Teras Offshore Pte Ltd v Teras Cargo Transport (America) LLC

CourtHigh Court (Singapore)
JudgeSir Henry Bernard Eder IJ,Simon Thorley IJ
Judgment Date20 March 2018
Date20 March 2018
Docket NumberSuit No 7 of 2017 (Summonses Nos 4 and 8 of 2018),Suit No 1 of 2016

[2017] SGHC(I) 4

Singapore International Commercial Court

Sir Henry Bernard Eder IJ

Suit No 1 of 2016

Teras Offshore Pte Ltd
Teras Cargo Transport (America) LLC

Peter Doraisamy and Andrew Lee (Peter Doraisamy LLC) for the plaintiff;

Timothy Ross Lord (instructed) and Rajkumar Mannar (Peter Low LLC) for the defendant.

Brightside Mechanical & Electrical Services Group Ltd v Hyundai Engineering & Construction Co Ltd [1988] 1 SLR(R) 1; [1988] SLR 186 (refd)

Browne v Dunn (1893) 6 R 67 (refd)

Durabella Ltd v J Jarvis & Sons Ltd [2001] EWHC 454 (TCC) (refd)

Hong Leong Singapore Finance Ltd v United Overseas Bank Ltd [2007] 1 SLR(R) 292; [2007] 1 SLR 292 (refd)

Interpro Engineering Pte Ltd v Sin Heng Construction Co Pte Ltd [1997] 3 SLR(R) 668; [1998] 1 SLR 694 (refd)

Rira Bina Sdn Bhd v GBC Construction Sdn Bhd [2011] 2 MLJ 378 (refd)

Evidence Act (Cap 97, 1997 Rev Ed) ss 32(1)(b)(iv), 32(3)

Contract — Breach — Non-payment — Defendant subcontracted work to plaintiff — Plaintiff claimed reimbursement of sums advanced to defendant and recovery of back-charges for work done and services provided — Whether plaintiff entitled to recover debt or damages

Contract — Contractual terms — Scope of work — Whether plaintiff's claims for back-charges were related to work and services that fell within existing contractual scope of work

Contract — Contractual terms — Whether clause was “pay when paid” or “pay if paid” clause — Whether burden was on plaintiff or defendant to show that defendant had not received payment from main contractor, and whether burden was discharged on the facts — Whether defendant complied with implied undertaking to pursue all means available to obtain payment from main contractor

The plaintiff and the defendant were in the business of providing marine logistics and support services to the offshore oil and gas industry. The defendant entered into contracts (“the Main Contracts”) with the main contractors of a project to construct three liquefied natural gas plants on Curtis Island, Australia (“the LNG Projects”). The defendant was to provide tugs and barges, and administrative, technical and professional services in the performance of the marine transportation operations in respect of the LNG Projects. This work was then subcontracted by the defendant to the plaintiff on back-to-back terms under three separate “parallel” subcontracts (“the Subcontracts”). In performance of the Subcontracts, the plaintiff carried out approximately 87 voyages transporting 92 modules to Curtis Island, without reported losses or damages and delivering the modules on time.

The plaintiff commenced an action against the defendant, claiming (a) reimbursement of a total sum of US$3.5m originally advanced by the plaintiff to the defendant; and (b) further sums referred to as “back-charges” in respect of work done and services provided by the plaintiff in relation to the LNG Projects. In summary, the plaintiff claimed that it had performed work or services in relation to the Subcontracts at the request of and/or with the agreement of the defendant, and that such work or services were “out of scope” of the Subcontracts. Pursuant to such requests and/or agreement, invoices were issued by the plaintiff to the defendant in respect of the plaintiff's work and services, and the defendant accepted the relevant invoices without protest or query or at least did not reject them. All of the plaintiff's claims were denied by the defendant on various grounds as well as a defence of set-off. The defendant also advanced its own substantial counterclaim for various sums likewise in relation to the LNG Projects.

At trial, after the plaintiff had called its witnesses and at the close of its case, the defendant elected not to call any of its three scheduled witnesses. Notwithstanding their absence, the defendant sought to put in evidence the documents exhibited to its witnesses' affidavits. The defendant's application was rejected on the ground that it would be contrary to the “interests of justice” under s 32(3) of the Evidence Act (Cap 97, 1997 Rev Ed) to allow the defendant to adopt such course.

