Gimpex Ltd v Unity Holdings Business Ltd and others and another appeal

• Judge: Sundaresh Menon CJ
• Judgment Date: 09 February 2015
• Neutral Citation: [2015] SGCA 8
• Docket Number: Civil Appeal Nos 160 of 2013 and 161 of 2013
• Hearing Date: 09 May 2014
• Published date: 11 February 2015
• Defendant Counsel: Bazul Ashhab and Mabel Tan (Oon & Bazul LLP)
• Subject Matter: Hearsay,Damages,Reports,Rules in awarding,Proof of actual damage,Breach,Evidence,Admissibility of evidence,Documentary evidence,Contract
• Court: Court of Three Judges (Singapore)
• Plaintiff Counsel: Philip Tay and Yip Li Ming (Rajah & Tann LLP)

Chao Hick Tin JA (delivering the judgment of the court): Introduction

These two appeals before us arose from the decision of Gimpex Limited v Unity Holding Business Limited and others [2013] SGHC 224 (“the Judgment”) in Suit No 390 of 2010 (“the Suit”). The Suit concerned a dispute surrounding a contract for the sale of 41,510MT of coal by Unity Holdings Business Limited (“Unity”) to Gimpex Limited (“Gimpex”). The coal was to be shipped from Kalimantan, Indonesia, and delivered to Karachi, Pakistan. When the coal was discharged at Karachi, Gimpex had the coal tested by surveyors and discovered that it did not meet the contractual specifications. Also, a request by Gimpex for a joint survey was turned down by Unity. As a result, Gimpex brought a number of claims against Unity and two other parties, including for breach of contract and unlawful means conspiracy based on fraud. The action thus concerned the quality of the coal which was delivered at Karachi and it also raised difficult issues concerning, inter alia, admissibility of documentary hearsay evidence.

The facts The parties to the dispute

The plaintiff in the Suit was Gimpex, a Chennai-based trading company which has been trading in commodities and raw materials since the 1950s. The representatives of Gimpex that were of particular importance to the present proceedings, were one Samir Goenka (“Samir”) who was the joint managing director, and one Avinash Kulkarni (“Kulkarni”) who was the executive director of a Singapore-incorporated subsidiary of Gimpex, SPG Mining Pte Ltd.

The first defendant, Unity, is a company incorporated in the British Virgin Islands (“BVI”). Unity is owned by a number of shareholders, ie, Sainik Mining (International) Ltd (“SMIL”), Classic Ventures Assets Incorporated (“Classic”) and the second defendant to the Suit, Param Energy Pte Ltd (“Param Energy”). SMIL owns 51% of the shares in Unity, and is in turn wholly owned by Sainik Mining and Allied Services Limited (“SMASL”). Classic owns 24% of the shares in Unity. Param Energy, a Singapore-incorporated company, owned the remaining 25% shares.

The third defendant, Vinay Parmanad Hariani (“Vinay”), is the sole shareholder and director of Param Energy, and is also one of five directors of Unity. Vinay’s evidence was that he was not very involved in dealings with Gimpex, and that he left it to three of his employees, namely, Lalit Balchandani (“Lalit”), Kishore Chuharmal Mahtani (‘Kishore”) and Prem Sangtani (“Prem”). All these three employees were directly involved in carrying out the sale of the coal, and testified in the present proceedings. Another director of Unity, Dev Sindhu (“Dev”), also gave evidence on behalf of the defendants.

Background to the dispute The Contract

In 2009, Samir and Kulkarni were interested in the coal business and were introduced to Vinay through a contact. Some discussions ensued, and this led to Gimpex deciding to purchase coal from the defendants. On 18 February 2010, Lalit sent a draft contract to Gimpex. In that draft, Param Energy was stated as the seller of the coal. Payment for the coal was to be made by a transferable letter of credit (“L/C”) in order for Param Energy to use the L/C to pay its supplier.1CA 160/2013 Appellants’ Core Bundle (“ACB”) Vol I at p 88.

As Gimpex was not agreeable to providing a transferable L/C, Lalit then asked that Unity be substituted as the contracting party in place of Param Energy if no transferrable L/C was to be provided. The reason for this change, as explained by Lalit, was because Param Energy did not have the required banking facilities needed to pay the supplier of the coal, whereas Unity had the required banking facilities and could pay the supplier directly instead of through a transferable L/C. These banking facilities, on clarification by Vinay during cross-examination, were actually funds provided by the shareholders of Unity. Gimpex alleged that it agreed to the change of contracting party on Samir’s understanding that Unity was a Singapore-incorporated company when, in fact, it is a BVI-incorporated company. Samir’s evidence was that he was wary of contracting with Indonesian coal companies, and only wanted to do business with a Singapore-incorporated company as he had a “good impression of the Singapore legal system”.2Record of Appeal (“RA”) Vol III(A) at p 219 at para 34. He alleged that he had told Vinay that it gave him great comfort that Vinay was in Singapore and owned a Singapore company. 3RA Vol III(A) at p 219 at para 33. He also alleged that he had sought confirmation from Lalit (who replied in the affirmative) that Unity was a Singapore company when the change in contracting party was proposed. 4RA Vol III(A) at p 220 at para 39.

