Apex Energy International Pte Ltd v Wanxiang Resources (Singapore) Pte Ltd

• Jurisdiction: Singapore
• Judge: Hoo Sheau Peng J
• Judgment Date: 06 July 2020
• Neutral Citation: [2020] SGHC 138
• Court: High Court (Singapore)
• Docket Number: Suit No 178 of 2018
• Published date: 14 July 2020
• Year: 2020
• Hearing Date: 14 February 2020,27 February 2020,13 February 2020,18 May 2020,11 February 2020,26 February 2020,12 February 2020,10 February 2020
• Plaintiff Counsel: Sarbjit Singh Chopra, Lee Wen Rong Gabriel and Luis Inaki Duhart Gonzalez (Selvam LLC)
• Defendant Counsel: Eng Zixuan Edmund, Brinden Anandakumar, James Tan and Danica Gan (Fullerton Law Chambers LLC)
• Citation: [2020] SGHC 138

Hoo Sheau Peng J: Introduction

In this suit, the plaintiff, Apex Energy International Pte Ltd (“Apex”), claims against the defendant, Wanxiang Resources (Singapore) Pte Ltd (“Wanxiang”), for breach of contract in refusing to proceed under a disputed agreement for the sale and purchase of a cargo of Light Cycle Oil (“LCO”).

On the strength of emails and text messages on handphones, Apex asserts that the parties entered into such a contract, and that Wanxiang is liable for the loss caused by its refusal to perform its obligations (including loss caused by mitigating steps taken by Apex). Wanxiang contends that the parties did not enter into any such contract, and that, in any case, Apex’s mitigating steps were unreasonable.

Having considered the evidence, and the closing and reply submissions of the parties, I now give my judgment.

Background The parties

Apex and Wanxiang are both Singapore-incorporated companies engaged in the business of oil trading.

Mr Park Jaehwan (“Park”) and Mr Shin Bumjin (“Shin”) were traders employed by Apex and Wanxiang respectively who handled the disputed transaction. They communicated mainly by emails and text messages on their handphones. The text messages in the Korean language were exchanged via the KakaoTalk instant messaging platform.

The disputed transaction

On or around 16, 17 and 20 November 2017, Park and Shin engaged in a series of text messages about Apex participating in an anticipated tender by S-Oil Corporation (“S-Oil”).¹ S-Oil, a major South Korean oil refinery, is a producer of LCO.² On a monthly basis, S-Oil invites reputable companies to participate in its tenders for cargoes of LCO.³ Apex is one such company.⁴

On 22 November 2017, Apex received the S-Oil invitation to tender for cargoes for delivery in December 2017 (the “S-Oil tender”). On the same day, Park forwarded the S-Oil tender to Shin by email. This email formed Apex’s invitation to tender (“Apex’s tender”).⁵ The parties then discussed the possibility of back-to-back bids ie, by Apex to S-Oil and Wanxiang to Apex.⁶ Apex would make a profit from the onward sale to Wanxiang.

The key portions of Apex’s tender (which incorporated the S-Oil tender) are as follows:⁷

Dear [Shin]

Please find below tender by S-Oil.

[Park]

[Apex]

…

Notice to invite LCO bidding for Dec 2017 (S-Oil) – Closing 15:00 (KST) Nov 23, 2017

This is to notify that S-OIL shall offer LCO for Dec 2017 lifting, and please provide us with your bid idea, including the loading schedule / nomination vessel size / your best prices in each case by return.

1. Delivery: 1) 10~12 Dec 2) 20~22 Dec 2. Q’ty 1) 10~12 Dec: 300 KB +/- 5% at Operational Tolerance 2) 20~22 Dec: 300 KB +/- 5% at Operational Tolerance 3. Pricing: FOB Onsan, whole month average of MOPS GO 500p in Dec 2017 + alpha($/B)

…

7. Demurrage: As per actual C/P, but Max 15,000 $/Day for MR size

…

…

[emphasis added]

On these key portions, I make a few points: While the email read that “S-OIL shall offer LCO for Dec 2017 lifting [emphasis added]”, this was treated by parties as the basis for Apex’s tender. Under cl 2, there were two quantities comprising 300,000 barrels of LCO each, with different delivery dates as set out under cl 1. In these proceedings, Wanxiang contends that the tender is concerned with one cargo of 600,000 barrels (and that any bid should relate to the entire cargo). Apex, however, contends that the tender provided for two cargoes each of 300,000 barrels (and that bids may be submitted for any one or both cargoes). For convenience, I shall refer to these as the “First LCO Cargo” and the “Second LCO Cargo” respectively, and collectively as the “LCO Cargoes”.⁸ Under cl 3, the price per barrel of LCO consisted of two components, namely, a fixed (and non-negotiable) component, set at the whole month average of the MOPS GO (ie gasoil) 500p price index in December 2017, and a price premium. In effect, the latter was the biddable portion of the tender.⁹ I shall refer to the whole month average of the MOPS GO 500p price index for the relevant months as the “Dec 2017 Indexed Price”, “Jan 2018 Indexed Price” etc. As for demurrage under cl 7, a maximum cap of US$15,000 per day was provided for.

