Seatrium New Energy Ltd (formerly known as Keppel FELS Ltd) v HJ Shipbuilding & Construction Co, Ltd (formerly known as Hanjin Heavy Industries and Construction Co Ltd)

• Jurisdiction: Singapore
• Judge: Kannan Ramesh JAD
• Judgment Date: 16 September 2024
• Neutral Citation: [2024] SGHC(A) 26
• Court: High Court Appellate Division (Singapore)
• Docket Number: Civil Appeal No 131 of 2023
• Hearing Date: 16 September 2024
• Citation: [2024] SGHC(A) 26
• Year: 2024
• Plaintiff Counsel: Wong Soon Peng Adrian, Sara Sim Hui Li, Wayne Yeo (Yang Weien), Sia Bao Huei and Mark Tang Yu Zhong (Rajah & Tann Singapore LLP)
• Defendant Counsel: Tan Wee Kheng Kenneth Michael SC (Kenneth Tan Partnership) (instructed), Daryll Richard Ng, Ang Kaili and Shannon Yeo Feng Ting (Virtus Law LLP)
• Published date: 16 September 2024

Kannan Ramesh JAD (delivering the judgment of the court ex tempore):

This is an appeal against the decision of a Judge of the General Division of the High Court (the “Judge”) dismissing the appellant’s claim against the respondent for defective work carried out by the respondent pursuant to a subcontract between them in relation to a vessel. The Judge’s decision is reported at Seatrium New Energy Ltd (formerly known as Keppel FELS Ltd) v HJ Shipbuilding & Construction Co, Ltd (formerly known as Hanjin Heavy Industries and Construction Co Ltd) [2023] SGHC 264. For the reasons below, we dismiss the appeal.

Background

We set out the facts briefly insofar as they are salient to the issues.

Pursuant to an agreement dated 17 August 2012, the appellant, Seatrium New Energy Ltd (formerly known as Keppel FELS Ltd) (“Seatrium”), contracted with Floatel International Ltd to build and deliver an accommodation support vessel that was to be connected to an offshore production facility in the Norwegian Continental Shelf (the “Vessel”). The Vessel was to provide living quarters and other amenities for staff working in the facility. There were four addenda to the agreement, through which the contract was novated to Floatel Endurance Ltd (“Floatel”).

Seatrium subcontracted the fabrication, assembly and erection of the pontoons and lower columns of the Vessel (the “Works”) to HJ Shipbuilding & Construction Co, Ltd (formerly known as Hanjin Heavy Industries and Construction Co Ltd) (“Hanjin”), pursuant to an agreement dated 17 January 2013 (the “Sub-Contract”). Under the Sub-Contract, the Works were to be completed by 30 October 2013. However, Hanjin did not meet the deadline and, despite multiple chasers, never completed the Works.

As a result, the parties entered into what was effectively a variation of the Sub-Contract, described as the “Side Letter” dated 27 December 2013, under which Seatrium agreed to take over construction of the outstanding works. The Side Letter comprised several documents of which the principal document was a “Letter Agreement” also dated 27 December 2013. Much of the arguments in this appeal focus on the Letter Agreement, in particular its fifth paragraph (the “5th Para”).

Seatrium completed the outstanding works and delivered the Vessel to Floatel on 16 April 2015. This date is critical for the computation of time for the warranty claim by Seatrium against Hanjin on the basis of warranties provided in the Sub-Contract.

In or around mid-August 2016, Floatel notified Seatrium that there were defects in the Vessel. Urgent repairs of only some of the key defects were carried out. On 24 August 2016, Seatrium put Hanjin on notice of the defects and attributed them to the work that Hanjin had carried out. Significantly, Hanjin replied on 6 September 2016 that Seatrium’s claim was subject to the warranty period which had since expired. Indeed, this has consistently been Hanjin’s position in the correspondence and is pleaded as a defence in the suit below. Whether Hanjin’s position is correct is an issue in this appeal.

Further defects were identified when the Vessel was berthed for inspection between 14 December 2017 and 21 July 2018 in Rotterdam. Again, numerous defects were discovered and only critical repairs were carried out.

Efforts by Seatrium between 29 August 2018 and 19 February 2019 to have Hanjin discuss the defects and repairs that were needed were met with silence. On 23 January 2019, Seatrium sent a letter to Hanjin stating on record its position that Hanjin had breached its contractual and tortious duties in view of the defects. This was also met with silence. Seatrium then carried out another round of inspection and repairs at its own cost and expense. The Vessel was inspected again, and further defects were identified. These were eventually resolved by Seatrium in July 2019.

In the suit below, Seatrium sought to hold Hanjin liable for the defects and claimed damages for alleged breaches by Hanjin of its contractual and tortious duties. Seatrium was unsuccessful. The Judge found that Hanjin’s works were defective and in breach of the Sub-Contract – there is no cross-appeal by Hanjin against this finding. However, the Judge also held that Seatrium’s claim was precluded by the 5th Para of the Letter Agreement, and Hanjin was not estopped from denying liability for breach of the Sub-Contract. The Judge was also of the view that Hanjin did not owe Seatrium a separate tortious duty of care that was co-terminous with its contractual duties. Finally, the Judge concluded that Hanjin was not liable under its warranty obligations as the warranty had expired before the defects were discovered.

Issues

The central issue in this appeal is whether pursuant to the Letter Agreement, in particular the 5th Para, Seatrium was precluded from bringing a claim for breach of the Sub-Contract for the defects, save for a warranty claim under the Sub-Contract. If so, the consequential question is whether the warranty claim was still available as the warranty had expired by the time the defects were discovered in mid-August 2016 and Seatrium had put Hanjin on notice of the defects on 24 August 2016. Another issue is whether, as Seatrium asserts, Hanjin is estopped from denying liability for breach of the Sub-Contract for the defects. The final issue is whether Hanjin owed a duty of care in tort to carry out the works with due skill, care and diligence, in relation to Seatrium’s alternative claim in tort for the defects.

We consider these issues in turn.

Whether Seatrium was precluded from bringing a claim for breach of the Sub-Contract pursuant to the Letter Agreement?

We reproduce the 5th Para:

In consideration for the Sub-Contractor’s acknowledgement and agreement above, Builder acknowledges and agrees that, save for Sub-Contractor’s warranty obligations for the Sub-Contract Works which it has carried out, Builder shall not have any claims whatsoever against Sub Contractor for the works which will have to be carried out by Builder to complete/remedy the Sub-Contract Works.

[emphasis added]

Pursuant to the 5th Para, Seatrium would have no claim against Hanjin for any work that it would have to carry out either to complete the outstanding works under the Sub-Contract that Hanjin had failed to do or to remedy the works that Hanjin had already carried out but were defective prior to Seatrium taking over the Sub-Contract. The only exception to this is the work that Hanjin had carried out that was caught by its warranty obligations under the Sub-Contract. As...