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

In Alliance Concrete Singapore Pte Ltd v Sato Kogyo (S) Pte Ltd, the Singapore Court of Appeal addressed whether contracts between Alliance Concrete (ACS), a ready-mixed concrete supplier, and Sato Kogyo (SK), a construction contractor, were frustrated by an Indonesian sand ban. The court, with Andrew Phang Boon Leong JA delivering the judgment, allowed ACS's appeal, finding the contracts were indeed frustrated due to the supervening event of the sand ban, which made performance radically different. The court also found that SK had not proven that ACS had breached the contracts prior to the date of frustration. SK was ordered to pay ACS for RMC supplied, assessed at contract rates up to the date of frustration and on a quantum meruit basis thereafter.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal allowed with costs. Contracts discharged by frustration.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore Court of Appeal case regarding frustration of contract due to an Indonesian sand ban and its impact on ready-mixed concrete supply.

1.7 Decision Date

29 May 2014

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Alliance Concrete Singapore Pte Ltd	Appellant	Corporation	Appeal Allowed	Won	Francis Xavier SC, Muthu Arusu, Winston Kwek Choon Lin, Avinash Pradhan, Istyana Ibrahim, Tng Sheng Rong
Sato Kogyo (S) Pte Ltd	Respondent	Corporation	Appeal Dismissed	Lost	Cavinder Bull SC, Chia Voon Jiet, Colin Liew, Rajaram Vikram Raja

3. Judges

Judge Name	Title	Delivered Judgment
Chao Hick Tin	Justice of the Court of Appeal	No
Andrew Phang Boon Leong	Justice of the Court of Appeal	Yes
V K Rajah	Justice of the Court of Appeal	No

4. Counsels

Counsel Name	Organization
Francis Xavier SC	Rajah & Tann LLP
Muthu Arusu	Rajah & Tann LLP
Winston Kwek Choon Lin	Rajah & Tann LLP
Avinash Pradhan	Rajah & Tann LLP
Istyana Ibrahim	Rajah & Tann LLP
Tng Sheng Rong	Rajah & Tann LLP
Cavinder Bull SC	Drew & Napier LLC
Chia Voon Jiet	Drew & Napier LLC
Colin Liew	Drew & Napier LLC
Rajaram Vikram Raja	Drew & Napier LLC

4. Facts

ACS agreed to supply RMC to SK for three construction projects.
The Indonesian government announced a ban on the export of concreting sand.
The BCA announced sand would be released from its stockpile from 1 February 2007.
ACS's supply of RMC to SK stopped from 25 February 2007 onwards.
SK begun ordering RMC from other RMC suppliers from 27 February 2007.
Both parties contemplated that Indonesian sand would be used in the preparation of RMC by ACS.
SK could have provided ACS with sufficient sand from the BCA Stockpile.

