High Court · Decided 21 December 2010

Super Continental Pte Ltd v Essential Engineering & Construction Pte Ltd

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[2010] SGHC 365Case no. Suit No 458 of 2008

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Grounds of decision

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Judith Prakash J:
Introduction
[1] This action arises out of a contract for the supply and installation of machinery intended to produce ultra high temperature (“UHT”) treated liquid products. The purchaser, the plaintiff in this action, is Super Continental Pte Ltd, a subsidiary of a well known beverage manufacturing company. The defendant, the supplier of the machinery, is Essential Engineering & Construction Pte Ltd, a company which has been in the business of manufacturing, supplying and repairing machinery for processing food products since 1987.
[2] In December 2004, the plaintiff and defendant entered into a contract under which the defendant was to supply, deliver, install and commission at the plaintiff’s premises the following machinery:
The specifications provided that the UHT plant would be able to work at a capacity of 500 litres per hour to produce fresh milk, non-dairy creamer (“NDC”), liquid coffee, liquid sugar and liquid “3-in-1” coffee (collectively, “the products”) in portion cups of 23 grammes per cup. The AFFS machine was to have an output of 18,000 cups per hour. The products were intended for human consumption.
[3] The UHT plant was delivered on 28 July 2005 and the AFFS machine was delivered on 25 November 2005. Upon delivery, they were installed in the plaintiff’s premises but the plaintiff complained that it had constant problems with the system from August 2005 up to September 2007. Various rectification works were undertaken but the plaintiff was not satisfied and alleged that the machines, in particular, the UHT plant, were not fit for the purpose for which they had been supplied. On 11 April 2008, the plaintiff informed the defendant that because of the defendant’s fundamental breach of the contract, it was not bound by the same. This action for rescission and/or damages was started shortly thereafter.
The claim
[4] The first cause of action in the Statement of Claim (Amendment No 4) (“Statement of Claim”) is for breach of contract. The plaintiff’s position is that the contract was not merely for the supply of parts but was a turnkey contract for the design, supply, installation of a system (“the System”) which comprised, inter alia, the UHT plant and the AFFS machine working inter-dependently to produce the products for sale in the course of the plaintiff’s business.
[5] The contract itself, however, contains no language indicating it is a turnkey contract. The plaintiff’s stand is that the nature of the contract was determined by the defendant’s representations. The plaintiff pleaded that Mr KK Lee (“KK Lee”), the managing director of the defendant, represented that the defendant was able to design and assemble a UHT plant for the plaintiff and to set up the entire system for the production of UHT treated milk in portion cups for sale to consumers, and that he had the relevant expertise in turnkey projects in this field. In setting up the System, the defendant would advise the plaintiff on the appropriate machinery, supply such appropriate machinery, install the same and provide the plaintiff with the necessary formulae, packaging material and requisite training. The plaintiff relied on the defendant’s expertise and experience when it accepted the November quotation by its letter of award dated 17 December 2004 (“Letter of Award”). By virtue of the November quotation, the Letter of Award, the drawing submitted by the defendant and the plaintiff’s purchase order dated 20 December 2004, the parties entered into an agreement for a turnkey project in respect of the System.
[6] Secondly, the plaintiff alleged that the defendant was in breach of some of the following express terms of the contract:
[7] Thirdly, the plaintiff alleged that the following terms, implied by law in the contract, had not been complied with:
[8] The Statement of Claim set out in detail the manner in which the defendant had allegedly breached these three components of the contract and the damages that the plaintiff had allegedly sustained by reason thereof. At this stage, I need not repeat or examine these allegations.
[9] Although para 17 of the Statement of Claim asserted that the defendant owed the plaintiff a duty in contract and in tort to use reasonable care, skill, competence and due diligence in designing, supplying and installing the System, the closing submissions did not emphasise any breach of any tortious duty that had been pleaded. The case therefore falls to be decided purely in a contractual context.
[10] In reply, the defendant denied that KK Lee had made representations to the plaintiff that the defendant was able to set up an entire system for the production of UHT-treated milk in portion cups. Further, he had never represented that the defendant would advise, recommend, supply or install the machinery for the System or that the defendant would provide the plaintiff with the formulae, packaging material and requisite training. As far as the defendant was concerned, its responsibility was simply to supply the UHT plant and AFFS machine. The contract was not a turnkey project for the entire system but only a contract for the supply of machines. The defendant also denied the various allegations of breach of contract and defects in the machines supplied. The defendant asserted that any defects observed were due to the failure, refusal or neglect of the plaintiff’s staff to maintain and operate the System properly or to the fact that the cooling tower supplied by the plaintiff was unable to provide an adequate cooling function. The defendant also put in a counterclaim for amounts due under the contract which it averred the plaintiff had not paid.
[11] From the pleadings and the closing submissions, the following broad issues arise:
The nature of the contract
[12] The contract was concluded after a substantial period of negotiation between the parties. The plaintiff had first become interested in producing UHT dairy creamer in portion cups in 2001. At that time, its executive director, Mr Charles Li (“Charles Li”), had discussions on the issue with KK Lee in the course of which they visited a factory in Hong Kong to see how a UHT dairy production system with an AFFS machine worked. Negotiations commenced seriously in July 2004 and from then up to November 2004, the defendant rendered a number of quotations to the plaintiff. The price and the specifications changed somewhat over the months and eventually it was the eighth quotation that was accepted. This was the November quotation and it ran to some 20 pages which contained the descriptions and specifications of the various components of the UHT plant and AFFS machine that were to be supplied, and also basic terms and conditions regarding matters like delivery, warranty, commissioning and acceptance.
[13] The plaintiff’s acceptance of the November quotation was expressed in the Letter of Award and it is worth quoting most of this document. It reads:
[14] It would be observed that the plaintiff had been careful to specify the main particulars of the contract it was awarding to the defendant under sub-paras i), ii) and iii) of the first paragraph of the Letter of Award. Additionally, the plaintiff had detailed other matters which were important to it and had emphasised that the scope of the contract would be according to the November quotation. Nowhere in the Letter of Award did the plaintiff mention the phrase “turnkey project” or indicate that it was relying on the defendant to take care of everything apart from the raw materials and utilities.
[15] The plaintiff, however, contended that it had entered into the contract based on the defendant’s representations that it had the necessary expertise in UHT treatment systems. Charles Li stated in court that the plaintiff’s only concerns during negotiations with the defendant were price and capacity of the System (ie the production rate) and that he eventually chose the defendant rather than other suppliers because the defendant could give the plaintiff “the formula and ... ensure the shelf-life of the product. That was why after comparison I decided to use [the defendant] because ... he was able to give me a turnkey project”.
