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laws.sgby aturio
Grounds publishedDecided 18 Jul 2003
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High Court

P.T. Bumi International Tankers (formerly known as P.T. Bumi Indonesia Tankers) v Man B&W Diesel S.E. Asia Pte Ltd (formerly known as Mirrlees Blackstone (S.E. Asia) Pte Ltd) and Another

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[2003] SGHC 152Case no. Suit 149/2001

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  1. [1] This is a claim in tort for damages arising out of the supply of a ship’s engine. The allegation is that the engine was negligently designed and/or manufactured so as to be unable to meet the purpose for which it was supplied.

  2. [2] The ship concerned, the M.T. Bumi Anugerah, is an Indonesian flagged oil tanker owned by the plaintiffs, P.T. Bumi International Tankers (‘Bumi’). It was built by Malaysian Shipyard and Engineering Sdn Bhd (‘MSE’) pursuant to a contract entered into between Bumi and MSE in October 1991. The main engine was supplied to MSE by the first defendants, Man B&W Diesel S.E. Asia Pte Ltd (‘MBS’), a Singapore company which sold and serviced engines manufactured by their UK parent company, Mirrlees Blackstone Ltd (‘MBUK’), the second defendants. The contract between Bumi and MSE provided for the construction and supply of a 6,500 tonne oil tanker with a main engine capable of meeting certain specifications. There was no separate contract between either MBS or MBUK and Bumi in relation to the engine. The only contract in relation to the supply of the engine on its own was a contract between MBS and MSE.

  3. [3] The engine was delivered to MSE in March 1994. On 22 December 1994, the vessel was formally delivered by MSE to Bumi. According to Bumi, within weeks of delivery, the engine had problems and the problems continued until the engine finally broke down in September 1997. The vessel was then laid up and has not operated since.

  4. [4] The losses sustained by Bumi as a result of the frequent problems experienced with the engine and its final breakdown have been economic losses. None of these incidents caused any physical damage to the vessel or its crew. Accordingly, this is a claim in tort for pure economic loss. Whilst the law in Singapore has recently recognised that tort claims for economic loss alone may be made, this is still a developing area of the law and this case raises interesting issues in this area. The defendants have vigorously contested the allegation that the engine was negligently or defectively designed or manufactured. They have asserted that the problems that Bumi experienced with the operation of the Bumi Anugerah were essentially due to poor maintenance and operation practices on the part of the engine room crew.

  5. Background

  6. [5] In 1991, Bumi obtained a long term charter contract for an oil tanker from the Indonesian oil company, Pertamina. The shipbuilding contract between themselves and MSE was entered into in order to acquire a vessel that would meet the requirements of this charter. The price to be paid by Bumi to MSE covered both the hull of the vessel and the engine although, from the start, it was recognised that MSE would acquire the engine from a third party. The original intention was to buy an engine from a company called Akasaka but this could not be confirmed in time and Bumi then asked MSE to recommend an alternative engine that could be delivered within the required time. MSE suggested engines from the defendants and Wartsila but only the defendants were able to meet the time requirements. Accordingly, MSE asked MBS to tender for the job.

  7. [6] On 19 July 1993, MBS sent a tender to MSE whereby MBS offered to supply MSE with one ESL 16 MK 2 marine propulsion engine designed to produce 4,000 ps at 1,000 rpm complete with all accessories and associated equipment for the price of MR2,225,629. It was an important feature of the engine that it would be able to run on both marine diesel oil (MDO), sometimes also referred to as light fuel oil or LFO, and the cheaper heavy fuel oil (HFO). The design of the engine was such that when certain operating specifications were met, specifically that the engine load reached 75% MCR and the jacket water temperature reached 70°C, the automatic valve would be activated and the engine would be automatically switched over to operating on HFO instead of on MDO.

  8. [7] There were meetings between representatives of MSE, MBS and Bumi. In late August 1993, MBS sent MSE two letters containing amendments to the original quotation. Bumi then instructed MSE to accept MBS’ tender. On 7 September 1993, MSE wrote to MBS referring to their quotation. MSE confirmed they wished to purchase the engine on the terms contained in that letter and in accordance with the documents that were attached to the letter ie the purchase order specification, the general purchase order specification and MSE’s commercial terms and conditions. The purchase order specification was revised subsequently and sent out again to MBS on 10 September 1993. At some subsequent time (the date is not indicated), both MSE’s representatives and MBS’s representative signed MSE’s document entitled ‘Commercial Terms and Conditions’ which had been sent over to MBS together with the purchase order. Between September 1993 and March 1994, MSE sent MBS drawings of the vessel and other information so that MBS would be aware of the vessel design and in particular the design of the propeller and the stern equipment.

  9. [8] In February 1994, Mr TM Robert and Mr Ricky Singgih, Bumi’s representatives, paid a visit to the factory of MBUK in order to be present at the factory testing of the engine. The purpose of this test was to show the customer that the engine was able to perform up to the contracted specifications. During the factory tests, however, the engine was not tested at 110% of the rated power for one hour as MSE considered was required by the contract. According to Mr Robert, MBUK told him that this was due to a fault in the brake system of their testing equipment.

  10. [9] The completed engine arrived in Malaysia in March 1994 and was installed in the vessel in May 1994. Construction of the vessel was completed by mid November 1994 and sea trials were held on 8 December 1994. The sea trials were attended by Mr Robert as Bumi’s representative (Mr Robert was the managing director of P T Bina Usaha Maritim Indonesia, the company which managed Bumi’s fleet of vessels), the ABS surveyor, commissioning engineers from the defendants and MSE personnel.

  11. [10] During the sea trials several difficulties with the engine were noted. First, the engine was unable to achieve its design speed of 1,000 rpm. The average full speed ahead was found to be 890 rpm and the maximum rpm attained was 960 rpm. The power developed by the engine was 2585 kw which was approximately 89% of the power that it was supposed to develop. MSE noted that at this stage the engine had developed high exhaust temperatures of 475°C and had problems with balancing of temperatures. Thirdly, the fuel pump injector failed. There was also a problem with the governor. Various rectification works were undertaken by the defendants. The vessel was scheduled to be delivered to Bumi on 20 December 1994 but the delivery was delayed by two days due to the discovery of a crack in the engine’s vulkan coupling.

