[1998] SGHC 395

In the High Court of the Republic of Singapore

[1998] SGHC 395

Suit 1631/1998

Between

Min Thai Holdings Pte Ltd

… Plaintiff

And

Sunlabel Pte Ltd
Another

… Defendant

grounds of decision

Civil Procedure — Injunctions

This judgment is subject to final editorial corrections approved by the court and/or redaction pursuant to the publisher’s duty in compliance with the law, for publication in LawNet and/or the Singapore Law Reports.

Min Thai Holdings Pte Ltd v Sunlabel Pte Ltd and Another

[1998] SGHC 395

Suit 1631/1998
Lai Kew Chai J
30 November 1998

1 LAI KEW CHAI J

4 The background

6 The plaintiff (`Min Thai`), the first defendant (`Sunlabel`) and the second defendant (`Finorgan`) are all traders in, amongst other commodities, China origin white rice. The quantity with which we are concerned is 50,000 metric tons. Min Thai has its own sources in the Peoples` Republic of China who would sell and deliver to it or to its order the white rice. Sunlabel has his own importers of the white rice to Indonesia to whom it intended to sell the white rice. Finorgan may be described in the two interfacing transactions, in one sense, as the intermediate party.

8 The contract between Sunlabel and Finorgan

10 The managing director of Min Thai, Mr Chew Ching Khim (`Mr Chew`), affirmed and filed an affidavit in support of its application for the injunction. He affirmed that Min Thai `was involved` in the contract dated 9 June 1998 which was entered into between Finorgan and Sunlabel. Under the contract written on Sunlabel`s stationery, Sunlabel agreed to buy and Finorgan agreed to sell the white rice. The contractual specification to note is that broken rice shall be `25% max.` Half of the quantity shall be shipped `within 25 days after receipt of acceptable L/C` and the remaining 25,000 MT has to be shipped within 25 days after the shipment. The unit price was US$255 per MT CFR FO Indonesian Main Port, Jakarta or Surabaya or Semarang or Medan (Pelawan). The loading ports were Dandong and/or Shanghai Ports, PRC.

Ultimate seller is requested to post 2% (two percent) of contract value performance bond to buyer bank to activate the letter of credit, such performance bond is payable to buyer upon default of seller to deliver the rice contracted within the agreed delivery schedule. (Attached is a bank guarantee format under Annex A which will form part of the L/C to be issued to Min Thai Holdings as our supplier.)

15 The force majeure provisions

17 The third clause incorporates the `Force Majeure` conditions under the ICC rules and regulations. The construction of these rules have to take into account the nature of the contract, its terms and the company of words and expressions in which these rules are found. The relevant parts of those rules read:

(1) Grounds of relief from liability A party it not liable for a failure to perform any of his obligations in so far as he proves: - that the failure was due to an impediment beyond his control; and - that he could not reasonably be expected to have taken the impediment and its effects upon his ability to perform into account at the time; and - that he could not reasonably have avoided or overcome it or at least its effects. (2) An impediment within paragraph (1) above, may result from events such as the following, this enumeration not being exhaustive: ... (b) natural disasters such as violent storms, cyclones, earthquakes, tidal waves, floods, destruction by lightning; ... (4) Duty to notify A party seeking relief shall as soon as practicable after the impediment and its effects upon his ability to perform became known to him give notice to the other party of such impediment and its effects on his ability to perform. Notice shall also be given when the ground of relief ceases. (5) The ground of relief takes effect from the time of the impediment or, if notice is not timely given, from the time of the notice. Failure to give notice makes the failing party liable in damages for loss which otherwise could have been avoided. (6) Effects of grounds of relief A ground of relief under this clause relieves the failing party from damages, penalties and other contractual sanctions, except from duty to pay interest on money owing as long as and to the extent that the ground subsists. (7) Further, it postpones the time for performance, for such period as may be reasonable, thereby excluding the other party`s right, if any, to terminate or rescind the contract. In determination what is reasonable period, regard shall be had to the failing party`s ability to resume performance, and the other party`s interest in receiving performance despite the delay. Pending resumption of performance by the failing party the other party may suspend his own performance. (8) If the grounds of relief subsist for more than such period as the parties provide (the applicable period to be specified here by the parties), or in the absence of such provision for longer than a reasonable period, either party shall be entitled to terminate the contract with notice. (9) Each party may retain what he has received from the performance of the contract carried out prior to the termination. Each party must account to the other for any unjust enrichment resulting from such performance. The payment of the final balance shall be made without delay.