[16] The plaintiff also emphasised that KK Lee had admitted in court that the defendant was not merely a trading agent who sold the UHT plant to the plaintiff but that the defendant had designed the flow sheet and layout plants showing the arrangement of the System within the plaintiff’s factory. Also, KK Lee had been the person who had derived the flow rate of 500 litres per hour to satisfy the plaintiff’s requirement of 18,000 portion cups per hour. The defendant’s evidence was that the UHT plant and AFFS machine were supplied as a set. The defendant had obtained the components of the UHT plant from various manufacturers and had assembled them. KK Lee had admitted that it had been the defendant’s obligation to prepare a drawing of the layout of the UHT plant and to put the UHT plant and AFFS machine together.
[17] The plaintiff submitted that the defendant’s obligations under the contract covered all aspects of production. KK Lee had agreed in court that it was the defendant’s obligation to ensure satisfactory performance of the UHT plant. The defendant had also agreed to supply the formulae for dairy creamer and was responsible for the sterility of the intended products and a guaranteed shelf-life of six months. Furthermore, as the plaintiff had had no prior experience in UHT treatment systems at the time of contracting with the defendant and had relied entirely on the defendant, it was probable that the plaintiff had entered into a contract on a turnkey basis for an integrated system rather than just a contract for parts.
[18] It is not quite clear to me exactly what the plaintiff hopes to achieve from a finding that the contract was for a “turnkey project”. The express terms of the contract as contained in the November quotation and the Letter of Award are quite detailed and these are supplemented by terms implied by law as I will discuss below. The defendant’s obligations as expressed and implied are fairly extensive and I am not sure how much further it takes the plaintiff to be able to establish that there was a turnkey project. The plaintiff did not define either “turnkey project” or “turnkey contract” and, as far as I am aware, no legal definitions of those terms exist. As one of the defendant’s witnesses testified, the word “turnkey” is open to subjective interpretation and even when parties agree on a turnkey project, the scope of the contractor’s contractual obligations would still depend on the terms of the contract.
[19] In the Statement of Claim, the plaintiff alleged that the defendant was responsible for the failure of the System to produce NDC because the defendant was not only responsible for supplying and installing the UHT plant and AFFS machine, but it was also responsible for the effectiveness of the System as a whole. In contrast, the defendant’s position was that under the contract, the defendant’s only responsibility was to supply, deliver and install individual component parts of the System. Both parties have taken extreme positions. On the one hand, there is nothing in the contract which implies that the defendant is guaranteeing that, whatever the plaintiff may do or put into the System, the resulting product will be satisfactory to the plaintiff. Such an interpretation would be contrary to the express provision of the November quotation to the effect that the defendant does not guarantee the physical properties of the products such as taste and colour. The plaintiff’s witnesses admitted that the formulation of the NDC, the preparation of the raw materials and the proper supply of utilities were all factors that could affect the quality of the NDC produced. The defendant was not responsible for the formulation of the NDC which was the plaintiff’s trade secret and, whilst the defendant agreed to recommend certain suppliers and give a recommendation for the formulation of dairy creamer, the plaintiff did not always follow the defendant’s recommendation and the defendant could not force the plaintiff to do so.
[20] On the other hand, I agree with the plaintiff that the defendant had undertaken an obligation to supply a system rather than simply components. The defendant denied designing the System and averred that a drawing that it supplied to the plaintiff was not the design of the System but was only intended to illustrate generally how the UHT plant and AFFS machine would have to fit in with the other key component of the System. This stand, however, was contradicted by testimony given by KK Lee and his project manager, Ms Maznah Ismawi (as summarised in [16] above). The defendant’s responsibility for supplying a system was clear from the context of the contract, the specific obligations undertaken by the defendant as set out in the contract and the evidence, including KK Lee’s admissions in court. Therefore, generally, the defendant’s responsibility extended to ensuring that the System worked in that the components supplied by the defendant were suitable in design and manufacture to perform together to produce the products in the manner intended by the contract. Exactly how the System was intended to perform is something that must be established from the express terms of the contract as supplemented by the implied terms.
[21] At this stage, I should also say that the express terms of the contract are in my judgment contained in the November quotation and the Letter of Award only. The plaintiff contended that two other documents, a drawing and its own purchase order, also formed part of the contract. The purchase order was only issued after the Letter of Award accepted the November quotation without reference to the terms of the purchase order. Therefore, it cannot be included as a contractual document. As for the drawing, this was something that the defendant supplied to the plaintiff during the negotiations as an indication of the layout of the System but it was not referred to in either the November quotation or the Letter of Award and therefore there is no reason to include it as a contractual document.
What terms are implied into the contract?
[22] In its closing submissions, the plaintiff contended that various provisions of the Sale of Goods Act (Cap 393, 1999 Rev Ed) (“SOGA”) applied to the contract so as to impose legal obligations of fitness for purpose and quality on the defendant. The defendant’s response was that the plaintiff could not rely on s 14(2) and s 14(3) of SOGA because it had not pleaded such reliance. Instead, the plaintiff had pleaded that it was relying on the terms and conditions implied by the Supply of Goods and Services Act 1982 (c 29)(UK), an English statute. The defendant pointed out that only Part I of this statute applied in Singapore, having been enacted as the Supply of Goods Act (Cap 394, 1999 Rev Ed) (“Supply Act”), and that even this part was inapplicable since it does not govern contracts under which a seller transfers property in goods to a buyer for a monetary consideration. The contract between the plaintiff and the defendant was clearly a contract by which the defendant transferred property in equipment and machinery to the plaintiff for a monetary consideration. Therefore, the defendant argued, no terms could be implied into the contract by virtue of either SOGA or the Supply Act.
[23] I agree with the defendant’s contentions in relation to the inapplicability of the Supply Act. The position in regard to SOGA is, however, different. I consider that the plaintiff is entitled to rely on that statute although it did not quote it specifically in the Statement of Claim. It is not necessary for a plaintiff to specifically cite the legal provisions on which he relies as long as he pleads sufficient facts to indicate to the defendant the case that he is making so as to enable the defendant to put forward his defence to that case. In a situation where a plaintiff is relying on obligations imposed by law, it would be a matter of good pleading for him to cite the relevant legal provisions in his Statement of Claim. Failure to do so would not, however, be fatal provided that the pleading sufficiently indicates the nature of his case.
[24] In this case, in para 14 of the Statement of Claim, the plaintiff set out certain terms which it said must be implied into the contract as a matter of law or fact to give the contract business efficacy. I have reproduced these at [7] above. The plaintiff also pleaded in para 6 of the Statement of Claim that the defendant knew or ought to have known that the purpose of producing the products using the System was for the plaintiff to sell the same to retailers in the course of the plaintiff’s business.
