Sunrise Industries (India) Ltd v PT OKI Pulp & Paper Mills and another

• Jurisdiction: Singapore
• Judge: Tan Lee Meng SJ
• Judgment Date: 21 June 2018
• Neutral Citation: [2018] SGHC 145
• Court: High Court (Singapore)
• Docket Number: Suit No 8 of 2017 (Summons Nos 1510 of 2017 and 1940 of 2017)
• Published date: 27 June 2018
• Year: 2018
• Hearing Date: 13 October 2017,12 December 2017
• Plaintiff Counsel: Christopher Anand Daniel, Ganga Avadiar and Eileen Yeo Yi Ling (Advocatus Law LLP)
• Defendant Counsel: Sushil Nair, Darius Bragassam and Teo Wei Ling (Drew & Napier LLC)
• Subject Matter: Credit and security,Performance bond,Fraud exception,Unconscionability exception
• Citation: [2018] SGHC 145

Tan Lee Meng SJ:

The plaintiff, Sunrise Industries (India) Ltd (“Sunrise”), a company incorporated in India, is in the business of manufacturing thermosets, thermoplastic-lined equipment, pipes and fittings. The first defendant, PT OKI Pulp & Paper Mills (“PT OKI”), an Indonesian company, is a manufacturer of pulp, paper and tissue paper. The present dispute between Sunrise and PT OKI relates to the making of a call on a performance guarantee (the “Bank Guarantee”) issued by the second defendant, Dena Bank Limited (“the Bank”), to PT OKI. The Bank Guarantee was intended to secure the performance by Sunrise of a contract to supply PT OKI with a complete set of FRP-Piping for the construction of a pulp mill in Ogan Komering Llir in South Sumatra, Indonesia (the “Project”). After PT OKI called on the Bank Guarantee on 10 October 2016, Sunrise applied for and obtained interim injunctions on 6 January 2017 to prevent PT OKI from making the said call and the Bank from paying any money under the Bank Guarantee to PT OKI (“the Injunctions”). Subsequently, Sunrise applied for fresh injunctions on the same terms in Summons No 1510 of 2017 (“SUM 1510”) and PT OKI applied to set aside the Injunctions in Summons No 1940 of 2017 (“SUM 1940”). In this judgment, I address both these summonses.

Background

In the latter part of 2014, PT OKI expressed an interest in procuring from Sunrise a complete set of FRP-Piping for the Project and in engaging Sunrise for the installation of the said piping. After extensive negotiations, Sunrise and PT OKI entered into two separate contracts dated 10 July 2015. Both contracts provided for Singapore law to be the governing law and further provided that the parties “irrevocably submit to the jurisdiction of the courts of Singapore, which shall have exclusive jurisdiction over such disputes” and that the parties agree to waive any objections to proceedings in Singapore on the ground that they were brought in an inconvenient forum.

The first contract (“the Supply Contract”) was signed on or around 12 August 2015 although it was dated 10 July 2015. It required Sunrise to supply a complete set of FRP-Piping for the Project. The initial contract price, which was subsequently revised, was US$6,647,625. The Supply Contract required Sunrise to furnish a Bank Guarantee to PT OKI with respect to the performance of its obligations under the said contract.

The second contract (the “Installation Contract”) required Sunrise to supervise and install the FRP-Piping for the Project for US$1,291,935. Unlike the Supply Contract, the Installation Contract did not require the provision of a Bank Guarantee by Sunrise.

On 14 September 2015, the Supply Contract was amended to exclude some items from and to include a number of other items in the list of goods to be supplied. As a result of the changes, the contract price for the goods to be supplied under the said contract was raised to US$6,925,839.

The required Bank Guarantee under the Supply Contract was issued by the Bank on 21 September 2015 for 10% of the total contract price under the said contract, as amended on 14 September 2015, which amounted to US$692,583.90. The Bank Guarantee was an unconditional on-demand guarantee that was intended to serve as security for the fulfilment of Sunrise’s obligations under the Supply Contract, including the delivery of goods to PT OKI within the prescribed time. Under the Bank Guarantee, the Bank irrevocably and unconditionally undertook to pay to PT OKI any amount up to US$692,583.90 immediately and within five banking days from receipt of PT OKI’s written demand calling on the said Guarantee “notwithstanding any challenge whatsoever or howsoever made by [Sunrise] or any other Party”.

On 10 November 2015, the parties amended the Supply Contract to include some further items (the “additional goods”) to be supplied by Sunrise. The amendments resulted in the raising of the contract price by a further US$1,398,293.

