Eastern Resource Management Services Ltd v Chiu Teng Construction Co Pte Ltd

• Jurisdiction: Singapore
• Judge: Edmund Leow JC
• Judgment Date: 14 June 2016
• Neutral Citation: [2016] SGHC 114
• Court: High Court (Singapore)
• Docket Number: Suit No 855 of 2014
• Year: 2016
• Published date: 22 November 2017
• Hearing Date: 22 October 2015,21 October 2015
• Plaintiff Counsel: Andrew J Hanam (Andrew LLC)
• Defendant Counsel: Chew Yee Teck Eric (ECYT Law LLC)
• Subject Matter: Contract,Consideration,Contractual terms,Duress,Economic
• Citation: [2016] SGHC 114

Edmund Leow JC:

Suit 855 of 2014 (“S 855/2014”) arises out of the Plaintiff’s claim against the Defendant for damages arising out of alleged breaches of a contract made in 2008 to share profits, as well as for an order for the Plaintiff’s future access to accounts. The parties agreed to have S 855/2014 heard before me as I had heard Suit 844 of 2013 between Virsagi Management (S) Pte Ltd and the current Defendant, involving a similar type of agreement that is at issue in this case. The parties also agreed that my knowledge of the context from the previous case would help to expedite the hearing of this suit.

The trial was heard over two days with one witness each from the Plaintiff and the Defendant. I dismissed the Plaintiff’s claim in totality. The Plaintiff has filed a notice of appeal (in Civil Appeal 34 of 2016) against my decision, and I thus set out my reasons.

Factual background

The Plaintiff is Eastern Resource Management Services Ltd, a company incorporated in Bangladesh. It is in the business of training construction workers in Bangladesh to work in Singapore. The Plaintiff’s sole witness at trial was Mr Abul Monsur Ahmad (“Monsur”), a director of the Plaintiff as well as of a joint venture company called CTBF Management Services Pte Ltd (“CTBF”).

The Defendant is Chiu Teng Construction Co Pte Ltd, a company incorporated in Singapore. The Defendant is licensed by the Building & Construction Authority (“BCA”) to operate an Overseas Test Centre – CT Test Centre Pvt Ltd – in Dhaka, Bangladesh (“the OTC”). The OTC administers tests on potential workers to determine their fitness to work in the Singapore construction industry. The Defendant’s local partner in Bangladesh, an operational requirement of the OTC, is Bangladesh Foundry and Engineering Works Ltd (“BFEW”). After the BCA imposed quotas on testing of workers, the Plaintiff was the Bangladeshi agent of the Defendant for a time, in charge of managing the Defendant’s allocated quota for testing workers at the OTC on the Defendant’s behalf.¹ The Defendant appeared to be affiliated to one CTTC Management Services Pte Ltd (“CTTC”), which was undisputed, though the details of how they were related were not canvassed at trial. The Defendant’s sole witness at trial was Cedric Ng Hark Li (“Cedric Ng”), the administrative manager of the Defendant.

In 2008, BFEW, the Plaintiff and the Defendant entered into an agreement² to work together on the testing of workers at the OTC (“the 2008 agreement”). This agreement was put into writing and signed by the Plaintiff and BFEW but not the Defendant. Nevertheless, pursuant to this agreement, the Defendant carried out its obligation and incorporated CTBF in Singapore.³ CTBF was incorporated on 4 February 2008 with a paid up capital of $10,000, and it was intended as a joint venture between the three parties regarding the management of the OTC. It was also expressly provided in the 2008 agreement that BFEW was not to have any share of the profits of CTBF.⁴ Since 2009, after BFEW divested its shareholding in CTBF, Monsur held 49% of the shares as the nominee of the Plaintiff, while one Kor Khee Nghee (“Kor”) held 51% of the shares as the nominee of the Defendant.⁵ Monsur and Kor were also the directors of CTBF. Under the agreement, the Plaintiff was responsible for liaising with the Building and Construction Authority (“BCA”) on all training and testing matters assist in mobilisation of workers in Singapore.⁶

On or about 17 June 2011, the Plaintiff and the Defendant also entered into another agreement⁷ (“the 2011 Agreement”) where the Plaintiff agreed to forgo its share of the profits from CTBF with effect from the April Test 2011. There was also an agreement⁸ on 6 July 2012 that was made between the parties (“the 2012 agreement”).

Issues in dispute

The parties disputed the material terms of the 2008 agreement, as well as the circumstances under which the 2011 agreement was signed. The key issues before me were as follows: Whether various terms should be implied into the 2008 agreement; Whether the 2008 agreement for splitting the direct testing fees of $345 per worker subsisted in light of the 2011 agreement such that the Plaintiff was entitled to future dividends of CTBF; Whether the Defendant’s nominee director had been allowed to participate in management of CTBF and had been given the accounts and records of CBTF?

