Singapore Precision Stampings Pte Ltd v Ranoda Electronics Pte Ltd

• Judge: Amarjeet Singh JC
• Judgment Date: 12 December 1997
• Neutral Citation: [1997] SGHC 337
• Citation: [1997] SGHC 337
• Court: High Court (Singapore)
• Plaintiff Counsel: Tan Hong Seng assisted by Marilyn Chia (Tan Lim & Wong)
• Defendant Counsel: Sally Yang assisted by Chiong Meng Chuan (Colin Ng & Partners)
• Published date: 19 February 2013

Judgment:

GROUNDS OF DECISION

Parties

1. The Plaintiffs are manufacturers and suppliers of electrical and computer component parts.

2. The Defendants are in the business of manufacturing and assembling electrical connectors and engineering plastic components for their computer industry.

3. The Plaintiffs were at the relevant time, a subsidiary of the then Uraco Precision Engineering Pte Ltd (‘Uraco Precision’). The Defendants were at that time, a subsidiary of Uraco Technologies Pte Ltd (‘Uraco Technology’). Both subsidiaries were related by common shareholders then and had a good business relationship since 1993. Sometime in or about 1994, the two subsidiaries ceased to have common shareholders. The Plaintiffs’ parent company was publicly listed on the Stock Exchange of Singapore in 1995.

Claim and Counterclaim

4. The Plaintiffs’ action herein was to recover from the Defendants the price of $378,551.99cts in respect of certain goods used in the computer industry which the Plaintiffs had sold and delivered to the Defendants between 29 December 1993 to 28 July 1994. The goods were Bandolein Pins, SMP contacts and receptacle terminals, known as Vertical Socket Terminals ("VSTs") from which connectors (‘connectors’) conducting electrical current are produced. The Plaintiffs produced VSTs in a precision stamping metal process whereby a strip of metal in a roll is stamped between a mould below and a die above. It was an undisputed fact that the Plaintiffs had to produce VSTs with a contact gap of 0.40mm with +/- 0.5 mm error according to drawings supplied by the Defendants so that the upper threshold of the contact gap was 0.45mm and the lower 0.35mm to be acceptable to the Defendants. After stamping, the VSTs were wound onto cardboard reels and packed for delivery to the Defendants. Each reel of VSTs could be cut into about 45,000 pieces of VSTs. The VSTs would be transformed after cutting by the Defendants into a different final product - a connector with 28 pins. The connector was assembled by the Defendants by inserting a number of VSTs into a plastic housing. The process was described by Teo Sze Cheng (DW1) the Defendants’ Senior Quality Engineer as follows:

"The plastic housing has required number of holes in it, 28 for this product. VST terminals cut to required number 4 sets of 7 pieces required for one connector. 2 parallel rows of holes. 1st set of VST will go into first hole occupying alternate holes, 2nd set goes to 2nd hole occupying the alternate holes, 3rd set goes into 1st hold of 2nd row occupying alternate holes, 4th set goes into 2nd hole of 2nd row occupying alternate holes. The VST gap is pushed in and locked in the hole of the plastic house. This completed piece is known as receptical. The VSTs undergo plating process before being slotted in."

The Defendants had contracted to deliver the connectors to their customer Seagate Technologies for incorporation into computer boards. Seagate’s documents refer to the connectors as ‘J2 receptacles’.

4.1 DW1’s further evidence by Affidavit was that a header pin 0.495mm supplied by a third party customer to Seagate would mate with the connector on Seagate’s computer board after Seagate had assembled the same to form an electrical circuit.

5. The Plaintiffs had obtained summary judgment for $318,000/- in respect of the Bandolein Pins and SMP contacts. That left a balance of their claim of about $58,680.06cts excluding GST, concerning the VSTs to be litigated together with the Defendants’ counterclaim for the supply to them by the Plaintiffs of VSTs which did not meet the contractual specifications resulting in a breach of contract and for all loss and damages suffered consequently by the Defendants, which I shall set out briefly very shortly. At the trial before me, the Plaintiffs eventually claimed only a balance of $56,760/- being the price of the VSTs after agreeing to deduct without admission of any manufacturing fault on their part, $1,900/- or half the amount in respect of 12 out of 24 reels of VSTs the subject matter of Invoice 0403 dated 17.2.95 which had been rejected by the Defendants. The comprehensive set of invoices containing deliveries of VSTs for which the Plaintiffs were not paid is as follows:

Plaintiffs’ Invoice No. Date of VST Value

Bundle Invoice Quantity $

(PB) ‘000 pcs

16 0386 07.02.95 500 2,000.00

18 0389 10.02.95 890 3,560.00

219 Free of charge (reworked)

20 0395 16.02.95 520 2,080.00

22 0403 17.02.95 960 3,840.00

24 0407 20.02.95 360 1,440.00

26 0413 23.02.95 1,480 5,920.00

32 0427 28.02.95 1,600 6,400.00

38 0436 04.03.95 480 1,920.00

42 0448 09.03.95 920 3,680.00

44 0452 13.03.95 800 3,200.00

50 0460 20.03.95 2,880 11,520.00

52 0470 23.03.95 1,360 5,440.00

58 0477 27.03.95 960 3,840.00

62 0484 29.03.95 960 3,840.00

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14,889 $58,680.00 (excludes GST)

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Total: $60,440.40 (with 3% GST)

I may add that the Defendants had orginally ordered altogether 20,000,000 pieces of VSTs (S50630-200-00) under a purchase order on 1.12.94 for a total sum of $80,000/- plus tax. Some VSTs were delivered to the Defendants in December 1993 and January 1994 and these had been paid for by the Plaintiffs.

