The "STX Mumbai" and another matter

• Jurisdiction: Singapore
• Court: Court of Appeal (Singapore)
• Judge: Sundaresh Menon CJ
• Judgment Date: 24 July 2015
• Neutral Citation: [2015] SGCA 35
• Citation: [2015] SGCA 35
• Hearing Date: 15 January 2015
• Subject Matter: Civil Procedure,Striking Out,Discharge,Contract,Anticipatory Breach
• Plaintiff Counsel: Leong Kah Wah, Vellayappan Bala, Koh See Bin (Rajah & Tann Singapore LLP) and Navinder Singh (Navin & Co LLP)
• Published date: 31 July 2015
• Defendant Counsel: Gerald Yee, Prakash Nair, Moses Lin and Nazirah K Din (Clasis LLC)
• Date: 24 July 2015
• Docket Number: Civil Appeal No 80 of 2014 and Summons No 4235 of 2014

Andrew Phang Boon Leong JA (delivering the grounds of decision of the court): Introduction

The Appellant supplied bunkers to the Respondent’s vessel, STX Mumbai (“the Vessel”), on terms which required payment to be made within 30 days. Three days before the payment date arrived, the Appellant issued a letter of demand to the Respondent’s agent, STX Corporation, demanding immediate payment of the contract price by the close of the same business day. This demand for accelerated payment was founded on a set of circumstances which, in the Appellant’s view, demonstrated that payment would not be forthcoming when it fell due under the contract. In essence, these circumstances had to do with the poor financial health of the group of companies that the Respondent appeared to be a part of and this was evidenced, in particular, by the insolvency of another company, STX Pan Ocean Pte Ltd (“STX Pan Ocean”), which was also named as the “group owner” of the Vessel. No payment was received pursuant to the letter of demand and so the Appellant proceeded to commence in rem proceedings and arrested the Vessel the next day. The Appellant did so on the basis that the bunker supply contract had been repudiated by reason of the Respondent’s anticipatory breach, claiming that the Respondent had evinced a clear intention to renounce the contract by refusing to comply with the letter of demand or, alternatively, that the circumstances were such that it was impossible in any event for the Respondent to have made payment when the time arrived under the contract.

The Respondent applied to strike out the in rem action. It succeeded before the Assistant Registrar whose decision was upheld on appeal to the High Court (see The “STX Mumbai” [2014] 3 SLR 1116 (“the GD”)). In the Judge’s view, the Appellant’s action was legally unsustainable. She noted that certain facts were disputed by the parties – for example, whether the Respondent was even the party liable in personam for the bunkers (see below at [7]) – but found that even if these facts were assumed in favour of the Appellant, the Respondent was not in anticipatory breach of the contract. In gist, the Judge held that insolvency per se did not automatically amount to a repudiatory breach in law and, further, that this principle applied a fortiori in the present case because what the Appellant had sought to rely on when it issued the letter of demand was not the insolvency of the party liable in personam for the bunkers (viz, the Respondent) but that of a separate corporate entity altogether (viz, STX Pan Ocean). In the absence of any attempt to lift the corporate veil, the insolvency of the latter could not be imputed onto the former. Hence, the Appellant had no legal basis for issuing the letter of demand. Accordingly, the Respondent’s failure to comply with the demand could not be construed as a renunciation of its contractual obligations. Not surprisingly, the Judge also rejected the Appellant’s alternative argument to the effect that the Respondent had (owing again to STX Pan Ocean’s insolvency) placed itself in a situation which would render it impossible for it to meet its obligation to pay on the date fixed for payment.

This was sufficient for the Judge to strike out the in rem action but she went on to consider, by way of obiter dicta, a novel legal point which touched on the scope of the doctrine of anticipatory breach. Simply put, the question was this – does the doctrine of anticipatory breach apply only to executory contracts or does its application extend further to executed contracts? In offering her tentative views on this issue, the Judge stated that she was inclined to prefer the former, more circumscribed, position with the result that, if applied to the present facts, the Appellant’s claim would have no legal foundation to rest on. There was, after all, no dispute that this case concerned an executed contract since the Appellant had fully performed its obligation to supply the bunkers and the only obligation which remained was on the part of the Respondent to make payment at a future date. However, as this particular argument was not canvassed by the parties, the Judge noted that she could not base her decision on it (see the GD at [54] and [55]). Fortunately, we were not faced with a similar constraint as this issue was in full legal play before this court. We will therefore consider it first as a matter of logic as well as commonsense. Put simply, if the exception applied (ie, the doctrine of anticipatory breach did not apply to executed contracts), then that would be the end of the matter and the present appeal would have to be dismissed on this point alone as it was clear – at least on the facts of this particular case – that the contract concerned was an executed one. However, as we note later on in this judgment, we are of the view that the exception is not good law in the Singapore context.

