High Court · Decided 28 October 2013

Gimpex Ltd v Unity Holding Business Ltd and others

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[2013] SGHC 224Case no. Suit No 390 of 2010

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Evidence Act 1893

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Lai Siu Chiu J:
[1] This case concerned a dispute over a contract for 40,000MT of coal which Gimpex Ltd (“the plaintiff”) bought from Param Energy Pte Ltd (“the second defendant”) which contract was to be performed by Unity Holdings Business Limited (“the first defendant”) whose director is Vinay Parmanand Hariani (“the third defendant”). The third defendant is also a director and the sole shareholder of the second defendant.
[2] The plaintiff is an Indian company based in Chennai, India, and it has been in the business of trading in commodities and raw materials since the 1950s. The first defendant is a company incorporated in the British Virgin Islands (“BVI”) while the second defendant is a Singapore company and its business is that of a wholesaler in general trade.
[3] By a contract dated 2 March 2010 (“the contract”) the plaintiff agreed to buy and the first defendant agreed to sell and deliver to the plaintiff, 40,000MT (+/-10%) of coal (“the coal” or “the cargo” where appropriate) from Indonesia. The salient terms of the contract will be set out later. It was stipulated therein under Arts 18 and 19 respectively, that Singapore law would govern and would be the jurisdiction for, the contract.
[4] The plaintiff’s joint managing-director is Samir Goenka (“Samir”) who is based in Chennai. The plaintiff has a Singapore subsidiary called SPG Mining Pte Ltd (“SPG”) which was incorporated in late 2009. SPG’s executive director is Avinash Kulkarni (“Kulkarni”) who is based in Singapore.
[5] In late 2009, the plaintiff was new to the coal trading business and wanted to deal with reliable coal companies and traders in Singapore. Samir said he had received feedback and read literature that advised him to avoid dealings with Indonesian coal companies. Samir and Kulkarni were introduced by the plaintiff’s auditor to one Amit Vaishnav who in turn introduced Samir to the third defendant.
[6] The initial dispute between the parties concerned an alleged representation (according to the plaintiff) made by the first defendant to the plaintiff that the first defendant is a Singapore company.
[7] When Samir (with one Jayanta Sinha (“Jayanta”) and Sashank Dixit) first met the third defendant in February 2010, the third defendant introduced himself as the owner of the second defendant. Jayanta has since left the plaintiff’s services and was not a witness for the plaintiff.
[8] At a meeting on or about 2 March 2010 between the second defendant’s representative Lalit Balchandani (“Lalit”) and Samir, the former allegedly told the latter that the first defendant was/is a Singapore company. According to Samir, he made it clear to the third defendant and to Lalit that the plaintiff wanted to do business only with a Singapore company. The third defendant apparently used the first defendant’s Singapore address to convince Samir that it was/is a local company. Samir was not aware until after the contract was signed, that the first defendant is a BVI company.
[9] Lalit offered to contract through the second defendant and provided a draft contract to the plaintiff for that purpose. However, the plaintiff rejected the offer as the second defendant wanted a transferable letter of credit to pay its supplier, which term was not acceptable to the plaintiff. Consequently the first defendant was substituted as the contracting party on Lalit’s proposal after a telephone discussion between him and Samir. According to the defendants’ defence (and Interrogatories answered by the third defendant), the third defendant had “allocated” the contract to the first defendant. In the contract itself, the first defendant was described as “a group company of Param Energy Pte Ltd”.
[10] Samir was also under the impression that Lalit was an employee of the first defendant when in effect Lalit worked for and under the direction of the third defendant. The first defendant had neither staff nor employees and the persons who dealt with the plaintiff on the contract at all material times all worked for the third, not the first defendant. Besides Lalit, the other employees of the third defendant who dealt with the plaintiff were Kishore Chuharmal Mahtani (‘Mahtani”) and Prem Sangtani (“Prem”).
[11] It was the plaintiff’s case that Samir was induced by the representations made by Lalit and/or the third defendant to enter into and sign the contract, which salient terms state:
1.1 Commodity: Coal – GVC 6,300-6,100 (ADB) (Indonesia origin);
1.2 Loading port: Taboneo Anchorage, South Kalimantan (“the Anchorage”)
1.3 Contract period: Spot
1.4 Shipment terms: FOB
1.5 Partial shipment: Not allowed
1.6 Quantity: 40,000MT (+/-10%) at vessel’s option
1.7 Value: US$2,640,000 (+/-10%).
The shipment dates were stated in the contract to be between 25 March and 3 April 2010. The other terms and conditions of the contract are set out in [45]. The coal was to be loaded at Batulucin in Kalimantan.
[12] I should state at this juncture that the coal contracted was not meant for the plaintiff’s use but for a Pakistani company called Awan Trading Pte Ltd (“Awan”) to whom the plaintiff had sold the coal by a contract dated 20 February 2010 (“Awan’s contract”). The plaintiff bought the coal from the first defendant at US$66 per MT and resold it to Awan at US$68 per MT. The first defendant supposedly obtained the coal from an Indonesian company called PT Planet Resources (“PT Planet”) of which the third defendant was/is a director and an indirect shareholder. However, in the course of the proceedings, the first defendant revealed that the coal was actually supplied by a third party called CV Berkah Mulya Abadi (“Berkah”) with whom it had a contract. However, the contract with Berkah was not produced at the trial (as the first defendant claimed its copy of the document could not be located while Berkah would not furnish a copy at the first defendant’s request).
[13] Pursuant to Art 7 of the contract, the plaintiff was to pay for the coal by an irrevocable letter of credit. To that intent, the plaintiff applied to ING Bank Chennai branch (“ING”), for letter of credit no. 407FLC002199/09 of US$2,640,000 (“the L/C”) to be issued in favour of the first defendant. The L/C allowed 21 days after the shipment date for negotiation.
[14] The first defendant was also required under Art 7 of the contract, to present specific documents (including a full set of non-negotiable bills of lading) to ING in order to negotiate the L/C. Further, the first defendant had to fax and then courier a non-negotiable set of those documents to the plaintiff. Under the L/C, the plaintiff had the right to appoint an inspection agency to inspect the coal at the loading port.
[15] As the contract was made on FOB terms, the plaintiff was required to nominate a vessel at the loading port for the first defendant to load and ship the coal to the port of Karachi in Pakistan. In this regard, the plaintiff’s buyer Awan had nominated the MV Michalakis (“the ship”) to carry the coal to Pakistan and the plaintiff notified the defendants of the nomination on 10 March 2010. Awan appointed PT Surveyor Carbon Consulting Indonesia (“SCCI”) as its surveyor while the first defendant appointed PT Sucofindo (“Sucofindo”) under Art 5.1 of the contract as the seller’s loading surveyor.
[16] The plaintiff informed Lalit on 22 March 2010 of the appointment of SCCI as the plaintiff’s surveyors. According to Kulkarni, the defendants made it difficult for SCCI to carry out inspection of the cargo at the Anchorage. The coal would be delivered to the jetty and stockpiled there before being loaded onto barges and then taken to the ship which would be waiting at the Anchorage. The ship arrived at the Anchorage on or about 23 March 2010 and loading of the coal commenced on 11 April 2010 and was completed on 21 April 2010 at 0245 hrs.
[17] Under Art 8.8(a) of the contract, demurrage was payable at US$10,000 per day, based on the charterparty rate of the ship. Kulkarni said he advised the defendants of the demurrage rate when the plaintiff nominated the ship on 10 March 2010.
[18] Under Art 3.1 of the contract, loading time (ie “laytime”) allowed was from 25 March to 3 April 2010 based on 8,000MT per weather working day, Sundays and holidays included except for five Indonesian public holidays (which did not apply here). For the 41,510MT loaded on the ship, the maximum laytime allowed was 5.1888 days. Kulkarni alleged he had agreed with Lalit (who denied it) at a meeting in Jakarta on 15 March 2010, that laytime would run from 30 March 2010 instead of 12 hours after Notice of Readiness (‘NOR”) had been given by the ship’s Master.
