Tozzi Srl v Bumi Armada Offshore Holdings Ltd

JurisdictionSingapore
CourtHigh Court (Singapore)
JudgeSteven Chong JA,Carolyn Berger IJ,Henry Bernard Eder IJ
Judgment Date21 September 2017
Docket NumberSuit No 6 of 2016
Date21 September 2017

[2017] SGHC(I) 8

Singapore International Commercial Court

Steven Chong JA, Carolyn Berger IJ and Henry Bernard Eder IJ

Suit No 6 of 2016

Tozzi Srl (formerly known as Tozzi Industries SpA)
and
Bumi Armada Offshore Holdings Ltd and another

Mohammed Reza s/o Mohammed Riaz and Lee Wei Han Shaun (JWS Asia Law Corporation) for the plaintiff;

Chou Sean Yu and Kevin Tan (WongPartnership LLP) for the defendants.

Case(s) referred to

ARS v ART [2015] SGHC 78 (refd)

Astrazeneca UK Ltd v Albemarle International Corp [2011] EWHC 1574 (Comm) (refd)

Australian Development Corp Pty Ltd v White Constructions (ACT) Pty Ltd (30 January 1996, NSWSC) (refd)

Norwest Holdings Pte Ltd v Newport Mining Ltd [2011] 4 SLR 617 (refd)

Tribune Investment Trust Inc v Soosan Trading Co Ltd [2000] 2 SLR(R) 407; [2000] 3 SLR 405 (refd)

Contract — Breach — Right of first refusal — Defendant awarding subcontract to third party — Whether defendant in breach of agreement to grant right of first refusal

Contract — Formation — Oral contract — Evidenced in writing — Whether agreement to grant right of first refusal was formed — Whether alleged agreement sufficiently certain

Contract — Intention to create legal relations — Effect of “subject to contract” provision in written record of alleged oral contract — Subsequent conduct of parties referring to agreement — Whether agreement to grant right of first refusal was formed

Tort — Inducement of breach of contract — Parent company completely controlling wholly-owned subsidiary — Subsidiary without employees or executives of its own — Whether parent company induced subsidiary into breach of contract

Facts

The plaintiff and the first defendant had entered into a pre-bid agreement (“PBA”) for the plaintiff to work exclusively with the defendants to support the defendants' bid for a project in Indonesia (“the Project”) with the plaintiff's expertise in gas processing facilities (“the Topside Process Modules”). In exchange, the defendants granted the plaintiff a right of first refusal for the subcontract to provide engineering, procurement and construction/fabrication (“EPC”) services for three of the seven Topside Process Modules known as the “TI Packages”.

After the PBA expired on 5 February 2014, both parties continued to work together on the bid. The plaintiff claimed that at a meeting on 31 July 2014 (“the 31 July Meeting”), the plaintiff and the first defendant reached a binding agreement to extend a right of first refusal to supply all seven Topside Process Modules to the plaintiff. This agreement was said to be evidenced in the minutes of meeting (“the MOM”). The defendants argued that the matters discussed at the 31 July Meeting either did not give rise to contractual rights and obligations or were too uncertain to constitute a binding contract. Further, the last paragraph of the MOM expressly rendered all matters discussed “subject to contract”.

The defendants were awarded the bid for the Project on 8 August 2014 but eventually awarded the subcontract for the TI Packages to a third party in May 2015 without informing the plaintiff of the price offered by the third party or giving the plaintiff an opportunity to exercise a right of first refusal. The plaintiff claimed that the first defendant breached the agreement to grant the plaintiff a right of first refusal, and that the second defendant induced that breach.

Held, allowing the claim with damages to be assessed:

(1) A contract was formed at the 31 July Meeting for the plaintiff to be granted a right of first refusal in respect of all the Topside Process Modules. Considering the relationship of a right of first refusal to the actual subcontract for the EPC supply of the Topside Process Modules, the immediate context of the 31 July Meeting and the parties' subsequent conduct, the “subject to contract” provision did not prevent a legally binding agreement to grant a right of first refusal from arising: at [24] and [29].

(2) The first defendant breached the agreement to grant the plaintiff a right of first refusal, in respect of all seven Topside Process Modules: at [32].

(3) The second defendant was liable for inducing the first defendant, its wholly-owned subsidiary, to breach the right of first refusal. The first defendant had no employees of its own and was completely controlled by the second defendant. The plaintiff had corresponded only with the second defendant's employees and executives, who could not be said to be corresponding only on behalf of the first defendant: at [40] and [43].

