Zalco Marine Services Pte Ltd v Humboldt Shipping Co Ltd

• Jurisdiction: Singapore
• Judge: Goh Joon Seng J
• Judgment Date: 30 April 1998
• Neutral Citation: [1998] SGCA 26
• Date: 30 April 1998
• Subject Matter: Formation,Remedies,List of documents not specified,Whether damages in the amount of unpaid deposit appropriate measure of compensation,Sale and purchase of ship,Contract,Whether contract concluded,Damages,Seller to provide documents 'reasonably required' by buyer on delivery,Abortion of sale before payment of deposit,Sale and purchase of ship under Norwegian Saleform 1987,Exchange of telexes
• Docket Number: Civil Appeal No 176 of 1997
• Published date: 19 September 2003
• Defendant Counsel: Richard Kuek and Tan Siew Tiong (Gurbani & Co)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: N Sreenivasan and Valerie Ang (Derrick Ravi & Partners)

Judgment:

KARTHIGESU JA

Cur Adv Vult

(delivering the judgment of the court): The background

1.This appeal arises out of the attempted sale and purchase of a ship known as the `Anna Spiratou`. The appellants, Zalco Marine Services Pte Ltd (Zalco Marine), were interested buyers of the ship, and the respondents, Humboldt Shipping Co Ltd (Humboldt), were the sellers. After considerable negotiations by their respective brokers, the deal fell through. In any event, the ship eventually sank on 15 June 1996 and insurance was later claimed on it by Humboldt.

2.The first issue before us was to ascertain whether a contract of sale existed between Zalco Marine and Humboldt. There was no dispute that all the terms were set out in writing; the question was thus simply whether a binding legal relationship existed between the parties. If there was, then it was conceded by Zalco Marine`s counsel that his client would be in repudiatory breach of such a contract by failing to complete the sale. This therefore raised the further issue of whether Humboldt was entitled to claim the amount of the deposit as compensation.

3.The transaction here was to be in three stages, namely: (a). negotiations between the ship brokers acting for Zalco Marine and Humboldt for the sale;

(b). the signing of an amended standard form memorandum of agreement (MOA), in the form of the Norwegian Saleform 1987 (NSF 87) to reflect the negotiated terms;

(c). the actual performance of the contract.

4.Stages (b) and (c) never took place. The issue was thus whether a contract was already concluded under stage (a).

5.For easy reference, the events which took place in stage (a) could be broken down further into three periods: (a). From 23 February 1996 to 28 February 1996

. There was no dispute that a binding contract was not concluded during this period. The correspondences reflect only the negotiations.

(b). 29 February 1996

. Humboldt took the view that the contract of sale was concluded on this date. There were two `recap` telexes, one from each party`s brokers (a `recap` telex is one which sets out the terms agreed between the parties). There was also an unsigned draft MOA prepared by Humboldt`s brokers.

(c). After 29 February 1996

. There were further negotiations between the parties, but the question was whether these terms merely varied an already concluded contract (as contended by Humboldt) or whether they were evidence to show that a contract had yet to be concluded (as contended by Zalco Marine).

6. The critical documents

The negotiations between the parties were made through an exchange of telexes. In the opening telex by Zalco Marine, in so far as relevant, the offer to purchase by Zalco Marine on 23 February 1996 was made on the following terms:

1 Buyers to lodge 10% deposit into joint account at sellers nominated bank within 3 working days of signing MOA on fax.

Balance of purchase funds to be paid to sellers nominated account on delivery and in exchange for buyers required delivery documentation .

3 Vessel to be delivered charterfree , safely afloat, at a safe berth or anchorage

7 Once MOA signed and 10% deposit lodged the buyers shall have the right to place 2 representatives on board the vsl without any interference to the vessel. Such reps to be on board entirely at buyers risk and expense.

11 Otherwise NSF 87 suitably amended to incorporate the above . [Emphasis is ours.]

So, right from the start, Zalco Marine`s offer to buy was made on the basis that the ship would be free of its time charter on the delivery date.

7.In reply, as far as relevant, Humboldt`s first telex on 23 February 1996 counter-proposed with the following:

Balance of purchase funds to be paid free of bank charges to the sellers nominated London bank on delivery of the vessel against presentation of deliver documentation as reasonably required by buyers for change of flags/registration. [Emphasis is ours.]

After this telex, there were no references in further telexes about the term concerning documentation. On 26 February 1996, Zalco Marine`s brokers replied on their own accept/except terms, and the only unresolved point then was the price of the ship.

