Wavemaster International Pty Ltd (In liq) v JR Marine Systems Pte Ltd - [2009] WASC 203

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: WAVEMASTER INTERNATIONAL PTY LTD (In liq) -v- JR MARINE SYSTEMS PTE LTD [2009] WASC 203

CORAM: KENNETH MARTIN J

HEARD: 28-30 APRIL 2009

DELIVERED : 30 JULY 2009

FILE NO/S: CIV 1092 of 2006

BETWEEN: WAVEMASTER INTERNATIONAL PTY LTD (In liq) (ACN 009 100 314)
Plaintiff
AND
JR MARINE SYSTEMS PTE LTD (2000 10656m)
Defendant

Catchwords:

Contract - Written Shipbuilding Agreement - Instalments payments not made - Default - Oral contract - Collateral - Claim for rectification - Claim for conventional estoppel - Damages for breach of contract

Legislation:

Nil

Result:

Judgment for the plaintiff for deposit amount and for common law damages

Category: B

Representation:

Counsel:

Plaintiff: Mr S K Dharmananda
Defendant: Mr K G Robson & Mr W C Tay

Solicitors:

Plaintiff: Clayton Utz
Defendant: Tan & Tan

Case(s) referred to in judgment(s):

Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Company Ltd [2008] WASCA 119
Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) [2008] WASC 239; (2008) 225 FLR 1
Chint Australasia Pty Ltd v Cosmoluce Pty Ltd [2008] NSWSC 635
Concut Pty Ltd v Worrell [2000] HCA 64; 75 ALJR 312
Connor v Blacktown District Hospital [1971] 1 NSWLR 713
Equuscorp v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471
GEC Marioni Systems Pty Ltd v BHP Information Technology (2003) 128 FCR 1
Hoyts v Spencer (1919) 24 CLR 133
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115
L'Estrange v Graucob Ltd [1934] KB 394
Mander Pty Ltd v Clements [2005] WASCA 67; (2005) 30 WAR 46
Masters v Cameron (1954) 91 CLR 353
McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457
Newmont Power Pty Ltd v Barrick Gold of Australia [2008] WASCA 74
Ryledar Pty Ltd t/as Volume Plus v Euphaic Pty Ltd [2007] NSWCA 65; (2007) 69 NSWR 603

KENNETH MARTIN J:

Overview

The plaintiff corporation, now in liquidation, carried on business from Western Australia as a commercial shipbuilder. By this action commenced in 2006, it claims liquidated sums, alternatively damages, against the defendant, grounded upon a written shipbuilding agreement (the Shipbuilding Agreement) entered between itself and the defendant, a Singaporean corporation, in or about late September or early October 2003.
Apart from the plaintiff and the defendant, there is a further party to the Shipbuilding Agreement, Penang Shipbuilding and Construction Sdn Bhd (PSC). PSC is a Malaysian corporation and, at relevant times, was the plaintiff's ultimate corporate parent. Although PSC is made a party to the Shipbuilding Agreement, the contents of that document do not reveal PSC as bearing any particular obligations of performance thereunder, notwithstanding that it is referred to as the 'Main Contractor'.
In the Shipbuilding Agreement, the plaintiff is described as the Builder and the defendant is described as the Purchaser.
By its action, the plaintiff pursues liquidated sums which it contends are due and payable by the defendant to it under the Shipbuilding Agreement, but which are entirely unpaid. Alternatively, the plaintiff claims damages, predicated upon alleged breach of the Shipbuilding Agreement, essentially by the defendant failing to make good its payment obligations as purchaser, after being invoiced for instalment payments.
The Shipbuilding Agreement itself relates to the construction of a vessel, sometimes referred to as Yard 207 or Y 207. It is undisputed that the plaintiff never completed the construction of the vessel, which, upon completion, was designed to be a commercially operating ferry.
The plaintiff allows to the defendant a credit in the amount of $AUD803,000, being funds the plaintiff was ultimately able to obtain in March 2005 upon its sale of the incomplete vessel, which was Yard 207.
The defendant, acknowledging that it is a party to the Shipbuilding Agreement, nevertheless seeks to raise various defences under its defence and counterclaim. Essentially, it contends that the Shipbuilding Agreement is the subject of an unfulfilled condition precedent going to its very formation as a binding agreement, pursuant to which the plaintiff first needed to obtain, for the defendant, purchaser finance - so as to enable the defendant as Purchaser to proceed with the acquisition of Yard 207.
The defendant further contends that undocumented arrangements in respect of the plaintiff's obligation to procure for it purchaser finance in respect of Yard 207 were the subject of an earlier oral agreement, entered into as between two individual directors of the plaintiff and the defendant, respectively, in Kuala Lumpur during September 2003 and prior to the written Shipbuilding Agreement being formally executed by the three corporate parties thereto.
The anterior oral agreement is said by the defendant to have been entered for it by its director, Mr Mohd Zin Bin Arif (Mr Arif). The defendant alleges that one of the plaintiff's directors, Mr Mohd Noordin Bin Dato' Abdullah (Mr Abdullah) reached these oral arrangements on behalf of the plaintiff at a meeting in person as between the two men, at Mr Abdullah's business premises on the 10th floor of the Ming Building in Kuala Lumpur, some time during September 2003.
The defendant then seeks rectification of the written Shipbuilding Agreement, so as to augment its written content by the addition of a condition precedent going to the formation of any agreement, and by which the Shipbuilding Agreement is expressly rendered conditional upon the obligation of the plaintiff to first obtain purchaser finance for the defendant.
In addition, the defendant raises various other defences, largely dependent upon the content and outcome of the September 2003 oral discussion between Mr Abdullah and Mr Arif at Kuala Lumpur, prior to the subsequent entry into of the Shipbuilding Agreement by its corporate participants. The defendant advances an estoppel as between it and the plaintiff, seeking essentially to bar the plaintiff from being heard to contend that the Shipbuilding Agreement may be enforced against it, absent the plaintiff first having procured for the defendant purchaser finance for Yard 207.
The defendant also contends that an oral, mutually agreed, abandonment of the Shipbuilding Agreement's performance obligations was reached by Mr Arif and Mr Abdullah, on behalf of the defendant and the plaintiff, some time during late 2004, and by which the parties are said to have accepted that the terms of the Shipbuilding Agreement could not be enforced as against the defendant (purchaser finance for Yard 207 for the defendant not having by then been arranged by the plaintiff). So the plaintiff was then looking to obtain a substitute purchaser for Yard 207 and, as a result, it is said, the defendant's obligations under the Shipbuilding Agreement were ended, by mutual agreement.
Apart from the defences which I have now mentioned and which go to the core issue of what I will call the 'purchaser finance obligation condition', the defendant also raises other matters - going towards the issue of whether the plaintiff met or strictly complied with its obligations under the Shipbuilding Agreement, so as to thereby entitle the plaintiff to take the benefit in its favour of certain terms of the Shipbuilding Agreement, entitling the plaintiff to receive liquidated amounts as instalment payments thereunder from the defendant. Essentially, the defendant contends that some strict prerequisites imposed under the terms of the Shipbuilding Agreement have not been complied with by the plaintiff, resulting in its inability to validly pursue liquidated sums or damages against it.
In summary, therefore, the defendant essentially asserts that it owes no monies to the plaintiff under the Shipbuilding Agreement, and furthermore, that it is not, in any event, to be held liable to the plaintiff for damages for breach of the Shipbuilding Agreement, as it contends that it has committed no breach thereof.
It is noteworthy, that examination of the written content of the Shipbuilding Agreement discloses no reference within that instrument to it having been made conditional, either in its formation, or as to its performance - upon a basis of the plaintiff being obliged to procure for the defendant any level of purchaser finance in respect of Yard 207.
It will be seen, however, that the Shipbuilding Agreement does contain (see exhibit TB(D), page 667) an express condition at its outset in the following terms:
The Agreement is subject to ratification by the Board of Directors of the Builder and of the Main Contractor (either in meeting or by Circular Resolution) and comes into effect on and from the later of such acts of ratification.
The phraseology of this condition goes to the very formation of a binding Shipbuilding Agreement (ie, via the words, 'comes into effect on and from').
On the defendant's case, it is pursuing the establishment of a further condition of similar moment, said to have been settled upon orally as between Messrs Arif and Abdullah at the September 2003 Kuala Lumpur meeting between them, prior to subsequent execution of the written Shipbuilding Agreement, albeit not finding its way into the terms of that instrument, as executed.
Having made these preliminary observations by way of overview, I turn to consider more fully some of the precise terms of the tripartite Shipbuilding Agreement.

