Kenwell & Company Pte Ltd v Southern Ocean Shipbuilding Company Pte Ltd

CourtHigh Court (Singapore)
Judgment Date17 June 1998
Date17 June 1998
Docket NumberSuit No 1836 of 1995

[1998] SGHC 421

High Court

Warren L H Khoo J

Suit No 1836 of 1995

Kenwell & Co Pte Ltd
Southern Ocean Shipbuilding Co Pte Ltd

Goh ChoonWah (Ang & Partners) for the plaintiff

Govindaraju Ramiah and Chng Li Ling (Wee Ramayah & Partners) for the defendant.

Consmat Singapore (Pte) Ltd v Bank of America National Trust & Savings Association [1992] 2 SLR (R) 195; [1992] 2 SLR 828 (distd)

Zinnia, The; Stag Line Ltd v Tyne Ship Repair Group [1984] 2 Lloyd's Rep 211 (refd)

Application of English Law Act (Cap 7A, 1994 Rev Ed)

Civil Law Act (Cap 43,1988 Rev Ed)s 5 (consd)

Unfair Contract Terms Act1977 (c 50) (UK) ss 1 (3), 3, 11 (consd);ss 3 (1),11 (1), 11 (4),11 (5)

Contract–Contractual terms–Exclusion clauses–Whether reasonable–Burden of proving reasonableness of exclusion clause–Sections 1 (3), 3 and 11 Unfair Contract Terms Act 1977 (c 50)–Contract–Contractual terms–Standard conditions of contract on reverse of work orders–Whether conditions forming part of contract–Contract–Remedies–Damages–Causation–Delay in repair works to vessel–Whether delay critical to completion of works as whole–English Law–Applicability–Agreement pre-dating Application of English Law Act (Cap 7A, 1994 Rev Ed)–Issue concerning mercantile law generally–Section 5 Civil Law Act (Cap 43, 1988 Rev Ed)–Unfair Contract Terms Act 1977 (c 50)

The plaintiff Kenwell engaged the defendant SOS and other contractors to carry out repairs to its vessel. Kenwell claimed damages for the delay in the overhaul works, and the cost of making good defective repairs done by SOS. SOS relied on cl 9 of the standard conditions, which purported to, inter alia, limit its liability for negligence to S$5,000, and relieve it of any liability for loss of profit, or loss of use of the vessel, or damages consequential on such loss of use. Two issues came before the court's consideration. The first related to the question of causation: (a) whether SOS was responsible for the delays complained of; and (b) whether the standard conditions were part of the contract, and how far they were applicable to limit or exclude the SOS's liability. SOS also counterclaimed for the cost of the repair and other work done and services provided.

Held, allowing the plaintiff's claim in part and the defendant's counterclaim:

(1) Kenwell had to prove causation if it was to succeed in its claim for loss and damage arising from allegations of delay. Kenwell had to show that SOS's delay was critical to the timely completion of the project as a whole. The claim for delay was considered by reference to two distinct periods - the first from March 1989 to the first sea trial in mid-March 1992, and the second from then till March 1993, when the vessel was put into service: at [22] and [25].

(2) In respect of the first period, Kenwell did not prove that SOS's delay in the overhaul of the main items of equipment substantially caused the delay in getting the vessel ready for the first sea trial. The evidence showed a lack of co-ordination by Kenwell, both in terms of timing of the award of the repair works to various contractors and in terms of the works to be done by various contractors: at [24] and [26].

(3) In respect of the second period, delay was caused by shoddy and negligent work by SOS's subcontractors and by SOS's delay in accepting responsibility for the re-overhaul of the engine. Kenwell was thus entitled to claim loss incurred from mid-March 1992 to end-August 1992, when the re-overhauled engine was reinstalled, subject to consideration of the provisions of SOS's standard conditions of contract: at [30] and [31].

(4) SOS's standard terms of contract formed part of the contract between the parties, not least because Kenwell signed the work orders, but Kenwell probably knew about the existence if not the details of the standard conditions: at [42].

(5) As the contract pre-dated the enactment of the Application of English Law Act (Cap 7A, 1994 Rev Ed), and the issue in this case concerned mercantile law generally, the UK Unfair Contract Terms Act 1977 (c 50) (“the Act”) applied by virtue of the repealed s 5 of the Civil Law Act (Cap 43, 1988 Rev Ed). Under s 3 of the Act, SOS could not rely on cl 9 to exclude or limit its liability except unless it satisfied the requirement of reasonableness under s 11 of the Act. Under s 11 (5) of the Act, it was SOS's burden to prove the reasonableness of cl 9: at [44] to [46], [49], [50] and [52].

