Cain Sales & Consultancy Pte Ltd v Beyonics Technology Limited

CourtHigh Court (Singapore)
JudgeBelinda Ang Saw Ean J
Judgment Date28 July 2003
Neutral Citation[2003] SGHC 163
Citation[2003] SGHC 163
Published date03 October 2003
Plaintiff CounselSavliwala Din and Gerald Martin Wee (Bogaars & Din)
Defendant CounselAlvin Yeo SC and Melvin Chan (Wong Partnership)
Subject MatterContract,Contractual terms,Rules of construction,Contextual approach,Sales representative agreement,Term for commission for "any contracts manufacturing related business" secured through sales representativeÂ’s efforts,Whether term for commission covers complex commercial transactions.

Introduction

1 This action concerns a claim by Cain Sales & Consultancy Pte Limited, a company incorporated in Singapore, for the payment of commission under a Sales Representative Agreement dated 15 August 2000 (“the Sales Representative Agreement”) with the Defendants. The Defendants, Beyonics Technology Limited formerly known as Uraco Holdings Limited (“Uraco”), are a Singapore incorporated public company whose activities are that of investment holding. Their subsidiaries are engaged in contract-manufacturing and integrated electronics manufacturing services.

2 On 1 June 2001, the Defendants (and their subsidiaries) signed an agreement (“the Asset Purchase Agreement”) with Seagate Technology International (“Seagate”), a Cayman Islands company, to acquire Seagate’s manufacturing facility in Batam. Concurrently, and as part and parcel of the transaction, the Defendants’ wholly-owned subsidiary Beyonics International Limited, a Mauritius company, entered into a two-year Supply Agreement with Seagate on 1 June 2001 to manufacture and supply printed circuit board assemblies (“PCBAs”). The Asset Purchase Agreement and Supply Agreement are collectively referred to as the “Seagate Deal”. The Plaintiffs’ claim for payment of commission is that the Supply Agreement was secured through their efforts.

3 The Defendants have denied the Plaintiffs’ entitlement to a commission contending that the Supply Agreement is outside the scope of the Sales Representative Agreement. The Defendants are also contending that the Plaintiffs were not instrumental in the acquisition of the manufacturing facility in Batam nor had they secured the Supply Agreement.

4 The relations between the parties came to an end on 31 October 2001, and this litigation followed.

The Plaintiffs’ case

5 Mr. Dale Cain (“Dale”) is the director and shareholder of the Plaintiffs and is the person with whom the Defendants dealt with. According to the Plaintiffs, Lowe Joo Chung Michael (“Lowe”), the Senior Vice-President, Sales and Marketing of the Defendants, in December 2000 told Dale that the Defendants wanted to expand their PCBA contract-manufacturing business. Dale was then tasked to approach Seagate’s Singapore office, because of his relationship with its senior management, to secure PCBA contract-manufacturing business for the Defendants. During the same conversation, Lowe told Dale that the Defendants would pay 1% commission under the Sales Representative Agreement.

6 Dale said he introduced to Goh Chan Peng (“Goh”), the Chief Executive Officer of the Defendants, the idea of acquiring an existing Seagate factory to secure from Seagate volume purchase business. This was suggested as an alternative to the conventional and time-consuming way of having the Defendants “qualify” as a supplier before tendering for contracts. The idea came from his knowledge of a transaction between a Thai company called Fabrinet and Seagate. Dale had not only introduced Goh to Seagate’s senior management in Singapore but had set up a meeting on 28 March 2001 thereby giving the Defendants an opportunity to submit a bid for the purchase of Seagate’s manufacturing facility in Batam. It was because of his relationship with Seagate’s senior management that Dale secured for the Defendants the golden opportunity to bid for the Batam facility, despite bidding having closed and the candidates already short-listed. In addition, Dale had specifically negotiated a more favourable purchase volume and value-add price for the Defendants in respect of the supply of PCBAs during the two-year term. Put simply, the Supply Agreement was secured through the efforts of the Plaintiffs. It has been submitted that it made no difference to the Plaintiffs’ entitlement to commission whether the Defendants chose to purchase the existing Seagate Batam facility to manufacture PCBAs for Seagate or upgrade their existing facilities and purchase new machine and equipment to do so.

7 Counsel for the Plaintiffs, Mr. Savliwala Din, submits that the manufacture and supply of PCBAs under the Supply Agreement is within the plain and natural meaning of “contract manufacturing related business”. Therefore, the Plaintiffs are entitled to a commission of 1% of the total sums received by the Defendants for the sale of PCBAs manufactured over the two-year term under the Supply Agreement. The Defendants have breached the Sales Representative Agreement by their failure or refusal to pay commission to the Plaintiffs.

