Pacific Ocean Engineering & Trading Pte Ltd v Tractors Singapore Limited

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 08 April 2021
• Neutral Citation: [2021] SGCA 31
• Published date: 13 April 2021
• Docket Number: Civil Appeal No 67 of 2020
• Year: 2021
• Hearing Date: 15 October 2020
• Plaintiff Counsel: Lee Eng Beng SC, Sim Jek Sok Disa, Ho Qi Rui Daniel and Shaun Ou (Rajah & Tann Singapore LLP)
• Citation: [2021] SGCA 31
• Defendant Counsel: Rakesh Gopal Kirpalani and Oen Weng Yew Timothy (Drew & Napier LLC)
• Court: Court of Appeal (Singapore)
• Subject Matter: Breach,Contractual interpretation,Remedies,Contract,Discharge,Contractual terms,Damages,Mitigation of damage,Implied terms

Quentin Loh JAD (delivering the judgment of the court): Introduction

This appeal arises out of a dispute over the fulfilment of ten contracts for the sale of shipbuilding equipment. The respondent claimed that it was unable to deliver the ordered equipment due to the appellant’s breach of two implied terms which required it to (a) advise on a delivery date within a reasonable period; and (b) nominate a port of destination within a reasonable period. The appellant counterclaimed for the wrongful termination of the contracts. The High Court judge (“the Judge”) found in favour of the respondent. He directed the appellant to pay damages for the outstanding sums due under disputed contracts less the amount the respondent had recovered in mitigation. The Judge also dismissed the appellant’s counterclaim for wrongful termination: Tractors Singapore Ltd v Pacific Ocean Engineering & Trading Pte Ltd [2020] SGHC 60 (the “Judgment”).

The appellant now seeks to set aside the Judge’s decision. In so doing, it advances some arguments that were neither pleaded nor properly canvassed at trial. Much judicial ink has already been spilt in an effort to caution litigants against raising new arguments on appeal. While we do not intend to cover old ground, the present case is another illustration of the consequences of failing to heed that caution. It is an established principle of our litigation regime that, where an appellant has taken a certain position in its pleadings and the trial below was conducted on that basis, it cannot deviate from this position by refining its case on appeal. Much less should it attempt to amend its defence on appeal. This is exactly what the appellant applied to do and we firmly rejected it (see [31] below).

The facts

The parties are both Singapore-incorporated companies. Pacific Ocean Engineering & Trading Pte Ltd (the “appellant”) is in the business of building and selling ships. Prior to the commencement of proceedings in the High Court by way of Suit 283 of 2018 (“Suit 283/2018”), the appellant was a long-time customer of Tractors Singapore Limited (the “respondent”), which distributes “Caterpillar” brand machines, engines, propulsion systems and lift racks.

Between 26 November 2012 and 25 July 2016, the parties entered into ten contracts (the “Contracts”) for the sale of shipbuilding equipment. This was effected by a standard procedure used throughout their 16-year relationship, viz, the respondent’s sales manager, Mr Gary Koh Teck Seng (“Koh”), would prepare a quotation for the required equipment on a standard template. This quotation would set out the approximate period during which the appellant was expected to take delivery and the respondent’s conditions of sale (“Conditions of Sale”). The appellant’s managing director, Mr Quah Peng Wah (“Quah”), would sign off on the quotation, and the appellant would then issue a Purchase Order (“PO”). The appellant regarded the respondent’s quotations as contracts, which it confirmed in writing via the POs (Judgment at at [5]–[6]).

The appellant usually confirmed the delivery dates and ports of delivery for the equipment under its contracts with the respondent after the issuance of its POs. Hence, the POs typically indicated delivery dates as “TBA by POET”, ie, to be advised by the appellant. In respect of all but one of the Contracts, “TBA by POET” was reflected in all the corresponding POs; the exception was PO 10601 for which the delivery date was stated as “TBA”.¹ The POs for the Contracts also listed tentative ports of delivery such as “CIF China Major Port”.² It was understood, however, that this indication was still subject to the appellant’s further advice. Unfortunately, as we explain at [6] to [8] below, the appellant failed to give this advice in a timely manner for the equipment under the Contracts, thereby inhibiting the performance of those Contracts.