The Shipbuilding Agreement

The Shipbuilding Agreement was uncontroversially received into evidence - see exhibit TB(D), pages 667‑773.
It will be seen that the written instrument, upon its face page (667), shows a space in the opening line - into which a date for a day in September 2003 was to be inserted. A longhand annotation upon the face of the written instrument shows the insertion of '2nd' (ie, second) as being the day nominated in September 2003. Notwithstanding that annotation, the burden of the evidence at trial suggests that the Shipbuilding Agreement was executed as between the parties thereto in Malaysia, either in very late September 2003, or in early October 2003, by directors of the parties concerned, whilst those directors were gathered to attend a military air show at the resort location of Langkawi, Malaysia.
On behalf of the defendant as 'Purchaser', the written Shipbuilding Agreement is executed by its director, Mr Arif (see page 696). No argument was put at trial that Mr Arif had not validly bound the defendant to the Shipbuilding Agreement by his signature - notwithstanding that no common seal for the defendant can be seen as applied. See also exhibit TB(D), pages 828 ‑ 833, being notice and minutes of an extraordinary general meeting of the defendant, chaired by Mr Arif and signed by him, containing the defendant's board of directors minuted approval for the purchase of vessels to be built for it by the plaintiff (828).
On behalf of the plaintiff, the Shipbuilding Agreement was signed by two of its then directors, Mr Maurice Gerkens and Mr Goran Dubljevic. The common seal of the plaintiff is seen to have been applied. No issue was pleaded or raised during the trial concerning any potential difficulty over the plaintiff not having complied with the ratification pre‑condition as seen at page 1 of the Shipbuilding Agreement (667), and to which I have referred at [16].
I have already observed that the Shipbuilding Agreement is also executed by PSC, as Main Contractor. At page 696, the document is seen to carry the signature of a director of PSC. Whilst there was reference at trial to the signing ceremony attended by the plaintiff's directors, as well as representatives of the plaintiff's ultimate Malaysian parent and a person referred to as the dominating personality on behalf of PSC at the time, (Mr Amin Shah), it is not totally clear that Mr Shah actually signed on behalf of PSC. Someone obviously did, however.
Each page of the Shipbuilding Agreement, between 667 and 773, appears to have been initialled by one person's common initial. At pages 771 and 772 of the trial bundle, two further typed pages are seen to have been added to the otherwise pro forma written instrument, as part of the specifications for Yard 207. Page 771 reveals the reference to discussions held on 26 September 2003, between Mr Dubljevic, on behalf of the plaintiff, and a Mr T C Leong, on behalf of the defendant. The document continues:
We are pleased to confirm and clarify that the following at no extra cost to the original price quoted in the Main Contract, will now be incorporated into the relevant clauses of the specification document. …
Little emerged during the trial concerning the content of any discussions on 26 September 2003 as between Mr Dubljevic and Mr Leong, on behalf of the defendant. The reference at page 771 does, however, indicate that matters of detail, at least concerning the specifications for Yard 207, had been under discussion as between the parties' representatives as late as 26 September 2003, a time which would be after any earlier oral discussion at Kuala Lumpur as between Mr Abdullah and Mr Arif.
The Shipbuilding Agreement document, in unexecuted form, would appear to have been prepared at the plaintiff's Henderson offices in Fremantle, Western Australia, and then been taken by Messrs Gerkens or Dubljevic from Perth to Malaysia. There, at Langkawi, the document came to be executed at a signing ceremony by Mr Arif, on behalf of the defendant, and Messrs Gerkens and Mr Dubljevic, on behalf of the plaintiff. It may be that Mr Amin Shah executed the agreement on behalf of PSC at Langkawi, although that is not entirely clear, and it is unnecessary to reach a conclusion as to who actually executed the document for PSC as Main Contractor.
The Shipbuilding Agreement is expressed to be governed by the laws of the State of Western Australia, with all the parties submitting to the jurisdiction of the courts of Western Australia (see cl 1.9).
It is now necessary to refer precisely to some of the more important clauses within the Shipbuilding Agreement, in order to assist the proper comprehension of the contractual issues in contention as between the parties.
The Shipbuilding Agreement is made subject to the fundamental qualifying condition relating to ratification by the plaintiff and by PSC, to which I have already referred. Whilst no issue at trial arises over any argued absence of ratification to satisfy that condition, as regards the boards of the plaintiff and PSC, nevertheless, in the context of the defendant's overall case asserting a claim for rectification of the Shipbuilding Agreement, the presence of an express ratification precondition, clearly stated, is of some negative weight, I think, against the defendant's pursuit of rectification to add a second precondition. It is to be seen that, at least in respect of one precondition, the parties, viewed objectively, apply their minds to a positive need for insertion of a ratification precondition bearing upon when the Shipbuilding Agreement 'comes into effect'.
Given that the parties can be seen to have chosen to nominate, clearly enough, a chosen precondition in express terms, that is a circumstance well capable of bearing upon the ultimate assessment about the probability of whether these parties are likely to have mistakenly left out of the same written instrument an equally important precondition going to its very formation, as the defendant contends. By its rectification case, the defendant argues for a new cl 1 of the Shipbuilding Agreement to be inserted to precede the definition and interpretation clause (currently cl 1 of the Shipbuilding Agreement), and which new clause is in the following terms (as handed up during counsel for the defendant's closing address at trial):
1.Condition precedent to formation
1.1Subject to the condition contained in clause 8.1A, the Builder will build and the Purchaser will buy the vessel.
1.2This Agreement is entirely subject to clause 1.1.
It will be seen that the defendant, through this formulated pre‑condition, as sought to be incorporated into the Shipbuilding Agreement by rectification, goes as far essentially as to erect a condition precedent which would govern the reaching of any binding agreement as between the parties. As to this type of precondition, see Masters v Cameron (1954) 91 CLR 353 at 360 ‑ 361, where Dixon CJ and McTiernan and Kitto JJ said:
Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
…
Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own …
I will deal further with the defendant's rectification case in the context of assessment of the evidence advanced at trial in the defendant's pursuit of that equitable remedy.
I now mention certain governing definitions found in cl 1.1 of the Shipbuilding Agreement:
Basic Purchase Price means the amount stated in Annexure A, as adjusted from time to time in accordance with the provisions of this Agreement.
…
Deposit means the total amount of the first progress payment set out in Annexure B, which shall be paid by the Purchaser to the Builder, in accordance with the provisions of this Agreement.
…
Interim Stage Certificate means an Interim Stage Certificate substantially in the form of Schedule 3.
…
Progress Payment means a payment described as a progress payment in cl 8.1 and includes the Deposit as the first progress payment.
…
Vessel means a vessel having the dimensions, speed and specifications described in the Specification (Annexure D), with the designated yard or hull number allocated to it by the Builder, to be, or being constructed or awaiting delivery, or being delivered, as the case may be.
It is of some significance that the Shipbuilding Agreement contains an entire agreement clause (cl 1.6). Such a clause obviously sits both uncomfortably and inconsistently with a number of aspects of the defendant's case, namely the alleged existence of a prior (inconsistent) oral collateral contract and the pursuit of rectification on the basis of a missing fundamental precondition going to the very existence of a binding agreement as between the parties in terms of the Shipbuilding Agreement, and upon the defendant's argument for an estoppel based upon the plaintiff's alleged prior obligation regarding procurement of purchaser finance for the defendant - in order for it to be required to proceed with the acquisition of Yard 207.
The entire agreement clause is in the following terms:
1.6Entire Agreement
This Agreement sets forth the full and complete understanding of the parties as of the date of execution of this agreement and supersedes any and all written or oral agreements and representations made or dated prior to the date of execution of this Agreement.
Further clauses of the Shipbuilding Agreement relate to construction, property and title, and the purchase price and payment, in the following terms:
2.CONSTRUCTION, SALE AND DELIVERY
2.1Basis of Agreement
2.1.1The Builder agrees to design, build, trial, sell and deliver the Vessel to the Purchaser for the Basic Purchase Price in accordance with the terms of this Agreement.
2.2.2The Purchaser agrees to purchase the Vessel for the Basic Purchase Price and to accept delivery of the Vessel, in accordance with the terms of this Agreement.
…
5.1Property and Title
5.1.1The Vessel shall be the property of the Purchaser at all times.
5.1.2The Builder shall have a charge on the Vessel (hereinafter 'Builder's Charge') in respect of any payment due to the Builder and the Purchaser agrees that under no circumstances will the Builder be obliged to give possession of the Vessel to the Purchaser until the final purchase price has been paid.
…
8.PURCHASE PRICE AND PAYMENT
8.1Purchase Price
A.The Purchaser shall pay to the Builder the Deposit, as the first progress payment in the amount calculated as the percentage of Basic Purchase Price specified in the Payment Schedule (Annexure B) immediately against delivery of the documents specified in the Payment Schedule (Annexure B).
B.The Basic Purchase Price includes:
(i)The cost of transport, insurance and shipment of the Vessel to the Place of Delivery; and
(ii)All sales taxes, fees, charges, levies, import duties and taxes which may be imposed on the Vessel in Australia.
C.…
DIn the event that the Vessel is lawfully rejected by the Purchaser in accordance with the terms of this Agreement, or this Agreement is lawfully rescinded by the Purchaser in accordance with the terms of this Agreement, before the Actual Delivery Date, then, provided such rejection or rescission is not disputed by the Builder, the Builder shall refund to the Purchaser the full amount of all Progress Payments paid by the Purchaser to the Builder upon which event, all right title and interest in the vessel shall vest in the Builder.
E.…
F.The Purchaser shall on the Actual Delivery Date pay to the Builder the Final Payment plus, where applicable, GST by delivering to the Builder against delivery of the Vessel a bank cheque payable to the Builder in the amount of the Final Payment.

Whilst mentioning cl 8, concerning purchase price, it is timely to observe that although cl 8.1A is somewhat less than perfect in terms of its clarity of drafting - as regards the setting up of an instalment payment regime by reference to a series of progress payments - since cl 8.1A only refers to the payment of the Deposit as the first progress payment - nevertheless, once the ensuing provisions of cl 8.1 as a whole are considered, particularly, subcl 8.1D and F, they, when also read with the content of Annexure B as referred to, do in my assessment, provide an adequate edifice to reach a conclusion, as a matter of construction, that the Shipbuilding Agreement sets down a regime of what are, in effect, a minimum of six separate progress instalment payments to be made over time by the Purchaser to the Builder, as the construction of Yard 207 is progressively advanced.
A remaining drafting component of the defendant's proposed rectification surgery to the Shipbuilding Agreement, seeks to further insert additional words at the commencement of cl 8.1A of the Shipbuilding Agreement, in the following terms:
8.1ASubject to the Builder obtaining purchase finance for the Purchaser, the Purchaser shall pay to the Builder …
It is now necessary for me to set out the content of Annexure B to the Shipbuilding Agreement, by which the contemplated multiple instalment payment regime by the Purchaser to the Builder, is more clearly seen:
PAYMENT SCHEDULE
(CLAUSE 8.1)

PROGRESS PAYMENT

% OF BASIC PURCHASE PRICE

STAGE OF COMPLETION

DOCUMENTS TO BE DELIVERED BY BUILDER TO THE PURCHASER

1ST

10%

Completion and signing of this Agreement by Main Contractor, Builder and Purchaser

A) Invoice

B) Certified copy of fully executed Agreement signed by Main Contractor, Builder and Purchaser

2ND	15%	Completion of laying of the first section plate	A) Invoice B) Photograph C) Interim stage Certificate issued by Builder and countersigned by the Classification Society
3RD	30%	Hull plated to main deck	A) Invoice B) Photograph C) Interim stage Certificate issued by Builder and countersigned by the Classification Society
4TH	25%	Arrival of the main engines in Fremantle	A) Invoice B) Photograph C) Interim stage Certificate issued by Builder and countersigned by the Classification Society
5TH	10%	Launching of vessel for sea trials	A) Invoice B) Photograph C) Interim stage Certificate issued by Builder and countersigned by the Classification Society
FINAL PAYMENT	10% +/- adjustment in accordance with cl.8.1	Delivery of Vessel	A) Invoice B) Other delivery documents as set out in this Agreement and the Specifications

I now examine certain clauses of the Shipbuilding Agreement dealing with issues relating to default by the Purchaser. I set out the following extracts from cl 9 of the Shipbuilding Agreement, in the following terms:
9.PURCHASER'S DEFAULT
9.1Definition of Default by the Purchaser
The Purchaser shall be deemed to be in default hereunder in the following circumstances:
…
B.If the Purchaser fails to pay the Deposit or any Progress Payment due and payable hereunder (which is not reasonably disputed) within three (3) days after notice has been received from the Builder of such failure to make payment;
Clause 9.2 then sets out the Builder's entitlement to interest against the Purchaser in certain circumstances, at the rate per annum stated in Annexure A to the Shipbuilding Agreement, from the date when payment was otherwise due.
Importantly to the plaintiff's alternative claim for relief in (liquidated) damages, cl 9.3 provides in these terms:
9.3Consequence of Termination
Where the Purchaser is in default and the default has not been remedied within fourteen (14) days after the Purchaser has received notice from the Builder requiring the Purchaser to remedy the default, the Builder may terminate the Agreement by notice in writing. In the event of termination:
A.This Agreement shall come to an end, save for this clause, and clause 5, which shall apply for the benefit of both parties.
B.The Builder, at its option, shall be at liberty, without further notice, either:
(i)To sell the Vessel; and/or
(ii)To complete construction of the Vessel in accordance with this Agreement and sell it after completion.
C.…
D.If any such sale occurs, then:
(i)…
(ii)The Builder shall account for all reasonable costs, charges, expenses or liabilities reasonably incurred by the Builder in connection with:
a.Such sale; and/or
b.The reasonable costs, charges, expenses and liabilities incurred by the Builder in connection with completion of construction as provided in Clause 9.3B, which shall include the cost of employment of subcontractors, and an amount equal to gross profit calculated at the rate of 11 per cent (collectively 'Builder's Damages').
E.… [Note: As far as I can ascertain, there is no cl 9.3E in the Shipbuilding Agreement.]
F.If there is any surplus of Cash Receipts over Builder's Damages, the Builder shall within fourteen (14) days after receipt of proceeds of the said sale, pay the surplus to the Purchaser. If there is any deficiency of Cash Receipts over the Builder's Damages, the Purchaser shall pay the deficiency with fourteen (14) days after written demand.
The term 'Builder's Damages', as used in cl 9.3F, is seen to be defined by that term's earlier use in cl 9.3D(ii)(b).
Clause 9.3F, as regards its use of the term 'Builder's Damages', is important to the alternative case that the plaintiff brings for what are, in effect, liquidated damages - claimed under the Shipbuilding Agreement, in circumstances of alleged breach by the defendant as purchaser - in the event that the plaintiff is not successful in establishing a primary entitlement to liquidated instalment amounts due and payable under the Shipbuilding Agreement.
A further provision of the Shipbuilding Agreement, concerns the way in which it prescribes its own mechanism for the proper addressing and despatch of notices, as between the parties. Clause 22 is in the following terms:
22.NOTICES
22.1Address for Notices
Any notice to be given hereunder to the Purchaser shall be addressed to the Representative of the respective party at the address sated in Annexure A or such other address as either party may from time to time by notice in writing to the other party designate for that purpose.
22.2Method of Sending Notices
All notices to be sent hereunder shall be sent by post or facsimile transmission and shall be deemed to have been received in the case of fax transmission on the next business day in the country of the recipient following dispatch thereof and in the case of a letter seven (7) days after the same is posted by prepaid registered airmail. To dispel doubt, time limits resulting from the giving or serving of notice under this Agreement commence from the date of receipt of the notice by the party affected by the time limit.
The address nominated in Annexure A for the defendant, is to be seen at page 36 of the Shipbuilding Agreement (exhibit TB(D), page 703), as:
Addresses for service of notices
Purchaser
2 Maritime Square
#03-03 SPI Building
Singapore, 099255
Having referred to the relevant provisions of the Shipbuilding Agreement, I can now proceed to review the significant evidence received at trial.

