Inzign Pte Ltd v Associated Spring Asia Pte Ltd

• Jurisdiction: Singapore
• Judge: Chua Lee Ming J
• Judgment Date: 21 June 2018
• Neutral Citation: [2018] SGHC 147
• Court: High Court (Singapore)
• Hearing Date: 12 March 2018,03 October 2017,28 September 2017,26 September 2017,29 September 2017,27 September 2017
• Docket Number: Suit No 1240 of 2014
• Plaintiff Counsel: Ronnie Tan, Beitris Yong and Liew Serenella Yen (Central Chambers Law Corporation)
• Defendant Counsel: Lai Yew Fei and Tao Tao (Rajah & Tann LLP)
• Subject Matter: Contract,contractual terms,Unfair Contract Terms Act,Civil Procedure,defence of set-off,costs,offer to settle
• Published date: 12 April 2019

Chua Lee Ming J: Introduction

The plaintiff, Inzign Pte Ltd, sued the defendant, Associated Spring Asia Pte Ltd, for breach of contract. The defendant filed a counterclaim for the price of goods which the plaintiff failed to take delivery of. On 3 October 2017, I gave judgment for the plaintiff in the sum of $52,111.37, and judgment to the defendant on its counterclaim in the sum of $78,087.60. The defendant then raised its defence of set-off. Although it had been pleaded in the defence, neither party had made submissions on the defence of set-off in closing submissions. I agreed to hear further submissions from both parties on the defence of set-off.

On 12 March 2018, I heard further submissions and decided in favour of the defendant on its defence of set-off. Accordingly, I varied the previous orders that I made on 3 October 2017 to the following orders instead: the plaintiff’s claim was dismissed with costs; and judgment was entered for the defendant on its counterclaim in the amount of $25,976.23 with interest and costs.

On the question of costs, it turned out that the defendant had made offers to settle the plaintiff’s claim and the counterclaim. The offer to settle the plaintiff’s claim exceeded the amount that I found the plaintiff was entitled to, whilst the offer to settle the counterclaim was less than the amount that I found the defendant was entitled to. I awarded the defendant costs on the standard basis until the date of the offer to settle and costs on an indemnity basis thereafter. I fixed the costs at $96,200 plus disbursements to be fixed by me, if not agreed.

Both parties have appealed against my decision. The plaintiff’s appeal is against the whole of my decision given on 12 March 2018. The defendant’s appeal is against my decision awarding $52,111.37 to the plaintiff (which was then set-off against the defendant’s counterclaim), and the costs order.

Background

The plaintiffs were in the business of manufacturing and assembling products for the pharmaceutical and healthcare industries, including asthma inhalers.

In 2003, the plaintiff was approached by IVAX Pharmaceuticals UK Limited (“IVAX”) through the Economic Development Board. IVAX was looking into the manufacture and assembly of asthma inhalers in Singapore. Two of the components required for these inhalers were compression springs and flap valve spring strips (together, “the Springs”). The plaintiff contacted the defendant regarding the manufacture and supply of the Springs.

Both the plaintiff and the defendant held discussions with IVAX’s representatives. IVAX required both the plaintiff and the defendant to undergo a pre-qualification process. From around 2003 to 2004, the defendant took part in this process. The defendant had to show that it would be able to meet the requirements set out in the following documents: Component Vendor Specifications (“CVS”) for the Springs. The CVS set out, among other things, the component specifications, manufacturing process requirements, cleaning requirements, qualification testing against approved Qualification Protocols, and acceptance testing; and Qualification Protocol and Checklists (“QP Checklists) for the Springs. The QP Checklists were used for the qualification of the tooling and secondary manufacturing processes used in the supply of the Springs. Production could commence only upon successful completion of the qualification protocol. IVAX, the plaintiff and the defendant signed the CVS¹ and the QP Checklists.²

The defendant acknowledged that the CVS and QP Checklists required the Springs to undergo a process of cleaning in a “100K cleanroom environment” before packaging (“the 100K Cleaning Process”).³ The 100K Cleaning Process was an additional process after “passivation”. Passivation was a process to make the metal components of the springs passive, through removal of free ions, and to leave a protective film over the surfaces to prevent rust and corrosion; it also involved cleaning the metal components.⁴ However, passivation did not require the use of a 100K cleanroom.

As the defendant did not have the requisite 100K cleanroom facility, it asked to be allowed to use a company called Alantac Industrial Services Pte Ltd (“Alantac”) to carry out the 100K Cleaning Process.⁵ The plaintiff agreed after inspecting Alantac’s 100K cleanroom facility. Alantac was also involved in the pre-qualification process.⁶

The defendant successfully completed the pre-qualification process and IVAX approved the appointment of the defendant as a supplier of the Springs.