The Supply Contract required the goods and additional goods to be delivered to PT OKI in Indonesia by 25 November 2015 and 15 January 2016 respectively (the “original delivery deadlines”). The Supply Contract provided for liquidated damages for delayed delivery, which were capped at 10% of the total contract price. The maximum amount payable as liquidated damages for delayed delivery would be reached once there had been a delay of six full weeks.

According to PT OKI, the delivery deadlines were not met. It is PT OKI’s case that this resulted in Sunrise being liable for the maximum liquidated damages for delayed delivery. However, Sunrise claimed that it was not in breach because the delayed delivery of the goods and additional goods was due to PT OKI’s failure to put the required Letters of Credit (“L/Cs”) in place on time as well as the latter’s delay in making the required initial payments for the goods and additional goods. In contrast, PT OKI blamed Sunrise for these delays and alleged that the latter failed to furnish the required documentation timeously to enable it to put the L/Cs in place and make the initial payments for the goods.

In view of the delays in shipment of the goods and additional goods to Indonesia, the L/Cs for these goods were amended on 23 December 2015 to reflect the changed position and the latest date for shipment of the goods was changed to 29 February 2016 in the L/Cs. The parties held different views on whether or not the amendment of the latest date for shipment of the goods extended the original deadlines for the arrival of the goods in Indonesia and released Sunrise from any alleged breach of the delivery deadlines.

On 7 January 2016, the security under the Bank Guarantee was increased to US$832,413.20, which is the sum claimed by PT OKI from the Bank under the Bank Guarantee.

Apart from complaining about the delayed shipment of the goods and additional goods, PT OKI asserted that Sunrise failed to perform some of its other obligations under the Supply Contract. It pointed out that Sunrise failed to deliver to it a cargo of “Special Tools” required for the installation of the FRP-Piping in the Project and that some of the goods supplied by Sunrise under the Supply Contract did not comply with the specifications stated in the said contract.

By May 2016, the parties were exchanging rather rude emails. On 18 May 2016, PT OKI’s Mr Tjandra Sujanto (“Sujanto”) emailed Sunrise’s managing director, Mr Joy Kunjukutty (“Kunjukutty”), as follows:

After all your tricks which has caused us severe delay and losses, we have no interest to continue business with you anymore.

All our rights under the contract shall be claimed from you to the fullest extent possible.

[emphasis added]

Faced with PT OKI’s position that it had no interest in doing business with Sunrise anymore, Kunjukutty replied with a hard-hitting email on the same day, in which he pointed out that he would be arranging for his Project Manager to collect the machinery and tools supplied for the installation of the FRP-Piping in the Project. He stated as follows:

[W]e will be deputing our Project manager to collect all the plant, machineries, special tools supplied for the installation against your installation contract…

In the meantime you are requested to kindly release the balance payment against your supply contract immediately and discharge us from the performance liabilities to enable us to allow you to install the piping through any other contractor.

As informed in our earlier mail we will not be responsible for the performance of the systems, if the same is installed by any other contractor. We are sure that you are not only going to delay the project beyond your imaginations but also going to screw up the plant operation during the years to come.

[emphasis added]

Sujanto’s rather terse reply to Kunjukutty on 19 May 2016 was also in rather impolite terms as he stated as follows:

There is nothing to return to you. You are a literate man so read your contracts carefully!! All the tools are part of the Goods contract and belong to us as we have paid for them. You sent your Site Manager to work on site without giving him the purchase contract for reference! Only after we showed him the contract did he realize that all the way you have misled him with wrong information and instructions!

….

You have no good intention to fulfill your contractual obligations since the beginning.

All your key staffs have left you one by one … You are as bad to your own staffs as to your customer.

The normal and only way to settle such situation is to meet your customers face to face and discuss solution, however bad the situation is, like a good businessman but you choose to hide behind your laptop.

You don’t have the guts to show up but pathetically have the face to try to claim the payment that you are not entitled to!

You are a hopeless person Joy!

[words in bold in original; emphasis added in italics]

Kunjukutty’s email on the same day to Sujanto included the following remarks, which showed that the relationship between the parties had totally broken down:

We are not responsible for your unprofessional and unethical behaviour, it is your problems and we understood it from the beginning and we are sure that you have grown with that culture. Please note that we can’t write or behave like you being a professional and highly ethical leading multinational company.

We have understood your culture from your first letter you have sent to us after the award of the contract. Hence, we were very careful in dealing with you to avoid such situations.

….

We fail to understand the meaning of your mail and if we have no intention to complete the project, why we have done all these things in advance without getting the payment. …

There can be dispute in the business due to various reasons but it is very important to behave professionally and that we have learned and...