PT OKI Pulp & Paper Mills v Sunrise Industries (India) Ltd and another appeal

• Jurisdiction: Singapore
• Judge: Woo Bih Li JAD
• Judgment Date: 24 November 2023
• Neutral Citation: [2023] SGHC(A) 38
• Hearing Date: 13 July 2023
• Docket Number: Civil Appeal Nos 10 and 15 of 2023
• Citation: [2023] SGHC(A) 38
• Court: High Court Appellate Division (Singapore)
• Year: 2023
• Subject Matter: Courts and Jurisdiction,Appeals,Commercial Transactions,Sale of goods,Breach of contract,Performance of contract,Contract,Variation,Termination,Civil Procedure,Damages,Interest
• Published date: 24 November 2023

[LawNet Admin Note: The following judgment is displayed as received from source]

Kannan Ramesh JAD (delivering the judgment of the court): Introduction

AD/CA 10/2023 (“AD 10”) and AD/CA 15/2023 (“AD 15”) are cross-appeals by PT. OKI Pulp & Paper Mills (“OKI”) and Sunrise Industries (India) Ltd (“Sunrise”) respectively against the decision of the High Court Judge (the “Judge”) in HC/S 8/2017 (“Suit 8”). The Judge’s judgment is published in Sunrise Industries (India) Ltd v PT OKI Pulp & Paper Mills and another [2023] SGHC 3 (the “Judgment”).

Facts The parties

The plaintiff in Suit 8, Sunrise, is an India-registered company in the business of manufacturing thermosets, thermoplastic-lined equipment, pipes and fittings. The first defendant, OKI, is an Indonesia-incorporated company in the business of manufacturing pulp, paper and tissue paper. The second defendant is Dena Bank Limited (“Dena Bank”), a public bank in India.

Sunrise and OKI agreed that Sunrise would supply OKI certain goods and install them in a pump mill (the “Mill”) in Indonesia owned by OKI. Two agreements were entered into for this purpose: (a) an agreement described as the “Purchase Contract for Delivery of a Complete Sets [sic] of FRP-Piping” dated 10 July 2015 (the “Supply Contract”); and (b) an agreement described as the “Purchase Contract for Supervision and Installation Work of a Complete Set of FRP-Piping” dated 10 July 2015 (the “Installation Contract”): the Judgment at [2]–[5]. The goods supplied under the Supply Contract were to be installed in the Mill pursuant to the Installation Contract. Various amendments were made to both contracts in the course of the parties’ dealings which we address below.

The Supply Contract and the Bank Guarantee

Under the Supply Contract, Sunrise was obliged to supply OKI goods including pipes, fittings and manholes. The contract price under the Supply Contract was initially agreed at US$6,647,625. On 14 September 2015, the parties signed an amendment agreement (“Supply Contract A1”), which reduced the scope of goods that were to be supplied and increased the contract price to US$6,925,839. On 10 November 2015, the parties signed a second amendment agreement (“Supply Contract A2”), under which OKI ordered additional goods and the contract price was accordingly increased to US$8,324,132 (the Judgment at [3]). Unless otherwise stated, references in this judgment to the Supply Contract are to be understood as the Supply Contract as amended by Supply Contract A1 and Supply Contract A2, and references to “Goods” are to be understood as the goods to be supplied under Supply Contract A1 and Supply Contract A2.

The contract price of the Supply Contract was to be paid by OKI in the following tranches: 10% (totalling US$832,413.20) was to be paid 15 days after the signing of each agreement and OKI’s receipt of Sunrise’s invoice and bank guarantee (see [6] below); 80% (totalling US$6,659,305.60) was to be paid by letter of credit procured by OKI (see [9] below); and the final 10% (totalling US$832,413.20) (the “Final 10%”) under Clause 3 of the Supply Contract (amended and renumbered as Clauses 3.1 by Supply Contract A1 and Supply Contract A2) was to be paid after a “Certificate of Performance Test Acceptance” (the “Acceptance Certificate”) was signed by authorised representatives of OKI and issued to Sunrise (see [83]–[84] below). The parties do not dispute that OKI had paid the first 90% of the contract price under the Supply Contract to Sunrise.

Under Supply Contract A1, Sunrise was required to procure a bank guarantee for the sum of US$692,583.90, which Sunrise procured from Dena Bank on 21 September 2015 (the “Bank Guarantee”). Supply Contract A2 required the Bank Guarantee to be increased to US$832,413.20 in view of the increase in the contract price. The revised Bank Guarantee was received by OKI on 7 January 2016 (the Judgment at [7]; see also [68] below).

The Installation Contract

Under the Installation Contract, Sunrise was obliged to install the Goods in the Mill. The contract price under the Installation Contract was initially agreed at US$1,291,935. By an agreement dated 14 September 2015, corresponding to Supply Contract A1 (“Installation Contract A1”), the contract price was reduced to US$1,162,812. Thereafter, by another agreement dated 10 November 2015, corresponding to Supply Contract A2 (“Installation Contract A2”), the contract price was increased to US$1,441,545. Unless otherwise stated, references in this judgment to the Installation Contract are to be understood as the Installation Contract as amended by Installation Contract A1 and Installation Contract A2.