[25] Section 14(2) of SOGA provides that where a seller sells goods in the course of a business, there is an implied condition that the goods supplied under the contract are of satisfactory quality. According to s 14(2A), goods are of a satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking into account any description of the goods, the price and all other relevant circumstances. By s 14(2B), the quality of goods includes aspects like fitness for all purposes for which goods of the kind in question are commonly supplied, safety, freedom from minor defects and durability. Further, under s 14(3), where the seller sells goods in the course of a business and the buyer makes known to the seller any particular purpose for which the goods are being bought, there is an implied condition that the goods supplied under that contract are reasonably fit for that purpose. In my judgment, the language used in paras 6 and 14 of the Statement of Claim sufficiently tracked the language of parts of s14 of SOGA as to make it clear to the defendant that although SOGA was not expressly mentioned some of the obligations it imposed were being relied on by the plaintiff. Although the plaintiff also sought in its closing submissions to rely on s 13(1) of SOGA relating to a sale by description, there was no language in the Statement of Claim that indicated such reliance or in what way the goods did not comply with their description. Accordingly, since the plaintiff did not afford the defendant the opportunity to make a defence to a claim that the contract was a contract for the sale of goods by description and the goods did not comply with the description, I will not consider any such claim in this judgment.
[26] I have set out in [7] above the various terms which the plaintiff sought to have implied into the contract, and I will now decide whether these are terms permitted or contemplated by s 14 of SOGA. Some of the terms that the plaintiff sought to imply were actually provided as express terms of the contract and there is no need to imply terms that overlap with the express terms. These included the terms that the System would produce 18,000 cups of the products per hour and that the capacity and performance of the System shall comply with the specifications in the contract. There is no express term stating that the System and its operation shall comply with local laws and regulations but I do not need to consider that as an implied term for two reasons. The first is that there is no allegation that such term if it existed was breached. Secondly, nothing in the SOGA implies such a term.
[27] The plaintiff submitted that the common or usual purpose of the System was to treat raw products using UHT treatment and to have such products aseptically packed into portion cups with the objective of extending the shelf-life of the treated products without the need for refrigeration. Apart from its fitness for the common purpose, the System also had to be fit for the “particular purpose” which was known to the defendant at the time of the sale (see s 14(3) of SOGA). In this connection, the plaintiff submitted, the particular purpose of the UHT plant and AFFS machine was to produce the products with a shelf-life of six months for dairy creamer and NDC, at the rate of 18,000 cups per hour for commercial sale. The products had to be fit for consumption throughout their intended shelf-life.
[28] As the plaintiff emphasised, the defendant by its defence accepted that the contract contained the following implied terms:
Where the defendant disagreed with the plaintiff was in relation to the assertion that the implied terms referred to the System as a whole. As far as the defendant was concerned, it was only willing to accept contractual obligations in respect of the specified machines. Thus, the defendant had no difficulty with the nature of the terms which the plaintiff sought to have implied into the contract. Its only quarrel was regarding the extent of the application of those terms.
[29] Having held that the defendant’s obligations under the contract were in respect of the supply of a system for a particular purpose rather than a provision of individual machines (see [20] above), I agree with the plaintiff that any terms to be implied must relate to the System as a whole and not only to the UHT plant and AFFS machine individually. Therefore, as I see it, the terms that were implied into the contract were the following:
[30] Apart from the physical functioning of the System after it was delivered, there was a great deal of contention regarding whether the System was capable of producing a satisfactory product. In this connection, the defendant pointed out that the implied condition regarding satisfactory quality under s 14(2) of SOGA does not, by virtue of s 14(2C)(a), extend to any matter making the quality of goods unsatisfactory which is specifically drawn to the buyer’s attention before the contract is made. Counsel emphasised that in August 2004, the defendant had informed the plaintiff that although there was a one year shelf-life for the product, the stability of the product and its quality might change over the period. In the November quotation, the defendant also stated it would not be responsible for the physical properties of the NDC. Accordingly, in so far as problems with the physical properties of the NDC formed the plaintiff’s basis for alleging that the UHT plant and the AFFS machine were not of satisfactory quality, the defendant argued that the plaintiff could not rely on s 14(2). The defendant also argued that the plaintiff did not rely on the defendant’s skill or judgment for the formulation of the NDC or for preparing the raw materials for the NDC. The defendant had only provided the machinery and it was not correct for the plaintiff to contend that it had relied on the defendant for the suitability of the ingredients, the manner in which there had been prepared or the suitability of the end product. These are matters that I will consider further in the course of considering the evidence on the alleged breaches of contract.
Alleged breaches and alleged defects
[31] The plaintiff complained that it experienced constant problems with the System from August 2005 to September 2007.
[32] Its first complaint was that both the UHT plant and the AFFS machine were delivered late. The UHT plant was delivered around 28 July 2005 when it should have been delivered by the end of May. Similarly, the AFFS machine came in November 2005 when, contractually, it was due in mid June 2005. The defendant did not accept that the delay was its fault but asserted that it arose from the delay on the plaintiff’s part to be ready to receive the machines. There is, however, no need for me to go into these allegations because, as the defendant also pointed out, the plaintiff did not show how it had suffered loss or damage as a result of the delay in delivery.
[33] The major complaint was that the plaintiff was unable to operate the System on a full time basis from August 2005 to September 2007 because of numerous problems that continually plagued the UHT plant and the AFFS machine. The plaintiff set out a list of the defects in Schedule B of the Statement of Claim (“Schedule B”). This list ran to some four pages of defects which the plaintiff had detected and informed the defendant about during the period in question. To give an example of these defects, between 26 August 2005 and 29 August 2005, the plaintiff informed the defendant that it had experienced certain electrical faults in the System; on 16 November 2005, the plaintiff informed the defendant that there were unusual noises when it operated the aseptic homogeniser; on 27 June 2006, the plaintiff informed the defendant of leaks from the rotating shaft of Product Pump 2, and on 15 August 2007, the plaintiff repeatedly informed the defendant about cooling problems in the System. It can be seen that the complaints varied from minor operational and mechanical matters, to serious seeming defects. The plaintiff in its closing submissions did not deal with all the defects set out in Schedule B but highlighted only some of them. The defendant sought to answer the highlighted defects, though it did also assert that the other defects were operational matters that were ironed out in the course of the period in question. I, too, will focus in this judgment on the major allegations as I am satisfied that most of the more minor complaints were sorted out over the period in question.
[34] The plaintiff asserted that whenever the System underwent testing by the defendant, different parts of the UHT plant and AFFS machine would break down or mal-function necessitating repairs. In July 2007, the plaintiff attempted to produce NDC for commercial sale during a trial run (“July trial run”) that operated on a full-time basis ie one shift a day, five days a week. The result of the July trial run confirmed that the UHT plant and AFFS machine were unable to produce NDC in portion cups that could be sold commercially. The defendant did not resolve the problems that arose during the July trial run and thereafter the plaintiff stopped attempts at production. In the plaintiff’s opinion, it did not derive any benefit from the System throughout the two years that it attempted to operate it. There was a total failure of consideration and the implied terms had been breached as the System was not of satisfactory quality due to the frequent breakdowns and lack of durability. Not only was the System unfit for the particular purpose for which the plaintiff required it, but it was also unfit for the common purposes of such a system.
