Glahe International Expo AG v ACS Computer Pte Ltd

• Jurisdiction: Singapore
• Judge: Warren Khoo L H J
• Judgment Date: 02 July 1998
• Neutral Citation: [1998] SGHC 225
• Docket Number: Suit No 342 of 1994
• Date: 02 July 1998
• Published date: 19 September 2003
• Year: 1998
• Plaintiff Counsel: Gregory Vijayendran (Drew & Napier)
• Citation: [1998] SGHC 225
• Defendant Counsel: Muthu Kumaran (WT Woon & Co)
• Court: High Court (Singapore)
• Subject Matter: Discharge,Force majeure clause,Whether contract frustrated when circumstances foreseeable although extent of changes may have been unforeseeable,Adverse monetary, fiscal and political changes,Frustration,Whether contract frustrated,Whether only circumstances prevailing at time when contract allegedly discharged relevant,Contract

Judgment:

WARREN LH KHOO J

Glahe International Expo AG is a company with a registered office in Basle, Switzerland. It was in the business of organising international trade exhibitions in the then Soviet Union as a way of facilitating trade between Soviet corporations and parties from other countries. It had been holding such exhibitions in the Soviet Union for many years. In September 1990, it organised a special exhibition devoted entirely to computers. The defendant company ACS was among Singaporean computer firms taking part at this exhibition.

2.Mr Marat, the President of the MS Group, which was apparently a joint venture between American and Russian private interests, was interested in the personal computers exhibited by ACS. He wanted to enter into a deal to import ACS computers for local distribution.

3.The Soviet Union, which was then still in existence, was emerging from decades of central control of its economy and society. It lacked certain basic banking tools for the conduct of international trade, such as letters of credit, which enable strangers to deal with each other with confidence. ACS was not known to people in the Soviet Union, but Glahe was quite well known and trusted. So, Marat got Glahe to be involved in the transaction he intended to go into with ACS. Mr Glahe, the founder-President of the plaintiff company, was there. As a result of discussions involving him, Mr Marat and Mr Jeremy Lek (for ACS), a contract was entered into between ACS and Glahe. Unknown then to Mr Lek, a contract was also entered into between Glahe and MS at about the same time.

4.The contract between ACS and Glahe, dated 23 September 1990, provided for the sale by ACS to Glahe of 2,323 units of AT 286 personal computers at a total price of US$2,921,000 CIF Moscow Sheremetyevo-II Airport. Delivery was `within 30 days after receipt of letter of credit in the bank of the seller.` Upon signing of the contract, the buyer was required to pay 8% of the total contract price, ie US$233,680 by telegraphic transfer to the seller`s bank account in Singapore. I shall refer to this contract as the ACS contract. As I said, unknown to ACS until near the hearing of the present suit, Glahe also entered into a contract with MS. The contract was dated 19 September 1990. It similarly provided for the sale by Glahe to MS of 2,323 units of AT 286 personal computers, but at the total price of US$3,555,556, and to be delivered not later than 24 October 1990. This contract required the entire amount of the contract price to be transferred by MS to Glahe within five days of the signing of the contract. I refer to this as the MS contract.

5.The ACS contract by cl 8 provided as follows:

Neither party shall be responsible for the complete or partial non-performance of any of its obligations, if the non-performance results from such circumstances as flood, fire, earthquake and other Acts of God, as well as war, military operations, blockade, act or actions of state authorities, or any other circumstances beyond the parties` control that have arisen after the conclusion of the contract (except for failure to pay any sum which has become due under the provisions hereof).

In this case the time stipulated for the performance of obligations under present contract is extended correspondingly for the period of time of action of these circumstances and their consequences. The party which is unable to fulfill its obligations due to such circumstances shall immediately notify in writing the other party of the beginning, expected time of duration and cessation of the above circumstances. A certificate of the Chamber of Commerce (Commerce and Industry) or other competent authority or organization of the respective country shall be a sufficient proof of commencement cessation of the above circumstances.

If the impossibility of complete or partial performance of the obligations lasts for more than two months the seller and buyer shall have the right to cancel the contract totally or partly without the obligation to indemnify eventual losses (including expenses) of the buyers and the sellers.

6.As stated above, the ACS contract required Glahe to pay 8% of the purchase price on the signing of the contract. It also required Glahe to establish a letter of credit for the entire balance of the contract sum. No time limit was expressly provided for that, although Mr Lek says that the discussions had all along been on the basis that delivery was urgent and that a letter of credit was to be established within days. I am sure Mr Lek is quite right on that. What he says is amply supported by the provisions in the MS contract requiring MS to pay the contract amount to Glahe within five days of the signing of that contract.

