Alliance Concrete v Sato Kogyo: Sand Ban, Frustration of Contract & RMC Supply

Alliance Concrete Singapore Pte Ltd (“Alliance”), sued Sato Kogyo (S) Pte Ltd (“SK”) in the High Court of Singapore on 5 July 2013, for money due for the supply of ready-mixed concrete (“RMC”). SK disputed the amount owed and counterclaimed for losses incurred when it had to purchase RMC from other suppliers due to Alliance’s alleged failure to supply RMC after the Indonesian authorities announced a ban on the export of sand to Singapore (“the Sand Ban”). Alliance claimed the contracts were frustrated by the Sand Ban. The court held that the Sand Ban did not frustrate the contracts, and Alliance was liable for breach of contract. Damages will be assessed.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Defendant on liability; damages to be assessed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Alliance Concrete sued Sato Kogyo for payment of ready-mixed concrete (RMC). Sato Kogyo counterclaimed for losses due to Alliance's failure to supply RMC after a sand ban. The court found Alliance liable.

1.7 Decision Date

4 July 2013

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Sato Kogyo (S) Pte Ltd	Defendant	Corporation	Counterclaim Allowed	Partial	Tan Kon Yeng Eugene of Drew & Napier LLC Tan Liam Beng of Drew & Napier LLC Soh Chun York of Drew & Napier LLC
Alliance Concrete Singapore Pte Ltd	Plaintiff	Corporation	Claim Dismissed	Lost	Winston Kwek Choon Lin of Rajah & Tann LLP Avinash Pradhan of Rajah & Tann LLP Istyana Ibrahim of Rajah & Tann LLP

3. Judges

Judge Name	Title	Delivered Judgment
Tan Lee Meng	Judge	Yes

4. Counsels

Counsel Name	Organization
Tan Kon Yeng Eugene	Drew & Napier LLC
Tan Liam Beng	Drew & Napier LLC
Soh Chun York	Drew & Napier LLC
Winston Kwek Choon Lin	Rajah & Tann LLP
Avinash Pradhan	Rajah & Tann LLP
Istyana Ibrahim	Rajah & Tann LLP

4. Facts

Alliance and SK entered into three agreements in 2006 for Alliance to supply RMC to SK for three construction projects.
On 23 January 2007, the Indonesian authorities announced a ban on the export of sand to Singapore, effective 5 February 2007.
Alliance informed SK that it would be adjusting the prices of concrete due to the increase in raw material prices.
SK maintained that the contracts remained in force and offered to supply sand from the BCA stockpile to Alliance.
Alliance insisted on new agreements with increased prices for RMC, which SK did not accept.
Alliance stopped supplying RMC to SK in late February 2007.
SK obtained approval for the release of sand from the BCA stockpile but claimed Alliance failed to respond to orders for RMC.

5. Formal Citations

Alliance Concrete Singapore Pte Ltd v Sato Kogyo (S) Pte Ltd, Suit No 465 of 2007, [2013] SGHC 127
Alliance Concrete Singapore Pte Ltd v Sato Kogyo (S) Pte Ltd, Civil Appeal No 82 of 2013, [2014] SGCA 35

6. Timeline

Date	Event
2006-01-01	Alliance agreed to supply RMC to SK pursuant to three separate agreements for three construction projects.
2007-01-23	Indonesian authorities announced a ban on the export of sand to Singapore as from 5 February 2007.
2007-01-24	The Building and Construction Authority of Singapore stated that the impact of the Sand Ban on construction work in Singapore would not be significant.
2007-01-29	Alliance wrote to SK stating that it would be adjusting the prices of concrete due to the sharp prices in raw materials.
2007-01-31	The BCA announced that sand would be released from its stockpile as from 1 February 2007.
2007-02-02	Alliance informed SK that the previously agreed prices of RMC were no longer applicable.
2007-02-05	Sand Ban took effect.
2007-02-09	Alliance sent SK a quotation with new terms for the supply of RMC.
2007-02-16	Alliance informed SK that it was no longer bound by the Contracts.
2007-02-23	SK reiterated its position that the Contracts remained in force and asked Alliance to furnish a proposal for sharing the increased cost of sand.
2007-02-28	Alliance issued a facsimile stating that it would not be able to supply RMC for the NTU project because of an alleged shortage of 20mm granite from Indonesia.
2007-03-06	Alliance insisted that SK accept its new prices for RMC at a meeting.
2007-05-16	The parties met but could not resolve their differences.
2007-05-30	The parties met but could not resolve their differences.
2007-06-04	SK forwarded to Alliance its proposal for sharing the increased cost of sand and a list tabulating its alleged loss.
2007-06-21	Alliance denied any liability to compensate SK.
2007-06-22	Alliance sued SK for failing to pay for RMC already supplied under the Contracts.
2013-07-05	Judgment reserved.
2014-05-30	The appeal to this decision in Civil Appeal No 82 of 2013 was allowed by the Court of Appeal.

