BACKGROUND
The case of DZD v DZE [2026] SGHC 199 concerned an ad hoc arbitration award obtained by a shipowner (Shipowner) against a commodities trader (Trader) for demurrage. The Shipowner obtained permission to enforce the award and subsequently secured an order attaching funds in one of the Trader’s bank accounts.
The arbitration was based on an arbitration agreement contained in a purported charterparty recorded in a clean recap of terms (Clean Recap). The document identified the Trader as head charterer and its supplier as sub-charterer and bore the signature of the Trader’s director, its company stamp, and a handwritten date. The parties had not dealt directly with one another in concluding the purported charterparty or arbitration agreement, and the Trader did not participate in the arbitration.
The Trader made various applications to the Singapore court in relation to the Shipowner’s award enforcement, including an application to set aside the award on the basis that there was no valid arbitration agreement (under Article 34(2)(a)(i) of the UNCITRAL Model Law on International Commercial Arbitration (Model Law)) or, alternatively, that the award conflicted with Singapore’s public policy (under Article 34(2)(b)(ii) of the Model Law).
As the award was eventually set aside on the former basis, the court did not make a determination on the latter.
In the court proceedings, the Trader maintained that the purported execution of the Clean Recap was a forgery (wherein the director’s signature, company stamp, and handwritten date were pasted images) and this had not been done by it or with its authority.
The Shipowner raised rebuttal arguments that there was a deemed arbitration agreement by the Trader’s non-participation in the arbitration, the Trader had executed or authorized the execution of the Clean Recap, and the Trader’s payment of freight had created a charterparty with an arbitration agreement or ratified any unauthorized execution of the Clean Recap.
Discussed in more detail below, the court rejected the Shipowner’s submissions and set aside the award.
NO ARBITRATION AGREEMENT WAS DEEMED TO EXIST BY REASON OF THE RESPONDENT’S NON-PARTICIPATION IN THE ARBITRATION PROCEEDINGS
The Shipowner relied on Section 2A(6) of the International Arbitration Act 1994 (IAA) and contended that the Trader’s non-participation in the arbitration meant that it had not denied the Shipowner’s assertion that an arbitration agreement existed and thus there is deemed to be an effective arbitration agreement between them.
Section 2A(6) provides that:
[W]here in any arbitral or legal proceedings, a party asserts the existence of an arbitration agreement in a pleading, statement of case or any other document in circumstances in which the assertion calls for a reply and the assertion is not denied, there is deemed to be an effective arbitration agreement as between the parties to the proceedings.
Having considered the following, the court rejected the Shipowner’s argument:
- The Trader is not obliged to participate in the arbitration proceedings and may wait and see if an award is made against it and thereafter apply to set it aside or resist enforcement (following the Singapore Court of Appeal’s decision of Rakna Arakshaka Lanka Ltd v Avant Garde Maritime Services (Pte) Ltd [2019] 2 SLR 131). Where the Trader is not obliged to and does not participate, any assertion by the Shipowner is not made “in circumstances in which the assertion calls for a reply” and the Trader is similarly not obliged to dispute that assertion. The court thus distinguished the present case from Vitol Asia Pte Ltd v Machlogic Singapore Pte Ltd [2021] 4 SLR 464 (Machlogic), wherein the deeming provision came into effect when the respondent (who participated in the arbitration proceedings) failed to deny the applicant’s assertion of an arbitration agreement twice in the course of that arbitration.
- The court went a step further to determine the question of whether an arbitration agreement can be deemed to exist by operation of Section 2A(6) IAA where such an agreement does not otherwise exist. Contrary to the decision in Machlogic, the court held that Section 2A(6) IAA does not have such an effect. Instead, the provision is intended to deem that an arbitration agreement, independently established, would be effective for the purpose of the IAA even if it was not in writing. In so finding, the court agreed with the provisional views expressed in the Singapore Court of Appeal’s decision in Cheung Teck Cheong Richard v LVND Investments Pte Ltd [2021] 2 SLR 890 (Richard Cheung) on Section 2A(6) IAA, notwithstanding that Richard Cheung concerned the identically worded deeming provision under Section 4(6) of the Arbitration Act 2001. The court was of the view that a reading of Richard Cheung and its analysis of legislative purpose and history sheds light on the intention of addressing the underlying issue of formal validity (i.e., the requirement for an arbitration agreement to be in writing). The deeming provision prevents a party from denying the validity or effectiveness of an arbitration agreement that was concluded orally, by conduct, or other means, on the basis that it was not in writing.