A contract for the sale of the coal was eventually entered into between Gimpex and Unity on 2 March 2010 (“the Contract”). The context within which the Contract was entered into by the parties is particularly important in understanding the dispute. For Gimpex, it did not purchase the coal for its own use. Instead, it was to on-sell the coal at a marked-up price to Awan Trading Co Pvt Ltd (“Awan”), a Pakistan-incorporated company, under a contract which it had earlier concluded with Awan (“the Sub-contract”). As Gimpex had agreed with Awan that the coal to be supplied would be of a certain quality, it was therefore important that the coal to be delivered by Unity was of the requisite quality which was stated in the Contract. The profit which Gimpex would make from this arrangement was approximately US$80,000. At the time of the Contract, Lalit’s evidence was that he knew that the Plaintiff was in need of the coal in order to fulfil a sub-sale. However, Lalit neither knew the identity of the sub-buyer nor the terms of the Sub-contract.5RA Vol III(F) at p 16 at para 16.

From the defendants’ perspective, Unity was also a middleman of sorts, in that it purchased the coal from another company, PT Planet Resources (“PT Planet”) which was an Indonesia-incorporated company, at a price slightly lower than the sale price stated in the Contract. PT Planet was owned by Unity and Classic, and Vinay was also a director of PT Planet. But PT Planet, however, was not the ultimate supplier of the coal; instead, it purchased the coal from CV Berkah Mulya Abadi (“Berkah”), another Indonesia-incorporated company, at an even lower price. Unity stood to make a profit of 1.83% from this arrangement. Lalit explained that the defendants were willing to enter into the Contract for such a small profit margin in order to cultivate a long-term commercial relationship with Gimpex. This was corroborated in a way by Samir’s evidence that Vinay had intimated to him that the defendants wanted to do business with Gimpex in relation to marble and granite.6RA Vol III(F) at p 11.

We now come to the salient terms of the Contract. The coal was to be shipped Free On Board from Kalimantan to Karachi with the loading to be done between 25 March 2010 to 3 April 2010. The price of the coal was US$68 per MT on the basis of it being of a certain quality, viz, having a Gross Calorific Value on an Air-Dried Basis (“GCV”) of not less than 6,300Kcal/kg and a total moisture (“TM”) of 16%. The price was subject to adjustments based on the quality of the coal. The Contract further provided for Gimpex to reject the coal if it did not meet the minimum quality of 6,100Kcal/kg or 18% TM. Payment for the coal was to be made through “an Irrevocable Single restrictive Letter of Credit payable at 100% Sight”. A US$50,000 performance bond was also provided for by SMASL on behalf of Unity to Gimpex.

Central to the Contract were the terms as to how the quality of the coal was to be ascertained, and this was provided for in these various provisions:7CA 160/2013 ACB Vol II at pp 142–143. 4.1 The quality of coal to be supplied hereunder shall be with the following typical specifications determined and analysed as per ASTM standard by Sucofindo, Indonesia. ...

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4.3 The consignment should be accompanied by Certificate of Sampling and Analysis as per ASTM standard issued by Sucofindo Indonesia. 4.4 All reported findings on all inspections/surveys conducted at Origin in relation to quality, quantity and weights etc done at origin and/or port and place of loading shall be FINAL and binding to both Buyer and Seller. 4.5 At least ten (10) days prior to the 1st day of load port laycan, Buyer has the option to appoint an independent inspection agency of their choice. All costs for this would be borne by the Buyer. 4.6 One set of raw samples drawn by the surveyors on board the vessel would be duly sealed and signed by the surveyors.

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5.1 Seller shall appoint Sucofindo, Indonesia to determine the weight of cargo loaded onto the mother vessel at loading point and issue a Certificate of Weight, which shall be final and binding on both parties. The loading of the coal at Kalimantan

The coal was to be shipped from Kalimantan to Karachi by the MV Michalakis (“the Vessel”), a ship nominated by Gimpex pursuant to the Contract. During the loading of the coal from the port in Kalimantan to the Vessel, PT Sucofindo (“Sucofindo”) (as provided for in the Contract) was to conduct a number of tests and produce survey reports which would include the quality and quantity of the coal shipped.

The process of loading the coal on board the Vessel and the sampling of the coal by Sucofindo during the loading process was particularly crucial to the dispute. The entire process of having the coal loaded on board the Vessel could be broken up into three stages: (1) delivering to and stockpiling of the coal at the jetty from source; (2) loading of the coal from the jetty to barges; and (3) loading of the coal from the barges onto the Vessel. Sucofindo conducted a variety of sampling and testing of the coal at...