Toptip Holding Pte Ltd v Mercuria Energy Trading Pte Ltd and another appeal

JurisdictionSingapore
JudgeSundaresh Menon CJ
Judgment Date23 November 2017
Neutral Citation[2017] SGCA 64
Date23 November 2017
Docket NumberCivil Appeals No 131 and 132 of 2016
Published date29 November 2017
Plaintiff CounselTan Boon Yong Thomas and Amirul Hairi (Haridass Ho & Partners)
Defendant CounselTay Twan Lip Philip and Yip Li Ming (Rajah & Tann Singapore LLP)
CourtCourt of Appeal (Singapore)
Hearing Date26 July 2017
Subject MatterContract,Voyage charterparties,Carriage of goods by sea,Formation,Admiralty and Shipping
Judith Prakash JA (delivering the judgment of the court): Introduction

The present appeals are cross-appeals by Toptip Holding Pte Ltd (“Toptip”) and Mercuria Energy Trading Pte Ltd (“Mercuria”). They arise out of the decision of the trial judge (the “Judge”) that negotiations carried on between these parties in October 2014 for the charter of the vessel m.v. Pan Gold (the “Vessel”) never achieved completion and thus no charterparty was concluded. This was a decision in favour of Mercuria which had acted as disponent owner of the Vessel in the negotiations while Toptip had intended to charter the Vessel from Mercuria to carry a cargo of iron ore pellets. Shortly after Mercuria’s denial of the existence of the charter, Toptip entered into another charterparty with a different disponent owner, albeit this was again in respect of the Vessel. The new charter was at a higher rate than that used during the discussions with Mercuria. The parties’ dispute centres on the construction of their e-mail correspondence and whether the presence of a “subject to review” clause had prevented the formation of a contract.

The Judge dismissed Toptip’s claim against Mercuria for damages for breach of contract on the basis that no valid charterparty had been formed and Toptip’s appeal (in Civil Appeal No 131 of 2016 (“CA 131”)) is against this finding. Mercuria, despite having won the case at trial, appealed (in Civil Appeal No 132 of 2016 (“CA 132”)) against aspects of the Judge’s decision that were not in its favour. After disposing of the main issue, the Judge had considered whether the charterparty, if formed, would have been void for uncertainty and concluded that it would not have been. He also opined that if a valid charterparty existed, Mercuria had been in repudiatory breach of contract. The reasons for the Judge’s decision are given in his judgment, viz, Toptip Holding Pte Ltd v Mercuria Energy Trading Pte Ltd [2016] SGHC 173 dated 1 September 2016 (the “Judgment”).

The factual background

This account of the background facts is largely derived from the Judgment. Toptip is a Singapore company trading in bulk commodities, including iron ore. Mercuria is the Singapore subsidiary of a global energy and commodity group engaged, inter alia, in the chartering out of vessels to carry dry cargo. Mercuria does not own any vessels itself and negotiated with Toptip on the basis that it would be the disponent owner of the Vessel if the charterparty was concluded.

On 10 October 2014, Toptip entered into a contract with Samarco Mineracao SA (“Samarco”) (the “Sale Contract”) to buy approximately 170,000 metric tonnes of iron ore pellets (the “cargo”) from Samarco to be shipped from the port of Ponta Ubu in Brazil to ports in China. Under the Sale Contract, the “laycan” for the shipment was stipulated as being between 21 and 30 November 2014. Further, Toptip had to arrange for a vessel to transport the cargo but Samarco had the right to reject Toptip’s nominated vessel if it was not suitable. Toptip therefore contacted Mr Shu Changhong (“Mr Shu”), a ship chartering broker, and asked him to find a vessel for it. Throughout the communications that followed, Mr Shu acted on Toptip’s behalf and Toptip never corresponded directly with Mercuria.

Toptip set out its requirements for a carrying vessel and the charter contract in its e-mail of 13 October 2014 (the “Enquiry”) to Mr Shu. Among these were clauses relating to details of the cargo, the expected laycan, the ports for loading and discharge, the age and other features of the carrying vessel, and the governing law and forum for dispute resolution. The clauses pertaining to freight and demurrage rates were left blank to be filled in by the prospective ship-owner. Some of the terms of the Sale Contract (the “Samarco terms”) were also attached to the Enquiry pursuant to a term reading: “OWNRS SHALL COMPLY ALL SHIPPING/LOADING TERMS AS ATTACHED”. One of these terms was a stipulation that vessel nominations had to be made at least ten days prior to the commencement of the shipping laydays and would be subject to Samarco’s acceptance. The last clause of the Enquiry read: “OTHERWISE AS PER VALE CP AS ATTACHED WITH LOGICAL AMENDMENT”. This clause was a proposal by Toptip that the detailed terms of the charterparty be based on the pro forma charterparty of Vale SA, a large iron ore producer (the “Vale CP”).

Mr Shu forwarded the Enquiry to Mr Sanjeev Gupta (“Mr Gupta”), chartering manager of Mercuria, on the same day, stating at the end of his e-mail: “Invite owners best freight for fixing” and asking for a response by 5pm on 14 October 2014. It was understood that Mercuria would, if interested, offer a freight rate for the carriage on a vessel that it would charter.

Shortly before 6pm on 14 October 2014, Mr Sanghwa Lee (“Mr Lee”), Mercuria’s Capesize chartering manager, responded to Mr Shu. His e-mail (the “Bid”) began with these words: “Mercuria would like to offer firm bss following terms”. In chartering language, the short form “firm bss” meant “firm basis”. The Bid substantially repeated the terms set out in the Enquiry. Both the freight rate and the demurrage rate were specified with the freight rate being stipulated at US$18.40 per metric tonne. The only other difference between the Bid and the Enquiry was in the last clause; Mercuria amended the clause to state the following: “OTHERWISE SUB REVIEW OF CHTRS PFMA CP WITH LOGICAL AMENDMENT” (the “Subject Review clause”). Written out in full the Subject Review clause would read: “Otherwise subject review of charterers’ pro forma charterparty with logical amendment”. The Bid did not nominate any specific vessel for consideration as the conveying vessel.