The evidence

Essentially, the plaintiff sought to advance its case for relief primarily by reliance upon documents. In this regard, the trial bundle comprised some seven volumes of documents, containing therein 110 documents. The content of the trial bundle as admissible evidence was, by the end of the trial, wholly uncontroversial as between the parties. Accordingly, the seven bound trial bundle books were tendered and received into evidence respectively, as exhibits TB(A) through (G) - as regards the content of 110 documents variously included therein, and subindexed within each of those seven bound books.
The plaintiff called, as its only witness, Mr Malcolm Swaddle who, for a period of approximately some 14 months commencing in September 2003, occupied a position as the plaintiff's general manager, until the plaintiff was placed into administration on 4 November 2004.
The defendant called evidence from two witnesses at trial, Mr Arif, and Mr Abdullah, to whom I have already referred.
I now set out my observations in respect of the evidence of these three witnesses.

Mr Malcolm Swaddle

Although he was its general manager, Mr Swaddle was never a director of the plaintiff. Accordingly, he did not ever occupy the position of managing director, as had his predecessor general manager, Mr Christopher Gerrard, between 17 March 1997 and 14 August 2003.
Mr Swaddle gave evidence about an urgent telephone call he received, the consequence of which was to deny him the opportunity of viewing, from Perth, a live telecast of the 2003 AFL grand final (held on the last Saturday of September each year). Instead, Mr Swaddle was required to urgently catch a plane that Saturday to Singapore, in order to meet with the ultimate controlling personality of the PSC Group, Mr Amin Shah. Mr Swaddle did meet with Mr Shah in Singapore, and from there was flown in Mr Shah's private jet to Kuala Lumpur. Mr Swaddle was travelling with his directors, Goran Dubljevic and Maurice Gerkens. From Kuala Lumpur, Mr Swaddle flew on to the Malaysian resort destination of Langkawi, where a military air show was being held over the course of the ensuing week. There appear to have been a number of exhibitors at the air show, including the PSC Group, and including as part of that, an exhibition by the plaintiff of its shipbuilding wares, as one PSC Group subsidiary.
Whilst he was at Langkawi, Mr Swaddle learned of a ceremony proposed in respect of the signing of the Shipbuilding Agreement in respect of the sale of Yard 207. At that time, early in the period of his appointment as general manager, Mr Swaddle knew that a partially complete hull had been under construction by the plaintiff at its Henderson yard, but which remained substantially incomplete.
Mr Swaddle was broadly aware that the hull being constructed by the plaintiff had been begun by the plaintiff, in contemplation of it being sold to an overseas buyer who had expressed in an interest in acquiring such a vessel or vessels. Unfortunately for the plaintiff, the Italian corporation concerned, Ustica Lines S.p.A, had, in the end, decided not to exercise its option to acquire Yard 207, leaving the plaintiff in need of a replacement purchaser. Accordingly, a sale of Yard 207 to the defendant was fortuitous at this time, since the plaintiff was facing tight financial constraints in funding the completion of Yard 207, and was also reliant upon a regular receipt of funds from its Malaysian parent entities in the PSC Group in order to provide it with a measure of necessary liquidity at the time.
Mr Swaddle was not responsible for assembling the sale contract documentation that the plaintiff prepared in respect of a shipbuilding agreement in respect of Yard 207 with the defendant. One or other of his directors, Gerkens or Dubljevic, he thought, carried that responsibility.
Mr Swaddle was aware, however, that there was a signing ceremony planned in respect of the Shipbuilding Agreement for Yard 207 to be conducted at Langkawi during the week of the military air show. At one point, he had been under the impression that the then Malaysian Prime Minister, Dr Mahatir, was to attend that ceremony as a witness. Whilst a signing ceremony did take place, in the end, it seems that Dr Mahatir did not attend.
Mr Swaddle was not directly involved in the signing ceremony for the Shipbuilding Agreement, although he was in a crowd of persons that were on the perimeter of a signing ceremony as it took place. He did not actually get to observe what occurred, since this mainly involved his directors, Gerkens and Dubljevic, much more than it did him. He did not meet with Mr Arif whilst at Langkawi. Nor does it appear that Mr Swaddle met with anyone else on behalf of the defendant whilst at Langkawi in late September/early October 2003.
Mr Swaddle gave some contentious evidence conveying his belief as to the plaintiff's likely despatch of invoices to the defendant at Singapore for Yard 207. This type of administrative work had, he said, been generally attended to by his subordinate, Mr Pip Mangano, who was the plaintiff's Project Manager at its Henderson premises, outside Fremantle. The four invoices of the plaintiff to the defendant concerned are respectively dated 8 October 2003 (W207001); 15 October 2003 for Stage 2 (W207002); 28 October 2003 for Stage 3 (W207003); and for Stage 4, dated 5 March 2004 (W207004).
Mr Swaddle said that he reported, in his first period of months as general manager, to directors Dubljevic (operations director) and Gerkens (chairman). Subsequently they had resigned as directors in about early May 2004, and from that point, he then reported to another director of the plaintiff, Mr Abdullah (see ts 125).
It does not appear that Mr Swaddle ever met at any stage with the defendant's director concerned with the Shipbuilding Agreement, namely Mr Arif.
Mr Swaddle knew nothing at all of any meeting as between Mr Abdullah and Mr Arif in Kuala Lumpur in or around September 2003, and prior to the signing of the Shipbuilding Agreement at Langkawi.
Mr Swaddle was cross‑examined about a likely despatch of the progress payment invoices by Mr Mangano, particularly for Stages 1, 2 and 3 (ts 140). Essentially, however, Mr Swaddle was not the person physically responsible for the actual despatch of those invoices, by facsimile or otherwise, and his evidence was directed towards his knowledge of the plaintiff's business practices in that respect, as well as his knowledge of Mr Mangano's practices, as regards reliable despatch of the plaintiff's invoices generally. It was Mr Swaddle's belief that Mr Mangano would have despatched the progress payment invoices to the defendant (ts 140). It is my assessment, on the balance of probabilities, that it was likely that all four invoices were properly prepared and sent by Mr Mangano to the defendant's nominated Singapore receipt address, pursuant to cl 22 and Annexure A of the Shipbuilding Agreement. This approach is supported by a decision concerning evidence as to reliable business practice (see Connor v Blacktown District Hospital [1971] 1 NSWLR 713 per Asprey JA at 721A ‑ E, Mason JA at 722).
Apart from the issue concerning proper despatch of the four invoices for progress payments to the defendant, Mr Swaddle's other evidence concerning his relatively brief 15‑month term as the plaintiff's general manager was largely uncontroversial, notwithstanding that he was extensively cross‑examined. Mr Swaddle was asked a number of questions about documents either created prior to his commencement as general manager of the plaintiff in September 2003, or which were of a financial or accounting character, and so largely outside the realm of his direct knowledge.
In my assessment, Mr Swaddle did his best to answer all questions posed to him in cross‑examination. He presented to me as a witness of truth, doing his best to answer honestly and to the best of his, at times somewhat limited, overall knowledge. In a number of instances of questioning under cross‑examination, his knowledge proved to be limited, but that, in my assessment, does not detract from the veracity of his evidence overall and my assessment of Mr Swaddle as a reliable witness.
To the extent that it was put to Mr Swaddle in cross‑examination that the plaintiff had either given up, or abandoned rights to receive amounts as progress instalment payments under the Shipbuilding Agreement from the defendant, essentially by reason of the failure by the plaintiff in 2004 to press the defendant for proper payment, or perhaps to press harder for payment during 2004, I do not draw that conclusion from his evidence overall. Indeed, my assessment would be to the contrary.
It is true that the plaintiff faced financial difficulties during Mr Swaddle's time as general manager, and the plaintiff was significantly dependent, in a number of respects, upon the plaintiff's 'up the line' Malaysian parent corporations at times for the funds required to meet local salaries and other overheads of the plaintiff associated with its Western Australia shipbuilding business operations. Because of that dependency upon receiving offshore funds from the PSC Group, Mr Swaddle needed to be sensitive to directions from superiors in the plaintiff's parent corporations overseas, and it does appear that some of his superiors were, during 2004, unwilling to see the plaintiff press the defendant too hard for payment of the Yard 207 instalment amounts the subject of the plaintiff's four instalment invoices.
As a result, Mr Swaddle himself did not press harder against the defendant for those instalments through 2004. That lassitude in pressing for payment, however, hardly constitutes a sufficient basis, in my assessment, to contend, without more, for the perpetual abandonment of the plaintiff's ultimate entitlement to such moneys under the Shipbuilding Agreement at some time.
By 11 November 2004, Mr Oren Zohar and Mr Brian McMaster had been appointed administrators of the plaintiff. Subsequently, they became the plaintiff's liquidators, as from 15 February 2005.

