Glahe International Expo AG v ACS Computer Pte Ltd and another appeal

• Jurisdiction: Singapore
• Judge: Karthigesu JA
• Judgment Date: 31 March 1999
• Neutral Citation: [1999] SGCA 23
• Docket Number: Civil Appeals Nos 192 and
• Date: 31 March 1999
• Published date: 19 September 2003
• Year: 1999
• Plaintiff Counsel: Gregory Vijayendran and Kirindeep Singh (Wong Partnership)
• Citation: [1999] SGCA 23
• Defendant Counsel: Muthu Kumaran and Shankar (WT Woon & Co)
• Court: Court of Appeal (Singapore)
• Subject Matter: Stipulated event,Frustration,Whether imposition of import taxes and lowering of exchange rate in Russia constitute force majeure, rendering contract impossible to perform,Contract,Order 57 r 94(17) Rules of Court,Appeals,Contract becoming less profitable,Force majeure,Solicitor failing to file client's case -- Whether solicitor duty bound to file case for client,Whether events rendering the contract less profitable fundamentally or radically alter the obligations under contract,Discharge,Whether court obliged to grant counsel leave to be heard,Civil Procedure

Judgment:

LP THEAN JA

(delivering the judgment of the court): The appellants, Glahe International Expo AG (`Glahe`), are a company incorporated in Switzerland with their registered office at Basle. The respondents, ACS Computer Pte Ltd (`ACS`), are a company incorporated in Singapore. Glahe brought an action against ACS for recovery of a certain sum paid by Glahe to ACS under a contract made between them on 23 September 1990 for the sale of computers by ACS to Glahe which were to be delivered in the then Union of Soviet Socialist Republics (`the USSR`). ACS denied the claim and counterclaimed damages for breach of contract and interests. The action was tried before Warren LH Khoo J who dismissed the claim of Glahe and allowed the counterclaim of ACS for damages for breach of contract but dismissed their claim for interests: [1999] 1 SLR 166. Against the decision of the learned judge, Glahe appealed and their appeal is CA 192/98. ACS in turn cross-appealed against that part of the decision of the learned judge that disallowed their counterclaim for interests, and their cross-appeal is CA 194/98. Both the appeals were heard before us.

2. Facts

The material facts that led to the dispute between the parties were not in dispute and were briefly these. Glahe were engaged, among other things, in the business of organising international trade exhibitions in the USSR as a way of promoting and facilitating trade between Soviet corporations and parties from other countries. In September 1990, they organised a special exhibition devoted entirely to computers. ACS were among the Singaporean companies taking part in that exhibition.

3.One Mr Marat, the President of a Russian company, MS-Group, which apparently were a joint venture between American and Russian interests, was interested in the personal computers exhibited by ACS. He wanted to enter into a deal to import ACS computers for local distribution. To that end, he approached Glahe`s founder, one Mr Jo Glahe, and asked him to act as an intermediary between MS-Group and ACS. ACS were represented at the exhibition by one Mr Jeremy Lek.

4.Mr Jo Glahe`s involvement in the deal between ACS and MS-Group was necessary for MS-Group, because the latter had difficulty in effecting payment in hard currency, such as US Dollars, which ACS required, as roubles were not an international currency. Although it was open to MS-Group to arrange for their customers to pay ACS directly, this would be difficult to achieve, because ACS were a newcomer to the Soviet market. An arrangement to pay Glahe would not give rise to any problems, since Glahe, albeit a foreign company, had a corporate presence in the USSR since 1965. To circumvent the difficulty, Glahe would act as a middleman. Not being a Soviet company, Glahe would not encounter any problem in dealing with hard currency. Under the arrangements as contemplated, MS-Group`s Soviet customers would pay US Dollars directly to Glahe in Switzerland, and Glahe, in turn, would pay ACS the moneys they had received. ACS would then ship the computers direct to Moscow for distribution by MS-Group to their customers.

