Dauphin Offshore Engineering & Trading Pte Ltd v The Private Office of His Royal Highness Sheikh Sultan bin Khalifa bin Zayed bin Zayed Al Nahyan

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin JC
• Judgment Date: 02 August 1999
• Neutral Citation: [1999] SGHC 201
• Court: High Court (Singapore)
• Year: 1999
• Published date: 07 March 2013
• Plaintiff Counsel: Govind Asokan and Henry Heng (Rodyk & Davidson)
• Defendant Counsel: Jeya Putra and Collin Choo (Joseph Tan Jude Benny)
• Citation: [1999] SGHC 201

JUDGMENT:

GROUNDS OF DECISION

1. The Defendants contracted the Plaintiffs, who are shipbuilders, to build a luxury yacht. The price was US$5.85 million. It was a term of the contract that the Plaintiffs should provide to the Defendants an irrevocable confirmed bank guarantee ("the Guarantee") for US$877,500. This the Plaintiffs did and they commenced work on the yacht. However disputes arose between the parties and on 18 April 1999, the Defendants demanded payment under the Guarantee. The Plaintiffs learned of this on 20 April and on the same day applied ex parte for an interlocutory injunction on the usual undertaking. This was granted by Lai Siu Chiu J. In this application, the Defendants seek to discharge the injunction. After hearing counsel for the parties on 30 April 1999, I discharged the injunction with costs and ordered an inquiry as to damages. Counsel for the Plaintiffs, Mr Govind, asked for a stay of the order pending appeal. I granted his request and stayed the order discharging the injunction pending appeal unless the Plaintiffs did not file notice of appeal by 10 May 1999. The Plaintiffs have filed the notice on that date and I now give the grounds of my decision.

Background

2. By a contract dated 2 August 1998 ("the Contract"), the Defendants engaged the Plaintiffs to build a 55-metre luxury yacht. The detailed specifications for this yacht are set out in a document entitled "Technical Specification for a 55M Luxury Yacht" and in accompanying plans. It was to have a displacement of 600 tonnes and fitted with staterooms for the owner, VIP guest, and 6 guests. The Contract provides for payment of the price in 6 instalments. The first, a sum of US$877,500 which is 15% of the contract sum, was payable on the date the Contract took effect. The second instalment, US$1,462,500 being 25% of the contract sum, was payable upon keel laying pursuant to Article II clause 4(b) which provides as follows:

"2^nd INSTALMENTS:

Within ten (10) working days in Singapore after receipt of fax notice from the Builder of keel laying of the Yacht having been made, confirmed by the Classification Society, the Buyer shall remit the amount of this instalment by telegraphic transfer to the Builder’s Bank for account of the Builder."

3. The next 4 instalments were payable at various other stages of completion culminating in payment of the last instalment upon delivery and acceptance of the vessel. Article II clause 5 of the Contract provides that the Plaintiffs shall, upon receiving the first instalment, provide the Defendants with an irrevocable confirmed bank guarantee for $877,500. This clause states as follows:

"5. REPAYMENT GUARANTEE

The Builder shall provide to the Buyer upon receiving 1^st Instalments of fifteen (15%) of the Contract value an irrevocable confirmed bank guarantee for the amount of United States Dollars eight hundred and seventy seven thousand five hundred only (US$877,500.00) from its Banker. The bank guarantee shall be a guarantee for the repayment to the Buyer over the period until the 3^rd instalment payment date.

This bank guarantee shall be payable/encashable on first demand by the Buyer if Builder does not fulfil [his] obligation under the term of the Contract. See Exhibit ‘A’"

4. Exhibit ‘A’ is the form of the letter of guarantee that the Plaintiffs were to provide. The Defendants made the payment of the first instalment and on 23 October 1998 the Plaintiffs procured the Guarantee from the Raffles Place branch of the Bank of America. The original date of expiry of the Guarantee was 31 December 1998. It was subsequently extended to 31 March 2000. The Guarantee was given on the terms specified in the said Exhibit ‘A’ and it is clearly an unconditional guarantee in which the bank undertook to pay the defendants upon written demand. Its terms are as follows:

"BANKER’S GUARANTEE NO. GT092773/98

IN CONSIDERATION OF YOUR MAKING PAYMENT OF THE FIRST INSTALMENT TO "DAUPHIN OFFSHORE ENGINEERING AND TRADING PTE LTD" (HEREINAFTER CALLED THE "BUILDER") AGGREGATING [US$877,500] REPRESENTING [15%] OF THE CONTRACT PRICE PAYABLE IN CONFORMITY WITH THE TERMS AND CONDITIONS OF THE CONTRACT … BETWEEN YOUR COMPANY AND THE BUILDER, COVERING CONSTRUCTION OF ONE (1) UNIT OF 55M HHR TWIN-SCREW LUXURY MOTOR YACHT BUILDER’S HULL NO. 123, WE THE UNDERSIGNED, HEREBY IRREVOCABLY AND UNCONDITIONALLY GUARANTEE THAT WE WILL PAY TO YOU IMMEDIATELY ON DEMAND THE AMOUNT OF [US$877,500] PAID BY YOU TO THE BUILDER AS THE SAID INSTALMENT … TOGETHER WITH INTEREST THEREON AT THE RATE OF [12%] PER ANNUM FROM THE TIME THE INSTALMENT HAS BEEN PAID TO THE BUILDER TILL PAYMENT OF THE GUARANTEED SUM BY US IN ACCORDANCE WITH THE TERMS OF THIS LETTER OF GUARANTEE PROVIDED THAT OUR AGGREGATE LIABILITY HEREUNDER SHALL BE LIMITED TO THE AMOUNT IN PARAGRAPH 2 BELOW UPON OUR RECEIPT OF A WRITTEN DEMAND FROM YOU, ACCOMPANIED BY A STATEMENT TO THE EFFECT THAT SUCH SUM BECOME REFUNDABLE TO YOU FROM THE BUILDER IN THE FOLLOWING FORM (DULY COMPLETED):