  12. [11] According to Mr Robert, after delivery many problems were encountered with the engine. First, on 5 January 1995, the engine governor malfunctioned. The engine had to be stopped for investigation and repairs. MBS ascertained that the governor drive shaft had sheared and had to be replaced. Repairs were completed on 11 January but the engine was not completely steady. In early March 1995, it was reported that the engine was overheating and that there was knocking sound in one of the cylinders. MBS sent an engineer to deal with the problems.

  13. [12] Amongst the problems noted at the sea trials was the need to replace the cam shaft. In late March 1995, an engineer from MBS attended on board to do this work. It turned out, however, that the wrong cam shaft was supplied by MBS and the correct cam shaft arrived only in mid April 1995 and was fitted on 25 April 1995. Other problems noted in March 1995 were that the indicator cock on one of the cylinders was broken, lube oil was found leaking from the crank shaft, the HFO heater module was found to be shorting and the two auto-contractors for the heater were out of order. In April, the engine raw water pump leaked. In May, problems were observed with the lube oil drive pump.

  14. [13] Bumi had specified that the engine should be able to run on HFO. This was required under its contract with Pertamina. Difficulties were encountered with running the vessel on HFO because of problems with the HFO heater. These began in March 1995. These problems continued in April 1995. The result was that the vessel had to be operated on HSD instead of HFO.

  15. [14] In May 1995, problems were observed with the lube oil drive pump of the engine. In July there were problems with the cam shaft, the raw water pump, the exhaust control panel and the light fuel oil pump. From about June 1995, the vessel began to experience high exhaust temperatures. This problem gradually worsened and, according to Mr Robert, was never rectified by the defendants. It continued until the time of the engine’s complete failure.

  16. [15] In February 1996, major repairs of the engine took place when the turbocharger and fuel injection pumps were replaced. Damaged cylinder heads and all 16 fuel injectors, as well as the piston and cylinder liners, the air start valves and the indicators cocks, were also replaced. The vessel continued to experience high exhaust temperatures. In March 1996, there was a complaint that the exhaust manifold was red hot even though the engine was operating at only 600 rpm. In August 1996, Mr Robert sent a lengthy complaint to MBS (and copied to MBUK) about the malfunctioning of the engine and asked them to send their experts to look at and remedy the ‘chronic problem’ and ‘to take immediate action to rectify all design and material defects’ of the engine. In September 1996, there was a meeting in Jakarta between Bumi and the sales director of MBUK. Subsequently, MBUK acknowledged Bumi’s dissatisfaction with the engine and offered to carry out various works on it.

  17. [16] On 19 September 1996, the turbocharger broke down again. The vessel had to remain at the port of Biak for two months to enable major repairs to be carried out. On 10 December 1996, sea trials were held to test the engine on the completion of the repairs. It was reported during the trials that the exhaust manifold was red hot. Bumi considered that this was an indication that the overheating problem had not been rectified. Later that same month, the cylinder heads were found to be leaking.

  18. [17] By 1997, there had been numerous repairs and two major overhauls of the engine. On 20 January 1997, MBS was informed the engine’s rpm could not be increased beyond 575 due to overheating of the exhaust manifold. MBS’s engineers visited the ship and carried out work but in March 1997, it was again reported that the engine was experiencing high temperatures. The ship also reported that month that the HFO module was again faulty. Finally, on 19 September 1997, whilst the vessel was on route to Camplong, the engine completely broke down.

  19. The action

  20. [18] This action was commenced in February 2001. By their statement of claim, Bumi pleaded that by reason of MBS having offered to supply the engine, (which engine was to be manufactured by MBUK), MSE’s agreement to purchase the engine and Bumi having taken delivery of the vessel with the engine installed, MBS and MBUK owed a duty of care to Bumi ‘to provide the engine that would be suitably manufactured and free from defect built for the safe and proper operation of Bumi Anugerah in ocean voyages’. In breach of this duty, the defendants had failed to exercise reasonable care and skill and provided an engine that was defective and failed to meet the required specifications. Particulars of this allegation were given but there is no need to deal with them at this point.

  21. [19] The defence of the defendants in its final form was to the effect that it was the responsibility of MSE to ensure that the specifications of the vessel’s speed, design draft and engine power requirements met the vessel’s performance criteria. The defendants denied that they had any duty of care to Bumi to provide an engine that would be suitably manufactured and free from defect built for the safe and proper operation of the vessel on ocean voyages. They averred that their only duty was to supply an engine that was suitably manufactured and free from defects and which complied with the engine power specifications as determined and specified by MSE. Alternatively, if there were defects these were rectified under the warranty provided for in the contract between MBS and MSE.

  22. [20] Subsequently, the defence was amended to add an assertion that the defendants were entitled to rely on a clause which had been part of the terms and conditions attached to MBS’s letter of 19 July 1993 to MSE. Further or in the alternative, the defendants sought to rely on certain clauses of the shipbuilding contract between Bumi and MSE to relieve them from liability to Bumi or to limit such liability. The other paragraphs of the defence dealt with specific assertions in the further and better particulars voluntarily filed by Bumi and denied them.

  23. [21] The broad issues that arise from the pleadings are as follows:

  24. First main issue - did MBS and/or MBUK owe Bumi a duty in tort?

  25. [22] It has been decided in Singapore that there can in certain circumstances be a tortious duty imposed on one party to avoid negligently causing another party to sustain pure economic loss. The applicable principles were set down by the Court of Appeal in RSP Architects Planners & Engineers v Ocean Front Pte Ltd [1996] 1 SLR 113 and reaffirmed and explained further by the same court in RSP Architects Planners & Engineers (Raglan Squire & Partners FE) v Management Corporation Strata Title Plan No 1075 [1999] 2 SLR 449. To avoid confusion, I shall refer to the first case as Ocean Front and to the second case as RSP Architects.

  26. The court then went on to consider whether in the circumstances of Ocean Front there was sufficient proximity in the relationship between the developers and the management corporation which gave rise to a duty on the part of the developers to the management corporation to exercise reasonable care in the construction of the common property so as to guard against the management corporation sustaining the kind of damage complained of. Having found such proximity to exist in the circumstances before it, the court then asked whether there was any policy consideration which would negative the existence of a duty of care. In that case no such policy consideration was found to exist.