5. Formal Citations

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

6. Timeline

Date	Event
2007-01-01	SK engaged as main contractor for three construction projects.
2007-01-01	ACS agreed to supply RMC to SK for each of the Projects.
2007-01-23	Indonesian government announced a ban on the export of concreting sand.
2007-01-31	BCA announced sand would be released from its stockpile from 1 February 2007.
2007-02-05	Grace period for sand exporters to honour existing sand export contracts ended.
2007-02-25	ACS's supply of RMC to SK stopped.
2007-02-27	SK begun ordering RMC from other RMC suppliers.
2007-03-01	SK ceased all supply of sand to ACS.
2007-03-06	Representatives from both parties had a meeting in an attempt to break the deadlock on new prices for RMC, but no resolution was reached.
2007-03-28	SK wrote to ACS to acknowledge a sand shortfall of 585 tonnes.
2007-04-13	Sand shortfall was made up.
2007-04-19	SK acknowledged ACS’s intention to resume RMC supply.
2007-04-20	ACS sent a quotation to SK, revising the prices of RMC for the Boon Lay Project and the Harbourfront Project.
2007-04-27	SK’s project manager for the Boon Lay Project acknowledged ACS’s intention to resume RMC supply and reiterated that the original contract prices applied.
2007-05-01	SK ordered and received RMC from ACS for the Boon Lay Project throughout the month.
2007-05-08	ACS wrote to SK to inform SK that ACS had not received sand from SK and was drawing on other contractors’ sand to fulfil SK’s RMC orders.
2007-05-16	Representatives from both parties met again. ACS made a proposal for increased RMC prices for all three projects in respect of the months of May to July 2007.
2007-05-29	ACS informed SK that it was temporarily unable to supply RMC to SK for the Boon Lay Project because SK’s credit limit had been exceeded.
2007-06-04	SK sent ACS a proposal which included how the increased costs should be shared and claimed the additional cost of obtaining RMC from alternative suppliers from March 2007 to May 2007.
2007-06-21	ACS replied that it was unable to accept SK’s claim for the additional cost of obtaining RMC from alternative suppliers, and that ACS would commence legal action.
2007-07-27	ACS commenced proceedings against SK for the price or value of RMC supplied and delivered to SK for the Projects.
2013-01-01	High Court decision in [2013] SGHC 127.
2014-05-30	Judgment reserved.

7. Legal Issues

Frustration of Contract
- Outcome: The court held that the contracts were discharged by frustration due to the Indonesian sand ban.
- Category: Substantive
- Sub-Issues:
  - radical change in obligation
  - supervening impossibility
  - unavailability of source
- Related Cases:
  - [1956] AC 696
  - [1981] AC 675
  - [2007] 4 SLR(R) 413
Breach of Contract
- Outcome: The court held that SK had not sufficiently proven that ACS had breached the Contracts prior to the date of frustration.
- Category: Substantive
- Sub-Issues:
  - repudiatory breach
  - failure to deliver
  - renunciation of contract
- Related Cases:
  - [2008] 1 SLR(R) 663
  - [1998] 3 SLR(R) 447