[35] To a large extent the plaintiff, in seeking to justify its complaints about the System, relied on observations and evidence arising out of the July trial run. It did not place as much reliance on problems in the System observed before then. The defendant, however, sought to show that the System functioned properly after installation and that the plaintiff’s complaints could not be ascribed to matters for which the defendant was responsible. Before I deal with the plaintiff’s main complaints, I should assess the strength of the defendant’s assertions.
Was the UHT plant successfully commissioned in January 2006?
[36] The portions of the contract relating to commissioning and acceptance are set out in Sections II and III of the November quotation. The relevant paragraphs of Section II are:
[37] The relevant paragraphs of Section III are:
[38] The defendant asserted that the UHT plant was successfully commissioned in January 2006 when three trial runs with product were carried out in co-operation with the plaintiff and a representative of the supplier of the AFFS machine. The trial runs were done on 20, 23 and 26 January 2006 with the intention of producing three batches of product and taking samples of the same for testing. Samples were in fact taken from the first two batches and handed to the plaintiff to send the same for micro-biological testing as shown from an e-mail sent by the defendant to the plaintiff on 24 January 2006. The defendant also declared its intention to take similar samples from the third batch. The plaintiff had not shown that no such samples were taken from the third batch.
[39] KK Lee had testified that these samples taken in January 2006 passed all the tests for smell, taste and sterility. It was notable that the plaintiff had not produced any evidence showing that the samples had failed the tests. There were no test results showing that more than 0.1 percent of the product had spoiled and therefore the UHT plant had to be considered satisfactory. The defendant emphasised that the plaintiff had not produced evidence to substantiate any allegation that in January 2006, the UHT plant was unsatisfactory. Further, on 6 March 2006, Tay Chiew Teck (“Mr Tay”), the plaintiff’s research and development manager, had signed the defendant’s Final Acceptance Testing/Equipment form (“Acceptance form”) for the UHT plant. This form clearly stated that:
(a) the defendant had completed and tested the UHT plant from 12 January 2006 to 26 January 2006;
(b) the defendant had imparted operation methods to the plaintiff’s designated officer, Mr Tay; and
(c) the warranty would take effect from 6 March 2006 with a duration of 12 months for mechanical parts and six months for electrical parts, but excluding damage caused by wear and tear, misuse and abuse.
[40] The plaintiff, on the other hand, argued that the commissioning of the UHT plant had not been successfully completed because:
(a) the condition in the contract that, during the commissioning period, the UHT plant was to be operated by the plaintiff’s operators under the supervision of the commissioning engineer had not been complied with;
(b) Mr Tay had testified that he had signed the Acceptance form solely to acknowledge receipt of the instruction manual for the UHT plant;
(c) the criteria for the commissioning, trial and acceptance test set out in Section (III) of the November quotation were not reflected in the Acceptance form;
(d) the plaintiff’s personnel were not trained to operate the System in January 2006;
(e) the micro-biological test was only conducted in August 2006; and
(f) there was no acceptance of the UHT plant because it was fraught with defects from the time it was installed until the plaintiff stopped attempting production in September 2007.
[41] Dealing with the last point raised by the plaintiff, the fact that the plaintiff may have experienced many difficulties after Mr Tay signed the Acceptance form does not mean that the UHT plant was not successfully commissioned. It may have had defects which only manifested themselves during continuing operations after the commissioning. Therefore, a successful commissioning would not by itself mean that the plaintiff’s complaints had no substance.
[42] I am satisfied on the evidence that on a balance of probabilities, the UHT plant was commissioned in January 2006 or if not then, then by 6 March 2006 when Mr Tay signed the Acceptance form. During re-examination, Mr Tay sought to explain why his signing of the Acceptance form should not be treated as an admission that the UHT plant had been successfully commissioned. I do not accept his explanations. First, he said that the three batches of product were not run and the samples were not taken. This was contrary to the defendant’s e-mail showing that at least two samples had been taken and the third would be taken on completion of the third run. Further, Mr Tay could have refused to sign the Acceptance form for this reason or could have noted the failure on the form. As for the fact that there were no test results showing that the product met the required standards, the contemporaneous documentary evidence indicated that it was the plaintiff who had to send the product for testing. Since the plaintiff did not produce the test results, I infer that the tests results were satisfactory. There was also KK Lee’s unchallenged evidence that the product looked, smelled and tasted good.
[43] The evidence showed that contrary to the plaintiff’s allegation that there could not have been a commissioning/acceptance trial in January 2006 because the plaintiff’s operators were only employed in February 2006, there were at least two persons in the plaintiff’s employ in January 2006 who were trained by the defendant to operate the machines. These were Mr Tay and a Burmese employee, Zaw Myo. The defendant also asserted that there was another employee of the plaintiff who was trained to operate the machines. Mr Zaw testified that both he and Mr Tay had operated the UHT plant in January 2006. They were supervised by Mr Huang Zhiliang who was employed as a project engineer by the defendant. He had been sent to Italy with Mr Tay for training by the manufacturers of the AFFS machine. Mr Huang’s unchallenged testimony was that from 3 January 2006 to 26 January 2006 he had supervised the commissioning trial of the UHT plant and that it had been operated by the plaintiff’s personnel during this time.
[44] In the Acceptance form, Mr Tay specifically agreed that the defendant had imparted the operation methods to him as the plaintiff’s designated person. Mr Tay is a food science graduate from Cornell University and thus fully capable of reading and understanding the contents of the Acceptance form. It is apparent from the wording of this form that it does not refer only to the receipt of instruction manuals but to the completion and testing of the UHT plant and buffer tank and aseptic tank. The form acknowledges that the same had been formally handed over by the defendant to Mr Tay, the plaintiff’s representative. Mr Tay confirmed that he read the form carefully. He must therefore have understood the nature of the form. I cannot accept his evidence that he did not understand its significance. He signed the Acceptance form without reservation or qualification though he admitted in court that he could have qualified the form had he wished to.
[45] It is also relevant that Schedule B does not contain particulars of any alleged defects noted between January 2006 and March 2006. No evidence has been produced by the plaintiff of any serious complaints made in respect of the UHT plant during this period. Mr Zaw’s affidavit mentions complaints made in September 2005 (before the commissioning and acceptance tests were carried out) but does not specifically describe problems that were noticed with the UHT plant during the two months from January to March 2006. In all I am satisfied that the commissioning of the UHT plant took place at the latest on 6 March 2006 when the Acceptance form was signed.
Problems with the System from August 2005 to September 2007
