ICC Awards

IV. The Factual Background

45. In this section, the Sole Arbitrator summarises the salient facts which form the backdrop to the Parties' positions with respect to the merits of the dispute as well as the damages claimed by the Respondent for the Claimant's breach of the Arbitration Agreement.
46. The dispute arose out of the Contract between the Claimant and the Respondent to sell … metric tons of [the "Cargo"] at a price of … FOT ex Seller's warehouse … for a total price of [the "Contract Price"].
47. The Contract provided that the Cargo was "[f]or collection during [period] (Buyer's Option)". Under the Contract, the ownership of the Cargo passes from the Claimant to the Respondent upon collection.
48. …
49. The Respondent took delivery of part of [half of the] Cargo …The Respondent did not collect the balance of the [other half of the Cargo].
50. …
51. … the Claimant wrote to the Respondent to request that it take delivery of the balance of the Cargo by [date], failing which it would have to resell it to a third party buyer. The Respondent did not take delivery of the balance of the Cargo.
52. [Three weeks later], the Claimant sold the balance of the Cargo … to another buyer… under Sales Contracts No. … at [unit price] … for [total price] ...
53. [One month following the sale to a third party], the Claimant requested that the Respondent pay [amount claimed] for the alleged loss the Respondent's non-performance of the Contract caused to the Claimant.

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VIII. The Merits

73. The Parties' positions on the merits are set out in detail in the Parties' submissions and witness statements, which the Sole Arbitrator has carefully considered. The Parties' positions are summarised as follows.

A. The Claimant's Position

97. The Claimant claims contractual damages. It states that the purpose of contractual damages is to put the innocent party in the position it would have been in, if the contract had been performed. lt further argues that under Singapore law, an innocent party is entitled to damages when the other party has breached the contract.
98. The Claimant states that under Singapore law, damages for non-acceptance or non­collection of cargo are based on Section 50 of the Sale of Goods Act (Chapter 393, 1999 Rev. Ed.), and that they consist of the difference between the Contract Price and the market price on or after [the last date for the Respondent to collect]. The Claimant in addition claims under the Contract the Financing of Stockholding costs (at 5% per annum) and Cargo Insurance costs ... The Claimant states that the price at which it sold the balance of the Cargo to [a third party] [a few weeks later] was higher than the market price at the time. The Claimant concludes that the compensation should be [amount claimed].

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99. The Claimant states that if the Sole Arbitrator takes the view that damages ought to be assessed prior to [Claimant's purported termination], then the relevant market price is … and on that basis, the damages would exceed the sum presently claimed by the Claimant.
100. As regards the Respondent's arguments that the damages claimed are too remote, the Claimant states that the Respondent's discussion of the Achilles judgment by English courts as irrelevant as it is not the basis of the law in Singapore. The Claimant states that whether the damages are computed under Section 50(2) or Section 50(3) of the Sale of Goods Act, the result is the same. According to the Claimant, foresight of the exact level to which the market dropped is not required to sustain a claim under Section 50(2) and Singapore law does not require proof of the actual extent of loss. Further, the Claimant states that the loss claimed in this arbitration is the loss which flows naturally from the breach and analysing this under Section 50(3), it is a prima facie the loss derived from the market/contract differential, and there is no need for the Claimant to show that the Respondent knew or ought to have known or foreseen the exact level to which the market moved, i.e. actual knowledge of the drastic reduction in price is not required. The Claimant concludes that its losses are not too remote.
101. The Claimant denies that it failed to mitigate its losses. The Claimant states that the burden of proof is on the Respondent to establish that the Claimant did not properly or reasonably mitigate its loss. It states that … the Respondent collected part of the Cargo; [then] reaffirmed its commitment to take the balance of the Cargo; and [on a later date] repeatedly told [Claimant's local agent] it would collect the balance of the Cargo. The Claimant adds that the evidence shows that no other party than [a third party] was interested in buying [half of the Cargo] … and that the Claimant sold the balance of the Cargo to [a third party] at a price higher than the market price at the time of the sale, so that it did not fail to mitigate its loss.
102. In response to a question by the Sole Arbitrator, the Claimant states that the Claimant loaned part of the balance of the Cargo to a third party pending collection by the Respondent, but that this is industry practice, and that the Claimant did not receive any payment from the third party borrowers for any of the loaned Cargo. Therefore, according to the Claimant, the Respondent remains liable to compensate the Claimant…
103. In its comments on legal authorities put forward by the Sole Arbitrator in its Procedural Order No. 7, the Claimant argued that the evidence clearly showed that the Parties continued to perform their obligations beyond [month of previous year] and that as stated in Prestige Marine Services Pte Ltd v. Marubeni International Petroleum (S) Pte. Ltd., ¹ "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". The Claimant concludes that the second limb of Section 50(3) is applicable and that the damages must be assessed as of [the time of the sale] and not as of [the month of price drop].
104. …