8. Remedies Sought

Damages for breach of contract
Payment for RMC supplied

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
Alliance Concrete Singapore Pte Ltd v Sato Kogyo (S) Pte Ltd	High Court	Yes	[2013] SGHC 127	Singapore	The judgment under appeal.
Davis Contractors Ltd v Fareham Urban District Council	House of Lords	Yes	[1956] AC 696	England and Wales	Cited for the 'radical change in obligation' test for frustration.
National Carriers Ltd v Panalpina (Northern) Ltd	House of Lords	Yes	[1981] AC 675	England and Wales	Cited for restating the test for frustration, focusing on the change in contractual rights and obligations.
Chiang Hong Pte Ltd v Lim Poh Neo (trading as Tai San Plastic Factory)	Court of Appeal	Yes	[1983-1984] SLR(R) 346	Singapore	Cited as a Singapore case accepting the 'radical change in obligation' test.
Glahe International Expo AG v ACS Computer Pte Ltd and another appeal	Court of Appeal	Yes	[1999] 1 SLR(R) 945	Singapore	Cited as a Singapore case accepting the 'radical change in obligation' test.
RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd	Court of Appeal	Yes	[2007] 4 SLR(R) 413	Singapore	Cited as a Singapore case accepting the 'radical change in obligation' test.
Edwinton Commercial Corporation and another v Tsavliris Russ (Worldwide Salvage & Towage) Ltd (The “Sea Angel”)	English Court of Appeal	Yes	[2007] 2 Lloyd’s Rep 517	England and Wales	Cited for articulating the multi-factorial approach to the doctrine of frustration.
Great Peace Shipping Ltd v Tsavliris (International) Ltd	English Court of Appeal	Yes	[2003] QB 679	England and Wales	Cited for the test for the doctrine of common mistake at common law which was based on the test of frustration.
Holcim (Singapore) Pte Ltd v Precise Development Pte Ltd and another application	Court of Appeal	Yes	[2011] 2 SLR 106	Singapore	Cited for the principle that a mere increase in cost per se will not result in a frustrating event, although it might if that increase is astronomical.
Howell v Coupland	English Court of Appeal	Yes	(1876) 1 QBD 258	England and Wales	Cited for the principle that where the source of goods is referred to in the contract, and that source fails, the contract is generally discharged by frustration.
In re Wait	Court of Appeal	Yes	[1927] 1 Ch 606	England and Wales	Cited for explaining Howell as being based on the failure of a condition precedent.
H R and S Sainsbury Ltd v Street	England and Wales	Yes	[1972] 1 WLR 834	England and Wales	Cited for explaining Howell as being based on the failure of a condition precedent.
Blackburn Bobbin Co Ltd v TW Allen & Sons Ltd	English Court of Appeal	Yes	[1918] 2 KB 467	England and Wales	Cited for the principle that where only one party intended for a particular source such that the source is not provided for in the contract, then the contract will not be discharged when that source fails.
Intertradex SA v Lesieur-Tourteaux SARL	English Court of Appeal	Yes	[1978] 2 Lloyd’s Rep 509	England and Wales	Cited for the principle that where only one party intended for a particular source such that the source is not provided for in the contract, then the contract will not be discharged when that source fails.
Re Badische Co Ltd	English High Court	Yes	[1921] 2 Ch 331	England and Wales	Cited as appearing to support the proposition that where both parties contemplated an unspecified source and that source fails, the contract would be discharged.
Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v Wong Bark Chuan David	Court of Appeal	Yes	[2008] 1 SLR(R) 663	Singapore	Cited for a useful summary of the applicable legal principles with respect to when an innocent party can elect to treat itself as discharged from the contract.
San International Pte Ltd (formerly known as San Ho Huat Construction Pte Ltd) v Keppel Engineering Pte Ltd	Court of Appeal	Yes	[1998] 3 SLR(R) 447	Singapore	Cited for the test for renunciation of contract.
NCC International AB v Alliance Concrete Singapore Pte Ltd	High Court	Yes	[2007] SGHC 64	Singapore	Cited for observing that at the relevant time, Indonesia was the primary, if not the sole, source of concreting sand used in Singapore.
NCC International AB v Alliance Concrete Singapore Pte Ltd	Court of Appeal	Yes	[2008] 2 SLR(R) 565	Singapore	Cited for observing that at the relevant time, Indonesia was the primary, if not the sole, source of concreting sand used in Singapore.
Holcim (Singapore) Pte Ltd v Kwan Yong Construction Pte Ltd	High Court	Yes	[2009] 2 SLR(R) 193	Singapore	Cited for stating that all sand used in the building industry had been sourced from Indonesia.
Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd	English Court of Appeal	Yes	[1962] 2 QB 26	England and Wales	Cited as the origin of the 'Hongkong Fir approach' to breach of contract.
Loo Chay Sit v Estate of Loo Chay Loo, deceased	Court of Appeal	Yes	[2010] 1 SLR 286	Singapore	Cited for observations on the concept of 'not proved' in s 3 of the Evidence Act.
Bank Line Ltd v Arthur Capel & Co	House of Lords	Yes	[1919] AC 435	England and Wales	Cited for the principle that the doctrine of frustration only operates without the default of either party.
Joseph Constantine Steamship Line Ltd v Imperial Smelting Corp Ltd	House of Lords	Yes	[1942] AC 154	England and Wales	Cited for the principle that the burden of proving self-induced frustration lies on the party who asserts that this is the case.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Evidence Act (Cap 97, 1997 Rev Ed)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Sand Ban
Ready-Mixed Concrete
Frustration
Radical Change in Obligation
BCA Stockpile
Repudiatory Breach
Indonesian Sand

15.2 Keywords

Sand Ban
RMC
Frustration
Construction
Contract

16. Subjects

Contract Law
Construction Law
Frustration of Contract

17. Areas of Law

Contract Law
Frustration of Contract
Building and Construction Law