[46] The plaintiff complained that it was unable to operate the System on a full-time basis from August 2005 to September 2007 because of numerous problems that continually plagued the UHT plant and AFFS machine. In view of my finding that the UHT plant was commissioned and accepted in March 2006, the period to be considered must start in April 2006 and not in August 2005.
[47] The plaintiff stressed that it continually encountered problems with one of the pumps which it referred to as Product Pump 2. It complained:
(a) on 19 May 2006, the shaft of Product Pump 2 broke and the next day, the defendant took the pump back for repairs. The plaintiff’s operations were at a standstill for the next few days until repairs were effected;
(b) on 27 June 2006, the rotating shaft of Product Pump 2 leaked and this leak was still evident in July 2006 when the defendant tested the System. The defendant had to take the pump back for repairs again and in so doing, disrupted operations once more;
(c) on 21 December 2006, the plaintiff discovered that the rotor in Product Pump 2 was damaged;
(d) on 24 January 2007, the defendant affixed a safety valve onto Product Pump 2 and subsequently the plaintiff observed that the safety valve leaked constantly and the System was unable to attain the contracted flow rate of 500 litres per hour;
(e) on 30 March 2007, the shaft complement of Product Pump 2 broke; and
(f) on 13 June 2007, the defendant replaced Product Pump 2 with a new pump (referred to as Product Pump 3).
[48] The defendant did not consider the problems with Product Pump 2 to be as serious as the plaintiff claimed. Product Pump 2 was covered under a 12-month warranty which commenced on 6 March 2006 and during the duration of the warranty period, the defendant took reasonable steps to repair Product Pump 2. However, the defendant was aware that its efforts to repair Product Pump 2 had not been entirely successful and had replaced it with Product Pump 3 free of charge even after the warranty period expired.
[49] The defendant would like me to consider the problems with Product Pump 2 as teething problems which were satisfactorily dealt with. However, since the defendant saw fit to replace Product Pump 2 free of charge even after the warranty period had expired, it would seem that the defendant had acknowledged that that Product Pump 2 was not a satisfactory component of the System. The difficulties with Product Pump 2 illustrated some problems that the plaintiff had in operating the System during the first year after commissioning of the UHT plant. Given that that pump was replaced, the plaintiff could not rely on those difficulties to justify its wholesale repudiation of the System. In its submissions therefore, it concentrated on problems observed during the July trial run which took place after Product Pump 3 had been installed and also highlighted its concerns about the suitability of Product Pump 3.
Gelation of dairy creamer and NDC
[50] It was common ground that the products of the System were to have a shelf-life of at least six months. The plaintiff’s complaint was that the products produced during the July trial run did not meet this requirement. It should be noted that although the plaintiff complained about the condition of two types of products, the only product that was processed in the System during the July trial run was NDC. Dairy creamer had been processed previously but was not produced during the July trial run. Further, the name NDC is somewhat misleading in that the ingredients of NDC as produced by the plaintiff include milk proteins.
[51] The plaintiff emphasised the evidence showing that its systematic shelf-life tests showed that NDC in properly sealed portion cups showed signs of spoilage as early as the second week after production. Tests were carried out by mixing the NDC with coffee on 14 August 2007, 18 September 2007 and 2 October 2007. On the first test date, a little bit of fine free fat was seen in the coffee, on the second test date, fine free fat and a few white flakes were seen in the coffee and on the third date (some nine weeks after production), the NDC had gelled. KK Lee agreed in court that he had no reason to doubt the truth of the shelf-life test reports. The plaintiff complained that it was unable to sell any of the NDC produced during the July trial run because the same had gelled. This result defeated the purpose of the System. The question that arises is as to the cause of this gelation.
[52] The plaintiff’s position is that the NDC and the dairy creamer produced by the System gelled because of the extremely long holding time of the UHT plant. The way that the UHT plant operates is that first the liquid to be processed is heated in the Tubular Heat Exchanger to a sterilisation temperature of 140ºC. It then flows from a valve called valve VII through a connecting tube into an insulated tube called the Holding Tube. The purpose of the insulation is to maintain the temperature of the liquid in the Holding Tube at a stable level. From the Holding Tube, the liquid flows through another connecting tube into a component called the Sterile Cooler where it should be cooled to about 30ºC to 35ºC. The duration of the time that the liquid spends at about sterilisation temperature (ie 140ºC) is called the Holding Time.
[53] The plaintiff emphasised that the specification in the November quotation was “Holding Time: 5 sec” but asserted that the de facto holding time was much longer. The insulated Holding Tube supplied is 6.3 metres long and at a flow rate of 500 litres per hour the heated liquid would remain in the Holding Tube for 17 seconds. This length of time in itself exceeds the intended holding time of five seconds specified in the contract by 12 seconds. The plaintiff, however, contended that it was insufficient to go on the basis of the length of the Holding Tube itself and that the total length of what the plaintiff called “the de facto holding tube” had to be considered. This total length is 9.48 metres and is made up of the length of the Holding Tube added to the lengths of:
It takes approximately 28.3 seconds for the product to pass through “the de facto holding tube”. The plaintiff argued that the longer period of time had to be used because the liquid is held almost consistently at the sterilisation temperature from the time it passes through valve V11 until it gets to the sterile cooler. The plaintiff noted that its expert Mr Allan Jensen (“Mr Jensen”) had stated that the temperature of the liquid from the time it left valve V11 till it reached the end of the insulated Holding Tube was at least 140ºC and that the drop in the temperature of the liquid as it travelled through the connection tube from the insulated Holding Tube to the Sterile Cooler would be insignificant (about 0.5ºC). The plaintiff contended that it was the excessive holding time that the product was subjected to that caused the gelation.
[54] The defendant disputed the plaintiff’s position on two counts. First, it contended that the holding time was only 17 seconds. It noted that Mr Jensen’s initial calculations in his first report (“First Report”) placed the length of the Holding Tube at 6.3 metres and it was only in his supplementary report (“Supplementary Report”) that he changed his position. In the Supplementary Report, Mr Jensen stated that due to the way the pipe work was connected within the UHT plant, the length of the tubes connecting the insulated Holding Tube to the Tubular Heat Exchanger and to the Sterile Cooler had to be factored in as well, making the length of the holding time 28.3 seconds. The defendant submitted that this explanation should not be believed because Mr Jensen had claimed to have prior experience in measuring holding tubes and to have come across holding tubes with connecting tubes. It was therefore highly improbable that, with this knowledge and experience, if the connecting tubes formed part of the Holding Tube, he would have omitted to include the same in his calculations in the first place. Further, he had agreed that once the product passed the temperature sensor at the end of insulated Holding Tube, its temperature would start to drop. The defendant also relied on the evidence of Mr Ho Lai-Ki Tony (“Mr Ho”), another of its experts, who had seen the sensor and who had stated that the correct holding time should be 17 seconds. Mr Ho explained that for a tube to be designated as a Holding Tube, one must have some degree of control over the temperature of the product in it. Accordingly, when the product is in another length of tube where there is no control over the temperature fluctuation, that length is not considered part of the Holding Tube. Therefore, the defendant said the NDC was not held at 140ºC for the entire 28.3 seconds but was kept at this temperature for not more than 17 seconds.