The contract price of the Installation Contract was to be paid by OKI in the following tranches: the first 20% (totalling US$288,309) within two months after Sunrise’s supervisor commenced working continuously at the Mill; 20% (totalling US$288,309) two months after the first payment above; 30% (totalling US$432,463.50) after OKI’s issuance of a “Certificate of Hand Over Test Acceptance”, which was defined in Clause 1 of Annex III of the Installation Contract as a certificate confirming that the Goods met certain stipulated standards; and 30% (totalling US$432,463.50) after OKI’s issuance of the Acceptance Certificate.

Performance of the Supply Contract and the letters of credit

At OKI’s request, on or about 24 September 2015, DBS Bank Ltd issued a letter of credit for the sum of US$5,318,100 to Sunrise (“LC1”) being 80% of the initial contract price of the Supply Contract. As the contract price of the Supply Contract was increased by Supply Contract A1 (see [4] above), LC1 was amended and re-issued on 16 November 2015 (“LC1 A1”) to reflect the increase in price. In view of the increase in the contract price arising from Supply Contract A2, a second letter of credit (instead of a revision to LC1 A1) was issued by DBS Bank Ltd on 11 January 2016 for the sum of US$1,118,634.40 (“LC2”) (the Judgment at [8]). The various letters of credit shall be collectively referred to in this judgment as the “LCs”.

The delivery dates (ie, the date of arrival of the Goods at the port of discharge in Indonesia (the “Port of Discharge”)) under the Supply Contract were amended by Supply Contract A1 and Supply Contract A2 (the Judgment at [9]–[10] and [24]–[25]) to 15 January 2016. We discuss this in detail below at [41]–[44]. For convenience, we shall refer to this delivery date as the “Supply Contract Delivery Deadline”.

It is pertinent that the “latest date of shipment” (or last shipment date) in the LCs differed from that stated in the Supply Contract. On 23 December 2015, the last shipment date in LC1 A1 was amended to 29 February 2016 (“LC1 A2”), which was the same date later stated in LC2 (the Judgment at [8]). It is immediately obvious that the last shipment date stated in the LCs was well after the Supply Contract Delivery Deadline (ie, 15 January 2016). We discuss this at [45] below.

Performance of the Installation Contract

To perform its obligations under the Installation Contract, Sunrise deployed personnel to the project site (the “Project Site”) at the Mill in January 2016. On or about 25 February 2016, Sunrise’s General Manager for the project, Mr Pradeep Mahadeo Thorat (“Mr Pradeep”), arrived at the Project Site. Sunrise’s installation works, however, stalled because of various disputes between the parties regarding, inter alia, provision of accommodation for Sunrise’s personnel and payment by OKI of moneys under the Supply Contract. On 8 March 2016, Sunrise demobilised its installation team pending resolution of these disputes: see the Judgment at [11].

On 17 May 2016, Sunrise informed OKI that it would “not be interested to continue the [Installation Contract]” as it had “not received the payment as per the terms and conditions of the contract” despite repeated requests and reminders. Sunrise further stated that if OKI was interested in proceeding, it could vary the Installation Contract, make payment of the Final 10%, and make full payment under the Installation Contract pursuant to an irrevocable letter of credit (the Judgment at [106]).

By an e-mail dated 18 May 2016, OKI informed Sunrise that it did not wish to continue business with Sunrise. Thereafter, Sunrise did not complete the installation works. On 23 May 2016, OKI engaged PT Piping Systems Indonesia (“PT Piping”) to complete the installation works. On 10 October 2016, OKI made a demand on the Bank Guarantee in the sum of US$832,413.20. The evidence of OKI’s mills procurement coordinator, Mr Djung Wi Kuang, was that OKI did so in order to satisfy (in part) the amounts due to it from Sunrise for breach of the Supply Contract. Following the commencement of Suit 8, on 24 May 2017, OKI issued to Sunrise formal notices of termination of both the Supply Contract and the Installation Contract.

Procedural history and the parties’ claims and counterclaims below

Suit 8 was commenced on 6 January 2017. On the same day, Sunrise applied ex parte for injunctions restraining OKI from calling on the Bank Guarantee and Dena Bank from making payment thereunder, until the determination of Suit 8. The applications were granted. On 28 April 2017, OKI filed an application to set aside the interim injunctions. OKI’s application was allowed on 21 June 2018: see Sunrise Industries (India) Ltd v PT OKI Pulp & Paper Mills and another [2018] SGHC 145 (the “Injunction Judgment”) and the Judgment at [14]. Accordingly, Dena Bank paid OKI the sum demanded on 23 May 2019.

Before the Judge, Sunrise contended that it had fully performed all its obligations under the Supply Contract and was therefore entitled to the full contract price thereunder. It submitted that there was no delay in the performance of the Supply Contract because the delivery dates in the Supply Contract were varied by agreement, and the delivery of...