Sinogreat International Trading Ltd v Hin Leong Trading (Pte) Ltd

• Jurisdiction: Singapore
• Judge: Lai Kew Chai J
• Judgment Date: 14 April 2003
• Neutral Citation: [2003] SGHC 91
• Date: 15 April 2003
• Docket Number: Suit No 1611 of 1999
• Published date: 07 October 2003
• Year: 2003
• Plaintiff Counsel: S Gunaseelan (S Gunaseelan and Partners)
• Citation: [2003] SGHC 91
• Defendant Counsel: Toh Kian Sing and David Tan Yew Beng (Rajah and Tann)
• Court: High Court (Singapore)
• Subject Matter: Causation,Discharge,Related company purchasing goods in place of original party to contract,Breach of contract,Agreement,Commercial Transactions,Whether there was evidence of any intention to novate on part of all parties involved,Whether breach of contract caused by plaintiffs' instructions to change description of cargo on shipping documents,Novation,Cargo confiscated by customs authorities,Sale of goods,Contract for sale of goods,Contract

1 The claims and counterclaims arise out of an agreement for the sale and purchase of 43,000 MT ± 5% of Vacuum Gas Oil (“the cargo”) for shipment to Xiamen, Peoples’ Republic of China (“the PRC”) to be delivered by 3 lots. After the agreement, the sellers at the request of the buyers changed the name of the cargo to Low Sulphur Waxy Residue (“LSWR”) in the shipping documents, including the bills of lading. The first two lots of the cargo were delivered to the receivers of the lots for the buyers’ account without any difficulties. When the vessel arrived at Xiamen to deliver the third lot, the buyers were not in a position to receive the cargo and the vessel sailed to Hong Kong, Out Port Limit (“Hong Kong OPL”) to await the buyers chartering and sailing vessels there for ship to ship transfers of the third lot of the cargo in smaller consignments. The sellers and buyers entered into a Storage Agreement. Just as the first shipment was being transferred from ship to ship, PRC Customs officers seized the two vessels and the third lot of the cargo. As the mis-description of the third lot of the cargo did not conform to the specifications of the cargo, it was found by PRC Customs and two Courts of the Province of Guangzhou, PRC that it was without legal documentation and the third lot of the cargo was confiscated by the PRC Customs on the ground that there was deemed smuggling. The vessel chartered by the sellers was detained for an extended period of time and substantial demurrage was incurred. The vessel also suffered damage.

2 The buyers claim damages for breach of the contract of sale and for negligence as the bailees in allowing the ship to ship transfer of the third lot of the cargo when the same should have taken place, as allegedly agreed, within the Hong Kong territorial waters. The sellers counterclaim for damages for detention of the vessel and the repair of the vessel caused during the detention.

3 And now the material facts as revealed by the evidence led. By a contract dated 17 May 1999, the defendants sold to Sinocean International Investments Ltd (“Sinocean”) the cargo on CFR, PRC basis. That the plaintiffs purchased the cargo from the defendants in place of Sinocean, a related company, is not disputed but the correct legal position under which the plaintiffs took over the cargo will be addressed later in this judgment. Delivery of the cargo, which was to be in two lots under the sale contract, was later varied to be in 3 lots. The range of delivery dates was extended by agreement to 10 June 1999. The contract was negotiated by Mr Lim Oon Kuin (“Mr Lim”), the Managing Director of and on behalf of the defendants. Mr Goh Kah Hiang (“Mr Goh”), the plaintiffs’ General Manager and Mr Wu Zai Jin (“Mr Wu”) negotiated on behalf of the plaintiffs.

4 The material times of the sale contract are as follows:

13 Title and Risks

Title and risk of product shall pass from seller to buyer when product passes ship’s permanent flange connection at loadport.

15 Taxes, Duties and Other Levies:

All duties, taxes, levies and other official dues and charges as well as the costs of carrying out and clearing all customs formalities for importation of the goods and, where necessary, for their transit through another country shall be arranged by and shall be for the account and responsibility of the buyer.

16 Governmental/Customs Requirements:

Buyer warrants that all customs formalities and requirements by the local authorities have been properly secured and compiled for importation of subject cargo to buyer’s designated disport.”

5 Accordingly, the defendants did not have to concern themselves with matters such as payment of import duties and taxes and the procurement of import permits or any customs clearance in connection with the importation of the cargo into the PRC.

6 The defendants had themselves bought the cargo under a contract from Feoso Energy (Hong Kong) Ltd (“Feoso”) who provided the specifications of the cargo to the defendants. The specifications were set out on the last page of the sale contract of 17 May 1999 and they are as follows:

