G-Fuel Pte Ltd v Gulf Petrochem Pte Ltd

• Jurisdiction: Singapore
• Judge: Tan Lee Meng SJ
• Judgment Date: 14 April 2016
• Neutral Citation: [2016] SGHC 62
• Court: High Court (Singapore)
• Docket Number: Suit No 588 of 2014
• Year: 2016
• Published date: 29 April 2016
• Hearing Date: 28 May 2015,20 October 2015,26 May 2015,25 May 2015,27 May 2015
• Plaintiff Counsel: Kelly Yap Ming Kwang and Kelly Toh (Oon & Bazul LLP)
• Defendant Counsel: Thomas Tan and Loh Chiu Kuan (Haridass Ho & Partners)
• Subject Matter: Contract,Formation,Contractual Terms
• Citation: [2016] SGHC 62

Tan Lee Meng SJ:

The plaintiff, G-Fuel Pte Ltd (“G-Fuel”), is in the business of trading crude oil, petroleum-related products and commodities. The defendant, Gulf Petrochem Pte Ltd (“Gulf”), is in the business of general wholesale and wholesale of petrochemical products. G-Fuel sued Gulf to recover the sum of US$2,002,404.78 (“the outstanding sum”) allegedly owed to it for supplying to the latter 2,989.467 MT of marine fuel oil 380 CST (“MFO”) on 8 February 2014 at the price of US$626 per MT. Gulf denied having purchased the cargo.

Background

In August 2013, New Energy Resources Pte Ltd (“NER”), a distributor of petroleum products, expressed an interest in purchasing MFO from G-Fuel on credit terms on a regular basis. G-Fuel was not prepared to sell MFO to NER on credit terms.

NER had an on-going business relationship with Gulf, which utilised its services to supply MFO to ships owned by Gulf’s customers. NER asked Gulf to be its credit sleeve provider whenever it required MFO from G-Fuel (“the sleeving arrangement”). Under a sleeving arrangement in the bunkering industry, a party, known as the “credit sleeve provider”, to whom the seller is prepared to sell fuel on credit terms, becomes the contractual buyer of the fuel required by a third party. The credit sleeve provider benefits from the arrangement by charging the third party a fee for sleeving a transaction. Both G-Fuel, who was prepared to sell MFO to Gulf on credit terms, and Gulf agreed to the sleeving arrangement. Gulf charged NER at least US$3 for every metric tonne of MFO that it purchased from G-Fuel for NER’s use.

It was common ground that each transaction under the sleeving arrangement involved a separate contract between G-Fuel and Gulf for the sale and purchase of MFO. Arrangements for the contracts under the sleeving arrangement were handled by G-Fuel’s then trading manager, Mr James Lim Chung Meng (“James Lim”), and Gulf’s then senior bunker trader, Mr Gary Chew Sung Kwang (“Gary Chew”), on behalf of their respective companies.

The first and second contracts under the sleeving arrangement involved parcels of MFO that were delivered on 7 December 2013 and 31 January 2014 respectively. Gulf paid G-Fuel for the MFO delivered under these two contracts.

The dispute between the parties concerns a parcel of 2,989.467 MT of MFO delivered by G-Fuel on 8 February 2014 (“the Joaquim cargo”). According to G-Fuel, this was the third contract under the sleeving arrangement made on 7 February 2014 by James Lim and Gary Chew on behalf of G-Fuel and Gulf respectively in the same way that the contracts for the first and second transactions were made.

Although Gary Chew informed James Lim on 7 February 2014 that the deal with respect to the Joaquim cargo was “confirmed” and the MFO was delivered on the following day, Gulf informed G-Fuel some three weeks later that it did not agree to sleeve the transaction for this cargo. At that time, Gulf had problems with NER, who owed it a very substantial amount of money.

Despite numerous demands by G-Fuel, Gulf refused to pay the outstanding sum claimed by the former. As such, G-Fuel instituted the present action to claim the outstanding sum or, alternatively, damages from Gulf.

The Parties’ Positions

According to G-Fuel, the sequence of events leading to the contract for the sale and purchase of the Joaquim cargo up to the time G-Fuel invoiced Gulf for the said cargo was as follows: On 7 February 2014, NER’s Mr Philip Tan Meng Huat asked James Lim through Yahoo Messenger to confirm that G-Fuel could supply 3,000 MT of MFO. James Lim replied that he had to confirm with Gary Chew whether or not Gulf will agree to sleeve the proposed transaction for the 3,000 MT of MFO. On the same day, James Lim telephoned Gary Chew, who confirmed that Gulf would be the credit sleeve provider, with the quantity and price fixed at 3,000 MT and US$626.00 respectively. The cargo was to be delivered on 8 or 9 February 2014. After speaking to Gary Chew, James Lim sent a mobile text message at around 6.15pm on the same day to record the confirmation of the order. The message was “Hi, gary, we cfm the sales of 3kt exwh at 626, loading 8-9”. Gary Lim’s immediate reply via a mobile text message was “K thnks”, which is short for “Okay. Thanks”. Shortly thereafter, at 6.22pm, G-Fuel sent its Sales Confirmation No G-F 2194 dated 7 February 2014 to Gulf by e-mail. The said document recorded that the contract was for “3,000 metric tons (+/-5% tolerance)” of MFO 380 CST at the price of US$626 per MT and that the said cargo was to be delivered to a barge at Universal Terminal on 8 or 9 February 2014. Forty minutes later, in an email timed at 7.02pm, NER nominated The Joaquim to lift the 3,000 MT of MFO at Universal Terminal, Singapore on the next day, 8 February 2014. No further instructions were received from Gulf and on 8 February 2014, 2989.467 MT of MFO were loaded onto NER’s barge, The Joaquim, at the named terminal. G-Fuel issued a tax invoice dated 8 February 2014 for the sum of US$2,002,404.78 to Gulf for the Joaquim cargo. The invoice stated that this amount was to be paid within 30 days.