[19] Kulkarni alleged that he encountered great difficulty in arranging for SCCI to have access to inspect the coal. He had to communicate repeatedly with Lalit and Prem by email before he finally succeeded. Kulkarni was shocked to receive Awan’s email dated 11 April 2010 informing him that SCCI had been “offloaded” and SCCI surveyors were not allowed to do sampling and witnessing of sampling of the cargo while it was being loaded onto the ship.
[20] Kulkarni conveyed Awan’s complaint to Lalit and Prem. On 13 April 2010, Prem informed Lalit (who in turn informed Samir) that the first defendant would prepare samples and deliver them to SCCI and that was “the maximum they can do”. When Kulkarni protested, Lalit responded by email on 13 April 2010 to say he had never said SCCI would be allowed to witness the loading – the plaintiff was free to send any buyer’s representative to witness the loading.
[21] Despite Kulkarni’s further protests, the first defendant’s representatives continued to refuse to allow SCCI to take coal samples although Lalit eventually agreed to SCCI witnessing the loading of the coal on the ship.
[22] On its part, Sucofindo on behalf of the first defendant sampled the coal from: (i) a stockpile on the wharf, (ii) from barges and (iii) from the ship itself while the coal was being loaded on board.
[23] The plaintiff also complained that the defendants failed to comply with the L/C requirements of forwarding copies of the bills of lading (see [14] above). The defendants only faxed the documents to the plaintiff on 29 April 2010 and later sent by courier only one bill of lading for 14,000MT of coal. However the first defendant subsequently tendered for negotiation of the L/C to ING through Bank of India, nine, completely different bills of lading. Eight of the nine bills of lading presented for negotiation were for 5,000MT of coal while the remaining bill of lading was for 1,510MT. Further, Lalit requested of the plaintiff on 3 May 2010 that the L/C be amended to reflect three bills of lading of 14,000MT each, that the bills of lading should state “shipped on board” instead of “clean shipped on board” and that negotiation of the L/C be extended by one week. That meant that the defendants had three and not nine bills of lading as of 3 May 2010. Again, the plaintiff accused the defendants of fraudulently tendering bills of lading to the plaintiff that differed from those presented to ING.
[24] According to the plaintiff, it realised only after the coal arrived in Karachi on 8 May 2010, that the first defendant’s refusal to allow SCCI to do sampling was due to the fact that the first defendant had shipped low grade coal and/or coal outside the contract specifications. The coal was discharged from the ship 8-12 May 2010. Awan appointed Intertek Pakistan (Pvt) Ltd (“Intertek”) while the plaintiff appointed Inspectorate Griffith India Pvt Ltd (“Inspectorate”) to inspect the coal after its arrival at Karachi port. The test results of Intertek and Inspectorate were vastly different from Sucofindo’s as can be seen from the following table:
[25] Kulkarni alleged that upon discovering the fraud perpetrated by the first defendant, he tried desperately to contact the defendants but they stopped picking up their telephones. Awan rejected the coal on the ground it was completely off-specifications. After being discharged from the ship, the coal had been kept at the storage yard pending delivery to Awan.
[26] In view of the plaintiff’s rejection, the defendants attempted to find another buyer for the coal. On or about 15 June 2010, the defendants found a buyer in Rafeh Enterprises Pte Ltd (‘Rafeh”) at prices ranging from US$48 to US$68 per MT which actual price would be determined after a survey of the coal’s quality, on an “as is where is” basis. The defendants sent Mahtani to Karachi to facilitate the sale to Rafeh. Mahtani alleged that he engaged SGS Pakistan (Pvt) Ltd to conduct the survey (“SGS”) but was stopped by Awan who also disallowed samples of the coal from being taken by SGS. Mahtani further alleged that Awan took away three truckloads of the coal before he lodged a police report of the theft. Mahtani claimed he received telephone threats causing him to fear for his life and to leave Karachi on 24 June 2010. The sale of the coal to Rafeh was aborted.
[27] Eventually, on 1 July 2010, the defendants managed to sell the coal to International Energy Resources FZC (“FZC”) on an “as is where is” basis at US$48.63 per MT. FZC is a company related to Awan.
[28] On its part, the plaintiff called on the performance bond of US$50,000 amounting to 2% of the contract value, that had been provided by Sainik Mining & Allied Services Ltd (“SMASL”), the major shareholder of the first defendant, under Art 7.7 of the contract.
The pleadings
[29] The plaintiff commenced these proceedings in Singapore and obtained an interim injunction on 31 May 2010 (“the injunction”) to restrain the defendants from obtaining payment on the L/C. It obtained a similar injunction from the Karachi courts restraining ING from making payment under the L/C. By consent, the injunction was set aside on 27 July 2010 on the defendants’ undertaking not to obtain payment under the L/C.
[30] In the statement of claim (Amendment no 3) the plaintiff alleged that;
(a) the second defendant on 2 March 2010 represented through Lalit that the first defendant was a Singapore company and that Lalit was an employee of the first defendant; Lalit did not disclose that the first defendant was a BVI company;
(b) It was stated in the contract that the first defendant’s domicillium was Singapore, it had a Singapore address and that the third defendant was its representative and director;
thereby inducing the plaintiff to enter into the contract.
[31] The plaintiff also alleged that the first and/or the second defendant and/or the third defendant had committed fraud by supplying grossly inferior coal under the contract while at the same time pushing ahead to procure payment under the L/C. To that intent and purpose, the defendants prevented the plaintiff’s inspection agency SCCI from inspecting and drawing samples of the coal while it was being loaded on the ship.
[32] The plaintiff alleged that as part of the defendant’s fraud and conspiracy, the third defendant arranged for the coal to be supplied by PT Planet which company was owned by the first defendant and of which the third defendant was a director. In fact, the directors of the first defendant were also directors of PT Planet.
[33] The plaintiff contended that the bills of lading presented by the defendants for negotiation of the L/C were suspicious in the light of the discrepancy set out earlier at [23] above.
[34] The plaintiff asserted that the third defendant was in fact the alter ego of the first and/or second defendants and/or was their directing mind with complete control over the contracts, the business and assets of the first and/or second defendants, that he had directed and/or procured the fraud that had been perpetrated on the plaintiff through the first and/or the second defendants. The plaintiff averred that the corporate veil of the first and/or second defendants should be lifted and the second and/or the third defendants should be liable for the liability of the first defendant.
[35] The plaintiff also made a claim for demurrage pursuant to Art 8 of the contract. The plaintiff alleged that as the defendants took 21.9479 days to load the cargo as opposed to the contractually allowed 5.1888 (see [18] above), the defendants were liable for demurrage of 16.7591 days amounting to US$167,591 (16.7591 x US$10,000). The amount (according to the plaintiff) was less than what it paid Awan for demurrage for which its laytime commenced on 25 May 2010 at 1200 hrs.
[36] The plaintiff’s final claim was for damages for non-delivery of the coal on the basis that it had been rejected by Awan.
[37] The three defendants filed a common defence (amendment No 4). The defendants admitted the contract and that the first defendant was a BVI company at all material times. They denied that any of them represented to the plaintiff that the first defendant was a Singapore company. The defendants further denied that the plaintiff was induced to enter into the contract based on the representations alleged by the plaintiff. They added that Art 20 of the contract (see [197] below) in any case superseded all prior representations as alleged or at all.
[38] The defendants contended that Art 8 of the contract on demurrage had been varied between the parties in that the first defendant would not be liable for any demurrage nor was it entitled to any dispatch money.