[55] Having considered the arguments and the evidence, I agree with the plaintiff that the essential point to be determined is not so much whether the Holding Tube is 6.3 metres long as contended by the defendant or 9.48 metres long as contended by the plaintiff, but, considering the design of the UHT plant, how long the product which had been heated to 140ºC remained at or about that temperature before it was cooled. Technically, the defendant must be correct and the Holding Tube itself is only 6.3 metres long and the product remains there for only 17 seconds. There is, however, sufficient evidence to satisfy me that the design of the UHT plant is such that once the product had been heated to 140ºC in the Tubular Heat Exchanger it remained at or close to that level for 28.3 seconds whilst it travelled from the Tubular Heat Exchanger to the Sterile Cooler.
[56] The defendant also argued that I should not interpret the contract as requiring a holding time of exactly five seconds. It relied on KK Lee’s evidence that this provision actually referred to a minimum holding time and on the fact that the defendant had all along admitted that the holding time exceeded five seconds. This was because under the contract documents, the UHT plant was supposed to be able to handle other products in addition to NDC. Each product would have its own minimum holding time before it could be properly sterilised. In this connection, Mr Ho who is a project consultant for dairy processes and training and who has had experience designing and handling numerous UHT plants and aseptic fillers, had testified that five seconds is insufficient to properly sterilise liquid sugar and 3-in-1 coffee mix. His evidence was that a holding time of about 15 to 16 seconds was required for these products. The defendant submitted that it would be inconsistent with this requirement for me to interpret the relevant term of the contract as an agreement by the defendant to provide an exact holding time of five seconds when such a specification would impair the overall function of the UHT plant.
[57] The November quotation contained the following relevant specifications of the UHT plant:
It was the defendant’s document and its phraseology was entirely up to the defendant. There was nothing to stop the defendant from specifying that the holding time would be “minimum 5 seconds” if it had chosen to word the quotation in that way. The defendant did not do so and it did not do so for a good technical reason. This is that the length of the holding time determines the length of the Holding Tube. If the defendant had specified a minimum holding time, the manufacturers of the Holding Tube would not have been able to determine its length. Secondly, if the defendant had wanted to ensure that the Holding Tube was long enough to sterilise liquid 3-in-1 coffee and liquid sugar for the requisite 15 to 16 seconds, it would have specified that the holding time was 16 seconds. Specifying five seconds as the minimum holding time would mean that a Holding Tube which was long enough to hold the product for ten seconds would meet the specification but would still be inadequate to sterilise liquid 3-in-l coffee and liquid sugar. I do not accept the defendant’s argument that the holding time was meant to be a minimum of five seconds as such a specification would be technically impossible and also not achieve what the defendant asserted it wanted to achieve.
[58] It is therefore my finding that the defendant was in breach of contract when it provided a UHT plant with a Holding Tube which held the liquid being treated for 17 seconds. It was in further breach of contract because the UHT plant in fact held the product at or close to the sterilisation temperature for a total period of 28.3 seconds instead of for five seconds. The next question is whether this breach caused the products to gel prematurely as contended by the plaintiff.
[59] The defendant disagreed that the long holding time was the most probable cause of the gelation observed in the products from the July trial run. In this connection, it relied on evidence given by Gregory Peter Mergen (“Mr Mergen”). Mr Mergen is the president of a company which designs and supplies dairy and food machinery. He has a degree in food science and 30 years of personal experience in the design and operations of all types of dairy processing systems.
[60] In preparing his expert report, Mr Mergen referred to a text called Dairy Chemistry & Physics by Pieter Walstra & Robert Jenness, published in 1984 (“DCP”). DCP contains a discussion of the gelation of sterilized concentrated milk products and considers that gelation is typically a problem in UHT products. It also states that when milk is held at temperatures above the boiling point, it eventually coagulates, the higher the temperature the sooner. The component of milk that undergoes heat coagulation is a protein called casein.
[61] In his report, Mr Mergen noted that the ingredients of the plaintiff’s NDC were water, vegetable oil, milk protein, stabilizers, emulsifiers, natural milk flavour and beta carotene. A product test indicated that these ingredients resulted in 26% - 28% fat content, 33% - 35% total solids and 2% - 3% milk protein. Mr Mergen assumed the milk protein here to be sodium caseinate. He stated that it is common knowledge within the food industry that, under various conditions, proteins will coagulate. In this case, however, Mr Mergen concluded that the higher than usual fat content (usual fat content being in the region of 3% - 18%) and use of fats that will turn solid easily were considerable factors to explain the product gelation. Secondly, he postulated that the formulation contained an inadequate proportion of stabilisers and this could also have been a cause of gelation. Another contributing factor was that in the UHT process here, insufficient time was allowed for hydration of the casein or sodium caseinate. He concluded that ingredients and formulation procedures and not the mechanical systems were to blame for the defects in the product.
[62] The plaintiff’s expert witness on this point was Professor Zhang Guonong (“Prof Zhang”), an associate professor in the School of Food Science and Technology at Jiangnan University, China. His evidence was that generally the temperature/time combinations used for sterilisation of milk are: 85ºC/15 seconds, 120ºC/15 seconds and 137ºC/4 seconds. He had not previously come across a milk sterilisation temperature/time combination of 140ºC/28 seconds. He was of the opinion that it was because product in the UHT plant was kept at 140ºC for 28 seconds that the product gelled. He gave the following reasons for his opinion:
(a) when a casein solution is heated to more than 140ºC, it starts to coagulate or solidify; and
(b) the heat stability of whey protein is lower than that of casein and it may be completely denatured if it is heated at a temperature exceeding 90ºC for a long time and therefore heating at 140ºC for 28 seconds could be one reason for coagulation.
The relevant paragraph of Prof Zhang’s report (see p 2) stated:
[63] The plaintiff pointed out that Mr Ho did not challenge Prof Zhang’s evidence that casein would start to coagulate when heated to more than 140ºC because he admitted that he did not have the relevant knowledge to do so. Further, during cross-examination, Mr Mergen accepted this piece of Prof Zhang’s evidence as being correct. He was not able to say definitely that the casein would not coagulate if kept at a temperature of 140ºC for 28 seconds. Mr Mergen suggested that casein being only one of the components of NDC, other components may stop or slow the coagulation. On questioning he elaborated that of these ingredients, water would not slow down the coagulation of milk solids but the qualities of the frozen cream added would affect the coagulation. The witness was not able to say, however, whether such frozen cream would accelerate or decelerate the coagulation process. He maintained that stabilisers were added to slow down or stop the coagulation of milk solids but said that he did not know whether they would have this effect when the product was heated to a 140ºC for 28 seconds. Thereafter, he confirmed that he was unable to say whether, under these conditions, any of the other components of the NDC would slow down or stop coagulation of the milk solids in the NDC. During cross-examination, Mr Mergen did not accept that this was the main reason why the NDC produced by the UHT plant coagulated. The furthest he was willing to go was to say that it may be one of the reasons for that result but he had no evidence to say that definitively that it was the only reason. He was, however, willing to agree that at a temperature of 140ºC, casein would coagulate and the higher the temperature rose above 100ºC, the sooner coagulation would take place.
