Chai Cher Watt (trading as Chuang Aik Engineering Works) v SDL Technologies Pte Ltd and another appeal

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 17 October 2011
• Neutral Citation: [2011] SGCA 54
• Court: Court of Appeal (Singapore)
• Hearing Date: 06 July 2011
• Docket Number: Civil Appeals Nos 233 of 2010 and 10 of 2011
• Plaintiff Counsel: Hee Theng Fong and Leong Kai Yuan (RHT Law LLP)
• Defendant Counsel: Kenny Chooi Yue Wai, David Kong Tai Wai and Kelvin Fong Kai Tong (Yeo-Leong & Peh LLC)
• Subject Matter: Commercial Transactions,sale of goods,breach of contract,effect of breach,section 13 Sale of Goods Act
• Published date: 02 November 2011

Andrew Phang Boon Leong JA (delivering the judgment of the court): Introduction

This is an appeal against the decision of the trial judge (“the Judge”) in Chai Cher Watt (trading as Chuang Aik Engineering Works) v SDL Technologies Pte Ltd [2010] SGHC 348 (“the Judgment”).

The proceedings below involved claims by Chai Cher Watt (trading as Chuang Aik Engineering Works) (“the Appellant”) against SDL Technologies Pte Ltd (“the Respondent”) for breaches by the latter in respect of two separate contracts to supply the former a drilling and boring machine (“the Drilling Machine”) and a lathe machine (“the Lathe Machine”) (hereafter referred to as “the Drill Contract” and “the Lathe Machine Contract”, respectively).

We would like to note at the outset, that, after considering all the relevant evidence, we agree with the Judge’s reasoning and decision with regard to the Lathe Machine (see the Judgment at [20]–[21]). Indeed, counsel for the Appellant, Mr Hee Theng Fong (“Mr Hee”), himself candidly admitted – correctly, in our view – that the Appellant’s arguments with regard to its claim for breaches of the Lathe Machine Contract were weak. Hence, this part of the appeal fails. As for the Appellant’s claim for alleged breaches of the Drill Contract, this will be dealt with subsequently in greater detail.

Facts

The salient facts of this appeal are as follows. In August 2007, the Appellant approached the Respondent’s sales representative indicating his interest in purchasing a boring and drilling machine with a boring depth of 4 metres. Parties then entered into the Drill Contract on 21 August 2007, on, inter alia, the following terms: Payment terms: 30% Deposit upon confirmation.

50% Subsequent payment by Cheque or T/T to SDL Technologies after machine inspection at manufacturer plant and before shipping to Singapore.

20% Balance payment upon delivery and commissioning.

The Drill Contract also provided a list of specifications of the Drilling Machine, including the fact that it would be 11 metres in length As required under the Drill Contract, the Appellant then paid 30% of the purchase price as a deposit on 22 August 2007.

In March 2008, the Respondent’s technical and service manager, He Jian Qin (“Xiao He”), approached the Appellant with a drawing of the Drilling Machine (“the First Drawing”), which showed the Appellant where to dig a cavity in the floor for the purposes of installing an L-shaped oil tank for the Drilling Machine, and its dimensions thereof. This First Drawing was a schematic drawing, consisting of line markings, numbers, mandarin notations and a table at the bottom right hand corner.

After comparing the First Drawing with floor plans of the factory in which the Appellant intended to store the Drilling Machine (“the Factory”), the Appellant came to realise that a cavity could not be dug in the proposed location due to the presence of a beam in the ground. Hence, further discussions with Xiao He were conducted and at the Appellant’s suggestion, parties finally decided to (i) substitute the L-shaped oil tank with a customised square one and (ii) move the oil tank from adjacent to the Drilling Machine to in front of it. The square oil tank was eventually installed on or about 14 July 2008.

On 19 August 2008, the Drilling Machine was delivered to the Appellant and uncrated in the presence of the Appellant’s foreman, Chai Kok Yong, but it was not inspected. On 20 August 2008, the Appellant acknowledged receipt of the Drilling Machine by signing a delivery order. However, on 23 August 2008, when the Appellant inspected the Drilling Machine, he noted that some parts of it appeared old and of poor quality. This caused him to engage the services of SGS Testing & Control Services Pte Ltd (“SGS”) to carry out an inspection of the Drilling Machine for the purpose of determining if it was new.

According to the Appellant’s evidence, it was only after SGS’s inspection on 1 September 2008 that he discovered the Drilling Machine was 13.5 metres in length as opposed to 11 metres as stated in the Drill Contract.¹ Pursuant to its inspection, SGS also issued a report dated 9 September 2008, which concluded that the Drilling Machine was “in refurbished condition”. Displeased, the Appellant made complaints to the Respondent.