7.In the event, it was well into October before ACS received the 8% payment. Glahe also did not establish a letter of credit for the entire balance of the contract sum. It only established one for 300 sets of computers. This was not confirmed until 5 November. Although ACS had the right under the contract to insist on a letter of credit for the entire balance of the contract price, it accepted this partial letter of credit, and despatched the 300 sets of computers in two shipments to MS.

8.At this point, I have to mention that although the ACS contract was between ACS and Glahe, since MS was the ultimate buyer, it must have occurred to all three parties, ie ACS, Glahe and MS, that it would be convenient in the implementation of the ACS contract for ACS to deal direct with MS. ACS in the event did have direct contacts with MS. Communications were sometimes copied to Glahe, sometimes not. It seems clear to me, however, that this course of dealings never led to any variation of the position that the contracting parties to the ACS contract were ACS and Glahe.

9.On 5 November, MS-Group sent a telex to ACS (copied to Glahe). It purported to cancel the contract for reason of force majeure. It cited the following as the circumstances constituting force majeure, and I quote:

1 Law No 815 dated 13.08.90 of the USSR Council of Ministers envisaging severe import taxation (thus the import tax for one PC/AX is 6,000 roubles) and widely disclosed in Soviet mass media actually only in October;

2 Presidential Law dated 26.10.90 of the new rate of exchange of the rouble, which makes the above import tax triple.

10.MS-Group said: `The above unforeseen force majeure obstacles turn our contract senseless for us (ie extra unprofitable).` It then proposed that ACS send computers to the amount of money which had been remitted to ACS, and that the balance of the contract be cancelled.

11.Glahe also sent to ACS a copy of the MS telex, and asked for ACS`s comments. ACS responded on 9 November rejecting MS`s claim of force majeure and purporting to hold MS responsible for any loss. On 11 November, MS telexed ACS (with copy to Glahe) that in the interests of future co-operation with ACS, it had decided to `come back to the whole contract` and promised to transfer to ACS the balance of the amount due under the contract. However, no letter of credit was established, nor was any date given as to when it would be done. Mr Glahe himself on 19 December told ACS in a telex that after a discussion with Marat, `it was confirmed that the contract will still remain valid`, but he added that the goods would be delivered `in parts`. ACS sought clarification from him as to how many shipments were contemplated, and whether there would be one letter of credit to cover the entire balance, and when ACS could have the letter of credit. A similar query was addressed to MS. There was no reply from either Glahe or MS. But on 18 January 1991 MS complained about defects in the 300 computers already shipped. In response, ACS sent a technician, Mr Topvis, to Moscow on 4 February to attend to the complaints, but apparently he had great difficulty getting to see the allegedly defective computers. Mr Topvis has not been called, but according to a note said to have been prepared by him, he had trouble even getting to see Mr Marat. Marat`s personal position in MS also appears to have been obscure. He is recorded by Mr Topvis as having left the MS-Group. Whether Marat really had left the MS-Group or was merely using that as an excuse to deflect personal embarrassment one would not know, as Marat has not been called either.

12.There was also no news as to what was to happen to the balance of the contract. According to Mr Topvis`s note, Marat was to give him his proposal for a new contract. However, nothing came of it. Mr Jeremy Lek himself went to Moscow in April, so did Mr Glahe. According to Mr Lek, he met Mr Glahe on 9 April; Mr Glahe assured him that the contract would be fulfilled but asked ACS to consider a discount. Mr Glahe, on the other hand, says that he would not characterise the encounter with Mr Lek as a meeting. It was, according to him, a very brief encounter, consisting of shaking hands and exchanging pleasantries. I think on balance Mr Lek is probably closer to the truth. The problem with the contract had been festering for so long. I cannot believe that the two of them did not discuss it. But I do not believe that Mr Glahe gave any kind of unconditional assurance that the contract would be fulfilled. Mr Glahe`s position, as he tells the court, was that Glahe was merely acting as a go-between; everything depended on whether the MS-Group was able to perform. Mr Glahe must have known that MS had problems fulfilling its part of the bargain.

13.Nothing much happened after the meeting in Moscow between Mr Lek and Mr Glahe except for a few phone conversations between them, which did not take matters any further. Then, on 13 June 1991, ACS received a telex from Mr Glahe saying that after a visit to Moscow and discussions there:

came to the conclusion that we have to dissolve this contract. The contract cannot be realised because the conditions in the Soviet Union have

...