Keppel FELS v. Int.l Coatings

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Keppel FELS Ltd v International Coatings Pte Ltd and Another

Singapore High Court: Tay Yong Kwang JC:, 28 May 2002
Ang & Partners, for Keppel FELS Ltd
Allen & Gledhill, for International Coatings Pte Ltd 
Keppel FELS agreed to build a floating dock for Hong Kong United Dockyard Ltd ("HUD"). Paints were supplied by International Coatings Pte Ltd. Blisters appeared in paint coating of internal ballast tanks and external hull. Dock was decommissioned and towed to China for repair works. HUD commenced arbitration against Keppel FELS for cost of repairs and estimated costs of further repairs. Keppel FELS settled the claim and then successfully sued International Coatings for an indemnity.

DMC Rating Category: Confirmed

This case note has been supplied by Ang and Partners, the International Contributors for Singapore

Keppel FELS agreed to build a floating dock in Singapore for Hong Kong United Dockyard Ltd ("HUD"). Paints for the construction were supplied by International Coatings. The general terms and conditions in Keppel FELS’ purchase orders required that International Coatings provide a full time technical representative on site throughout the project, and included a "normal warranty" of 12 months.

Six months after delivery of the dock in 1995, HUD informed Keppel FELS that there were defects in the coating of internal bulkheads of her ballast tanks. A first inspection was carried out but on the recommendation of International Coatings, no repairs were done. In 1996, a trial repair was carried out after a second inspection. In late 1997, blisters were seen in all 28 tanks of the dock and HUD decommissioned her and had her towed from Hong Kong to China for repairs. In July 1999, HUD commenced arbitration against Keppel FELS in London, claiming the cost of repairs to the internal bulkheads, as well as the estimated costs of further repairs in areas where the damage was less severe. In April 2000, Keppel FELS settled the claim at 82% of the total claim, on the advice of London Ccounsel.

The Arguments
Keppel FELS commenced action against International Coatings in Singapore, alleging that the blisters were caused by invisible soluble salts, which could have been avoided had International Coatings given instructions for high pressure freshwater washing prior to blasting. Alternatively, it was alleged that the paints were not reasonably fit for use in the ballast tanks. Therefore, International Coatings had failed in its duty to advise Keppel FELS of the technical aspects of the paint system as required under the terms in the purchase orders.
International Coatings alleged that the blisters were caused by low dry film thickness ("DFT"). They denied that the paints were unfit, but even if they were, International Coatings claimed that their liability was limited by contract to the supply of free replacement paint.

1. The Court found that the blistering was due to salt being present on the steel surfaces before the paint was applied. It was the duty of International Coatings to ensure that a proper paint system was in place and that included proper surface preparation, without which the paint coating would be doomed from the beginning. International Coatings failed in their duty. They were aware of the risk of invisible salt contamination but took no steps to test for the presence of salts on the steel surfaces or to advise Keppel FELS to do high pressure freshwater washing before the steel surfaces were grit/shot blasted or swept. The fault did not lie in the paints supplied.
2. There was no evidence in support of International Coatings’ argument that, by a course of dealing between the parties, it was understood that the "normal warranty" referred to in the purchase order was limited to free paint replacement.
3. Keppel FELS did whatever could reasonably have been expected of them in mitigating the damages claimed against them by HUD. The judge said: "We should not weigh in nice scales the measures taken by a sufferer from a breach of contract to extricate himself (Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452, at 506, followed)…. There should be some latitude given to parties for reasonable posturing and for time to reconsider the strengths and the weaknesses of their case, especially in a situation like the present where millions of dollars are at stake."
4. Judgment was, accordingly given in favour of Keppel FELS, with costs and interest.

The latest information from Singapore is that the case in not going to appeal. Editor, 13 January 2003

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