China Resources Purchasing Co Ltd v Yue Xiu Enterprises (S) Pte Ltd and Another

• Jurisdiction: Singapore
• Judge: Karthigesu JA
• Judgment Date: 07 March 1996
• Neutral Citation: [1996] SGCA 9
• Docket Number: Civil Appeal No 69 of 1995
• Date: 07 March 1996
• Published date: 19 September 2003
• Year: 1996
• Plaintiff Counsel: S Suresh and Julia Loh (Allen & Gledhill)
• Citation: [1996] SGCA 9
• Defendant Counsel: James Ponniah (Wong & Lim),Jason Lim (Winston Chen Ong & Pnrs)
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether alternative goods should have been accepted by plaintiffs in mitigation of damages,Damages,Remedies,Mitigation,Potential liability of innocent appellants to a third party as a result of first respondents' breach,Contract,Whether this head of damage should be reserved for future assessment

Cur Adv Vult

China Resources Purchasing Co Ltd (China Resources) commenced an action in the High Court against Yue Xiu Enterprises (S) Pte Ltd (Yue Xiu) on 17 August 1993 for certain liquidated sums or alternatively for damages and certain other reliefs for non-delivery of 10,000 metric tons, plus or minus 10%, of deformed steel round bars (the steel bars) under a contract in writing dated 20 February 1993. On 3 September 1993 Yue Xiu brought third party proceedings against Bulsing (Pte) Ltd (Bulsing) for an indemnity. On 1 December 1993 China Resources obtained an interlocutory judgment against Yue Xiu for damages in a sum to be assessed and costs. On 2 March 1994 Yue Xiu obtained an interlocutory judgment against Bulsing by way of judgment or declaration that Yue Xiu be entitled to recover from Bulsing such damages and costs for which Yue Xiu may be held liable to pay to China Resources or its customers. It was not disputed by either Yue Xiu or Bulsing that China Resources` purchase of the steel bars was for the purpose of immediate resale to Success Honour Development Ltd (Success Honour).

The learned assistant registrar assessed the damages at US$110,000 being the difference in the price for the steel bars payable by China Resources to Yue Xiu and the price at which China Resources had sold the steel bars to Success Honour. China Resources had also claimed for the banking charges and other expenses amounting to HK$10,654.69 but this claim was disallowed on the basis that China Resources would have had to incur these expenses in order to earn their profit of US$110,000. Moreover, there was no evidence to show that China Resources would have been entitled to reimbursement of these expenses had the contract been successfully performed.

In addition, China Resources also claimed an indemnity from Yue Xiu in the sum of US$153,000 which they alleged they were liable to pay Success Honour for their failure to deliver the steel bars to Success Honour. However, no action as yet had been commenced by Success Honour against China Resources and there was no evidence of the actual loss suffered by China Resources. Hence, this claim being only a potential liability of China Resources was not allowed but was reserved for assessment if and when China Resources had to meet such a claim from Success Honour. The authority relied on by the learned assistant registrar was Benjamin`s Sale of Goods (4th Ed) p 860 and Trans Trust SPRL v Danubian Trading Co Ltd [1952] 2 QB 297 at pp 303 and 307.

Accordingly, China Resources entered judgment against Yue Xiu on 23 January 1995 for US$110,000 together with US$9,492 being interest at the rate of 6% pa from 17 August 1993 to 23 January 1995 and costs of the action to be taxed. The judgment further provided that the issue of China Resources` claim for damages to Success Honour be reserved for assessment if and when China Resources meet Success Honour`s claim.

Yue Xiu and Bulsing being dissatisfied with the foregoing assessment of damages appealed to the judge-in-chambers. The learned judge allowed the appeals; set aside the judgment entered on 23 January 1995; affirmed the order of costs in favour of China Resources made on 23 January 1995; gave judgment for China Resources in the sum of US$21,000 with interest at 6% pa from 17 August 1993 to 8 May 1995 (the date of his judgment); ordered that Yue Xiu be indemnified by Bulsing in respect of the judgment in favour of China Resources; and further ordered that the costs of the appeal to the judge-in-chambers be taxed and paid by China Resources to Bulsing.

