CW Continental Corp v Patec Pte Ltd

• Judge: Andrew Ang SJ
• Judgment Date: 02 September 2016
• Neutral Citation: [2016] SGHC 224
• Citation: [2016] SGHC 224
• Court: High Court (Singapore)
• Published date: 15 October 2016
• Docket Number: Suit No 205 of 2015
• Plaintiff Counsel: Loong Tse Chuan and Chan Tuan San, Jonathan (Allen & Gledhill LLP)
• Defendant Counsel: Balasubramaniam Ernest Yogarajah and Bernadette Chen (Unilegal LLC)
• Subject Matter: Contract,Contractual Terms,Implied Terms,Discharge,Breach,Remedies,Damages
• Hearing Date: 24 May 2016,17 May 2016,19 May 2016,18 May 2016,20 May 2016,24 June 2016

Andrew Ang SJ:

This is my oral judgment setting out briefly my grounds of decision. Should there be an appeal I may elaborate on the grounds.

Facts

This action was brought by the Plaintiff, CW Continental Corp, against the Defendant, Patec Pte Ltd, seeking damages and other relief for the Defendant’s failure to deliver certain customised machinery and equipment (“Patec Turnkey System”) which, to the knowledge of the Defendant, was intended for delivery to Honeywell with whom the Plaintiff had entered into a contract (“Honeywell Contract”) for the sale of the said machinery and equipment.

Apart from a first tranche, the balance of the Patec Turnkey System was never delivered to the Plaintiff. Instead, the Defendant sold it directly to Honeywell and obtained a higher price than it would have received from the Plaintiff.

The Plaintiff’s case is that the Defendant was behind schedule and had not completed the Patec Turnkey System by 3 November 2014, the deadline set by Honeywell. As a result, Honeywell terminated the Honeywell Contract with the Plaintiff on 11 November 2014. Thereafter, the Plaintiff continued to seek confirmation that the Patec Turnkey System was completed but received what it considered to be unsatisfactory answers.

The Defendant, on the other hand, contended that the delivery date agreed was 30 November 2014 and that before that date, it had called upon the Plaintiff to make payment as the Defendant considered that the Patec Turnkey System was complete (by its interpretation of its obligations under the contract between the Plaintiff and the Defendant). When the Plaintiff did not make payment, the Defendant claimed to have accepted the alleged repudiatory breach of the Plaintiff and sold the Patec Turnkey System directly to Honeywell.

Apart from the dispute about the date for delivery, there was a dispute over what the Defendant’s obligations were in regard to Honeywell’s requirements and specifications. Whereas the Plaintiff’s case was that the Defendant was obligated to meet them, the Defendant contended that they were not included as terms of the contract between the Plaintiff and the Defendant.

Accordingly, the following are the issues in this case : What were the terms of the contract between the Plaintiff and the Defendant? What was the date by which the Patec Turnkey System was to be delivered? Did the Defendant breach its obligations under the Purchase Order 4502007163 (the “P.O.”) when it failed to deliver the Patec Turnkey System to the Plaintiff? If so, what measure of damages is to apply?

Issue 1 What were the express terms of the contract between the Plaintiff and the Defendant?

For a start, the terms of the contract were set out in the P.O. issued by the Plaintiff on 3 December 2013 and accepted by the Defendant on 6 December 2013 when the Defendant invoiced the Plaintiff with reference to the same P.O.

In the P.O., the terms of payment were stated to be “As per PATEC Quote PPL/1041/13R”. Also, the delivery schedule was stated in the P.O. to be “As per “Intel 7 parts qualifying strategy” and “Plan for HIS Turnkey Solution”. Despite the typographical errors (“qualifying” instead of “qualification” and “HIS” instead of “IHS” there is no doubt what these two documents were).

In the Defendant’s closing submissions, at paragraphs 22 to 24, the Defendant contends that the “Intel 7 parts qualifying strategy” and “Plan for HIS Turnkey Solution” did not form part of the contract between the parties. This contention is plainly at odds with Defendant’s pleadings (see paragraphs 12, 15A, 18, 19, and 20) and cannot stand.

In addition to those two documents, the Plaintiff contends that it was an implied term of the contract between the parties that the Patec Turnkey System must be fit for the purpose for which it was purchased viz for delivery to Honeywell pursuant to the Honeywell Contract.

In support of this contention the Plaintiff cited Francis v Cockrell (1870) LR 5 QB 501, where Kelly CB said at p 503:

“I do not hesitate to say that I am clearly of opinion, as a general proposition of law, that when one man engages with another to supply him with a particular article or thing, to be applied to certain use and purpose, in consideration of a pecuniary payment, he enters into an implied contract that the article or thing shall be reasonably fit for the purpose for which it is to be used and to which it is to be applied.” [emphasis added]

Section 14(3) of the Sale of Goods Act (Cap 393, 1999 Rev Ed) is to the same effect.

