RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd and another appeal

JurisdictionSingapore
CourtCourt of Three Judges (Singapore)
Judgment Date29 August 2007
Date29 August 2007
Docket NumberCivil Appeals Nos 151 and 152 of 2006

[2007] SGCA 39

Court of Appeal

Chan Sek Keong CJ

,

Andrew Phang Boon Leong JA

and

V K Rajah JA

Civil Appeals Nos 151 and 152 of 2006

RDC Concrete Pte Ltd
Plaintiff
and
Sato Kogyo (S) Pte Ltd and another appeal
Defendant

Por Hock Sing Michael and Siva Sambo Krishnasamy (Tan Lee & Partners) for the appellant in Civil Appeal No 151 of 2006 and respondent in Civil Appeal No 152 of 2006

Tan Yew Cheng (Leong Partnership) for the appellant in Civil Appeal No 152 of 2006 and respondent in Civil Appeal No 151 of 2006.

Alfred McAlpine Plc v BAI (Run-Off) Ltd [2000] 1 Lloyd's Rep 437 (refd)

Andre & Cie SA v Tradax Export SA [1983] 1 Lloyd's Rep 254 (refd)

Bank Line, Limited v Arthur Capel and Company [1919] AC 435 (refd)

Bentsen v Taylor, Sons & Co [1893] 2 QB 274 (refd)

Brauer & Co (Gt Britain), Ltd v James Clark (Brush Materials), Ltd [1952] 2 Lloyd's Rep 147 (refd)

Bunge Corpn v Tradax SA [1981] 2 All ER 513 (refd)

Bunge Corporation, New York v Tradax Export SA, Panama [1981] 1 WLR 711 (refd)

C Czarnikow Ltd v Koufos, The Heron II [1969] 1 AC 350 (refd)

Chan Buck Kia v Naga Shipping & Trading Co Ltd [1963] MLJ 159 (refd)

Channel Island Ferries Ltd v Sealink UK Ltd [1988] 1 Lloyd's Rep 323 (refd)

China Resources (S) Pte Ltd v Magenta Resources (S) Pte Ltd [1997] 1 SLR (R) 103; [1997] 1 SLR 707 (refd)

CHS CPO GmbH v Vikas Goel [2005] 3 SLR (R) 202; [2005] 3 SLR 202 (refd)

Continental Grain Export Corporation v STM Grain Ltd [1979] 2 Lloyd's Rep 460 (refd)

Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 (refd)

Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd [2006] 1 SLR (R) 927; [2006] 1 SLR 927 (refd)

GIB Automation Pte Ltd v Deluge Fire Protection (SEA) Pte Ltd [2007] 2 SLR (R) 918; [2007] 2 SLR 918 (refd)

Glahe International Expo AG v ACS Computer Pte Ltd [1999] 1 SLR (R) 945; [1999] 2 SLR 620 (refd)

Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 (refd)

Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 (refd)

Janagi v Ong Boon Kiat [1971] 2 MLJ 196 (refd)

Jet Holding Ltd v Cooper Cameron (Singapore) Pte Ltd [2006] 3 SLR (R) 769; [2006] 3 SLR 769 (refd)

Kriti Rex, The [1996] 2 Lloyd's Rep 171 (refd)

Magenta Resources (S) Pte Ltd v China Resources (S) Pte Ltd [1996] 2 SLR (R) 316; [1996] 3 SLR 62 (refd)

Metropolitan Water Board v Dick, Kerr and Company, Limited [1918] AC 119 (refd)

Multi-Pak Singapore Pte Ltd v Intraco Ltd [1992] 2 SLR (R) 382; [1992] 2 SLR 793 (refd)

Nam Kee Asphalt Pte Ltd v Chew Eu Hock Construction Co Pte Ltd [2000] SGHC 45 (refd)

Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 (refd)

Raineri v Miles [1981] AC 1050 (refd)

Ross T Smyth & Co, Ltd v T D Bailey, Son & Co [1940] 3 All ER 60 (refd)

Saint Line Limited v Richardsons, Westgarth & Co, Limited [1940] 2 KB 99 (refd)

Seaflower, The [2001] 1 Lloyd's Rep 341 (refd)

Singapore Telecommunications Ltd v Starhub Cable Vision Ltd [2006] 2 SLR (R) 195; [2006] 2 SLR 195 (refd)

State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyd's Rep 277 (refd)

Suisse Atlantique Société d'Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361 (refd)

Torvald Klaveness A/S v Arni Maritime Corporation [1994] 1 WLR 1465 (refd)

Universal Bulk Carriers Ltd v Andre et Cie [2001] 2 Lloyd's Rep 65 (refd)

Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277 (refd)

Ymnos, The [1982] 2 Lloyd's Rep 574 (refd)

Frustrated Contracts Act (Cap 115, 1985 Rev Ed)s 3 (3)

Rules of Court (Cap 322, R 5, 2006 Rev Ed)O 18r 8 (1)

Sale of Goods Act (Cap 393, 1994 Rev Ed)