(6) The fact that the parties were business or commercial entities dealing with each other in the course of business did not go towards satisfying the reasonableness requirement. The protection provided by the Act extended not only to those who entered into contracts as consumers; it also extended to any party, consumer or not, who entered into a contract on the other party's written standard terms. A party who apparently willingly entered into a contract was not prevented from subsequently raising questions of reasonableness. While a provision commonly found in an industry could be reasonable by being in common use, it could also be unreasonable. The more unreasonable a contractual provision appeared to be, the greater the burden on the party seeking to rely on it. Whether a contractual term satisfied the requirement of reasonableness depended on the facts of each case. In this case, SOS failed to show that cl 9 was reasonable: at [57] to [62].

(7) Judgment was entered for Kenwell's loss resulting from the delay in the period from 15 March 1992 to 31 August 1992, to be assessed, the full cost of re-overhauling the engines, half the cost of replacing one generator and two turbochargers, and the price of electrodes supplied to SOS. Judgment was also entered on SOS's counterclaim, to be assessed: at [72] and [73].

Judgment reserved.

Warren L H Khoo J

1 The plaintiffs claim damages for delay in the repair by the defendants of certain equipment of their vessel. They also claim the cost of making good allegedly defective repairs done by the defendants. The defendants, on the other hand, counterclaim for the cost of the repair and other works done and facilities and services provided.

2 The plaintiffs had just bought the vessel second-hand, with a view, according to them, of using her for their chandlery business to serve ships in the Singapore harbour. The plaintiffs engaged contractors to carry out repairs to the vessel. This was being done at Southern Ocean's wharf on the seafront in Jurong. Southern Ocean at that stage merely provided berthing space, but had no part in doing any of the repair work. However, on 20 February 1989, by a mishap, the vessel got grounded. Its interior, including the engine compartment, was submerged in seawater. Repairs of the sea damage had to be done in addition to those that were being carried out.

3 Mr How Seen Ghee, the managing director of the plaintiffs, and Mr Pong, the managing director of Southern Ocean, who knew each other, entered into discussions with a view to the vessel being hauled up on to Southern Ocean yard so as to allow the repairs to be carried out. Southern Ocean was to be given only some of the repair work to do, the rest to be given by the plaintiffs to their other contractors. This is how Southern Ocean came to be involved in the repair of the vessel.

4 Southern Ocean did not have any slipway for up-slipping the vessel. A temporary slipway had to be constructed. This was completed on 11 March, and the vessel was hauled up on that day. It is not in dispute that Southern Ocean contracted to overhaul the main engines, generators and gearboxes. On 17 March, Clipper Lim, the plaintiffs' man in charge of overseeing the repair works, signed a work order on Southern Ocean's usual form to this effect. The work order, at least the original in Southern Ocean's possession, contains Southern Ocean's standard terms and conditions, including clauses limiting Southern Ocean's liability. There are questions as to whether the standard terms and contains were part of the contract and how far they are applicable to limit or exclude Southern Ocean's liability. Similar questions arise in relation to two subsequent work orders for other works dated 5 October 1990 and 23 February 1991. I shall deal with these questions later.

The delay claim: the facts

5 The plaintiffs' delay claim is founded on alleged delays in the execution of the overhaul work on the equipment I have just mentioned,ie the main engines, the generators and the gearboxes. The vessel, as I said, was grounded on 20 February 1989. It was refloated the next day. The parties blame each other for the subsequent delays in attending to the overhaul work. There are also significant differences of evidence as to dates when things were done and so on. Thus, there is a difference of evidence as to when these pieces of equipment were removed from the vessel for overhaul. According to Clipper Lim, this was on 2 March while the vessel was still on water. But according to Mr Teo, Southern Ocean's project manger, they were not removed until two weeks after the work order was signed. Mr Teo says he did not start on any work until the work order had been signed. Even then, he says, a further two weeks' time was needed for preparatory work to be done before the equipment could be removed.

The main engines

6 Another difference in evidence is in regard to when the main engines were taken to Fumar's workshop. According to Clipper Lim, they were left lying in Southern Ocean's yard until early June before Fumar took them away. But according to Mr Teo, they were taken away at the end of March, as soon as they had been taken off the vessel.

7 At the workshop, the main engines had to be taken apart for Clipper Lim to inspect. Here, again, Lim and Teo differ as to when the engines were ready for Lim's inspection. Lim says it was not until June before they were ready for him to inspect, but Teo says they...

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