Hawley & Hazel Chemical Co (S) Pte Ltd v Szu Ming Trading Pte Ltd

• Judge: Lai Siu Chiu J
• Judgment Date: 28 January 2008
• Neutral Citation: [2008] SGHC 13
• Citation: [2008] SGHC 13
• Court: High Court (Singapore)
• Published date: 31 January 2008
• Plaintiff Counsel: Adrian Tan Gim Hai (Drew & Napier LLC)
• Defendant Counsel: Julian Tay and Yeo Lih Wei (Lee & Lee)
• Subject Matter: Civil Procedure

28 January 2008

Lai Siu Chiu J

1 Hawley & Hazel Chemical Co (S) Pte Ltd (“the plaintiff”) applied for summary judgment on its claim for goods sold and delivered to Szu Ming Trading Pte Ltd (”the defendant”) after the defendant had filed a defence to the statement of claim. The plaintiff’s application in summons no. 2140 of 2007 (“the application”) pursuant to O 14 of the Rules of Court (Cap 322, R 5, 2006 Rev Ed) was heard and dismissed on 25 July 2007 by the assistant registrar.

2 The plaintiff appealed to a judge in chambers in Registrar’s Appeal No. 208 of 2007 (“the Appeal”) against the dismissal of the application. I heard and allowed the Appeal and awarded the plaintiff final judgment against the defendant in the sum of $6,452,012.47 (“the judgment sum”) with interest at 5.33% per annum from the date of the writ (9 March 2007) to the date of judgment (21 September 2007). The defendant has now filed a notice of appeal (in Civil Appeal No. 124 of 2007) against my decision.

3 The plaintiff claimed the judgment sum in its statement of claim (filed on 9 March 2007). The defendant filed its amended defence and counterclaim two days before the hearing of the application. The defendant offered no defence to the plaintiff’s claim in its original defence and counterclaim. Instead, the defendant focussed on its counterclaim wherein the defendant alleged that the plaintiff induced the defendant to continue with the distributorship of the products by representing that it would prevent/stop parallel imports and sales of the same into Singapore. The defendant alleged that the plaintiff failed to prevent and/or to stop parallel imports.

4 The defendant subsequently denied owing the judgment sum in its amended defence and counterclaim, and raised (for the first time) the issue of set-off of its counterclaim of $2,074,710.00 for loss and damage suffered, arising from the plaintiff’s alleged wrongful termination of the distributorship arrangement.

The facts

5 The plaintiff is the manufacturer of toothbrushes as well as the Darlie brand of toothpaste (hereinafter referred to as “the products”). The defendant was the Singapore distributor of the products from 1951 until 24 January 2007 when its distributorship was terminated by the plaintiff. The reasons will become apparent later. I should add that there was no written distributorship agreement between the parties. The arrangement was purely oral throughout the 35 years that the distributorship was in existence,

6 The relevant facts leading up to the application are to be found in the affidavits filed by the plaintiff and the defendant. The plaintiff’s two affidavits were filed by its country manager Wong Tuck Fatt, also known as Kelvin Wong (“Wong”), while those filed by the defendant were affirmed by its managing-director Lee Peng Shu (“Lee”).

7 Apart from deposing the fact that the defendant had raised no bona fide defence to the plaintiff’s claim, Wong’s first affidavit exhibited the exchange of correspondence between the parties that were relevant to my determination that the defendant had not raised any triable issues or plausible defences to the plaintiff’s claim.

8 Wong disclosed the following correspondence in his first affidavit:

(a) A letter from the plaintiff dated 1 September 2006 (signed by the Palmolive Group Financial Director Paul Alton) making a final demand for payment of three outstanding invoices for 2004 (by 14 September 2006) and 14 outstanding invoices for 2005 (by 30 September 2006). The total outstanding sum demanded was $2,862,938.81. The letter warned (in bold print) that if the defendant failed to meet the first deadline of 14 September 2006, the plaintiff would take action, which included, but was not limited to, ceasing shipments and commencing legal proceedings.

(b) A letter from the defendant dated 13 September 2006 (signed by Kenneth Lai its operations manager) which, inter alia, stated “As for the current year’s outstanding payment, I had already instructed our Accounts Manager to proceed with the remittance promptly from here on”.

(c) A letter from the plaintiff to the defendant dated 18 September 2006 (signed by Paul Alton) stating that the plaintiff had received no payment of outstanding invoices from the year 2004 as of 15 September 2006, and as a result, the plaintiff had suspended shipments immediately;

(d) A letter from the defendant dated 20 September 2006 (again signed by Kenneth Lai) stating that the defendant was unable to come up with full payment of the outstanding sums due for 2004/2005 and 2006. Instead, the defendant proposed instalment payments of $700,000 per month from October 2006 to January 2007 to settle the outstanding sum. The defendant further promised to settle the outstanding invoices for 2006 by instalments payable between February 2007 and January 2008. There was a further promise to pay invoices for the year 2007 and promptly within the stated 30 days’ credit period.