On 10 February 2014, James Lim sent a mobile tax message to Gary Chew at around 11am stating “Hi Gary, pls send the [Deal Recap confirmation] to us for book keeping. Thks” [emphasis added].

On the same day, Gary Chew replied at 3.31pm with the message “Chas[e] elaine”. Ms Elaine Koh was the junior accountant in Gulf’s Finance & Accounts Department.

On 11 February 2014, in an email timed at 5.25pm, James Lim asked Elaine Koh to send him the deal recap. He said that he telephoned Elaine Koh twice to remind her to forward the deal recap to him and that she promised on both occasions to send the deal recap to G-Fuel.

It was only on 28 February 2014, almost three weeks after the delivery of the Joaquim cargo on 8 February 2014, that Gulf first denied that it purchased the MFO in question. Subsequently, on 3 March 2014, Gulf informed G-Fuel that as it did not authorise the loading of the Joaquim cargo on 8 February 2014, it was treating the transaction as “cancelled”.

In the light of the sequence of events outlined above, G-Fuel contended that it was beyond doubt that Gulf was bound by the terms of the contract for the sale and purchase of the Joaquim cargo that was concluded on 7 February 2014 by James Lim and Gary Chew on behalf of their respective companies and that Gulf had to pay the outstanding sum to it.

On 14 February 2014, Gulf sent NER an e-mail, to which was attached a table spreadsheet that showed that the Joaquim cargo delivered on 8 February 2014 was part of the oil already supplied by it to NER. Despite this, Gulf contended that it did not have to pay for the Joaquim cargo for a number of reasons.

First, Gulf asserted that whatever arrangements may have been agreed upon by Gary Chew and James Lim on 7 February 2014, it had to send a formal purchase confirmation called a “deal recap” in response to G-Fuel’s Sales Confirmation No G-F 2194 before there could be a binding contract with G-Fuel. Its case was that as it did not send a deal recap to G-Fuel for the Joaquim cargo, there was no binding contract for this transaction.

Secondly, Gulf contended that for it to be bound by any sleeving transaction, the MFO may be delivered by G-Fuel only after it has issued a barge nomination form to G-Fuel to load the MFO onto its nominated barge. As G-Fuel loaded the Joaquim cargo onto a barge nominated by NER, Gulf contended that the risk of such loading fell on G-Fuel.

Thirdly, Gulf claimed that G-Fuel knew or ought to have known that the sleeving of the purchase of the Joaquim cargo was conditional upon NER’s compliance with certain terms stated in its email to NER on 8 February 2014. Although G-Fuel was never informed about the terms in this email to NER, Gulf insisted that as the said conditions were not fully met, it was not bound to pay G-Fuel for the Joaquim cargo.

Finally, Gulf contended that the Joaquim cargo was delivered by G-Fuel to NER pursuant to a contract between them and that NER should pay G-Fuel for the said cargo.

Gulf’s Failure to call Gary Chew as a Witness

G-Fuel’s case is that James Lim and Gulf’s then senior bunker trader, Gary Chew, entered into a contract on behalf of their respective companies for the sleeving of the Joaquim cargo on 7 February 2014. As such, one would have expected Gulf to call its former key staff member, Gary Chew, to testify on the events surrounding the Joaquim cargo, including how a contract for the purchase of MFO under the sleeving arrangement is made, whether a deal recap is required for the formation of a contract and whether there must be a written barge nomination by Gulf before the Joaquim cargo can be loaded on the barge nominated by NER. Regrettably, Gulf chose not to call Gary Chew as a witness in these proceedings.

Gulf’s main witness, its current trading manager, Mr Avik Ghosh, acknowledged that Gary Chew, who is now a partner in another bunker oil trading firm, had personally handled all the transactions under the sleeving arrangement and that the latter is the best person to give direct evidence on what transpired in these transactions.¹ He could not explain why his company did not call Gary Chew to testify in these proceedings and could only say that he was not the person who called the witnesses.² Instead of calling Gary Chew, Gulf thought that it could make do with Avik Ghosh’s attempt to explain in paragraph 13 of his affidavit of evidence-in-chief (“AEIC”) the mechanics of the sleeving arrangement, including the need for a deal recap and a barge nomination. However, he did not have personal knowledge of these matters and his AEIC merely dealt with inferences and his belief and/or opinion.

In these circumstances, Gary Chew was a crucial witness who should have been called by Gulf to testify...