R1 International Pte Ltd v Lonstroff AG

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 21 November 2014
• Neutral Citation: [2014] SGCA 56
• Plaintiff Counsel: Paul Tan and Matthew Koh (Rajah & Tann Singapore LLP) (instructed) and Mohammed Ibrahim (Achievers LLC)
• Date: 21 November 2014
• Docket Number: Civil Appeal No 78 of 2014
• Hearing Date: 17 October 2014
• Subject Matter: Contractual terms,Contract
• Published date: 25 November 2014
• Citation: [2014] SGCA 56
• Defendant Counsel: Boey Swee Siang and Ow Sze Mun Cassandra Geraldine (ATMD Bird & Bird LLP)
• Court: Court of Appeal (Singapore)
• Year: 2014

Sundaresh Menon CJ (delivering the grounds of decision of the court): Introduction

This is an appeal against the Judge’s decision allowing the application brought by Lonstroff AG, the Respondent, to set aside an interim anti-suit injunction that had been granted in favour of R1 International Pte Ltd, the Appellant, and dismissing the Appellant’s application for a permanent anti-suit injunction. The Judge’s decision is reported as R1 International Pte Ltd v Lonstroff AG [2014] 3 SLR 166 (“the Judgment”).

The arguments in the appeal did not focus on the power of the court to grant an anti-suit injunction to support the arbitration. Rather, the appeal turned on whether a set of terms containing an agreement to arbitrate in Singapore, which is found in a detailed contract note that was sent by the Appellant to the Respondent shortly after the deal had apparently been agreed, was incorporated as part of the contract between the parties.

After hearing the oral arguments, we allowed the appeal and gave our brief reasons. We now set out the detailed grounds of our decision.

The parties

R1 International Pte Ltd, is a Singapore incorporated company which trades in natural rubber. It conducts its European operations through its authorized agent R1 Europe GmbH, a German incorporated company. For convenience only, we refer to R1 International Pte Ltd and R1 Europe GmbH collectively as “R1” although we state for the avoidance of doubt that R1 Europe GmbH is not a party to the proceedings.

Lonstroff AG (which we shall refer to as “Lonstroff”), is a Swiss incorporated company which processes natural rubber and other elastomers and obtains its supply of natural rubber from the international rubber commodities markets.

The background

Between January and December 2012, Lonstroff purchased “SVR” from R1 pursuant to five separate transactions. SVR is a type of “Technically Specified Rubber” which, as the descriptor suggests, is rubber that meets certain technical specifications.

The dispute between the parties concerned the second transaction. Pursuant to this transaction, Lonstroff took delivery of a shipment of SVR though it subsequently notified R1 that the rubber in question emitted a foul smell. R1 did not deny this assertion of a foul smell but maintained that as “smell” was not a contractually specific parameter of SVR, it was not in breach of the supply contract in relation to the second transaction (“the Second Supply Contract”). This is the subject matter of the substantive dispute between the parties and it does not arise before us.

Following the failure of the parties to reach a commercial solution to the problem, Lonstroff commenced proceedings against R1 in Switzerland in March 2013 on the basis that R1 had breached the Second Supply Contract by supplying defective goods.

R1 responded by commencing proceedings in Singapore, seeking an anti-suit injunction to prevent Lonstroff from continuing with the Swiss proceedings. R1 claimed that by commencing the Swiss proceedings, Lonstroff was in breach of an agreement to arbitrate any disputes in Singapore, which agreement, according to R1, had been incorporated as part of the terms of the Second Supply Contract.

The basis for R1’s contention was a “sales contract” that R1 had sent to Lonstroff in connection with the second transaction. For clarity and to avoid confusion with the Second Supply Contract, we shall refer to a “sales contract” as a “Contract Note”.

The Contract Note for the second transaction stated that the terms of the International Rubber Association Contract (IRAC) for “Technically Specified Rubber” would apply (to the second transaction). Under the IRAC, disputes were to be resolved by arbitration in London though parties were permitted to agree otherwise. To this end, the Contract Note included a rider which specified that arbitration would be conducted in Singapore. It is not disputed that Lonstroff never countersigned and returned this Contract Note.

Even though the dispute concerns only the Second Supply Contract, it would be helpful to set out some of the key features that emerge from the undisputed chronology of all five transactions that is evident on the face of the documents. This chronology suggests that in broad terms, each transaction was negotiated, concluded and performed in a largely similar manner, as follows: The parties would first conduct negotiations for the sale and purchase of a quantity of SVR by way of email or telephone. Once the basic terms had been concluded, R1 would send an email to Lonstroff setting these out. The parties referred to these emails as “Email Confirmations”. Lonstroff would similarly send a “Purchase Order” to R1. Subsequently, R1 would send to Lonstroff a Contract Note (see [11] above), with a request that Lonstroff countersign and return a copy. R1 would then deliver the SVR and issue an invoice. On its part, Lonstroff would accept delivery and pay the invoice.