  27. [24] The Court of Appeal in Ocean Front therefore applied a two stage test in order to determine the existence of a duty of care. This two stage test was in large part derived from two English cases Anns v Merton London Borough Council [1978] AC 728 and Junior Books Ltd v Veitchi Co Ltd [1983] 1 AC 520. Both were decisions of the English House of Lords. In England the issue of whether a duty of care should be imposed to prevent pure economic loss was discussed in many cases over many years and there were decisions both in favour of imposing such a duty such as Anns and Junior Books and decisions against doing so. The anti-duty view finally won a resounding victory in Murphy v Brentwood District Council [1990] 2 All ER 908, another House of Lords decision, and presently English law does not recognise such a duty.

  28. [25] In RSP Architects, the Court of Appeal was asked to reconsider the conclusions reached in Ocean Front. It was suggested to the court that its reliance on Junior Books in Ocean Front had been unsafe as that case was ‘obviously no longer good law’ and was also inconsistent with the reasoning of the Australian High Court in Bryan v Maloney [1995] 128 ALR 163. RSP Architects involved a suit by the management corporation of a condominium against the firm of architects that had designed the condominium for damages arising out of the need to make good defects in the cladding of the condominium arising out of defective design by the architects. The architects’ argument was that having been employed by the developer of the condominium and not having had any contractual relationship with the management corporation, they did not owe the latter any duty in respect of the design of the structure. The court upheld the decision in Ocean Front after a further review of the relevant English and commonwealth authorities. It revisited both Junior Books and Bryan v Maloney. Thean JA who delivered the judgment noted that the attack on Junior Books arose because it had followed Anns and the proposition propounded in Anns by Lord Wilberforce that there was a single general rule which could be applied in every situation to determine whether a duty of care arises and that this test, based on the foreseeability of damage alone, had been heavily criticised. Thean JA then conducted a thorough analysis of the leading speeches in Junior Books, especially that of Lord Roskill and noted that notwithstanding that the two stage test propounded in Anns was followed by the latter, Lord Roskill did not premise the first test on foreseeability of damage alone as the foundation of the duty of care. It appears to me that the Court of Appeal did not accept that Junior Books was impugned simply by reason of its association with Anns.

  29. [26] The court next considered Bryan v Maloney and cited several passages from the case which dealt with a claim against the builder of a house by a subsequent owner (ie someone who had bought the house from the person of whom the builder built it). In these passages the Australian High Court pointed out first, that in such a case, it was foreseeable by the builder that negligent construction of the house with inadequate footings would be likely to cause economic loss, of the kind claimed in the suit, to the owner of the house at the time when the inadequacy of the footings first became manifest. Secondly, it pointed out that the relationship between the builder and subsequent owner was marked by ‘the kind of assumption of responsibility and known reliance’ commonly present ‘in the category of cases in which the relationship of proximity exists with respect to pure economic loss’. In coming to the decision that there was sufficient proximity in the relationship between the builder and the subsequent owner to give rise to a duty of care, the High Court also considered whether there was any factor or policy consideration which precluded the recognition of such relationship.

  30. [27] The Court of Appeal then stated that the approach that it had previously adopted in Ocean Front was the same as that adopted in Bryan v Maloney and that the crux of such approach would be no more than this:

  31. The court dismissed the argument that in Ocean Front, the element of ‘reliance’ which was crucial to the imposition of a duty of care had not been present. It pointed out that in Ocean Front the element of foreseeability had been only one of the several elements taken into account and that there were present in that case the elements of ‘assumption of responsibility’ and ‘known reliance’ in the sense stated in Bryan v Maloney.

  32. [28] The principles laid down by the Court of Appeal as to when one party owes a duty of care to another to avoid causing economic loss to that other are capable of application in a wide variety of circumstances. They are not confined to the types of factual situations that were seen in the Ocean Front and RSP Architects cases. There are substantial differences between the facts of the present case and those of the cases cited. That in itself is not decisive of the issue. The differences must be examined in the context of an investigation into whether the application of the principles to the existing facts provides a sound basis for the imposition of a tortious duty on the defendants. One cannot simply brush aside any suggestion of the existence of a duty by saying airily ‘the facts are different’.

  33. [30] The defendants do not accept that Ocean Front and RSP Architects stand for the proposition that, generally, proximity between parties gives rise to a tortious duty to avoid negligently causing economic loss. They accept that proximity and foreseeability are essential ingredients of such a duty but argue that even where the same are present, proximity being determined by using ‘assumption of responsibility’ and ‘reliance’ the duty of care should generally only be imposed where it falls within recognised categories. If a duty outside recognised categories is to be imposed, an incremental approach should be taken, with justification based on the particular facts of the case, in particular the unavailability of any other remedy, and where it is fair, just and reasonable to impose a duty. Notwithstanding proximity, it is necessary to consider whether there is a material factor or policy consideration to preclude a duty to avoid the type of loss caused and, based on various authorities that they cite, they assert that the contractual matrix is a key factor which precludes the existence of the duty or even it does arise, severely limits its scope. The defendants are also strongly critical of the decision in Junior Books which they say should not be followed having been criticised severely by later English cases.

  34. [31] Having considered the defendants’ arguments carefully, I think that their analysis is not completely consistent with Ocean Front and RSP Architects, cases which are binding on me. I consider that I am bound by those cases to approach this issue in the way set out in ¶ 29. I agree, however, that when it comes to the second stage of the enquiry, one of the policy considerations to be examined would be whether by imposing the duty, I would be leapfrogging the recognised categories or acting incrementally to expand them. I also consider that as far as Singapore law is concerned, the approach in Junior Books has been endorsed and has been found to be not inconsistent with high Australian authority.

  35. (i) Proximity

  36. Another member of the majority, Lord Fraser, noted that the proximity of the parties was extremely close ‘falling just short of a direct contractual relationship’ (at p533).