Following this ruling, the defendant admitted the sums claimed totalling US$3.5m and withdrew its set-off and counterclaim. The plaintiff's claims regarding the back-charges remained in dispute. The defendant raised two points of principle in its defence to the plaintiff's claim for the back-charges. First, all three Main Contracts and, in turn, all three Subcontracts, were by their express terms “all-inclusive” contracts. Thus the plaintiff's claims were in respect of work done or services provided which fell within the existing contractual scope of work, and therefore all the claims had to fail in limine. Second, at least in respect of some of the plaintiff's claims, there was no independent obligation on the defendant to pay unless and until the plaintiff was itself paid the corresponding amount by the main contractor. In other words, it was only if the plaintiff were paid such corresponding amount by the main contractor that the defendant came under any obligation to pay the plaintiff. As that had not yet happened (or at least there was no evidence that it had happened), and given that the burden was on the plaintiff, its claims had to again fail in limine. In this regard, the defendant relied on cl 5 of the Subcontracts which provided that the defendant would pay the plaintiff a portion of the marine spread amounts “as and when received” by the defendant from the main contractor.

Held, allowing the plaintiff's claims and dismissing the defendant's counterclaim:

(1) Following the defendant's admission of the sums claimed by the plaintiff totalling US$3.5m and the withdrawal of its set-off and counterclaim, the plaintiff was entitled to judgment in the total sum of US$3.5m plus interest, and the defendant's counterclaim was dismissed: at [11].

(2) The moneys claimed by the plaintiff for the back-charges were in respect of work done or services provided by the plaintiff in relation to the Subcontracts, and all such work and services were properly reflected in the invoices issued by the plaintiff to the defendant. The defendant's suggestion that the invoices were never sent by the plaintiff or received by the defendant was rejected. There was also no reason to doubt the veracity of the plaintiff's witnesses on the quantum of the claims, nor did counsel for the defendant seek to challenge any of them on this matter: at [24].

(3) Although the scope of the work under both the Main Contracts and the Subcontracts was very broad, it was plain that both sets of contracts were not all-encompassing and did not include certain work. The Main Contracts identified specific areas of work which were, in effect, excluded from the scope of work to be performed by the defendant under the Main Contracts and, in turn, the plaintiff under the Subcontracts. In addition, there were other specific provisions in the Main Contracts which specifically identified and delimited the work to be done or services to be provided: at [30].

(4) The mere fact that certain work done or services provided were “out of scope” did not, of itself, entitle the plaintiff to recover the cost of such work or services. The plaintiff would generally have to show that such work or services were not merely “out of scope” but done or provided pursuant to some special agreement or, at the very least, at the express or implied request of the defendant: at [31].

(5) The plaintiff was entitled to recover the back-charges in relation to charter hire, grillage removal charges, fresh water required by the plaintiff's tugs, anchorage/wharfage fees, port disbursements, shifting and pilot fees, lube oil, Inmarsat charges and protection letters: at [35] to [46].

(6) The defendant's submission that it had no independent obligation to pay the plaintiff's claims unless and until the defendant was itself paid the corresponding amount by the main contractor was broader than its pleaded defence. In any event, these pleas were, in large respect, fatally flawed because they depended on the defendant making good its assertions that the main contractor had denied payment of certain items or had only agreed to pay a limited sum in respect of certain items, and that the plaintiff was “aware” that this was the case. However, given that the defendant called no evidence to support any of these assertions, they inevitably fell away: at [48] to [50].

(7) A party could not rely on a “pay when paid” clause if the reason for non-payment was its own breach of contract or default. A contractor impliedly undertook that it would pursue all means available to obtain payment, or it would not be able to rely on the provision to defeat the claim of the subcontractor: at [57] and [58].

(8) The burden to show that (a) the defendant had not received payment from the main contractor and (b) such non-receipt was not due to any breach or fault on the defendant's part lay on the defendant as the party seeking to rely on the clause to show that payment had not been received. Clause 5 of the Subcontracts operated, in effect, as an exceptions clause and in the ordinary course it seemed right in principle that it should be for the party seeking to rely on such clause to establish sufficient facts so as to bring itself within the clause. There was also obviously good practical sense in such approach because it would generally be the party seeking to rely upon the clause (ie, the defendant) who would be able – or at least be in the best position – to adduce relevant evidence in relation thereto. That was the position in this case particularly since the defendant's emphatic position throughout was that the plaintiff should have no contact at all with the main contractor. For these reasons, it seemed that (a) the burden of proof was on the defendant to demonstrate that it had not received relevant payments from the main contractor...

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