The first signs of trouble emerged towards the end of 2013. The earliest of the Contracts, evidenced by POs 8874 and 8875, were tentatively scheduled for performance in September 2013³ and October 2013⁴. However, the appellant failed to nominate ports of destination by these dates and the respondent was unable to effect delivery. The respondent did not take steps to terminate these contracts. Instead, the parties continued to discuss possible delivery dates and/or ports of destination for the Contracts. This led to a meeting in December 2015 where the parties agreed to extend the delivery dates for seven of the Contracts, evidenced by PO 8874, 8875, 9992, 10600, 11289, 11290 and 11651, to the end of 2016 or January 2017 (Judgment at [74]). This agreement is corroborated by a project list outlining revised delivery dates that was circulated via email on 16 February 2017.⁵

The parties then met for a second time on 9 April 2016 and, according to the respondent, agreed that delivery for two of the remaining Contracts evidenced by POs 9968 and 9969 would take place in May 2017 and July 2017. We note that these contracts were for the sale of complete propulsion systems with “components such as engines, power generators, thrusters, motors and a user interface”.⁶ In order to fulfil its obligations under the PO 9968 and 9969 contracts, the respondent contracted with a vendor to supply it with two battery-powered Xeropoint Hybrid Propulsion Systems (the “Propulsion Systems”). However, in 2015, the appellant modified its order and requested the respondent to remove the Propulsion System batteries and the respondent agreed to do so (Judgment at [65]). The respondent subsequently obtained a S$200,000 rebate from its vendor for the cost of these batteries.

Following the 9 April meeting, the parties were still unable to come to an agreement as to the delivery date for the last of the Contracts evidenced by PO 10601. The appellant also failed to nominate ports of destination in respect of the Contracts for which delivery dates had been agreed upon.

By reason of its inaction, the respondent understood that the appellant no longer intended to be bound by or was unable to comply with the Contracts and was thus in repudiatory breach. On 13 October 2017, the respondent purported to accept the appellant’s breaches and elected to discharge the Contracts by way of written notice (Judgment at [12]).⁷

The proceedings below The respondent’s case at trial

On 16 March 2018, the respondent commenced Suit 283/2018 for a declaration that the appellant had breached eight of the Contracts, namely those evidenced by POs 9968, 9969, 9992, 10600, 10601, 11289, 11290 and 11651. More specifically, it claimed that the appellant had breached two implied terms of the contracts. The particulars of these terms are as follows: a term requiring the appellant to advise on a delivery date for the ordered equipment within a reasonable period (“Term 1”); and a term requiring the appellant to nominate a port of destination within a reasonable period (“Term 2”). Besides declaratory relief, the respondent also sought to claim the outstanding 90% of the price due under all these contracts, less the sums that it had recovered in mitigation (Judgment at [12]).

The particulars of the respondent’s claim are straightforward. It pleaded that, over 42 months after the issuance of PO 10601, the appellant had still failed, neglected and/or refused to advise on a delivery date for the equipment under this contract.⁸ This far exceeded the usual period of two years within which the appellant would satisfy Term 1 (Judgment at [106]). In respect of the remaining contracts, the appellant had failed, neglected and/or refused to nominate a port of destination despite the parties having already agreed on dates of delivery for the equipment under the contracts.⁹ By reason of the above, the respondent was unable to fulfil its orders under the relevant contracts. It thus chose to accept the appellant’s repudiatory breaches and elected to discharge the contracts.

The respondent did not seek relief in respect of the final two contracts evidenced by POs 8874 and 8875. These contracts had been for the sale of eight C32 generators to be installed on-board two hulls, Hulls 1517 and 1518 (“H1517 and H1518”).

The appellant’s case at trial

The appellant raised a number of defences to the respondent’s claim. In respect of the contract underlying PO 10601, it pleaded that it had not breached this contract because:¹⁰

… [t]he PO 10601 Equipment were expressly purchased as ‘stock’ and had no express or implied delivery date (or any reasonable delivery time as alleged by the [respondent]). The [respondent] was obliged to deliver the equipment to the [appellant] as and when [the appellant] required delivery.

The appellant further pleaded that the respondent had not been entitled to terminate and/or discharge this contract “without giving reasonable prior notice”.¹¹ More fundamentally, it did not agree that its failure to nominate a delivery date was so serious a breach that the respondent was permitted to terminate the contract. Term 1 was neither a condition nor a condition precedent of the contract.¹² The appellant also took issue with the respondent’s argument, raised for the first time in its further trial submissions (Judgment at [118]), that it was contractually entitled to terminate the contract by virtue of cl 11 of its Conditions of Sale.¹³ The appellant’s position was that cl 11 was inapplicable because it deals with credit default and insolvency situations. It also argued that cl 11’s application ought to be limited to the breach of an express term or obligation. The respondent’s broad construction of cl 11 would have the effect of “turn[ing] every provision in the [c]ontract into a condition” (see also Judgment at [121]).¹⁴

In the event that it was found to have breached PO 10601, and the other contracts under the respondent’s claim, the appellant averred that the respondent had failed to...