P.T. Bumi International Tankers (formerly known as P.T. Bumi Indonesia Tankers) v Man B&W Diesel S.E. Asia Pte Ltd (formerly known as Mirrlees Blackstone (S.E. Asia) Pte Ltd) and Another

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 18 July 2003
• Neutral Citation: [2003] SGHC 152
• Docket Number: Suit No 149 of 2001
• Date: 18 July 2003
• Year: 2003
• Published date: 03 October 2003
• Plaintiff Counsel: Ung Tze Yang (Rajah & Tann),Philip Tay (Rajah & Tann)
• Citation: [2003] SGHC 152
• Defendant Counsel: N Sreenivasan, Counsel (Straits Law Practice LLC),Charles Lin (Donaldson & Burkinshaw),Collin Choo (Straits Law Practice LLC)
• Court: High Court (Singapore)
• Subject Matter: Whether appropriate to grant order for assessment of damages where damages specific and calculable,Whether sufficient proximity between parties to give rise to duty of care on part of engine manufacturer and seller to avoid shipowner suffering pure economic loss,Duty of care,Pure economic loss,Tort,Negligent design and manufacture of engine,Damages,Negligence,No contractual relationship between shipowner and engine manufacturer nor engine seller,Assessment,Proximity,Whether pure economic loss recoverable

1 This is a claim in tort for damages arising out of the supply of a ship’s engine. The allegation is that the engine was negligently designed and/or manufactured so as to be unable to meet the purpose for which it was supplied.

2 The ship concerned, the M.T. Bumi Anugerah, is an Indonesian flagged oil tanker owned by the plaintiffs, P.T. Bumi International Tankers (‘Bumi’). It was built by Malaysian Shipyard and Engineering Sdn Bhd (‘MSE’) pursuant to a contract entered into between Bumi and MSE in October 1991. The main engine was supplied to MSE by the first defendants, Man B&W Diesel S.E. Asia Pte Ltd (‘MBS’), a Singapore company which sold and serviced engines manufactured by their UK parent company, Mirrlees Blackstone Ltd (‘MBUK’), the second defendants. The contract between Bumi and MSE provided for the construction and supply of a 6,500 tonne oil tanker with a main engine capable of meeting certain specifications. There was no separate contract between either MBS or MBUK and Bumi in relation to the engine. The only contract in relation to the supply of the engine on its own was a contract between MBS and MSE.

3 The engine was delivered to MSE in March 1994. On 22 December 1994, the vessel was formally delivered by MSE to Bumi. According to Bumi, within weeks of delivery, the engine had problems and the problems continued until the engine finally broke down in September 1997. The vessel was then laid up and has not operated since.

4 The losses sustained by Bumi as a result of the frequent problems experienced with the engine and its final breakdown have been economic losses. None of these incidents caused any physical damage to the vessel or its crew. Accordingly, this is a claim in tort for pure economic loss. Whilst the law in Singapore has recently recognised that tort claims for economic loss alone may be made, this is still a developing area of the law and this case raises interesting issues in this area. The defendants have vigorously contested the allegation that the engine was negligently or defectively designed or manufactured. They have asserted that the problems that Bumi experienced with the operation of the Bumi Anugerah were essentially due to poor maintenance and operation practices on the part of the engine room crew.

Background

5 In 1991, Bumi obtained a long term charter contract for an oil tanker from the Indonesian oil company, Pertamina. The shipbuilding contract between themselves and MSE was entered into in order to acquire a vessel that would meet the requirements of this charter. The price to be paid by Bumi to MSE covered both the hull of the vessel and the engine although, from the start, it was recognised that MSE would acquire the engine from a third party. The original intention was to buy an engine from a company called Akasaka but this could not be confirmed in time and Bumi then asked MSE to recommend an alternative engine that could be delivered within the required time. MSE suggested engines from the defendants and Wartsila but only the defendants were able to meet the time requirements. Accordingly, MSE asked MBS to tender for the job.

6 On 19 July 1993, MBS sent a tender to MSE whereby MBS offered to supply MSE with one ESL 16 MK 2 marine propulsion engine designed to produce 4,000 ps at 1,000 rpm complete with all accessories and associated equipment for the price of MR2,225,629. It was an important feature of the engine that it would be able to run on both marine diesel oil (MDO), sometimes also referred to as light fuel oil or LFO, and the cheaper heavy fuel oil (HFO). The design of the engine was such that when certain operating specifications were met, specifically that the engine load reached 75% MCR and the jacket water temperature reached 70°C, the automatic valve would be activated and the engine would be automatically switched over to operating on HFO instead of on MDO.