[64] The text cited by Mr Mergen, DCP, states emphatically at p 248 under section 13.5 “When milk is held at temperatures above the boiling point it eventually coagulates, the higher the temperature the sooner”. The following extract from this text is also useful:
[65] The defendant referred to an extract from the Dairy Processing Handbook exhibited and relied on by Mr Allan Jensen, the plaintiff’s dairy engineering expert, which stated that “the major protein in milk, casein, is not affected by heat treatment” and other materials referred to by Mr Ho that stated that casein was relatively unaffected by UHT treatment. These references were to discredit Prof Zhang’s attribution of the gelation to “denaturation” of casein. It seems probable that Prof Zhang was wrong in stating that gelation occurred because the casein was denatured by the high temperature it was exposed to but that does not mean that the process of gelation in the NDC did not result from it being kept at 140ºC for an extended period. The Dairy Processing Handbook states that UHT treatment of proteins and milk causes marginal changes only in their nutritional value. Nutritional value is something separate from gelation.
[66] The same text notes in a section entitled “Production of long life milk” that when long life milk is produced by UHT treatment “the product [is] heated at 135ºC - 150ºC for 4 - 15 seconds followed by aseptic packaging”. That is some indication that a holding time of longer than 15 seconds is not recommended. This inference is also supported by the evidence of Mr Ho. Mr Ho stated in his report that the recommended holding time for dairy products using the UHT plant could range from around 8.56 to 17 seconds. He conceded under cross-examination, however, that he did not know whether dairy creamer would coagulate if held at 140ºC for 17 seconds because he had never come across a UHT plant with this specification. His experience was that when dairy creamer was sterilised at 140ºC, the holding time would be 10 seconds. He also said that based on his experience the most common time/temperature combination for non-dairy creamer would be a temperature range of between 137ºC and 142ºC and a holding time range of between 4 and 20 seconds. Subsequently, when asked whether he had experience of UHT treatment in the production of non-dairy creamer, Mr Ho said that he had not. He further confirmed that he was not in a position to make a recommendation of a holding time of 17 seconds for non-dairy creamer. The defendant’s other expert, Mr Mergen, said that in relation to dairy creamer he was not qualified to say what temperature and what holding time would cause the defects complained of by the plaintiff. When asked specifically whether he could tell the court, from his experience, if non-dairy creamer would coagulate if heated to 140ºC and held at that temperature for 28 seconds, his response was that he did not know because he had not had the opportunity to run this process and also his research did not specifically cover anything relating to coagulation of a non-dairy creamer.
[67] The plaintiff submitted that the sum total of the defendant’s evidence was that its experts were unable to tell with any degree of certainty what acceptable holding times for the plaintiff’s dairy creamer and NDC would be. The defendant on the other hand submitted that, on a balance, the plaintiff’s experts could not show any significant degradation of the NDC if it was held at 140ºC for 28 seconds.
[68] The alternative explanation given by the defendant was that the gelation was probably caused by the ingredients and/or mixing process used by the plaintiff in preparing the NDC. It noted that the plaintiff’s formula used substantially more fat than the formulae of other manufacturers and pointed to evidence that the role of phosphates as stabilisers in food products was to prevent coalescence of fat droplets and thus reduce the chances of gelation. Both Mr Mergen and Mr Jensen had agreed that the amount of stabiliser used by the plaintiff was on the low side of the recommended amount and the defendant theorised that the effect of there being less phosphate in the mix may have been aggravated due to the high fat content. As for the mixing process, Mr Mergen’s inspection at the plaintiff’s premises revealed that the likwifier (a machine for blending powders into liquids) used by the plaintiff was an inferior model and there was also no de-aerator system. Mr Mergen’s opinion was that this would almost certainly lead to improper homogenisation because air would be incorporated into the NDC. The defendant therefore submitted that both the product formula and the mixing process were not perfect and the plaintiff’s questions to its witnesses had been based on the assumption that a perfect formula perfectly mixed had been found to coagulate after being heated to 140ºC for 28 seconds. The defendant submitted that the plaintiff had to produce evidence that its product formula and mixing process were “perfect” as alleged, and if it was unable to do so, an inference should be drawn that these areas were unfavourable to the plaintiff.
[69] It appears to me that the defendant’s objections about the imperfection of the product and the process do not assist it. Mr Mergen conceded in court that, on the assumption that the product was perfect, the most likely cause of gelation was the holding time of 28 seconds at the temperature of 140ºC. If even a perfect product would gel under those conditions, then the defendant cannot be in a better position to dispute the cause of gelation on the basis that the product was imperfect because of its ingredients or mixing process. As regards the amount of stabiliser, whilst Mr Mergen suggested at one point that there was insufficient stabiliser in the plaintiff’s products, he then agreed that the amount of stabiliser was in the range of that required although on the low side of the recommended amount. He also stated that his calculation leading to the conclusion that the stabiliser was insufficient was a rough calculation based on inadequate information. The defendant also took a contradictory stand in its cross-examination of Mr Tay when it was put to the latter that it was the addition of stabiliser to the product (rather than the addition of an inadequate amount of stabiliser) that caused the gelation. Mr Mergen was not emphatic in his suggestions regarding the inadequacy of stabilisers and, overall, I find the defendant’s evidence inconclusive as to whether the proportion of stabilisers in the NDC caused or contributed to the gelation.
[70] As noted above in [68], Mr Mergen gave various other possible reasons why the NDC could have gelled. These related mainly to the formulation of the product. Although I accept that such matters may theoretically contribute to gelation, I think that the significance of these theories must fade in the light of Mr Mergen’s admission that even if a perfect product would have gelled if it had been subjected to the conditions that the plaintiff’s NDC was subjected to.
[71] In the final analysis, on a consideration of all the evidence, I find that on a balance of probabilities, the holding time of 28 seconds at 140ºC was the cause of the early gelling of the NDC (within nine weeks of production) produced during the July trial run. I also find that if the plaintiff had used dairy creamer or fresh milk, in all probability there would have been a similar result since these products would have contained an equal amount of milk protein if not more than the NDC did.
Is operation of the UHT plant unsafe?
[72] After the defendant replaced Product Pump 2 with Product Pump 3, the plaintiff installed a pressure gauge at the outlet of Product Pump 3. The gauge recorded an operating pressure of 17 to 18 bars immediately after the UHT plant was started and that this pressure thereafter increased to 22 bars. The plaintiff noted that in the defence, the defendant had admitted that the UHT plant had to be operated at a high operating pressure in order to achieve the required flow rate of 500 litres per hour. It was Mr Ho’s evidence that the operating pressure of the UHT plant had to be at least 18 bars to achieve this rate.
[73] The plaintiff submitted that the high operating pressure of the UHT plant coupled with the high temperature of the liquid in it (55ºC before entering the Tubular Heat Exchanger and 140ºC from that component to the Sterile Cooler) created a real risk to persons within the vicinity of the plant. This made the System unstable, hazardous, unsafe and/or unsuitable for normal operations.