Mohd Zin Bin Arif

Mr Arif gave evidence as a continuing director of the defendant, using an interpreter who translated from Malay to English and vice versa, to assist Mr Arif in giving his evidence. Mr Arif's evidence‑in‑chief was submitted to the court via the medium of a witness statement, exhibit D115, also translated to English.
Mr Arif was, at first, briefly a director of the defendant between May 2001 and March 2002. In late June 2003, after the resignation of another director, Mr Arif was reappointed as a director of the defendant, and he has continued in that capacity to date.
It is necessary for me to set out certain parts of Mr Arif's evidence‑in‑chief from exhibit D115:
9.In or about September 2003, Mr Mohd Noordin Bin Dato Abdullah (Abdullah) who was then a director of the Plaintiff, met me with a view to getting the Defendant to buy a vessel from the Plaintiff.
10.At that time I was the director of the Defendant and in charge of operations.
11.In or about September 2003, there was a meeting between Mr Abdullah and I at his office at PSCSB in Malaysia along Jalan Bukit Nanas, Kuala Lumpur.
12.At that meeting Mr Abdullah said words to the effect:-
a.that the Plaintiff had a hull of a Vessel that had been constructed for another customer who was not proceeding with the construction;
b.requesting the Defendant to purchase the Vessel to be built with the hull; and
c.requesting help from the Defendant to purchase the Vessel.
13.At that time, I did not know that the vessel referred to by Mr Abdullah was the Vessel or Yard 207. It was only at the end of 2004 or early 2005 that I realized that the Vessel discussed between Mr Abdullah and I was Yard 207.
14.I told Mr Abdullah words to the effect that:-
a.we would help him by buying the Vessel provided that the Plaintiff would assist the Defendant to get financing to buy the Vessel;
b.we needed the financing as we could not pay for the Vessel from our own funds;
c.without the Plaintiff getting the financing for us, the Defendant cannot commit to purchasing the Vessel; and
d.from the revenue generated by the Vessel ferrying passengers and goods, the Defendant could then apply the proceeds to repay the finance loan.
15.Mr Abdullah, then, agreed to raise financing for us so that we could purchase the Vessel.
16.On the basis of the above discussion I had with Mr Abdullah, it was the understanding between Mr Abdullah and I that:-
a.I agreed to purchase the Vessel if the Plaintiff raised the financing for the Defendant to do so; and
b.unless and until the Plaintiff had procured financing for the Defendant, the Plaintiff would not continue with the building of the Vessel, ie, that the defendant was not required to purchase the Vessel; nor to pay any deposit.
17.When I left Mr Abdullah's office, it was clear in my mind that the Plaintiff had to procure financing for us to purchase the Vessel.
Agreement
18.It was round about September 2003 that Mr Abdullah:-
a.asked me to sign the Agreement, i.e., the agreement to purchase the Vessel; and
b.said that he needed the Agreement signed so that he could obtain financing to meet the cashflow problems encountered by the Plaintiff.
19.I said words to the effect that the Defendant will help the Plaintiff. But I told Mr Abdullah that it must be on the basis that the Plaintiff procured financing for the Defendant to purchase the Vessel.
20.Mr Abdullah told me that I should not worry as he would raise financing for the Defendant to purchase the Vessel.
21.I signed the Agreement without reviewing each paragraph in the Agreement.
22.In November 2003 and December 2003, I sought approvals from the board of directors and shareholders of Defendant in respect of signing the Agreement for and on behalf of the Defendant. I refer to these meetings below.
23.The minutes of the respective directors' meetings and shareholders' meetings did not show that I had informed about the Plaintiff procuring the financing for us to purchase the Vessel before we are committed to buying the Vessel. Unfortunately, I cannot read English well enough. (emphasis added)

Some passages which I have set out above in exhibit D115, (see pars 16 and 17, passages in italics) were objected to by the plaintiff, on the basis that they strayed beyond the bounds of the parol evidence rule by seeking to elicit what was in Mr Arif's mind in terms of his subjective and uncommunicated understanding of discussions concerning the Shipbuilding Agreement, for instance, par 17, ie, 'clear in my mind'. But the defendant sought to support these paragraphs upon the basis of its claim to rectification of the Shipbuilding Agreement. Bearing in mind observations of the New South Wales Court of Appeal in a recent decision Ryledar Pty Ltd t/as Volume Plus v Euphaic Pty Ltd [2007] NSWCA 65; (2007) 69 NSWR 603, particularly per Tobias JA at [182] and [187] and Campbell JA at [269] and [304], I admitted this evidence provisionally, on the basis that it would be considered in the overall context of delivering my final reasons for judgment, particularly going to the issue of rectification. Having regard to the observations of Tobias and Campbell JJA in Ryledar, I will allow the evidence seen in pars 16 and 17, on a basis that when also read with Mr Abdullah's evidence, to which I shall next refer, there may be a basis that it could be relevant to the overall circumstances of ascertaining an ultimate understanding as between Mr Arif and Mr Abdullah, which was, on analysis, common and continuing (see Ryledar [187] and [281]). I will return to resolve the issue of rectification as contended for by the defendant, after I have completed my analysis of the evidence of Mr Abdullah.
Subsequently, by his witness statement (par 24), Mr Arif refers to a discussion in which Mr Abdullah is said to have informed Mr Arif that his (ie, Mr Abdullah's) attempts to raise financing for the defendant to purchase the vessel had to that point been unsuccessful, but how Mr Arif 'trusted Mr Abdullah' because of their 'business relationship', and that in or about September 2004 (par 27), Mr Abdullah informed him that he was unable to procure any financing for the defendant and that he would offer to sell the vessel to another party. Mr Arif then said, '[a]fter that I did not think much about the agreement.'
Mr Arif concludes his witness statement by relating that on 20 December 2004, in response to a 25 November 2004 letter from Clayton Utz as solicitors for the plaintiff, that the defendant's Singapore solicitors, M & A Law Corporation, responded to Clayton Utz, stating that, 'the Agreement was terminated by the Plaintiff's conduct as it marketed the Vessel to another third party without informing the Defendant.'
Mr Arif also denied, in exhibit D115, that the defendant had received any of the four invoices despatched by the plaintiff for progress payments in respect of Yard 207, but did not elaborate on the bare assertions by way of denial.
Mr Arif was then extensively cross‑examined in respect of his witness statement, exhibit D115. Even allowing for the fact that he needed to give his evidence using the assistance of a translator from the Malay language into English and vice versa, it soon became apparent to me, as Mr Arif's cross‑examination proceeded, that any ostensible reliability as to his evidence arising from use of a written witness statement to convey his evidence‑in‑chief, was illusory. It soon became apparent that:
(a)Mr Arif, by his own admission on many occasions during cross‑examination, had a very poor memory of relevant events: see generally his cross‑examination at ts 223, 245, 258 and 262, as illustrations.
(b)Notwithstanding what he had put in his witness statement, he professed at first not to have ever seen the Shipbuilding Agreement before - see ts 232 - notwithstanding that it bears his signature as director on behalf of the defendant - see exhibit TB(D) at page 696. This was surprising evidence, in light of the fact that his witness statement, at pars 18 to 23, purports to deal with the very circumstances in which he signed the Shipbuilding Agreement as a director of the defendant, albeit he says, at par 21, that he did not review each paragraph.
(c)Mr Arif was initially uncertain and confused in his evidence about whether or not he was a 'blacklisted' director in Malaysia and as such, subject to travel restrictions imposed by the Malaysian government. Eventually it emerged that, by reason of what appears to be an unsatisfied judgment debt in Malaysia in respect of another corporation that Mr Arif is associated with, he is subject to travel restrictions from Malaysia. Hence, it seems, he needed permission from the Malaysian authorities to attend Australia to give evidence in this trial, by reason of that restriction, see ts 221 ‑ 222, and see in re‑examination, ts 268 ‑ 269. The debt appears to be in respect of non‑payment of customs tax.
(d)Whilst Mr Arif had been prepared, in exhibit D115, to make some sweeping negative general conclusions about documents either not being in the possession of the defendant, or not being received by the defendant, it emerged under cross‑examination that Mr Arif's own efforts in terms of his seeking to locate relevant documents of the defendant, were less than adequate. The locations for documents possibly held by the defendant was relevant in respect of Mr Arif's reference in his witness statement to his attempts to locate a 'Term Sheet' prepared by Credit Suisse First Boston (CSFB): see exhibit D115, par 26. The inadequacy of Mr Arif's efforts to locate documents, was also relevant to the plaintiff's invoices for progress payments said to have been despatched from Perth to Singapore by the plaintiff, as to which Mr Arif in his witness statement denied receipt by the defendant (see par 29 witness statement).
Under cross‑examination, however, it was plain that Mr Arif's own efforts were wholly inadequate to reliably ascertain what documents might or might not have been held at the defendant's Singapore office. Mr Arif attempted to explain that inadequacy of inquiries (as to what might or might not have been held at the defendant's Singapore office), see ts 251 ‑ 252, essentially on a basis that because he was located in Kuala Lumpur, he did not have ready access to Singapore records of the defendant. In my view, however, this explanation was a feeble attempt to justify the unjustifiable. The gross inadequacy of Mr Arif's efforts to locate documents strongly detracts from the reliability of the bare negative assertions by way of an asserted conclusion of non‑receipt by the defendant in his witness statement which are a central plank of the defendant's case to the effect that the plaintiff's four instalment invoices were not received at Singapore, or at all.
(f)Mr Arif also gave inconsistent evidence on many occasions. A particular illustration can be seen at ts 242, as regards the issue of what he had (not) reported to his Board concerning the alleged oral arrangements reached with Mr Abdullah concerning the plaintiff's obligation to arrange the purchaser finance for the defendant, as regards acquisition of Yard 207. Initially, Mr Arif could not recall making any report to his Board on the issue, either written or oral, as to the circumstances in which he came to execute the shipbuilding agreement. His attention was drawn to certain minutes of a board meeting of the defendant (which refer to Mr Arif chairing that meeting - see exhibit TB(D), page 845) that contain no mention of the Arif/Abdullah conversations. Then followed this evidence under cross‑examination - ts 242:
You have said to me that you did not tell the board, orally or in writing, about the shipbuilding agreement?‑‑‑Yes, I did inform the board.
Now you are saying you did inform the board?‑‑‑Yes, I did inform the board of directors.
What did you inform them?‑‑‑I told the board of directors that we intend to purchase a boat from Abdullah if we get the finance from them.
Why is that not in the minutes?‑‑‑That I don't know.
(e)Mr Arif was also unable to explain why it was that after receipt of a letter of demand from the plaintiff's solicitors (see exhibit TB(D), page 911) dated 25 November 2004, in circumstances where Mr Arif was admittedly the director responsible for the conduct of the defendant's defence to this litigation, a response from the defendant's Singaporean lawyers, M & A Law Corporation Advocates and Solicitors (exhibit TB(D), page 916 and 919) makes no reference whatsoever to any oral arrangements involving Mr Arif and Mr Abdullah concerning the arrangement of purchaser finance for the defendant by the plaintiff. The response merely asserts (see page 919):
Our client is of the view that the contract between Wavemaster International Pty Ltd (Wavemaster) and JR Marine Systems Pte Ltd was terminated by Wavemaster's conduct on the basis that Wavemaster acted inconsistently with the terms of Contract by attempting to market the vessel to a third party without informing J R Marine of its actions.
In the circumstances, our clients deny being indebted to Wavemaster, as claimed or at all. All our clients' rights are expressly reserved.
[It emerged that the defendant's first Defence filed in these proceedings, dated 12 April 2006 (of some ten paragraphs) also makes no reference to any oral arrangements concerning the plaintiff's alleged obligation to secure the purchaser finance for the defendant's acquisition of Yard 207.] All this, I think, bears strongly against the credibility of such a fundamental cornerstone of that defence premise as is now pursued by the defendant. I would have expected such a pivotal matter to have been raised in defence against the plaintiff far earlier in the litigation.
All in all, then, I found Mr Abdullah's evidence, once exposed by cross‑examination, to be wholly unreliable.
As regards the defendant's claim for rectification of the written Shipbuilding Agreement by insertion of a further qualifying clause, essentially making formation of the Shipbuilding Agreement conditional upon the plaintiff's prior procurement of purchaser finance for the defendant, a critical exchange occurred during Mr Arif's cross‑examination - see ts 233 ‑ 234. Mr Arif had been taken to an earlier affidavit he had sworn in those proceedings on 13 July 2006 - resisting (successfully) the plaintiff's then attempt to obtain summary judgment. Mr Arif had said this, at pars 11 and 12 of his July 2006 affidavit:
11.I had known some of the directors of Wavemaster for a long time as they were also involved in the shipbuilding business. The friendship is for more than 5 years, since 2001. J R Marine did lend some money to Wavemaster ($275,957) on an interest free friendly loan basis. None of the monies lent were for the account of the vessel. This relationship and the interest free loan is the reason why neither Mr Haij Mohd Noordin Bin Abdullah nor myself needed to put the above verbal agreement into the Shipbuilding Agreement.
12.I am endeavouring to locate Mr Haij Mohn Noordin Bin Abdullah. It seems he is in Ghana on business. I will attempt to have him read this affidavit and swear an affidavit to corroborate mine as soon as possible.
The following exchange occurred by reference to Mr Arif being taken to paragraph 11 of his July 2006 affidavit, see ts 233 ‑ 234:
You don't agree that that sentence says that 'This relationship and the interest free loan is the reason why neither Mr Abdullah nor myself needed to put the above verbal agreement into the shipbuilding agreement'. You don't think it says that?
THE INTERPRETER: He is asking whether this 'needed to put' means you want agreement - I and Mr Abdullah needed to put agreement - this thing into agreement. Is that what you mean?
No. This is his evidence, it's his affidavit. He has previously sworn this statement. He has said that there was some verbal agreement and because of the relationship and the interest‑free loan that existed, that was the reason why he and Mr Abdullah did not need to put the verbal agreement into the shipbuilding agreement?‑‑‑Yes.
That's true?‑‑‑It's true.
So there was a decision made not to put it in the agreement because it was not necessary?‑‑‑Yes.
To my mind, those last two answers from Mr Arif as quoted above, are fatal to the premise underlying the defendant's claim for rectification, namely that the content of the written Shipbuilding Agreement, by omission or mistake, somehow failed to encapsulate the complete extent of the bargain as between the parties, and in particular, as regards any issue of an accepted obligation by the plaintiff to first secure purchaser finance for the defendant.
Counsel for the defendant attempted to rehabilitate this issue in re‑examination - see ts 271 - by questions to Mr Arif in the following terms:
It was said to you yesterday that a decision was made not to put the oral agreement for purchase finance into the agreement. I'm confused about what you said. What is your answer to that question? Was a decision made or not?‑‑‑My answer was it should be by right, should be included.
But did you and Mr Abdullah decide to make an actual decision to leave it out of the shipbuilding agreement?‑‑‑Please repeat the question.
Did you and Mr Abdullah actually decide, positively make a decision, to leave it out, the oral agreement, out of the shipbuilding agreement?‑‑‑No.
In my view, even putting aside the global unreliability of Mr Arif's evidence, as I assess it, that evidence in re‑examination does not go far enough towards grounding a platform for rectification of the Shipbuilding Agreement. What is required to obtain the equitable remedy of rectification is cogent, reliable evidence that a term or provision which the parties commonly intended be part of their written agreement has, by reason of error or omission, not found its way into the final written instrument. The evidence from Mr Arif on this issue overall falls far short of establishing any, let alone a convincing basis for rectification, in my view.
Mr Arif was also asked, towards the end of his cross‑examination, about a document submitted to the Australian Taxation Office in September 2004 (16 September 2004) by Mr Abdullah, on behalf of the plaintiff. See exhibit TB(E) commencing at page 1142, bearing Mr Abdullah's signature at 1145, and underneath carrying a declaration to the effect that the information supplied in the application to the Australian Taxation Office was true and correct, and that all relevant information had been included.
That application on behalf of the plaintiff to enter an arrangement to remit tax by instalments, contained this question, at page 1150:
5.Reasons why the business is unable to pay its debt. State fully the reason[s] why you cannot pay in full by the due date
Underneath this heading, was provided the following response:
Our business source of revenue is from shipbuilding contract payments signed with client. In the past, all our clients have fulfilled their payments obligation and so far we never failed to meet our tax payment. However, our Singaporean client namely, JR Marine Systems Pte Ltd, is unable to honour their payments obligation for the construction of a 37.5 metres fast monohull ferry known as Yard 207 worth AUD5.935 million. The progress claims due to us is AUD4,748,000 and in view of the non‑payment of our progress claims, our cashflow was affected and therefore we are unable to reach the tax payment on its due date.
Question:
Are the business financial difficulties temporary?
Answer:
Yes.
Question:
If yes, when is it expected that the financial situation will improve?
Answer:
We anticipate our financial situation will improve by December 2004.
Questioned in cross‑examination about what Mr Abdullah had declared to be correct information, Mr Arif, naturally enough, took issue with this, see ts 267 and 268.
Mr Abdullah was called as the defendant's next witness, notwithstanding that he was at material times, a director of the plaintiff.