[39] The defendants alleged that it was the plaintiff that was in breach of contract in that the plaintiff should have furnished a clean and workable L/C by 13 March 2010. Instead, the plaintiff only procured the L/C on 23 March 2010 whereas the plaintiff had arranged for the ship to arrive by 22 March 2010.
[40] The defendants denied they had conspired to injure or to defraud the plaintiff by unlawful or fraudulent means as alleged or at all. They further denied committing any of the acts complained of by the plaintiff. They denied the plaintiff had suffered the damage as alleged in the statement of claim or at all. However, the defendants admitted that the contract was allocated by the second defendant to the first defendant.
[41] The defendants averred it had purchased the coal from PT Planet which company was owned by the first defendant and Classic Ventures Assets Incorporated (“Classic”) but denied the coal was of grossly inferior quality, contending that their contract with PT Planet was back-to-back with the contract in relation to contractual specifications. Although PT Planet was owned by the first defendant and Classic, PT Planet had procured the coal from an independent third party that was neither controlled by nor related to, the first defendant or any of the defendants (alluding to Berkah whom the plaintiff described as shadowy in its closing submissions).
[42] The defendants averred that the quality of the coal under the contract was to be determined by Sucofindo, an independent surveyor, and its findings showed that the quality complied with the defendants’ contract with PT Planet and in turn with the defendants’ contractual obligations to the plaintiff. They added that it was the plaintiff that had nominated Sucofindo under Art 4 of the contract and under Art 4.4, Sucofindo’s findings on quantity and quality at the load port were final and binding on the plaintiff and the first defendant. They added that the plaintiff had also independently appointed SCCI to witness the sampling and loading of the coal on or about 12 April 2010. However, the defendants caught SCCI taking coal samples of low grade and stopped SCCI as the samples were not representative of the entire cargo that was shipped.
[43] The defendants contended that having performed the contract, they were entitled to payment under the L/C. Consequently, they presented the L/C for negotiation. The defendants contended that the plaintiff had unlawfully rejected the coal and refused to pay the price of US$2,661,991.32. Eventually, the defendants sold the coal to FZC at US$48.63 per MT. The defendants counterclaimed from the plaintiff for
(a) the difference between the contract price (US$2,661,991.32) and the sale price to FZC (US$2,018,631.30) amounting to US$643,360.02;
(b) charges of US$750.00 paid to SGS at Karachi for the aborted survey of the coal;
(c) expenses incurred by the defendants (US$6,804) in the aborted sale to Rafeh (which included Mahtani’s travel and accommodation expenses);
(d) refund of the sum of US$50,000 paid to the plaintiff on the performance bond;
(e) an inquiry into the loss that they had suffered as a result of the injunction obtained by the plaintiff;
(f) alternatively, damages for the plaintiff’s breach.
The evidence
[44] A total of fifteen witnesses testified in the course of the ten days’ trial. Besides Samir (PW1) and Kulkarni (PW2), the plaintiff’s four other witnesses included two who came from Inspectorate, Pakistan and one from India. On their part, the defendants called nine witnesses including Lalit, the third defendant, Prem, Mahtani and a representative from Sucofindo (Nonot Imam Norbintoro). The parties also called expert witnesses. The plaintiff’s experts were Sebastian Jon Norager (“Norager”) and Liang Yun whilst Peter Robin Gunn (“Gunn”) was the defendants’ expert.
The plaintiff’s case
[45] Before I review the evidence that was adduced in court, it would be appropriate to first set out the other salient terms of the contract:
(a) Article 4.1 – The quality of coal to be supplied hereunder shall be with the following typical specifications determined and analysed as per ASTM standard by Sucofindo, Indonesia. All percentages used refer to percentage by weight.
(b) Article 4.2 – The costs of inspection for sampling and Analysis described in this article shall be borne by the Seller.
(c) Article 4.3 – The consignment should be accompanied by Certificate of Sampling and Analysis as per ASTM standard issued by Sucofindo Indonesia.
(d) Article 4.4 – All reported findings on all inspections/surveys conducted at Origin in relation to quality, quantity and weights etc done at origin and/or port and place of loading shall be FINAL and binding to both Buyer and Seller.
(e) Article 4.5 – At least ten (10) days prior to the 1st day of load port laycan, Buyer has the option to appoint an independent inspection agency of their choice. All costs for this would be borne by the Buyer.
(f) Article 4.6 – One set of raw samples drawn by the surveyors on board the vessel would be duly sealed and signed by the surveyors.
(g) Article 5.1 – Seller shall appoint Sucofindo, Indonesia to determine the weight of cargo loaded onto the mother vessel at loading point and issue a Certificate of Weight, which shall be final and binding on both parties.
(h) Article 7.1 – payment will be made through an irrevocable Single restrictive Letter of Credit payable at 100% Sight issued by a Prime International Bank for 100% of the shipment value in a standard format acceptable to Seller.
(i) the clean and workable Letter of Credit must be established at least (20) days prior to the first day of lead port laycan.
(j) …
(k) L/C to call for the following
(l) …
(m) a full set (3+3) of “clean on board” Charter Party bills of lading consigned to the order of L/C opening bank and notify applicant marked “Freight payable as per Charter Party”.
(n) Article 8.1 – At least 14 days before the first day of the load port laycan Buyer shall nominate a vessel or subs to the Seller stating the following:
Name and description of vessel or subs
Expected Time of Arrival at lead port
Expected cargo quantity
Demurrage and despatch rate
Age of the vessel
Seller to accept/reject such nomination within 24 hrs of such nomination.
(o) Article 8.5 – Laytime shall commence 12 hours after vessel’s agent’s tendering “NOR” unless sooner commenced.
(p) Article 8.7 – Demurrage/Despatch will be as per charter party. Seller shall provide laytime calculation to the buyer within 3 days after completion of discharge.
(q) Article 21 – Domicillium
All communications and/or notices under this Agreement shall be deemed to have been duly given in terms of this Agreement if they are sent by mail/facsimile or telex transmission to either Party at the following addresses:
[46] The following words were defined in the contract:
(a) “ADB” stood for “air dried basis”;
(b) “AR” or “ARB” meant “as received basis”;
(c) “ASTM” stood for “the standard prescribed by the American Society for Testing and Materials”;
(d) “k/cal” meant “kilocalories of energy per kilogram of coal.
[47] I turn now to review the evidence adduced in support of the plaintiff’s case, starting with Samir’s testimony. Nothing much turns on his evidence as, apart from signing the contract on behalf of the plaintiff and what was allegedly represented to him by the third defendant and Lalit,, Samir did not have any further or significant dealings with the defendants as that task was essentially left to Kulkarni. Samir did allege that the third defendant (whom he described in his affidavit of evidence-in-chief (“AEIC”) as the mastermind behind the fraud that was perpetrated on the plaintiff) had deceived the plaintiff.
[48] Kulkarni dealt with the defendants on the shipping and/or L/C documentation. Citing the various Arts of the contract (as set out in [45] above), Kulkarni gave examples in his AEIC of how the defendants had breached the contract.
[49] Kulkarni criticised Sucofindo’s certificate of sampling and analysis as not being in compliance with the contract citing the following certificate no. 03401/GAEDAD as an example; the extracts state:
(The above and other certificates of Sucofindo (save for the certificate of origin) were not signed by Nonot Imam Norbintoro (“Nonot”) even though he testified Sucofindo’s behalf).
[50] Kulkarni pointed out that the above certificate gave the impression that sampling of the coal took place while the cargo was being loaded. That was not true as the samples were taken well before the coal was loaded on the ship. Further, the certificate did not specify from where and which part of the cargo the samples were taken or who had taken the samples. Kulkarni/the plaintiff viewed such a certificate as invalid since it did not comply with Art 4.3 of the contract set out at [45(c)] above.
