Petrosin Corp Pte Ltd v Clough Engineering Ltd

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang J
• Judgment Date: 20 September 2005
• Neutral Citation: [2005] SGHC 170
• Court: High Court (Singapore)
• Published date: 22 September 2005
• Year: 2005
• Plaintiff Counsel: Kenneth Tan SC (Kenneth Tan Partnership) and Oommen Matthew (Haq and Selvam)
• Defendant Counsel: Steven Chong SC, Sim Kwan Kiat and Kelvin Poon (Rajah and Tann)
• Subject Matter: Contract,Formation,Whether oral agreement concluded between parties,Consideration,Past consideration,Plaintiff providing assistance to defendant to clinch project,Whether such assistance constituting sufficient consideration for subsequent agreement,Formalities,Whether requirements under s 6(e) Civil Law Act (Cap 43, 1999 Rev Ed) fulfilled
• Citation: [2005] SGHC 170

20 September 2005

Tay Yong Kwang J:

1 This action is in respect of the plaintiff’s claim against the defendant for loss and damages suffered as a result of the defendant’s alleged breach of an oral agreement entered into by the parties on or about 18 October 2001 and evidenced by a memorandum of understanding (“MOU”) which was not signed by both parties.

The plaintiff’s case

2 The plaintiff is a Singapore company whose primary business is that of design and construction of equipment and plants for the oil and gas, petrochemical, refining, power generation and other related industries worldwide. It was incorporated in 1989 with a paid-up capital of $21m. The defendant is an Australian company whose primary business is that of project development in the oil and gas, minerals, infrastructure and property industries.

3 Sohail Latif (“Latif”), the President of the plaintiff, testified that he had worked with the plaintiff on projects in Pakistan since 1991. He introduced the defendant to Pakistan and advised and assisted it in securing and operating projects in that country. It was after he had introduced and assisted the defendant through companies in which he held an office that the defendant’s associated company, Clough Ltd, became a public listed company in Australia.

4 From 1996 to 2000, there was a hiatus in the collaboration between the companies that Latif was involved in and the defendant because of the political situation in Pakistan. However, in 2001, new opportunities became available there. A project known as the Sawan Field Project was to be developed. This involved the construction and commissioning of a gas purification plant in Pakistan. A company called Corvetina Technology Limited (“Corvetina”), of which Latif was also President, and the plaintiff collaborated, advised and guided the defendant, enabling it to clinch the said project by 28 October 2001 from the project’s owners, a company known as OMV. The project was worth some US$169m. The shareholders of Corvetina and the plaintiff were different entities.

5 From early June 2001, Latif, representing Corvetina and the plaintiff, was negotiating with Jeremy Roberton (“Roberton”), a director of the defendant, on three separate proposed agreements. They were a commission agreement between Corvetina and the defendant in relation to the Sawan Field Project (“the Sawan commission agreement”), a General Agency Agreement between Corvetina and the defendant for future collaboration and an in-country or local works agreement in relation to the same project. The last of these proposed agreements (“the local works agreement”) formed the subject matter of this action.

6 The only benefit to the plaintiff in introducing and assisting the defendant in the Sawan Field Project was that it would be awarded the local works agreement. This was made abundantly clear by Latif to Roberton, who in turn indicated to Latif that the defendant was ready, able and willing to award the local works agreement to the plaintiff. The works contemplated under this agreement were the support services essential for the Sawan Field Project, namely, civil construction works, pipe fabrication, construction of buildings, storage tanks, roads, air strips and recreational facilities, plant installation and pre-commissioning assistance and other miscellaneous works.

7 On 19 June 2001, Latif met Roberton in Singapore. The next day, Latif spoke to Roberton over the telephone as the latter had flown to Perth. They discussed the Sawan commission agreement as well as the local works agreement. On 21 June 2001, Latif sent an e-mail to Roberton stating:

As you suggested and we have agreed, in principle, that if there is any indeed a sizeable in-country work, Petrosin would be pleased to execute the work as a local sub-contractor. Based on our telephonic understanding from you last night, the in-country work would roughly for as under [sic]:

i) Approx. US$6 to 8 million for mechanical and erection work;

ii) Approx. US$22 million for civil construction and related work.

The above would represent a total value of about US$28-30 million in-country work.

...

