SUPREME COURT OF SINGAPORE

23 January 2019

Case summary

Simpson Marine (SEA) Pte Ltd v Jiacipto Jiaravanon [2019] SGCA 7
Civil Appeal No 233 of 2017

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

Decision of the Court of Appeal (delivered by Judge of Appeal Andrew Phang Boon Leong):

CoA allows luxury yacht dealer to retain pre-contract deposit paid by prospective buyer to reserve two specific yachts for his choice for a limited period notwithstanding that he decided not to proceed with a purchase.

Background to the appeal

1    In early 2013, the respondent (deceased) (“Jiaravanon”) was in negotiations with the appellant, a luxury yacht dealer, to purchase yachts from an Italian yacht maker, Azimut Benetti SpA (“Azimut”). On 26 April 2013, Jiaravanon signed an invoice agreeing to pay a deposit of €1m (“the Deposit”) to secure two specific 100-ft yachts, identifiable by their hull numbers, until 15 May 2013, at which time the deposit was to be transferred to either yacht to become the initial down payment. These two yachts were the 100 Leonardo hull number 15 (“100L #15”) and the 100 Grande hull number 12 (“100G #12”). Jiaravanon paid the Deposit to the appellant on 29 April 2013, but it transpired that Azimut had just sold the 100G #12 to another buyer. The appellant informed Jiaravanon that hull number 15 for the same 100 Grande model (“100G #15”) was the next available yacht. Jiaravanon continued to discuss with the appellant’s representatives whether to go ahead with a purchase.

2    On 8 May 2013, Jiaravanon met the appellant’s and Azimut’s representatives in Hong Kong and viewed a 100 Leonardo yacht. The appellant alleged that Jiaravanon had agreed at this meeting to use the Deposit he had paid to the appellant to secure the 100L #15 and 100G #15 until 31 May 2013 in order to enable him to choose between them, at which point the Deposit would be applied to the purchase price of his chosen yacht. Jiaravanon denied that such an agreement had been reached. On 9 May 2013, the appellant remitted the Deposit to Azimut.

3         As events panned out, Jiaravanon eventually refused to purchase an Azimut yacht in the 100-ft series. On 31 July 2013, a compromise was reached whereby half the Deposit was to be applied to the purchase price of another Azimut yacht that Jiaravanon had already purchased (“the Azimut 64”) (“compromise agreement”). The remaining €500,000 (“the Remainder”) was the subject of dispute in this appeal.

4              The High Court judge (“the Judge”) held that the basis for the payment of the Deposit, which was to secure the 100L #15 and the 100G #12 until 15 May 2013, failed when Azimut sold the 100G #12 to another buyer. No agreement was reached on 8 May 2013 to use the Deposit as a non-refundable deposit to secure the 100L #15 and 100G #15 for Jiaravanon’s choice by 31 May 2013. It was also not agreed on 31 July 2013 that the Remainder would be utilised to purchase another yacht. Therefore, the Judge granted Jiaravanon restitution of the Remainder.

5              The appellant appealed against the Judge’s finding that Jiaravanon did not agree on 8 May 2013 to pay the Deposit to Azimut as a non-refundable deposit to reserve the 100L #15 and 100G #15. Since the 100L #15 and 100G #15 were in fact reserved for Jiaravanon for the stipulated period, the appellant argued that Jiaravanon was not entitled to restitution of the Remainder.

Decision on appeal

6              Pre-contract deposits are governed by general principles of restitution for failure of consideration or basis. The inquiry into failure of consideration or basis has two parts: first, what was the basis for the transfer in respect of which restitution is sought; and second, did that basis fail? Since the appellant did not contest that the initial basis for the payment of the Deposit had failed when the 100G #12 was sold and that Jiaravanon was entitled to restitution as of 30 April 2013, the burden fell on the appellant to establish that on 8 May 2013, the parties had agreed on a fresh basis for the Deposit and this fresh basis did not fail. The question of whether the Deposit was refundable was to be viewed with reference to the evidence of the basis for the payment: at [47]–[48] and [60].

7              The Court of Appeal held that there was sufficiently cogent evidence in the appellant’s favour that Jiaravanon had agreed on 8 May 2013 that the Deposit would be applied to hold the 100L #15 and 100G #15 until at least 31 May 2013 so that Jiaravanon could choose between them. The Court’s reasons, in brief, were as follows:

a.    While it was a significant weakness in the appellant’s case that there was no documentation of the fresh terms for the appellant’s receipt of the Deposit, this was not insurmountable if the factual matrix clearly pointed towards the existence of the alleged agreement: at [66].

b.    The testimony of the appellant’s Azimut-brand representative, who met Jiaravanon on 8 May 2013, was consistent with the surrounding evidence, including the relevant documentary evidence and the parties’ contemporaneous conduct: at [65].

c.     Viewed in its proper context, the appellant’s decision to remit the Deposit on 9 May 2013 to Azimut must have followed from Jiaravanon’s agreement on 8 May 2013 to apply the Deposit to reserve the 100L #15 and 100G #15. This was supported by the text of the remittance record; the similarity in the structure of the alleged holding deposit agreement and that of the earlier abortive holding agreement; and the evidence of the appellant’s reliance on Jiaravanon’s authorisation to remit the Deposit to Azimut: at [67]–[72].

d.    The manner in which the parties conducted themselves was consistent with the alleged agreement. First, Jiaravanon and the appellant knew that Azimut was holding the 100L #15 and 100G #15 off the market for Jiaravanon until 31 May 2013, and that Azimut would only do so if a holding deposit had been paid to it. Second, the fact that the compromise agreement reached on 31 July 2013 was understood as a “concession”, as well as Jiaravanon’s willingness to pay the remainder of the purchase price of the Azimut 64 under that existing contract without accounting for the Remainder, suggested that the Deposit ought to have been forfeited when Jiaravanon decided not to purchase either of the 100-ft yachts. Third, Jiaravanon failed to challenge the appellant’s assertions of the alleged holding deposit agreement of 8 May 2013, though less weight was placed on this evidence because the relevant correspondence could have been crafted to buttress either party’s position as the dispute over the Remainder had crystallised by that time: at [73]–[79].

8                Since the parties agreed on 8 May 2013 that the appellant would retain and apply the Deposit for the purpose of securing the 100L #15 and 100G #15 until 31 May 2013 for Jiaravanon to choose between them, the basis of the Deposit did not fail because both yachts were kept off the market for Jiaravanon until at least 31 May 2013. Jiaravanon’s decision not to purchase either yacht did not cause a total failure of basis because the payment was not made on the basis that a contract of purchase would be executed. Accordingly, the appellant was not liable to return the Remainder to Jiaravanon: at [81] and [83].

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.

Version No 1: 27 Oct 2020 (22:41 hrs)