Contract–Discharge–Breach–Party to contract failing to perform obligations–Situations where innocent party entitled to terminate contract–Whether breach of warranty by one party entitling innocent party to terminate contract–Contract–Frustration–Party in breach of contract invoking force majeure clauses in contract–Construction and effect of force majeure clauses–Distinction between doctrine of frustration and force majeure–Whether force majeure clauses applicable–Whether doctrine of frustration excluded by force majeure clauses–Contract–Remedies–Damages–Costs incurred from breach of contract by one party sought as damages by innocent party–Whether such costs flowing directly and naturally from breach

Sato Kogyo (S) Pte Ltd (“Sato Kogyo”), a contractor engaged by the Land Transport Authority (“LTA”) to construct a Mass Rapid Transit station, contracted to purchase ready-mixed concrete from RDC Concrete Pte Ltd (“RDC”). Subsequently, LTA instructed Sato Kogyo to suspend RDC's supply of concrete (“LTA's suspension”) due to the concrete showing an unacceptable amount of cube failure. During the period of LTA's suspension, Sato Kogyo obtained all its concrete from Pan United Concrete Pte Ltd (“Pan United”) at rates higher than those stipulated in its contract with RDC.

Later on, LTA approved Sato Kogyo's request to allow RDC to resume concrete supply, with supply being restricted to concrete produced at RDC's Kaki Bukit plant. Thereafter, RDC failed, on at least 42 occasions, to supply concrete ordered by Sato Kogyo, citing reasons of: (a) shortages of raw material, ie, aggregates and cement; and (b) plant breakdowns. Sato Kogyo had to purchase concrete from alternative suppliers at higher rates. Pursuant to its contract with RDC, Sato Kogyo deducted all the cost differentials incurred from the outstanding amounts due to RDC, which RDC maintained it was not liable for by invoking the contractual clauses relating toforce majeure. As a result of non-payment by Sato Kogyo, RDC eventually suspended its supply of concrete (“RDC's suspension”) and Sato Kogyo terminated the contract shortly thereafter.

Sato Kogyo instituted proceedings to claim damages for breach of contract and RDC counterclaimed for amounts due under outstanding invoices for concrete supplied. The parties raised the following issues: (a) whether the contract was an “exclusive” or “sole supplier” contract; (b) whether the failure of the cube tests allowed Sato Kogyo to claim the cost differentials of obtaining concrete from alternative suppliers incurred during the suspension period; (c) whether the force majeure clauses exempted RDC from liability for the non- or short supply of concrete during the period prior to RDC's suspension; (d) whether RDC was entitled to suspend the supply of concrete; and (e) whether Sato Kogyo was entitled to terminate the contract after RDC's suspension.

The trial judge held in favour of RDC with respect to issues (a), (b) and (d), and found for Sato Kogyo with respect to issue (e). With regard to issue (c), the trial judge found that the force majeure clauses only exempted RDC from liability arising due to shortage of raw materials. Sato Kogyo appealed against the trial judge's findings on issues (a), (b), (c) and (d) in Civil Appeal No 152 of 2006 (“CA 152”), whilst RDC appealed against the findings on issues (c) and (e) in Civil Appeal No 151 of 2006 (“CA 151”).

Held, dismissing CA 151 and allowing CA 152 in part:

(1) The contract was not an exclusive or sole supplier contract. There was no express term as such and such a term could not be implied on either the business efficacy or officious bystander tests. Implying such a term would considerably alter the nature of the bargain because it was not the intentions of both parties that Sato Kogyo would be deemed to be in breach whenever it obtained concrete from alternative suppliers during the contract period, even after it had already purchased the stipulated amount of concrete from RDC: at [25] to [32].

(2) The proper construction of the contract showed that Sato Kogyo could claim direct costs incurred as a result of RDC's breach even if it had not terminated the contract. This was consistent with the position at common law where even if the innocent party was not entitled to terminate the contract, or, if so entitled, chose nevertheless not to terminate the contract, it would generally be entitled to claim damages as of right for loss resulting from the breach of contract: at [39] to [41].

(3) Sato Kogyo was entitled to claim the cost differentials of obtaining concrete from Pan United incurred during the period of LTA's suspension because such cost differentials were direct costs which flowed directly and naturally from RDC's inability to supply concrete that met with LTA's requirements. It was within the reasonable contemplation of both contracting parties that such loss was likely to result from the breach of contract: at [42] to [44].

(4) RDC could not invoke the force majeure clauses because it had not pleaded force majeure in its defence. In any case, the force majeure clauses would not have exempted RDC from liability for the non- or short supply as RDC could not prove that the shortage of raw materials or plant breakdowns were beyond its control. As such, RDC was liable to Sato Kogyo for the cost differentials: at [50] to [52], [76] to [80].

(5) RDC was entitled to suspend its supply of concrete because Sato Kogyo had wrongfully withheld a sum of money by imposing an administrative charge on RDC: at [86].

(6) Where a contract clearly and unambiguously provided for the events pursuant to which a party was entitled to terminate the contract, the innocent party might elect to do so. Even where the contract did not provide as such, the innocent party might elect to terminate the contract in three situations: (a) where a party, by his words or conduct, clearly conveyed to the other party that it would not perform its contractual obligations at all; (b) where there was a breach of a term which the parties had designated as so important that any breach of it would entitle the innocent party to terminate the contract; and (c) where the breach in question would deprive the innocent party of substantially the whole benefit of...

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