Creative Technology Ltd and another v Huawei International Pte Ltd

• Jurisdiction: Singapore
• Judge: Chan Seng Onn J
• Judgment Date: 16 August 2017
• Neutral Citation: [2017] SGHC 201
• Court: High Court (Singapore)
• Docket Number: Suit No 55 of 2012/H consolidated with Suit No 606 of 2012/Z
• Year: 2017
• Published date: 25 July 2018
• Hearing Date: 22 July 2015,15 July 2015,10 October 2016,19 April 2016,02 December 2015,11 April 2016,09 July 2015,10 July 2015,13 October 2016,21 July 2015,14 July 2015,27 July 2017,16 July 2015,24 July 2015,18 April 2016,12 October 2016,07 July 2015,30 November 2015,03 December 2015,08 July 2015,23 July 2015
• Plaintiff Counsel: Yim Wing Kuen Jimmy SC, Soo Ziyang, Daniel, Lee Yicheng Andrew (Li Yicheng), and Huang Junjie (Drew & Napier LLC)
• Defendant Counsel: Andre Francis Maniam SC, Yong Shuyi, Alma, Ho Weijie, and Siew Guowei (WongPartnership LLP)
• Subject Matter: Contract,Misrepresentation Act,Breach,Anticipatory breach,Contractual terms,Implied terms,Exclusion clauses
• Citation: [2017] SGHC 201

Chan Seng Onn J: Introduction

In Suit No 55 (“Suit No 55”), Creative Technology Ltd (“CTL”) and its wholly-owned subsidiary, QMAX Communications Pte Ltd (“QMAX”) (collectively referred to as “Creative”) claimed against Huawei International Pte Ltd (“Huawei”) for loss and damage arising from Huawei’s repudiatory breach of a contract in which Huawei was to build, design and operate a WiMAX network for Creative in the 2.3GHz spectrum (“WiMAX Network”). Prior to its acquisition by CTL sometime in February 2009, QMAX was the holder of exclusive spectrum rights for the 2.3GHz frequency band in Singapore.

Alternatively, Creative claimed against Huawei under s 2(1) of the Misrepresentation Act (Cap 390, 1994 Rev Ed) and under tort for Huawei’s negligent misstatement. Under each of these alternative causes of action, Creative sought the return of the sum of US$9,295,388.98 paid to Huawei under the contract. Creative also claimed damages of S$19,253,120.01 and US$22,000, being the expenses incurred by Creative for the WiMAX Network.

In the same Suit No 55, Huawei counterclaimed against Creative for wrongful rescission and/or termination of the contract and claimed the additional sums of US$9,649,935.86 and S$6,224.19 that Huawei would have received from Creative had the WiMAX Network been completed successfully.

In Suit No 606 of 2012/Z (“Suit No 606”), which was consolidated with Suit No 55, Huawei claimed against CTL’s wholly-owned subsidiary, ZiiMAX Singapore Pte Ltd (“ZiiMAX”) an outstanding payment of US$104,860 for indoor Customer-Premises Equipment (“CPE”) purchased by and supplied to ZiiMAX under a purchase order dated 13 May 2011 (“CPE Agreement”). ZiiMAX counterclaimed against Huawei in the same Suit No 606 for the return of US$85,600 paid by ZiiMAX to Huawei for the Universal Serial Bus (“USB”) dongles supplied by Huawei to ZiiMAX under a purchase order dated 28 April 2011 (“USB Agreement”). ZiiMAX had intended to use the CPE and USB dongles with the WiMAX Network to be operated by QMAX.

Background facts Events leading up to the Contract

In early 2009, Creative explored the possibility of engaging Huawei to construct a WiMAX Network to provide mobile data services using WiMAX technology after Creative’s representatives PW1 Koh Zi Kai (“PW1-Koh”) and PW3 Lian Yam Fei (“PW3-Lian”) had met up with Huawei’s sales representative DW1 Leong Yu Ming (“DW1-Leong”) at a WiMAX Forum Congress Asia held in Singapore in April 2009 at which Huawei’s representatives presented a paper titled “Build a Successful WIMAX Network” that would entail a “quick and low cost WiMAX deployment”. On 15 May 2009, PW1-Koh followed up with an email requesting Huawei for more information including its presentation materials, an “Information Template” that Huawei would require its customers to provide, a “Sample RFI/RFP [ie, Request for Information/Request for Proposal]” and a Network Diagram.

It is unclear to me whether Huawei had sent the information that Creative had requested. However, on 17 June 2009, Creative wrote a brief letter inviting its potential vendor, Huawei, to submit a proposal for the “design, build, maintenance and operation of a 2.3 GHz WiMAX” and requested detailed information to be furnished on Huawei’s WiMAX proposal including the “Estimated number of sites needed to cover Singapore (Military areas, cemeteries & large bodies of water are to be excluded from the planned coverage)” (“nationwide coverage”) with the estimate to be minimally “accurate up to ±10%”. By way of an email dated 1 July 2009, PW1-Koh asked Huawei to plan for a target data-rate requirement of 1 Megabits per second (“Mbps”) for the Down Link (“DL”) and 256 kilobits per second (“kbps”) for the Up Link (“UL”) at the cell edge. According to PW1-Koh,¹ Creative had also made clear from the outset that it wanted the proposed WiMAX Network to have nationwide coverage with first wall penetration. This was corroborated by DW1-Leong² during his cross-examination.