21 September 2017

Judgment reserved.

Steven Chong JA (delivering the judgment of the court):

Introduction

1 This dispute can be traced to a project for the supply of facilities and services in relation to the development of the Madura BD Gas and Condensate Field in Indonesia (“the Project”). The Project included the construction and lease of a floating production, storage and offloading unit (“FPSO”) of which an integral part was the gas processing facilities (“the Topside Process Modules”).

2 The defendants (collectively referred to as “Bumi”) intended to make a bid for the Project through the first defendant, Bumi Armada Offshore Holdings Limited (“BAOHL”), a wholly-owned subsidiary of the second defendant, Bumi Armada Berhad (“BAB”). They invited the plaintiff, then known as Tozzi Industries SpA (“Tozzi”), to support their bid given its expertise in gas processing facilities. Both parties formalised their working relationship in a pre-bid agreement (“the PBA”). Tozzi's role in the PBA concerned the supply of some or all of the Topside Process Modules. Central to the PBA was the requirement for Tozzi to work exclusively with Bumi in respect of the bid for the Project. In exchange, Bumi granted Tozzi a right of first refusal.

3 Although the PBA was only valid for one year, both parties continued to work together on the bid notwithstanding the expiry of the PBA. Eventually when the expiry date was raised, both parties met to discuss and decided to continue the relationship on terms which were recorded in the Minutes of Meeting (“the 1 August MOM”). Crucially, although the 1 August MOM recognised Tozzi's right of first refusal, it also expressly stated that it was “subject always to successful negotiation and mutual agreement and execution of a formal contract”.

4 After BAOHL was awarded the contract for the Project, BAB's chief executive officer (“CEO”) stated that it would not favour any bidder for the subcontract to supply the Topside Process Modules, thereby implicitly denying that Tozzi had any right of first refusal.

5 As it turned out, BAOHL eventually awarded the subcontract for part of the Topside Process Modules to another party without first extending the right of first refusal to Tozzi. This led to the commencement of the present proceedings. Although several causes of action were pleaded to ground Tozzi's claim – breach of express contract, variation, estoppel, waiver and implied contract – ultimately they essentially advance the same claim which is premised on Tozzi's right of first refusal.

6 Tozzi called only one witness – Mr Stefano Schiavo, who was intimately involved throughout the period in the lead up to Bumi's bid for the Project. On the other hand, although Bumi was represented by many senior members of its management in the course of preparing the bid, none of them was offered as a witness for the trial. Instead, its sole witness was its in-house legal counsel, Ms Johana Rosli, who had no personal knowledge whatsoever of the events which led to the proceedings. In fact, she only joined Bumi after the dispute had arisen. For all intents and purposes, Bumi's defence is akin to a submission of no case to answer. Its principal defence is that the right of first refusal had no contractual force on the basis that it had either expired with the PBA or was in any event “subject to contract” in the 1 August MOM. This judgment will examine the legal effect of the “subject to contract” provision in the 1 August MOM, in particular whether it was intended to qualify the right of first refusal stated therein or the contract which the parties would have negotiated if the right of first refusal had been extended by Bumi and accepted by Tozzi.

Background

7 In the second quarter of 2012, Husky-CNOOC Madura Limited (“Husky”) invited BAOHL, amongst other qualified companies, to submit a bid for the Project. Bumi invited Tozzi in April 2012 to submit a proposal for engineering, procurement and construction/fabrication (“EPC”) services for two of the Topside Process Modules. There were seven Topside Process Modules in total. Tozzi submitted its first unpriced proposal for the supply of those two modules on 1 June 2012. Between September 2012 and February 2013, Tozzi and Bumi discussed working together to prepare a technically compliant and commercially competitive bid to Husky. An issue that arose early on was the number of modules that Tozzi was to supply or design so as to enable it to guarantee, as Bumi desired, that the operation of the whole Topside Process would be in accordance with the specifications in the tender documents. On 13 December 2012, Tozzi submitted a range of price proposals with a view to supplying EPC services for two modules and at least developing the designs for the remaining five.

8 On 6 February 2013, Tozzi and BAOHL entered into the PBA which was to govern their working relationship in preparation for Bumi's bid to Husky. The PBA was signed by Mr Schiavo for Tozzi and Mr Nicolas Abela (BAB's then vice-president, business development asia) for BAOHL. Clause 1(a) of the PBA provided that upon the successful award of the Project, Tozzi would be...

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