Advantest Corporate Office (Singapore) Pte Ltd and Another v SL Link Co Ltd (also known as Solar Link Co Ltd) and Another

• Jurisdiction: Singapore
• Judge: Lai Kew Chai J
• Judgment Date: 22 April 2005
• Neutral Citation: [2005] SGHC 75
• Plaintiff Counsel: Thio Shen Yi, Adrian Tan and Dean Cher (TSMP Law Corporation)
• Published date: 25 April 2005
• Court: High Court (Singapore)
• Defendant Counsel: Leo Cheng Suan and Teh Ee-Von (Infinitus Law Corporation)
• Subject Matter: Contract,Parties to contract,Identity of parties,First defendant identified in contract as another company which shared the same premises,Contract providing non-competition clause to protect plaintiffs' interests,Plaintiffs seeking to enforce non-competition clause against defendants,Whether non-competition clause enforceable against defendants,Tort,Inducement of breach of contract,Contract between first defendant and first plaintiff containing non-competition clause,First and second defendants entering into negotiations to deal directly with first plaintiff's customers,Whether second defendant liable for inducing breach of contract

22 April 2005 Judgment reserved.

Lai Kew Chai J:

1 The central issue of fact in this action is whether the first defendant, ie, SL Link Co Ltd (“SL Link”), is a party to a manufacturing agreement, as asserted by the plaintiffs, or Solar Link Co Ltd, as asserted by the defendants.

2 The party which on the face of the manufacturing agreement had entered into the agreement with the first plaintiff was “Solar Link Co Ltd” which, according to the defendants, was registered in Taiwan as 追日润工科技股份 有限公司 (Zhui Ri Run Gong Ke Ji Gu Fen You Xian Gong Si) bearing Taiwanese company registration no 16991864 on 18 November 1999.

3 On the face of the agreement, therefore, SL Link is not a party to the agreement. SL Link is a company incorporated in Taiwan. It was incorporated in February 2001. As it is a company incorporated in Taiwan, it is known only by its Chinese name in Taiwan. It would have been conclusively identified if it had been correctly identified by its Chinese name and by its company registration number issued by the Taiwan Ministry of Economic Affairs. Its Taiwanese registration number was RC No 12737841. Its name in Chinese is 追日 润股份有限公司 (Zhui Ri Run Gu Fen You Xian Gong Si).

4 The dispute as to the identity of the party to the agreement with the first plaintiff had come about because the first defendant was not identified in the agreement either by its name in Chinese or by its registration number. It was simply identified as “Solar Link Co Ltd” of a certain address, which was shared by SL Link.

5 There are several other issues which have to be determined should SL Link be found to be a party to the agreement. The first such issue is whether SL Link has breached its obligations under the agreement. The second issue is whether cl 7 of the agreement providing for non-competition is enforceable. Thirdly, have both defendants breached their duty of confidence owed to the plaintiffs? Fourthly, had both defendants conspired to cause harm to the plaintiffs and/or alternatively, had the second defendant induced SL Link to breach its obligations under the agreement? Fifthly, as alleged by the defendants, had the first plaintiff entered into the agreement in bad faith? Sixthly, the defendants raised the issue whether one Alex Wang, who had signed the agreement for ostensibly “Solar Link Co Ltd”, had the authority to enter into the contract on behalf of SL Link. Finally, the issue arises whether the defendants are entitled to counterclaim for damages against the plaintiffs for allegedly causing them loss.

The facts

6 The following facts were established by the evidence led. For the plaintiffs, the evidence was given in the main by Cheng Sui Yoong (“Mr Cheng”), the managing director of both plaintiffs. He was at all material times in charge of the operations of the Advantest Group in Southeast Asia. Mr Wang Ching Dong Alex William (“Mr Alex Wang”) gave the bulk of the evidence on behalf of the defendants. He was founder of Solar Link Co Ltd in Taiwan, registration number 16991864, whose Chinese name is as stated above at [2]. He was the substantial shareholder of the company and was the general manager from 1999 to 2004. This company’s main business was in the manufacture of an “interface” between the tester machine and the chips to be tested. But it was in liquidation before the manufacturing agreement was signed.

7 Based on Mr Cheng’s Affidavit of Evidence-in-Chief, which is not disputed, the plaintiffs are part of the Advantest Group of companies (“Advantest”) which has its headquarters in Japan. Advantest was the largest supplier of automatic test systems in the world in 2003. It had a 30% market share. Some of Advantest’s customers include big names in the semiconductor industry such as AMD, Micron Semiconductor Asia Pte Ltd (“MSA”), Motorola, NEC, ST Micro-electronics and Infineon Technologies Sdn Bhd.

8 Automatic test systems are used to test the functionality of integrated circuit chips (“IC chips”). The test system produced by Advantest consists of three main components, namely the test system, the handler and the device interface. The test system consists of computers designed to create and simulate different conditions to test the IC chips. The handler is a mechanism which places the IC chips into the device interface (known as “Hi-Fix”) which is connected to the test system. Hi-Fix is a form of adaptor between the test system and the IC chips. In parenthesis, it may be noted that the Hi-Fix together with the other accessories of the test system are known as the “tooling”. By applying a different Hi-Fix, different types of IC chips can be tested on the same test system.