The learned judge arrived at the figure of US$21,000 in this way. He reasoned that since China Resources` contract with Yue Xiu and their contract with Success Honour was for the same specifications of the steel bars and in the same quantities for each specification totalling 10,000 metric tons, with a tolerance of 10%, Yue Xiu would have fulfilled their contract with China Resources and China Resources with Success Honour were 9,000 metric tons of steel bars delivered respectively. The difference in the unit rate of the two prices was US$11 per metric ton. Accordingly, China Resources was entitled to claim from Yue Xiu US$99,000 and not US$110,000. Further, Success Honour was also entitled to a commission of US$3 per metric ton from China Resources, that is to say, US$27,000 on 9,000 metric tons which should be set off against the US$99,000 reducing it to US$72,000. The learned judge then accepted the argument of Bulsing that since the price payable by China Resources to Yue Xiu was c & f whereas the price payable by Success Honour to China Resources was cif, there ought to be a deduction for the cost of insurance and he further accepted Bulsing`s contention that the insurance cost would be US$1 per metric ton. Hence, there was a further deduction of US$9,000 reducing the figure to US$63,000. Finally, the learned judge accepted the further argument of Bulsing that China Resources should have accepted an offer made by Yue Xiu to China Resources through Bulsing to supply 6,000 metric tons of steel bars, of 2,000 metric tons each of the specifications, 12 mm, 16 mm and 18 mm in diameter notwithstanding that the contracts were for 2,000 metric tons each of the specifications, 12 mm, 16 mm, 18 mm, 20 mm and 22 mm in diameter. Failure on the part of China Resources to accept this offer, so the learned judge held, was a failure to mitigate the damages. Had China Resources accepted this offer they would have reduced their loss by two-thirds. Accordingly, the learned judge arriv ed at US$21,000 by deducting two-thirds of US$63,000 from US$63,000. On the question of the reservation of China Resources` relief for the potential claim of Success Honour, the learned judge held that as no such claim had yet been made by Success Honour on 23 January 1995, China Resources had not proved that item of loss and disallowed reservation. Since the arguments he accepted were advanced by Bulsing and since he had rejected Yue Xiu`s arguments, he ordered the costs of the appeal to be paid to Bulsing and did not award Yue Xiu any costs. He did not interfere with the order for costs made by the learned assistant registrar.

China Resources now appeal against the decision of the learned judge but confine their appeal to four issues, namely:

(a) Whether China Resources ought to have mitigated their loss by two-thirds by accepting the offer of 6,000 metric tons of steel bars offered by Yue Xiu through Bulsing;

(b) Whether the cost of insurance deducted ought to have been the sum of US$9,000;

(c) Whether China Resources` claim to relief from Yue Xiu in respect of the potential claim of Success Honour against China Resources ought to have been reserved for further assessment if and when Success Honour pursued their claim against China Resources; and

(d) Whether China Resources ought to have been ordered to pay Bulsing`s costs in the appeal to the judge-in-chambers.

The first three issues are against Yue Xiu and the fourth is against Bulsing.

Before we deal with these issues we should outline the salient facts; but before we do that, we should dispose of Bulsing`s motion to this court to strike out China Resources` notice of appeal, in so far as it is related to the appeal against the order for costs made by the learned judge on the ground that China Resources` appeal against Bulsing being only on the question of costs, leave which was required under s 34(2)(b) of the Supreme Court of Judicature Act (Cap 322) had not been obtained, and secondly for leave to intervene in this appeal and file a case. We saw no merits in the first prayer of the motion and dismissed it but gave leave for Bulsing to intervene, China Resources not objecting, and dispensed with the case. The costs of the motion was reserved.

The salient facts we should set out are these.

In early February 1993, Yue Xiu by a faxed transmission offered to sell to China Resources a quantity of steel bars of the quality ST 25. As China Resources then had an interested buyer of steel bars of the quality ST 25, they duly informed Yue Xiu of their interest in steel bars of the quality ST 25. Relying on this communication from Yue Xiu, China Resources entered into an agreement with Success Honour, the interested buyer, on 17 February 1993 under which Success Honour agreed to purchase from China Resources 10,000 metric tons of ST 25 steel bars with a 10% tolerance, comprising 2,000 metric tons each of the specifications 12 mm, 16 mm, 18 mm, 20 mm and 22 mm in diameter at the cif price of US$306 per metric ton, delivery in one lot at Zhanjiang, China, latest by 31 March 1993 but later extended to 10 April 1993. However, on 18 February 1993 Yue Xiu inquired from China Resources whether they would accept the quality ST 18 instead of ST 25. China Resources replied after conferring with Success Honour that ST 18 quality was acceptable and accordingly the agreement entered into with Success Honour was duly amended to reflect this.

On 20 February 1993 China Resources concluded a contract with Yue Xiu for the purchase of 10,000 metric tons of ST 18 steel bars with a tolerance of 10% comprising 2,000 metric tons each of the specifications 12 mm, 16 mm, 18 mm, 20 mm and 22 mm in diameter at the c & f price of US$295 per metric...