Rapiscan Asia Pte Ltd v Global Container Freight Pte Ltd

CourtHigh Court (Singapore)
JudgeS Rajendran J
Judgment Date16 April 2002
Neutral Citation[2002] SGHC 72
Citation[2002] SGHC 72
Plaintiff CounselS Palaniappan, N Sreenivasan and K Gopalan (Straits Law Practice LLC)
Subject MatterStandard terms,Admiralty and Shipping,Performance of contractual obligation in negligent way,Exclusion clauses,Third party and principal’s relations,Limitation of liability clauses,Remedies,Shipper's sister company negotiating contract of carriage with freight forwarder,Negligence,Whether limitation clauses limit freight forwarder's liability for negligent misrepresentation,Whether more appropriate to pursue remedy in contract or tort,Whether term that freight forwarder needs to monitor shipment to be implied,Bills of lading,Parties subsequently entering into oral contract of carriage,Contractual relations,Agency,Implied terms,Whether contract between shipper and freight forwarder,Tort,Whether breach on freight forwarder's part,Whether contract subject to SFFA Conditions,Freight forwarder making known to shipper that shipment subject to Singapore Freight Forwarders Association Standard Trading Conditions,Bill of lading not issued at formation of contract of carriage but issued later,Contractual terms,Bills of lading as contract of carriage,Contract,Contract of carriage,Whether terms in bill of lading incorporated in contract of carriage,Application of Morton tests,Whether exemption clauses exempt freight forwarder from liability for negligent misrepresentation
Defendant CounselLoo Dip Seng and Gerald Yee (Ang & Partners)
Published date19 September 2003

Held, awarding judgment in favour of the plaintiff,

(1) From the time the contract was being negotiated, Global knew that OSM was an agent of Rapiscan and was negotiating on behalf of Rapiscan. This was evident from the factual matrix as well as from the correspondence between Global and Rapiscan after the "mistake" regarding the shipment was discovered. The first time that Global sought to deny that Rapiscan was the contracting party was in the Defence filed in these proceedings. ( 29 – 31)

(2) The evidence clearly showed that the obligation to monitor the shipment and keep Rapiscan informed of its progress was an express term. It was also reasonable to imply such a term: see George Peereboom v World Transport Agency Ltd [1921] LLR 170. Global’s negligence in monitoring the shipment was a breach of both the express and implied term of the parties oral contract of carriage. ( 6 – 9)

(3) Every page of the two quotations faxed to OSM by Global on 4 and 5 December 2000 had carried a qualification that all transactions entered into by Global would be subject to the SFFA Conditions. In the circumstance, Global had made known to Rapiscan, before Global agreed to undertake the shipment, that the shipment was subject to the SFFA Conditions. Hence, the contract of carriage entered into was subject to those Conditions. ( 32)

(4) When parties enter into a contract of carriage with the expectation that a bill of lading will be issued to cover it, they enter into it upon those terms which they know or expect the bill of lading to contain : see Pyrene Co Ltd v Scindia Steam Navigation Co Ltd [1954] 1 LLR 321. In the present case, Rapiscan who had used the services of Global in the past, were aware that there were standard conditions attached to the bill of lading issued by Global. Hence, the terms in the bill of lading issued in this case formed part of the contract between Global and Rapiscan notwithstanding that the bill of lading had not been issued at the time the oral contract was entered into. ( 33 – 34)

(5) Whether the exemption clauses contained in both the SFFA Conditions and the bill of lading can be construed as exempting liability from negligence would depend on whether it succeeds on the three limbs of the "Morton test" : see Canada Steamship Lines Ltd v The King [1952] HL 192. In the present case, the exemption clauses which did not make any express reference to negligence or any synonym of negligence did not satisfy the first Morton test. The second test requires the court to consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the person whose favour it is made. The words used in the exemption clauses in question were wide enough to cover negligence. However, since the exemptions clauses in both the SFFA Conditions and the bill of lading were applicable to heads of claim other than claims based on negligence, the third Morton test was not satisfied. The exemption clauses would not therefore exempt from liability the claim against Global for the breach of contract arising from their negligence to monitor the shipment. ( 43 – 59)

(6) The same strict approach adopted by the courts towards exemption clauses does not apply to contracts containing limitation of liability clauses. Whether Global can rely on the limitation clauses contained in the SFFA Conditions and bill of lading depends on whether the clauses are sufficiently clear and unambiguous to receive effect in limiting the liability of Global for its negligence. Both cl 27 (b) of the SFFA Conditions and cl 6(4)(A) of the bill of lading, relied on by Global, limits liability for negligence only in respect of claims for delay. As such, the limitation of liability clauses could not limit Global’s liability arising from its negligence in fulfilling its obligations to properly monitor the shipment of the X-ray machines. ( 60 – 65)

(7) Global’s negligence in monitoring the shipment also made Global liable in tort. There is no need to consider Global’s remedy in tort since Global has been found to be liable in contract which is the more appropriate remedy. ( 67 – 68)

(8) Global’s failure to comply with its contractual obligation to monitor the shipment resulted in Rapiscan’s loss of rental income from the Fei Fu contract which amounted to US$ 125,000. Rapiscan, by its abortive attempt to air-freight the X-ray machines to Macau was attempting to mitigate that loss. As the attempt would have been successful but for matters outside the control of Rapiscan, Rapiscan was entitled to recover those costs amounting to US$ 29,056 from Global. Judgment for the sum of US$ 154,056 with interest was awarded in favour of Rapiscan. ( 69 – 72)