B. The Respondent's Position

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119. According to the Respondent, Section 50(3) of the Sale of Goods Act provides for the measure of damages to be paid to the Claimant, in the event the Sole Arbitrator finds that the Respondent breached the Contract, and the damages would be the Contract price less the market price in [month by which the respondent ought to have collected the Cargo].
120. According to the Respondent, Section 50(2) of the Sale of Goods Act reflects the first rule on determining the amount of damages laid down by the House of Lords in Hadley v. Baxendale. ² The Respondent states that in Singapore, the judicial approach to the question of remoteness of losses has been in line with the traditional rules of remoteness in Hadley v. Baxendale. According to the Respondent, the losses resulting from the unprecedented, unexpected and unforeseeable price drop were beyond the Parties' contemplation. They were not foreseeable by the Parties and they were not considered by the Parties as a direct and natural outcome of a breach of the Contract at the time of contracting. According to the Respondent, the Claimant's alleged losses are therefore too remote and should not be compensated.
121. The Respondent further contends that the Claimant failed to act reasonably in order to mitigate its alleged losses. It notes that Singapore courts do not adopt too high a standard of reasonableness and that the inquiry is very much a factual one, and case precedents are thus of limited guidance. It adds that Singapore courts observed that reasonableness is a flexible concept and that they have considerable discretion in evaluating the facts to reach a commercially just determination. According to the Respondent, the Claimant failed to meet the standard of reasonableness, noting that there is a gap in the Parties' correspondence between … and … The Respondent stresses that the written correspondence from the Claimant to the Respondent does not contain any request from the Claimant to the Respondent to collect a balance of quantity of Cargo for 11 months. According to the Respondent, the Claimant could have either avoided the Contract … at the time of the alleged breach, or [one month later] when it was clear that the price was dropping, or it could have waited until the prices increased [at a later date].The Respondent concludes that the Claimant failed to mitigate its losses.
122. The Respondent adds that there existed an established method and practice of dealings between the Claimant and the Respondent, with reference to Article 9 of the CISG. The Respondent relies to that effect on a previous contract with the Claimant, Sales Contract No. … which was for the sales and purchase of [another product]. According to the Respondent, the Claimant terminated that earlier contract further to the Respondent's 54-day delay in taking delivery of the cargo. According to the Respondent, this constitutes a "method and practice of conducting business" established between the Claimant and the Respondent, pursuant to which the Claimant should have, in respect of the alleged breach of the Contract, sold the goods at the end of [month by which the respondent ought to have collected the Cargo]. The Respondent contends that if the Claimant had sold the goods in [month by which the respondent ought to have collected the cargo], it could have sold them for the same or a nearer or a higher price, thus preventing any loss/damage.
123. In response to a question by the Sole Arbitrator, the Respondent states that the Claimant's damages claim is based on a false computation as it includes stock holding expenses for months during which the Claimant did not hold the stock in its warehouse. The Respondent further alleges that if the Claimant loaned the stock to a third party, it would constitute a violation of the exchange control regulations and draws the conclusion that the stock of products allegedly loaned could not have been unpaid stock, because the product is stocked in the Claimant' s warehouse on a no foreign exchange bond.
124. The Respondent concludes that the Claimant has failed to prove its case.
125. In its comments on legal authorities put forward by the Sole Arbitrator in its Procedural Order No. 7, the Respondent, in relation to the Prestige Marine case, states that in the present case, there was no agreed extended collection date between the parties nor was there any contractual provision which entitled the Claimant to extend the collection date. The Respondent states that in that case the arbitrator observed that there was no clear and unequivocal refusal to perform because the buyer was until the last moment trying to perform its part, but that in the present case, there is no evidence to show that the Respondent was trying to perform its part until the Claimant’s purported termination … or during the one year prior to that. The Respondent concludes that the second limb of Section 50(3), which deals with a situation where the time for acceptance is not fixed, cannot be applied in the present case and that the present case falls within the first limb of Section 50(3) (i.e. situation where the time for acceptance is fixed).
126. The Respondent requests as relief that the Sole Arbitrator dismiss the Claimant's claims and order the Claimant to reimburse the costs incurred by the Respondent in relation to this arbitration.