  37. [33] The similarities in the factual situation in Junior Books and that of the present case are quite striking and it is no wonder that Bumi relied heavily on Junior Books in its enunciation of the facts present here which, they contended, established the necessary proximity between them and the defendants. In this context, the relevant facts are:

  38. [34] In light of the facts enumerated, I can only conclude that there was a sufficient relationship of proximity between Bumi and MBUK so as to give rise to a duty on the part of MBUK to exercise reasonable care in the design and manufacture of the engine so that the engine delivered would be fit for the safe and proper operation of the vessel. Among the more important facts are MBUK’s knowledge that the vessel was being custom built to meet a specific owner’s requirements and that that owner had discussions with its sole agent and was relying on the expertise of MBUK as a specialist manufacturer of engines to produce an engine that was suitable for the vessel. MBUK could also foresee that if the engine was defective and continually broke down or required excessive maintenance and repair work, Bumi would suffer economic loss from disruptions in the use of an income producing chattel.

  39. [35] I have more difficulty with the relationship between MBS and Bumi. MBS was a subsidiary of MBUK and had to be dealt with because it was the entity that had the right to sell the engine to MSE. Bumi knew, however, that MBS was not the designer nor the maker of the engine. Bumi knew, or must have known, therefore, that during the construction of the vessel and the engine, the role of MBS would only be to liase between MSE and MBUK in relation to the technical details of the engine. MBS would have no part to play in the actual design or manufacture of the engine. Accordingly, it is difficult to hold that Bumi relied on the expertise of MBS in the manufacture and design of ship’s engines when it selected MBUK’s engine for the vessel. On the other hand, whilst it has been decided that the reliance factor is an important component of proximity, the ‘assumption of responsibility’ factor is also significant. By asserting that the engine was reliable and actively marketing it through the various tenders that they sent MSE and the various meetings with Bumi and MSE, I think that MBS was assuming responsibility for the delivery of an engine that would meet Bumi’s requirements. Thus, even though Bumi may not have relied on MBS’s expertise as an engine maker, I have come to the conclusion that there was sufficient proximity between them and MBS to impose the same duty on MBS as was imposed on MBUK.

  40. (ii) Policy considerations

  41. [37] The defendants have submitted that notwithstanding the above, direct liability of this nature should not be imposed on either of them for the following reasons:

  42. The above considerations were not discussed in either the Ocean Front or RSP Architects case. In my opinion, however, when the Court of Appeal considered only two issues in relation to whether any policy consideration would negative the duty of care, it did not do so because it considered that those two issues were exhaustive of the question. It did so because those two issues were general issues that have to be considered in each such case and there was no other more specific issue that needed to be determined in relation to the facts there. The claimants in those two cases did not have contractual relationships with any of the parties involved in the construction of the buildings concerned. There was thus no need to discuss whether the existence of a chain of contracts or any term in any of those contracts could negative any possible tortious duty that could otherwise be owed by one party in the chain to another with whom he was not in a direct contractual relationship. Since the situation does exist here, I must consider whether there is any policy reason in relation to this situation to negative the duty.

  43. [38] In my opinion, the simple fact that a chain of contracts exists cannot, as a matter of policy, mean that in all circumstances each party in the chain is limited to suing only the party with whom he is in privity of contract for any damages sustained as a result of the transactions undertaken under the contracts. Whether such a limitation exists must depend on the facts of the case and not simply on the existence of the chain of contracts. I must therefore consider whether there is any fact present here which would make it unfair or unreasonable or against public policy to allow Bumi to sue the defendants instead of MSE.

  44. [39] The defendants contended that Bumi should not be allowed to leapfrog over MSE and take direct action against MSE’s sub-contractors because, by their contract with MSE, they had agreed that liability for the suitability of the vessel and any damages sustained by reason of the vessel being defective would be regulated in a particular fashion. The relevant terms in the Bumi-MSE contract were clauses 14, 17 and 22. Under clause 22, MSE stated that they and their sub-contractors were fully experienced and properly qualified to construct the vessel, that MSE would control their employees and sub-contractors, and that nothing in the contract would create any contractual relationship between Bumi and any sub-contractor of MSE. Clause 17 dealt with MSE’s responsibility for their sub-contractors and imposed on MSE full responsibility for any part of the work performed by their sub-contractors and for the acts and omissions of the sub-contractors.

  45. [40] Clause 14 contained MSE’s warranties in respect of the vessel. By clause 14.1, MSE guaranteed the replacement of all parts and equipment of the vessel manufactured or furnished by MSE which had defects caused by defective or faulty design or by constructional miscalculations or by poor workmanship as long as these defects were discovered within 12 months of the delivery of the vessel and notice of them was duly given to MSE. MSE also agreed to be responsible for all machinery supplied by sub-contractors and guaranteed the same for a period of 12 months on the same basis as laid down in clause 14.1. This general responsibility was limited by clause 14.4 which provided that MSE would not be responsible for consequential losses including loss of time, loss of profit or loss of earnings of the vessel arising from the defects or work undertaken to remedy the defects.

  46. [44] The difficulty with the defendants’ argument is that the facts do not support their contention that the sale contract between them and MSE included MBUK’s conditions of sale. Mr Donald Chua testified that when he first sent out the tender for the engine to MSE, one of the documents attached to the tender was the conditions of sale. MBS’s letter of 19 July 1993 itself, however, does not state that these conditions would be incorporated as part of any contract concluded if the tender was accepted. The evidence of MSE’s Mr Manoel Gomes who conducted the commercial negotiations was that MSE did not receive any conditions of sale and that he had not seen them prior to the trial. In any case, when Bumi decided to use the defendants’ engine, MSE placed the order under cover of their letter of 7 September 1993 which was accompanied by their purchase order and various other documents. In court, Mr Donald Chua was asked whether he agreed that the defendants had supplied the engine based on the MSE purchase order and his answer was an unequivocal ‘yes’. He further agreed that he had signed MSE’s commercial terms and conditions and that neither in this or in any of the documents MSE had forwarded to him, was there a reference to the application of MBUK’s conditions of sale. In my judgment, MBUK’s conditions of sale did not apply as between MBS and MBUK and therefore could have no impact on the existence of a duty of care.

  47. [45] I realise that by imposing a duty on the defendants to avoid causing Bumi to suffer financial loss by supplying them with an engine that was suitably designed and manufactured to meet the requirements of the Bumi Anugerah as known to the defendants, I am extending the class of cases to which the principles established in the Ocean Front decision apply. For one thing, the duty is being applied to a chattel rather than to a building and, for another, the beneficiary of the duty did have a contract in relation to the chattel though not with the defendants. As the facts here involve a large and expensive piece of equipment custom made for a particular ship which was to operate in particular conditions and the persons who would be owning and operating the vessel were known to and in contact with the defendants, however, I do not think that my decision is an extreme extension of the applicable principles. Instead, it is an incremental extension of the law and is appropriate on the facts. This case does not open the floodgates.

