D'Oz International Pte Ltd v PSB Corporation Pte Ltd

• Judgment Date: 18 March 2010
• Date: 18 March 2010
• Docket Number: District Court Appeals Nos 11 and 12 of 2009
• Court: High Court (Singapore)

D'Oz International Pte Ltd

Plaintiff

and

PSB Corp Pte Ltd and another appeal

Defendant

[2010] SGHC 88

Chan Sek Keong CJ

District Court Appeals Nos 11 and 12 of 2009

High Court

Civil Procedure—Proof of foreign law—Presumption of similarity of laws—Rule of convenience—Application of presumption that foreign law was the same as the lex fori depended on whether it was unjust and inconvenient in the circumstances to do so—Whether party having burden to prove foreign law could rely on presumption when he himself failed to prove foreign law—Contract—

Contract governed by Chinese law—Force majeure—Promulgation of Chinese regulations after parties entered into legal relations—Whether party could rescind contract pursuant to Chinese law

PSB Corporation Pte Ltd (“PSB”) is a company registered in Singapore that operated and managed educational training centres through its business unit, PSB Academy. It had developed a system for operating and running education and training centres known as “PSB Intellis” (“the System”), which it wanted to extend internationally on a franchise basis. D'Oz International Pte Ltd (“D'Oz”) was a party that submitted an application to PSB for a franchise in the People's Republic of China (“China”). On 19 December 2002, the parties signed a term sheet (“the Term Sheet”) and a preliminary agreement (“the Preliminary Agreement”), and on 26 December 2002, D'Oz paid a sum of $120,000 to PSB as part payment for the Franchise Fee. Both the Term Sheet and the Preliminary Agreement provided that a franchise agreement was to be executed by the parties, and, on 12 March 2003, the parties signed a franchise agreement (“the Franchise Agreement').

Unbeknown to both parties, China had promulgated the “Regulation for Establishing Chinese- [F]oreign Cooperative Schools” (“the 2003 Regulation”) on 1 March 2003, which required both parties, in any joint venture educational institution set up in China between Chinese and foreign parties, to be educational institutions. D'Oz, however, was not an educational institution. In March 2003, D'Oz, and later PSB, submitted an application for an education licence to the Ministry of Education in Beijing, China. In both instances, the application was unsuccessful.

On 21 July 2004, D'Oz informed PSB that it decided to cease the franchise venture, and sought a refund of the $120,000 that had been paid as part payment for the Franchise Fee. On 1 November 2004, PSB gave notice of its termination of the Franchise Agreement and sought the payment of the balance of the Franchise Fee that was overdue. D'Oz then brought a claim before the District Court, arguing that it was entitled to a refund of the $120,000 since, under Chinese law, there was an event of force majeure that permitted it to rescind the contract. In its counterclaim, PSB argues that D'Oz is liable to it for the remainder of the Franchise Fee as D'Oz could not rescind the contract since no event of force majeure occurred.

At the conclusion of proceedings before the District Court, the district judge (“the District Judge”) dismissed D'Oz claim. The District Judge found that Chinese law governed the Franchise Agreement, and under Chinese law, the promulgation of the 2003 Regulation on 1 March 2003 constituted an event of force majeure. However, since the parties only entered into legal relations after the promulgation, when the Franchise Agreement was signed on 12 March 2003 by virtue of an entire agreement clause, D'Oz could not therefore rescind the Franchise Agreement.

With respect to PSB's counterclaim, the District Judge held that its claim also failed since it had adduced no evidence, apart from its expert's opinion, to show that any of its suggested alternatives could have been carried out, and that it had adduced no evidence that it had any right to enforce the Franchise Agreement against D'Oz under Chinese law.

Dissatisfied with the decision, both parties cross-appealed.

Held, allowing the appeal by D'Oz and dismissing the appeal by PSB:

(1) The District Judge erred in holding that the parties commenced their legal relations on 12 March 2003 when she misconstrued the effect of the entire agreement clause. The Term Sheet, Preliminary Agreement and Franchise Agreement, all formed part of the entire agreement between the parties since the Term Sheet and Preliminary Agreement were specifically referred to in cl 4.1 of the Franchise Agreement. Accordingly, the legal relations between the parties commenced on 19 December 2002 when the Term Sheet and Preliminary Agreement were signed. On this basis, there was no reason why a finding that the promulgation of the 2003 Regulation constituted an event of force majeure should be precluded purely on the basis that it had occurred before the signing of the Franchise Agreement: at [15] to [19].

(2) PSB's appeal was premised on the dismissal of D'Oz's appeal. Since the court had now found that D'Oz could rescind the contract because of an event offorce majeure under Chinese law, PSB's appeal on its claim for the remainder of the Franchise Fee automatically failed: at [21].