Subsequently, the plaintiff and defendant signed a Supply Agreement dated 19 July 2005 (“the Agreement”).⁷ It was not disputed that schedules that were supposed to have been attached to the Agreement were not in fact attached. One of these was Schedule 2. Schedule 2 was to have set out the “technical and quality specifications and relevant drawing” which the defendant was to comply with in manufacturing the Springs (Article 4.2 read with Article 1).⁸ The Agreement further provided that the defendant shall deliver each batch of Springs to the plaintiff with a Certificate of Compliance (“COC”) stating that the Springs met the specifications (Article 4.4(f)).⁹

Another schedule which was not attached to the Agreement was Schedule 3, which was to have set out the prices at which the defendant was to supply the Springs to the plaintiff (Article 6.1).¹⁰

Further, the Agreement envisaged that the defendant would agree on the period within which the defendant must deliver the Springs to the plaintiff’s facility once the plaintiff confirmed its requirements via the Vendor Delivery Schedule (Article 4.4(a)).¹¹ The defendant was to manufacture and deliver the Springs in accordance with the dates and quantities specified in the “Vendor Delivery Schedule” (Articles 4.4(d)–(e)).¹² However, no such schedule was provided by the plaintiff to the defendant.

Thereafter, the plaintiff and the defendant transacted between themselves in the following manner: The defendant would send the plaintiff a quotation for the Springs.¹³ The quotation would set out, among other things, the unit prices of the compression springs and flap valve spring strips and the production lead time. The plaintiff would place a purchase order (“PO”) setting out, among other things, the quantity and delivery schedule.¹⁴ Some of these POs were blanket orders which allowed the plaintiff to activate deliveries of requisite quantities according to its needs. The defendant would confirm acceptance of the plaintiff’s PO and send it back to the plaintiff. Thereafter, the defendant would deliver the Springs to the plaintiff with a delivery order (“DO”)¹⁵ and invoice¹⁶ the plaintiff.

Each batch of the Springs delivered by the defendant was accompanied by a COC signed by the defendant. Among other things, the COC certified the following:¹⁷

CLEANING:	ULTRASONIC WASH AND PACKED IN CLASS 100K CLEANROOM
...
We certify that the items in this shipment have been inspected and met all customer specifications.…

Sometime in December 2012, the plaintiff discovered that some of the compression springs supplied by the defendant were stained. The plaintiff conducted internal investigations which included cleaning the springs manually and cleaning the assembly machines on its premises. However, the plaintiff’s internal investigations could not ascertain the cause of the stains.

The plaintiff then turned its attention to possible external causes. Sometime in February or March 2013, the plaintiff learnt from Alantac that it had not received Springs for washing from the defendant for certain periods of time. In July 2013, the plaintiff conducted an audit of the defendant’s premises and confirmed that the defendant had not been complying with the 100K Cleaning Process.

The defendant did not dispute that it did not send some of the Springs to Alantac for cleaning. However, the defendant alleged that it had no contractual obligation to carry out the 100K Cleaning Process whether by itself or through Alantac.

In August 2013, the plaintiff asked for the COC confirming compliance with the 100K Cleaning Process to be issued by Alantac. Thereafter, the defendant delivered the Springs together with COCs issued by Alantac.

It was not disputed that subsequently, the plaintiff did not take delivery of 153,200 compression springs and 820,000 flap valve spring strips, (“the Outstanding Orders”) the total value of which amounted to $78,087.60.

The plaintiff’s claims

The plaintiff’s case was that the defendant had breached its contractual obligations in supplying Springs which had not undergone the 100K Cleaning Process. The plaintiff’s claims were for various losses alleged to have been caused by this breach.

The plaintiff did not pursue all of its claims as pleaded in its statement of claim. In its closing submissions, the plaintiff proceeded with the following claims:¹⁸ $63,688.69 being the costs incurred in conducting internal investigations into the stained Springs supplied by the defendant; $315,398.55 (or in the alternative, $485,366.17, which the Plaintiff claimed was the original value of the missed shipment), being the losses suffered as a result of a missed shipment to IVAX in December 2012. The plaintiff claimed that the missed shipment was a consequence of the internal investigations that had to be carried out due to the discovery of the dirty compression springs; and $92,310.19 being the loss suffered by the plaintiff in respect of Springs which were not sent to Alantac for the 100K Cleaning Process from 2008 to 2013.

The defendant’s counterclaim

The defendant claimed the sum of $78,087.60 being its loss arising from the Outstanding Orders which the defendant claimed the plaintiff had wrongfully failed to take delivery of.

The issues

The issues in this...