C) The Sole Arbitrator's Decision

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The Claimant's Mitigation of Its Losses

194. The Respondent argues that the Claimant failed to mitigate its losses and that it should either have sold the balance of the Cargo to a third party shortly after the end of [month by which the respondent ought to have collected the cargo] or that it should have sold them [at a later date], when the prices increased.

195. Both Parties concur that the Claimant bad a duty to mitigate its losses. The question is whether the Claimant complied with its duty.
196. As a preliminary point, as noted by the Singapore Court of Appeal in the Asia Star³ case discussed by the Parties and which discusses in detail Singapore law on mitigation of damages:

24.... the burden of proving that the aggrieved party has failed to fulfil its duty to mitigate falls on the defaulting party... This burden is ordinarily one which is not easily discharged…

a) ... Reasonableness forms the one identifiable foundation on which this inquiry - and, in turn, the principle of mitigation - rests…

b) The existence of the duty to mitigate may also appear to be an unfair obligation to impose on the aggrieved party as it is the innocent party in relation to a breach of contract (in that the defaulting party is to blame for the breach of contract). To minimize any potential unfairness to the aggrieved party in this regard, the courts have sought to ensure that the standard of reasonableness required of the aggrieved party will not be difficult to meet...

c) ... The concept of reasonableness in the context of mitigation is a flexible one... the principle of mitigation confers on the courts considerable discretion in evaluating the facts of the case at hand in order to arrive at a commercially just determination. The principle embodies a fact-centric flexibility...

34. The reasonableness inquiry, therefore, is very much a factual one... For this reason, case precedents are of limited guidance as they are specific to their particular factual matrices.

197. In view of the above, the Sole Arbitrator will follow the following directions in deciding whether the Claimant failed to mitigate its losses: the burden of proving the Claimant's alleged failure to mitigate its losses rests with the Respondent; the Sole Arbitrator's assessment will be fact-centric and aimed at determining whether the Claimant’s conduct was reasonable; and the Sole Arbitrator enjoys broad discretion and should strive to arrive at a commercially just determination.
198. The Sole Arbitrator first notes that the Respondent's contentions on the Claimant’s failure to mitigate its losses are fairly contradictory. On the one band, the Respondent argues the Claimant should have resold the balance of the Cargo earlier than it did, on the other band it argues it should have done so later. Further, the Sole Arbitrator does not find that the [previous] contract between the Claimant and the Respondent, relied on by the Respondent in support of its argument that the Claimant should have resold the Cargo shortly after the end of [month by which the respondent ought to have collected the Cargo], bears any relevance to the present case. A single contract, for the sale of a [different product] several years ago, is simply irrelevant and incapable of constituting a trade practice.
199. In view of the Claimant's efforts, as described above, to seek the performance of the Contract by the Respondent, of the ongoing discussions between the Parties after the expiry of the contractual collection period, and of the failure by the Respondent to indicate prior to [month by which the respondent ought to have collected the Cargo] that it would not collect the balance of the Cargo, the Sole Arbitrator finds that it was perfectly reasonable for the Claimant to resell the Cargo [at a later date], after the expiry of its final deadline to the Respondent …
200. The Claimant resold the balance of the Cargo at the market price as acknowledged by the Respondent ...
201. The Sole Arbitrator considers irrelevant the question whether or not [a third party] should be considered a related party of the Claimant or [Claimant's local agent] as the balance of the Cargo was sold at the market price.
202. Further, the Sole Arbitrator does not see any merit in the Respondent's argument that the Claimant should have waited [a later date] to resell the Cargo. The Respondent has not established that the Claimant should have predicted that the prices would increase [at a later date].
203. The Sole Arbitrator finds that the Claimant has acted reasonably and has complied with its duty to mitigate its losses. The Respondent has failed to meet its burden to establish otherwise.
204. The Sole Arbitrator is comforted in her conclusion by trade usages, which both Parties admitted are for sellers to grant additional time to buyers to collect goods where buyers are unable to collect a cargo during the collection period set in the contract.

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