Holcim (Singapore) Pte Ltd v Kwan Yong Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu J
• Judgment Date: 11 December 2008
• Neutral Citation: [2008] SGHC 231
• Docket Number: Suit No 291 of 2007
• Date: 11 December 2008
• Year: 2008
• Published date: 17 December 2008
• Plaintiff Counsel: Chandra Mohan with V Jesudevan (Rajah & Tann LLP)
• Citation: [2008] SGHC 231
• Defendant Counsel: Chung Khoon Leong John and Jasmin Yek (Kelvin Chia Partnership)
• Court: High Court (Singapore)
• Subject Matter: Economic,Whether sand ban amounted to force majeure,Whether agreements were entered into without valuable consideration and was unenforceable at law,Whether agreements were made under economic duress and hence unenforceable at law,Force majeure,Contractual terms,Increase in price of ready-mixed concrete due to ban on export of sand to Singapore,Whether reasonable steps taken to mitigate damages caused,Frustration,Duress,Damages,Express terms,Whether contract was frustrated by sand ban so that supplier was discharged from further performance,Variation,Subsequent agreements by parties to vary price of concrete originally supplied,Mitigation,Contract,Contract for supply of ready-mixed concrete

11 December 2008 Judgment reserved

Lai Siu Chiu J:

1 This was a dispute concerning the supply of ready-mix concrete (“concrete”) by Holcim (Singapore) Pte Ltd (“the plaintiff”) to Kwan Yong Construction Pte Ltd (“the defendant”). The plaintiff is a manufacturer and supplier of concrete to the construction industry while the defendant, as its name implies, is a local construction company.

2 On 17 August 2006, the defendant was awarded a contract by the Ministry of Education (“MOE”) to rebuild Pei Tong Primary School located at Clementi Avenue 5, Singapore (“the project”) at a contract sum of $16.8m. The commencement date was 28 August 2006 while the contractual completion date was 27 February 2008. In the event of delay in completion of the project, the defendant was liable to pay liquidated damages to the MOE at $3,150 per day for each day of delay.

3 On 28 August 2006, the plaintiff and the defendant entered into an agreement for the supply of concrete by the plaintiff to the defendant. The terms of the contract are set out in the plaintiff’s quotation dated 25 August 2006 (“the Quotation”) and contained the following salient clauses:

3 The Purchaser must provide sufficient advance notice in confirming each order. The Supplier shall be under no obligation to supply the concrete if the said supply has been disrupted by virtue of inclement weather, strikes, labour disputes, machinery breakdowns, riots, and shortage of materials, Acts of God or any other factors arising through circumstances beyond the control of the Supplier.

…

12 The Supplier reserves the right to suspend the concrete supply without notice in the event of exceeding or default in payment of the agreed credit terms and recover such outstanding payment plus legal costs, expenses and interest accrued thereon.

…

21). Default in supply

Where the order is duly made and the Supplier failed (sic) to deliver to site within the stipulated time, the contractor shall be entitled to seek other source for the supply and the difference in cost shall be borne by (sic) Supplier by way of offset from the account.

Standard Terms and Conditions

All prices are fixed till 31^st December 2006, thereafter, an increase of $2.0/m3 for period of Jan ‘07 to Jun ’07 and additional increase of $2.0/m3 for period of Jul ’07 to Dec ‘07 for all grade (sic) of concrete.

Payment Terms 30 60 days.

Clause 21 was a handwritten insertion by the defendant. Amongst the grades, the plaintiff quoted a pump price of $68 per cubic metre (“m³”) for grade 40 concrete.

4 Pursuant to the Quotation, the plaintiff delivered concrete to the defendant between 1 June 2006 and 25 January 2007 for which invoices were issued. The invoices totalled $175,142.66 and these sums were not paid by the defendant.

5 On 24 January 2007, the Indonesian authorities announced the ban of sand exports to Singapore with effect from 5 February 2007 (“the sand ban”). This caught the construction industry as well as the Building and Construction Authority (“the BCA”) off guard. All sand used in the building industry had been sourced from Indonesia.

6 On 26 January 2007, the plaintiff notified the defendant of the possible stoppage of supply of sand due to the above reason.

7 As a consequence of the sand ban, the parties agreed on 29 January 2007 to vary the price of the concrete supplied under the Quotation by increasing it by $35 for all grades (“the January Agreement”). Pursuant to the January Agreement, the defendant continued to order concrete from the plaintiff who continued to supply the same between 29 January 2007 and 1 November 2007. The total value of concrete supplied under the January Agreement was $60,843.30 which the defendant admitted it failed to pay.

8 On 1 February 2007, the BCA announced that it would release sand from the government stockpile at $25 per tonne (“the government price”) but only to contractors for their onward delivery to concrete suppliers such as the plaintiff. The government price was much higher than the price the plaintiff had paid for sand from Indonesia previously. Accordingly, the plaintiff wrote to the defendant (at AB57) on the same day to advise that it was unable to supply concrete based on the Quotation and it would be revising its prices with immediate effect.