18 The alleged collateral contract between Min Thai and Sunlabel

20 Mr Chew in his affidavit narrated his version alleging the collateral contract between Min Thai and Sunlabel, in addition to the contract between Min Thai and Finorgan. Mr Chew deposed to the fact that Min Thai worked in co-operation with Finorgan to source the white rice from suppliers in the PRC. It was to comprise no more than 25% of broken rice. The contract price was below the market price because the Chinese government would subsidise such commodities for export. His counsel referred to the fact that Min Thai had through its agent signed and had applied its stamp on every one of the three paged contract dated 9 June 1998 between Sunlabel and Finorgan. He said that it was orally agreed between Min Thai and Finorgan that Min Thai would source for Finorgan the white rice and was in that sense the ultimate supplier.

At the request of the supplier (ie Min Thai) we Allied Irish Banks plc ... hereby issued our letter of guarantee No LC/S0117/98 and irrevocably undertake to pay you any sum or sums not exceeding in total an amount of US$255,000 ... upon receipt by us of your first demand in writing issued by tested telex stating that the Supplier has failed to ship or make the full shipment as per his obligation(s) under the terms of the L/C No IL24111 dated 26 June 1998.

This guarantee is effective from date hereof and shall expire on 15 September in full and automatically on this date and any demand for payment must be received by us at this office on or before that date.

This guarantee shall be governed and construed in accordance with the Law of Singapore. [Clarification is added.]

27 The force majeure - the floods

29 Subsequent to the issue of the performance guarantee of 26 June 1998, the PRC was subject to severe floods. Flooding is one of the exceptions specified in the ICC Force Majeure Conditions, cl 2(b).

37 Royal Design Studio Pte Ltd v Chang Development Pte Ltd [1990] SLR 1116 [1991] 2 MLJ 229 , Kvaerner Singapore Pte Ltd v UDL Shipbuilding (S) Pte Ltd [1993] 3 SLR 350 , Raymond Construction v Low Yang Tong (Unreported) judgment of mine in Suit No 1715 of 1995) and Bocotra Construction Pte Ltd & Ors v A-G (No 2) [1995] 2 SLR 733 . In the last-named authority, the Court of Appeal ruled that an applicant is required to establish a clear case of fraud or unconscionability to obtain an injunction restraining any payment under an unconditional bond or performance guarantee.

38 Raymond Construction v Low Yang Tong ), I ventured to elaborate on the parameters of the notion of `unconscionability`. I said: `The concept of `unconscionability` to me involves unfairness, as distinct from dishonesty or fraud, or conduct so reprehensible or lacking in good faith that a court of conscience would either restrain the party or refuse to assist the party`.

40 Sunlabels` grounds

42 Both Mr Koh and Mr Maideen in their affidavits alleged that Min Thai had failed to disclose material facts and had misled the court when applying for the injunction from Rajendran J. In the main, Sunlabel referred to Min Thai`s failure to disclose Finorgan`s letter dated 14 September 1998. However, this letter was placed before the learned judge. In any case, the letter did not support Sunlabel`s assertion that between them and Finorgan there was no dispute and that Finorgan had not delivered the white rice. An examination of the contents revealed to a reasonable reader that they were capable of indicating that there was an on-going dispute since it talked of an `amicable settlement`. If there was no dispute, what was there to be amicably settled?

Lai Kew Chai J

Simon Yuen and Gerald Khor (Chong Yeo & Partners) for the plaintiffs
Lum Pak Meng (Leong & Lum) for the first defendants