7 There were meetings between representatives of MSE, MBS and Bumi. In late August 1993, MBS sent MSE two letters containing amendments to the original quotation. Bumi then instructed MSE to accept MBS’ tender. On 7 September 1993, MSE wrote to MBS referring to their quotation. MSE confirmed they wished to purchase the engine on the terms contained in that letter and in accordance with the documents that were attached to the letter ie the purchase order specification, the general purchase order specification and MSE’s commercial terms and conditions. The purchase order specification was revised subsequently and sent out again to MBS on 10 September 1993. At some subsequent time (the date is not indicated), both MSE’s representatives and MBS’s representative signed MSE’s document entitled ‘Commercial Terms and Conditions’ which had been sent over to MBS together with the purchase order. Between September 1993 and March 1994, MSE sent MBS drawings of the vessel and other information so that MBS would be aware of the vessel design and in particular the design of the propeller and the stern equipment.

8 In February 1994, Mr TM Robert and Mr Ricky Singgih, Bumi’s representatives, paid a visit to the factory of MBUK in order to be present at the factory testing of the engine. The purpose of this test was to show the customer that the engine was able to perform up to the contracted specifications. During the factory tests, however, the engine was not tested at 110% of the rated power for one hour as MSE considered was required by the contract. According to Mr Robert, MBUK told him that this was due to a fault in the brake system of their testing equipment.

9 The completed engine arrived in Malaysia in March 1994 and was installed in the vessel in May 1994. Construction of the vessel was completed by mid November 1994 and sea trials were held on 8 December 1994. The sea trials were attended by Mr Robert as Bumi’s representative (Mr Robert was the managing director of P T Bina Usaha Maritim Indonesia, the company which managed Bumi’s fleet of vessels), the ABS surveyor, commissioning engineers from the defendants and MSE personnel.

10 During the sea trials several difficulties with the engine were noted. First, the engine was unable to achieve its design speed of 1,000 rpm. The average full speed ahead was found to be 890 rpm and the maximum rpm attained was 960 rpm. The power developed by the engine was 2585 kw which was approximately 89% of the power that it was supposed to develop. MSE noted that at this stage the engine had developed high exhaust temperatures of 475°C and had problems with balancing of temperatures. Thirdly, the fuel pump injector failed. There was also a problem with the governor. Various rectification works were undertaken by the defendants. The vessel was scheduled to be delivered to Bumi on 20 December 1994 but the delivery was delayed by two days due to the discovery of a crack in the engine’s vulkan coupling.

11 According to Mr Robert, after delivery many problems were encountered with the engine. First, on 5 January 1995, the engine governor malfunctioned. The engine had to be stopped for investigation and repairs. MBS ascertained that the governor drive shaft had sheared and had to be replaced. Repairs were completed on 11 January but the engine was not completely steady. In early March 1995, it was reported that the engine was overheating and that there was knocking sound in one of the cylinders. MBS sent an engineer to deal with the problems.

12 Amongst the problems noted at the sea trials was the need to replace the cam shaft. In late March 1995, an engineer from MBS attended on board to do this work. It turned out, however, that the wrong cam shaft was supplied by MBS and the correct cam shaft arrived only in mid April 1995 and was fitted on 25 April 1995. Other problems noted in March 1995 were that the indicator cock on one of the cylinders was broken, lube oil was found leaking from the crank shaft, the HFO heater module was found to be shorting and the two auto-contractors for the heater were out of order. In April, the engine raw water pump leaked. In May, problems were observed with the lube oil drive pump.

13 Bumi had specified that the engine should be able to run on HFO. This was required under its contract with Pertamina. Difficulties were encountered with running the vessel on HFO because of problems with the HFO heater. These began in March 1995. These problems continued in April 1995. The result was that the vessel had to be operated on HSD instead of HFO.

14 In May 1995, problems were observed with the lube oil drive pump of the engine. In July there were problems with the cam shaft, the raw water pump, the exhaust control panel and the light fuel oil pump. From about June 1995, the vessel began to experience high exhaust temperatures. This problem gradually worsened and, according to Mr Robert, was never rectified by the defendants. It continued until the time of the engine’s complete failure.

15 In February 1996, major repairs of the engine took place when the turbocharger and fuel injection pumps were replaced. Damaged cylinder heads and all 16 fuel injectors, as well as the piston and cylinder liners, the air start valves and the indicators cocks, were also replaced. The vessel continued to experience high exhaust temperatures. In March 1996, there was a complaint that the exhaust manifold was red hot even though the engine was operating at only 600 rpm. In August 1996, Mr Robert sent a lengthy complaint to MBS (and copied to MBUK) about the malfunctioning of the engine and asked them to send their experts to look at and remedy the ‘chronic problem’ and ‘to take immediate action to rectify all design and material defects’ of the engine. In September 1996, there was a meeting in Jakarta between Bumi and the sales director of MBUK. Subsequently, MBUK acknowledged Bumi’s dissatisfaction with the engine and offered to carry out various works on it.

16 On 19 September 1996, the turbocharger broke down again. The vessel had to remain...