(e) A letter from the plaintiff dated 22 September 2006 (again signed by Paul Alton) requesting the issuance of post-dated cheques for the instalment payments proposed by the defendant and requiring that the defendant settle by the end of 2007 all amounts outstanding since 2006.

(f) A letter from the defendant dated 25 September 2006 (again signed by Kenneth Lai) accepting the plaintiff’s conditions and attaching a schedule for the payment of the plaintiff’s invoices for 2004 to 2006. The letter added that post-dated cheques would be submitted to Wong three months in advance of payment.

(g) A letter from the defendant dated 23 January 2007 (signed by Lee) addressed to Wong referring to a meeting in Hong Kong on 12 January 2007 between the parties where the issue of the plaintiff’s subsidy to and performance incentives for the defendant were discussed. There were discrepancies between the parties’ figures for subsidies. The defendant requested a 36 months repayment plan for the outstanding balance instead of 15 months on the basis that the latter would severely impair the defendant’s ability to maintain cashflow. The letter added that the defendant was unable to obtain additional working capital of $3.8m from shareholders or potential investors and requested the plaintiff for 60 days credit plus a gross (profit) margin of 14.35% before a 1.1% incentive.

(h) A letter from the plaintiff dated 24 January 2007 (signed by Wong) expressing disappointment that the defendant had failed to comply with its own payment schedule (in (e) above). The plaintiff rejected the defendant’s request for 36 months in which to repay the outstanding amounts. The letter concluded as follows:

In view of your company (sic) inability to repay the outstanding amounts and meet current obligations, we regret to inform you that we have decided to cease further shipment and to terminate the relationship with your company with immediate effect as of 24 January 2007.

Please proceed to make full payment of all outstanding amounts due to us by 31 January 2007, failing which we will have this matter in the hands of our solicitors.

Although the plaintiff was not obliged to (in view of its letter of demand dated 1 September 2006), it still sent a final warning on 6 March 2007 to the defendant for payment and reminded the latter to pay the outstanding invoices as, otherwise, it would commence legal proceedings.

9 Wong’s first affidavit also deposed to the fact that the plaintiff continued to supply the products to the defendant in reliance on the defendant’s promise in its letter dated 25 September (see [8(f)] above) to pay all the outstanding invoices. The plaintiff supplied six shipments of the products to the defendant between 3 November 2006 and 15 January 2007 totalling $834,177.23. The plaintiff also issued a credit note to the defendant for $332.83 for damaged goods.

10 Wong added that the defendant paid $$1,511,602.34 between 5 October 2006 and 7 December 2006 so that the sum owed to the plaintiff was reduced to the judgment sum as shown in the following breakdown:

Amount owing under the schedule in [8(f)]:		$7,129,770.41
Amount owed for further shipments made in [9]		$ 834,177.23
		$7,963,947.64
Amount paid by the defendant	$1,511,602.34
Plaintiff’s credit note	$332.83
		$1,511,935.17
Net amount owed by the defendant:		$6,452,012.47

11 In his affidavit, Lee traced the history of the relationship between the parties to 1951, when his father Lee Szu Yin obtained a distributorship from Hawley & Hazel Chemical (HK) Ltd (“the Hong Kong company”) to promote a brand of toothpaste called Darkie in Singapore, Malaysia and South East Asia. Originally, the distributorship agreement was with a company called Kiauw Hin & Co Pte Ltd (“KH”). The distributorship agreement with KH was not in writing as well.

12 After Lee’s father was asked to leave KH in 1971, KH gave up the distributorship of the Darkie brand of products to the former. Lee’s father then started Szu Ming & Co to distribute and market the Darkie brand of products.

13 In 1985, the plaintiff merged with the Colgate-Palmolive group and renamed the Darkie brand to Darlie. The distributorship of Szu Ming & Co was restricted to Singapore and it was then that the defendant was incorporated. The Hong Kong company started the plaintiff in 1993 to manage the Singapore operations.

14 While the Darkie brand was the best selling toothpaste in Singapore up to 1984 (with a 56% market share), Lee deposed that sales declined thereafter and the brand faced increasing competition from 1995 onwards, due to a proliferation of other brands in Singapore. The problem was made worse by price wars in Thailand and Hong Kong which caused dental care products in those countries to fall drastically rendering them much cheaper than those in Singapore. This caused trading companies to engage in parallel importation of the products from Thailand and Hong Kong and selling them in...