference between the contract price of the goods and the value of the goods to the claimant at the date of the breach. The relevant date for the assessment of damages was the date of the breach although in assessing what the value of the goods were at that date the court may have recourse to the resale price of the goods even though the resale took place some time after the breach. The judge distinguished Golden Strait Corporation v Nippon Yusen Kabushiki Kaisha [2007] 2 Lloyd's Rep 14 (HL) on the basis that the contract in that case had provided for obligations to be performed over a period of time and was not, as here, a question of a one-off sale and delivery. Further, that contract, unlike this one, contained a specific provision providing for early termination on the occurrence of certain events. In Golden Strait a "suspensive condition" existed in the charterparty influencing their Lordships not to apply the standard rule of crystallisation of damages at the date of the breach. In assessing damages under section 50(2) in the case of a one-off contract for sale of goods, regard must be had to the value of the goods to the seller as at the date of the breach and in determining that value at the date of the breach, regard could be had to re-sales taking place within a reasonable period thereafter. Once the value had been established, the damages were crystallised and what happened thereafter would not, save in the most exceptional circumstances (cf R Pagnan & Fratelli v Corbisa Industrial Agropacuaria Limitada [1970] 2 Lloyd's Rep 14), affect the measure of damages. In light of this assessment of damages, the quantum of damages procured by the defendant had not been procured by fraud or unconscionable conduct. Even if the arbitrator had been wrong in the way that he assessed the damages that would be an error of law that would not be subject to the review of the court. What was important was that the defendant did not mislead the arbitrator in relation to the assessment exercise; the facts and documents that the defendant did not disclose had no relevance to that exercise.

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