Mohd Noordin Bin Dato' Abdullah (witness statements, exhibits D120A and D120B))

Mr Abdullah described himself as a director of the plaintiff and chairman of WaveMaster International Pte Ltd. Notwithstanding a prima facie alignment to the plaintiff's side of the case, Mr Abdullah was called as a witness by the defendant at the trial. His witness statement, D120A and D120B, were tendered as his evidence‑in‑chief on behalf of the defendant.
Mr Abdullah (par 7) referred to PSC Industries Berhad, a Malaysian listed company at the apex of the PSC Group of companies. The PSC Group of companies had included the plaintiff, Penang Shipbuilding and Construction Sdn Bhd (PSCSB) and PSC Naval Dockyard Sdn Bhd.
By his witness statement, Mr Abdullah related that between March 2002 and September 2002, he was personally aware that the plaintiff had commenced construction of two vessels known as Yards 207 and 208, and that this had begun in the year 2001. He observed that the chairman of the board of directors, Mr Tan Sri Dato' Amin Shah (Amin Shah) 'would fund the construction of Yard 207 and Yard 208'. Further, he said that there were 'some negotiations between the Plaintiff and the Defendant about the purchase of two vessels from the Plaintiff'.
Mr Abdullah related that to his knowledge, negotiations about the two vessels with the defendant were carried out by the then managing director of the plaintiff, Mr Gerrard. He provided no further detail.
He also related that, to his knowledge, in January 2003 the plaintiff had entered into an agreement with the Italian company, Usticia Lines S.p.A., to buy another vessel to be constructed, Yard 208, and with an option for it also to buy Yard 207.
Mr Abdullah said that to his knowledge:
11.… both the plaintiff's construction finance for Yard 208, as well as Usticia Lines S.p.A.'s purchase finance were approved by Caterpillar Finance Europe, and drawn down.
As to the business relationship of the plaintiff with the defendant, Mr Abdullah said:
12.I had known some of the directors of the Defendant for a long time as they were involved in the same business.
13.It was based on that relationship that in or about March 2002, the Defendant advanced an interest-free loan in the sum of $488,787 to the Plaintiff.
Mr Abdullah said that in or about August 2003, the plaintiff was experiencing cashflow problems, so that the construction of Yard 207 was progressing very slowly as a result. At pars 16 through to 22 of his witness statement Mr Abdullah described what he refers to as a September 2003 meeting with Mr Arif. He said:
16.In or about September 2003, I met Mr Mohd Zin Bin Arif (Arif), whom I have known for some time, and who was a director of the Defendant, with a view to getting the Defendant to buy Yard 207 from the Plaintiff.
17.At that time, i.e., on or about September 2003, there was a meeting between Mr Arif and I at my office at PSCSB in Malaysia along Jalan Bukit Nanas.
In par 18, Mr Abdullah seeks to relate what occurred at the meeting at his office.
It is not necessary for me to set out par 18 of Mr Abdullah's witness statement. It substantially replicates pars 12a, b and c of Mr Arif's witness statement, which I have earlier set out verbatim above. Mr Abdullah says that during that meeting he did not say that the vessel to which he referred was either 'the vessel or Yard 207' (substantially replicating what Mr Arif says in par 13 of his statement).
Paragraph 20 of Mr Abdullah's statement seeks to relate certain words which he says Mr Arif said to him at this meeting. Again, there is no need for me to set them out, as they substantially replicate what Mr Arif says in pars 14a, b, c and d of his own statement.
Mr Abdullah, at par 21, next says that he said words to Mr Arif to the effect that, 'the Plaintiff will raise financing for the Defendant so it could purchase the Vessel', thereby substantially replicating what Mr Arif said Mr Abdullah said to him, at par 15 of Mr Arif's statement.