The Defendants’ case

8 The Defendants have denied the Plaintiffs’ entitlement to commission contending that the Seagate Deal is outside the scope of the Sales Representative Agreement. The Defendants deny giving a general authorisation to Dale to approach Seagate for the purpose of securing PCBA contract-manufacturing business. There was no promise that, if the Plaintiffs secured such business from Seagate, the Defendants would pay the Plaintiffs’ commission of 1% under the Sales Representative Agreement. They further deny that the Plaintiffs had secured contract-manufacturing business for the Defendants under the Supply Agreement through the Seagate Deal.

9 Counsel for the Defendants, Mr. Alvin Yeo S.C., pointed out that the Plaintiffs had not in their Amended Statement of Claim alleged that the “Accounts Coverage” provision had been varied to include Seagate. It is only in their Reply that they pleaded the December 2000 conversation.

10 To the Defendants, Dale did not introduce the Seagate Deal to them. The idea to acquire a PCBA manufacturing facility, and in this case the Batam facility, had not come from the Plaintiffs. In March 2001, the Defendants were themselves considering setting up a factory in Batam. On or about 23 March 2001, Goh, Lowe and Richard Chee (Vice-President, Contract Manufacturing) visited Batam. During that visit they learned from an acquaintance, Santos Loy, that Seagate was looking to sell its PCBA manufacturing facility in Batam. In a subsequent telephone conversation in March 2001 between Goh and Chang Faa Shoon (“Chang”), an Executive Director of Seagate Singapore, Goh informed Chang that the Defendants were interested in taking over the Batam facility. Typically such a sale is usually part of an outsourcing strategy and would be accompanied by a supply contract to the successful purchaser with a confirmed volume over a fixed number of years and at a determinative price.

11 The Seagate Deal was initiated, arranged and completed through the Defendants’ own efforts. Dale neither negotiated nor secured the Supply Agreement. He was not authorised to negotiate and agree terms, contract volume and value-add price with Seagate. Dale’s involvement in the Seagate Deal was purely that of an individual with administrative and liaison functions.

12 The Defendants also point out that the Plaintiffs’ computation of their entitlement to commission is incorrect. Under the Sales Representative Agreement, the Plaintiffs would only be entitled to a commission based on:

(i) the value-add price; and

(ii) for a period of one-year after termination of the Sale Representative Agreement.

According to the Sales Representative Agreement, the Defendants are to continue to pay commission for one year after termination. The Sales Representative Agreement was terminated with effect from 31 October 2001.

The Sales Representative Agreement dated 15 August 2000

13 The following provisions of the Sales Representative Agreement are relevant:

Terms of Contract

Two (2) months notice by either party to terminate relationship with commission to continue for one (1) year thereafter.

Measurement

To secure two (2) new customers or projects or new business revenue not less than Singapore dollars Eight Million (S$8,000,000) in each financial year.

Commission

1. Commission to be paid on the 15th of each month for sales proceeds collected from the preceding month.

2. 1% commission for contracts manufacturing related business.

3. 3% for plastics moulding and metal stamping business, depend on profitability of such business.

4. As for DC/PM business, 3% commission for IBM Stingray & Hammerhead business if price maintain at US$2.85 per piece. IBM Arawana project or other IBM projects to be discussed at later stage.

Accounts Coverage

Existing Account: IBM (HDD) (San Jose & Fujisawa), Castlewood (All Sub-Contractors)

New Account:

Company Product

IBM PC

Cisco Server related

Brocade SAN’s

3 Com PDA

Spectrian RF Amplifers

Gadzoox SAN’s

Quantum Tape/HDD

Diamond-S3 Multimedia

Powerwave RF Amplifers

Iomega Removable media

Broadlogic Broadband Devices

The Company deserves (sic) the right to review and change the account portfolio depending on relationship and circumstances.”

14 By an Addendum dated 17 November 2000, the Commission clause was amended to include “Mako”, an IBM product. At the material time, Seagate was an existing customer of the Defendants. As such, it was one of the accounts excluded from the Sales Representative Agreement when it was signed in August 2000.

15 The claim is put forward on the basis of the Sales Representative Agreement. The Plaintiffs’ argument can only prevail if the Sales Representative Agreement is interpreted to include PCBA manufactured and supplied pursuant to the Supply Agreement in the Seagate Deal. The Plaintiffs will have to establish on a balance of probabilities the December 2000 conversation.

Findings and Decision

(i) What was it in August 2000 that the Defendants had agreed to pay for under the Sales Representative Agreement.

16 It is not disputed that the manufacture of PCBA is “contract manufacturing related business” for which a 1% commission is stated to be payable under the Sales Representation Agreement. Notwithstanding that concession, it is the Defendants’ case that the Supply Agreement is outside the scope of the Sales Representative Agreement. Mr. Yeo, submits that the Sales Representative Agreement was meant to encompass the simple “purchase order” type of arrangement...

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