Humboldt Shipping Co Ltd v Zalco Marine Services Pte Ltd

• Jurisdiction: Singapore
• Judge: Amarjeet Singh JC
• Judgment Date: 08 November 1997
• Neutral Citation: [1997] SGHC 293
• Date: 08 November 1997
• Subject Matter: Sale and purchase of ship,Breach of contract,Whether purchasers in breach of contract to purchase ship,Whether damages could be equal to sum of unpaid deposit to be forfeited in event of breach by purchaser,Measure of damages,Contract,Purchasers' failure to complete and take delivery of ship,Discharge,Purchasers' failure to sign agreement,Correspondence by telexes through brokers,Whether signing of agreement a mere formality or condition precedent to contract,Breach
• Docket Number: Suit No 1248 of 1996
• Published date: 19 September 2003
• Defendant Counsel: Brij Raj Rai and Lee Yean-Lin (Rajah & Tann)
• Court: High Court (Singapore)
• Plaintiff Counsel: Ian Koh and John Seow (Drew & Napier)

Judgment:

AMARJEET SINGH JC

The plaintiffs/respondents (plaintiffs), incorporated in Cyprus, owners of the ship `Anna Spiratou` and the defendants/appellants (defendants), a locally incorporated company, exchanged offers and counter offers by telexes through their respective experienced and professional ship sale and purchase brokers for the sale by the plaintiffs to the defendants of the aforementioned ship. It was also envisaged by the telexes that a memorandum of agreement (MOA) in a suitably amended Norwegian Sale Form 1987 (NSF 87) would be executed. The correspondence by telex provided for payment of a deposit of 10% of the purchase price (US$500,000) into a joint account at the plaintiffs` nominated bank within three days of the signing of the MOA on fax. The telex communications being concluded, the defendants` broker sent to the plaintiffs` broker a `recap` telex. The plaintiffs` broker responded with their own recap telex as reflecting in their view the correct position and sent an MOA based on their recap telex to the defendants` broker for the defendants` signature and return. The defendants on receiving the MOA failed to execute it by the required date or after extensions granted.

2.The plaintiffs claimed US$500,000 being 10% deposit of the purchase price arising out of the defendants` repudiatory breach of contract to purchase and take delivery of the said ship.

3.At the conclusion of the hearing, I made the following orders against which the defendants are dissatisfied and now appeal:The plaintiffs are hereby granted a declaration:

1

(i) that there is a binding contract between the plaintiffs and the defendants concerning the purchase of the ship `Anna Spiratou` by the defendants from the plaintiffs;

(ii) there was repudiatory breach of the contract by the defendants of the same and

(iii) that the plaintiffs are entitled to a deposit of US$500,000 with 12% interest from the date of issue of their writ in respect thereof and the defendants do make the said payment to the plaintiffs;

2 defendants to pay plaintiffs the costs of this action. Costs to be taxed or agreed between the parties.

4.The appeal raises the question of whether a concluded contract existed between the vendors and purchasers of a ship made through their respective brokers where: (i). they have exchanged telex messages as to all material terms;

(ii). the telexes provided for the execution of the MOA which consisted of an amended Norwegian Sale Form 1987 (NSF 87);

(iii). the MOA is not thereafter signed when forwarded to the purchasers and the purchase deposit remained unpaid;

. or

whether the respective parties intended that the existence of a formal contract by way of a signed MOA was to be a condition precedent to the payment of the initial deposit and of binding relations between them; . and further,

if there was in existence a valid contract and the defendants were in breach of it,

whether the plaintiffs were entitled to claim the deposit with interest or on the other hand damages/compensation to be proved.

5.Evidence adduced on behalf of the plaintiffs was briefly this.

5.1.On 23 March 1996 the defendants` shipping broker Jonathan Southern (Jonathan) of Braemar in London, United Kingdom, sent to the plaintiffs` broker John Lawrence Bonsor (Bonsor), PW1, a director of P Wigham-Richardson in Piraeus, Greece, a telex, PB1, (first telex) consisting essentially of paras 1 to 11 offering under the first clause of para 1 , to purchase the plaintiffs` ship as follows:

On behalf of clients tbn by zalco shipping, we hv been authorised to offer as follows. This is firm for reply 1700 hrs London time 23 Feb 1996:

B/C `Anna Spiratou` abt 25,200 dwt blt 78 ccn Maua

1 Price USD4,700,000 (four million seven hundred American dollars) less 3 percent.

Buyers to lodge 10 pct deposit into joint account at sellers nominated bank within 3 working days of signing MOA on fax.

Balance of purchase funds to be paid to sellers nominated account on delivery and in exchange for buyers required delivery documentation.

The defendants` offer to purchase was at all times made on the basis that the ship which was then on time charter be free of charter on the date of delivery as set out in para 3 of their first telex.