Mr Abdullah was extensively cross‑examined as regards the content of his witness statements.
It is apparent that Mr Abdullah's witness statement, exhibit 120A, had been constructed to closely mirror the evidence‑in‑chief seen in the witness statement of Mr Arif, thereby presumably seeking, on behalf of the defendant, to create, as regards their respective evidence, a degree of apparent consistency, particularly as to the critical meeting between Mr Abdullah and Mr Arif at Mr Abdullah's offices in Kuala Lumpur in September 2003, prior to the execution by the parties of the written Shipbuilding Agreement at Langkawi. However, the intellectual scrutiny of the cross‑examination process swiftly exposed Mr Abdullah, in my assessment, as an unreliable witness in many respects. I mention the following matters, causing me to form, overall, a negative impression as to the reliability of Mr Abdullah's evidence:
(a)Mr Abdullah was forced to accept that he, like Mr Arif, also suffered from a weakness of memory in a number of respects. Once taken away from the refuge of a witness statement, his grasp of detail presented as very shaky. On occasions he sought to attribute this to his age of 68 years, characterising himself as an 'old man'. One illustration of Mr Abdullah's poor memory concerned the issue of his being asked whether he had ever read an affidavit or statement by Mr Arif (dealing with the events concerning the alleged oral agreement reached between them at his office in Kuala Lumpur, prior to execution of the Shipbuilding Agreement). Initially, Mr Abdullah believed he had not seen any affidavits or statements by Mr Arif. However, it soon became apparent that his memory in that respect was unreliable. He was shown his own earlier affidavit of 28 May 2007 in these proceedings, at par 6, which expressly referred to his having read an affidavit of Mr Arif of 23 May 2007 (and which, at par 7, deals with the events of the alleged Kuala Lumpur meeting between the two men). Paragraph 6 of Mr Abdullah's affidavit said:
I have read the affidavit of Mohd Zin Bin Arif sworn 23 May 2007 (Arif's affidavit) and I corroborate the facts deposed to in paragraph 7 of Arif's affidavit. In particular, the meeting I referred to in the above paragraph 5, is the same meeting referred to in paragraph 7 of Arif's affidavit.
(b)This exchange also shows that as far back as May 2007, Messrs Abdullah and Arif had seen each others respective versions of events concerning their meeting. In Mr Arif's affidavit of 23 May 2007, at par 13, he had said:
I am endeavouring to locate Mr Mohd Noordin Bin Dato' Abdullah. I believe he is in Ghana on business. I will attempt to have him read this affidavit and swear an affidavit to corroborate mine as soon as possible.
Mr Arif, in his cross‑examination, had initially denied any collaboration with Mr Abdullah, as regards the men's respective versions of events - until confronted with the content of par 13 of his own affidavit.
(c)At times Mr Abdullah, in my assessment, sought to obfuscate, rather than directly answer questions put to him, particularly in situations where he thought a direct answer might not advantage the defendant's case. This recurring phenomenon of unresponsiveness in his answers to questions in cross‑examination, can be illustrated by one exchange at ts 296 ‑ 297, concerning the issue of whether Mr Abdullah had ever personally attempted to raise finance for the defendant (purchaser finance), subsequent to the entry of the Shipbuilding Agreement. At ts 297, this exchange occurred:
You yourself made no attempt to raise finance - you yourself?‑‑‑I myself?
Yes?‑‑‑Personally?
Yes?‑‑‑Not me; the group, yes - the person.
Mr Abdullah was then taken to par 29 of his witness statement, exhibit D120A, which is in these terms:
Sometime in early 2004, I did attempt to raise financing for the Defendant to purchase the Vessel from Credit Suisse First Boston, Singapore (CSFB). CSFB issued a draft term sheet specifying the terms and conditions of the loan. I cannot find it now.
When that inconsistency was put to Mr Abdullah, the following exchange occurred - ts 297:
I am just trying to understand whether what you have sworn to in this statement …?‑‑‑And what I have just said to you - - -
- ‑ ‑is consistent?‑‑‑It's not consistent.
It's not.You would agree with me?‑‑‑Yes.
It's inconsistent?‑‑‑But then the story is the same.
Then followed my question:
Mr Abdullah, is what you have said in paragraph 29 correct or incorrect?‑‑‑I did attempt - the group is going, but I did - I'm part of the group.
Did you personally attempt to raise finance or did Shamsul [another director of the plaintiff] attempt to raise finance?‑‑‑Shamsul. If that's the question you want, Shamsul.
Not you?‑‑‑Not me personally, but a group, yes.
DHARMANANDA, MR: So that's incorrect?‑‑‑The way you put it that way, yes.
Yes. So are you saying that whenever you use the pronoun 'I' it could mean anyone?‑‑‑It could mean the group or the team that we look for for the financing, but I being the director, 1.11 put myself as 'I' all the time.
To my mind, this most unsatisfactory exchange, was but one illustration of the lack of overall responsiveness in regard to answers by Mr Abdullah and also illustrates a base inability on his part to differentiate as between his personal conduct, in contrast to conduct of the plaintiff by its agents or employees. That vice permeates Mr Abdullah's evidence generally, in my assessment.
(d)It was confirmed that there were no written notes or records by Mr Abdullah (or by Mr Arif, for that matter) concerning the important (from the defendant's perspective) face to face meeting held at his office with Mr Arif in September 2003, prior to the execution of the Shipbuilding Agreement.
(e)When questioned about whether the outcome of the Kuala Lumpur meeting concerning an alleged obligation upon the plaintiff to secure purchaser finance for the defendant had been reported to his fellow directors of the plaintiff, Mr Abdullah was, again, uncertain in his response: see ts 300, concerning Mr Abdullah's asserted belief that he told his fellow director, Shamsul, but with speculation as to whether or not he told his fellow directors, Gerkens or Dubljevic - ts 300 ‑ 301.
(f)Mr Abdullah was taken through a series of documents in exhibit TB(D) at pages 813, 842 and 861, respectively. The content of those documents, particularly the document of 8 December 2003, at 842, is difficult to align with Mr Abdullah's recognition of any obligation in the plaintiff by way of precondition, as regards the prior obtaining of purchaser finance for the plaintiff. In exhibit TB(D), page 842, Mr Abdullah is seen to write to the plaintiff's management and other Malaysian personnel associated with the plaintiff's parent companies, on 8 December 2003, under the subject heading, Financing for JR Marine Ferries, stating:
With reference to the above matter, JR Marine finance application to Caterpillar for the purchase of ferries built by WMI may not go through. However, it is understood that WMI will make an application to CAT directly in its own name and pay it back as the progress payment is received from JR Marine.
Implicit in what was written by Mr Abdullah on 8 December 2003, as to progress payments being expected to be received by JR Marine, in circumstances where a finance application by it or on its behalf to Caterpillar was not going through, is that the defendant remained obligated to the plaintiff. That premise is fundamentally inconsistent with the purchaser finance precondition, said to have been settled upon, as between Mr Arif and Mr Abdullah at Kuala Lumpur, prior to the Shipbuilding Agreement being executed.
(g)Mr Abdullah, in his witness statement, had related an understanding of his discussion with Mr Arif, in these terms:
22.… it was the understanding between Mr Arif and I that:-
a.Mr Arif agreed to purchase the vessel if the Plaintiff raise the financing for the Defendant to do so; and
b.unless and until the Plaintiff had procured financing for the Defendant, the Plaintiff would not continue with the building of the Vessel i.e. that the Defendant was not required to purchase the Vessel - nor to pay any deposit.
The similarity as between par 22 of Mr Abdullah's witness statement and par 16 of Mr Arif's witness statement, even down to common bad grammar, as seen in subparagraph 22 (ie, 'raise' the financing - rather than 'raised' the financing), is negatively striking - as to an overall implausibility.
(h)Mr Abdullah acknowledged that he was not present at the signing ceremony for the Shipbuilding Agreement at Lankawi (see ts 297 ‑ 298). That, I think, is of negative significance in regard to whether or not the written Shipbuilding Agreement in its terms, should be qualified in some fashion, by regard to what is alleged to be an anterior Kuala Lumpur oral agreement, or by representations there made, and giving rise to some form of estoppel arising out of the result that meeting between Mr Arif and Mr Abdullah.
(i)Mr Abdullah was questioned about the document bearing his signature submitted to the Australian Taxation Office on behalf of the plaintiff seeking to remit tax under an instalment arrangement as at 16 September 2004. See exhibit TB(E), page 1142 to 1145, the relevant content of which I have set out above at [87]. Mr Abdullah was confronted with the statement made under the heading: '5. Reasons why the business is unable to pay its debt. State fully the reason(s) why you cannot pay in full by the due date.'
This document caused considerable consternation to Mr Abdullah. Plainly, the statement made, in unqualified terms as regards the progress claims and debt said to be due by the defendant in the amount of $AUD4,748,000, is irreconcilable with the preconditional purchaser finance condition, as is now relied on by the defendant and ostensibly supported by Mr Abdullah.
At first, Mr Abdullah said that he had simply signed the Tax Office form in blank for the plaintiff, before he left urgently for overseas. He accepted that this had been a particularly foolish act by him, as an experienced businessman and ex‑banker. But nevertheless, he said that he had just signed a form in blank - see ts 306.
Mr Abdullah was then asked what information, if anything, he had contributed to what is seen to appear under section 5 of page 1150, exhibit TB(E).
It was at this point that Mr Abdullah sought to invoke 'privilege' (seemingly privilege against self‑incrimination) before responding.
Bearing in mind Mr Abdullah's expressed consternation about answering substantively and s 11(1) of the Evidence Act 1906 (WA), I indicated that I would be prepared to grant Mr Abdullah a certificate of indemnity, in due course, in the event that I assessed his following answers to questions put, as satisfactory. Questioning continued with Mr Abdullah being asked whether the information provided to the Tax Office under section 5 was true or not (ts 310). Eventually, Mr Abdullah provided this answer:
My lord, whichever answer that I give will not satisfy to anybody so I've got to answer it truthfully, whether to me this is true or not? My answer is, based on what they must have written, bearing in mind I signed the form, it must be true, but - ah, the answer 'but' is not wanted. Okay, I'm so sorry but I cannot give - the answer I give I don't know, how am I going to answer? I don't know how to answer it.
DHARMANANDA, MR: You don't know how to answer it?‑‑‑Because I signed the form (ts 310).
Counsel for the defendant, in re‑examination of Mr Abdullah, returned to this issue, at ts 312, after he had foreshadowed a possible application to have Mr Abdullah declared as a hostile witness. This series of questions followed in re‑examination, at ts 313, as to the information provided to the Tax Office, and seen at exhibit TB(E), at page 1150:
You see, there's a statement that Mr Dharmananda has taken you to. That's Mr Dharmananda here. He is saying to you in effect that JR Marine is unable to honour its payments obligation and the progress claims due to us is $4.748 million. But that's not true, is it?‑‑‑The way you - my lord, is depending on the depression, being what I am.
Yes?‑‑‑Now, when you say it that way, this is not true, because back to the whatchamacallit, email, corresponding, and what I know what I sign, because JR Marine do not owe Wavemaster on this because we are supposed to do the whatchamacallit, look for the loan for them. We fail.
So are you saying that 1150 at paragraph 5 means that the money is owed, but only if the purchase finance is found for JR Marine. Is that what you're saying?‑‑‑Yes.
(My emphasis added in italics)
Notwithstanding Mr Abdullah's responses provided in re‑examination, I can afford them no weight. Manifestly, notwithstanding that there was no objection to the obviously leading character of this questioning (which I have highlighted in italics) in re‑examination, the answers, in my assessment, are barely coherent, particularly when measured against the earlier cross‑examination to which I have referred.
Mr Abdullah's evidence on the issue is so unsatisfactory that I cannot accept him as reliable on this issue, or generally.
(j)As regards the claim for rectification, this exchange occurred at ts 301, as regards the Shipbuilding Agreement executed at Langkawi, at a signing ceremony not attended by Mr Abdullah. The questioning proceeded:
… Mr Arif has said that there was no need to write anything about the finance discussion he had with you in the Shipbuilding Agreement?‑‑‑Okay.
Do you agree with him?‑‑‑Yes.
I have already referred in my observations concerning Mr Arif's cross‑examination, to responses he gave to questioning over the omission to make any written reference to a financing precondition in the Shipbuilding Agreement, and that omission bearing adversely against the case by the defendant seeking to rectify the Shipbuilding Agreement to include a preconditional term to that effect. Likewise, the above response by Mr Abdullah also impacts negatively against any reliable basis being found for rectification of the Shipbuilding Agreement, as is contended for by the defendant. Mr Abdullah's response to questioning simply confirms that the Shipbuilding Agreement, drawn as it was, was not prepared in error or omission - as regards some missing term by way of a precondition that the parties finally settled upon, albeit (somehow) had mistakenly left out of their final written document.

Analysis of evidence at trial

On the basis of the tendered documents and the evidence from the three trial witnesses, the plaintiff contends for an entitlement to a liquidated amount due from the defendant to it, in the amount of $AUD4,748,000, plus interest. Alternatively, it seeks damages on a twofold basis, first under cl 9.3D, in effect as liquidated damages, or alternatively, in the event of an inapplicability of that avenue, then as general damages at common law, for breach of contract.
The defendant contends, in resistance to this claim, first for an anterior oral agreement, arising out of the meeting between Mr Arif and Mr Abdullah at Kuala Lumpur in early September 2003, the effect of which, it contends, is to negate, in material respects, any entitlement of the plaintiff to instalment amounts otherwise due under the Shipbuilding Agreement. Second, it contends for rectification of the Shipbuilding Agreement by addition of the condition precedent as to formation of that agreement, in terms to which I have already referred. Third, the defendant contends for the benefit of some species of estoppel which, by the pleaded defence and counterclaim, appears to be of a promissory character, based upon an alleged representation in the Abdullah/Arif meeting in Kuala Lumpur, as to the plaintiff's prior obligation to procure, for the defendant, purchaser finance. However, by its written closing submissions, and confirmed by its counsel in closing, the defendant identifies the nature of the estoppel contended for by it as a conventional estoppel - giving rise to somewhat different considerations to those applicable to the evaluation of a promissory estoppel - and as to which distinction, see Owen J in Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) [2008] WASC 239; (2008) 225 FLR 1 at s 15.3.4 as to the nature of an equitable (or promissory) estoppel and s 15.3.3 as to the nature of estoppel by convention as a species of common law estoppel.
The defendant also contends for what is, in effect, the abandonment of the Shipbuilding Agreement as to its performance obligations, and effected as between Mr Arif and Mr Abdullah, during some part of 2004.
In my assessment, the availability of all this relief as pursued by the defendant, is heavily dependent upon whether or not the evidence of Mr Arif and Mr Abdullah, particularly going to a September 2003 meeting at Kuala Lumpur at Mr Abdullah's office, preceding execution of the written Shipbuilding Agreement at Langkawi, can be accepted as reliable.
For reasons which I have earlier expressed in evaluating their respective evidence, I am unable to conclude that any verbal consensus reaching the level of binding agreement was ever achieved in oral discussion as between Mr Arif and Mr Abdullah. There are a number of reasons for this key conclusion. First, I am unable to place any reliance upon the reliability of the evidence given at trial by either Mr Arif or Mr Abdullah. Notwithstanding an ostensible compatibility of their versions of events, rendered via their respective witness statements as their evidence‑in‑chief, for the reasons I have already explained, I evaluated them both after cross‑examination, to be unreliable witnesses. Accordingly, no basis has been established from their evidence to make good an oral agreement arising out of what passed between these men at Kuala Lumpur in September 2003. Second, in the defendant's conduct of these proceedings, reference to this oral agreement emerged relatively late in the litigation, in May 2007, at the time of the defendant's resistance to the plaintiff's summary judgment application. I find it puzzling that such a fundamental aspect of the defendant's case, if it were truly a founding premise of the business relationship, by which the defendant was to purchase Yard 207, was not immediately and firmly articulated by way of defence, much earlier in 2004, as a primary basis upon which it would not be just for the plaintiff to pursue the defendant, either for moneys due as instalment payments, or for damages for breach of the Shipbuilding Agreement. The late emergence of this line of exculpation detracts, in my assessment, from its credibility, once ultimately put.
Third, there is no reference, it would appear, in any record or document of the defendant, to what on its case, would be a fundamental underlying premise of its decision to enter into the Shipbuilding Agreement with the plaintiff concerning Yard 207. I mention in this respect, the prima facie binding character of what parties commit to in writing. I especially note what the High Court has recently said about the importance to commerce of parties being able to establish certainty in their dealings by reducing their agreements to writing; see on that issue, particularly Equuscorp v Glengallan Investments Pty Ltd [2004] HCA 55 [35]; (2004) 218 CLR 471, at 483, applying the venerable L'Estrange v Graucob Ltd [1934] KB 394 line of authority (footnote (22) Equuscorp).
As regards the defendant's pursuit of an anterior inconsistent oral Kuala Lumpur agreement, it also seems to me that the plaintiff faces fundamental difficulties in seeking to qualify and to undermine, in a material way, the full force and application of the written terms of the Shipbuilding Agreement. The defendant's pursuit of what would be, in effect, a collateral contract, even if that could be established, seems to me to infringe, as a matter of legal principle, the rule in Hoyts v Spencer (1919) 24 CLR 133, which essentially rejects collateral agreements, where they are inconsistent with the content of the main agreement. To my mind, the anterior oral agreement as is here contended for by the defendant, would stand fundamentally at odds with otherwise unqualified payment obligations of the defendant as purchaser, as expressed by the comprehensive written terms of the Shipbuilding Agreement.