5.Accordingly, Glahe entered into two contracts. One contract was made with MS-Group on 19 September 1990 (`the MS contract`), the principal terms of which were that (1) Glahe would sell and deliver cif Sheremetyevo Airport, Moscow, 2,323 units of personal computers not later than 24 October 1990, partial shipment being allowed, and (2) MS-Group would pay Glahe the full purchase price of US$3,555,556 for the computers within five days of the date of execution of the contract.

6.The other contract was made with ACS on 23 September 1990 (`the ACS contract`). The principal terms of this contract were that ACS would sell to Glahe 2,323 units of personal computers cif Sheremetyevo Airport, Moscow, and the total purchase price was US$2,921,000 and payment was to be effected by way of a confirmed letter of credit to be established in favour of ACS, and delivery of the computers would take place within 30 days after receipt of the letter of credit by ACS. Upon the signing of the contract, Glahe were to pay in advance 8% of the total sale price amounting to US$233,680 by telegraphic transfer to the account of ACS with the Singapore branch of The Bank of Tokyo, Ltd. No time limit was stipulated for the opening of the letter of credit. The ACS contract also contained a force majeure clause in the following terms:

Cl 8. 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 (sic) 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 (sic) 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 Sellers.

7. Performance of the contracts

ACS were not unaware of MS-Group`s involvement in the transaction. Not only were they aware that MS-Group were the ultimate buyers, but that at times they dealt direct with MS-Group and not Glahe. On numerous occasions, ACS corresponded with MS-Group directly in relation to the performance of the ACS contract without any reference to Glahe. However, there was no contractual relationship between ACS and MS-Group.

8.MS-Group did not pay or furnish Glahe with the full purchase price of the computers within five days of 19 September 1990, as they had agreed to do under the MS contract. As a consequence, Glahe did not make the advance payment of US$233,680 to the account of ACS in Singapore or take any action to open the letter of credit in favour of ACS as they were required to do under the ACS contract. After some enquiries by ACS as to when the letter of credit would be opened, Glahe responded on 26 September 1990 stating that they were now `expecting the payment transfer from Moscow` and would, upon confirmation, send the advance payment of 8% and open the letter of credit. Following that, on 8 October 1990, ACS were informed that the first payment from Moscow had arrived, and that Glahe would pay US$233,680 to ACS by telegraphic transfer and would open a letter of credit for part delivery of the goods, with a second one to follow shortly for the balance. This was a deviation from the terms of the ACS contract, which provided for a single letter of credit for the full sum, though partial shipments were allowed.

9.The payment of US$233,680 was eventually made to ACS, and on 9 October 1990, Glahe opened a letter of credit for US$400,000 for part delivery of 300 sets of computers. The letter of credit was only confirmed on 5 November 1990 because of difficulties in the wordings. ACS accepted the partial letter of credit and shipped the 300 computers in two shipments. However, the contract thereafter ran into difficulties. On Glahe`s part, no further letters of credit were opened; nor were any further payments made to ACS. Correspondingly, on ACS`s part no further shipments of computers were made.

10.On 5 November 1990, MS-Group sent a telex direct to ACS, with a copy extended to Glahe, stating that they had encountered `certain insurmountable difficulties` preventing the `successful implementation of the contract signed with you` (meaning ACS). Among other things, the telex stated the following:

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 6000 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.

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

11.On 11 November 1990, ACS replied to the MS-Group (without sending a copy to Glahe) that they were disappointed and shocked to hear that they (MS-Group) wanted to forgo the balance of the computers ordered, and stated they would incur heavy losses if MS-Group breached the contract. By a telex of even date to ACS (with a copy extended to Glahe), MS-Group informed ACS that in the interests of future co-operation with ACS they 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.

12.Mr Jo Glahe then spoke to Mr Marat on 18 December 1990 and on the following day Glahe sent a fax to ACS stating that Mr Marat had confirmed that the contract would remain valid, except that the goods would be delivered in partial shipments instead of a single second shipment. By a fax to Glahe dated 20 December 1990 ACS enquired...