Case Details
- Citation: [2018] SGCA(I) 05
- Also known as: Bumi Armada Offshore Holdings Ltd and another v Tozzi Srl (formerly known as Tozzi Industries SpA)
- Case Title: Bumi Armada Offshore Holdings Limited & Anor v Tozzi Srl
- Court: Court of Appeal of the Republic of Singapore (Singapore International Commercial Court appeal)
- Date of Decision: 6 August 2018
- Judges: Sundaresh Menon CJ; Beverley Marian McLachlin IJ; David Edmond Neuberger IJ
- Procedural History: Appeal against the SICC decision in Tozzi Srl v Bumi Armada Offshore Holdings Ltd and another [2017] 5 SLR 156
- Civil Appeal No: 199 of 2017
- Appellants/Defendants: (1) Bumi Armada Offshore Holdings Limited (BAOHL); (2) Bumi Armada Berhad (BAB)
- Respondent/Plaintiff: Tozzi Srl (formerly known as Tozzi Industries SpA)
- Legal Areas: Contract law (formation; right of first refusal; breach); Tort (inducement of breach of contract)
- Statutes Referenced: Evidence Act
- Cases Cited: [2015] SGHC 78
- Judgment Length: 29 pages; 8,888 words
Summary
This appeal arose from a commercial dispute connected to the development of the Madura BD Gas and Condensate Field in Indonesia. BAOHL, a subsidiary of BAB, was awarded the project contract and engaged Tozzi, an Italian engineering, procurement and construction (EPC) services provider, in relation to gas processing facilities. The central issue was whether Tozzi was contractually entitled to a right of first refusal (“ROFR”) over the supply of certain topside process modules, and whether BAOHL breached that ROFR by awarding a subcontract to a third party without first giving Tozzi the opportunity to match the third party’s offer.
The Singapore International Commercial Court (SICC) found that BAOHL breached the ROFR and that BAB was liable in tort for inducing BAOHL’s breach of contract. BAOHL and BAB appealed against the whole of the SICC’s decision. The Court of Appeal dismissed the appeal, affirming the SICC’s findings on contractual formation and scope of the ROFR, as well as the tortious liability of BAB for inducement.
What Were the Facts of This Case?
BAOHL is incorporated in the Marshall Islands and provides services to offshore oil and gas companies. It is wholly owned by BAB, a Malaysian publicly listed company providing offshore oilfield services. Tozzi is an Italian company providing EPC services to the oil and gas industry. The dispute concerned a project for the supply of facilities and services connected with the development of the Madura BD Gas and Condensate Field in Indonesia (“the Project”).
The Project involved the construction and lease of a Floating Production, Storage and Offloading unit. A key component was the gas processing facilities, consisting of seven Topside Process Modules (“Modules”). BAOHL was awarded the contract for the Project. In preparing its bid, BAOHL asked Tozzi to provide EPC services for three of the seven Modules, known as the “TI Packages”.
In February 2013, Tozzi and BAOHL entered into a Pre-Bid Agreement (“PBA”) governing their working relationship in preparation for BAOHL’s bid. The PBA provided that, if BAOHL was awarded the Project, BAOHL would subcontract to Tozzi the EPC services for the TI Packages. Importantly, the PBA also granted Tozzi a right of first refusal for the supply of the TI Packages. The PBA expired after a year. Although the Project was not awarded within that period, the parties continued working together on BAOHL’s bid.
After Husky informed BAOHL in July 2014 that BAOHL would be awarded the Project, BAOHL’s leadership (through BAB’s then CEO, Mr Hassan Basma) met Tozzi on 31 July 2014. The following day, Tozzi’s director, Mr Stefano Schiavo, emailed Mr Basma intending to summarise the discussions as a basis for a memorandum of understanding (“MOU”). The email recorded commercial terms, including that if Tozzi confirmed its given price for all process topsides, BAOHL would issue a purchase order; if not, BAOHL would seek other quotations but Tozzi would be granted a right of first refusal. The parties then signed minutes of the meeting dated 1 August 2014 (“1 August MOM”).