6. The Defendants denied owing the balance due in the said sum of $56,760/- and instead by way of counterclaim sought to claim:

(a) damages for loss of profits to be assessed;

(b) the sum of $2,071,985/- made up of loss of profit consisting of:

(i) $795,000/- based on 30% margin of their sale price of $0.53cts. per connector for 5,000,000 pieces arising from Plaintiffs’ breach of contract in supplying defective VSTs concerning the delivery in Invoice 0403 from which connectors had been manufacturered and supplied to Seagate who had rejected them because they only produced intermittent electrical contact as their contact gaps were ‘out of specification’ that had been agreed and Seagate further cancelling all the staggered orders to come.

(ii) $1,276,985,000/- (US$899,285.40cts) based on margins of profit of between 12% to 50% of their sale price as set out in the counterclaim arising from a cancellation by Seagate of all existing orders placed with the Defendants in respect of other products.

(c) Further and/or alternatively, the expenditure of $209,000/- incurred and wasted by the Defendants for the manufacture of the above connectors and cancelled orders namely:

(i) cost of 87,000 pieces of assembled connectors which had to be scrapped - $49,000/-.

(ii) cost of the remainder of new materials which were yet to be incorporated into connectors - $25,000/-.

(iii) cost of the machines and equipment required of the manufacture of the VST terminals - $135,000/-. (iv) interest.

The Defendants’ counterclaim occupied almost all the time of the trial.

Orders

At the conclusion of the trial, the proved probabilities of the Plaintiffs’ claim being in their favour and that of the counterclaim being against the Defendants, I made the following orders:

" (1) Judgment for the Plaintiffs in the sum of $56,760/- with costs to be taxed or agreed. Interest on judgment amount at 6% from date of issue of Writ to date of judgment.

(2) Defendants’ counterclaim is dismissed with costs to be taxed or agreed. "

7. The Defendants being dissatisfied with the above decision, they now appeal.

Issues

8. There were two main issues in the action:

(1) Whether the Plaintiffs supplied VSTs to the Defendants which were ‘out of specification’ and/hence defective resulting consequently in defective connectors being manufactured by the Defendants and that the cause and effect of the defective connectors made was attributable to the Plaintiffs and not the Defendants and further

(2) Whether as a result of Seagate cancelling or rejecting all the Defendants’ orders for their:

(a) connectors and consequently

(b) other products,

the Plaintiffs are liable for the same.

Evaluation and Findings

9. As has been seen, between 7.2.95 and 29.3.95, the Plaintiffs had delivered 14,889,000 pieces of VSTs to the Defendants. There had also been some deliveries of VSTs before 7.2.95 for which the Plaintiffs had already been paid.

9.1 The Defendants’ entire defence and counterclaim was very substantially built around the delivery of 17.2.96 concerning the 24 reels of about 960,000 pieces of VSTs.

9.2 It was the Defendants’ case that after the delivery to them of the VSTs on 17.2.96 the Defendants caused routine incoming checks as was their practice. Samples of the VSTs examined showed that out of the 24 reels delivered 12 reels of VSTs did not meet the contractual specifications as the VSTs were out of specifications and those 12 reels were rejected by the Defendants as is set out in their Non-Conformance and Corrective Action Report dated 18.2.95 ("18 February CAR") a copy of which was sent to the Defendants with a remark against the proforma print:

"Corrective Action:

Please advise corrective action."

In respect of the 12 rejected reels, samples taken by the Defendants from the initial five to ten feet of each reel showed a contact gap in the VSTs of between 0.484mm to 0.501mm which was beyond the upper threshold limit of 0.45mm. Altogether 1,250 pieces of VST samples had been cut and examined. The Defendants had explained that they adopted this sampling system as it was not possible to unwind the whole 160 meter VST reel to take samples and as they had indicated this method of sampling to the Plaintiffs. Further unwinding the reels and rewinding them might cause damage to some of the individual VSTs. I had examined some of the VSTs which were quite pliable on some pressure being applied to them and it was plain that the VSTs had to be handled with care. The Defendants’ evidence was that strictly the contact gap of only 5 of the reels of VSTs were within the specification of 0.40mm +/-5mm. They accepted these reels and made the connectors from these VSTs. They also further accepted the remaining 7 reels of VSTs although the...