Thereafter, Huawei submitted various wireless network planning proposals to Creative with different numbers of radio sites based on different network equipment, antenna configurations and end-user devices. In these proposals, the number of radio sites ranged from 184 to 360 radio sites to cover a total area of 256.93km2 identified by Huawei to be the area of nationwide coverage required by Creative. Huawei divided the nationwide coverage area into three different clutters: “Dense Urban”, “Urban” and “Suburban”.

The proposal for 184 radio sites was premised on a two-way antenna transmitting and receiving configuration (with two transmitters and two receivers, ie, 2T2R) using a mix of USB dongles and CPEs as end-user devices. The proposal for 360 radio sites was for a 2T2R antenna configuration using only USB dongles.

In an email dated 28 July 2009, Huawei informed Creative that the cost of equipping a typical radio site would be between US$79,715 to US$89,610. Hence, if the WiMAX Network required more radio sites, the total project cost would accordingly increase. In August 2009, Creative requested for a revised proposal using a four-way antenna transmitting and receiving configuration (with four transmitters and four receivers, ie, 4T4R) instead. At a presentation on 18 August 2009, Huawei informed Creative that 256 radio sites would be required for this configuration in order to support 300,000 subscribers using only USB dongles.

After PW1-Koh and PW3-Lian notified DW1-Leong and Huawei’s Vice-President of Solutions and Sale Support, An Jian, at a meeting on 28 October 2009 that Creative’s budget was US$20m, DW1-Leong sent an email dated 30 October 2009 to PW1-Koh stating that Huawei was able to provide the WiMAX Network based on 220 radio sites, which was lower than Creative’s budget expectation.

Finally, in its WiMAX Network Planning Proposal dated 25 January 2010, Huawei provided a detailed link budget calculation explaining the radio frequency parameters it had chosen for the penetration loss (inclusive of first wall penetration) for its three different clutters under Dense Urban (ie, a loss of 20dBm), Urban (ie, a loss of 15dBm) and Suburban (ie, a loss of 10dBm) including the radio frequency parameters for the USB dongle as the end device (“the Link Budget”). In the proposal, Huawei also explained how it arrived at the coverage planning result that 225 radio sites would be required based on a 4T4R configuration using only USB dongles with 0dBi antenna gain as the end-user device and with the data-rates at the cell edge of 1Mbps for the DL and 256kbps for the UL. The estimated total cost for the equipment, design, engineering and installation of the whole WiMAX Network was US$17.7m (based on US$78,680.92 per radio site multiplied by 225), which would be well within Creative’s budget.

Clearly, the changes in the number of radio sites from 256 down to 220 and finally to 225 were made after Creative had informed Huawei that Creative’s budget for the WiMAX Network project was US$20m. There is no evidence before me that Creative was ever cautioned that Creative’s budget of US$20m constrained them to a “lower quality network” or to one that would not have met the requirements of Creative. Instead, the evidence of DW1-Leong³ and Huawei’s Account Manager Cao Dan Bo (“DW2-Cao”)⁴ was that 225 radio sites would suffice to meet Creative’s requirements.

I note that in the introduction to the WiMAX Network Planning Proposal to Creative, Huawei claimed that it “has already deployed WIMAX, CDMA, UMTS and GSM commercial networks around the world and accumulated plenty of networks planning experience through theoretic research and project implementation”. Huawei stated very impressively that it had “over 2000 engineers and experts specializing in radio network planning and optimization”.

From January to June 2010, Huawei continued to represent in its various correspondence and documents that 225 radio sites were sufficient to meet Creative’s requirements. Amongst the documents were (a) the “WiMAX 16e Wireless Network Planning Proposal For Singpore [sic] Creative Project” dated 25 January 2010; (b) the “WiMAX Technical Proposal for QMC Technology WiMAX Project” dated 25 January 2010; (c) the “RNP Solution for Creative” dated 25 January 2010; (d) the revised “High Level Requirement Response” (“HLRR”) from Huawei dated 19 March 2010; (e) Huawei’s document titled “RNP Solution for Wise Port”; (f) DW1-Leong’s email dated 2 April 2010 to PW1-Koh; (g) Huawei’s radio planner Zou Yicai (“DW5-Zou”)’s email dated 5 April 2010 to PW1-Koh; and (h) all subsequent updated versions of the HLRRs from Huawei leading up to the date of signing of the contract.

The Contract

On 28 June 2010, Creative and Huawei executed the “Supply Contract for the Wireless Broadband Network (WIMAX Infrastructure) Solution” (the “Contract”). The total Contract Price (exclusive of GST) was US$19,900,916. The finalised version of the HLRR document was annexed and incorporated as Annexure 6 to the Contract.

Paragraph 8 of Annexure 6 of the Contract

Paragraph 8 of Annexure 6 of the Contract is central to this dispute and it states as follows: 8 Radio Access Network: a. 225 radio sites will be sufficient to provide Nationwide coverage for Singapore with first wall penetration, based on a measurement criteria of ≥ -85dBm RSSI [Received Signal Strength Indicator] Signal Strength and CINR [Carrier to Interference and Noise Ratio] of 3dBm. Military areas, cemeteries & large bodies of in-land water can be excluded from the planned initial coverage.

[Huawei’s response]: Comply.

Based on Huawei WIMAX radio network planning, the coverage criterion for each scenario is:

1) Dense urban: RSSI >=-85.76dBm & CINR >=3dB with 90% area coverage probability; 2) Urban: RSSI>-85.76dBm & CINR>=3dB with 90% area coverage probability; 3) Suburban: RSSI>=-87.53dBm &...