LETTER OF GUARANTEE DATED ( ) 1998

WE, ( ) AS BENEFICIARY OF THE ABOVE GUARANTEE NO. GT092773/98 DATED 23 OCTOBER, 1998 HEREBY DEMAND PAYMENT OF USD( ), WHICH SUM WE CERTIFY IS REFUNDABLE TO US BY THE BUILDER (AS DEFINED IN THE ABOVE GUARANTEE) UNDER THE CONTRACT (AS DEFINED IN THE ABOVE GUARANTEE).

OUR OBLIGATIONS UNDER THIS LETTER OF GUARANTEE SHALL NOT BE DISCHARGED OR IMPAIRED BY A WAIVER OF OR LACK OF DILIGENCE ON YOUR PART IN ENFORCING YOUR RIGHTS UNDER SAID YACHT CONSTRUCTION CONTRACT, ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO OR THE INSOLVENCY BANKRUPTCY, LIQUIDATION OR REORGANISATION OF THE BUILDER.

THE LETTER OF GUARANTEE IS SUBJECT TO THE FOLLOWING CONDITIONS:

1) THE MAXIMUM AMOUNT THAT WE IN ANY EVENTUALITY MAY BE OBLIGED TO PAY TO YOU SHALL BE THE SUM OF [US$912,600] WHICH IS INCLUSIVE OF INTEREST CALCULATED AT THE RATE AS STIPULATED ABOVE IN THIS LETTER OF GUARANTEE.

2) THIS LETTER OF GUARANTEE SHALL EXPIRE ON THE 31ST DECEMBER 1998.

THIS GUARANTEE IS EFFECTIVE FROM THE DATE HEREOF AND EXPIRES ON 31ST DECEMBER 1998, AFTER WHICH DATE IT IS AUTOMATICALLY CANCELLED AND NO CLAIM THEREUNDER SHALL BE ENTERTAINED , ACCEPTED OR VALID.

THIS LETTER OF GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH SINGAPORE LAW."

The ex parte Application

5. In support of their application for the ex parte injunction, Miss Tan Wah Leng, one of the Plaintiffs' directors, filed an affidavit on 20 April 1999. The grounds she gave for the injunction are set out in 9 to 18. She deposed that after the Contract was entered into, the Plaintiffs proceeded with the construction of the yacht. On 17 October 1998 the Plaintiffs gave the Defendants notice of keel laying, tentatively on 25 October 1998. The keel was laid on that date and had been certified by the Lloyd's Register in their Stage Certificate dated 27 October. A copy of that certificate, together with a video tape of the keel laying ceremony was sent to the Defendants on 5 November 1998. She said that the Defendants’ General Manager acknowledged receipt of the notice in their letter dated 10 November, which she exhibited. That letter goes as follows:

" Thank you for sending the tape of the Keel Laying ceremony. However, please refer to our fax OSK/93/10/98 dated 25/10/98, we are still waiting for a reply for the Project Quality Plans. (Schedule-Milestone).

Please provide us with the following:

a) ITP

b) Mobilisation and Deliverables

c) All Dues/Plans, Codes, Standard.

We appreciate receiving your reply on 12^th Nov. ’98, as you are aware that delaying of the above will result in delay in the progress of Building the Yacht."

6. Miss Tan said that the Defendants failed to remit the second instalment of $1,462,500 within 10 working days as provided under Article II clause 4(b) of the Contract. Instead, they had requested to be furnished with the items and information stated in the letter which will result in delay in the progress of the construction of the vessel. She said that the Defendants had, at the outset, asked for various plans and other technical information. The Plaintiffs had, so far as was possible, provided such information. Miss Tan exhibited a series of correspondence to demonstrate this point. She said that she went to Abu Dhabi on three occasions to attempt to resolve any differences so that the project could proceed. These were on 3 and 22 November 1998 and 9 January 1999. She exhibited minutes prepared by both sides for some of these meetings. Miss Tan said that she did raise at the meeting the question of payment of the second instalment. But she did not make very strong demands as she did not want to offend the Defendants. Instead she tried to clarify and resolve the outstanding problems and accommodate the Defendants’ requests. She said that the Defendants had complained, among other matters, about the engine, helicopter deck and calculations on stability. She claimed that none of those matters were relevant or necessary at that stage of the construction.

7. Miss Tan said that the Plaintiffs were competent and ready to proceed at all times, but as they did not receive the second instalment, they could not proceed any further. She said that she believed that the Defendants, in raising such irrelevant and unnecessary questions at that stage, were intentionally trying to avoid payment of the second instalment. The Plaintiffs' suspicions were confirmed when they received, on 12 April 1999, a letter from the Defendants’ solicitors alleging that the Plaintiffs had breached the Contract and purporting to terminate it. In her affidavit, Miss Tan refuted the allegations made in the solicitors’ letter. She said that she believed that it was wrong and unconscionable to allow the Defendants to call on the Guarantee when they themselves had failed to perform their obligations under the Contract.

Defendants’ Application to Discharge Injunction

8. On 27 April 1999 the Defendants...