Computer Interface Singapore Ltd v Compaq Computer Asia Pte Ltd

• Jurisdiction: Singapore
• Judge: S Rajendran J
• Judgment Date: 15 October 2003
• Neutral Citation: [2003] SGHC 239
• Plaintiff Counsel: Harpal Singh and L Devadason (Harpal Mahtani Partnership)for the plaintiffs
• Published date: 26 November 2003
• Court: High Court (Singapore)
• Defendant Counsel: Philip Tay and Chia Song Yeow (Rajah & Tann)
• Subject Matter: Contract,Formation,Whether binding contract entered into between parties.

1 Reuters Singapore Pte Ltd (“Reuters Singapore”) had, prior to 1993, a technical division within it which provided field support services to customers subscribing to Reuters information services. These field services comprised the installing, servicing, relocating, recovering and maintaining the hardware and software installed by Reuters Singapore at the offices of its customers. In 1993, Reuters Singapore decided to outsource the provision of such field services. As a result its field services division had to be closed. Some employees from within that division grouped together and incorporated a company – Computer Interface Singapore Pte Ltd (“CIS”) – to provide those services from outside. From that time onwards CIS has been providing field services to Reuters Singapore under consecutive contracts of between 2 and 3 years duration. The last such contract was for a period of 2 years commencing 30 June 2000. One Bala Supramaniam (“Bala”) was the Managing Director of CIS.

2 In December 1999, as required under the terms of its contract, CIS gave notice to Reuters Singapore of its willingness to negotiate the renewal of the contract but was informed by Reuters Singapore that it had received a directive from its Head Office in London that in order to save costs, tenders should be called for the provision of such services. Thereafter, Reuters Singapore invited five companies – CIS, IBM, Siemens, Gentronics and Compaq Computer Asia Pte Ltd (“Compaq”), the defendants in this action – to bid for the provision of field services for a period of 3 years with effect from 1 July 2000 and formal tender documents were sent to these companies. The Director of Compaq in charge of this matter was Lawrence Mok (“Mok”).

3 Reuters Singapore was anxious that its services to its customers should not suffer any disruption by any change in the service provider and therefore requested the five companies to explore possibilities of working together with CIS in the event their tender was accepted. Compaq took up this request. Mok had several discussions with Bala on the possibilities of co-operation. Amongst the alternatives discussed were: (a) Compaq making the bid and, if successful, sub-contracting to Reuters Singapore; (b) Compaq and CIS submitting a joint bid; and (c) both Compaq and CIS submitting separate bids and whoever is successful consider entering into a sub-contract with the other in order to capitalise on their respective capacities in different areas of operation. These discussions did not result in any agreement and it was decided that Compaq and CIS would bid separately.

4 After the tenders had been received, Reuters Singapore called in CIS and Compaq and informed them that they were the two lowest tenderers and asked them to re-submit their bids as their quotes were still too high. Both CIS and Compaq complied with this request and submitted fresh bids.

5 It turned out that Compaq submitted a bid lower than CIS. Reuters Singapore, however, was hesitant about awarding the tender to Compaq as Reuters Singapore had misgivings about the ability of Compaq to provide the field services as efficiently as CIS had been doing. Dennis Lim (“Dennis”), the Managing Director of Reuters Singapore, communicated this misgiving to Mok and asked Compaq to do a presentation detailing the manner in which Compaq would carry out the services.

6 At the presentation made on 16 May 2000, one of the options (Option 2) suggested by Compaq was that Compaq would provide the services in conjunction with CIS. Option 2 attracted the interest of Reuters Singapore and on 18 May 2000 Reuters Singapore issued a “Conditional Letter of Intent” stating that Compaq would be awarded the field services contract with effect from 1 July 2000 provided Compaq met the following conditions:

(a) Compaq will work with CIS as proposed under Option 2.

(b) Compaq will, within 5 working days (19 – 25 May 2000), finalise the Compaq/CIS partnership.

(c) By 26 May 2000, Compaq would give Reuters Singapore a document detailing the partnership arrangement with CIS with CIS signature on it.

(d) A 3-party (Compaq/CIS/Reuters Singapore) meeting was to be held not later than 29 May 2000.

The Conditional Letter of Intent ended on the note that Reuters Singapore, in deciding whether to award the contract to Compaq or otherwise, will assess the proposal as a whole.

