SMART GLOVE INTERNATIONAL PTE. LTD. v FULL SUPPORT HEALTHCARE LIMITED

Facts

Smart Glove International Pte Ltd (SGI), the sales arm of a Malaysian glove group, sued Full Support Healthcare Ltd (FSH), a United Kingdom distributor of protective equipment, in the General Division of the High Court (Suit No 49 of 2022); FSH counterclaimed. At the height of the Covid-19 pandemic the parties signed a Supply Agreement on 11 June 2020 for about 1.3 billion 3mil nitrile gloves at US$82.50 per 1,000, followed by a first purchase order, a separate order for 5mil gloves and a second purchase order for more 3mil gloves. FSH paid 80% of each tranche in advance.

SGI never met the delivery schedules for the two 3mil orders and raised its 3mil prices month after month, which FSH accepted at the time. FSH asked on 19 March 2021 for EN455 shelf-life certificates, which SGI supplied on 1 June 2021. On 20 April 2021, with market prices falling, FSH emailed that it was cancelling all its 3mil orders and stopped taking delivery; on 6 July 2021 it asked for a refund of its advance payments. The parties agreed that US$64,782,300 had been paid for undelivered 3mil gloves and was still held by SGI. SGI said FSH had repudiated the contracts and claimed to keep the money as deposits; FSH said it had accepted SGI's repudiatory breaches.

Issues

1. Whether SGI breached the Supply Agreement and the purchase orders by its late deliveries, price increases and delay in producing the EN455 certificates.
2. Whether any breach by SGI was repudiatory, whether FSH waived its rights, and when FSH validly terminated the contracts.
3. Whether FSH itself breached the contracts by refusing deliveries after 20 April 2021, and what damages each party should recover.
4. Whether the 80% advance payments were forfeitable deposits or must be repaid to FSH.

Holding

The court found both parties in breach and allowed each side's claims in part. It awarded FSH US$51,239,650.02 in damages for SGI's breaches, with interest at 5.33% per annum from the date of writ, and ordered SGI to repay the advance payments of US$64,782,300 less US$5,127,384.80 owed by FSH for delivered gloves, that is US$59,654,915.20, with interest at 5.33% per annum from 6 July 2021. SGI was awarded US$282,560.60 with interest and US$5,127,384.80 without interest, the latter set off against the refund. Specific performance was refused, and both sides were given liberty to apply over possible third-party claims.

Reasoning

The Supply Agreement governed all three orders, so SGI had to use all reasonable endeavours to meet the schedules. SGI breached that duty: while falling far behind, it kept accepting many new orders, including for the large sizes it said it lacked moulds to make, and diverted capacity to them. It also breached the fixed-price term for the first order, because the rise in raw material costs was a risk SGI had agreed to bear and the increases did not reflect its costs. Clause 3.2 was rectified to require certificates within a reasonable time, and taking more than two months breached it.

SGI had not renounced the contracts, since it kept trying to deliver. But the contracts were time-sensitive, meant to exploit pandemic demand, and the delays deprived FSH of substantially the whole benefit, a repudiatory breach. FSH did not waive its rights because it did not know SGI was overcommitting itself. The 20 April 2021 email was not a termination, because the parties then negotiated prices under the existing contracts; FSH terminated validly only on 6 July 2021. Its refusal to take delivery in between was itself a repudiatory breach.

On SGI's claims, it recovered the unpaid invoices without contractual interest, since FSH had offered to set them off against its advance payments. For gloves made but not shipped it recovered only its 5% margin, less its resale proceeds, because the group's manufacturers bore the production costs. It recovered nothing for the cancelled orders, having fully mitigated by filling its capacity with other customers. FSH's damages compared its actual results with a scenario of punctual delivery at the original first-order price, excluding revenue for the period of its own breach but keeping the cost of those gloves.

Applying Li Jialin and another v Wingcrown Investment Pte Ltd [2024] 2 SLR 372, the court found no express or implied right to forfeit the 80% payments, which were treated as advance payments to buy materials, and 80% was in any event unreasonable as an earnest. The orders were divisible, so consideration had wholly failed for the undelivered orders, and SGI's change of position defence failed.

From the judgment