Biofuel Industries Pte Ltd v V8 Environmental Pte Ltd

• Judge: Woo Bih Li J
• Judgment Date: 28 July 2017
• Neutral Citation: [2017] SGHC 184
• Citation: [2017] SGHC 184
• Court: High Court (Singapore)
• Published date: 29 June 2018
• Docket Number: HC/Suit No 468 of 2015
• Plaintiff Counsel: G Radakrishnan (instructed) and Ramachandran Shiever Subramanium (Grays LLC)
• Defendant Counsel: Kok Chee Yeong Jared and Jared Ravin Dass (Rajah & Tann Singapore LLP)
• Subject Matter: Contract,Termination,Repudiation of contract
• Hearing Date: 07 March 2017,26 May 2017,10 March 2017,08 March 2017,03 March 2017,09 March 2017

Woo Bih Li J: Introduction

The Plaintiff, Biofuel Industries Pte Ltd (“Biofuel”) is a waste disposal service provider. The Defendant, V8 Environmental Pte Ltd (“V8”) is a waste management service provider. It collects waste from its customers’ construction sites or premises for a fee and eventually delivers the waste to disposal facilities provided by others such as Biofuel. In the present case, the waste involves waste wood and wood chips collectively referred to as “biomass”. Biofuel accepts such biomass for a fee.

The dispute between the parties is centred on an agreement called the Biomass Supply Agreement (“BSA”). Under the BSA, V8 agreed to appoint Biofuel as its exclusive Recycling Plant Facilitator for the disposal of biomass for a period of five years. V8 undertook to supply a minimum tonnage of 2,000 metric tons of biomass per month and to pay Biofuel at certain fixed rates for waste wood (at $30 per metric ton or “pmt”) and for wood chips (at $13.50pmt).

It was unclear from the BSA when the five year period commenced from. One copy of the BSA in the Agreed Bundle of Documents (“AB”) has a handwritten date of 25 July 2013 below the signature of Derrick Yu of V8 but the date of execution by Eugene Lee of Biofuel was left blank. Another copy annexed as an exhibit to an affidavit of evidence-in-chief (“AEIC”) of Derrick Yu does not show the date of 25 July 2013 but has a handwritten note, “(Start from 1 August 2013)” beside his signature. Biofuel’s Opening Statement at para 11(b) stated that the BSA started from July 2013 to July 2018. V8’s Opening Statement at para 1 stated that the BSA was entered into on 1 August 2013.

The difference in the alleged starting date was not material for the issue of liability. However, it should be established as it may affect, however slightly, the computation of certain reliefs claimed by Biofuel. Since the execution by Derrick Yu of V8 was on 25 July 2013 and it is unclear when Eugene Lee of Biofuel executed the BSA and in the light of the handwritten note, “(Start from 1 August 2013)”, I am of the view that the BSA commenced on 1 August 2013.

By an undated letter from V8 to Biofuel sent on 10 April 2015 with an email, V8 purported to terminate the BSA on the ground that Biofuel had wrongly repudiated the BSA based on various conduct of Biofuel which I shall elaborate on later. On the other hand, Biofuel took the position that it did not repudiate the BSA and that V8’s termination of the BSA was wrongful. Biofuel then filed the present action to claim the following from V8: Payment of specific invoices issued by Biofuel to V8 in respect of deliveries of waste wood for the months of January to April 2015 (“the Unpaid Invoices”); Damages for breach of the BSA. The damages claimed were: for the shortfall in deliveries of biomass by V8 during February 2015 and April 2015 and the period from 1 May 2015 to 31 July 2015; and loss of profit in respect of Biofuel’s onward sale of wood chips to a Thai company, SCG Trading Co Ltd (“SCG”) under a contract with SCG (“the SCG contract”).

The conduct which V8 complained of as amounting to Biofuel’s repudiation of the BSA comprised the following: Biofuel’s attempts to increase the prices of disposal stated in the BSA; Biofuel’s rejection of delivery of biomass on various dates; and Biofuel’s attempts to impose a new requirement that wood chips delivered by V8 must be less than 100mm in length (“the 100mm requirement”), failing which Biofuel would either reject the delivery of wood chips or charge the higher rate for waste wood disposal.

As I will elaborate on later, the third reason was the most important one. It entailed a consideration as to whether the 100mm requirement was an applicable term of the BSA. Before I continue, I would mention that there was some slight confusion over the 100mm requirement. The parties referred to it as requiring wood chips delivered by V8 to be less than 100mm in length or not more than 100mm in length interchangeably. The two standards are not exactly the same but the difference is immaterial for present purposes. For convenience, I have treated the 100mm requirement to be less than 100mm in length.

The witnesses

The two witnesses for Biofuel were: Lee Shung Guan also known as Eugene Lee. He was the Chief Executive Officer of Biofuel and was the main witness for Biofuel. He signed the BSA on behalf of Biofuel. Lee Peng Quan also known as George Lee. He is the brother of Eugene Lee and was the Plant Manager of Biofuel.