THE EVIDENCE DID NOT SUPPORT THE AUTHORISED EXECUTION OF THE CLEAN RECAP (AND THE ARBITRATION AGREEMENT THEREIN)
The Trader adduced expert evidence that its director’s signature, company stamp, and handwritten date had been electronically pasted into the Clean Recap as separate objects. Expert evidence also supported the director’s account that the date was not in her handwriting. The Shipowner did not dispute the electronic pasting but argued that the Trader, or someone authorised by it, must have been responsible.
The court examined the evidence concerning the preparation and transmission of the document. A broker’s employee denied inserting the images and attributed his receipt of the executed document to an intermediary. However, the intermediary did not give evidence, and there was no documentary evidence establishing his authority to act for the Trader. Material correspondence concerning the document’s transmission was also absent.
The court ultimately accepted the Trader’s evidence that the purported execution was neither undertaken nor authorised by it. The appearance of its director’s signature and company stamp did not, in those circumstances, establish the asserted charterparty or arbitration agreement.
NO CHARTERPARTY (OR ARBITRATION AGREEMENT) WAS FORMED BY THE RESPONDENT’S FREIGHT PAYMENT
The Shipowner also relied on the Trader’s payment of freight, which it argued indicated a Free on Board purchase arrangement under which the Trader was responsible for arranging carriage and must therefore have chartered the vessel.
The court rejected the argument after examining the trading chain and circumstances of payment. While the Shipowner asserted that the freight invoice was issued to the Trader, no evidence supporting that was adduced and the Trader’s address was not stated on the invoice.
Further, the court found no evidence that the Trader received the freight invoice any earlier than the day after the vessel’s arrival at the discharge port from its supplier. Based on the explanation of the Trader’s director (in which the court found nothing unbelievable), the Trader made payment on the same day at the request and on behalf of its supplier, with the monies representing part of the purchase price of the goods.
The court observed that a cargo owner might pay freight to obtain release of goods without being, or becoming, the charterer. This was distinguishable from a situation in which the payer had participated in negotiations concerning carriage and payment might evidence formation of a contract by conduct. There was no evidence of the Trader being involved in negotiations concerning the carriage of goods.
The court further held that even if a charterparty had been formed by conduct, with the Trader who made payment of freight as charterer, no arbitration agreement (which is a distinct and separable agreement from the main contract) would have arisen as there was nothing to show that the Trader knew that the terms of that charterparty contained one.
PAYMENT OF FREIGHT ALSO DID NOT RATIFY THE UNAUTHORISED EXECUTION OF THE CLEAN RECAP
The Shipowner contended in the alternative that even if the purportedly executed Clean Recap were a forgery, the Trader had, by paying freight, ratified it. The court, with reference to well-settled law, found that it is not possible for a forgery to be ratified.
The court distinguished an unauthorised act by a person professing to act as an agent from a forger purporting to execute the document as the principal (i.e., impersonating the principal rather than professing to be an agent). While the former may be capable of ratification, the latter is a nullity and does not engage the agency principle of ratification.
The court further found that even if the principle of ratification were relevant, it would not be applicable as the invoice on which the Trader paid freight contained only the amount of freight payable and nothing to indicate that anyone had purported to conclude the charterparty in the name of the Trader. The Trader also had no knowledge of the forged execution in its name and could not have ratified it.
LOOKING AHEAD
Departing from Machlogic, which is a decision of a court of coordinate jurisdiction, this decision adopted the provisional view of the Court of Appeal in Richard Cheung and distinguished the existence of an arbitration agreement from its formal validity. The Court of Appeal had in Richard Cheng left the interpretation of Section 2A(6) IAA for a definitive determination when the issue is squarely before the court with the benefit of the parties’ arguments.
Unless otherwise determined by the appellate court in the future, a claimant should be ready to establish the existence of an arbitration agreement even when the respondent does not participate in the arbitration proceedings.