ANALYSIS

TEST METHOD RESULT

GRAVITY, API AT 60 F D-1298 25.8

OUR POINT, DEG F D-97 -/-64

TOTAL SULFUL, X-RAY,

WT PC D-4294 1.7217

CARBON RESIDUE,

CONRADSON, WT PCT D 189 0.14

ANILINE POINT, DEG F D-611 159.8

FLASH POINT PENSKY

MARTENS, DEG F D-93 200

WATER & SEDIMENT (BS&W),

VOL PCT D-1796 <0.05

VANADIUM, PPM SOL/DIL <0.1

SODIUM, PPM SOL/DIL 0.3

COPPER, PPM SOL/DIL <0.1

NICKEL, PPM SOL/DIL <0.1

HYDROGEN SULPHIDE,

PPM @ 140 DEG F <0.5

VISCOSITY, CST @ 122 DEG F 10.1

DISTILLATION (VACUUM),

1.8.P DEG F D-1160 433

RCVD, 5 PCT, DEG F 510

RCVD, 10 PCT, DEG F 54

RCVD, 20 PCT, DEG F 584

RCVD, 30 PCT, DEG F 617

RCVD, 40 PCT, DEG F 648

RCVD, 50 PCT, DEG F 674

RCVD, 60 PCT, DEG F 706

RCVD, 70 PCT, DEG F 743

RCVD, 80 PCT, DEG F 797

RCVD, 90 PCT, DEG F 878

RCVD, 95 PCT, DEG F 941

END POINT, DEG F 976

RECOVERY, VOL PCT 97.5

RESIDUE, VOL PCT 2.5

TOTAL NITROGEN, PPM D-4629 619

7 After the sale contract, the defendants chartered two vessels, namely “Ocean Dolphin” and “Ocean Opal” from Ocean Tankers Pte Ltd (“Ocean Tankers”) to lift the cargo from Feoso, which was then on board the vessel known as “Condoleezza Rice”, and to deliver the same to the plaintiffs in Xiamen, PRC. On 19 and 20 May 1999, some 12,032.252 MT of the cargo was transferred from the “Condoleezza Rice” to the “Ocean Dolphin” which then proceeded to Xiamen. On 20 and 21 May 1999, the balance of the cargo, some 30,664.673 MT, was transferred from the “Condoleezza Rice” to the “Ocean Opal” which also headed for Xiamen.

8 On the evidence, it was clearly established that the plaintiffs instructed the defendants to describe the cargo on board the two vessels as LSWR instead of Vacuum Gas Oil (“VGO”) on all shipping documents including the bills of lading and the certificate of quantity, quality and origin. By their fax of 24 May 1999 Sinocean to the defendants Sinocean acknowledged with thanks the defendants’ co-operation in ‘assisting to show product name as “LOW SULPHUR WAXY RESIDUE’ in all shipping documents instead of VGO. They stated that the ‘change of product name (was) purely for purpose of customs clearance facilities at discharging port’. They “further unconditionally indemnify (the defendants) all damages, losses and hold (the defendants) free from any claims, damages arise (sic) from our above request.” By their letter of 8 June the plaintiffs issued an indemnity to the same effect in respect of the 11,950 MT of partial shipment of cargo which was to be paid by a Letter of Credit.

9 As to the defendants’ performance under the sale contract, the lot of about 12,032.25 MT of the cargo on board the “Ocean Dolphin” was duly delivered as the first lot under the sale contract on or about 25 May 1999 to or for the account of the plaintiffs who duly paid the price without any complaint whatsoever about the specifications or quality. As to the 30,908.621 MT of the cargo on board “Ocean Opal”, about 12,419.214 MT was transferred to “Ocean Dolphin” at Outport Limit, Hong Kong (“OPL, Hong Kong”) for onward carriage to Xiamen on the instructions of the plaintiffs. This was the second lot under the sale contract. It was duly delivered to the plaintiffs who, again, paid for it without on or about 1 June 1999 without any protest about the specifications or quality. Both the first and second lots were, according to the Master of “Ocean Dolphin”, delivered at Xiamen to other vessels without any problems. The shipments were VGO.

10 The 18,489.407 MT of the cargo, remaining on board “Ocean Opal” was the 3^rd and final lot of the cargo under the sale contract. This last lot became the subject matter of this action.

11 The final lot was due for delivery at Xiamen to the plaintiffs on or about 9 June 1999. This, in the event, did not happen. On 10 June 1999 as “Ocean Opal” was nearing Xiamen waters, the vessel was turned back and it sailed back to OPL, Hong Kong. On the evidence, it was the plaintiffs who requested that this be done because they, the plaintiffs, were unable to obtain sufficient ullage capacity to take delivery of the 3^rd and final lot of the cargo at the discharge port of Xiamen. If the plaintiffs had been ready to receive the final lot of the cargo, the defendants would have delivered the same as they were ready, able and willing to do so. The plaintiffs were therefore in breach of the agreement to take delivery.

12 As the plaintiffs had paid for most of the cargo and had caused to be issued in favour of the defendants a letter of credit for the rest of the cargo, they were anxious to obtain some documentary assurance that the defendants would not dispose of the final lot of the cargo. Both Mr Wu and Mr Goh, on behalf of the plaintiffs, spoke to Mr Lim of the defendants over the telephone. They assured Mr Lim that the plaintiffs would urgently charter vessels to take delivery of the final lot from “Ocean Opal”. Their intention, I find on the evidence, was to take delivery of the final lot from “Ocean Opal” at where she was anchored which was Hong Kong, OPL in smaller quantities over a few trips by means of vessels chartered by the plaintiffs which would ultimately carry them to Xiamen. Mr Goh of the plaintiffs confirmed that the plaintiffs’ intention was to lift the cargo as soon as possible by small lots and that they would lift the final lot from the vessel at the position she was anchored.

13 Mr Lim accordingly instructed Ms Serene Seng, the Manager for Corporate Affairs of the defendants, to prepare a document to be sent to the plaintiffs by way of assurance. On 14 June 1999 Ms Seng drafted what was described as the “Storage Agreement” in respect of the “redelivered” cargo, i.e. the final lot of the cargo. No consideration was furnished by the plaintiffs for the storage on board “Ocean Opal” till the end of June. It was, in my view, more in the nature of a gratuitous bailment, and I shall...