8.There were further exchanges. But on 28 February 1996, Zalco Marine appeared to have made the final offer. The telex states:

This for confirmation only for reply by 1600 hrs 28th Feb 1996:

1 Price usd 5,000,000 cash less 3%

3 Agreed sllrs last

9 Agreed sllrs last

End offer

Await yr confirmation

9.On the same day, 20 minutes before the deadline, Humbolt replied:

1 Price usd 5,000,000 cash less 4%

3 Agreed sllrs last

9 Agreed sllrs last

Will draw up recap accordingly,

10.Zalco Marine`s brokers then acknowledged the confirmation:

Tks yr confirmation and for sake good order, confirmation received 1533 hrs london time 28th feb 1996, look forward ownrs lifting their subject by 1600 hrs London on Friday 1st march 1996.

I will do you a favour (whilst you concentrating helping owners to get out of chtr) and prepare the re-cap tomorrow morning. [Emphasis is ours.]

The expression `lifting their subject` meant freeing the ship from its time charter by the time of its delivery date. On 29 February 1996, Humbolt succeeded in lifting the subject and informed Zalco Marine`s broker.

11.On 29 February 1996, in the recap telex prepared by Zalco Marine`s broker, the following was repeated as the agreed terms. In particular, the following was stated:

This is my understanding of re-cap, pls confirm same all in order from sllrs side:

Balance of purchase funds to be paid to sellers nominated account on delivery and in exchange for buyers required delivery documentation. [Emphasis is ours.]

12.On the same day, Humboldt`s brokers replied in its recap telex that the documents presented would be as per their first telex:

Herewith my understanding of recap

Balance of purchase funds to be paid free of bank charges to the sellers nominated London bank on delivery of the vessel against presentation of delivery documentation as reasonably required by buyers for change flag/registration. [Emphasis is ours.]

The term as to documentation against delivery was again repeated in the draft MOA prepared by Humboldt.

13.On 5 March 1996, Zalco Marine`s brokers responded by proposing acceptance of Humboldt`s condition of `reasonably required` but proposed that the documents be actually listed in an addendum. The content of this list remained the only outstanding issue.

14.There were subsequent correspondences on what these documents should be, but before this was resolved, Zalco Marine decided to abort the purchase. The MOA was never signed; the deposit was never paid.

Was there a concluded contract?

The decision below

15.The learned Judicial Commissioner below concluded that a binding contract between the parties was reached on 29 February. His judgment is reported at [1998] 1 SLR 503. He reasoned as follows:

10.2 In fact the evidence in the subsequent telexes sent by the defendants [Zalco Marine] shows that until the 28 February 1996 only two areas of agreement really remained outstanding between the parties, namely, the purchase price of the ship which had not been agreed and the lifting of the subject, ie the plaintiffs [Humboldt] had not freed the ship from its existing time charter. On 28 February 1996 by telex the defendants and the plaintiffs had agreed to the price of US$5,000,000 and the defendants` broker on that day had given the plaintiffs` broker 48 hours, ie until 1 March 1996, to lift the subject. The plaintiffs succeeded in lifting the subject on 29 February 1996 and in so informing the defendants` broker.

16.Hence, in the circumstances, having lifted the subject on 29 February 1996, the sale became outright. As for the list of documents required by Zalco Marine, the learned judicial commissioner held that that was only a detail on what was already agreed upon, namely that all documents `reasonably required` for change of flag/registration would be supplied by Humboldt. The end result was that Humboldt had kept to their side of the bargain to the last by agreeing to give documents in the list as wanted by Zalco Marine.

17.The learned Judicial Commissioner went on to find that the telexes had constituted a contract and Humboldt`s recap accurately reflected and confirmed the contract arrived at on the telexes. Zalco Marine was thus bound to accept the recap by Humboldt`s brokers. He concluded as follows:

12.1 As the only subject as evidenced by the telexes had already been lifted, the plaintiff`s broker`s recap was therefore a clean recap and as I have found for the plaintiffs on the issue of documentation, the defendants were bound, in the circumstances, to accept the plaintiffs` broker`s recap. I found that the telexes had constituted a contract and the plaintiffs` recap accurately reflected and confirmed the contract arrived at on the telexes and the defendants were bound to accept the plaintiffs` broker`s recap. [The Judicial Commissioner`s emphasis.]

The existence of a contract

18.The issue in the appeal was whether the telexes in themselves evidenced a properly concluded contract, or did the term as to documentation mean that the parties were still negotiating and hence had yet to reach an agreement.

19.As counsel for Zalco Marine contended, `all the terms were set down in writing. It [was] therefore unnecessary to consider the oral evidence; indeed it would be excluded under the parole evidence rule.` Therefore, we simply have to look at the telexes to determine the existence of a contract.

20.In this respect, we recalled that a similar situation involving whether a contract was properly concluded arose in Grace Shipping Inc v CF Sharp & Co (Malaya) Pte Ltd [1986] SLR 32 . That case was an appeal from this court to the Privy Council. Lord Goff, in delivering judgment for the Board, stated as follows at p 36:

It was successfully argued by Sharp before the Court of Appeal that no agreement had been reached

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