[51] In his AEIC, Kulkarni deposed that Awan had asked Sucofindo on 22 April 2010 to add the following words to the latter’s certificate:
but the defendants rejected the request.
[52] Kulkarni also had issues with the bill of lading. In this regard, he denied Lalit’s claim that it was at Kulkarni’s telephone request made on or about 3 May 2010, that the cargo was split by the defendants into three bills of lading.
[53] As for the defendants’ contention that Kulkarni had inspected the stockpiles of the coal before shipment, Kulkarni recalled that between 24 and 27 March 2010, he had made one cursory visit to a coal stockpile, accompanied by Prem and the plaintiff’s Jayanta Sinha (see [7]). He estimated the stockpile he saw to have between 5,000- 6,000MT of coal. Kulkarni could not ascertain the quality of the coal just by a visual inspection of the stockpile which he recalled was near to a coal mine.
[54] In the course of Kulkarni’s cross-examination, counsel for the defendants (“Mr Bazul”) sought to establish that the coal that had been loaded onto barges was the cargo that was delivered to the ship at the Anchorage. Counsel drew Kulkarni’s attention to analysis reports of coal loaded on barges and cross-referred them with progress reports of loading on the ship. I note that the progress reports were sent to Awan by email from a company called IDT Agency (“IDT”) whose identity was not told to the court and whose representatives, including the maker of the progress reports, did not appear as witnesses. Consequently, the court had no evidence to support the defendant’s stand that the coal that was loaded onto the barges (from which samples were taken and tested) was loaded onto the ship. I had also pointed out to counsel for the defendants that there was no evidence before the court to even suggest that the coal stockpiled on the jetty was what was loaded on the ship.
[55] Mr Bazul attempted to prove his point above in another way. He referred to Sucofindo’s reports of analysis of cargo on the barges. He cross-referred the document to the same progress report of loading on the ship by IDT Agency, to support his point that the coal on the barges was indeed shipped. However, that method still did not overcome the problem that the maker of the progress report did not testify.
[56] On the issue of the defendants’ refusal to allow SCCI to inspect and take samples of the coal, Kulkarni referred to his email below to Lalit dated 13 April 2010:
[57] The stand of the defendants was that the email did not state that SCCI was contractually allowed to take samples of the coal. The defendants’ position was that SCCI was not entitled to do so under Arts 4.5 and 4.6 of the contract (see [45]) and that task was Sucofindo’s responsibility.
[58] Kulkarni’s attention was drawn by Mr Bazul to an email dated 14 April 2010 from Jayanta Sinha to Awan which inter alia stated:
The email suggested that the defendants had acceded to Kulkarni’s email request of 13 April 2010; Kulkarni disagreed. He testified that no counter samples were given by Sucofindo to SCCI; neither did he request for the samples.
[59] Kulkarni was also cross-examined on events that transpired after the coal’s arrival in Karachi. Questioned on who he and/or the plaintiff had (unsuccessfully) attempted to contact from the defendants, Kulkarni testified they were Lalit and Prem. He said he discovered that the coal did not comply with the contract specifications after Awan complained, prompting the plaintiffs to apply to and obtain an injunction from the Madras court to restrain the defendants from obtaining payment under the L/C.
[60] The issue of demurrage was also raised in Kulkarni’s cross-examination. Kulkarni rigorously denied the defendants’ contention that he had agreed to waive demurrage. Kulkarni referred to the exchange of emails between the plaintiff and the defendants to support his denial. This is set out below.
[61] On 22 April 2010, Lalit had emailed Geetha, the plaintiff’s staff-member as follows:
[62] This was in response to Geetha’s email earlier that day setting out the plaintiff’s demurrage claim of US$167,591.00 with a breakdown.
[63] In his email response to Lalit of 23 April 201, Kulkarni said:
[64] Kulkarni then received another email from Lalit on 23 April 2010 stating:
[65] In Kulkarni’s response to Lalit on the above email on the same day, he said inter alia:
[66] Kulkarni was referred to other emails exchanged between IDT and Awan that suggested that there was a problem with loading the coal onto the ship because the cranes on the ship were old and/or slow and/or not working to the maximum. If that was true, Mr Bazul asserted (to which Kulkarni disagreed), the defendants were not liable for demurrage.
[67] Emails from Sucofindo produced by the defendants seemed to show that it was PT Planet and not the defendants who had given instructions to Sucofindo to do sampling of the coal that was to be shipped from the Batulicin jetty at Banjarmasin. The defendants further disclosed a letter dated 7 April 2010 from PT Planet to Sucofindo giving instructions on pre-shipment, draught survey and analysis.
[68] I turn now to the evidence that was adduced from the Pakistan surveyors of the plaintiff, after the coal’s arrival in Karachi. Earlier (at [24]), I had identified the plaintiff’s surveyor as Inspectorate. Majeed Qazi Muhammad Abdul (“Majeed”), the plaintiff’s witness from Pakistan was not from Inspectorate but was the operations manager of Inspection Services Incorporated (Pvt) Ltd (‘ISIP”) who are the Pakistani agents of Inspectorate. Majeed (PW5) testified he had collected the coal samples certified by Inspectorate. A geologist by training, Majeed had collected samples at the custom bonded coal storage yard (“the yard”) at Karachi port accompanied by three surveyors from his company. The coal was in a rectangular stockpile marked by the customs authorities with a signboard stating the name of the vessel it came from. Majeed was taken by the yard’s supervisor to the stockpile marked with the ship’s name. The stockpile was about 30-40 feet high and 90-100 feet across.
[69] Majeed testified he collected the coal samples from the stockpile using the ISO 18283 standard. Markers were placed on the stockpile, marking the top, middle and bottom layers horizontally. Shovels were used to collect samples from each layer. It took about a day to complete the sampling after which the samples were sent to Inspectorate’s office at Kolkata.
[70] In cross-examination, Majeed testified that he would have taken 150 to 200 kgs of coal samples from the ship’s stockpile.
[71] The plaintiff also produced as a witness the assistant manager of Inspectorate Mallik Shyamal Kumar (“Mallik”), a chemist by training. In his AEIC, Mallik deposed to how he had carried out a chemical analysis of the coal samples for inter alia: (i) total moisture and (ii) gross calorific value, using the ASTM method. The analysis was carried out at Inspectorate’s laboratory at Bhubaneswar (“the Laboratory”).
[72] In cross-examination, Mallik disclosed that the 800gms samples tested at the Laboratory came from Kolkata. However, he could not confirm that the samples came from the ship. He did not carry out the tests himself nor did he sign the test reports. The tests were done by two chemists in the Laboratory in compliance with standard procedures.
[73] Not surprisingly, in their closing submissions, the defendants contended that Mallik’s evidence was of little if not of no probative value since he did not conduct the Laboratory tests. Neither did he record the test results in or sign the Inspectorate certificate. Mallik was not even the person who received the coal samples from Inspectorate’s Kolkata office.
[74] The defendants further pointed to discrepant evidence from Mallik and Majeed on the weight of the coal samples. Majeed had testified he had collected 150-200 kgs of coal while Mallik said the Laboratory received 800 gms of coal. The vast difference in the weight of the coal samples meant that:
(a) either Majeed or Mallik was lying or;
(b) not all the samples collected by Inspectorate were analysed at the Laboratory or;
(c) the samples analysed by the Laboratory were not from the samples collected by Majeed.
The defendants’ suspicions are unjustified. It would be impossible for the Laboratory to have analysed all 150-200 kgs of coal collected by Majeed. The standard practice of any laboratory is to extract and test, a small portion of samples that are collected.