9 Advantest is divided into three main regional groups, namely, Advantest America, Advantest Europe and Advantest Asia. Advantest Asia (the second plaintiff) is a holding company for all of the Advantest wholly-owned subsidiary companies in Asia, amongst which are Advantest Taiwan Incorporated (“ATI”) and Advantest Korea. They are autonomous and are run by their own managing directors. In 2001, ATI started a new subsidiary, Advantest Taiwan Engineering Incorporated (“ATEI”) which is involved in the manufacture of tooling such as Hi-Fix. ATI is the majority shareholder of ATEI, holding more than 50% of the shares in ATEI. Advantest companies do on occasion subcontract work to local companies in Taiwan, Korea and Singapore to assemble and solder some parts of the equipment required by their customers.

10 I turn to the history of SL Link. In 2001, SL Link was incorporated in Taiwan. Mr Alex Wang was part of the mind and management of this company. The name was used to benefit from what he alleged was the substantial goodwill of the name “Solar Link”. In capitalising on the reputation of Solar Link Co Ltd, it was important, in the interest of fair dealing, for Mr Alex Wang to ensure that the two companies, namely Solar Link Ltd and SL Link, were kept distinct and separate so that foreign parties negotiating with him, wearing different hats, did not confuse one for the other. This was especially necessary, seeing that companies in Taiwan are identified by their Chinese names and by their registration numbers. In a perfect world, of course, such foreign parties or those professionally acting for them could have made an official search at the Ministry of Economic Affairs, Taiwan, to ensure that any agreement is entered into with the right corporate party by stating a party’s name in Chinese and its registration number.

11 Mr Alex Wang found some investors, who were interested in Solar Link Co Ltd’s technology, to invest in SL Link. From February 2001 to October 2002, he was the general manager of SL Link. He was also a director until he resigned as director on or about 22 August 2003.

12 SL Link is involved in the Taiwanese local market in the soldering business. In contrast, Solar Link Co Ltd was in liquidation at all material times.

13 Mr Cheng gave evidence of his first contact with SL Link. SL Link was previously known as “追日润工企业设” (Zhui Ri Run Gong Qi Ye She). It also referred to itself as “Solar Link” in English. Sometime in February 2001, SL Link sent a memo to all its customers (including ATI) informing them that it had changed its name to its present name, 追日润股份有限公司 (Zhui Ri Run Gu Fen You Xian Gong Si). I refer to an instance where SL Link had referred to itself as “Solar Link Co Ltd”. In November 2000, ATI entered into a contract with SL Link (“the Taiwanese Agreement”) for it to assemble for ATI tooling such as Advantest’s T5581 and T53xx test systems. SL Link provided a quotation in October 2001. Its Mandarin name, “追日润股份有限公司” (Zhui Ri Run Gu Fen You Xian Gong Si) was set out in large font while its English name, “Solar Link Co Ltd” was set out in much smaller font. The company registration was stated on the quotation as “12737841” which has always been its identification number. The address stated in the quotation was “2F, No 64 Kuang Hua Street, Hsin-Chu City”, which up to 22 July 2002 has been the address of SL Link.

14 I therefore accept the evidence of Mr Cheng, a Malaysian comfortable with Mandarin, that in his mind SL Link was known as “追日润股份有限公司” in Mandarin and “Solar Link Co Ltd” in English. He said that before August 2003 he had never heard of a company named “SL Link Co Ltd” or a company named “追日润工科技股份有限公司” (Zhui Ri Run Gong Ke Ji Gu Fen You Xian Gong Si).

15 I refer to the Taiwanese Agreement. ATI entered into a contract with SL Link who was then known as “追日润工企业社” (Zhui Ri Run Gong Qi Ye She) in November 2000 for the latter to assemble tooling such as Advantest’s T5581 and T53xx test systems. SL Link could not, under the Taiwanese Agreement, solicit Advantest’s customers without prior approval from ATI.

16 In October 2001, Mr Cheng learned from his colleagues from ATI that MSA had placed a purchase order for five sets of Hi-Fix with SL Link. MSA had previously always ordered its Hi-Fix from the first plaintiff. He was concerned that SL Link did not seek the consent of ATI when it solicited the order from MSA, as it was obliged to do under the Taiwanese Agreement.

17 Since MSA appeared satisfied with the quality of SL Link’s work, and eschewing confrontation, Mr Cheng decided that the first plaintiff should co-operate with SL Link. He decided to engage SL Link as a subcontractor of the first plaintiff, to assemble and manufacture Hi-Fix sets for the first plaintiff to on-sell to its customers. He contacted Mr L A Tang of the second defendant whom he knew. Mr Tang arranged for Mr Alex Wang to meet Mr Cheng in Singapore.

18 The meeting took place on 28 November 2001 at the first plaintiff’s office at Alexandra Technopark. As Mr Alex Wang is Taiwanese, Mr Cheng spoke to him in Mandarin. Mr Alex Wang introduced himself as the general manager of 追日润股份有限公司 (Zhui Ri Run Gu Fen You Xian Gong Si) or SL Link. He also handed Mr Cheng a name card which showed SL Link’s English name as “Solar Link Co Ltd” on the...