Product Pump 3
[74] The plaintiff was concerned about the safe operation of Product Pump 3. It noted that the operating pressure of this pump is about 22 bars. The plaintiff referred to an instructions manual in respect of a type of pump known as “Helicoidal Pump Kiber KS” which states that the maximum operating pressure of this type of pump is 10 bars.
[75] The defendant’s position was that Product Pump 3 was a one-off, custom made pump. The defendant referred to an e-mail that apparently was from the manufacturers of the pump (“Inoxpa”) recommending that it be run without any pressure by-pass apparatus and stating that it was of a completely different design from Product Pump 2. The defendant said that the manual that the plaintiff referred to was a general manual for all of Inoxpa’s standard Kiber KS/KST/KSF Helicoidal Pumps and did not apply to Product Pump 3 because Inoxpa had assured the defendant that this pump could be run at 22 bars without a pressure by-pass apparatus. The defendant also relied on a document from Inoxpa stating that Product Pump 3 is a customised design especially made to the order of the defendant and would be able to operate safely at a pressure of 22 bars. The defendant argued that the plaintiff had not adduced any evidence to show that Product Pump 3 had broken down or would break down. Mr Tay had admitted that during the July trial run Product Pump 3 had not broken down or leaked. He also admitted that he was speculating that the pump might break down or leak if it was run for more than one and half months. While Mr Zaw had maintained that Product Pump 3 had leaked and he had reported this leak to his manager, neither Mr Tay nor the defendant seems to have been notified of the leak so it could not have been a serious matter. Mr Jensen had also admitted that he did not see Product Pump 3 break down and therefore, probably, it could sustain 22 bars. He agreed he had not given the court any evidence that the pump would break under that pressure. Mr Jensen maintained, however, that the inner tubes of the pump had become deformed because of the level of pressure.
[76] The defendant also emphasised the evidence of Mr Mergen that Product Pump 3 is a progressive cavity pump and that the pressure rating of such pumps falls within a standard fixed range. He affirmed that 22 bars would be within that range. Mr Jensen had agreed that he had no knowledge pertaining to the design and specifications of such pumps and that he did not do any comparison between Product Pump 3 and such pumps.
[77] In my opinion, the evidence regarding the capability of Product Pump 3 is inconclusive. On the one hand, the catalogue for the standard Helicoidal pump shows an operating pressure of 10 bars with a by-pass valve. On the other hand, in the absence of any contradictory evidence, I accept the defendant’s evidence that Product Pump 3 was custom-made because of the problems that Product Pump 2 had encountered during the operation of the UHT plant. Thus, the specifications in the catalogue most likely do not apply to Product Pump 3. However, I cannot place any weight on the e-mail from Inoxpa as to the capability of Product Pump 3 since this was hearsay and no one from Inoxpa was called to testify as to the actual capability of Product Pump 3. I am left with the evidence of Mr Mergen on the capability of pumps of the type of Product Pump 3 and the further evidence that during the July trial run when Product Pump 3 was run every day for a month it did not break down and functioned much better that Product Pump 2 had. The plaintiff has the onus of showing that Product Pump 3 is unsafe and, in my judgment, it has not discharged this onus. According to the evidence, since its installation, Product Pump 3 has not broken down or leaked even though it was used continuously during the July trial run. Product Pump 2, which was of a different model (and probably not designed to withstand the same pressures as Product Pump 3), in comparison broke down twice before the UHT plant was commissioned and handed over, twice during the warranty period and one further time after the warranty period had expired. It therefore gave signs of inadequacy very early on. Such signs were not present when Product Pump 3 was operated. In all the circumstances, I cannot infer that, on a balance of probabilities, Product Pump 3 is unsafe.
Joints and valves
[78] Three witnesses for the plaintiff testified that the joints of the UHT plant in the vicinity of the Tubular Heat Exchanger leaked when the System operated during the July trial run. Mr Jensen’s opinion was that such leakage was an early warning sign that the weakest links in the pipe work (ie the joints) were unable to withstand the high operating pressure. He also testified that the inner tubes of the Sterile Cooler had bent due to the high pressure.
[79] The defendant responded by doubting the veracity of this evidence. It pointed out that Mr Tay had admitted that the plaintiff had no documentary evidence of any leaks relating to the Tubular Heat Exchanger. This admission contradicted the allegations of Mr Zaw and Mr Ji De Qiang (another of the plaintiff’s employees) who both operated the UHT plant, that they had submitted reports of the alleged leaks to their supervisor. I agree that the omission of any written record of the leaks and the failure of the plaintiff to make a contemporaneous complaint about the same to the defendant are indications that either no leakage occurred or, if it did, the leaks were minor matters easily attended to by the plaintiff’s operators.
The difficulties with the Tubular Heat Exchanger
[80] The plaintiff’s position was that the operating pressures of between 18 and 22 bars within the UHT plant were very high. Mr Jensen testified that these high operating pressures were due to resistance within the tubes of the Tubular Heat Exchanger which had resulted from the following defects in that component:
(a) small inner diameters of some of the tubes;
(b) the Tubular Heat Exchanger tubes having only one inner tube;
(c) improper welding of the Tubular Heat Exchanger tubes and clamp unions;
(d) non-alignment of the Tubular Heat Exchanger tubes; and/or
(e) gaskets of the wrong size being used. Some gaskets did not conform to the shape of the inner tube openings whilst others were misaligned. This had the effect of reducing the size of the inner tube openings.
The plaintiff contended that any fault, blockage or resistance within the tubes rendered the UHT plant susceptible to damage, leaks and even explosions.
[81] First, regarding the narrow inner tube and single tube design ((a) and (b) in [80] above), the plaintiff cited Mr Ho’s evidence to the effect that the “tube size is dependent on the manufacturer’s design and would have been calculated in accordance with the requirements of the customer”. The plaintiff alleged it was incumbent on the defendant to choose a proper tube size and design for the plaintiff. According to Mr Jensen, using inner tubes with an internal diameter of 10mm, as in this case, would be unacceptable where there are many bends in the tubes and impediments to flow. Further, Mr Ho had testified that in the context of the present case, a multi-tube design would have been better than a single tube design.
[82] In response, the defendant stressed evidence from Mr Ho and Mr Mergen that using inner tubes of a larger size in a UHT plant with a capacity of 500 litres per hour would create problems. According to Mr Mergen, the machine was designed with a 10mm tube because the flow rate was 500 litres per hour. He testified that if the diameter of the inner tube was increased from 10mm to 23mm, then he would not be able to guarantee its performance. He said that it was necessary, as the product was flowing through the tube, that the velocity of the product matched the tube size so that the heat exchange would be continuous and correct. If the tube was too large for the velocity, there would be gaps in the product and it would roll around and hit hot surfaces “and ultimately burn on will occur at these high temperatures”. That was why the engineers had managed the tube size based on the flow rate and velocity.

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Super Continental Pte Ltd v Essential Engineering & Construction Pte Ltd

Grounds of decision

Introduction

The claim

The nature of the contract

What terms are implied into the contract?

Alleged breaches and alleged defects

Was the UHT plant successfully commissioned in January 2006?

Problems with the System from August 2005 to September 2007

Gelation of dairy creamer and NDC

Is operation of the UHT plant unsafe?

Product Pump 3

Joints and valves

The difficulties with the Tubular Heat Exchanger