Highness Electrical Engineering Pte Ltd v Sigma Cable Co (Pte) Ltd

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 29 June 2006
• Neutral Citation: [2006] SGHC 114
• Docket Number: Suit No 403 of 2005
• Date: 29 June 2006
• Published date: 03 July 2006
• Year: 2006
• Plaintiff Counsel: Alvin Chang (M & A Law Corporation)
• Citation: [2006] SGHC 114
• Defendant Counsel: Gan Kam Yuin (Bih Li & Lee)
• Court: High Court (Singapore)
• Subject Matter: Plaintiff subcontractor contracting with defendant supplier for supply of goods at fixed prices and on dates determined by plaintiff,Repudiatory breach,Defendant withholding delivery of goods to compel plaintiff to agree to increases in prices of goods such that delivery of goods delayed,Whether defendant's conduct amounting to repudiatory breach of contract,Mitigation of damage,Whether plaintiff obliged to mitigate loss suffered by such breach by accepting defendant's offer to continue to supply goods at original contractual prices,Remedies,Breach,Whether plaintiff entitled to accept defendant's repudiation of contract,Contract,Defendant in repudiatory breach of contract to supply goods to plaintiff

29 June 2006 Judgment reserved.

Tan Lee Meng J:

1 The plaintiff, Highness Electrical Engineering Pte Ltd (“Highness Electrical”), which specialises in installing electrical works in building projects, sued the defendant, Sigma Cable Company (Pte) Ltd (“Sigma”), which manufactures and supplies electrical cables, for loss arising from an alleged breach of a contract to supply the plaintiff with electric cables for one of its projects. Sigma denied breaching the contract in question and asserted that even if it did, most of the losses claimed by Highness Electrical were outside the ambit of the contract.

Background

2 In 2003, Highness Electrical was awarded a subcontract for the installation of electrical works at a building project in Toh Guan Road East (“the building project”). To fulfil its obligations in the building project, Highness Electrical entered into a contract on 17 December 2003 with Sigma for the supply of various types of electrical cables from December 2003 to 31 December 2005.

3 The relevant documents evidencing the contract in question are Highness Electrical’s purchase order dated 8 December 2003, Sigma’s letter dated 16 December 2003 and Sigma’s confirmation order dated 17 December 2003. The total cost of the electric cables to be supplied under the contract was $2,796,884.09, exclusive of goods and services tax. It is common ground that the electric cables were to be delivered progressively over a period of about two years until 31 December 2005 and that the prices quoted by Sigma for the electric cables were only valid until the end of December 2005, by which time the building project was supposed to have been completed. The purchase order issued by Highness Electrical, which was accepted by Sigma, provided that payment for goods ordered under the contract was to be made within 60 to 90 days and that the delivery dates for the goods ordered were to be advised by Highness Electrical.

4 Both Highness Electrical and Sigma had dealt with each other for many years before the contract in question was entered into. Initially, the parties had no real difficulties under the present contract although Highness Electrical was tardy in paying for goods ordered, until this problem was ironed out by 6 December 2004. However, when the price of raw materials for the required electric cables, such as copper and cathode, increased significantly, Sigma wanted to increase the prices for certain types of cables supplied to Highness Electrical and even sought to terminate the contract at an earlier date without just cause. According to Highness Electrical, Sigma deliberately withheld the supply of electric cables ordered by it in order to force it to agree to price increases, a charge denied by Sigma. On two occasions, in July and December 2004, Highness Electrical acceded to the price increases, which amounted to more than $160,000.

5 What is clear is that by early February 2005, Sigma still had not delivered goods ordered several months before that date. Highness Electrical consulted its lawyers, M & A Law Corporation, who wrote to Sigma on 3 February 2005, alleging that the contract had been repudiated by the latter and that the repudiation was accepted by its client.

6 On 30 March 2005, Sigma altered its position and agreed to supply electric cables at the prices originally agreed upon in December 2003. According to Highness Electrical, the offer was irrelevant because it no longer had any confidence in working with Sigma and the latter tried to impose new unacceptable conditions for resuming the delivery of goods, including a “lead time” for manufacturing cables.

7 In June 2005, Highness Electrical instituted this action to recover damages for the loss it had suffered as a result of having to pay higher prices for the electric cables in question. At that time, it was purchasing electric cables that it required for the building project on a piecemeal basis from various sources. It was only in September 2005 that it entered into a contract with Keystone Cable (S) Pte Ltd (“Keystone”) for the supply of electric cables yet to be delivered under its contract with Sigma. Needless to say, the prices under the contract with Keystone were significantly higher than those quoted by Sigma in its contract with Highness Electrical on 17 December 2003.

