'Sand ban excuse doesn't hold water'

SINGAPORE - An Indonesian ban on sand exports to Singapore was no reason for a concrete maker to halt supplies to a construction firm, the High Court has held.

It was ruling after a row between the firms erupted after Indonesia stopped exporting sand here in February 2007, citing environmental reasons.

Alliance Concrete Singapore told Sato Kogyo the ban had affected material costs and "frustrated" its contract with the construction firm. It said prices they had agreed to no longer applied, and a fresh deal should be signed. When Sato Kogyo then failed to pay for ready-mix concrete already provided by Alliance, the concrete maker sued - only for Sato Kogyo to counter-sue for losses incurred in seeking alternative suppliers when the ban had taken effect.

The court was not convinced by Alliance's argument. Justice Tan Lee Meng held, in judgment grounds released yesterday, that there were alternative sources of sand supply. He noted that the Building & Construction Authority had put in place a supply system from its stockpile to offset any shortfall.

Alliance had supplied ready-mix concrete to Sato Kogyo for three projects comprising a Boon Lay MRT extension and two other buildings at Nanyang Technological University and HarbourFront. These were based on agreements made in 2006.

Alliance, represented by lawyer Winston Kwek, argued that the sand ban was unforeseen but Sato Kogyo's lawyer Tan Liam Beng countered that sand was readily available for Alliance to fulfil its existing contract. At issue was "whether or not the sand ban radically altered the nature of Alliance's obligations under the contracts or merely made it more expensive or onerous for it to fulfil its obligations", said Justice Tan. He found Alliance initially had surplus sand stocks and had not been rendered incapable of fulfilling its contractual obligations.

Justice Tan said the ban "merely made it more expensive for Alliance to manufacture concrete for the projects and did not frustrate the contracts".

He added that the NTU and HarbourFront contracts did not include "force majeure" clauses, that void liability or obligation when an unforeseen event prevents either party from fulfilling their obligations. He allowed damages for breach of contract to be assessed for Sato Kogyo. The amount owed to Alliance would be offset from this sum, he said.

The judge noted that Alliance reaped huge profits in 2007 with higher prices kicking in after the ban. It made a profit of $22.49 million in 2007, following losses of $7.98 million from 2004 to 2006.

vijayan@sph.com.sg

Get a copy of The Straits Times or go to straitstimes.com for more stories.