Mr Arif's inadequate efforts to reliably ascertain precisely what materials were held at the defendant's Singapore office, leaves me in a position that I am unable to attribute weight to the defendant's bare assertion, through Mr Arif, that the plaintiff's invoices were not received, especially since on their face, they are sent to a Singapore address, as nominated pursuant to cl 22 of the Shipbuilding Agreement.
In my view, the defendant's position lacks a sustainable edifice of reliable inquiry in order to ground a negative conclusion of likely non receipt.
Accordingly, I find on the balance of probabilities, that the plaintiff's invoices for the four progress payments were despatched by the plaintiff by Mr Mangano, in the ordinary course of business, to the correct Singapore address of the defendant, as specified in Annexure A of the Shipbuilding Agreement, in accordance with cl 22.2 of the Shipbuilding Agreement.
Accordingly, the plaintiff's first invoice for the deposit amount of $AUD593,500 was, in my assessment, received by the defendant and the plaintiff accordingly complied with all requirements, in my assessment, to validly establish its entitlement to that liquidated deposit amount.
I now turn to consider the plaintiff's case for damages.

Re ME Report: Plaintiff's damages case grounded upon cl 9.3 of the Shipbuilding Agreement

The plaintiff, in effect, pursues liquidated damages, in reliance upon an asserted application of cl 9.3D(ii) and 9.3F (there being no cl 9.3E) of the Shipbuilding Agreement.
The damages claimed are pursued upon the basis of amounts derived from a report prepared by Maritime Engineers Pty Ltd, for the then administrators of the plaintiff, dated 24 November 2004 - exhibit TB(D), pages 895 ‑ 908 (the ME Report).
The ME Report was introduced into evidence at trial by consent, without need for its authors (Messrs Kent Stewart and Mark Browne) to be called as witnesses. Some essential foundation information emerging from the ME Report, in respect of the incomplete Yard 207, is as follows:
(a)The contract price for the finished vessel was $AUD5,935,000 (referring to Annexure A to the Shipbuilding Agreement, in respect of the Basic Purchase Price.
(b)The aggregate of the four instalment invoices issued to the defendant by the plaintiff amounted to $AUD4,748,000.
(c)The incomplete Yard 207's hull, when ultimately sold off, realised only $AUD803,000.
(d)Selling costs associated with finding a buyer for the incomplete Yard 207's hull, amounted to $AUD24,090.
(e)The ME Report assessed the cost of completing Yard 207, as at 24 November 2004, as requiring an outlay of a further $AUD2,365,850.
With that founding base information, it is necessary to refer to some more detailed aspects of the ME Report, concerning Y 207. The ME Report provided:
1.VESSEL DESCRIPTION
…The vessel is designed to be capable of carrying a full complement of 170 passengers and eight crew at 29 knots. The vessel has a fuel capacity of 12,000 litres, providing a range of 475 nautical miles.
Propulsion is configured with three (3) 821 kw Caterpillar Model 3412E main engines driving a conventional driveshaft via ZF Model 1900 gearboxes to three (3) five‑blade bronze propellors.
…
3.BACKGROUND INFORMATION
…
The hull superstructure fabrication is complete however, a considerable amount of outfit fabrication is yet to be done.
Outfit of the vessel has progressed in all trades however, no completions have been made of any of the ship's systems or equipment.
The propulsion system is not installed and no major propulsion machinery is supplied.
The DNV Classification Survey presents a certain amount of concern as the proposed 1994 HSC safety code has now been replaced with the implementation of the 2000 Rules.
…
4.DET NORSKE VERITAS (DNV) CLASS ?
Investigation of available shipyard documentation has revealed that no formal agreement had been signed with DNV for the Classification of this vessel and no fees have been paid.
Furthermore, no 'survey during construction' of the vessel structure has been 'signed off' by DNV.
,,,
5.1HULL AND FABRICATION
All major fabrication of the hull and superstructure is complete with approximately 5% (of total) remaining. This is predominantly outfit fabrication (masts, rails, engine room floor plates and fittings, etc).
5.2OUTFIT
…
Machinery Spaces
No main engines or gearboxes are fitted. Both auxiliary generator sets are installed but not connected to fuel or cooling services. No electrical work is completed.
Paragraph 6 of the ME Report is particularly relevant to the plaintiff's claim for liquidated damages. I set it its terms in full, as follows:
6.VALUE OF CONTRACT
Our research has revealed several original quotation budgets for this Class of Vessel built at Wavemaster since 1999/2000.
Preliminary raw costings carried out in 2002 appear to have budgeted the cost to the shipyard (ie 'at cost') to be slightly over
$A[UD]4,000,000
This figure would have been based on building a series of vessel concurrently where economy of scale can be applied. Allowing for this vessel being built as single build plus current industry escalation (labour and materials over 2 years to 2004) this figure appears to be slightly conservative.
A later budget was carried out this year for a commercial sale to an Italian customer for a different scope of supply in terms of fitout. We have adopted these costs to allow for escalation of manufacturing cost (and the fact that it was a single vessel build) and adjusted the scope of supply to mirror the actual build to that matching the specification for JR Marine.
This figure is estimated to be approximately
$A[UD]4,700,000
COMMENT
We consider this figure to be a more realistic reflection of the subject vessel's value had the project progressed to completion.
These figures are direct construction costs only, do not contain any element of shipyard overheads or profit.
My reading of the ME Report, particularly par 6, is that the abovementioned assessed amounts of $AUD4 million and $AUD4.7 million, as referred to in par 6, are references to the then budgeted cost - to complete Yard 207, from start to finish.
In other words, and contrary, I think, to the plaintiff's construction of par 6, I do not read the ME Report as saying that the cost of actually finishing Yard 207 from the partly finished (45%), but incomplete state it had then reached, ie, as at November 2004, was a further $AUD4 million, or $AUD4.7 million. I assess that further amount as then required to complete Yard 207, as at November 2004, as I have set out above, as the lesser amount of $AUD2,365,850.
Paragraph 7 of the ME Report then deals with the assessment by the authors of the value of work in progress, as regards the incomplete Yard 207 at that time. It provides:
7. VALUE OF WORK IN PROGRESS
We have analysed the content of the construction of the vessel as it stands currently at the Wavemaster site.
Reference is made to our Cost Estimate spreadsheet (Annexure 1).
In this spreadsheet we have summarised the costs for work completed to date and formulated estimates of labour and materials necessary to complete the vessel (at cost).
Based on these expenditure figures we estimate the vessel to be approximately 45% complete as it now stands.
Based on expended man hours, the vessel is closer to 70% complete.
However, a number of major capital items are still to be purchased. These items are set out in Section 8 below.
Our calculations resulted in a value of work to date of slightly over $AUD1,700,000. [my emphasis in bold]
A cost estimate spreadsheet is contained at Annexure 1 to the ME Report, see exhibit TB(D), at pages 909 to 910. Under a broad heading, 'Cost Estimates', there are two subheadings, namely 'Completed Work' and 'Labour and Materials for Completion'. A further subheading, 'Existing Value of the Completed Works', on page 2 of the spreadsheet, eventually shows a total figure of of $AUD1,791,000. The concluding total for the labour and materials for the completion collation at page 2, shows an end figure of $AUD2,365,850.
I note that this annexure estimate concludes with a note: 'estimates do not allow for labour on costs (approx 35% on labour costs in Australia) or any shipyard overheads'.
In my assessment, the correct interpretation of the ME Report, based upon its entire content, is that the existing value of the unfinished Yard 207, assessed at 24 November 2004, was $AUD1,791,000, a figure seen at the conclusion of the Completed Works Existing Value Column, on page 2 of the Annexure. That amount is also the amount referred to at the conclusion of par 7 of the ME Report. The operative phrase is 'Existing Value', seen in the Annexure as regards the Completed Works as at 24 November 2004.
The Completed Work Existing Value Figure, however, does not describe the amount of already outlaid funds in respect of the construction of Yard 207 by the plaintiff, up to November 2004. The evidence at trial uncontroversially establishes that the plaintiff had, by November 2004, already expended considerably more than $AUD1.7 million in respect of progressive construction of Yard 207, but such outlaid funds by the plaintiff do not, of course, represent any sort of reliable existing value assessment of Yard 207 in the marketplace for an incomplete Yard 207, as at 24 November 2004
By November 2004, the plaintiff had, of course, invoiced the defendant by four progress instalment invoices for a total amount of $AUD4,748,000, as of 5 March 2004, under the progress payment instalment regime established by Annexure B of the Shipbuilding Agreement.
It is necessary to refer to some further components of the ME Report, as follows:
9.2MARKET ACTIVITY
…New building programs for vessels of this type are strong and the demand for late model secondhand vessels is good.
Indications are that on completion, this vessel could likely realise a fair market value of up to $AUD4,000,000.
However, expenditure necessary to complete the vessel is well in excess of $AUD2,300,000.
The completion of this vessel involves considerable risk as well as high expenditure. The DNV Survey reinstatement and the acceptance of the 1994 HSC Rules being the foremost problems to be resolved.
A concluding valuation in the ME Report for Yard 207, is found at par 10:
With reference to section 7 we consider that the $A[UD]1.7 million value of Work in Progress must be discounted by taking into account all of the factors discussed above in Notes of Valuation.
To this end, we consider the vessel's value as it stands, on an as is where is basis to be
$A[UD]600,000 - A[UD]930,000
…
These valuations were given on 24 November 2004 at Fremantle, Western Australia.