9 The BCA then announced to members (including the defendant) of the Singapore Contractors Association Ltd (“SCA”) on 3 February 2007 that to assist contractors, there would be a cost-sharing initiative for public projects in that the government would absorb 75% of the price increase of concrete with the remaining 25% to be shared between contractors and concrete suppliers. Hoarding of sand was not allowed.

10 On 1 March 2007, the BCA increased the price of sand from $25 to $60 per tonne. The price of 20mm aggregate was increased from $25 to $70 per tonne after some 13 barges transporting aggregate to Singapore were detained by the Indonesian authorities in late February. By March 2007, there was a granite embargo by Indonesia.

11 On 1 March 2007, the parties agreed to vary the terms of the January agreement by a second quotation no. HSPL/Q/387/07 (“the March agreement“) the salient terms of the second quotation were as follows:

B. Standard Terms & Conditions

…

3 This quotation supersedes all previous quotations.

C. Terms of payment

14 days from the date of invoice

…

13 Any overdue interest at the rate of 1% per month shall be imposed on the portion of debt that remains unpaid upon expiry of the agreed credit term.

12 Together with the March agreement, the plaintiff forwarded a letter also dated 1 March 2007 (at AB 83) to the defendant in which it explained the circumstances for the price increase and indicated that it was prepared to give credit to the defendant if the latter could supply sand and aggregates (two major components in the manufacture of concrete) to the plaintiff. Such credit would be in accordance with the price guidelines set by the BCA, viz $63 per tonne for sand and $73 per tonne for 20mm aggregate.

13 The defendant responded with a purchase order dated 2 March 2007 (“the PO”) to the plaintiff for 440 m³ of G40 pump mix concrete at the plaintiff’s quoted price of $191 per m³. It also supplied the plaintiff with 401 tonnes of sand to enable the plaintiff to fulfil its order which the plaintiff did on 6 March 2007. The plaintiff took the precaution of writing to the defendant on 2 March 2007 to say that the prices of concrete would be those as reflected in the March agreement.

14 The plaintiff issued two invoices totalling $93,857.40 to the defendant for concrete it had delivered in March 2007. The defendant did not pay these invoices. The plaintiff suspended supplies of sand to the defendant as a result. The total amount due and outstanding from the defendant for concrete supplied between December 2006 and March 2007 was $330,935.36.

15 On 13 March 2007 (AB94-95), the defendant wrote to the plaintiff (apparently after taking legal advice) referring to the defendant’s letters dated 1 February 2007 (at [8]) and 1 March 2007 (at [11]) and protested that the plaintiff’s price increase was in breach of the contract in [3]. The defendant contended that the plaintiff’s aforesaid two letters and its refusal to supply the defendant with concrete at previously agreed prices evinced an intention not to be bound by the terms of the contract and amounted to a repudiatory breach which breach the defendant accepted. The defendant gave notice it would claim for loss and damages resulting from the disruptive effects caused by the plaintiff’s refusal to supply any more concrete to the former.

16 The plaintiff sent a letter of demand to the defendant on 19 March 2007 (at AB99-100) for sums totalling $330,935.36 for concrete supplied (not including interest for late payment). Notwithstanding its failure/refusal to pay the plaintiff’s outstanding claim, the defendant placed orders with the plaintiff on 22 and 27 March 2007 for grade 40 concrete to be delivered. The plaintiff did not accede to the defendant’s requests.

17 The defendant replied on 4 April 2007 (at AB109) to the plaintiff’s letter of demand in [15] to say that due to the plaintiff’s wrongful repudiation of the Quotation, the defendant intended to set off its claim for damages for breach of contract against the plaintiff’s claim. Accordingly, no payment was due to the plaintiff.

18 The plaintiff’s solicitors sent a letter of demand to the defendant on 16 April 2007 (AB110) for the sum of $305.153.40. The defendant’s solicitors replied on 19 April 2007 (at AB113) to deny the plaintiff’s claim and alleged that it was the plaintiff who was in breach of contract.

The pleadings

19 Not surprisingly, the plaintiff commenced these proceedings on 9 May 2007 claiming the sum of $305,153.40. The claim amount was $330,935.36 but the defendant was credited with $25,781.96 (inclusive of GST) for 389.75 metric tons (@$63 per metric ton) of sand it had delivered to the plaintiff in March 2007 (see [12]).

20 The plaintiff relied on cl 3 of the Quotation at [3] to say it was entitled to suspend performance of its obligations under the contract from or around the time of the sand ban.

21 The plaintiff then pleaded (in para 23B of the statement of claim) as an alternative that due to the sand ban, the plaintiff’s obligations were rendered radically different from what was originally undertaken in the Quotation, performance had become impossible without the fault of the plaintiff, the contract was frustrated and the plaintiff was discharged from further performance.

22 In the defence (Amendment No. 3), the defendant denied it had entered into the January agreement in [7]. The defendant alleged that its site manager Lee Kong Honn (“Lee”) had no alternative but to agree to the surcharge imposed by the plaintiff’s account manager Pek Leng (“Pek”) of $35 per m³ in order to ensure a supply of concrete for the project. Consequently, the defendant pleaded,...