We allowed the Appellant’s appeal. In our view, the in rem action here was not so plainly and obviously unsustainable as to warrant being struck out. To begin with, there was the issue as to whether the doctrine of anticipatory breach applied not only to executory contracts but also to executed contracts – an issue which (as mentioned in the preceding paragraph) we deal with later on in this judgment. Assuming that the doctrine of anticipatory breach applied to executed contracts (an assumption which, for the reasons we set out below, is entirely correct), it would be open to the Appellant to invoke the doctrine of anticipatory breach but whether its claim was a sustainable one on the facts required us to focus on STX Pan Ocean’s insolvency and consider whether that formed a proper basis for the Appellant to conclude that payment could not have been made when the time arrived under the contract. On this score, we were pointed to sufficient material which satisfied us that there was an arguable connection between the Respondent and STX Pan Ocean such that one could not discount entirely the bearing which the latter’s insolvency had on the ultimate question of whether the bunkers supplied to the Vessel would eventually be paid for. In addition to this, the Appellant raised a new argument and fresh evidence on appeal to buttress its submission on the impossibility of performance. Its new argument and fresh evidence revolved around its standard terms and conditions. The Appellant submitted that, on a true interpretation of the relevant clause, it was in fact entitled to receive payment on the date of the arrest itself and so, in the absence of any evidence to suggest that the Respondent had arranged to make payment by that time, it was virtually impossible for timely payment to have been made. In our view, this was not so plainly unmeritorious an argument that the Appellant should be precluded from amending its pleadings to raise it subject to the usual costs consequences.

In the result, we decided to set aside the Judge’s decision to strike out the Appellant’s claim. For completeness, we should also mention that the Judge had set aside the arrest of the Vessel and found the Appellant liable for wrongful arrest and continuance of the same, ordering, in this last-mentioned connection, an inquiry as to the sum of damages payable. However, in light of our decision not to strike out the action, we allowed the Appellant’s appeal against the setting aside of the arrest and reserved the question of wrongful arrest to the trial judge to be considered after the relevant findings have been made. These are the detailed grounds of our decision.

Background facts The parties

The Appellant, Transocean Oil Pte Ltd, is a locally incorporated company in the business of supplying bunkers. The Respondent, POS Maritime VX SA, is a Panamanian incorporated company and the registered owner of the Vessel.

The Appellant supplies bunkers to the Vessel

On 15 May 2013, the Appellant received an order from a company known as STX Corporation (see above at [1]) for the supply of bunkers to the Vessel. The buyer named in the purchase order was stated thus – “M.V. STX MUMBAI AND/OR MASTER AND/OR OWNERS, MESSERS. STX Corporation”. We should highlight that this – the identity of the buyer – was the source of a fundamental disagreement between the parties. The arguments ran as follows: The Appellant understood the above description in the purchase order to mean that it had contracted with the Respondent as owner of the Vessel. Although it had dealt with STX Corporation, STX Corporation had simply placed the order for the bunkers as the Respondent’s agent. On the other hand, the Respondent claimed that the Appellant’s contract was concluded directly with STX Corporation. In support of this contention, the Respondent relied on an affidavit filed by its representative, Mr Lee Sun Haing (“Mr Lee”), wherein the Vessel was stated as being on bareboat charter to STX Pan Ocean at the material time and, further, that STX Pan Ocean had independently arranged with STX Corporation for the latter to procure the supply of bunkers to the Vessel. In other words, the Respondent’s case, effectively, was that there was a chain of contracts for the supply of the bunkers with the Appellant as the ultimate seller who had contracted only with STX Corporation. On this view, the Respondent could not be said to be the “relevant person” liable in personam for the bunkers and, accordingly, the Appellant had improperly invoked the court’s in rem jurisdiction under s 4(4) of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed) when it arrested the Vessel.

We were not required to resolve this difference in views. In the proceedings below, the Respondent was content to take the Appellant’s case at its highest for the purposes of the striking out application and, as a consequence, the parties proceeded on a set of facts which were assumed in favour of the Appellant. This included the...