  48. Second main issue – was there a breach of the duty?

  49. [46] There was a great deal of technical evidence on what problems the engine had experienced and what could have been the possible causes of those problems. Breakdowns of the engine do not by themselves establish a breach of duty. In order to decide whether there was such a breach, I have to consider whether the pleaded allegations of the ways in which the engine was defective have been established, (ii)(a) those defects were due to negligent or defective design or manufacture or (ii)(b) were due to negligent or inadequate operation by the crew and, (iii) such defects as I find to have existed establish a breach of duty on the part of the defendants. In this connection, I have to be guided by the pleadings and not only by the submissions. For example, in Bumi’s submission, there was an allegation that MBS had failed in their duty to conduct proper trials of the engine during the sea trials of the vessel on completion of construction and/or had been negligent in the way that they handled the sea trials. It was not pleaded that MBS had any specific duty to Bumi in relation to the conduct of the sea trials. I will therefore not be considering any submission on breach of such a duty.

  50. [47] I therefore return to the pleadings in relation to the allegations of defect. Paragraph 11 of the statement of claim set out the alleged defects of the engine. It read:

  51. 11. The engine was unable to achieve suitable speeds and was also unable to operate properly under normal circumstances. The engine suffered, inter alia, from the following defects:

  52. [48] In their voluntary further and better particulars, Bumi gave the following further details of their allegation that the defendants had failed to exercise reasonable care and skill and had provided a defective engine:

  53. The plaintiffs contend that the engine which was supplied was negligently designed and was not able to operate normally or properly on heavy fuel oil, as a result of which there was repeated overheating and breakdown of the engine, as set out below. The Plaintiffs aver that the Defendants ought not to have supplied an engine that was modified from an industrial non heavy fuel oil using type of engine, for use on their vessel. The Plaintiffs further contend that prior to the supply of the engine in the present case, the Defendants had already received repeated complaints regarding overheating and breakdown of the same type of engine supplied to other shipowners and therefore ought not to have supplied the Plaintiffs with the same type of engine.

  54. [49] When asked to state the alleged failure on the part of the defendants to exercise reasonable care and skill, Bumi replied that they would rely on the numerous occurrences of breakdown of the engine and its component parts despite complete overhauls as well as on the defects in the engine set out above as the basis of the defendants’ failure to exercise reasonable care and skill.

  55. [50] The defendants denied paragraph 11 of the statement of claim. They asserted that the engine overheating and detachments of valve inserts had been caused by Bumi having:

  56. [51] As regards the two failures of the turbocharger, it was alleged that these were caused by debris from the valve seat inserts which debris had been created by Bumi’s failure as described in sub-paragraphs (b), (c) and (d) of ¶ 50 and also by their failure to comply with MBUK’s maintenance recommendations. The defendants also asserted that the cylinder heads had been damaged as a result of Bumi having disconnected the auto-changeover fuel valve and used HFO in incorrect conditions as well as by the wrongful actions described in ¶ 50(b), (c) and (d) and by failure to comply with the maintenance manuals. Similar reasons were given for the damage sustained by the exhaust valve and valve guides.

  57. [52] In closing, Bumi submitted that the evidence had established that:

  58. Bumi submitted that the evidence led directly to the irresistible conclusion that the problems faced by the engine of the Bumi Anugerah were due to its defective design which meant that it was not able to operate properly on HFO on a vessel in the tropics.

  59. [53] It may be helpful if at this stage, I identify the witnesses who gave evidence in relation to the operations of the vessel and of the seven Malaysian vessels. For Bumi, they were:

  60. [54] The witnesses who appeared on behalf of the defendants were, in addition to Mr Donald Chua:

  61. The evidence on which Bumi relied and the defendants’ response:

  62. (i) The factory test of the engine

  63. [55] Before the engine was shipped off to MSE, it was tested at MBUK’s factory in England. Subsequently, a certificate on the result of the tests was issued by the American Bureau of Shipping (‘ABS’). The engine was run on light fuel oil (‘LFO’) for the purpose of the tests and no tests were carried out using HFO. On LFO, the engine attained its design speed of 1,000 rpm and 4,000 ps. Bumi’s complaint was that despite a contractual requirement for this to be done, the engine was not tested at 110% load (ie in an overloaded condition) for an hour (the MCR test) due to a fault in MBUK’s testing system.

  64. [56] Whilst the defendants could not deny that they had not established that the engine could have passed the MCR test, they pointed out that the 110% MCR test is not a general requirement for marine propulsion engines. Mr Kwan agreed that once a vessel is operational, the engine would not be run at a 110% MCR and, to prevent this, the fuel rack would be locked at the 100% position. Mr Kwan also agreed that in general, the 110% MCR test is not required for vessels. Bumi did not explain the importance of the 110% MCR test and how if it had been carried out and the engine had failed the test that failure would have supported their assertion that the engine was not fit for its purpose. In the circumstances, I do not think that the failure to carry out the MCR test establishes anything about the engine. I agree, however, that the factory tests established only that the engine could run at full load on LFO. They did not establish the engine’s ability to meet the design criteria when it was operated on HFO.

  65. (ii) Sea trials

  66. [57] The official sea trials were held in December 1994. The engine specifications, as admitted by the defendants, included the following:

  67. During the sea trials the engine, when running on HFO, was not able to attain 4,000 ps with an engine speed of 1,000 rpm. Instead, the engine developed only about 90% of its rated power at a maximum of 960 rpm. Additionally, the exhaust temperatures, as admitted by Mr Pereira, should have fallen within the normal range. Instead, during the trials, the exhaust temperatures were high, reaching 475°C. Various other problems were noted and after the trials, MSE sent MBS a list of defective parts and defects with the main engine that had to be rectified. At trial, the defendants through Mr Howard agreed that the matters complained of were matters that had to be dealt with.

