PT Bumi Tankers v. Man B&W

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Note: this judgment has been overruled by a decision of the Singapore Court of Appeal, dated 9 March 2004. For a note on that decision, click here

DMC/SandT/04/11
PT Bumi International Tankers v. Man B & W S E Asia Pte Ltd and Mirrlees Blackstone Ltd
Singapore High Court: Judith Prakash J: [2003] SGHC 152: 18 July 2003
Rajah & Tann for PT Bumi
Straits Law Practice LLC and Donaldson & Burkinshaw for Man B&W and Mirrlees Blackstone Ltd
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
PT Bumi bought an oil tanker from Malaysian Shipyard and Engineering Sdn Bhd. The main engine was supplied by Man B&W, who sold and serviced engines manufactured by Mirrlees Blackstone Ltd of UK. Persistent problems were encountered with the engine after delivery, despite repairs and overhaul. PT Bumi suffered economic loss in the form of loss of hire and the costs of replacing the engine. It sued Man B&W and Mirrlees Blackstone Ltd in tort for negligent design or manufacture of the engine. There was no contract between PT Bumi and the defendants. The court found in favour of PT Bumi.

DMC Rating Category: 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 their 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. After that, the vessel was laid up. 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.

The judge gave judgment to PT Bumi.

Judgment
1. There can in certain circumstances be a tortious duty imposed on one party to avoid negligently causing another party to sustain pure economic loss. The judge adopted a two-pronged approach: first, whether there was a sufficient degree of proximity of relationship between the parties to give rise to a duty of care to avoid the kind of loss sustained by PT Bumi; and if so, whether there was any material factor or policy which precluded such a duty from arising.

2. The facts and factors to determine whether there is a sufficient degree of proximity include but are not limited to foreseeability and reliance. The judge concluded that there was a sufficient relationship of proximity. Mirrlees Blackstone knew that the vessel was being custom-built to meet a specific owner’s requirements and the owner had discussions with their sole agent and was relying on the expertise of Mirrlees Blackstone as a specialist manufacturer to produce an engine that was suitable for the vessel. Mirlees Blackstone could foresee that if the engine was defective and continually broke down, PT Bumi would suffer economic loss from disruptions in the use of the vessel as an income producing chattel.

3. Although PT Bumi did not rely on the expertise of Man B&W in the manufacture and design of the engine, by asserting that the engine was reliable and actively marketing it, Man B&W was assuming responsibility for the delivery of an engine that would meet PT Bumi’s requirements. There was sufficient proximity between them to impose the same duty on Man B&W as was imposed on Mirrlees Blackstone.

4. The judge concluded that there was no policy reason against imposing the duty. First, the judge found that imposing the duty would not result in imposing liability in an indeterminate amount for an indeterminate time to an indeterminate class. The cost of repairing or replacing the engine and the financial loss sustained due to breakdown of the engine were not infinite. The class of persons entitled to recover is finite, namely the owner of the vessel.

5. The judge also held that recovery would not result in an indefinitely transmissible warranty [of fitness for purpose]. The product was an expensive engine, custom-made for a particular ship and for a particular owner, with specific requirements that were made known to the defendants.

6. The contract between PT Bumi and MSE did not deprive PT Bumi of any claim in tort against the sub-contractors. The contract did not create a "Himalaya" clause (a clause giving contractual rights of limitation or exemption from liability to the sub-contractors of a contracting party). Nor did the contract incorporate Mirrlees Blackstone’s conditions of sale either.

7. On the evidence, the judge found that defendants had failed in their duty to supply an engine that was suitably designed and manufactured to meet the requirements of the ship. The judge went on to evaluate the evidence on loss and awarded damages for loss of hire and the cost of replacing the engine.

Comments
The judge recognized that she was extending the class of cases to which the principles for recovery of economic loss applied. As the facts involved a large and expensive piece of equipment, custom-made for a particular ship, and the shipowner was known to and was in contact with the defendants, the judge considered that her decision was merely an incremental extension of the law and would not open the floodgates.

The judge found grounds to impose the same duty on Man B&W as on the manufacturer. Nonetheless, it is not apparent how Man B&W, who did not design and manufacture the engine, had failed to meet the standard of reasonable care in this regard.

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