National Foods Ltd v Pars Ram Brothers (Pte) Ltd

• Jurisdiction: Singapore
• Judgment Date: 23 April 2007
• Date: 23 April 2007
• Docket Number: Civil Appeal No 118 of 2006
• Court: Court of Appeal (Singapore)

National Foods Ltd

Plaintiff

and

Pars Ram Brothers (Pte) Ltd

Defendant

[2007] SGCA 23

Chan Sek Keong CJ

,

Andrew Phang Boon Leong JA

and

Lai Siu Chiu J

Civil Appeal No 118 of 2006

Court of Appeal

Contract–Contractual terms–Implied terms–Sale of goods–Contracts for sale of dried ginger slices for export to Pakistan–Ginger slices heavily contaminated with mould and having high ash content–Whether implied conditions of quality and fitness for purpose under Sale of Goods Act breached–Sections 14 (2), 14 (3) Sale of Goods Act (Cap 393, 1999 Rev Ed)–Contract–Contractual terms–Implied terms–Sale of goods–Whether additional term that ginger slices would not contain more than 7% ash content could be implied into contract–Section 14 (1) Sale of Goods Act (Cap 393, 1999 Rev Ed)–Commercial Transactions–Sale of goods–International sale contracts–Contract for sale of ginger slices for export to Pakistan–Whether Sale of Food Act and Food Regulations applicable where sale of food products under contract not for sale in Singapore –Food Regulations (Cap 283, Rg 1, 2005 Rev Ed), Sale of Food Act (Cap 283, 2002 Rev Ed)

The respondent, a locally-incorporated company, entered into four identical contracts (“the Contracts”) to sell dried ginger slices of Chinese origin to the respondent, a company incorporated in Pakistan. When the ginger slices arrived in Karachi, the appellant discovered that they were heavily contaminated with mould, had high moisture levels, high ash content and were very dirty and full of dust. Efforts to clean and dehydrate the ginger in order to make it fit for use were futile.

As a result, the appellant commenced the present action. It argued that there had been a breach of the implied conditions of quality and fitness for purpose under ss 14 (2) and 14 (3) of the Sale of Goods Act (Cap 393, 1999 Rev Ed) (“the SOGA”). The appellant also argued that it was an implied term of the contract that the ash content of the ginger slices should not exceed 7% and such an implied term had been breached.

In the court below, the trial judge (“the Judge”) dismissed the appellant's claim. In relation to s 14 (2) of the SOGA, the Judge found that the appellant had not discharged its burden of proving that the ginger slices were not of satisfactory quality. The Judge also found that the condition implied by s 14 (3) of the SOGA had not been breached as the appellant had failed to show that the ginger slices were not reasonably fit for the purpose of usage in food products.

Held, allowing the appeal:

(1) The Sale of Food Act (Cap 283, 2002 Rev Ed) (“the SFA”) and the Food Regulations (Cap 283, Rg 1, 2005 Rev Ed) applied to the Contracts. It could be inferred from the definition of “import” under s 2 of the SFA that only food which was merely on transit in Singapore, in the sense that it would not land or be transhipped in Singapore, would not be subject to the SFA. On the facts, the ginger slices had “landed” in Singapore: at [23], [24] and [27].

(2) As the ginger slices were sold as spices or condiments, reg 227 of the Food Regulations (“Reg 227”) applied to the Contracts. Where ginger was sold, it was normally sold as a food product and in particular, where dried ginger was sold, it was normally sold as a spice or condiment. If a seller wished to dispute the fact that dried ginger slices were not sold as spices or condiments, it bore the burden of proving that they were sold as something else. Here, the respondent failed to prove that the ginger slices were sold as something other than spices or condiments: at [31] and [32].

(3) Under s 14 (1) of the SOGA, in so far as the quality or fitness for any particular purpose of goods supplied under a contract of sale was concerned, the terms implied by the SOGA were exhaustive. Section 14 (1) thus prevented the implication of contractual terms other than those already stipulated in ss 14 and 15. It was therefore not an implied term of the Contracts that the ginger slices would contain ash content of not more than 7%: at [43] and [44].

(4) In many sales, the standards required by ss 14 (2) and 14 (3) of the SOGA would coincide because the particular purpose for which the goods were required would usually be that for which the goods were commonly supplied. In such cases, a breach of s 14 (2) would usually signify a breach of s 14 (3). However, the court would not find a breach of s 14 (3) if it found that the buyer had not relied on the skill or judgment of the seller, or that such reliance was unreasonable in the circumstances: at [53] and [55].

(5) In transactions where the buyer required the goods to possess some special quality to enable him to use them for some special purpose, and the buyer made known to the seller such special purpose, the standards exacted by s 14 (3) would be higher than those exacted by s 14 (2). In these cases, the seller was liable if the goods were not reasonably suited for that special purpose, even though they may be of satisfactory quality in general: at [54].