  68. [58] Dealing first with the problem of power, it should be noted that there was not one occasion after delivery when the vessel attained its rated or design speed of 1,000 rpm. During a sea passage on 25 December 1994, the engine speed went up to 970 rpm. During a voyage two days later, a maximum of 960 rpm was achieved. Thereafter, the engine speed varied between 800 and 890 rpm. Bumi relied on the early manifestation of the engine’s inability to attain full speed as an indication that this inability was due to a design defect rather than to any mishandling of the engine by the crew.

  69. [59] Two days after the trials, MSE asked MBS to explain why the main engine could not develop full power. Their response was that this was due to the failure of the fuel injector pump in cylinder B1. When asked why such a failure had occurred since the engine had been shop-tested in the factory, MBS responded that the failure could have been contributed to by debris contamination and that they would ‘revert after the pump [had] been returned to [their] store for investigation’. Bumi contended that this explanation for the failure of the engine to develop full power during the sea trials could not be accepted since no debris was found in the pump and, contrary to its promise, MBS never reverted to state the cause of the failure. Further, internal correspondence between MBS and MBUK in March 1995 showed that they did not consider the pump to be the cause of the failure. Finally, Mr Pereira and Mr Howard agreed that the assertion by MBS that debris caused the fuel pump to fail was a statement of opinion, not a statement of fact.

  70. [60] The pleaded case of the defendants was that the inability to achieve rated engine speed during the sea trials was due to the over-pitching of the propeller. They did not plead the fuel pump failure as a cause. Following from this, in their closing submissions, the defendants continued to rely solely on the assertion that the propeller was over-propped or over-pitched as the explanation for the deficiency in the engine’s performance during the trials. This was an allegation which they had to prove.

  71. [61] The defendants sought to discharge their onus of proof through the evidence of Mr Howard. In his affidavit, Mr Howard made it clear that the fuel pump failure could not explain the 11% power loss experienced by the engine during the sea trials. He asserted that since under factory conditions, the engine had reached full speed, its failure to do so during the trials could only be due to overloading caused by over-pitching of the propeller. He explained his views in this way:

  72. [62] The defendants conceded that Mr Howard was not a naval architect but contended that this was irrelevant. He had not been giving evidence of propeller design but was analysing the engine’s performance when attached to the load (propeller). It was the shipyard’s job and their naval architect’s responsibility to ensure that the load generated by the propeller was not an overload for the output of the engine. As an engineer, Mr Howard was amply qualified to analyse the engine test sheets. The defendants pointed out that Mr Kwan, Bumi’s expert, had no qualification to comment on whether the propeller was over-pitched though he had admitted that there was a possibility of this having been the case.

  73. [63] Under cross-examination, Mr Howard agreed that issues relating to over-prop should be dealt with by a naval architect. The defendants had originally planned to adduce evidence from a naval architect but in the event they did not do so. Instead, they relied only on Mr Howard’s opinion and his expertise as an engineer. Mr Howard had never seen the vessel or the engine in question although he was familiar, by reason of his work, with the type of engine installed on Bumi Anugerah. Notwithstanding this, he confidently asserted in his affidavit that since full power had been reached during factory tests, the only reason why it could not be reached at sea trials had to be over-propping of the propeller. When it came to cross-examination, however, he agreed that the factory and sea trial conditions are different and therefore there could be other reasons, apart from over-propping, why the engine could not reach 1,000 rpm during the sea trials. It is also notable that Mr Howard admitted that he had never attended any sea trial of any engine and had no idea what would normally be done during a sea trial. He also agreed that he would expect the advice of a naval architect to be sought if it was sought to determine whether or not a vessel was over-propped.

  74. [64] Mr Howard made the assertion in his affidavit that MSE had, prior to the construction of the Bumi Anugerah, over-propped other vessels that they had constructed. Under cross-examination, Mr Howard admitted that this assertion should have been made in respect of one vessel only. He had also stated that Mr Donald Chua had informed him that MSE had compensated for the over-propping by increasing the fuel racks of the vessel. Mr Donald Chua, however, admitted that in that case, MSE had simply asked whether there was a way in which they could get more power out of the engine because the engine was not achieving its rated speed and that they had not admitted that the engine concerned was over-propped. It was therefore Mr Howard’s interpretation only that in the earlier case there had been over-propping. No such situation had been acknowledged by MSE. Further, in the second affidavit made by Mr Howard, he suggested that the seven Malaysian ships may also have been over-propped. He agreed that this suggestion was based on his comparison of the results of the factory tests of the engines concerned with how they had performed during sea trials.

  75. [65] In my judgment, the defendants have not established that the failure of the engine to achieve full speed during the trials was due to over-pitching of the propeller. First, there was no evidence from a naval architect as to the relationship between the design of the vessel and the design and weight of the engine and the propeller and the likelihood or otherwise of the vessel being over-propped once the propeller was installed.

  76. [66] Secondly, if over-propping was such an obvious possible reason for the inability of the engine to achieve its rated speed, surely MBS’s engineers at the sea trials would have suggested it to Bumi and MSE at the time so that steps could be taken by the shipbuilders to modify the vessel in order to solve the problem. They did not do so. The idea does not even appear to have occurred to them which in itself is strange since, if one goes by what Mr Howard says, over-propping was the reason why many of the engines of the seven Malaysian ships also under-performed at their respective sea trials. By the time the Bumi Anugerah was commissioned, one would have expected the defendants to be on the lookout for over-propping and to point out the possibility to the builder and owner immediately. Further, the evidence shows that MBS did not tell Bumi or MSE at the time of the sea trial that there was a problem with the engine speed. The first indication that MBS considered this a problem came in an internal memorandum in March 1995 to MBUK when MBS told the latter that the vessel could not achieve its design speed and asked MBUK for advice on how to deal with the problem. Mr Crowle responded to MBS that the cause was likely to be that the propeller was over-pitched. MBS did not, however, act any further on that suggestion. They did not bring it to the attention of Bumi or MSE even though the latter had asked them why the engine could not develop full power and there is no evidence that they investigated it further even though shortly after Mr Crowle’s letter their service engineers made a visit to the vessel. Their conduct indicates to me that MBS did not seriously consider over-pitching of the propeller as having been responsible for the deficiency in the engine speed.