The three witnesses for V8 were: Yu Jia Ru Derrick, referred to as “Derrick Yu” in this judgment. He was the Sales and Operations Director of V8 and was its main witness. He signed the BSA on behalf of V8. Er Kee Sing. He was the founder and Managing Director of V8 and is the father of Derrick Yu. Er Chin Guan also known as Ah Tee. He was the Operations Manager of V8 and is the cousin of Er Kee Sing.

Biofuel’s alleged repudiatory conduct

I turn now to consider the conduct which V8 complained of as amounting to Biofuel’s repudiation of the BSA, beginning with Biofuel’s attempts to impose the 100mm requirement.

The 100mm requirement

As mentioned earlier, the key consideration is whether the 100mm requirement was an applicable term of the BSA.

The business relationship between the parties started in 2006 or 2007. At that time, pursuant to an oral agreement between a sales staff of Biofuel (by the name of Roy) and Derrick Yu, the parties agreed that Biofuel would provide waste wood disposal services to V8 at the price of $40pmt. In the course of that relationship, Derrick Yu got to become familiar with Eugene Lee.

In late 2010, Eugene Lee informed Derrick Yu that his other company Hammel (S) Pte Ltd (“Hammel Singapore”) was distributing wood shredders. Eugene Lee said that with such a machine, V8 could shred its waste wood into wood chips and deliver the latter to Biofuel at a reduced price of $15pmt. Consequently, an order confirmation was issued by Hammel Singapore to V8 dated 24 December 2010 for the supply to V8 of one such shredder.

According to Eugene Lee, he had specifically informed Derrick Yu and his father, when they were discussing about the purchase of a shredder, that the machine they were to purchase would meet the 100mm requirement for wood chips. This was because the machine had 10 knives with 7/7 discs and such a specification would meet the 100mm requirement.

On the other hand, Derrick Yu and his father denied having been told specifically that the shredder would meet the 100mm requirement. It was their position that the 100mm requirement was not discussed.

The shredder was delivered to V8 in or about May 2011. From July 2011, V8 began to deliver wood chips to Biofuel at the reduced price discussed.

About two years later, the BSA was signed. I have mentioned above that I will consider it as being effective from 1 August 2013. Under this exclusive five year contract, V8 had the option of delivering wood chips or waste wood to Biofuel. This would cost V8 $13.50pmt and $30pmt respectively.

The terms of the BSA did not explicitly specify the 100mm requirement. However, Eugene Lee said that this requirement applied in the light of what he had said to persuade V8 to buy the shredder. He also alleged that the 100mm requirement was part of the BSA as the BSA was to ensure that Biofuel would have a supply of suitably sized wood chips to meet its own obligations to supply wood chips of the same size to SCG. Biofuel had been supplying wood chips to SCG for some time and this was subsequently formalised under its agreement with SCG dated 23 March 2012. Thus the chronology was:

(a)	24 December 2010	Order confirmation from Hammel Singapore to V8 to supply a shredder.
(b)	May 2011	Delivery of the shredder to V8.
(c)	July 2011	V8 starts to deliver wood chips to Biofuel.
(d)	23 March 2012	Biofuel’s agreement with SCG.
(e)	1 August 2013	Effective commencement date of BSA.

Biofuel’s contentions about the 100mm requirement ran into various difficulties. First, the 100mm requirement was not mentioned in Biofuel’s Reply (Amendment No 1) even though V8’s Defence (Amendment No 3) had raised the point that Biofuel’s imposition of the 100mm requirement was part of Biofuel’s repudiatory conduct. Biofuel’s Reply did not even hint that the 100mm requirement had already been agreed to when the shredder was ordered by V8 or that it was agreed to in order to meet Biofuel’s contractual obligations to SCG.

Secondly, Eugene Lee’s AEIC did not mention the 100mm requirement.

Thirdly, it was only Biofuel’s Opening Statement that first mentioned the 100mm requirement at para 19. Even then, Biofuel’s reasons for saying that this requirement applied was that, “This is the industry standard for a wood chip or the length required by [Biofuel] by custom of its business with [V8] and in wood chips”. Yet Eugene Lee’s AEIC and his subsequent oral testimony did not say anything about the alleged industry standard that wood chips delivered to a disposal facilitator must meet the 100mm requirement. Instead, his oral testimony was that there was an express oral agreement to this requirement.

The allegation about such an express oral agreement also contradicted the allegation in Biofuel’s Opening Statement that such a length was required by the custom of its business with V8.

Fourthly, the agreement between Biofuel and SCG did not specify that all wood chips supplied by Biofuel to SCG must meet the 100mm requirement. Instead, that agreement specified that 90% of the wood chips had to be less than 50mm in length and 10% would be 100mm in length. Thus, even if that agreement was a genuine one, it did not entirely support Biofuel’s contention that the 100mm requirement was part of the BSA in order to meet its obligations with SCG.

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