[75] For added measure, the defendants’ submissions described Majeed as an evasive and unreliable witness as he was unable or unwilling to answer when questioned on the inherent limitations of stack sampling. The defendants highlighted Majeed’s testimony that Inspectorate had taken at the yard 75 samples allegedly from the stockpile containing the coal whereas during Norager’s cross-examination (see [102]) Norager testified Majeed had informed him Inspectorate collected 50 samples from the stockpile. Further, although Majeed used shovels to take the coal samples, he did not notice any wetting of the coal whereas Norager testified that where the coal’s total moisture is 24%, it would likely be wet even if the surface looks dry – by scraping a few centimetres below the coal’s surface.
[76] The plaintiff’s closing submissions on the other hand argued that both Majeed and Malik had given direct evidence on the sampling and testing of the coal when the cargo arrived at Karachi.
[77] No witness from Intertek testified for the plaintiff. Instead, an AEIC was affirmed by the plaintiff’s legal manager Balagurusamy Nagamania Pillai Shankara Subramaniam (“Bala”) which exhibited the tests report and inspection certificate of quality and quantity carried out by Intertek. Bala (PW3) deposed he had contacted Intertek to seek the cooperation and presence in court of the surveyor who had carried out the tests. His request was refused. On that basis, the plaintiff submitted that Intertek’s certificate should be admitted into evidence, as it satisfied the requirements under s 32(1)(j)(iii) or (iv) of the Evidence Act (Cap 97, 1997 Rev Edn) (“The Evidence Act”) Although the defendants disagreed with the plaintiff’s submission, they themselves relied on s 32(1)(b) of the Evidence Act for their submission that the Sucofindo certificates are admissible and conclusive evidence (citing Toepfer v Continental Grain Co [1974] 1 Lloyd’s LR11). I shall return to the issue of admissibility of Sucofindo’s and Intertek’s certificates later (see [201] onwards).
[78] I turn now to the evidence of Norager (PW6); he holds a doctorate in chemistry and is from the Singapore office of DH Burgoyne & Partners (International) Ltd (“Burgoyne”) who are consultant scientists and engineers. Norage filed two AEICs for the trial, the first (filed on 9 April 2013) contained his report while his second AEIC (filed on 6 May 2013) contained his supplementary report.
[79] Norager’s brief from the plaintiff was to address the following issues:
(a) could the calorific value and the total moisture content of the coal have changed to the extent of the differences between the Sucofindo and Inspectorate/Intertek certificates at [24] due to the shipment of the coal from Indonesia to Pakistan;
(b) would storing the coal at the custom bonded storage at Karachi for two weeks cause the calorific value of the coal to decrease from the figure of 6,266 kcal/kg stated in the Sucofindo certificate to the figure of 5,255 kcal/kg in the Inspectorate certificate and the total moisture content to increase from 18% in the Sucofindo certificate to the 24.35% in the Inspectorate certificate?
(c) are there any inconsistencies between the Sucofindo certificate and the supporting documents and facts in terms of the total moisture figures?
(d) were the test methods used by Inspectorate consistent with the standards in the contract? Based on the Inspectorate test results, did the coal meet the specifications in the contract?
[80] In his first report attached to his first AEIC filed on 9 April 2013 (‘Norager’s first AEIC”), Norager answered the four questions in accordance with the numbering as follows:
(a) no, the calorific value and the total moisture content of the coal should not have changed to the extent of the differences between the Sucofindo and Inspectorate/Intertek certificates simply due to the shipment of the coal from Indonesia to Pakistan;
(b) no, the storage of the coal at the custom bonded storage at Karachi for two weeks should not have caused the calorific value of the coal to decrease from the figure of 6,266 kcal/kg stated in the Sucofindo certificate to the figure of 5,255 kcal/kg in the Inspectorate certificate and the total moisture content to increase from 18% in the Sucofindo certificate to the 24.35% in the Inspectorate certificate;
(c) yes, there were inconsistencies between the Sucofindo certificate and the supporting documentation regarding the total moisture content figure of the coal;
(d) yes, the test methods used by Inspectorate for the determination of the total moisture content and the calorific value were consistent with the standards in the contract. Based on the Inspectorate test results, the coal did not meet the specifications in the contract.
[81] Although the contract did not specify the type/quality of the coal, Norager noted that the certificates of Sucofindo and Inspectorate used the terms “steam coal” and “non-coking” coal while the Intertek certificates used the phrase “coal in bulk”. Norager opined that “steam coal” is a generic term that can have different meanings while non-coking coal implied that the coal in not suitable for the steel manufacturing industry, which uses coking coal. “Non-coking” implied that the coal was probably intended for power generation, and the term is sometimes used interchangeably with “steam coal”. In other words, the terms used in the certificates of Sucofindo and Inspectorate probably referred to the end-use of the coal rather than the type.
[82] Relying on an extract from ASTM’s classification and the calorific content described in the contract, Norager opined that ASTM would categorise the coal either as sub-bituminous or bituminous.
[83] Norager explained that the loss of calorific value in coal is linked to the oxidation and weathering of the coal. Low rank coal was more prone to weathering and oxidation than high rank coal. Norager cited as an example that higher rank coal such as anthracite and bituminous coal would lose about 1% per year in calorific value during stockpiling as compared with sub-bituminous and lignite coals. Sub-bituminous coal was more prone to losing calorific value during storage than bituminous coal. Given that the loss of calorific value in coal was substantial in this case, Norager proceeded on the basis that the contracted coal was sub-bituminous. In this case, he found that:
(a) There was 3.5% loss of calorific value after three months storage;
(b) 5.6% loss of calorific value after ten months.
[84] Norager gave his views on the differing calorific values and total moisture content in [24] given by the three inspectors. He noted that all three inspectors used the same method, ie ASTM 5865 to carry out their tests. Norager further noted that the Intertek samples were taken during the discharge of the coal (8-12 May 2010) from the ship. The time interval between the shipment of the coal and the sampling by Intertek was at most 23 days while for Inspectorate it was 35 days. After discharge, the coal was stored at the yard for approximately six weeks (until 1 July 2010).
[85] Accordingly, from the time the coal was loaded (21 April 2010) until 1 July 2010, less than three months had passed. On the basis of the information he had obtained from literature he had consulted, Norager considered that the calorific value of the coal could have decreased by between 0% and 3.5%, at the most, until 1 July 2010. However, according to Intertek’s tests, the loss was 10% whilst Inspectorate’s tests showed a loss of 16%.
[86] As for the change in total moisture content, Norager noted from Sucofindo’s draft surveys (41,150MT) and those of Intertek (41,150/65) that the weight discrepancy was only 0.65MT or 0.0016% of the total weight. Yet, the inspectors’ tests showed great differences in total moisture content as reflected in [24] above. Norager surmised that it must be due to the coal being exposed to water at some stage, which would likely be during the loading operation or after discharge at Karachi.
[87] Norager referred to Prem’s AEIC which exhibited the barge schedules in the loading operations. He noted therefrom that loading stopped at some stages on 12, 19 and 20 April 2010 due to heavy rain. However, he also noted that samples for the total moisture content in Sucofindo’s certificates were collected during the loading of the vessel at the Anchorage. Consequently, any wetting of the coal at the time of loading should be reflected in Sucofindo’s analysis which it was not. Even so, Norager was of the view that the cargo’s exposure to rain whether before or during the loading operation could not account for the vast differences reflected in the three inspectors’ certificates.