8 Sporadic discussions then took place over the course of the next few months between Latif on the one hand and Roberton and the defendant’s officers on the other relating to all three proposed agreements. On 22 September 2001, Latif sent to Roberton by e-mail a draft MOU in relation to the local works. On 23 September 2001, he met the defendant’s officers in Perth. At that meeting, the defendant’s officers gave him the impression that, after having benefited from the advice and assistance rendered by the plaintiff, the defendant might be bypassing the plaintiff where allocation of the local works was concerned. Latif immediately protested by e-mail the next day, writing to Roberton as follows:

Thank you for the meeting Sunday 23 Sept in your offices.

We hope the things do work out in the best interest of Clough.

As there were some handouts given which I only had a chance to review after I left the meeting, I do like to record some observations.

1 On fees, we have no built in interest. Therefore the benefit we are looking for is from subcontracting.

2 However the subcontracting must be done in good grace, respect and dignity. If not possible, we should look at alternative ways of handling the interest of our group. My understanding is reflected in my email to you of 21 June 2001.

3 Allowing OMV to get involved on pre-screening the so called Clough itself proposed 6-8 subcontract packages allows a built in mechanism to jeopardize whatever we are trying to do. If for example there is package for airstrip, your proposal will allow OMV to get you to remove our name from the list presumably on solid grounds.

To date Clough has handled us with an approach not acceptable to us at all. You have been reluctant to share information, scope, bids, etc.

9 Latif claimed that there was no discussion on the issue of pre-qualification or OMV’s approval at the 23 September 2001 meeting. He asserted that there was a further meeting on 25 or 26 September 2001 when this issue was discussed.

10 On 13 October 2001, Latif raised the question of signing the MOU in relation to the local works. His e-mail of 13 October 2001 to Roberton read:

We have forwarded to you a Memorandum of Understanding in Perth for local subcontracting work. You have not yet agreed with the execution of an agreement although now a major improvement has been made thankfully that we have received copies of tender documents, your bid proposals and various vendor bids you had received from Pakistan.

Please understand that because of the agency fees of which we have no benefit whatsoever, this matter is what benefits our group and this should not be left unattended and should be put to bend and should be done while you are here on Wednesday, 17 October 2001. As long as it stays in this manner, when apprehensions remain with our people which are not doing any good.

I am asking Amir Hassan to be prepared when we meet on Wednesday. We are in a position to sign the agreement with you. Of course, the agreement would be dependent of your getting contract from OMV. We do not believe that there is anything in these documents which require presence of our people in Perth for an extended period to reach the above mentioned agreement. Of course, once an agreement is made, then our people and your people would work together. Our people should go to Perth for as long as required as your subcontractor to liase with your people and assist Clough in every manner possible so that Clough is assisted in a substantive manner by our organization.

I would also think that Clough nominate a person who possibly acts as Client’s representative and is based in our office for the project duration to be Clough’s eyes and ears to ensure that Clough’s interests are protected at all times, to keep us on our toes if needed as we fully appreciate and recognize the importance of this project, tight margins, tight deadlines and therefore the necessity to move fast and to move professionally.

We expect to be partners to pain and gain in proportion to our contribution to the project and therefore have common interest with Clough towards success of this project.

11 Roberton replied the next day (14 October 2001) as follows:

Lets get a few things straight –

1. The current Clough senior management do fully understand and appreciate the support Petrosin / Otech has given Clough both in the past and what they are currently giving us on the Sawan project.

2. Personally, I do not want Clough to work in Pakistan, either now or in the future, other than with Petrosin / Otech. All other senior Management within Clough (Harold Clough, Brian Hewitt and Rob Jewkes) feel exactly the same way. Please discuss this with them if you have any doubts.

3. There is no sinister plot for Clough to work in Pakistan with anyone other than yourself and your companies either now or in the future. Please believe this.

4. Both myself and yourself made a big mistake not finalising all these matters before we submitted the SAWAN bid.

5. As you are aware we do have a fundamental problem/difference with timing of payment of fees.

We have agreed with your request on this Sawan project.

However we have to reach a clear understanding for the future on this issue – if we cannot resolve this to our satisfaction for the future it may be the stumbling block to any ongoing Clough work in Pakistan.

6. Any lack of agreement to date has not been a deliberate attempt to avoid such agreements – I have a very small staff (1 person) and sometimes you also take some time to respond.

This in no way indicates we have some other motive – please also believe this.

In response specifically to the agreements.

As I said in my earlier email – I will be in Singapore from 2:10pm Wednesday 16^th until 7:30pm Thursday. I will need to spend a few hours at our office but intend to...