The evidence showed that during the negotiations between the Plaintiff and Honeywell from May 2012 to November 2013, the Defendant’s General Manager, Mr Hiroyuki Hidaka (“Hiro”) was fully involved in the marketing efforts and technical discussions with Honeywell. The Defendant was fully aware that the Patec Turnkey System was intended for resale to Honeywell. It stands to reason that the Patec Turnkey System had to meet the requirements of Honeywell.

Those requirements were set out in: Attachment A to the Honeywell Contract; and A document entitled “Specifications for Progressive Stamping Turn-Key Package” dated 30 April 2013 described below.

As earlier stated, Francis Wong, the director and sole shareholder of the Plaintiff, testified that the Defendant’s Hiro was fully involved in marketing efforts and technical discussions with the Plaintiff and Honeywell.

In April 2013, one Nagu of Honeywell invited Hiro and Francis Wong to Honeywell’s office to present the Plaintiff’s and the Defendant’s capabilities to the members of the Honeywell technical and commercial teams.

At the meeting, Nagu provided Francis Wong a document entitled “Specifications for Progressive Stamping Turn-Key Package” dated 30 April 2013, which contained the specifications of the machines needed by Honeywell. Hiro and Francis Wong went to the Plaintiff’s office to jointly review the specifications in the document aforesaid. Hiro then confirmed to Francis Wong that the Defendant had the capability to meet Honeywell’s requirements.

At all material times the Defendant had copies of the Honeywell Contract and the Specifications for Progressive Stamping Turn-Key Package. The Defendant was therefore fully aware of the specifications.

Further on 4 August 2014, Honeywell circulated to the Plaintiff and the Defendant a buyout checklist based on discussions between Honeywell and Defendant on 1 August 2014.

The Plaintiff submits that in assessing whether the remaining items of the Patec Turnkey System had been completed, there has to be taken into account Honeywell’s requirements set out in the buy-off checklist, Attachment A to the Honeywell Contract, and the document entitled “Specifications for Progressive Stamping Turn-Key Package”.

The Defendant contends that there should not be any terms implied into the contract between the Plaintiff and the Defendant. It argues that there is no gap in the contract between the parties and therefore no room for implication.

Michael Wee, the Managing Director of the Defendant, disputes the Plaintiff’s contention and asserts in his Affidavit of Evidence-in-Chief (“AEIC”) that at a meeting in the Defendant’s office on 23 December 2013, he had refused to sign a Custom Equipment Purchase Agreement between the Plaintiff and the Defendant which was on similar terms as the Honeywell Contract. The Defendant argues that by such refusal, Michael Wee signified that the Defendant did not wish to be bound by Honeywell’s requirements.

Francis Wong, recounts, however, that Michael Wee’s objection was to clause 10.1 of the draft Custom Equipment Purchase Agreement, which required Defendant to indemnify Honeywell for any losses arising from Defendant’s negligence or misconduct. Francis Wong further stated that Michael Wee nevertheless confirmed that the Defendant would meet Honeywell’s technical specifications and timelines.

On a balance of probabilities, I would tend to believe Francis Wong’s account of what transpired at the 23 December 2013 meeting.

Francis Wong’s uncontroverted evidence was that: Throughout the course of the project, there were regular communications and meetings between the Plaintiff, the Defendant, and Honeywell. From January 2014, there were weekly conference calls between the Plaintiff, the Defendant, and Honeywell to monitor the progress of the project. From December 2013 to November 2014, Francis Wong was in regular communication with Defendant’s Hiro and Senior Project Manager, Sajesh Babu (“Sajesh”) conveying instructions from Honeywell and liaising between Honeywell and the Defendant. Representatives from Intel and Honeywell also regularly visited the Defendant’s factories in Singapore and Indonesia to observe the progress.

During cross examination, Michael Wee admitted that from December 2013 until November 2014, the Defendant’s employees assisted the Plaintiff towards meeting Honeywell’s requirements and specifications. The Plaintiff relies upon that as lending support to the Plaintiff’s contention that Honeywell’s requirements and specifications were implied obligations. I do not accept Michael Wee’s contention that it was purely out of goodwill that such assistance was provided. Indeed it defies commercial sense that the Plaintiff would contract with Defendant for the Patec Turnkey System without being sure that the Defendant would meet Honeywell’s requirements and specifications.

In an endeavour to find support for his contention that Honeywell’s requirements and specifications did not form part of the contract between the Plaintiff and the Defendant, Michael Wee referred to a Whatsapp conversation on 27 November 2013 between Hiro and Francis Wong. Allegedly, in that conversation, Hiro informed Francis Wong that the Defendant was unable to sign the Custom Equipment Purchase Agreement between the Plaintiff and Honeywell.

I accept...