[88] The total moisture figures of Intertek and Inspectorate of 26.44% and 24.35% respectively were fairly consistent and they suggested that no wetting took place between the times the two samples were taken at Karachi. However, the two figures approximated 8% more than Sucofindo’s tests, Norager extrapolated the figures and estimated that based on 41,150MT, it meant that for the increase in total moisture content from 18% to 26%, the coal was wet by approximately 4,488m³ of water.
[89] Norager checked the Internet and ascertained therefrom that the average annual rainfall in Karachi showed that May is one of the driest months of the year with almost no rainfall (exhibiting in his AEIC printouts of his searches). That being the case, it was unlikely that the coal came into contact with rain after it was discharged at Karachi.
[90] Based on his reasoning for the total moisture content, Norager opined that the calorific value of the coal should not have been reduced from 6,266 kcal/kg to 5225 kcal/kg while it was at the yard.
[91] On issue (c) at [79], Norager elaborated on his confirmation in [80(c)] that there were inconsistencies between the Sucofindo certificates and the supporting documentation on the total moisture content of the coal.
[92] Norager looked at the samples taken during the loading of the five barges identified in Nonot’s AEIC. The barge analysis results for total moisture content and inherent moisture are as follows:
[93] Using the above figures, Norager was able to calculate the weighted total moisture content of the cargo in the five barges as 19%. This was just 1% above Sucofindo’s figure in [24]. As the loading of the barges had stopped periodically due to heavy rain on certain days (see [87]), Norager did not think the cargo could have dried to any significant degree whilst it was on the barges waiting to be loaded onto the ship. He therefore concluded that either one or more of Sucofindo’s barge analysis reports or the total moisture figure in Sucofindo’s inspection certificate were incorrect.
[94] Norager further noted that the cargo on the fifth barge Ar Razzaq 12 had the lowest total moisture content even though according to the barges’ loading schedule exhibited in Prem’s AEIC, there were at least three stoppages due to heavy rain during the loading of that barge. That meant that the cargo on the Ar Razzaq 12 would have been exposed to more heavy rain rainfall between 4 and 18 April 2010 when it came alongside the ship.
[95] Norager testified that he could not verify that the coal supplied to the plaintiff was of the quantities and had the calorific values described by Lalit and Prem in their respective AEICs. Indeed, because of the significant differences in the calorific values and the total moisture contents between the certificates of Intertek, Inspectorate and Sucofindo, it was unlikely that the coal supplied was what was described in Sucofindo’s certificates.
[97] In the above circumstances, Norager thought it was possible that the cargo loaded on the ship was not the coal that was sampled by Sucofindo at the Sungai Putting jetty.
[98] As for the issue in [80(d)], Norager confirmed that the test methods used by Inspectorate in the analyses of the coal samples as described in Mallik’s AEIC were ASTM standards. Based on the test results of Inspectorate, which were supported by Intertek’s test results, Norager was of the view that the coal from the ship did not meet the contractual specifications for total moisture content and calorific value.
[99] Before I review the evidence that was adduced from Norager in cross-examination, I should state at the outset, that Norager’s credentials showed he is familiar with coal shipments from Indonesia, having attended at coal loading anchorages in South and East Kalimantan. During his visits to those places, Norager had observed some stockpiles by the jetties and he had assessed the coal that was presented for loading at the anchorages. Norager testified he had made recommendations to shipowners and charterers to reject or accept cargoes of coal loaded in barges. He had also given directions to stevedores working at the anchorages to conduct trimming operations in order to reduce the temperature of the coal prior to loading. He had also conducted and overseen the monitoring of coal cargoes during and after the loading on the vessels, to determine the chemical properties of the coal cargoes.
[100] In his second/supplementary report exhibited in his second AEIC filed on 6 May 2013 (“Norager’s second report”), Norager gave his views on the report of the defendants’ expert Gunn (see [44]), which was filed on 10 April 2013, a day after Norager’s first AEIC/report. Essentially, Norager disagreed with the views/opinion of Gunn. I shall elaborate on this later when the court considers Gunn’s testimony.
[101] In cross-examination by Mr Bazul, Norager explained that he had witnessed coal sampling in Indonesia on the instructions of charterers of vessels. He said he was at the anchorages in South and East Kalimantan in 2010 and 2011 for ten days to two weeks respectively.
[102] Norager emphasised that sampling was critical especially if the coal came from different stockpiles as sampling determined the quality of the coal that was being sold. Further, if the samples were not properly taken, the sampling may not be representative of all lots of coal in different stockpiles. Norager had spoken to Majeed who told him 50 samples were taken by Inspectorate from the coal at the yard. Norager said he did not query Majeed why only 50 samples were taken when ASTM standards called for 225 samples. Norager explained that stack sampling from a stockpile had its limitations as, unless there was heavy machinery (which was not the case here as shovels were used), samples could only be taken from the surface or just below the surface of the stack.
[103] I should point out that in his AEIC, Majeed had deposed that samples were taken from the top, middle and bottom layers horizontally from the stockpile. In his report, Gunn had described such sampling as “extremely unsatisfactory and unprofessional” stating the results would not be representative of the cargo. Norager disagreed pointing out that (according to Prem’s evidence which will be dealt with later) the coal in the stockpile would have been mixed four times by the time it reached the yard:
(a) first, when the coal was loaded;
(b) the second time was when the coal was discharged by the ship’s grab at Karachi port;
(c) the third was when the coal was discharged onto the wharf and trucked to the yard; and
(d) the fourth time was when the coal was built into a stockpile at the yard.
It would appear from the defendants/Prem’s subsequent testimony (see below at [111]) that Norager was right on the number of times the coal was mixed or ‘blended’.
[104] The plaintiff’s other expert was Liang Yun (“Liang”) who is a specialist in steam coal/iron ore/nickel and is the general manager of China Packing Corporation and two Chinese companies. Liang has extensive knowledge and experience of the coal trade industry including sourcing of coal and its transportation. Mr Bazul did not cross-examine Liang on her AEIC.
The defendants’ case
[105] I turn now to the evidence that was presented by the defendants, starting with that of Prem (DW5). Despite the pivotal role he played in the contract, Prem is not/was not an employee of any of the defendants. Instead, Prem deposed in his AEIC that he works for an Indonesian company called PT Anugrah Prima Colindo (“APC”), in which the third defendant holds 90% shares. The remaining 10% shares are held by Lalit from whom Prem received his instructions.
[106] Prem supervised and co-ordinated the loading operations of the coal at the Anchorage and liaised with the ship’s agents for the issuance of the bills of lading. Prem’s involvement began even before the coal was loaded as he accompanied Kulkarni and Jayanta to inspect a coal mine in or about February 2010, at Binuang, Banjarmasin. Prem claimed (which Kulkarni denied) that again on Lalit’s instructions, he took Kulkarni (accompanied by Jayanta) to visit coal stockpiles at Binuang on or about 18 March 2010. Prem deposed that four of the six stockpiles that were then inspected were the source of supply for the contract. Earlier, Prem had gone to Banjarmasin on or about 10 March 2010 to coordinate and make the necessary arrangements to load the coal. He arranged for the coal to be moved from the coal mines to the stockpiles at Binuang and from there to the two jetties at Sungai Putting.