The plaintiff's computation of liquidated damages under cls 9.3D(ii) and 9.3F of the Shipbuilding Agreement

The first basis upon which the plaintiff pursues (liquidated) damages, invokes cls 9.3B(i), 9.3D(ii) and a 'deficiency of Cash Receipts' claimed under cl 9.3F of the Shipbuilding Agreement, which I have set out earlier in these reasons. See [43] above.
The plaintiff's closing written submissions (par 44) contend:
On a commercially sensible construction of cl 9, the Plaintiff is entitled to damages in the amount of $3,221,090 (being $4,000,000 + $24,090) - $803,000.
I do not accept this calculation of liquidated damages by the plaintiff under cl 9.3F as appropriate.
In the first place and fundamentally to my view, it must be remembered that Yard 207 was never completed. The plaintiff's written submissions, in effect, contend that this is no obstacle to the application of cl 9.3D(ii), when read with cl 9.3B. My attention was drawn to the definition of 'Vessel' (which I have set out above; see [34]), and the plaintiff observes, correctly, that the definition of 'Vessel' could extend to embrace an incomplete vessel.
My construction difficulty, however, arises from other terminology used in cl 9.3B(ii) and 9.3D(ii)(b), which refer respectively to completing construction of the vessel in accordance with the Shipbuilding Agreement, and then to selling it, after completion.
At its commencement, subclause 9.3D(ii)(b), contains reference within the defined term 'Builder's Damages', to the reasonable costs, charges, expenses and liabilities incurred by the Builder in connection with completion of the construction, as is provided in cl 9.3B. (I read that reference to cl 9.3B as meaning, in context, a reference to cl 9.3(ii) only - since (ii) refers to 'complete construction', and (i) does not.) The balance of subclause 9.3D(ii)(b) proceeds to specify 'an amount equal to gross profit calculated at the rate of 11%', in order to generate what is referred to and is defined collectively under the term of 'Builder's Damages'.
My reading of these clauses, in context, leads me to a conclusion that a pursuit by the Builder of a 'surplus' or a 'deficiency', derived and calculated by reference to a phenomenon of what are defined as 'Builder's Damages' via cl 9.3F, is only appropriate in circumstances where what has been an incomplete vessel, at some point, has then in fact subsequently been completed by the Builder, ie, before an eventual sale by the Builder of a complete finished vessel.
In the present case, that did not ever occur for the always incomplete Yard 207.
When sold by the plaintiff's administrators, the incomplete Y 207 only realised in the marketplace the amount of $AUD803,000.
Accordingly, in my assessment, the pathway to what is, in effect, a claim for liquidated damages as a 'deficiency' calculated by reference to 'Builder's Damages', is not available to the plaintiff here, in circumstances where Yard 207 was never completed by the Builder/plaintiff.
Accordingly, I am unable to accept the plaintiff's claim for a liquidated damages amount - reliant upon invocation of cls 9.3B(i), D and F of the Shipbuilding Agreement.

The plaintiff's alternative claim to common law damages

Notwithstanding my view that the plaintiff is not entitled to pursue 'Builder's Damages' under cl 9.3F of the Shipbuilding Agreement, I do accept, as correct in principle, the plaintiff's further submission that nothing in the Shipbuilding Agreement constitutes a basis upon which to deny the Builder its recourse to a common law right to pursue damages for breach to the Shipbuilding Agreement. In my assessment, it would take more than a specification of a mechanism under a contract which provides a possible liquidated damages outcome, to have the end consequence of constituting a bar against an invocation of the plaintiff's common law right to damages for breach of contract. See generally Concut Pty Ltd v Worrell [2000] HCA 64; 75 ALJR 312 at 23 and Newmont Power Pty Ltd v Barrick Gold of Australia [2008] WASCA 74 per McLure JA [38], [39].
At common law, a plaintiff is entitled to be compensated in damages for breach of contract, insofar as money is able to do so, to the extent necessary to restore that plaintiff to the position it would have been in, had the defendant not breached its obligations of performance under the contract. This is sometimes referred to as expectation loss. That principle, in the present case, when applied, requires a conclusion that the plaintiff should, at completion of the Shipbuilding Agreement in respect of Yard 207, have been able to expect to receive at least the Basic Contract Price of $5,935,000, in exchange for it delivering to the defendant, as Purchaser, a completed vessel in accordance with the specifications of the Shipbuilding Agreement.
The defendant, as Purchaser, in my assessment, is in clear breach of its obligation to render to the plaintiff the deposit amount of $AUD593,500 which was due shortly after despatch of the plaintiff's first invoice, W207001, of 8 October 2003, and which I have found was received by the defendant at its Singapore address, as stipulated on its invoice. The deposit amount was not paid, either in 2003 or 2004, or at all, as it should have been.
It is true that the plaintiff did not press the defendant for payment of that or any amount throughout the course of 2004, prior to it going into Administration in November 2004. But that does not detract from its ultimate right to receive an accrued entitlement to a payment under the Shipbuilding Agreement.
The plaintiff is certainly entitled, as I have found, to receive that deposit amount as a liquidated sum due and payable under the Shipbuilding Agreement as an accrued obligation of the defendant never complied with, prior to the plaintiff's' Administration.
The more relevant question, however, as regards the plaintiff's pursuit of common law damages for breach of contract, is whether the plaintiff is also entitled to damages over and above its entitlement to that liquidated deposit amount, bearing in mind that I have also concluded that there were deficiencies in the plaintiff's Interim Stage Certificates, as regards its invoices 2, 3 and 4, which inhibit the plaintiff from validly claiming those amounts as liquidated sums due and payable under the Shipbuilding Agreement.
It is necessary, in addressing this breach issue, to turn to correspondence that passed between the solicitors of the respective parties, towards the end of 2004.
On 25 November 2004, with the Shipbuilding Agreement subsisting, and as I have found, not abandoned by the parties, the plaintiff's solicitors, Messrs Clayton Utz, wrote to the defendant in Singapore, seeking payment of all four invoices, aggregated in the amount of $AUD4,748,000.
That amount was sought within three days of receipt of the letter, which threatened termination of the Shipbuilding Agreement 14 days thereafter, in the event of non‑receipt of the full amount as claimed see exhibit TB(D), page 911.
On 3 December 2004, M & A Law Corporation, Singapore solicitors acting on behalf of the defendant, responded, seeking time, so that they could 'seek full instructions' - see TB(D), page 916.
The plaintiff's solicitors agreed not to take any further action until 20 December 2004, under their response of 6 December 2004 (TB(D), page 917).
On 20 December 2004, the defendant's solicitors, M & A Law Corporation, then wrote to Messrs Clayton Utz, in the following, as I find, significant terms:
Our client is of the view that the contract between Wavemaster International Pty Ltd (Wavemaster) and JR Marine Systems Pte Ltd was terminated by Wavemaster's conduct on the basis that Wavemaster acted inconsistently with the terms of the Contract by attempting to market the vessel to a third party without informing JR Marine of its actions.
In the circumstances, our clients deny being indebted to Wavemaster, as claimed or at all. All our client's rights are expressly reserved.
In my assessment, the defendant's solicitors' response, wrongly asserting, in effect, that the Shipbuilding Agreement had been terminated, on the basis of the plaintiff's conduct, was erroneous, and unjustified. It amounted to an act of repudiation (or renunciation) on behalf of the defendant, in respect of the performance by the defendant of all further obligations under the Shipbuilding Agreement. The Shipbuilding Agreement remained on foot at that time, albeit that the defendant, to that point, was in breach - but only by failing to render payment of the deposit amount - correctly invoiced under invoice W207001 on 8 October 2003.
The defendant's solicitor's response of 20 December 2004 elevated matters, in my view. Its blunt content resulted in the plaintiff's solicitors, on 1 February 2005, see exhibit TB(D), page 920, responding to the defendant's solicitors, in these terms:
We refer to your facsimile to us dated 20 December 2004.
As your client has failed to make payment as requested in our letter to it dated 25 November 2004 a copy of which we enclose, the agreement has now terminated.
Please inform us whether you have instructions to accept service on behalf of your client.

I assess the response of 1 February 2005 by the plaintiff's solicitors, as, in effect, the elected acceptance on behalf of the plaintiff of the defendant's repudiatory breach (renunciation) of the Shipbuilding Agreement - as embodied in the letter of 20 December 2004.
In light of the content of that December 2004 letter, the plaintiff, by its solicitors, was fully justified, in my assessment, in then electing to accept a wrongful repudiatory breach (or renunciation) of the defendant's obligations of future performance of the Shipbuilding Agreement; see Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115, per Gleeson CJ, Gummow, Heydon and Crennan JJ, who said:
First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the parties' obligations. It may be termed renunciation [44].
Accordingly, in my view, all parties' obligations of future performance under the Shipbuilding Agreement terminated as at 1 February 2005, upon the valid election of the plaintiff by its solicitors - to accept the defendant's repudiatory breach, as had been communicated by the defendant's Singapore solicitors - as at 1 February 2005.
Accordingly, in addition to holding an entitlement to such amounts as had accrued due to it prior to 1 February 2005 (namely the deposit amount of $AUD593,500), the plaintiff is also entitled to be compensated by common law damages arising out of the defendant's repudiatory breach of the Shipbuilding Agreement, leading to its termination, with those common law damages for breach being assessed, as at 1 February 2005 - on a basis of monetary compensation to the plaintiff to render it towards the expected position it would have been in - had the defendant adhered to its obligations of performance under the Shipbuilding Agreement.
Notwithstanding issues arising in respect of the inadequacy of the Interim Stage Certificates in respect of the plaintiff's claims for progress payments 2, 3 and 4, those were defects, in my view - capable of eventually being properly redressed in due course, had the Shipbuilding Agreement remained on foot and the plaintiff completed Yard 207, then entitling it to receive the Basic Purchase Price from the defendant.
The ME Report, essentially unchallenged at trial, compels a conclusion that in order to complete Yard 207, the plaintiff would have needed to have outlaid at least a further $AUD2,365,850 to get to the position of finishing Yard 207, so as to validly then claim the Basic Purchase Price from the defendant. That amount of $AUD2,365,850 should be deducted from the Basic Purchase Price, as should the liquidated deposit amount of $AUD593,500, to which the plaintiff has already proven an established entitlement prior to termination of the Shipbuilding Agreement. See McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476 ‑ 477.
Deducting those two amounts (ie, $AUD2,959,350) from the Base Purchase Price ($AUD5,935,000) produces a common law damages figure, for breach of the Shipbuilding Agreement, in the amount of $2,975,650.
From that amount must also be deducted the funds as received by the plaintiff in respect of the realisation in the market for the value of the incomplete hull for Yard 207 (less the costs of sale of $AUD24,090), ie, $AUD803,000 received for the hull, less the $AUD24,090 sale costs, generating a further deduction of $AUD778,910.
Essentially then, I would award to the plaintiff as common law damages, the Basic Purchase Price less the outgoing cost to the plaintiff, assessed as at November 2004, of completing unfinished Yard 207, and also deducting what the plaintiff then realised in the marketplace for the incomplete Yard 207.
Deducting $AUD778,910 from the figure of $AUD2,975,650 - derives the ultimate amount of $AUD2,196,740 common law damages.
In summary, therefore, the plaintiff, in my assessment, is entitled to receive:
(a)the amount of its first invoice for the deposit amount dated 8 October 2003 in the amount of $AUD593,500; and
(b)the further amount for common law damages I have assessed, at $AUD2,196,740.
The plaintiff should also receive interest on the deposit amount from a date 14 days subsequent to 8 October 2003, at the rate of 6% per annum. The plaintiff is also entitled, in my assessment, to receive interest at the rate of 6% on the damages figure of $AUD2,196,740, but only running from 1 August 2006 - and being eighteen months after the date upon which the plaintiff's solicitors gave notice to the defendant's solicitors in Singapore that the Shipbuilding Agreement was terminated, for breach. I have assessed that date on the basis that, as from 1 February 2005, I would assess it (conservatively) that it would have taken the plaintiff approximately a further 18 months to complete the then only 45% complete Yard 207 as at that time, in order to get the plaintiff to a position of receiving the Basic Purchase Price for a completed vessel.