  77. [67] Finally, the whole basis of Mr Howard’s opinion was the difference in the engine’s performance during the factory tests and during the sea trials. Since he himself had to admit that the conditions in which these two sets of tests took place were different and that therefore other reasons could have contributed to the non-performance of the engine, the strength of that opinion was undermined. His willingness to make assertions with regard to other vessels previously built by MSE and MSE’s acceptance of the over-propping problem without sufficient basis for such assertions also undermined the credibility of his evidence.

  78. (iii) Overheating and breakdowns

  79. [68] The other matter that was complained of relating to the sea trials was that the exhaust temperature stood at 475°C. Bumi’s case was that this was the first manifestation of the tendency of the engine to overheat. They asserted that throughout the years that followed, the engine frequently overheated when operated on HFO and that this perennial problem was one of the strongest indications of a defect in the engine design. The vessel had been designed to be operable on both LFO and HFO but it was not able in practice to operate on LFO as there was an inordinate number of breakdowns and there was chronic overheating.

  80. [69] In the report that MBS gave MSE after the sea trial, it did not accept that the average exhaust temperature of 475°C recorded when the engine was at full ahead was a serious problem. The report stated that this temperature was ‘slightly higher than normal’. However, in the March 1995 memorandum to MBUK, MBS in listing the problems with the engine encountered during the sea trial mentioned that the exhaust temperatures were found to be ‘relatively high’. Mr Pereira agreed that this memorandum showed that as of March 1995 there were still unresolved problems with the engine. Mr Howard too agreed that based on the internal correspondence, the indications were that the temperature was high. Bumi submitted that this evidence showed clearly that the cause of the high exhaust temperatures was the design of the engine rather than the crew’s operation of it. At the sea trial stage, the engine was operated at full power but nevertheless developed high exhaust temperatures and experienced problems with balancing of temperatures.

  81. [70] Bumi asserted that the problem with overheating continued after the trials. To establish this, they relied on the analysis of the ship’s records carried out by Mr Kwan. None of the engineers who had served on the ship were called to give direct evidence of the alleged overheating problem. Mr Kwan’s evidence was that for the two and a half years the engine was operating, the principal problem was overheating. He also noted from the records that the engine exhaust temperatures could not be balanced from as early as the sea trial and had remained in an unbalanced state thereafter. Mr Kwan stated that the engine had experienced high exhaust temperatures at all times from delivery onwards even when it worked at loads well below 100% and that this problem had worsened progressively resulting in the exhaust manifold being red hot and glowing. He also noticed that the turbocharger had experienced regular surging during much of the period between 1996 and 1997 when the vessel was operating on HFO at lower loads. The problem became so bad that, in order to reduce it, from 14 April 1997 the main engine was operated with HSD instead of HFO. Mr Kwan noted that the service engineers from MBS had visited the vessel repeatedly to deal with Bumi’s complaints. In his view, the persistence of the problems experienced by the engine indicated that the engineers were neither able to find the cause nor solve the problems completely. Mr Kwan was of the opinion that the overheating phenomenon was attributable to an inherently defective design. His opinion was also based on the fact that between delivery from MSE and final breakdown on 1997, a period of 999 days, the engine had clocked only 7,223 running hours since for approximately 25% of that period the vessel had been out of operation due to main engine problems.

  82. [71] Bumi also made much of the failure of the defendants to state what the maximum allowable exhaust temperature was. Mr Kwan pointed out that in the instruction manual whilst a recommendation was made that the temperature differential between the inlet temperature and the exhaust temperature should not exceed plus or minus 30°C, the manual did not state what the maximum allowable exhaust temperature was. Theoretically, the engine could have been operating at temperatures of 600 to 630°C and this would still have met the defendants’ operating requirements. Secondly, the defendants had given different advice from time to time on that maximum temperature. Mr Donald Chua had stated it was 540°C whereas Mr Patrick Teo, a senior service engineer, stated it was 480°C and, in their answers to interrogatories, the temperature given was between 500 and 520°C. At the trial, Mr Pereira’s evidence was that, based on his experience, the maximum allowable temperature was 500°C.

  83. [72] There were also variations in the defendants’ evidence as to what the normal operating exhaust temperature should be. Mr Pereira said 460°C, Mr Crowle said 450°C and, in a letter, one of MBS’s employees stated that temperatures falling within the range of between 370°C and 400°C would be normal. Mr Howard was not able to give the normal operating temperature. At first he said it would vary from contract to contract, then that it would depend on the application, then that it would be necessary to use a computer to get the figure and, finally, that it would depend on the sea trial. It was odd that a mechanical engineer who had more than 30 years of experience designing and building diesel engines for both land based applications and marine propulsion applications was not able to give an indication of the normal operating temperature of an engine type with which he said he was familiar.

  84. [73] The defendants in their closing submissions dealt with the overheating problem in two parts. First, they dealt with the issue of the temperature differential between cylinders. They accepted that the instruction manual provided by MBUK stated that the difference in temperature between any two cylinders should be plus/minus 30°C. They also appeared to accept that on this engine, the temperature differentials constantly exceeded the 30° guideline. Their argument was that such excessive temperature differentials did not in themselves mean that the engine was overheating and did not of themselves prove defective engine design. They also pointed out that the engine instruction manual stated that the temperature differential guide of 30° was to be used ‘only when the engine is on full load’. The manual stated the differential at no load would be at 120° which indicated that if the engine was operated at less than full load, the maximum differential would lie somewhere between 30° and 120°.

  85. [74] The defendants argued that Bumi had chosen to use the 30° figure slavishly, either out of ignorance or to create a misapprehension of the facts. They pointed out that in his first affidavit, Mr Kwan did not mention the implications of the exhaust temperature differential exceeding 30° other than to state that it showed a defective design. Throughout his supplementary affidavit which dealt with the seven Malaysian ships, however, Mr Kwan equated the exhaust temperature differential with overheating even though he had admitted in cross-examination that overheating is a separate matter.

  86. [75] Mr Crowle’s evidence in chief on temperature differentials was that:

  87. the temperature differential is a guide to show whether the cylinders are balanced and whether there are any other problems that have occurred. Where this is a high differential on a constant basis, balancing will be needed or other components and fuel and fuel treatment may have to be checked. The exhaust temperature differential is a guide and in unmanned machinery space ships, is used to trigger an alarm for engine room staff to be alerted.