5.2.The plaintiffs` broker replied by telex, PB12, the same day responding to each paragraph and countering with their higher price in cl 1 of para 1 and proposing amendments to cll 2 and 3 of para 1 all of which reads as follows:

Thks buyers offer which we now instructed to counter to as follows firm for reply here within 1200 hours Athens time Monday 26/2/96

1 Price USD5,400,000 cash less 3 pct your side

Second para after nominated insert `London` third para to read

`Balance of purchase funds to be paid free of bank charges to the sellers nominated London bank on delivery of the vessel against presentation of delivery documentation as reasonably required by buyers for change flag/registration`.

5.3.The defendants` broker responded by telex, PB19, on 26 February 1996 by stating in respect of para 1:

Byrs thank sllrs for their last and hv instructed us to reply on an accept/except bss firm for reply within 1700 hrs London time 26 Feb 1996.

1 Price USD4,750,000 less 4 pct commission.

5.4.Thereafter the offers and counter offers by each party mainly as to the price continued. The defendants` broker each time replied on the same `accept/except bss`.

5.5.PW1 explained `accept/except bss` as follows:

` accept/except bss` means ` accept previous counter but with following alternatives which explains " except". BSS means basis` .

PB12 is a firm offer made by plaintiffs. Defendants responded by PB19. PB19 is defendants` letter. Under para 1, PB19 the defendants `accepted` second and third paragraphs of PB12 but `excepted the price`.

5.6.Apart from addressing the question of the purchase price by increasing it steadily in various counter telexes thereafter, there was no `except` taken or alternatives expressed by the defendants to the amendments of cll 2 and 3 of para 1 of the defendants` first telex.

5.7.On 28 February 1996 the plaintiffs` and defendants` respective brokers agreed on the price of US$5m on the telephone for the sale and purchase of the ship. The plaintiffs then by cl 1 of para 1 of their telex, PB40, on 28 February 1996 reconfirmed acceptance of the defendants` offer of the purchase of the ship at US$5m. Within minutes afterwards the plaintiffs received a telex, PB38, as follows sent by the defendants on the outstanding matter as shown by the numbered paras 1, 3 and 9 :

This for confirmation only for reply by 1600 hrs 28 Feb 1996:

1 price usd5,000,000 cash less 3 pct;

3 agreed sllrs last;

9 agreed sllrs last

end offer;

await yr confirmation

Regards

Braemar

5.8.The sale and purchase continued though in the meantime, to be subject to cancellation of the current time charter. The plaintiffs had all along been actively negotiating with the charterers to free the ship from the time charter.

5.9.The defendants` broker on the same day, on 28 February 1996, also sent another telex, PB42, to the plaintiffs` broker thanking them again for the confirmation and looked forward to the plaintiffs lifting their `subject` by 1600 hours London on Friday 1 March 1996. This meant freeing the ship from its time charter by the time of its delivery date. The defendants` broker also stated that as `a favour` he would prepare and send a recap the next morning.

5.10.On 29 February 1996 the defendants` broker sent to the plaintiffs` broker a `recap, PB44/45, of his understanding of the telexes exchanged`.

5.11.The plaintiffs` brokers on 29 February 1996 on receiving the defendants` broker`s recap some hours later, forwarded to the defendants their understanding of the recap, PB46/46A, of the telexes as well as informing the defendants` broker in an ` end ` note that the plaintiffs had lifted their `subject` and the sale was ` outright ` (emphasis added). The plaintiffs` broker`s recap was different from the defendants` broker`s recap. The difference is reflected in the original cll 2 and 3 of para 1 of the telex sent by the defendants and the amendments made by the plaintiffs as reproduced earlier. PW1 testifying when asked if he rejected the defendants` recap in PB44 had answered:

Yes. The effect of stating my understanding in PB46 and PB46A is to reject those paragraphs in PB44 and PB45 as may be different from what I have set out in PB46 and PB46A.

According to PW1 a recap was just an accurate summary of an agreement reached. PW1 was questioned that his amendment of cl 3 of para 1 relating to supply of documents to defendants as `reasonably required` had been a restrictive amendment. He denied the same replying that he had earlier stated that the amendment made was to prevent an unreasonable request for documents. He further added:

I have done over 300 deals over 20 years - buying and selling ships. I have never seen a deal lost over a dispute over documentation.

However, when informing the defendants on his understanding of the recap, the defendants` broker had sent to his clients, the defendants, the contents of the recap sent by the plaintiffs` broker as shown in DB19/20.

5.12.On 29 February 1996 in a fax, PB56, the plaintiffs` broker asked the defendants` broker to immediately obtain from the defendants a list of documents the defendants wanted. On 29 February 1996 the plaintiffs` broker further faxed, PB62, the defendants` broker an MOA for their comment as to alterations, spelling, errors etc. Paragraphs 2 and 13 of the faxed MOA are material and they read as follows:

2 Deposit

As a security for the correct fulfillment of this contract, the buyers shall pay a deposit of 10% - ten per cent - of the purchase money within three (3) banking days from fax copies of this agreement being signed. This amount shall be deposited with ANZ Grindlays Bank Plc, Minerva House, 7 Montague Close,...