Odebrecht Oil & Gas Services Ltd v. North Sea Production Co Ltd and another
(Republic of Singapore) High Court, Lee Seui Kin
JC, February 20, 1998.
Contractual provisions for interim expert determination - requirements for a valid notice initiating procedure - whether matters determined by the expert could be referred back to him for reconsideration.
Facts:
The claimant ("Odebrecht") contracted with the first defendant ("NSPCL") for the conversion of a motor tanker into a storage facility ("the conversion contract"). A performance bond was issued by the second defendant ("New Hampshire") as guarantor in favour of NSPCL as employer, with Odebrecht as contractor. The bond included, in clause 2(1), a requirement for the employer to give notice of any breach to the contractor and the guarantor, specifying the nature of the breach and its estimate of the amount of damages arising therefrom. Clauses 2(b) and 2(c) of the bond provided for disagreements arising out of such a notice to be provisionally determined by an expert. Clause 2(d) provided that the expert could revise his assessment of damages in respect of a particular breach or alleged breach.
Disputes arose under the conversion contract between Odebrecht and NSPCL. By letter dated 12th December 1992, expressed to be pursuant to clause 2(a) of the bond NSPCL notified Odebrecht about these disputes and gave an estimate of its damages. NSPCL also stated that it wished to protect its position under the bond by giving notice to New Hampshire. NSPCL issued a further notice of breaches of the conversion contract to Odebrecht by letter dated 1st April 1997.
Following a period of suspension, the expert procedures in the bond were initiated. The expert ordered the exchange of submissions. NSPCL, in its submission, summarised its claim for damages. Odebrecht included in its submission a number of counterclaims against NSPCL. The expert subsequently gave his determination concluding that, because Odebrecht's entitlements extinguished those of NSPCL, no damages were payable to
NSPCL.
By letter dated 6th July 1998 to Odebrecht and New Hampshire, NSPCL purported to give notice of further breaches of the conversion contract, under clause 2(a) of the bond. Both Odebrecht and New Hampshire disputed the validity of this letter as a valid notice under clause 2(a) of the bond on the grounds that it was insufficiently specific and included matters that had been previously determined by the expert.
The matter came before the court on an Originating Summons, the questions for consideration being whether the 6th July 1998 notice was valid and whether NSPCL was entitled to serve a notice under clause 2(a) in respect of alleged breaches of contact or damages which had already been the subject of a reference to expert determination under clause 2(a).
Held:
The letter of the 6th July 1998 was a sufficient notice for the purpose of clause 2(a) of the bond. In order to allow the procedure in clause 2 to begin, all that was required was a general description of the nature of the alleged breaches. To require more than this would mean that it would always be possible to emasculate the clause 2 machinery by challenging the sufficiency of the information provided. The estimate of damages provided by that letter was also sufficient, the mere fact that the estimate might be shown to be flawed did not prevent it being an estimate for the purpose of that clause.
As to the question of whether a notice could be served under clause 2(a) in respect of allegations that had already been the subject of a decision by an expert pursuant to clause 2(b), this had to be determined by reference to the ordinary principles of construction of
contract and/or the implication of terms. No issues of general law or questions of res judicata or abuse of process arose. On construction of clause 2(d) it was clear that a revision of findings on issues of liability was not allowed, but that issues of damages could be reconsidered by the expert.
For the claimant: Mr J Blackburn QC and Mr R Planterose (instructed by Messrs Fenwick
Elliott).
For the first defendant: Mr Streatfield-James (instructed by Messrs Masons).
For the second defendant: Mr Wilmot-Smith QC (instructed by Messrs Halliwell Landau).
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