Against this general description, we turn to the salient details surrounding each of the transactions.

First Transaction

The negotiations for the first transaction were concluded on 24 January 2012 whereupon R1 sent Lonstroff the first Email Confirmation. The first Email Confirmation set out the essential terms of the first transaction including the (i) type of commodity; (ii) quantity; (iii) price; (iv) terms of payment; (v) method of packing; and (vi) estimated date of delivery.

On 25 January 2012, Lonstroff sent R1 its Purchase Order. As with the first Email Confirmation, the first Purchase Order included the essential terms of the first transaction.

On 1 February 2012, R1 emailed Lonstroff a Contract Note and requested Lonstroff to “return us a signed copy.”

This first Contract Note stated that R1 “confirmed having sold” to Lonstroff SVR and repeated the terms in the first Email Confirmation. The first Contract Note also stated:

CONTRACT OTHER CONDITIONS:

SUBJECT TO THE TERMS, CONDITIONS AND RULES (INCLUDING THE ARBITRATION CLAUSES AND RULES) OF THE INTERNATIONAL RUBBER ASSOCIATION CONTRACT FOR TECHNICALLY SPECIFIED RUBBER IN FORCE AT DATE OF CONTRACT.

PLEASE RETURN A SIGNED COPY

As we noted above, this essentially sought to incorporate the terms in IRAC’s standard form which included a default provision for arbitration in London though the parties could also agree to arbitrate their dispute elsewhere.

On 16 and 28 May 2012, R1 issued Lonstroff with invoices for the SVR sold under the first transaction. On 22 May and 1 June 2012, Lonstroff took delivery from R1 of the SVR ordered.

On 16 July 2012, Lonstroff made payment in respect of both invoices. At no point did Lonstroff sign and return the first Contract Note. There was also no protest from Lonstroff in respect of the terms stated in the first Contract Note.

Second Transaction

On 15 August 2012, R1 sent an Email Confirmation to Lonstroff. As with the first transaction, this Email Confirmation included the essential terms of the second transaction.

On 22 August 2012, R1 issued an invoice for the second transaction. On 27 August 2012, Lonstroff took delivery from R1 of the SVR ordered.

On 31 August 2012, R1 emailed Lonstroff with a Contract Note and again requested Lonstroff to “[k]indly sign and return it to us by e-mail.”

The second Contract Note recited that R1 “confirmed having sold” to Lonstroff a quantity of SVR and repeated the terms contained in the second Email Confirmation. Like the first Contract Note, this too was expressed to be subject to IRAC terms. It, however, also had a rider which stated that “[i]n the event of any arbitration, it [the arbitration] will be conducted in Singapore”.

We observed that Mr Andreas Schenker, the Head of Purchasing of Lonstroff, denied in his affidavits that Lonstroff had received R1’s email of 31 August 2012 until July 2013. This appeared to be flatly contradicted by the documentary evidence produced by R1. It was therefore unsurprising that the arguments made by Mr Boey Swee Seng, counsel for Lonstroff, on appeal were made on the basis that Lonstroff did in fact receive the email on 31 August 2012.

On 20 September 2012, Lonstroff emailed R1 to complain that a foul smell was being emitted from the SVR which had been delivered pursuant to the second transaction. Mr Schenker said in his affidavit that Lonstroff complained to R1 about the smell of the rubber on 27 August 2012 (ie, the day Lonstroff took delivery of the rubber), but this did not seem to be consistent with an email sent by Mr Schenker (disclosed by R1) that suggested that R1 was informed of this problem for the first time around 20 September 2012. From that time until March 2013, the parties attempted to find a commercial solution to the problem.

On 5 October 2012, Lonstroff paid the invoice for the second transaction. Again, the second Contract Note was not signed and returned by Lonstroff; there was also no protest from Lonstroff against the terms set out in the second Contract Note.

Third transaction

On 10 October 2012, Lonstroff sent R1 a Purchase Order which contained the essential terms of the third transaction as well as the following statement:

Unless otherwise agreed in writing our General Terms and Conditions shall apply from 14.02.2011 as an integral part of the mutual contractual obligations. We generally do not recognize any of the suppliers terms and conditions. [emphasis added]

Later that day, R1 sent Lonstroff an Email Confirmation. As with the first two Email Confirmations, the third Email Confirmation contained the essential terms of the third transaction but said nothing of Lonstroff’s request to have its general terms incorporated into this supply contract for the third transaction.

On 11 October 2012, R1 emailed Lonstroff the usual Contract Note and again requested Lonstroff to “kindly return us a signed copy.” This third Contract Note...