7. Legal Issues

Frustration of Contract
- Outcome: The court held that the Sand Ban did not frustrate the contracts because Alliance was still able to perform its obligations, albeit at a higher cost.
- Category: Substantive
- Sub-Issues:
  - Radical alteration of obligations
  - Increased cost of performance
  - Unavailability of essential materials
- Related Cases:
  - [1999] 1 SLR(R) 945
  - [1981] 1 AC 675
  - [1952] 1 AC 166
  - [2007] 2 Lloyd’s Rep 517
Breach of Contract
- Outcome: The court found that Alliance breached the contracts by refusing to supply RMC to SK at the agreed prices, entitling SK to treat the contracts as repudiated and obtain RMC from other sources.
- Category: Substantive
- Sub-Issues:
  - Repudiation of contract
  - Failure to supply
  - Damages for breach
Force Majeure
- Outcome: The court found that the contracts for the NTU and Harbourfront projects did not include force majeure clauses. Even if they did, the clauses were not triggered by the Sand Ban because Alliance did not take sufficient steps to avoid the consequences of the Sand Ban.
- Category: Substantive
- Sub-Issues:
  - Interpretation of force majeure clauses
  - Causation
  - Reasonable steps to avoid consequences
- Related Cases:
  - [2007] 4 SLR(R) 413
  - [2011] 2 SLR 106

8. Remedies Sought

Monetary Damages

9. Cause of Actions

Breach of Contract

10. Practice Areas

Commercial Litigation
Construction Law

11. Industries

Construction

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Glahe International Expo AG v ACS Computer Pte Ltd	Court of Appeal	Yes	[1999] 1 SLR(R) 945	Singapore	Cited for the principle that a contract is frustrated when a supervening event fundamentally alters the nature of the parties’ obligations.
National Carriers Ltd v Panalpina (Northern) Ltd	N/A	Yes	[1981] 1 AC 675	England and Wales	Cited for the principle that frustration occurs when an event significantly changes the nature of contractual rights and obligations, making it unjust to hold parties to the original terms.
British Movietonews v London and District Cinemas	N/A	Yes	[1952] 1 AC 166	England and Wales	Cited for the principle that increased costs of performing contractual obligations do not, without more, frustrate a contract.
Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage & Towage) Ltd (The Sea Angel)	N/A	Yes	[2007] 2 Lloyd’s Rep 517	N/A	Cited for the multi-factorial approach to the doctrine of frustration, considering the terms of the contract, context, parties' knowledge, and the nature of the supervening event.
Holcim (Singapore) Pte Ltd v Kwan Yong Construction Pte Ltd	High Court	Yes	[2009] 2 SLR(R) 193	Singapore	Cited to distinguish the present case, noting that in Kwan Yong, the contractor refused to assist the RMC manufacturer in applying for sand from the BCA stockpile.
Holcim (Singapore) Pte Ltd v Precise Development Pte Ltd and another application	Court of Appeal	Yes	[2011] 2 SLR 106	Singapore	Cited to distinguish the present case, noting that the Court of Appeal in Precise (CA) rested on its finding that it was impossible for the supplier to meet orders exceeding 100m3 of RMC within two days after the order had been placed, as required by the contract.
Precise Development Pte Ltd v Holcim (Singapore) Pte Ltd	High Court	Yes	[2010] 1 SLR 1083	Singapore	Cited to distinguish the present case, noting that the RMC supplier based its defence on a force majeure clause and did not plead frustration.
RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd and another appeal	Court of Appeal	Yes	[2007] 4 SLR(R) 413	Singapore	Cited for the explanation of the difference between the application of the doctrine of frustration and force majeure clauses.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

Ready-mixed concrete
Sand Ban
Force majeure
Frustration
BCA stockpile
Cost-sharing arrangement
Repudiation
Raw material shortages

15.2 Keywords

Sand Ban
Ready-mixed concrete
RMC
Frustration of contract
Force majeure
Construction
Singapore
Breach of contract

17. Areas of Law

Area Name	Relevance Score
Breach of Contract	90
Contract Law	85
Frustration	75
Force Majeure	70
Sand Ban	60
Ready-Mixed Concrete (RMC)	55
Construction Law	50
Commercial Disputes	40
Company Law	30
Evidence	25

16. Subjects

Contract Law
Construction Law
Supply Agreements