  88. When Mr Crowle was cross-examined, it was put to him that he had tried to downplay the significance of the engine temperature differential by calling it ‘a guide’ when in fact it was a warning of problems with the engine. Mr Crowle denied this and maintained his stand that it was a guide rather than a warning though he did admit that the purpose of the alarm triggered by the differential in unmanned machinery space ships was to warn of problems with the engine. He also conceded that in the view of MBUK, the exhaust temperature differential was even more important than the maximum allowable exhaust temperature since the first was mentioned in the manual and the second was not. It should also be noted that even in his evidence-in-chief, he agreed that where there was a high differential on a constant basis, corrective action and/or checking of components had to be effected. It is also notable that Mr Crowle did not assert that the greater than 30° differential frequently noted in the engine room records was within normal limits because during the times when it was recorded the vessel had been operating at less than a full load.

  89. [76] The defendants did not deny that there had been numerous overheating problems with the engine. They admitted that their service engineers had attended on board on several occasions to deal with Bumi’s complaints of overheating. Their position was that the mere fact of such complaints having been made did not mean that the design was defective. Overheating, the defendant said, was a symptom. It indicated that the engine was not operating well. It did not mean that the engine was poorly designed. Overheating could arise from poor combustion, maladjustment of fuel settings, poorly maintained nozzles and design defect. They submitted that in this case the overheating problems were symptomatic of the improper operation of the engine by Bumi.

  90. [77] It was accepted by Mr Pereira that the number of breakdowns and problems encountered by Bumi Anugerah before the vessel was two years old was not normal for a brand new engine. He agreed that if the engine was operated in a correct manner but still had this level of breakdowns and failures, the cause of the same could be a combination of bad design and bad manufacture. It was Mr Kwan’s opinion that one has to look at the performance of an engine to assess the viability or success of its design. Mr Crowle agreed that the success of an engine design could be shown by the performance of an engine and that if the engine was properly maintained and operated but it persisted in breaking down, that would mean that the design was defective.

  91. [78] The evidence before me does establish, on the balance of probabilities, that the engine overheated more frequently than would be expected from a normal and newly installed engine. The overheating manifested itself from the very beginning and continued up to till the engine’s final collapse. The question now to be determined is whether on the balance of probabilities the overheating was symptomatic of the improper operation of the engine by Bumi as asserted by the defendants.

  92. (iv) Improper operation

  93. [79] The defendants submitted that there was clear evidence that Bumi had failed to operate the engine properly which consequently led to the overheating problems. Their first supporting point was that the propeller was over-pitched. I have already dealt with that.

  94. Heat shields

  95. [80] The second point was the assertion that Bumi had operated the engine with abnormally high exhaust temperatures. MBS’s service engineer, Mr Lee Meng Liang, testified that he had discovered on a visit to the vessel that the heat shields had been removed from the engine. The chief engineer had stated that had been done to enable the engineers to observe the exhaust pipe. Mr Lee told the crew that it was wrong to remove the shields because if the engine was operated without the shields, the engine room ambient temperature would increase causing the engine to draw in hotter air and this would eventually result in higher exhaust temperatures. When the heat shields were reinstalled in Mr Lee’s presence, he observed that both the room temperature and the exhaust temperature decreased immediately. I note here that this was an isolated incident and that Mr Lee could not state under cross-examination by how much the temperatures had been lowered when the shields were reinstalled.

  96. Protection devices

  97. [81] The third point was that Bumi had intentionally disconnected the instrumentation and protection devices of the engine. This was to enable Bumi to operate the engine on HFO when the conditions were not right. Correct conditions for HFO operation would be a jacket water temperature of 70°C or more and an engine load of 75%. The evidence supporting this allegation came from service reports issued by MBS engineers. In the first, dated 17 May 1996, an MBS engineer named Patrick Cheo noted from the performance log that the engine had been operating on HFO since the vessel had been put into service despite very low water jacket temperatures and speeds not exceeding 630 rpm. The jacket water temperature switch which had been set at 70°C should have prevented the changeover under these conditions, but it was apparent to Mr Cheo that the HFO operating system had been bypassed to facilitate manual changeover to HFO. This report was the first time any observation or allegation of a deliberate bypass of the HFO system was made. When a different MBS engineer had visited the ship in February 1996, no such matter was noted or alleged.

  98. [82] The next report related to three visits made to the vessel between October 1996 and December 1996. It was noted that the engine protection alarms and trips system were completely malfunctioning, that the jacket water temperature normal protection switch had been disconnected, that the heavy fuel pressure low protection switch had been disconnected and the viscosity high/low protection alarm had been disconnected. The defendants made much of the fact that the job sheet on which these observations were recorded was countersigned by the then chief engineer. They asserted that such counter signature meant that the chief engineer accepted the observations as being correct and pointed out that Mr Kwan’s opinion was that the chief engineer would have verified the information in the job sheet before signing it. It should also be noted that during the service engineer’s visit, all the protection devices were reconnected and the whole HFO protection system was then tested again to ensure it was in good order. Mr Crowle also visited the ship in late September 1996. He noted that from readings in the log sheet, it appeared that between July 1995 and 18 September 1996, the engine had been running on HFO even though the jacket water outlet water was consistently below 70°C. He also noted that whilst the engine had been running on HFO between 9 September 1996 and 18 September 1996, no speeds above 575 rpm had been recorded. Thus, the 75% MCR requirement had definitely been breached during that nine day period.

  99. [83] Mr Kwan agreed that it was bad practice to run the engine without any thermostat or protective devices. He also agreed that there were no entries in the log book which recorded the disconnection and/or malfunctioning of the auto changeover system. He agreed that a reasonably competent and hardworking engineer would record a defect in the auto changeover valve.

  100. [84] The defendants’ case was that if the protective devices were malfunctioning or deliberately disconnected, that would allow the crew to operate the engine on HFO even when the appropriate conditions did not exist. For one thing, fuel with a higher than allowed viscosity could then be injected into the cylinders. Mr Kwan agreed that if this was done, the result would be high exhaust temperatures. The defendants submitted that this was precisely the circumstance in which the vessel’s engineers were operating the engine. Without any protective devices, they were operating the engine manually on HFO, according to the job sheet, for a long time. That the exact length of time is not known is due they say to the shoddy records kept by Bumi and the fact that none of the engineers were called as witnesses.

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