The 1 August MOM contained a paragraph expressly recording Tozzi’s ROFR in relation to “entire topsides”, with a mechanism for Tozzi to review and confirm its price within three weeks, and for BAOHL to go out for a price check and offer Tozzi first right of refusal for the lowest price alternative offer if the adjusted price was not acceptable. The minutes also included a “subject to contract” style statement indicating that the minutes constituted an understanding of discussions and were subject to successful negotiation, mutual agreement, and execution of a formal contract.
On or about 8 August 2014, Husky awarded the Project to BAOHL. While Tozzi’s FEED works were underway, BAOHL issued a Request for Quote (“RFQ”) on 5 November 2014 inviting proposals for the supply of all seven Modules. Mr Schiavo objected, asserting that the RFQ was inconsistent with Tozzi’s ROFR and that Tozzi had commenced FEED works in reliance on that ROFR. Despite these objections, Tozzi submitted a quote for EPC supply of all seven Modules in January 2015. BAOHL later decided to subcontract only the supply of the TI Packages (three Modules) and Tozzi submitted a revised quote accordingly.
In late February 2015, Mr Schiavo raised Tozzi’s ROFR with BAB’s new CEO, Mr Jesse van de Korput. Mr van de Korput responded by denying Tozzi’s entitlement to a ROFR. Tozzi then submitted its final bid for the TI Packages. However, on 20 May 2015, BAOHL awarded the subcontract for the TI Packages to VME Process Asia Pacific Pte Ltd without giving Tozzi the opportunity to exercise its alleged ROFR by matching VME’s bid. Tozzi commenced proceedings against BAOHL and BAB.
At trial before the SICC, Tozzi called Mr Schiavo, who was described as intimately involved in the negotiations leading up to BAOHL’s bid. By contrast, BAOHL’s evidence came largely from its in-house legal counsel, who had no personal knowledge and joined after the dispute had arisen. The SICC characterised BAOHL’s defence as akin to a submission of no case to answer, reflecting the weakness of its evidential support for its position.
What Were the Key Legal Issues?
The Court of Appeal had to consider, first, whether the ROFR had contractual force and whether a binding agreement was reached at the 31 July Meeting / as recorded in the 1 August MOM. BAOHL’s principal defence was that the “subject to contract” provision in the 1 August MOM meant that the ROFR was not intended to be legally binding.
Second, the court had to determine the scope of the ROFR: whether it extended to the supply of all seven Modules (as Tozzi contended) or only to the TI Packages (as BAOHL argued). This question mattered because BAOHL ultimately subcontracted only the TI Packages, and the legal consequences depended on whether the ROFR covered that category.
Third, the court had to address Tozzi’s tort claim against BAB for inducing BAOHL’s breach of contract. This required the court to assess whether BAB’s conduct met the elements for inducement, including whether BAB knowingly procured or encouraged BAOHL’s breach of the ROFR.
How Did the Court Analyse the Issues?
The Court of Appeal approached the contractual formation question by examining the parties’ objective intention, as evidenced by the documentary record and the surrounding circumstances. The 1 August MOM was not treated as a mere informal exchange. The court focused on the fact that the minutes recorded specific commercial terms and a clear ROFR mechanism. In particular, the ROFR was not expressed in vague or aspirational terms; it included a pricing review process, a time period for confirmation, and a defined consequence if the adjusted price was unacceptable—namely that BAOHL would seek a price check and offer Tozzi first right of refusal for the lowest price alternative offer.
BAOHL relied on the “subject to contract” language at the end of the 1 August MOM to argue that no binding contract had been formed. The Court of Appeal, however, treated that clause as insufficient to negate binding effect where the operative terms were sufficiently certain and where the parties had proceeded in a manner consistent with legal obligations. The court’s reasoning reflects a common contractual principle: “subject to contract” wording may indicate that parties intended to defer legal effect, but it does not automatically prevent formation if the rest of the document and the parties’ conduct show that they intended to be bound by particular terms.