(6) In ascertaining whether s 14 (2) had been breached, the factors listed in s 14 (2B) were non-exhaustive aspects of quality that should be taken into account only in appropriate cases and were not absolute requirements: at [60].

(7) The factor of “freedom from minor defects” (s 14 (2B) (c) of the SGOA) was not a good indicator of quality in agricultural products where freedom from minor defects may be impossible to achieve. This aspect of quality was mainly targeted at mass-produced manufactured consumer goods: at [62].

(8) Where a contract was silent as to the standard that was to be expected of the goods, a good (but not exhaustive) gauge of quality would be the standards prescribed by the relevant statutes. In this regard, Reg 227 operated as a convincing benchmark by which to assess quality. As Reg 227 had been breached, the ginger slices were therefore of unsatisfactory quality and alsoprima facie unsafe for consumption. The respondent had not conducted any scientific analysis of the ginger slices to prove otherwise: at [65] and [70].

(9) The words “particular purpose” in s 14 (3) were not used in contradistinction to a “general purpose” and certainly did not mean that only a “special purpose” would be sufficient. Rather, they were used in the sense of being a “specified” or “stated” purpose. If no purpose was indicated, it would be assumed that goods were ordered for their normal purpose. The commonplace purpose for ginger slices was for use as a food product and there was thus no need for the appellant to expressly convey this purpose to the respondent: at [76], [77] and [79].

(10) The respondent had failed to discharge its onus of proving that the appellant did not rely on the former's skill and judgment, or that it was unreasonable for the appellant to so rely. The respondent, as an experienced trader in spices, was itself a buyer and would have had to exercise its judgment and skill in making the purchase of ginger slices from China: at [84].

(11) The particular purpose for which the appellant required the goods were identical to the common purposes for which the ginger slices were supplied, viz, for use in food products. Thus, a prima facie breach of s 14 (2) also meant that s 14 (3) had been breached. The respondent had failed to adduce evidence to prove otherwise: at [85].

Balmoral Group Ltd v Borealis (UK) Ltd [2006] 2 Lloyd's Rep 629 (refd)

Compact Metal Industries Ltd v PPG Industries (Singapore) Ltd [2006] SGHC 242 (refd)

Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd [2006] 1 SLR (R) 927; [2006] 1 SLR 927 (refd)

Henry Kendall & Sons (a firm) v William Lillico & Sons, Ltd [1969] 2 AC 31; [1968] 2 All ER 444 (refd)

Jet Holding Ltd v Cooper Cameron (Singapore) Pte Ltd [2006] 3 SLR (R) 769; [2006] 3 SLR 769 (refd)

Jewson Ltd v Leanne Teresa Boyhan [2004] 1 Lloyd's Rep 505 (refd)

Food Regulations (Cap 283, Rg 1, 2005 Rev Ed) regs 213, 227, 238

Sale of Food Act (Cap 283, 2002 Rev Ed) ss 2, 13, 56 (1)

Sale of Goods Act (Cap 393, 1999 Rev Ed) ss 14 (1), 14 (2), 14 (3) (consd);ss 14 (2A), 14 (2B), 14 (4), 62 (2)

Lai Swee Fung and Low Eng Wan Eric (UniLegal LLC) for the appellant

Palaniappan Sundararaj, N Sreenivasan and Choo Ching Yeow Collin (Straits Law Practice LLC) for the respondent.

Judgment reserved.

Andrew Phang Boon Leong JA

(delivering the judgment of the court):

1 The appellant, National Foods Limited, is a public listed company incorporated in Pakistan and carries on the business of trading, manufacturing, packing and selling food items and products. The respondent, Pars Ram Brothers (Pte) Ltd, is a locally incorporated company and carries on the business of trading in natural produce, in particular, spices such as cloves, cumin seeds and ginger. The parties have an established trading relationship. From 2000 to 2004, the appellant purchased various quantities of products such as cassia, nutmeg, clove stems and dried ginger slices from the respondent. Those transactions proceeded smoothly.

2 In August 2004, the appellant entered into four contracts (“the Contracts”) with the respondent to purchase dried ginger slices of Chinese origin. It was not disputed that the Contracts were governed by Singapore law and contained identical terms except with respect to the quantities of ginger slices sold under each contract. Delivery of the ginger slices was to be made to Karachi in September and October 2004. Under the Contracts, the ginger slices were first to be landed in Singapore and tested for quality and weight by SGS Testing & Control Services Singapore Pte Ltd before being shipped to Karachi.

3 The ginger slices supplied under the first two contracts arrived in Karachi on 12 September 2004. The appellant discovered that the ginger slices were heavily contaminated with mould and, on 14 September 2004, requested the respondent to halt the remaining shipments. On 23...