Whether Sigma repudiated the contract

8 As in many cases of this nature, the position of the party who claims to have accepted a repudiation by the other contracting party depends on whether that other party had committed a repudiatory breach in the first place. In this context, the following words of Buckley LJ in Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361 (“Decro-Wall International”) at 379–380, are worth noting:

Each party to an agreement is entitled to performance of the contract according to its terms in every particular, and any breach, however slight, which causes damage to the other party will afford a cause of action for damages; but not every breach, even if its continuance is threatened throughout the contract or the remainder of its subsistence, will amount to a repudiation. To constitute repudiation, the threatened breach must be such as to deprive the injured party of a substantial part of the benefit to which he is entitled under the contract.

9 As for what is required to deprive the innocent party of a substantial part of the benefit to which he is entitled under the contract, Buckley LJ added at 380 that the test is whether the consequences of the breach are such that “it would be unfair to the injured party to hold him to the contract and leave him to his remedy in damages as and when a breach or breaches may occur”.

10 Buckley LJ’s approach was endorsed by Lord Fraser of Tullybelton in Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1979] AC 757 at 783 and has been adopted in local decisions: see Kool Team Marketing v Pacific Sunwear Pte Ltd [2002] 2 SLR 243 at [40].

11 Sigma certainly acted most unreasonably after the prices of raw materials for the electric cables required by Highness Electrical went up. Having contracted on 17 December 2003 to supply Highness Electrical specified electric cables at fixed prices until the end of 2005, it was neither obliged to reduce prices if the cost of raw materials went down nor entitled to increase prices when the cost of raw materials went up.

12 The first increase in prices demanded by Sigma was in relation to two types of XLPE/PVC electric cables measuring 500mm² and 1,000mm² in conductor size ordered by Highness Electrical under its delivery instruction No HE/DI/04/0037, which was issued on 7 April 2004. By mid-May 2004, only some of the electric cables ordered had been delivered. When Highness Electrical pressed for the delivery of the remaining electric cables, Sigma sought an increase in the prices for the outstanding cables. Under the contract, the agreed prices for cables measuring 500mm² and 1,000mm² were $19.30 and $38.50 per metre respectively. On 8 June 2004, Sigma informed Highness Electrical that the prices for the cables that had been ordered would be increased to $25.50 for the 500mm² cables and $51.60 for the 1,000mm² cables. Highness Electrical had a tight schedule to meet and was liable for delay in completion of its electrical work in the building project. It claimed that it acceded to the price increases only because it urgently needed the cables to complete its work. Only after the increase in prices was agreed to were the remaining electric cables delivered in late June and July 2004.

13 The second round of price increases occurred after Highness Electrical issued delivery instruction No HE/DI/04/0128 on 20 September 2004 for the delivery of two types of XLPE/PVC cables measuring 500mm² and 1,000mm² in conductor size by the first week of October 2004. Sigma did not deliver the cables despite repeated requests. On 18 December 2004, Sigma sent Highness Electrical a fax confirming that the prices for the goods would be increased from $19.30 and $38.50 per metre to $25.50 and $51.60 per metre respectively for the 500mm² and 1,000mm² XLPE/PVC cables. Highness Electrical claimed that it eventually agreed to pay more for the cables because it was in urgent need of them. The cables were then delivered on 20 December 2004 and 4 January 2005. After commencing this action, Highness Electrical discovered from Sigma’s internal documents that the requested cables had been manufactured only after it had agreed to the price increases requested.

14 On 10 January 2005, Sigma made it plain in a letter to Highness Electrical that it was not going to fulfil its contractual obligation to supply electric cables at the prices agreed under their contract of 17 December 2003 and quoted new increased prices to Highness Electrical. The letter was as follows:

[D]ue to the current raw material price increased more than 100%, we are unable [to] meet the old price.

After review[ing] our long-term relationship, we will requote to you as follows:-

…

We hope you can understand our current situation and look forward [to] your acceptance of the above offer by [14/1/05] and the delivery date should be to reconfirm.

15 On 11 January 2005, Highness Electrical rejected the new prices in the following terms:

We regret to inform [you] that we are unable to accept your new pricing.

Kindly refer to your quoted prices as per Order Confirmation...