[107] Prem stationed a man to record the weights of the coal that was loaded on as well as the number plates of the dumper trucks that transported the coal from the stockpiles to the jetties at Sungai Putting and Batulicin. He himself travelled constantly between the stockpiles and the jetties, to monitor the hauling of the coal by trucks to Binuang and from there to the jetties, in the period 18 March 2010 to 3 April 2010. Prem returned to Banjarmasin on or about 5-6 April 2010 to supervise loading operations at Sungai Putting which began on or about 7 April 2010. His daily routine was to go to the Sungai Putting jetties in the morning to monitor the loading process of the coal onto barges and to the ship in the afternoon. At the jetties, the coal would be taken from the trucks, pushed onto hoppers and then placed on conveyor belts to bring to the barges.
[108] According to Prem, the coal was loaded onto the ship by five barges, four barges at Sungai Putting and one (the AR Razzaaq) at Batulicin. He forwarded to the plaintiff’s Ms Geetha the barge schedule via email on 10 April 2010. Loading of the four barges at Sungai Putting was between 7 and 13 April 2010 while loading of the AR Razzaaq at Batulicin was between 4 and 6 April 2010.
[109] Prem explained that loading of coal onto trucks from a stockpile was done systematically – only after a specified quantity of coal from a stockpile had been loaded entirely onto the truck would loading from the next stockpile commence. That method also ensured that the loaded trucks would arrive at the jetties in sequence.
[110] It was Prem’s evidence that on 3 April 2010, Sucofindo attended at the stockpiles to conduct a pre-shipment analysis of the coal. Subsequently, Sucofindo conducted sampling of the coal between 7 to 13 April 2010 at Sungai Putting as it was being loaded into the barges. However, Sucofindo did not take samples of the coal at Batulicin. Prem deposed that Sucofindo had 2-3 inspectors during the barge loading operations and 5-6 surveyors who worked in shifts to draw samples. Using shovels, Sucofindo’s representatives took samples at 2-3 minute intervals from the conveyor belt with each shovel holding 3kgs of coal. Sucofindo took around 500-800 kgs of samples at the conveyor belt for each barge load of about 8,000MT. The samples were then tested at Sucofindo’s laboratory. Sucofindo’s representatives did further sampling of the coal from the barges while the coal was being loaded onto the ship. Coal samples would be taken from the top, middle and bottom layers of the coal on the barges.
[111] Prem explained that the plaintiff was sold blended coal – the coal came from different stockpiles of different qualities. In this case, the cargo that was shipped to Karachi came from seven stockpiles – six from Binuang and one from Batulicin. The cargo was blended by being mixed manually during the loading operations at the barges. The coal from one stockpile would be loaded onto a barge together with coal from another stockpile; the coal from the two stockpiles would be blended. Further blending took place when the coal was being loaded onto the ship; the coal from each barge would be loaded into different hatches allowing further mixing of the coal from different stockpiles.
[112] Although Prem attended at Sungai Putting to supervise the loading of the coal onto barges, he disclosed it was not possible for him to be present throughout the loading operation because he had to allocate some of his time to supervising loading on the ship which began on 11 April 2010. The barges at Sungai Putting did not complete their loading until 13 April 2010. Prem relied on his staff at Sungai Putting and Batulicin as well as on board the ship to supervise the loading process.
[113] Prem complained that the cranes and ship’s grab worked very slowly and two of the four cranes kept malfunctioning while the other two worked below capacity. It should not have taken more than a day for each barge to offload its coal but the first barge took almost two days to offload its cargo. Consequently, Prem complained to the plaintiff in an email on 11 April 2010.
[114] On 12 April 2010, Prem said he was told by Berkah that another set of surveyors ie from SCCI had boarded the ship and was taking samples. Prem boarded the ship and stopped SCCI’s surveyors from taking samples as he had not received instructions beforehand that they could do so. He then contacted Lalit for instructions. Meanwhile, Awan had stopped the loading of the ship.
[115] On 13 April 2010, Lalit informed Prem that it had been agreed with the plaintiff that representatives of SCCI could remain on board the ship to witness the sampling and loading process but they were not allowed to take samples. Prem was told that Sucofindo would hand over counter samples of the coal to SCCI after the sampling and loading process was completed (which the plaintiff alleged was never done). However, the master of the ship refused to allow loading to resume without confirmation from Awan. As the instructions from Awan to continue loading came on 14 April 2010, loading only resumed on 15 April 2010 and was finally completed on 21 April 2010.
[116] After the ship had sailed, Prem remained behind at Banjarmasin to collect the certificates to be issued by Sucofindo for the cargo. These were the certificates (i) of origin; (ii) of weight; (iii) of sampling and analysis as well as (iv) the draft survey report. The certificates were passed by Sucofindo to Berkah who passed them in turn to Prem. Prem received first the draft bills of lading and then the amended draft bills of lading from Kishore.
[117] Prem claimed he received instructions from Madhuri on 22 April 2010 informing him that the plaintiff wanted the bills of lading to be split into nine of which eight were to be for 5,000MT while the last bill of lading would be for 1,510MT of coal. The defendants obliged and the nine draft bills of lading were issued and sent to the plaintiff via email on 22 April 2010. On 7 May 201 Prem collected the original bills of lading from IDT.
[118] In cross-examination it was established that Prem was not present when Sucofindo did the pre-shipment survey. Neither was he present when Sucofindo’s representatives carried out tests nor did he know what type of samples Sucofindo used in the tests or how the tests were done.
[119] Although Prem did not accompany the loaded barges when they were towed to the ship, he insisted there was no possibility of the barges and their tugs going elsewhere other than the ship because the barges would have their names on the front and back ends of the barges and sometimes on the sides as well. In re-examination, Prem said the journey from the jetties to the ship took not 12 to 15 hours but 24 hours or more.
[120] Prem disagreed with Philip Tay that the defendants could have switched the stockpiles of coal meant for the contract without the plaintiff’s knowledge. He maintained that was not done and if a switch had been made, the plaintiff would have been informed. In any case, a representative from Awan was present when he showed Kulkarni the stockpiles. Further a representative from Awan and from Berkah were on board the ship at all times during the loading operations. However, Prem acknowledged that the plaintiff and Awan would not know if the coal in the stockpiles seen by their representatives was what was loaded onto trucks, taken to the jetties, loaded onto the barges and then on the ship. Neither did Prem know if Sucofindo went to the right stockpiles to carry out the pre-shipment analysis as he was not present; he was only told by Berkah (see [114]). Cross-examination revealed that whatever information Prem had on Sucofindo was not his personal knowledge but largely came from Nonot. Neither did he liaise with Sucofindo, as that was done by Berkah and/or PT Planet.
[121] Prem was unable to explain why one of the five barges loaded coal at Batulicin but he hazarded a guess that the coal loaded there must have come from coal mines at Batulicin. The supplier of the Batulicin coal was also Berkah.
[122] In the course of cross-examination, Prem conceded that he could have been mistaken that there were two visits and there may have been only one visit to view the stockpiles at Binuang as Kulkarni asserted.
[123] Prem had exhibited to his AEIC the report of sampling and analysis of Sucofindo. It was noted therefrom that the analysis only covered 32,000MT of coal, leaving a shortfall of about 8,000MT stipulated under the contract. Prem said the certificate did not cover the coal that was loaded/ shipped at Batulicin.
[124] Cross-examination of Prem also established that the four barges that carried coal to the ship were not covered and the cargo became wet when it rained.
[125] I turn now to Lalit’s testimony. Lalit (described by the third defendant as “his right hand man”) played a crucial role in the contract negotiations and in the defendants’ performance of the contract as he gave instructions to Prem, the first defendant’s man on the ground.