7 Compaq forwarded the Conditional Letter of Intent to CIS and intensive discussions ensued between Compaq and CIS as to how the two companies could work together. On 26 May 2000 – the day stipulated in the Conditional Letter of Intent – Compaq and CIS signed a Memorandum of Understanding (“MOU”) and Compaq forwarded that MOU to Reuters Singapore. The MOU envisaged that CIS will be a sub-contractor and not a partner or agent of Compaq in the provision of the field services. Recital 4 of the MOU stated that “a formal services sub-contract will be entered into between CIS and Compaq within a reasonable period of time which shall not be more than 30 days from the date of signing of this MOU”.

8 The 30-day stipulation in the Recital of the MOU for the contract between Compaq and CIS to be concluded was, no doubt, necessitated by the fact that Compaq would have to commence providing its services to Reuters Singapore by 1 July 2000: it would therefore be important to both Compaq and CIS have the sub-contract in place by then.

9 The MOU (in an attachment) contained, inter alia, the following clauses:

1. A subcontract agreement will be entered into with CIS for providing services of installation and maintenance. The Terms and conditions will be back to back depending on Reuter’s agreement with Compaq. Price to be given to CIS will be determined based on further negotiation between Compaq and CIS. CIS will give Compaq a formal quote for the work to be done which shall not be more than the amount quoted by CIS to Reuters.

…

5. The subcontract agreement will run for 3 years and is cancelable at the option of Compaq if the services provided by CIS are not in line with generally accepted levels of service indicated by Reuters in the Contract or not as per the subcontract agreement entered into with Compaq. Any notice for cancellation will give detailed reasoning for cancellation and cancellation would be effective only after 60 days from the date of giving the notice. [Emphasis added]

It was clear from the MOU and its attachments that it was, from the beginning, envisaged that the sub-contract term would be for a term of 3 years and that its terms would be “back-to-back” with the terms of the main contract between Compaq and Reuters Singapore. It was also clear that the parties were envisaged that this 3-year sub-contract was not to be terminated except for cause.

10 As required in the Conditional Letter of Intent, a meeting was held on 29 May 2000 at the office of Reuters Singapore between Reuters Singapore, Compaq and CIS for Reuters Singapore to decide whether to award the contract to Compaq. Dennis told the court that he noted from cll 1 and 5 of the MOU (which are quoted above) that Compaq would have a back-to-back agreement with CIS for the provision of the field services for the duration of Compaq’s contract with Reuters Singapore and this satisfied him that Compaq would be able to provide the necessary level of services that Reuters Singapore expected. He was therefore prepared to accept the tender of Compaq. Bala, however, was not at the meeting and Dennis did not want to make a final decision until he was sure that Bala was satisfied with the arrangement. Dennis therefore re-scheduled the meeting to enable Bala to attend.

11 At the re-scheduled meeting held in early June 2000, Dennis sought confirmation from Bala that CIS would perform the field services as Compaq’s sub-contractors on the terms contained in the MOU. Upon Bala giving this confirmation, Dennis informed Compaq that their tender was accepted. Upon such acceptance the terms contained in the tender submitted by Compaq would constitute the contract (the main contact) between Compaq and CIS. The formal contract between the two was signed on 13 July 2000, about 2 weeks after CIS accepted the LOA.

12 The MOU called for the sub-contract between Compaq and CIS to be entered into within 30 days of the MOU. On 30 June 2000 – the last day of the existing CIS field services contract with Reuters Singapore – Compaq issued to CIS a document headed “Letter of Award” for acceptance by CIS. Attached to the Letter of Award (“LOA”) were various schedules, taken mainly from the tender documents detailing, inter alia, the services to be rendered, the charges payable and the terms of the engagement of CIS. The LOA reflected the terms that had been agreed upon and so Bala signed the acceptance of the LOA by CIS at the space provided.

13 Confident that the grant of the LOA was sufficient evidence that the main terms of the sub-contract had been agreed, CIS, from 1 July 2000 onwards, continued to provide the field services to the customers of Reuters Singapore on behalf of Compaq. It is interesting to note that even after Compaq became the service provider of Reuters Singapore, Reuters Singapore continued to send its work orders for field services work – as it had for the past several years – to CIS and CIS carried out the work requested. As CIS was carrying out these services on behalf of Compaq, CIS invoiced Compaq for the services in accordance with the payment terms set out in the LOA. This state of affairs continued for about 18 months.

14 It would appear that at about the time that Compaq and CIS were having the discussions referred to above, negotiations were going on in London between the head offices of Compaq and Reuters – negotiations in which Compaq in Singapore and Reuters in Singapore played no role – with a view to entering into a framework agreement whose provisions would, as far as possible, apply to any service contract that any Compaq company may...