Man B&W SEAsia v. PT Bumi CofA

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DMC/SandT/04/27
MAN B & W S E Asia Pte Ltd and Another v 
PT Bumi International Tankers
Singapore Court of Appeal: Yong Pung How CJ, Chao Hick
Tin JA, Tan Lee Meng J:[2004] SGHC 8: 9 March 2004
Donaldson & Burkinshaw for Man B&W and Mirrlees
Blackstone Ltd
Rajah & Tann for PT Bumi
NEGLIGENCE: WHETHER SUPPLIER AND 
MANUFACTURER OF ENGINE TO A NEWBUILDING OWED DUTY OF CARE TO SHIPOWNER: WHETHER SHIPOWNER CAN RECOVER FOR PURE ECONOMIC LOSS
Summary
In this decision, the Court of Appeal, overruling the judgment at first instance, held that PT Bumi could not sue in tort an engine manufacturer and its Singaporean supplier for pure economic loss that it suffered as a consequence of defects in the engine. There was no contract between PT 
Bumi and the defendants. The Court of Appeal held that neither manufacturer nor supplier owed a duty of care to PT Bumi. In reaching its decision, the Court attached importance to the limited recourse that PT Bumi had been content to accept under its contract with the shipbuilder. The
Court said that the correct approach was not to ask whether there was any justification for depriving PT Bumi of a remedy or whether the contract had deprived PT Bumi of its right to 
sue the sub-contractors, but whether there were any compelling reasons to extend the law and afford a separate remedy to PT Bumi. It was not for the court to help a party, after the event, to improve his commercial bargain.

DMC Category Rating: Developed

This Case Note was contributed by Ang & Partners, the Website’s International Contributors for Singapore

Facts
In fulfillment of a long-term charter contract with Pertamina, PT Bumi entered into a shipbuilding contract with Malaysian Shipyard and Engineering Sdn Bhd ("MSE"). After meetings and negotiations between PT Bumi, MSE and Man B&W, PT Bumi instructed MSE to accept Man B&W’s tender to supply the engine. Man B&W were suppliers for engines manufactured by their UK parent company, Mirrlees Blackstone.

PT Bumi contracted only with MSE. The contract provided that MSE would assume responsibility for the work and the design of heir sub-contractors, and MSE gave a limited guarantee for parts and equipment.

The engine encountered problems during sea trials and continued to give problems after delivery until it finally broke down. The essel was laid up after that. PT Bumi suffered pure economic loss, including loss of hire and the costs of replacing the engine. PT Bumi sued Man B&W and Mirrlees Blackstone in negligence, alleging 
breach of a duty of care to provide an engine that would be suitably manufactured and free from defect, built for the safe and proper operation of the vessel.

At first instance, the judge found in favour of PT Bumi. Man B&W and Mirrlees Blackstone appealed.

Judgment
The Court of Appeal allowed the appeal.

1. In RSP Architects v Ocean Front [1996] 1 SLR 113, the Court of Appeal held that the developer of a condominium was liable in tort for pure economic losses suffered by the management corporation of the development. It adopted the two-step test advanced by Lord Wilberforce in Anns v Merton London Borough Council [1978] AC 728. The first step was to determine whether there existed a degree of proximity that would give rise to a duty of care and to determine the scope of that duty. The second step was, having found such a degree of proximity, to consider whether there was any material factor or policy which precluded such a duty from arising.

2. It was important to bear in mind that the court had been at pains in Ocean Front to explain the special position of the management corporation, which was in fact the creation of the developers. It was in this very special factual matrix that the court came to the view that a remedy in tort should be made available to the management corporation, which would otherwise have been without a remedy.

3. Extreme caution had to be exercised in extending the Donoghue principle (that a person who appreciates that his careless act or omission may cause physical injury to others, owes a duty to those people to exercise reasonable care to avoid such careless act or omission) or the decision in Ocean Front to new situations, particularly to a scenario which is essentially contractual. Foreseeability of harm does not automatically lead to a duty of care. Ocean Front should be treated as a special case in the context of the statutory scheme of things under the Strata Act* or at least be confined to defects in buildings.

4. It was unnecessary to make a general pronouncement that the Donoghue principle should not be extended at all to a claim for economic loss in respect of chattels because, in the light of special circumstances here, Man B&W and Mirrlees could not have owed a duty of care to PT Bumi.

5. Though Man B&W and Mirrlees supplied the engine, PT Bumi made MSE solely responsible under the contract for any defect that could arise. Under the contract, PT Bumi had bargained for a limited warranty, limited to defects discovered within 12 months of delivery, and the obligation of MSE was only to repair the defects. It was PT Bumi’s deliberate choice 
that there was no direct contractual relationship with Man B&W and Mirrlees. If PT Bumi had wanted to, it could have entered into a direct contractual relationship with Man B&W and Mirrlees, but it felt more 
comfortable making MSE wholly responsible for the entire vessel, including the engine. In such circumstances, PT Bumi could not say that it had relied on the promises of Man B&W and Mirrlees to deliver a satisfactory engine.

6. The grounds for denying PT Bumi’s claim became stronger when the court took into account the fact that PT Bumi had contractually agreed to limit their recourse should the vessel, including its engine, fail to meet the specifications. What was involved in this regard was
a delicate balancing exercise in which consideration should be given to all the conflicting claims of the plaintiffs and the defendants as viewed in a wider context of society. The court should not stretch the 
Donoghue principle and afford PT Bumi a remedy which would be wholly in conflict with PT Bumi’s express contractual commitment. The correct approach was not to ask whether there was any justification for depriving PT Bumi of a remedy or whether the 
contract had deprived PT Bumi of its right to sue the 
sub-contractors, but whether there were any compelling reasons to extend the law and afford a separate remedy to PT Bumi. It was not for the court to help a party, after the event, to improve his commercial bargain. It would not be just and reasonable in all the 
circumstances to impose the duty on Man B&W and Mirrlees.

Comments
The trial judge had taken a formula gleaned from case law in finding that a duty of care existed in a factual matrix that had not been previously ruled upon. The Court of Appeal’s decision is conservative and discourages attempts to find a duty in new situations, even if such attempts were based on the two-step approach in Ocean Front. It will not be easy to predict which way the scale will tip given any new set of facts. The Court of Appeal approved Lord Roskill’s  comment in Caparo Industries v Dickman [1990] 2 AC 605, at 628 that "there is no simple formula or touchstone to which recourse can be had in order to provide in every case a ready answer to the questions 
whether, given certain facts, the law will or will not impose liability for negligence …"

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