On 23 November 2016, at 1.46 pm, Shin sent Park an email containing Wanxiang’s “firm bid” for the LCO Cargoes (the “Firm Bid”).¹⁰ Wanxiang set its price premium for the First LCO Cargo at US$12 per barrel, and that for the Second LCO Cargo at US$11.50 per barrel. The other terms of the Firm Bid mirrored that of the Apex tender, except the demurrage clause. Wanxiang increased the demurrage cap to US$17,500 per day¹¹ (from the US$15,000 stated in the S-Oil and Apex tenders¹²). Specifically, the portion on pricing read: 3. Pricing: FOB Onsan, whole month average of MOPS GO 500p in Dec 2017 with 1) 10~12 Dec: plus $12/bbl and 2) 20~22 Dec: plus $11.5/bbl

[emphasis added]

After Shin had sent the Firm Bid to Park, a series of text messages were exchanged at 2.03pm. Park asked Shin for his permission to increase Apex’s bid to US$12.30 per barrel as the price premium of the First LCO Cargo and US$11.70 per barrel as the price premium for the Second LCO Cargo. Apex contemplated making a US$0.10 profit per barrel for itself from on-selling the LCO Cargoes to Wanxiang.¹³ Shin assented to the increase.¹⁴ Effectively, this pushed up the price premium at which Apex would agree to sell the same to Wanxiang (ie, US$12.40 for the First LCO Cargo and US$11.80 for the Second LCO Cargo).

I shall now set out some critical text messages from 3.10pm to 3.17pm, which shall be referred to as the “Deal Done messages”:¹⁵

Park:	Deal done
Park:	Apex & S-Oil : 11.80$ fob
Park:	Wanxiang & Apex : 11.90$ fob
Park:	Ok?
Shin:	Yes

According to Apex, the exchange meant that a deal was done with Apex having bid US$11.80 per barrel for the Second LCO Cargo. The cargo would be sold on to Wanxiang at US$11.90 per barrel. Park then asked Shin whether he was agreeable, and Shin agreed to the deal. Indeed, at 4.54pm, Shin instructed Park to keep “the deal that is done today” private and confidential. To this, Park readily replied “Certainly”.¹⁶ Wanxiang, however, disputes that any deal was reached in relation to the Second LCO Cargo only. The Firm Bid was in relation to both the LCO Cargoes. It had to be accepted in relation to the entire cargo.

At 5.49 pm, Park sent Shin a “Deal Recap” by email.¹⁷ He informed Shin by way of a text message that the email had been sent.¹⁸ The Deal Recap purported to set out the terms of the deal struck that day, for a cargo of “300KB +/-5% at Operational Tolerance” to be delivered “20-22 December 2017”. The demurrage cap stated in the Deal Recap had reverted back to the original sum of US$15,000 per day (as per the S-Oil and Apex tenders), and not the revised sum of US$17,500 per day (as per the Firm Bid).¹⁹

At 5.56pm, Park asked Shin to formally confirm the Deal Recap, and Shin replied “yes”.²⁰ Park sent nine text messages on 24 November 2017, as well as one on 27 November 2017, requesting for a formal confirmation of the Deal Recap. However, Shin did not respond to Park’s repeated requests to do so.

It appears that Wanxiang’s potential buyer was unwilling to purchase the Second LCO Cargo only.²¹ Both parties explored various ways of resolving the situation.²² On 28 November 2017, by way of an email at 5.15pm, Shin asked Park for his position on the modification of two terms relating to the laycan and the delivery deadline in the Firm Bid.²³ By way of two emails on 29 November 2017 at 10.35am and 11.17am, Park responded to say that Apex was agreeable to these modifications. However, Park made further alterations to these modifications. I shall refer to these as the “28-29 November 2017 emails”.²⁴

Subsequent events

Shin, however, did not respond to any more of Park’s communications thereafter.²⁵ Instead, on 29 November 2017, at 4.32pm, Mr Xu Zhiyu (“Xu”), Wanxiang’s General Manager of Petroleum Products, sent an email to Park, formally denying that Apex and Wanxiang had ever entered into any contract, and pointing out, inter alia, that the Firm Bid was a bid for both the LCO Cargoes.²⁶

At 6.29pm, Park responded to Xu, stating that a deal was reached by way of communications with Shin. Apex would be holding Wanxiang responsible for all expenses and costs incurred in reselling the Second LCO Cargo.²⁷

On 1 December 2017, at 3.17pm, Xu replied by email, stating that Wanxiang maintained “the same position in respect of the matter”.²⁸

On 1 December 2017, Apex reached an agreement with Shanghai Rui Run Petrochemistry Pte Ltd (“Shanghai Rui Run”) for the Second LCO Cargo. The deal recap sent by email at 6.02pm from Apex to Shanghai Rui Run provided as follows:²⁹ 6. DELIVERY LAYCAN: 26-30 Dec 2017 (Loading will be 18-22, Dec 2017 at Onsan Korea) 7. PRICE: CFR, Mops Gasoil 0.05% (December WMA) plus US$9/bbl.

[emphasis added]

On 4 December 2017, Shanghai Rui Run confirmed the deal recap.³⁰

On 5 December 2017, Shanghai Rui Run nominated the counterparty for the contract to be Ningbo Youngor International Trade and Transportation Co Ltd (“Youngor”).³¹ On 6 December 2017, the formal contract was entered into between Apex and Youngor at the Jan 2018 Indexed Price with a premium of US$9 per barrel³² (the “Alternative Sale”) with loading dates of 18 to 22 December 2017 in Onsan, South Korea for delivery “CFR to Zhoushan, China”.³³

According to Apex, while the deal recap sent to Shanghai Rui Run mentioned the Dec 2017 Indexed Price ie, the December WMA, the correct reference should have been the Jan 2018 Indexed Price as the delivery was scheduled for January 2018.³⁴ This meant that Apex was exposed to...