Mr Shu immediately forwarded the Bid to Mr Liu Bin (“Mr Liu”) of Toptip from whom he received, shortly afterwards, the response: “We confirm to accept your bid”. Mr Shu then contacted Mr Lee and Mr Gupta stating, “We confirm the acceptance of your offer. Thanks for your business!”

On 16 October 2014, Mr Shu asked Mr Lee for “the working CP in word format”. On the same day, Mr Lee replied that they “[did not] have working CP in word format” and that they were “waiting for chtrs PFMA CP for [their] review”. Soon after, Mr Gupta, who was copied in the entire exchange, sent an e-mail to his colleague Mr Lee as well as to Mr Shu, asking two questions: “Do we have their Australian cargo CP? Can we use that as base?” Mr Lee then e-mailed Mr Shu a form of charterparty stating simply: “Please find attached CP in word format”. The attached document, which we shall term the “Australian CP”, was the form of a charterparty which had been used by Mercuria and Toptip a few months earlier for the carriage of similar cargo on a ship which Mercuria had chartered out to Toptip.

Thereafter, Mr Shu and his employee prepared a draft charterparty using the Australian CP format as a base and amending it to reflect the main terms in the Bid (the “Draft CP”). They dated the Draft CP 14 October 2014 and, on 24 October 2014, sent it to Toptip and Mercuria for comments.

In the meantime, the parties corresponded regarding the nomination of the carrying vessel. On 23 October 2014, Mercuria nominated the Vessel and asked for the cancelling date (the last day of the laycan) to be pushed back from 30 November 2014 to 1 December 2014 as it was “targeting [the] back end of [the] laycan”. This nomination was conveyed to Samarco as required. As it turned out, Samarco rejected the Vessel due to concerns over the financial health of Pan Ocean Co Ltd (“Pan Ocean”), the Vessel’s registered owner, based on a report by Rightship, a ship-vetting company. This rejection was communicated to Mercuria via Mr Shu on the morning of 24 October 2014.

Later that day, at 7.56pm, Mercuria replied to Mr Shu, passing on Pan Ocean’s request to “persuade” Samarco to accept the Vessel and to inform the latter that the Vessel had been given five stars by Rightship. Mr Shu responded that Samarco would maintain its rejection unless Rightship’s reservation was removed. The next day, 25 October 2014, Mercuria asked Mr Shu for Samarco’s contact details. These were provided by Mr Shu on the morning of 27 October 2014. That afternoon, Mr Shu e-mailed Mercuria on an amendment that needed to be made to the Draft CP with respect to the dispute resolution clause.

On 29 October 2014, Mr Shu forwarded an e-mail to Mercuria. The e-mail contained a message from Samarco stating that even though Samarco did not receive any call from Mercuria, it was of the view that the Vessel was “OK”. This was after Samarco had obtained a new vetting analysis from Rightship. Later that day, however, Mercuria replied to Mr Shu stating: “Owrs cannot accept chtrs cp after review, so subject failed on cp review. Owrs cannot accept chtrs cp for this trade.” The meaning of this e-mail was that Mercuria was rejecting the business on the basis that the Draft CP was unacceptable but without assigning any reason for its unacceptability. Toptip accepted this rejection on 5 November 2014 and sent out a message stating it was terminating the charterparty.

Toptip therefore had to secure a substitute charter contract (the “Substitute Charter”) for the carriage of the cargo. On or about 8 November 2014, it chartered the Vessel (ie, m.v. Pan Gold) from another company, RGL Shipping Pte Ltd (“RGL”), but at the higher freight rate of US$25.25 per metric tonne for approximately 160,000 metric tonnes of cargo. Toptip claimed that the terms of the Substitute Charter were contained in a “recap” e-mail dated 7 November 2014 (the “Recap E-mail”) which was sent to both Toptip’s Mr Liu and to RGL. It then commenced proceedings against Mercuria to recover the difference between the freight it would have paid Mercuria and the freight that it actually had to pay RGL.

The decision below

The Judge held that the question of whether a contract for the...

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2 books & journal articles
  • Contract Law
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    • Singapore Academy of Law Annual Review No. 2017, December 2017
    • 1 December 2017
    ...12.161–12.171 below. 3 [2009] 2 SLR(R) 332 at [47]. 4 [2017] 5 SLR 1106. 5 Goh Yihan would like to thank Tham Chee Ho for this point. 6 [2018] 1 SLR 50. 7 Toptip Holding Pte Ltd v Mercuria Energy Pte Ltd [2018] 1 SLR 50 at [7]. 8 [2017] 5 SLR 156. 9 [2017] 5 SLR 268. 10 Some of the interest......
  • Admiralty and Shipping Law
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    • Singapore Academy of Law Annual Review No. 2017, December 2017
    • 1 December 2017
    ...2014 R ev Ed. 11 c 27. 12 [2018] 3 SLR 372 . 13 The Posidon [2018] 3 SLR 372 at [24]. 14 The Posidon [2018] 3 SLR 372 at [36]. 15 [2018] 1 SLR 50. 16 [2016] 5 SLR 243 . 17 See (2016) 17 SAL Ann Rev 51 at 65–69, paras 2.42–2.54. 18 Toptip Holding Pte Ltd v Mercuria Energy Trading Pte......

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