I note that the terminology used by the Plaintiff and the Defendant in this suit regarding the sharing of CTBF’s profits is not legally accurate as profits of a company are distributed by way of dividends to shareholders (see s 403 of the Companies Act (Cap 50, 2006 Rev Ed) (“the CA”)). It is entirely possible that profitable companies do not declare dividends for a particular year. It is also trite law that a shareholder has no right to the profits of a company (see Walter Woon on Company Law (Tan Cheng Han SC gen ed) (Sweet & Maxwell, Revised 3rd Ed, 2009) at para 12.87). Having entered into these agreements without legal advice, I infer that the parties must have intended that CTBF and their representatives on the CTBF board would take all steps to realize this profit-sharing intention. Thus, I will take parties’ references to sharing of profits as a reference to payment of dividends.

Whether various terms should implied into the 2008 agreement

For the implication of a term into a contract, the threshold is a high one and the court can only do what is necessary to give effect to business efficacy, or what is so plain and obvious in its necessity that an officious bystander would have no doubt as to the inclusion of the term into the contract. The enquiry is also a highly fact-specific one as the court is only concerned with the presumed intention of the particular contracting parties (see Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd [2006] 1 SLR(R) 927 in general).

The Plaintiff pleaded that it was an implied term of the 2008 agreement that Plaintiff and Defendant would act as equal parties and have equal say in the operation of CTBF. This was notwithstanding the fact that the shareholding structure of CTBF was 51-49 in the Defendant’s favour after BFEW had divested itself of its shares in 2009. I am not inclined to believe the Plaintiff’s account, because the 51-49 shareholding structure reflects the parties’ arrangement both in terms of dividends and voting rights, and this was an arrangement entered into consciously by the parties. The Plaintiff’s claim flies in the face of general company law principles. The Plaintiff has also failed to show the necessity of implying this term to ensure that CTBF can continue its operations.

The Plaintiff also pleaded that there was an implied term that the Plaintiff would be able to inspect books and accounts of CTBF, including primary documents such as the ledgers, books, vouchers and invoices.⁹ I agree with the Defendant that the Plaintiff has no such right under the CA by default as it is a mere shareholder of CTBF. It is for the company’s management not its shareholders to operate and manage the company. The general right of access to the company’s “accounting and other records” is thus available to directors, as a corollary of their supervisory role over the company (see s 199(3) of the CA). The shareholders will receive the company’s financial statements and balance sheets (see s 203(3) of the CA) but even then it must be noted that these do not include the items that the Plaintiff was seeking to inspect through implication of a term into the 2008 agreement, i.e., primary documents such as the ledgers, books, vouchers and invoices entitle have. Again, the Plaintiff has also failed to show the necessity of implying this term into the 2008 agreement to achieve the purpose of the 2008 agreement or to ensure that CTBF’s operations run smoothly, especially when Monsur was already the Plaintiff’s representative on the board of directors and had access to these items.

I thus declined to give the Plaintiff an order for future access to books and accounts of CTBF.

Whether the 2008 agreement for dividing the direct testing fees of $345 per worker subsisted in light of the 2011 agreement

Direct testing was the practice of testing workers at the OTC without the workers having undergone training at BFEW’s training centre.¹⁰ It was undisputed that Clause 8 of the 2008 agreement dictated that out of the $525 direct testing fee paid to CTBF by each worker and/or their agent, $180 would be paid to BFEW as rental and the remainder $345 would be divided between the Plaintiff and the Defendant.¹¹

Proportion of division of direct testing fees

Clause 8 of the 2008 agreement was silent as to the proportion of division of this $345. Parties disputed the division of this $345 per worker - the Plaintiff claimed that it was to be split equally, while the Defendant claimed that it was in proportion to the parties’ shareholding in CTBF. I note here that during the opening statement the Plaintiff’s counsel appeared to contradict the pleadings when he said that the Plaintiff just wanted the Defendant to pay the 49% share of directing testing fees from June 2012 onwards.¹²

I am of the view that the Plaintiff’s position on equal sharing of the dividends arising out of this $345, as pleaded, is untenable. The Plaintiff’s position was contradicted by firstly, the relative shareholding of the parties which would imply an uneven sharing of dividends (if any), and secondly, it was Monsur’s own admission that the parties intended to share profits in accordance with their relative shareholdings in CTBF:¹³ Q ---Mr Monsur, can I put it to you, therefore, that there was never any agreement, right, to divide the profits equally and they were to be divided, well, let me stop there first. There was never any agreement to divide the profits equally. A It is a CTBF Management Service Ltd. It’s 49% and 51%. Yah,...