In reply, the Respondent forwarded to the Appellant a letter dated 29 August 2008 written by the manufacturer of the Drilling Machine explaining as follows:² That the Drilling Machine was purchased by the Respondent from the manufacturer on 31 August 2007; and That the length of the Drilling Machine was 13.5 metres in length and not 11 metres as the manufacturer had incorrectly informed the Respondent when the contract between them was created.

On 9 October 2008, the Appellant wrote to the Respondent via their solicitors, rejecting the Drilling Machine.

The claim

In his Statement of Claim (Amendment No 1), the Appellant alleged, inter alia, that it was either an express or implied term of the Drill Contract that the Drilling Machine was to be “newly manufactured” and therefore the Respondent was in breach for delivering a used and/or reconditioned and/or refurbished machine. Alternatively, the Appellant claimed that the Respondent was in breach for failing to deliver a Drilling Machine that conformed to the specifications set out in the Drill Contract and so sought the following reliefs: The return of deposits paid pursuant to the Drill Contract; Damages for losses suffered by reason of the Respondent’s breach of the Drill Contract; and Interest on the aforesaid at the rate of 5.33% per annum, calculated from the date of the writ until the date of judgment.

The Drilling Machine

A great number of arguments centring on both law and fact were canvassed by parties before this court. In essence, however, the main (and closely related) issues in this appeal can be summarised as follows: Firstly, does s 13 of the Sale of Goods Act (Cap 393, 1999 Rev Ed) (“s 13”) apply to the facts of the present appeal? If not, then what would the applicable legal principles under the common law be? Secondly, what result ought to follow from applying the relevant legal principles to the facts of the present appeal?

As is evident from the statement of these two issues, the focus of the first is on the law, whereas the second is on the facts. Looked at in this light, both issues comprise one larger – and holistic as well as integrated – inquiry. It is also significant to note that the second issue is, at least in the context of the present appeal, not an easy one and, as we shall see, in fact poses more difficulties than the first.

Does s 13 apply?

The provision itself reads as follows:

Sale by description 13. —(1) Where there is a contract for the sale of goods by description, there is an implied condition that the goods will correspond with the description.

(2) If the sale is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description.

(3) A sale of goods is not prevented from being a sale by description by reason only that, being exposed for sale or hire, they are selected by the buyer.

(4) Paragraph 4 of the Schedule applies in relation to a contract made before 18th May 1973.

On this issue, it was argued by counsel for the Respondent, Mr Kenny Chooi (“Mr Chooi”), that the Appellant had made no mention of s 13 in the course of pleadings or in trial. Therefore, allowing the Appellant to raise this “new” point at such a late stage would prejudice the Respondent since it had neither led evidence on this point, nor made the relevant submissions in the proceedings below.³

We disagree with Mr Chooi’s submission. The fact that s 13 was the operative governing provision in the proceedings below was clear from the Judge’s decision at [7] of the Judgment, where he stated:

I first consider the issue of whether the plaintiff is entitled to reject the Drilling Machine. It is trite law that in order to repudiate the Drill Contract, it would be necessary for the plaintiff to establish that the defendant had breached a condition of the contract or breached a warranty the consequence of which was to deprive the plaintiff of substantially the whole benefit of the Drill Contract. [emphasis added]

The Judge then proceeded to consider the effect of s 13(1), which imposes an implied condition that the goods will correspond with their description in a contract of sale by description. Finally, at [8] of the Judgment, he observed as follows:

The Drill Contract and the Lathe Contract insofar as they contain specifications are contracts of sale by description within the meaning of s 13 of the Sale of Goods Act: see Chuan Hiap Seng (1979) Pte Ltd v Progress Manufacturing Pte Ltd [1995] 1 SLR(R) 122. Where the contract contains a detailed description of the goods, minor discrepancies between the delivered goods and their description may entitle the purchaser to reject the goods: Arcos Ltd v E A Ronaasen & Son [1933] AC 470 at 479. In certain cases, in the absence of detailed commercial description, goods having considerable discrepancy from their described characteristics would nevertheless fall within s 13(1): Benjamin’s Sale of Goods (Sweet & Maxwell, 8th Ed, 2010) at para 11-019. Thus, where a contract for a new Singer car was made, it was not satisfied by the delivery of a second hand model: Andrew Bros Ltd v Singer & Co Ltd [1934] 1 KB 17. Also, a contract for a one-year-old second-hand reaping machine which had been used to cut only 50 acres, was held not to have been performed by a very old machine which had been mended: Varley v Whipp [1900] 1 QB 513. [emphasis added in bold italics]

Indeed, a close perusal of the Record of Appeal for this particular case demonstrates that the focus in trial centred around various...