Cases referred to

Alisa Craig Fishing Co Ltd v Malvern Fishing Co Ltd and Anor [1983] 1 LLR 183 (folld)
Belships (Far East) Shipping (Pte) Ltd et al v Canadian Pacific Forest Products et al (1999) 175 DLR (4th) 449 (refd)
Canada Steamship Lines Ltd v The King [1952] HL 192 (folld)
Darwish MKF Al Gobaishi v House of Hung Pte Ltd [1998] 3 SLR 435 (folld)
E Scott (Plant Hire) Ltd v British Waterways Board (1982, unreported) (refd)
George Peereboom v World Transport Agency Ltd [1921] LLR 170 (folld)
Marina Centre Holdings Pte Ltd v Pars Carpet Gallery Pte Ltd [1997] 3 SLR 625 (folld)
Pyrene Co Ltd v Scindia Steam Navigation Co Ltd [1954] 1 LLR 321 (folld)
Rutter v Palmer [1922] 2 KB 87 (refd)
Smith & Anor v South Wales Switchgear Ltd [1978] 1 ALL ER 18, 1 WLR 165 (refd)
Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank [1986] AC 80 (refd)



1. The plaintiff, Rapiscan Asia Pte Ltd ("Rapiscan"), is a Singapore incorporated company which markets/rents X-ray machines that screen for the presence of guns, knives and other such weapons. Such X-ray machines are found in airports and other public places. They are also used by organisers of public events. Rapiscan is a wholly-owned subsidiary of an American company, OSI Systems Inc, said to be one of the largest manufacturers of such equipment. Opto Sensors (M) Sdn Bhd ("OSM") is also a wholly-owned subsidiary of OSI Systems. OSM manufactures such X-ray machines and has its offices in Johor Baru, Malaysia. Rapiscan and OSM, being sister companies, were managed administratively as one group of companies. The defendant, Global Container Freight Pte Ltd ("Global") is a freight forwarding company incorporated in Singapore.

The Fei Fu contract

2. In December 1999, Macau was handed back to China by the Portuguese. In connection with the hand-over celebrations, Rapiscan rented some of its X-ray machines to an organisation in Macau called Fei Fu and the X-ray machines were shipped to Macau through the services of Global. In December 2000, for the First Anniversary Celebrations of the hand-over, Fei Fu again contacted Rapiscan for the rental of X-ray machines. A contract was entered into between Rapiscan and Fei Fu on 4 December 2000 for the rental of 13 such X-ray machines for use from 10 to 31 December 2000. It was subsequently agreed between Rapiscan and Fei Fu that it would be sufficient if Rapiscan had the X-ray machines operationally ready at the designated sites in Macau before 18 December 2000. The First Anniversary Celeberations were to commence on 19 December 2000.

The contract with Global

3. Rapiscan had, in connection with the APEC Meeting held in Brunei in mid-2000, rented X-ray machines to the authorities in Brunei. These X-ray machines, which had also been shipped to Brunei by Global, were still in Brunei and Rapiscan decided to ship 13 of these X-ray machines to Macau. Towards this end, Paul Quek Jat Han ("Paul"), the Materials Manager of OSM, asked Sharimah bte Mohamed ("Sharimah"), an Administrative Assistant with OSM, to make enquiries from Global about their freight charges. Sharimah contacted one Jason Thng ("Jason") of Global. From the two quotations sent by Jason – the first on 4 December 2000 and the second on 5 December 2000 – it would appear that Sharimah had at first asked for a quote from Muara to Singapore and thereafter a quote from Muara to Macau.

4. Paul told the court that upon receipt of the quotations he had spoken on the phone with Jason and emphasized to Jason that the X-ray machines were for use in Macau in connection with the First Anniversary Celebrations and the shipment therefore had to be closely monitored in order to ensure that the X-ray machines arrived in Macau by 16 December 2000. Paul claimed that he told Jason that if Global could not confirm that the X-ray machines would reach Macau by then, Rapiscan would consider other methods of transport to meet the deadline. According to Paul, Jason assured him that he would monitor the shipment. He said that Jason also assured him that the X-ray machines would reach Macau by 16 December 2000 or the early hours of 17 December 2000 at the latest. Paul relayed this assurance to his senior management and, after obtaining their approval, reverted to Jason and gave the go-ahead to effect the shipment. Paul also informed Jason that Tamil Selvan ("Selvan") and Swaminathan ("Nathan") of Rapiscan in Singapore would liaise on the shipment details.

5. Jason’s account of that conversation was somewhat different. Jason agreed that he was told by Paul that the shipment was urgent and required in connection with the First Anniversary Celeberations in Macau but maintained that Jason had not given 16 December 2000 as the deadline by which the X-ray machines had to be in Macau. Jason’s evidence was that Paul told him that the X-ray machines had to be in Macau before 20 December 2000.

6. Mr S Palaniappan, counsel for Rapiscan, in his closing submission submitted that this oral contract entered into between Rapiscan and Global contained the following terms:

    (a) that Global would ensure that the X-ray machines reached Macau by 16 December 2000;

    (b) that the X-ray machines were to be carried on the "Kota Perkasa"; and

    (c) that Global...

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