Case Summaries

Pacific Ocean Engineering & Trading Pte Ltd v Tractors Singapore Limited

SUPREME COURT OF SINGAPORE

8 April 2021

Case summary

Pacific Ocean Engineering & Trading Pte Ltd v Tractors Singapore Limited [2021] SGCA 31
Civil Appeal No 67 of 2020

-----------------------------------------------------------------------------------------------------

Decision of Quentin Loh JAD (delivering the judgment of the court):

Outcome: The Court of Appeal dismisses the shipbuilder’s appeal against the decision of a High Court judge (“the Judge”) holding the shipbuilder liable for damages for breaches of contracts for the purchase of shipbuilding equipment.

Pertinent and significant point of the judgment

  • Litigants should not refine their cases on appeal by raising new arguments on appeal which were neither pleaded nor properly canvassed at trial.
  • It is an established principle of our litigation regime that where an appellant has taken a certain position in its pleadings and the trial below was conducted on that basis, it cannot deviate from that position by refining its case on appeal; much less should it attempt to amend its defence on appeal.

Background

1 The respondent was the appellant’s long-time supplier of shipbuilding equipment, mainly “Caterpillar” brand machines, generators, engines, propulsion systems and lift racks. Between 26 November 2012 and 25 July 2016, the parties entered into ten contracts for the sale of shipbuilding equipment. The standard procedure established by the parties in their 16-year relationship involved the respondent’s sales manager issuing a quotation on its standard template, which would in turn be signed by the appellant’s managing director. The appellant’s managing director would then issue a Purchase Order (“PO”) and the appellant would confirm the delivery dates and ports of delivery at a later date after the issuance of the POs.

2 Delivery dates were eventually agreed upon for nine of the ten contracts and the respondent brought an action seeking relief in respect of seven of these nine contracts, claiming that the appellant had failed, neglected and/or refused to nominate a port of destination despite the parties having already agreed on dates of delivery for the ordered equipment. In doing so, the appellant had allegedly breached an implied term of the contract requiring the appellant to nominate a port of destination within a reasonable period (the “Destination Term”).

3 As for the sole contract for which delivery dates were not specified (“PO 10601”), the respondent contended that the appellant had breached an implied term requiring the appellant to advise on a delivery date for the ordered equipment within a reasonable period (the “Delivery Date Term”).

4 Accordingly, the respondent averred that there had been breaches of eight of the ten contracts, terminated those contracts and claimed the outstanding 90% of the price due under all these contracts, less the sums that it had recovered in mitigation.

5 The appellant brought a counterclaim for the wrongful termination of two contracts PO 8874 and PO 8875.

The appellant’s case on appeal

6 The appellant argued that the Judge was wrong to imply the Delivery Date Term in the PO 10601 contract and the Destination Term for the remaining contracts. Further, the respondent was wrong in invoking Clause 11 of the Conditions of Sale to terminate the contracts for breach of an obligation under the contracts as Clause 11 was limited to credit-default and insolvency events.

7 Even if the respondent validly terminated the contracts, it had failed to prove its loss and was not entitled to any substantial damages. The Judge was also wrong to award damages for the respondent’s avoidable losses as there was an available market for or residual value of the unsold equipment under the contracts.

8 The appellant also argued that the Judge was wrong to dismiss the appellant’s counterclaim in respect of PO 8874 and PO 8875 and the Judge wrongly held that the appellant had breached these contracts by failing to nominate a port of destination by end 2016 or January 2017. In fact, the parties had agreed to extend the delivery dates for the contracts. It was the respondent who had prematurely terminated the contract and was accordingly liable to repay the appellant the down-payments (amounting to 10% of the contract price) under the contracts.

The court’s decision

9 The Judge was correct in implying the Delivery Date term as there was a clear gap which needed to be addressed in order for the contract to make commercial sense and the Judge was also right to hold that 2 years constituted a reasonable period on the evidence (at [32]).

10 The appellant’s argument that either party could fix the delivery date subsequently in PO 10601 and the assertion that the respondent would store the ordered equipment and effect delivery upon being given reasonable notice had been rightly rejected by the Judge (at [29])

11 In addition, the court did not accept that the parties intended that either one of the could have advised on a date of delivery. The effect of such an agreement would have been that, with a 10% down payment, which would have locked in the price indefinitely, the respondent had to hold itself ready to deliver the equipment whenever the appellant was ready to take delivery (at [28] and [29]).

12 The court rejected the appellant’s submission that either party could subsequently propose a delivery date which had to be accepted if it was reasonable, as this amounted to the appellant seeking to imply its own term into the contract, namely that both parties could have brought the contract to a state of certainty by raising the delivery date issue (at [30]).

13 This presented a difficulty of a more fundamental nature as it was not part of the appellant’s case at trial. Its sole defence (at trial) against the respondent’s claim that the appellant had breached the Delivery Date term, was that there was actually no requirement for it to advise on a date of delivery within a reasonable period; this was because the respondent was purportedly only obliged to deliver the equipment as and when the appellant required delivery (at [13]). Having failed on its sole defence, the appellant could not suggest that the Judge below should have considered implying a term to the effect that either party could have brought the contract into a state of certainty by raising the delivery date issue (at [30] and [32]).

14 The plain wording and structure of clause 11 made it clear that it was not limited to credit default or insolvency-related events. Instead, it was a wider termination clause that allowed the respondent to terminate for breaches of any obligation owed by the appellant to the respondent (at [37]).

15 The court also held that the respondent was free to enforce its right of termination without prior notice as clause 11 only obliged the respondent to give written notice “upon”, and not “before”, termination. Further, the respondent was not estopped from terminating the contract (at [38]).

16 The court rejected the appellant’s submissions on the damages awarded by the Judge.

  1. The appellant’s first submission was that since the respondent had not incurred all the necessary costs that would have been part of performing its contractual obligations, an award of the outstanding price of these contracts would necessarily result in overcompensation. This submission effectively contended that the respondent had failed to prove its loss and such an argument diverged from the case that the appellant ran at trial, namely, that the respondent had failed to adequately mitigate its loss by selling the ordered equipment (at [15] and [42]). The court rejected this argument as it involved heavily factual points that should have been raised at trial and not on appeal without relevant evidence. Having failed to dispute the quantification of the respondent’s loss at first instance, there was insufficient evidence on which the appellant could mount such a challenge (at [43])
  2. The appellant’s second submission was that the respondent had failed to adequately mitigate its loss since it could have easily re-sold the undelivered equipment as there had been an “available market” and the Judge should have accounted for the residual market value of the unsold equipment in calculating the respondent’s damages (at [23] and [41]). The court rejected this argument as the appellant was unable to point to evidence beyond bare assertions of the appellant’s employees that the equipment was “of wide application in the marine industry” and were “very common models sold in the market”. Having failed to adduce expert evidence of the market value of the relevant equipment and the additional steps the respondent could have taken to sell the equipment, the appellant could not adequately substantiate its claims (at [47] – [48]).

17 As to the appellant’s claim that it had not breached the destination term for two of the contracts (POs 8874 and 8875) because delivery had been postponed to sometime in 2018 and the appellant had therefore not failed to nominate a port in time for delivery (at [50] – [51]), the court rejected the appellant’s arguments as none of the correspondence between the parties suggested that there had been any mutual agreement to postpone the delivery of the equipment purchased under POs 8874 and 8875 (at [53] – [54]).

 

This summary is provided to assist in the understanding of the Court’s judgment. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s judgment.

YOU MAY ALSO BE INTERESTED IN