[Observation: The presumption of similarity of laws was a rule of convenience which the courts might resort to unless it was unjust and inconvenient to do so. Whether a common law court would presume foreign law to be the same as the lex fori in any case where foreign law was not pleaded or not proved (if pleaded) depended on the circumstances of each case. The question that was ordinarily asked when the presumption was invoked was whether, in the circumstances of the case, it would be unjust to apply it against a party so as to make him liable on a claim subject to foreign law when the claimant had failed to prove what the foreign law was and how liability was established under that foreign law: at [25].]

Damberg v Damberg (2001) 52 NSWLR 492 (refd)

Goh Chok Tong v Tang Liang Hong [1997] 1 SLR (R) 811; [1997] 2 SLR 641 (refd)

K-Rex Finance Ltd v Cheng Chih Cheng [1992] 3 SLR (R) 296; [1993] 1 SLR 46 (refd)

Ong Jane Rebecca v Lim Lie Hoa [2003] SGHC 126 (refd)

Parno v SC Marine Pte Ltd [1999] 3 SLR (R) 377; [1999] 4 SLR 579 (refd)

Tamil Nadu Electricity Board v ST-CMS Electric Co Pte Ltd [2008] 1 Lloyd's Rep 93 (refd)

Contract Law of the People's Republic of ChinaArts 94, 97,117

Regulation for Establishing Chinese-Foreign Cooperative Schools (PRC)

Yeoh Oon Weng Vincent (Malkin & Maxwell LLP) and Kwok-Chern Yew Tee (Foo, Kwok & Lai Partnership) for the appellant in District Court Appeal No 11 of 2009 and the respondent in District Court Appeal No 12 of 2009

Wong Siew Hong and Kalaiselvi d/o Singaram (Infinitus Law Corporation) for the respondent in District Court Appeal No 11 of 2009 and the appellant in District Court Appeal No 12 of 2009.

Judgment reserved.

Chan Sek Keong CJ

1 These cross-appeals arise from two actions between D'Oz International Pte Ltd (“D'Oz”) and PSB Corporation Pte Ltd (“PSB”). In District Court Appeal No 11 of 2009 (“DCA 11”), D'Oz appeals against the decision of the district judge (“the District Judge”) to dismiss its claim to be refunded the sum of $120,000 that had been paid as part payment for a franchise fee of $200,000 (“the Franchise Fee”), with interest at the rate of 6% per annum from the date of the writ to the date of judgment. In District Court Appeal No 12 of 2009 (“DCA 12”), PSB appeals against the District Judge's dismissal of its counterclaim for the unpaid balance of $80,000 of the Franchise Fee. The reasons for the District Judge's decisions can be found in D'Oz International Pte Ltd v PSB Corporation Pte Ltd [2009] SGDC 221 (“the GD”).

Background facts

2 D'Oz is a company registered in Singapore. It is in the business of providing management and marketing consultancy services in the international market. PSB is also a company registered in Singapore. It operates and manages educational training centres through its business unit, PSB Academy, in Singapore.

3 PSB had developed a system for operating and running education and training centres known as “PSB Intellis” (“the System”), which it wanted to extend internationally on a franchise basis. An appointed franchisee would have to establish training centre (s), and thereafter operate the training centre (s) in accordance with the System. On 21 September 2002, PSB gave a public presentation on the System. D'Oz attended the presentation, and later submitted an application to PSB for a franchise in the People's Republic of China (“China”). D'Oz subsequently submitted an executive summary of the proposed franchise, which was to be a joint venture with Beijing Mingzhu University, to PSB. On 19 December 2002, the parties signed a term sheet (“the Term Sheet”) and a preliminary agreement (“the Preliminary Agreement”), and, on 26 December 2002, D'Oz paid a sum of $120,000 to PSB as part payment for the Franchise Fee. Both the Term Sheet and the Preliminary Agreement provided that a franchise agreement was to be executed by the parties, and, on 12 March 2003, the parties signed a franchise agreement (“the Franchise Agreement'). Prior to that, between 13 February 2003 and 28 February 2003, training was provided by PSB to D'Oz's personnel in China and Singapore. For convenience, the franchise that was contemplated between the two parties will hereafter be referred to as “the Franchise”.

4 During the negotiations between D'Oz and PSB for the Franchise, D'Oz obtained legal advice from a Singapore law firm, but did not seek legal advice on whether the Franchise could be implemented under Chinese law. Unbeknown to both parties, prior to the signing of the Franchise Agreement, the State Council of China had promulgated, on 1 March 2003, the “Regulation for Establishing Chinese- [F]oreign Cooperative Schools” (“the 2003 Regulation”), which required, in any joint venture educational institution set up in China between Chinese and foreign parties, both the...