On the scope of the ROFR, the court analysed the language of the 1 August MOM and the commercial context. The minutes recorded Tozzi’s right of first refusal for “entire topsides” and described the process for confirming price for the entire topsides. The Court of Appeal considered that BAOHL’s later conduct—such as issuing an RFQ for all seven Modules and Tozzi’s reliance on the ROFR in commencing FEED—supported the conclusion that the ROFR was intended to operate beyond the initial TI Packages arrangement. The court also considered that BAOHL’s attempt to narrow the subcontract to only the TI Packages did not eliminate the ROFR obligations if the ROFR had been agreed in relation to the broader supply of topsides.
In addition, the Court of Appeal addressed the evidential dynamics at trial. The SICC’s observation that BAOHL’s defence was effectively unsupported by credible, contemporaneous evidence was significant. The Court of Appeal accepted that Tozzi’s involvement through Mr Schiavo, and the documentary trail of negotiations, provided a stronger basis for interpreting the parties’ intentions. Where a party asserts that a contractual term lacks binding force due to “subject to contract” language, the court will scrutinise whether that assertion aligns with the rest of the document and the parties’ subsequent actions.
Turning to the tort claim, the Court of Appeal considered the elements of inducement of breach of contract. While the extract provided is truncated, the SICC’s findings (affirmed on appeal) indicate that the court accepted that BAB induced BAOHL’s breach. The analysis would have required the court to identify BAB’s role in the decision-making process and whether BAB’s conduct amounted to knowingly encouraging or procuring BAOHL to breach the ROFR. The facts included BAB’s CEO denying Tozzi’s entitlement to a ROFR and BAOHL’s subsequent award of the subcontract to VME without offering Tozzi the opportunity to match. The Court of Appeal treated this as sufficient to establish inducement on the SICC’s findings.
Overall, the Court of Appeal’s reasoning demonstrates a structured approach: (i) interpret the parties’ objective intention from the operative terms and context; (ii) assess whether “subject to contract” language genuinely prevents formation of binding obligations; (iii) determine the scope of the ROFR by construing the relevant provisions in light of the commercial purpose; and (iv) apply the tort principles to the conduct of the parent company in relation to the breach.
What Was the Outcome?
The Court of Appeal dismissed the appeal and upheld the SICC’s decision. BAOHL was found to have breached the ROFR by awarding the subcontract for the TI Packages to VME without first giving Tozzi the contractual opportunity to match the offer. BAB was also held liable for inducing BAOHL’s breach of contract.
Practically, the outcome confirmed that parties cannot rely on “subject to contract” language to escape binding obligations where the operative terms show a clear ROFR mechanism and where the parties’ conduct indicates reliance and performance consistent with legal effect.
Why Does This Case Matter?
This case is significant for practitioners dealing with pre-contractual documents, memoranda of meeting, and “subject to contract” clauses. The Court of Appeal’s approach underscores that courts will not treat “subject to contract” wording as a blanket shield against contractual formation. Instead, the court will examine whether the document contains sufficiently certain operative terms and whether the parties’ conduct indicates an intention to be bound by those terms.
For commercial parties negotiating rights such as ROFRs, the decision highlights the importance of precision in drafting and the need to align internal decision-making with the agreed mechanisms. If a ROFR is recorded with a defined pricing review and matching process, the grantor must comply with that process before awarding the relevant supply contract to a third party.
From a litigation perspective, the case also illustrates how evidential credibility and contemporaneous involvement can influence contractual interpretation. Where one party’s evidence is supported by the negotiation record and witness testimony closely tied to the events, and the other party’s evidence is weak or post-dispute, the court may be more willing to accept the former’s interpretation of contractual intent.
Legislation Referenced
Cases Cited
Source Documents
This article analyses [2018] SGCAI 5 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.