[126] In his AEIC, Lalit (DW4) deposed that he was familiar with the coal trade and assisted the first and second defendants in that regard. He contended that there was no truth in the plaintiff’s allegation of conspiracy and alleged that the allegation was an afterthought by the plaintiff for the purpose of obtaining an injunction to prevent the defendants from receiving payment under the L/C. He maintained that the first and second defendants were separate legal entities in their own right and there was no conspiracy on their part to commit fraud on the plaintiff with the third defendant. If indeed the defendants intended to defraud the plaintiff, they would not have taken the trouble to negotiate the contract and would simply have signed any contract put forward by the plaintiff. Neither would the first defendant have reduced the contract price by US$68,668.68 from US$2,730,660 to US$2,661,991.32 on account of the findings by Sucofindo, that the coal differed from the contract specifications.
[127] Lalit disclosed that if the contract had been performed and everything had gone smoothly, the first defendant would only have made a small profit of 1.83%. If indeed the first defendant was a fraudster as the plaintiff alleged, it would have simply disappeared after collecting payment under the L/C. Instead, the first defendant returned the money to the negotiating bank.
[128] Lalit denied that he had represented to the plaintiff that the first defendant was a Singapore company – the question of the first defendant’s place of incorporation never arose. Neither did the plaintiff inform the first defendant of the importance it placed on signing the contract with a Singapore based company. He denied that the first defendant’s Singapore address in the contract amounted to a representation and denied all other representations levelled against him by the plaintiff. Lalit contended that he had informed the plaintiff that the first defendant was part of the second defendant’s group of companies and the plaintiff asked no further questions about the first defendant thereafter. He said the plaintiff was in fact desperate to conclude the contract as it had entered into Awan’s contract first and it needed to procure the coal sold thereunder urgently.
[129] Lalit maintained that the coal shipped to Karachi was certified by Sucofindo to be compliant with the contract specifications; Sucofindo’s findings were final and binding under the contract and it was the plaintiff who was in breach of the contract in unlawfully rejecting the coal.
[130] Lalit added that the first defendant was not liable for demurrage as the parties had varied the contract to ship the coal on a “no demurrage no dispatch” basis. In the alternative, Lalit contended that the first defendant was not liable for demurrage because (i) the plaintiff arranged for the ship to arrive earlier than the time given to the first defendant to load; (ii) the plaintiff instructed the ship to stop loading for an extended period and (iii) the plaintiff did not provide efficient and/or functioning cranes as required under the contract.
[131] Lalit disclosed that PT Planet was/is owned by the first defendant and Classic (see [41]). PT Planet and the first defendant have common directors in Dev Sindhu (“Sindhu”), the third defendant, Dalip Nagar and Kuldeep Singh Solanki. However, the ultimate supplier of the coal purchased by the plaintiff was Berkah, an independent third party who was not related to or controlled by any of the defendants. APC (see [105]) had paid on behalf of PT Planet part of the price due to Berkah for the plaintiff’s coal. Lalit holds 10% shares in APC with the remaining 90% being held by the third defendant.
[132] As for demurrage, Lalit disclosed he had met Kulkarni in Singapore and Jakarta at about the time the ship tendered NOR on 22 March 2010 and shortly thereafter. Jayanta was absent from the meeting in Singapore but he was present at the Jakarta meeting. At both meetings, Kulkarni tried to persuade Lalit to accept the NOR but Lalit refused. Lalit told Kulkarni that he needed a minimum of 20 days to load the coal after the L/C was opened as Lalit wanted confirmation that payment for the coal was secured. That was also why the contract (at Art 7.1) provided for the L/C to be opened at least 20 days before the first date of laycan. In order to persuade the first defendant to load earlier, Lalit alleged that Kulkarni offered to have the shipment loaded on a “no demurrage and no dispatch” basis. Only then did Lalit agree he would do his best to load the coal earlier than the contractual requirement. Lalit promptly sent the following email to Geetha on 22 March 2010 at 4.44 pm:
Lalit claimed the plaintiff did not reply to object to his email. Accordingly, he asserted, the defendants were not liable for demurrage. It was only on 22 April 2010 that Lalit received a copy of Geetha’s email to Mahtani enclosing demurrage calculations amounting to US$167,591/- to which he replied immediately to dispute (see [61]).
[133] As to why one out of the five barges were loaded at Batulicin jetty, Lalit explained that it was due to his difficulty in obtaining a jetty slot for the last barge to load at Sungai Putting. He had informed Samir of this fact in his email dated 19 March 2010. It was also because Lalit was unable to load the entire cargo required by the plaintiff from Sungai Putting due to insufficient notice being given by the plaintiff. Hence, he loaded the last barge from Batulicin, with small quantities of high quality coal obtained from Batulicin mines at higher prices. The quality of the coal was evidenced in the barge analysis report of Sucofindo for the coal loaded at Batulicin; it had 6,195 kcal/kg, which was well above the rejection limit of 6,100 kcal/kg set in the contract. Lalit denied the coal from Batulicin was inferior to that from Binuang. In any case, the plaintiff bought blended coal which necessarily meant that the coal supplied would be of varying qualities.
[134] As for the first defendant’s refusal to allow SCCI to do sampling, Lalit pointed out that it was not a contractual requirement; SCCI was only allowed to witness sampling. He noted that Awan’s contract (see [12]) contained the same stipulation regarding SCCI’s role. In any case, SCCI’s findings would have no effect because it was Sucofindo’s findings that bound the parties under Art 4.4 (see [45]) of the contract.
[135] At this juncture, I should point out that Lalit’s interpretation of the plaintiff’s contract with Awan is incorrect - Art 4.6 of Awan’s contract is not identical to Art 4.5 of the contract at [45(e)]. I shall revert to this issue later.
[136] Lalit claimed that he did not instruct Prem to stop SCCI from taking samples of the coal per se – he told Prem to stop SCCI from taking samples of the poor quality coal. He added that in Sucofindo’s pre-shipment analysis commissioned by PT Planet, the results complied with the contract as can be seen from the results below:
If the plaintiff wanted to purchase coal from a single mine, the price would have been much higher than the contract price of US$66 per MT – it would have been almost US$78 per MT at the material time. In any case, it was irrelevant whether the coal was blended or not as it only had to be comply with the contract specifications. Lalit contended that due to the imperfect nature of the blending process, different results could be obtained by different surveyors from the same coal analysed. The only purpose of appointing a second set of surveyors (according to Lalit) was to witness the loading and sampling of the coal to satisfy the plaintiff that the sampling process was proper. If the plaintiff wanted to conduct tests as well, that could only be carried out on the same samples taken by Sucofindo. Lalit claimed that SCCI was given samples for testing. Yet, the plaintiff had not found out if SCCI had analysed the coal and if SCCI did, the plaintiff had not produced the results.

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Gimpex Ltd v Unity Holding Business Ltd and others

Laws this judgment relies on

Grounds of decision

1.2 Loading port: Taboneo Anchorage, South Kalimantan (“the Anchorage”)

1.3 Contract period: Spot

1.4 Shipment terms: FOB

1.5 Partial shipment: Not allowed

1.6 Quantity: 40,000MT (+/-10%) at vessel’s option

The pleadings

The evidence

The plaintiff’s case

(j) …

(k) L/C to call for the following

(l) …

Name and description of vessel or subs

Expected Time of Arrival at lead port

Expected cargo quantity

Demurrage and despatch rate

Age of the vessel

(q) Article 21 – Domicillium

The defendants’ case